Exhibit 10.10


 


LEASE AGREEMENT


 


Between


 


 


LINCOLN PO BENICIA LIMITED PARTNERSHIP, Landlord


 


and


 


BEBE STORES, INC., Tenant


 


 


Lincoln Distribution Center


 


Benicia, California


 

















 


TABLE OF CONTENTS


 


	
  1.

  	
  PREMISES, TERM, AND INITIAL IMPROVEMENTS

  
	
  2.

  	
  BASE RENT, SECURITY DEPOSIT AND ADDITIONAL
  RENT

  
	
  3.

  	
  TAXES

  
	
  4.

  	
  LANDLORD’S MAINTENANCE

  
	
  5.

  	
  TENANT’S MAINTENANCE AND REPAIR OBLIGATIONS

  
	
  6.

  	
  ALTERATIONS

  
	
  7.

  	
  SIGNS

  
	
  8.

  	
  UTILITIES

  
	
  9.

  	
  INSURANCE

  
	
  10.

  	
  CASUALTY
  DAMAGE

  
	
  11.

  	
  LIABILITY, INDEMNIFICATION, WAIVER OF
  SUBROGATION AND NEGLIGENCE

  
	
  12.

  	
  USE

  
	
  13.

  	
  INSPECTION

  
	
  14.

  	
  ASSIGNMENT AND SUBLETTING

  
	
  15.

  	
  CONDEMNATION

  
	
  16.

  	
  SURRENDER OF PREMISES, HOLDING OVER

  
	
  17.

  	
  QUIET
  ENJOYMENT

  
	
  18.

  	
  EVENTS
  OF DEFAULT

  
	
  19.

  	
  REMEDIES

  
	
  20.

  	
  LANDLORD’S DEFAULT

  
	
  21.

  	
  MORTGAGES

  
	
  22.

  	
  ENCUMBRANCES

  
	
  23.

  	
  MISCELLANEOUS

  
	
  24.

  	
  NOTICES

  
	
  25.

  	
  HAZARDOUS
  WASTE

  
	
  26.

  	
  RENEWAL
  OPTION

  
	
  27.

  	
  RIGHT OF FIRST OFFER

  
	
   

  
	
  Exhibit
  A-1

  	
  Legal
  Description of Property

  
	
  Exhibit
  A-2

  	
  Site
  Plan

  
	
  Exhibit B

  	
  Tenant Work Letter

  
	
  Exhibit
  B-1

  	
  Description
  of Landlord’s Work

  
	
  Exhibit C

  	
  Tenant’s Personal Property

  
	
  Exhibit D

  	
  Rules and Regulations

  
	
  Exhibit E

  	
  Renewal Option

  
	
  Exhibit F

  	
  Right of First Offer

  
			



 


i

















 


LEASE AGREEMENT


 


This Lease
Agreement (this “Lease”) is
entered into as of October 24, 2000 by and between LINCOLN PO BENICIA LIMITED
PARTNERSHIP, a Delaware limited partnership (“Landlord”),
and BEBE STORES, INC., a California corporation (“Tenant”).


 


1.                                       PREMISES, TERM, AND INITIAL IMPROVEMENTS.


 


(a)                                  Subject
to and upon the terms, provisions and conditions hereinafter set forth, and
each in consideration of the duties, covenants and obligations of the other
hereunder, Landlord hereby leases to Tenant, and Tenant hereby leases and takes
from Landlord, 144,000 square feet of Net Rentable Area (hereinafter defined)
(the “Premises”) located in
a building (the “Building”)
to be constructed upon certain land situated in the City of Benicia, California
(the “Land”).  The Building contains an aggregate of
approximately 240,000 square feet of Net Rentable Area on the Land known as the
“Lincoln Distribution Center” (the “Project”).  A legal description of the Land is attached
hereto as Exhibit “A-1”.  A preliminary Site Plan depicting the
Premises is attached hereto as Exhibit
“A-2”.  Landlord
anticipates that it may be necessary for Landlord to make certain modifications
to the Site Plan; accordingly, if and when such Site Plan is revised by
Landlord, such revised Site Plan shall be initialed by Landlord and Tenant and
substituted in place of the then current Site Plan attached to this Lease.  The term “Net
Rentable Area” refers to the square footage of the Premises, as
calculated within the boundaries defined by (i) the exterior surface of the
exterior walls and windows of the Building, and (ii) the center line of any
demising walls separating the Premises from space to be occupied by another
tenant.  The Net Rentable Area in the
Premises has been calculated on the basis of the foregoing definition and is
hereby stipulated to be 144,000 square feet.


 


(b)                                 The
term of this Lease (the “Term”)
shall be twelve (12) years, beginning ninety (90) days following the later to
occur of (i) “Building Shell Completion” (as defined in Exhibit “B”) or (ii) January 4, 2001
(the “Commencement Date”)
and, unless extended by Tenant pursuant to the terms and conditions contained
in Exhibit “E” attached
hereto, ending on the last day of the calendar month in which the twelve (12)
year anniversary of the Commencement Date shall occur; provided, however, that
if the Commencement Date shall occur on the first day of a calendar month, the
Expiration Date shall be the last day of the calendar month immediately
preceding the twelve (12) year anniversary of the Commencement Date (“Expiration Date”).  Notwithstanding the foregoing, if Landlord
is unable to deliver possession of the Premises to Tenant on or before January
4, 2001 for any reason, then, subject to the provisions of Section 1.(d) below,
(1) this Lease shall not be void or voidable by either party, and (2) Landlord
shall not be liable to Tenant for any loss or damage resulting therefrom.  Although the Term may not commence until
after the date hereof, from and after the date hereof, this Lease shall be
deemed to be a contract between Landlord and Tenant and the provisions hereof
shall be effective for all purposes.


 


1

















 


(c)                                  Landlord
shall construct the Building Shell in a good and workmanlike manner in substantial
accordance with the plans and specifications referenced on Exhibit “B-1”, and, by occupying the
Premises, Tenant shall be deemed to have accepted the Premises in their then
“as is” condition, subject only to the completion of any punch-list items and any
latent defects noted by Tenant in writing to Landlord within one (1) year
following Building Shell Completion. 
Neither Landlord nor Landlord’s agents have made any express or implied
representations or promises with respect to the Building or the Premises or the
repair or alteration thereof, except as expressly set forth in this Lease, and
no rights or easements or licenses are acquired by Tenant by implication or
otherwise, except as expressly set forth herein.


 


(d)                                 In
the event that Building Shell Completion does not occur on or before April 1,
2001 (the “Outside Building Completion
Deadline”), Tenant, as its sole remedy, shall have the right to
terminate this Lease by giving written notice of such termination to Landlord
at any time after the Outside Building Completion Deadline and prior to the
date Building Shell Completion occurs, in which case this Lease shall be
terminated effective thirty (30) days after Landlord’s receipt of Tenant’s
termination notice, unless Building Shell Completion occurs within said thirty
(30) day period; provided, however, that the Outside Building Completion
Deadline shall be extended by the number of days that Building Shell Completion
is delayed due to a Tenant Delay (as defined in Exhibit “B” attached hereto).  In the event Tenant terminates this Lease pursuant to this
Section 1.(d), neither party shall have any obligations to the other under this
Lease, except for obligations arising before such termination.  For purposes of this Lease, the term “Tenant
Delay” shall mean any delay in Building Shell Completion caused by or
attributable to any act, neglect, failure or omission of Tenant or any of
Tenant’s agents, employees, contractors or subcontractors.


 


2.                                       BASE RENT, SECURITY DEPOSIT AND ADDITIONAL RENT.


 


(a)                                  Tenant
shall pay to Landlord monthly “Base Rent”,
in advance, without demand, deduction or set off, the sums specified below:


 


	
  Months in
  Term

  	
   

  	
  Monthly
  Base Rent

  	
   

  	
  Rate Per
  Square

  Foot Per Year

  	
   

  
	
  1-36

  	
   

  	
  $

  	
  53,280

  	
   

  	
  $

  	
  4.44

  	
   

  
	
  37-72

  	
   

  	
  $

  	
  56,520

  	
   

  	
  $

  	
  4.71

  	
   

  
	
  73-108

  	
   

  	
  $

  	
  60,480

  	
   

  	
  $

  	
  5.04

  	
   

  
	
  109-144

  	
   

  	
  $

  	
  64,080

  	
   

  	
  $

  	
  5.34

  	
   

  



 


(b)                                 The
first monthly installment, plus the other monthly charges for Tenant’s
Proportionate Share of Operating Expenses (as defined and set forth in Section
2.(c) below), shall be due on the date hereof; thereafter, monthly installments
of Base Rent shall be due on the first day of each calendar month following the
Commencement Date.  If the Term begins
on a day other than the first day of a month or ends on a day other than the
last day of a month, then Base Rent and additional rent for such partial month
shall be prorated.


 


2

















 


(c)                                  Intentionally
Omitted


 


(d)                                 Tenant
shall pay, as additional rent, Tenant’s Proportionate Share (herein-after
defined) of all costs incurred by Landlord in owning, operating, maintaining,
repairing and replacing the Land and Project and the facilities and services
provided for the common use of Tenant and any other tenants of the Project
(collectively, “Operating Expenses”),
including the following items: (1) Taxes (as defined below) and the cost of any
tax consultant employed to assist Landlord in determining the fair tax
valuation of the Project and Land or otherwise in contesting the Taxes; (2) the
cost of all utilities used in the Project which are not billed separately to a
tenant of the Project for above standard utility consumption; (3) insurance
premiums (including the related deductibles); (4) the cost of repairs,
replacement, management fees and expenses, landscape maintenance and
replacement, security service (if provided), sewer service (if provided), trash
service (if provided); (5) the cost of dues, assessments, and other charges
applicable to the Land payable to any property or community owner association
under restrictive covenants or deed restrictions to which the Premises are
subject; and (6) alterations, additions, and improvements made by Landlord to
comply with any change in any applicable Laws (defined in Section 23.(a) below)
enacted subsequent to the time of construction of the Building.  Throughout the Term on the same day that
Base Rent is due, Tenant shall pay to Landlord an amount equal to 1/12 of
Landlord’s estimate of Tenant’s Proportionate Share of annual Operating Expenses.  The initial monthly payments are based upon
Landlord’s estimate of the Operating Expenses for the calendar year in
question, and shall be increased or decreased annually to reflect the actual
Operating Expenses determined by Landlord for that calendar year.  If Tenant’s total payments in respect of
Operating Expenses for any calendar year are less than Tenant’s Proportionate
Share of actual Operating Expenses for that calendar year, Tenant shall pay the
difference to Landlord within ten days after Landlord’s request therefor; if
such payments are more than Tenant’s Proportionate Share of actual Operating
Expenses for that calendar year, Landlord shall retain such excess and credit
it against Tenant’s future annual payments. 
Operating Expenses shall not include the following: (A) any costs for
interest, amortization, or other payments on loans to Landlord, except as
provided in clause (H) below; (B) expenses incurred in leasing or procuring
tenants; (C) legal expenses other than those incurred for the general benefit
of the Project’s tenants; (D) allowances, concessions, and other costs of
renovating or otherwise improving space for occupants of the Project or vacant
space in the Project; (E) income taxes imposed on or measured by the income of
Landlord from the operation of the Project; (F) rents under ground leases; (G)
costs incurred in selling, syndicating, financing, mortgaging, or hypothecating
any of Landlord’s interests in the Project; (H) the cost of any capital
improvements (except for the amortization over such reasonable period as Landlord
shall determine, with interest at a rate per annum equal to the “Reference
Rate” defined in Section 23.(k) below, of the cost of (1) capital improvements
made by Landlord or equipment purchased by Landlord as a means to accomplish
savings in operating, repairing, managing or maintaining the Project, and (2)
capital improvements made by Landlord to comply with any change in any
applicable Laws enacted subsequent to the time of construction of the
Building); (I) depreciation of the Project; (J) management fees in excess of
three percent (3%) of total rent payable hereunder; and (K) the cost of repairs
or other work occasioned by


 


3

















 


fire, windstorm or other
insured casualty or hazard, to the extent that Landlord shall receive proceeds
of such insurance or would have received such proceeds had Landlord maintained
the insurance coverage required under this Lease (costs of repairing an insured
casualty to the extent of the commercially reasonable deductible amount under
the applicable insurance policy shall constitute an Operating Expense).  There shall be no duplication of costs or
reimbursements in calculating Operating Expenses.


 


(e)                                  If
during any calendar year the Project is less than 100% occupied, then, for
purposes of calculating Tenant’s Proportionate Share of water and sewer charges
for that calendar year, the amount of such charges shall be “grossed-up” to the
amount which, in Landlord’s estimation, would have been incurred by Landlord
had the Project been 100% occupied for that entire calendar year.


 


(f)                                    If
any payment required of Tenant under this Lease is not paid when due, such late
payment will cause Landlord to incur costs not contemplated by this Lease, the
exact amount of such costs being extremely difficult to fix.  Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Landlord by the terms of any encumbrance and/or note secured by an encumbrance
covering the Premises.  Therefore, if
any payment required of Tenant under this Lease is not paid when due, except to
the extent limited by any applicable Laws, and not in limitation or waiver of
any of Landlord’s other rights and remedies under this Lease, Landlord may
charge Tenant and Tenant shall pay to Landlord a fee equal to five percent (5%)
of the delinquent payment as a late charge. 
The parties agree that this late charge represents a fair and reasonable
estimate of the costs that Landlord will incur by reason of late payment of rent
by Tenant.


 


(g)                                 All
payments and reimbursements required to be made by Tenant under this Lease
shall constitute “rent”
(herein so called).


 


(h)                                 The
term “Tenant’s Proportionate Share”
means the ratio from time to time of the Net Rentable Area of the Premises to
the Net Rentable Area of the Project. 
Tenant’s Proportionate Share has been initially determined to be sixty
percent (60%).  If the Net Rentable Area
of the Premises changes, Tenant’s Proportionate Share shall change accordingly.


 


(i)                                     Tenant
shall have the right, at Tenant’s sole cost upon thirty (30) days’ written
notice to Landlord, during the sixty (60) day period following the end of each
calendar year, to review in Landlord’s offices Landlord’s records of Operating
Expenses for the subject calendar year. 
Such review shall be carried out only by regular employees of Tenant or
by a major national or regional accounting firm and not by any other third
party.  No person conducting such an
audit shall be compensated on a “contingency” or other incentive basis.  Tenant shall keep any information gained
from its inspection of Landlord’s books and records confidential and shall not
disclose any such information to any other party, except as required by
applicable Law, as defined in Section 23(a) below.  If, as of the sixtieth (60th) day after the end of the calendar
year, Tenant shall not have delivered to Landlord an objection statement (as
defined below),


 


4

















 


then the calculation of
Operating Expenses for the subject calendar year shall be final and binding
upon Landlord and Tenant, and Tenant shall have no further right to object to
such calculation of Operating Expenses. 
If within such sixty (60) day period, Tenant delivers to Landlord a
written statement specifying objections to the calculation of Operating
Expenses for the subject calendar year (an “objection statement”), then Tenant
and Landlord shall meet to attempt to resolve such objection within thirty (30)
days after delivery of the objection statement.  Notwithstanding that any such dispute remains unresolved, Tenant
shall be obligated to pay Landlord all amounts payable in accordance with this
Section 2 (including any disputed amount). 
If such objection is not resolved within such thirty (30) day period,
then either party shall have the right to require that the dispute be submitted
to binding arbitration under the rules of the American Arbitration
Association.  All costs and expenses of
Tenant’s initial review of Landlord’s records shall be paid by Tenant.  In the event either party shall submit the
dispute over Tenant’s objection statement to arbitration as provided above, the
prevailing party shall be entitled to receive from the non-prevailing party, in
addition to the arbitration costs incurred by the prevailing party, such amount
as the arbitrator may adjudge to be reasonable attorneys’ fees for the services
rendered the prevailing party in such proceeding.  Landlord and Tenant agree that, notwithstanding any provision of
this Lease or any provision of the rules of the American Arbitration
Association to the contrary, Landlord shall be deemed the prevailing party in
any arbitration proceeding brought by either party under this Section 2 unless
the final determination of such arbitration proceeding is that Landlord
overstated Tenant’s Proportionate Share of Operating Expenses, in the
aggregate, for the applicable calendar year by more than ten percent
(10%).  If such dispute results in an
agreement or determination that Tenant is entitled to a refund, Landlord shall,
at its option, either pay such refund or credit the amount thereof to the Base
Rent next becoming due from Tenant.


 


3.                                       TAXES.


 


(a)                                  Landlord
shall pay all taxes, assessments and governmental charges whether federal,
state, county, or municipal and whether they are imposed by taxing or
management districts or authorities presently existing or hereafter created but
excluding any interest or penalties for late or delinquent payments
(collectively, “Taxes”)
that accrue against the Premises, the Land and the Project.  If, during the Term, there is levied,
assessed or imposed on Landlord a capital levy or other tax directly on the
rent or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon rent, then all such taxes, assessments, levies or
charges, or the part thereof so measured or based, shall be included within the
term “Taxes”.  Taxes shall not include income, franchise,
transfer, inheritance or capital stock taxes, unless, due to a change in the
method of taxation, any of such taxes is levied or assessed against Landlord in
lieu of, as a substitute (in whole or in part) for, or as an addition to, any
other charge which would otherwise constitute a part of Taxes.  Further, Taxes shall not include penalties
and interest on Taxes caused by the failure of Landlord to make timely payment
(not due to any failure of Tenant to make timely payment of Tenant’s
Proportionate Share of Taxes to Landlord). 
Tenant shall pay, as additional rent, Tenant’s Proportionate Share of
Taxes as specified in Section 2.(d) above; provided, however, if the Project is
occupied by more than one tenant and the


 


5

















 


cost of any improvements
constructed in the Premises is disproportionately higher than the cost of
improvements constructed in the premises of other tenants of the Project, then
Landlord may require that Tenant pay the amount of Taxes attributable to such
improvements in addition to Tenant’s Proportionate Share of other Taxes.


 


(b)                                 Tenant
shall (1) pay when due all taxes levied or assessed against any personal
property, fixtures or alterations placed in the Premises and (2) upon the
request of Landlord, deliver to Landlord receipts from the applicable taxing
authority or other evidence acceptable to Landlord to verify that such taxes
have been paid.  If any such taxes are
levied or assessed against Landlord or Landlord’s property and (A) Landlord
pays them or (B) the assessed value of Landlord’s property is increased thereby
and Landlord pays the increased taxes, then Tenant shall pay to Landlord such
taxes immediately upon Landlord’s request therefor.


 


4.                                       LANDLORD’S MAINTENANCE.


 


(a)                                  This
Lease is intended by Landlord and Tenant to be a net lease; accordingly,
Landlord’s maintenance obligations are limited to the replacement of the
Building’s roof and maintenance of the foundation and structural members of the
exterior walls and load bearing columns within the Premises (collectively, the “Building’s Structure”); however,
Landlord shall not be responsible (1) for any such work until Tenant delivers
to Landlord written notice of the need therefor, or (2) for alterations to the
Building’s Structure required by any applicable Law (including, without
limitation, the Americans with Disabilities Act of 1990) because of Tenant’s
use of the Premises (which alterations shall be performed by Tenant at Tenant’s
sole cost and expense).  The Building’s
Structure does not include skylights, windows, glass or plate glass, doors,
special store fronts or office entries, all of which shall be maintained by
Tenant at Tenant’s sole cost and expense. 
Landlord’s liability for any defects, repairs, replacement or
maintenance for which Landlord is responsible hereunder shall be limited to the
cost of performing such work.  Landlord
shall perform all maintenance work hereunder as expeditiously as reasonably
practicable (without overtime or premium time labor) and shall make
commercially reasonable efforts to minimize any interference with Tenant’s use.


 


(b)                                 Landlord
shall maintain the parking areas, driveways, alleys and grounds surrounding the
Premises in a clean and sanitary condition, including, without limitation,
maintenance, repairs and replacements of (i) any drill or spur track servicing
the Premises, (ii) the exterior of the Building (including painting), (iii)
sprinkler systems and sewage lines, and (iv) any other items normally
associated with the foregoing.  Tenant
shall repair or replace, as applicable, and pay for any damage caused to such
parking areas, driveways, alleys and grounds by a Tenant Party (as defined in
Section 23.(a) below) or caused by Tenant’s default hereunder.


 


(c)                                  The
cost of performing Landlord’s maintenance and repair obligations shall be an
Operating Expense (except to the limited extent any such cost is specifically
excluded from being an Operating Expense pursuant to Section 2.(c) above).


 


6

















 


5.                                       TENANT’S
MAINTENANCE AND REPAIR OBLIGATIONS.


 


(a)                                  Tenant
shall maintain all parts of the Premises (except for maintenance work for which
Landlord is expressly responsible under Section 4 above) in good condition and
promptly make all necessary repairs and replacements to the Premises, and
Tenant waives all rights under, and benefits of, subsection 1 of Section 1932
and Sections 1941 and 1942 of the California Civil Code and under any similar
law or ordinance now or hereafter in effect. 
Tenant shall also be responsible for the cleaning and sweeping of the
Premises and for the removal of any trash which originates from the
Premises.  Tenant shall be responsible
for disposal of its trash from the Premises and will maintain adequate
receptacles for such disposal, the design, placement and capacity of such
receptacles to be subject to the prior approval of Landlord.  Outdoor storage of trash or any other
material and receptacles or containers not approved by Landlord is strictly
prohibited.  At its sole cost and
expense, Tenant shall provide interior pest and insect extermination at the
Premises as often as is reasonably necessary to eliminate any pests or insects,
whether endemic to the Building or specific to the Premises or Tenant’s use
thereof.


 


(b)                                 Subject
to Landlord’s obligations set forth in Section 4.(c) above, Tenant shall
maintain the hot water equipment and the HVAC System in good repair and
condition and in accordance with all applicable Laws and with such equipment
manufacturers’ suggested operation/maintenance service program. Tenant shall
enter into a regularly scheduled (at least monthly) preventive
maintenance/service contract for the hot water equipment and the HVAC System,
in form and substance and with a contractor reasonably acceptable to Landlord,
and deliver copies thereof to Landlord. At least fourteen (14) days before the
end of the Term, Tenant shall deliver to Landlord a certificate from an
engineer reasonably acceptable to Landlord certifying that the hot water
equipment and the HVAC System are then in good repair and working order.


 


(c)                                  If
Tenant fails to perform any of Tenant’s maintenance or repair obligations, and
if such failure continues for thirty (30) days after written notice thereof is
delivered to Tenant, then Landlord may perform such obligation, in which event
Tenant shall pay to Landlord the reasonable cost incurred by Landlord in
performing such obligation within thirty (30) days after Landlord’s written
request therefor; provided, however, that if, by the nature of such maintenance
or repair, Tenant cannot reasonably complete the work within the 30-day period
described above, Landlord shall not perform such maintenance or repair
obligation so long as Tenant commences such maintenance or repair with due
diligence and dispatch within the 30-day period described above, and, having so
commenced, thereafter performance such maintenance and repair with diligence
and dispatch and completes the same.


 


(d)                                 Tenant
acknowledges that Landlord is not providing security services of any kind to
the Premises or for Tenant’s property and that the keys given to Tenant for the
Premises may not be secure.  At its
expense, Tenant shall provide whatever security and/or alarm systems Tenant
deems necessary or appropriate for the protection of the Premises and of
Tenant’s personal property and personnel located therein, including, if Tenant
desires to do so, installing new locks for the Premises with


 


7

















 


new keys. Tenant shall provide
to Landlord copies of all keys and access codes to allow Landlord entry to the
Premises. In no event shall Landlord be responsible for, and Tenant waives any
and all claims arising from, the loss or damage to any of Tenant’s personal
property situated in and on the Premises, even though Landlord may have
provided general area security or guard services. Landlord may elect to, but
shall have no obligation to, provide general area security or guard services.
In the event Landlord elects to provide general area security or guard
services, it may discontinue such security or guard services with at least
thirty (30) days’ notice. At its expense, Tenant is also responsible for the
maintenance, repair, or replacement of any mechanical, security, and fire
protection systems which Tenant has installed within the Premises. Tenant is
expressly advised that if Tenant should place any fixtures, inventory or
equipment in or on the Premises prior to the time the Premises are completed
and delivered to the Tenant, the risk of loss or damage to such inventory,
fixtures, or equipment will be greatly increased in view of the fact that, out
of necessity, numerous people will be permitted access to the Premises for the
purpose of completion of any work. All such risk of loss or damage shall be
borne exclusively by the Tenant and not by the Landlord, and the Tenant hereby
waives any claim for any such loss or damage against the Landlord.


 


6.                                       ALTERATIONS.  
Tenant shall not make any alterations, additions or improvements to the
Premises (collectively, “Alterations”)
without the prior written consent of Landlord; provided, however, that
Landlord’s consent shall not be required for Alterations to the interior of the
Premises that are reasonably anticipated to cost less than Fifty Thousand
Dollars ($50,000.00), provided that such Alterations do not affect, or require
work to be performed on, the Building’s Structure, the HVAC System or any
Building systems, including, without limitation, the electrical, life-safety,
plumbing and fire protection systems (collectively, the “Building Systems”)  (such alterations, additions or
improvements are herein referred to as “Minor
Alterations”).  Landlord
shall not be required to notify Tenant of whether it consents to any
Alterations until it (a) has received plans and specifications therefor which
are sufficiently detailed to allow construction of the work depicted thereon to
be performed in a good and workmanlike manner, and (b) has had a reasonable
opportunity to review them. If the Alterations will affect the Building’s
Structure, HVAC System, or other Building Systems, then the plans and
specifications therefor must be prepared by a licensed engineer acceptable to
Landlord. Landlord’s approval of any plans and specifications shall not be a
representation or warranty that the plans or the work depicted thereon will
comply with applicable Laws or be adequate for any purpose, but shall merely be
Landlord’s consent to performance of the work by Tenant. Upon completion of any
Alterations, Tenant shall deliver to Landlord accurate, reproducible as-built
plans therefor. Tenant may erect shelves, bins, machinery and trade fixtures
provided that such items (1) do not alter the basic character of the Premises
or the Building; (2) do not overload or damage the same; and (3) may be removed
without damage to the Premises. Unless Landlord specifies in writing otherwise,
all Alterations shall be Landlord’s property when installed in the Premises;
provided, however, the following shall remain Tenant’s property: (i) furniture,
movable equipment and other personal property that is not attached to the floors,
walls, or ceiling of the Premises; and (ii) any other fixture, equipment, or
other item, regardless of the manner of attachment, that is used primarily in
Tenant’s trade or


 


8

















 


business and that can be
removed as a separate physical unit without damage to the Building and without
interference with other tenants’ use and enjoyment of their leased premises.
All work performed by a Tenant Party in the Premises (including that relating
to the installation, repair, replacement, or removal of any item) shall be
performed in accordance with all applicable Laws and with Landlord’s
specifications and requirements, in a good and workmanlike, lien-free manner,
and so as not to damage or alter the Building’s Structure or the Premises. In
connection with any such Alterations, Tenant shall pay to Landlord an
administration fee of five percent (5%) of all costs incurred for such work.
Upon expiration of the Term or termination of Tenant’s right to possess the
Premises, Landlord may require Tenant to remove Alterations installed in the
Premises by or at the request of Tenant (excluding the Initial Improvements
described on Exhibit “B”),
to repair any damage to the Premises caused by such removal, and to restore the
Premises to good condition and repair, ordinary wear and tear excepted. If
Landlord elects to require Tenant to remove any Alterations, it may do so by
delivering to Tenant written notice thereof at the time Landlord consented to
the Alterations or at any time thereafter. Attached hereto as Exhibit “C”  is a list of trade
fixtures, equipment, or other items that shall remain the property of Tenant.
Subject to Landlord’s prior written approval, this list may be updated as
Alterations are made to the Premises.


 


7.                                       SIGNS.  
Tenant shall not place, install or attach any signage, decorations,
advertising media, blinds, draperies, window treatments, bars, or security
installations to the Premises or the Building without Landlord’s prior written
consent; provided, however, that Landlord agrees that Tenant may install the
signage approved by Landlord and shown on the Final Working Drawings (as
defined in Exhibit “B”
attached hereto) (the “Pre-Approved
Signage”). Tenant shall repair, paint, and/or replace any
portion of the Premises or the Building damaged or altered as a result of its
signage when it is removed (including, without limitation, any discoloration of
the Building). Except for the Pre-Approved Signage, Tenant shall not (a) make
any changes to the exterior of the Premises or the Building, (b) install any
exterior lights, decorations, balloons, flags, pennants, banners or paintings;
or (c) erect or install any signs, windows or door lettering, decals, window or
storefront stickers, placards, decorations or advertising media of any type
that is visible from the exterior of the Premises without Landlord’s prior
written consent. Landlord shall not be required to notify Tenant of whether it
consents to any sign until it (1) has received detailed, to-scale drawings thereof
specifying design, material composition, color scheme, and method of
installation, and (2) has had a reasonable opportunity to review them.


 


8.                                       UTILITIES.


 


(a)                          Tenant shall obtain and pay
for all water, gas, electricity, heat, telephone, sewer, sprinkler charges and
other utilities and services used at the Premises, together with any taxes,
penalties, surcharges, deposits, maintenance charges, and the like pertaining
to Tenant’s use of such utilities within the Premises. Tenant or Landlord may,
at Tenant’s expense, separately meter and bill Tenant directly for its use of
any such utility service, in which case, the amount separately billed to Tenant
for Building—standard utility service shall not be duplicated in Tenant’s
obligation


 


9

















 


to pay Tenant’s Proportionate
Share of Operating Expenses under Section 2.(c) above. All amounts due from
Tenant under this Section 8 shall be payable immediately upon Landlord’s
request therefor.


 


(b)                                 If
solely as a result of Landlord’s gross negligence or willful misconduct,
Landlord fails to provide an Essential Service (as hereinafter defined) which
Landlord is required to provide to the Premises pursuant to the terms of this
to Section 8 (an “Abatement Condition”),
which prevents Tenant from occupying all or a material portion of the Premises
(the “Abatement Space”),
then Tenant may elect, by notice to Landlord, to have Base Rent and Tenant’s
Proportionate Share of Operating Expenses and Taxes abate, subject to the following
additional conditions having been satisfied in each instance:


 


(i)                                     With
respect to the Abatement Condition in question, Tenant shall have given notice
to Landlord of the occurrence thereof, which notice shall designate the cause
or suspected cause of the Abatement Condition, if known to Tenant, and the
portion of the Premises which is not usable by Tenant, and the Abatement
Condition in question shall have continued after Tenant has given such notice
for a period of not less than seven (7) consecutive days; and


 


(ii)                                  Tenant,
solely because of the occurrence of the Abatement Condition, shall have
actually vacated the Abatement Space for not less than seven (7) consecutive
days after giving its notice to Landlord of the Abatement Condition.


 


If, with respect
to the Abatement Condition in question, the conditions of this Section 8.(b)
are fulfilled, then Base Rent and Tenant’s Proportionate Share of Operating
Expenses and Taxes shall abate, in the proportion that the rentable square foot
area of the Abatement Space actually vacated bears to the rentable square foot
area of the Premises, for a period equal to the lesser of (A) the period during
which Tenant has actually vacated the Abatement Space, or (B) the period of
time between Tenant’s having vacated the Abatement Space and the date Tenant
receives notice from Landlord that the Abatement Condition has been cured,
provided that such time periods shall not commence to run until the day after
Tenant gives Landlord notice of the Abatement Condition as required above. For
purposes of this Section 8.(b), vacation of the Abatement Space shall not
require Tenant to remove furniture, fixtures or equipment. Tenant shall be
deemed to have vacated the Abatement Space if, due to the Abatement Condition,
the Abatement Space is not occupiable by Tenant, and Tenant does not in fact
conduct any business in or use the Abatement Space. Tenant agrees that
furnishing Landlord with notice of the Abatement Condition shall be an election
of remedies, and Tenant shall be deemed to have waived any other rights against
Landlord at law or in equity, including, but not limited to, an action for
money damages in connection with the Abatement Condition in question. Nothing
contained herein shall limit Tenant’s right to an abatement of rent or
termination of this Lease in the case of a Casualty as provided in Section 10
hereof. For purposes hereof, an “Essential
Service” shall mean the standard services to be provided by the
heating, ventilation and air conditioning systems, life safety systems,
mechanical systems, plumbing and waste disposal systems and electrical systems
to the extent Landlord is


 


10

















 


required to provide such
services to the Premises pursuant to the terms of this Section 8.


 


(c)                                  Except
as expressly provided above, Landlord shall not be liable for any interruption
or failure of utility service to the Premises, and Tenant hereby waives the
provisions of California Civil Code Section 1932(1) or any other
applicable Laws permitting the termination of this Lease due to such failure or
interruption.


 


9.                                    INSURANCE.  
Tenant shall maintain (a) workers’ compensation insurance (with a waiver
of subrogation endorsement reasonably acceptable to Landlord) and commercial
general liability insurance (with contractual liability endorsement), including
personal injury and property damage in the amount of $2,000,000 per occurrence
combined single limit for personal injuries and death of persons and property
damage occurring in or about the Premises, plus umbrella coverage of at least
$5,000,000 per occurrence, (b) fire and extended coverage insurance covering
(1) the replacement cost of all alterations, additions, partitions and
improvements installed in the Premises by or on behalf of a Tenant Party
(including the Initial Improvements described on Exhibit “B”), and (2) the replacement cost of all of
Tenant’s personal property in the Premises, and (c) business interruption
insurance and such other insurance as any Landlord’s Mortgagee (as defined in
Section 21.(a) below) may reasonably require, provided that any such other
insurance shall be reasonably consistent with the insurance requirements of
prudent landlords of comparable projects in the vicinity of the Project. Such
policies shall (A) name Landlord, Landlord’s agents, and their respective
affiliates (as defined in Section 23.(a) below), as additional insureds (and as
loss payees on the fire and extended coverage insurance), (B) be issued by an
insurance company licensed to do business in the State of California with a
Best’s Guide Insurance Rating of A-VII, or better, and otherwise acceptable to
Landlord, (C) provide that such insurance may not be canceled unless thirty
(30) days’ prior written notice is first given to Landlord, (D) be delivered to
Landlord by Tenant before the Commencement Date and at least 30 days before
each renewal thereof, and (E) provide primary coverage to Landlord when any
policy issued to Landlord is similar or duplicate in coverage, in which case
Landlord’s policy shall be excess over Tenant’s policies.


 


Landlord shall procure and maintain throughout the Term, the cost of
which shall be included as an Operating Expense, (1) fire and extended coverage
insurance covering the Building in an amount not less than the full replacement
cost of the Building, and (2) such other insurance as Landlord or Landlord’s
Mortgagee (hereinafter defined) shall require.


 


10.                              CASUALTY DAMAGE.


 


(a)                                  Tenant
immediately shall give written notice to Landlord of any damage to the Premises
or the Building. If the Premises or the Building are totally destroyed by an
insured peril, or so damaged by an insured peril that, in Landlord’s reasonable
estimation, rebuilding or repairs cannot be substantially completed within 180
days after the date of Landlord’s actual knowledge of such damage, then either


 


11

















 


Landlord or (if a Tenant Party
did not cause such damage) Tenant may terminate this Lease by delivering to the
other written notice thereof within thirty (30) days after such damage, in
which case, the rent shall be abated during the unexpired portion of this
Lease, effective upon the date such damage occurred. Time is of the essence
with respect to the delivery of such notices.


 


(b)                                 Subject
to Section 10.(c) below, if this Lease is not terminated under Section 10.(a),
then Landlord shall restore the Premises to substantially its previous
condition, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and other improvements
or personal property required to be covered by Tenant’s insurance under Section
9. If the Premises are untenantable, in whole or in part, during the period
beginning on the date such damage occurred and ending on the date of
substantial completion of Landlord’s repair or restoration work (the “Repair Period”), then the rent for
such period shall be reduced to such extent as may be fair and reasonable under
the circumstances and the Term shall be extended by the number of days in the
Repair Period.


 


(c)                                  If
the Premises are destroyed or damaged by any peril not covered by the insurance
maintained by Landlord or any Landlord’s Mortgagee requires that insurance
proceeds be applied to the indebtedness secured by its Mortgage (defined below)
or to the Primary Lease (defined below) obligations, Landlord may terminate
this Lease by delivering written notice of termination to Tenant within thirty
(30) days after such destruction or damage or such requirement is made known by
any such Landlord’s Mortgagee, as applicable, whereupon all rights and
obligations hereunder shall cease and terminate, except for any liabilities of
Tenant which accrued before this Lease is terminated.


 


(d)                                 If
the Premises are destroyed or damaged by any peril not covered by the insurance
maintained by Landlord and, in Landlord’s reasonable estimation, rebuilding or
repairs cannot be substantially completed within 180 days after the date of
such damage, then (if a Tenant Party did not cause such damage) Tenant may
terminate this Lease by delivering to Landlord written notice thereof within
thirty (30) days after Tenant’s receipt of Landlord’s estimation of the time to
repair such damage, in which case, the rent shall be abated during the
unexpired portion of this Lease, effective upon the date such damage occurred.
Time is of the essence with respect to the delivery of such notices.


 


(e)                                  The
provisions of this Lease, including this Section 10, constitute an express
agreement between Landlord and Tenant with respect to any and all damage to, or
destruction of, all or any part of the Premises or the Building, and any
statute or regulation of the State of California, including, without
limitation, subsection 2 of Section 1932, subsection 4 of Section 1933, and Sections
1941 and 1942 of the California Civil Code, with respect to any rights or
obligations concerning damage or destruction in the absence of an express
agreement between the parties, and any other statute or regulation, now or
hereafter in effect, shall have no application to this Lease or any damage or
destruction to all or any part of the Premises or the Building.


 


12

















 


11.                                 LIABILITY, INDEMNIFICATION, WAIVER OF SUBROGATION AND NEGLIGENCE.


 


(a)                                  Subject
to Section 11.(b) below, Tenant shall, to the maximum extent permitted by Law,
protect, indemnify, defend, and hold harmless Landlord, its successors,
assigns, agents, employees, contractors, partners, directors, officers and
affiliates (collectively, the “Indemnified
Parties”) from and against all fines, suits, losses, costs,
liabilities, claims, demands, actions and judgments of every kind or character
(1) arising from Tenant’s failure to perform its covenants hereunder, (2)
arising from, or caused, wholly or in part, by a Tenant Party or any other
person entering upon the Premises under or with a Tenant Party’s express or
implied invitation or permission, (3) arising from or out of the occupancy or
use of the Premises by a Tenant Party or arising from or out of any occurrence
in the Premises, howsoever caused, or (4) suffered by, recovered from or
asserted against any of the Indemnified Parties by the employees, agents,
contractors, or invitees of Tenant or its subtenants or assignees. However,
such indemnification of the Indemnified Parties by Tenant shall not be
applicable if such loss, damage, or injury is caused by the sole active
negligence or willful misconduct of Landlord or any of its duly authorized
agents or employees.


 


(b)                                 Landlord
and Tenant both waive any claim it might have against the other for any damage
to or theft, destruction, loss, or loss of use of any property, to the extent
the same is insured against under any insurance policy maintained by it that
covers the Building, the Premises, Landlord’s or Tenant’s fixtures, personal
property, leasehold improvements, or business, or is required to be insured
against by the waiving party under the terms hereof, regardless of whether the
negligence or fault of the other party caused such loss. Each party shall cause
its insurance carrier to endorse all applicable policies waiving the carrier’s
rights of recovery under subrogation or otherwise against the other party.


 


12.                                 USE.


 


(a)                                  The
Premises shall be used only for receiving, storing, shipping and selling
clothing products, materials and merchandise made or distributed by Tenant and
for such other lawful purposes as may be incidental thereto; however, no retail
sales may be made from the Premises. Tenant shall not use, or permit the use
of, the Premises to receive, store or handle any product, material or
merchandise that is explosive or highly inflammable or hazardous. Outside
storage is prohibited. Tenant shall be solely responsible for complying with
all Laws applicable to the use, occupancy, and condition of the Premises.
Tenant and all Tenant Parties shall comply with all reasonable non-arbitrary
rules and regulations governing the use and occupancy of the Premises which are
now or hereafter imposed by Landlord. A copy of the rules and regulations now
in force are attached as Exhibit “D”.
Tenant shall not cause or permit any objectionable or unpleasant odors, smoke,
dust, gas, light, noise or vibrations to emanate from the Premises; nor take or
permit any other action that would constitute a nuisance or would disturb,
unreasonably interfere with, or endanger Landlord or any other person; nor
cause or permit the Premises to be used for any purpose or in any manner that
would (1) void the insurance thereon, (2) materially increase the insurance


 


13

















 


risk, or (3) cause the
disallowance of any sprinkler credits. Tenant shall pay to Landlord on demand
any increase in the cost of any insurance on the Premises or the Building
incurred by Landlord which is caused by Tenant’s use of the Premises.


 


(b)                                 Tenant
and its employees and invitees shall have the non-exclusive right to use, in
common with others, a proportionate share of the parking spaces in the Project
(based on the ratio from time to time of the Net Rentable Area of the Premises
to the Net Rentable Area of the Project) which Landlord has designated for such
use, subject to (1) such reasonable rules and regulations as Landlord may
promulgate from time to time and (2) rights of ingress and egress of other tenants
and their employees, agents and invitees. Landlord shall not be responsible for
enforcing Tenant’s parking rights against third parties.


 


13.                                 INSPECTION.  
Landlord and Landlord’s agents and representatives may enter the
Premises during business hours to: inspect the Premises; to make such repairs
as may be required or permitted under this Lease; to perform any unperformed
obligations of Tenant hereunder; and to show the Premises to prospective
purchasers, mortgagees, ground lessors, and (during the last six (6) months of
the Term) tenants. During the last six (6) months of the Term, Landlord may
erect a sign on the Premises indicating that the Premises are available. Tenant
shall notify Landlord in writing of its intention to vacate the Premises at least
sixty (60) days before Tenant will vacate the Premises; such notice shall
specify the date on which Tenant intends to vacate the Premises (the “Vacation Date”). At least thirty
(30) days before the Vacation Date, Tenant shall arrange to meet with Landlord
for a joint inspection of the Premises. After such inspection, Landlord shall
prepare a list of items, if any, that Tenant must perform before the Vacation
Date. If Tenant fails to arrange for such inspection, then Landlord may conduct
such inspection and Landlord’s determination of the work Tenant is required to
perform before the Vacation Date shall be conclusive.  If Tenant fails to perform such work before the Vacation Date,
then Landlord may perform such work at Tenant’s cost. Tenant shall pay all
reasonable costs incurred by Landlord in performing such work within ten days
after Landlord’s request therefor.


 


14.                                 ASSIGNMENT AND SUBLETTING.


 


(a)                                  Tenant
shall not, without the prior written consent of Landlord, which consent
Landlord shall not unreasonably withhold, (1) advertise that any portion of the
Premises is available for lease or cause or allow any such advertisement, (2)
assign, transfer, or encumber this Lease or any estate or interest herein,
whether directly or by operation of law, (3) if Tenant is an entity other than
a corporation whose stock is publicly traded, permit the transfer of an
ownership interest in Tenant so as to result in a change in the current control
of Tenant, (4) sublet any portion of the Premises, (5) grant any license, concession,
or other right of occupancy of any portion of the Premises, or (6) permit the
use of the Premises by any parties other than Tenant (any of the events listed
in Sections 14.(a)(2) through 14.(a)(6) being a “Transfer” and any person or entity to whom any
Transfer is made or sought to be made is hereinafter sometimes referred to as a
“Transferee”).


 


14

















 


(b)                                 If
Tenant requests Landlord’s consent to a Transfer, then Tenant shall provide
Landlord with a written description of all terms and conditions of the proposed
Transfer, copies of the proposed documentation, the portion of the Premises to
be Transferred (herein called the “Subject
Space”) and the following information about the proposed
Transferee: name and address; satisfactory information about its business and
business history; its proposed use of the Premises; banking, financial, and
other credit information; and general references sufficient to enable Landlord
to determine the proposed Transferee’s creditworthiness and character
(collectively, the “Notice of Proposed
Transfer”). Tenant shall reimburse Landlord for its reasonable
attorneys’ fees and other expenses incurred in connection with considering any
request for its consent to a Transfer, up to a maximum of One Thousand Five
Hundred Dollars ($1,500.00).


 


(c)                                  If
Landlord consents to a proposed Transfer, then the proposed Transferee shall
deliver to Landlord a written agreement whereby it expressly assumes the
Tenant’s obligations hereunder (however, any Transferee of less than all of the
space in the Premises shall be liable only for obligations under this Lease
that are properly allocable to the space subject to the Transfer, and only to
the extent of the rent it has agreed to pay Tenant therefor).  Landlord’s consent to a Transfer shall not
release Tenant from performing its obligations under this Lease, but rather
Tenant and its Transferee shall be jointly and severally liable therefor.
Tenant hereby waives its rights under Section 2819 of the California Civil Code
or any similar statute or law now or hereafter in effect, and agrees that
Landlord may consent to subsequent assignments or subletting of this Lease or
amendments or modifications to this Lease with assignees of Tenant, without notifying
Tenant, or any successor of Tenant, and without obtaining its or their consent
thereto, and such action shall not relieve Tenant of its liability under this
Lease. If an Event of Default occurs while the Premises or any part thereof are
subject to a Transfer, then Landlord, in addition to its other remedies, may
collect directly from such transferee all rents becoming due to Tenant and
apply such rents against Tenant’s rent obligations. Tenant authorizes its
transferees to make payments of rent directly to Landlord upon receipt of
notice from Landlord to do so.


 


(d)                                 Notwithstanding
the foregoing, Landlord’s consent shall not be required for the following
Transfers (herein referred to as “Permitted
Transfers” and a Transferee under any such Permitted Transfer is
herein referred to as a “Permitted
Transferee”): (i) an assignment of this Lease to a Transferee
that purchases all or substantially all of the assets of Tenant, or to a
Transferee that is the resulting entity of a merger or consolidation of Tenant
with another entity, or (ii) an assignment or subletting of all or a portion of
the Premises to an affiliate of Tenant; provided that (1) Tenant shall not be
in default (beyond applicable notice and cure periods ) in the performance of
any of its obligations under this Lease at the time of the Transfer; (2) Tenant
delivers to Landlord a Notice of Proposed Transfer with respect to such
proposed Transfer at least thirty (30) days prior to the effective date thereof
and promptly supplies Landlord with any documents or information reasonably
requested by Landlord regarding such Transfer or Transferee, including, but not
limited to, copies of the sublease or instrument of assignment, copies of
documents establishing to the reasonable satisfaction of Landlord that the
transaction in question is one described in


 


15

















 


clause (i) or (ii) above; and
(3) any such proposed Transfer is made for a good faith operating business
purpose and not, whether in a single transaction or in a series of
transactions, be entered into as a subterfuge to evade the obligations and
restrictions relating to Transfers set forth in this Section 14. In the event
of a transfer to a Permitted Transferee, Tenant shall not be released from performing
its obligations under this Lease, but rather Tenant and the Permitted
Transferee shall be jointly and severally liable therefor.


 


(e)                                  Tenant
hereby assigns, transfers and conveys one-half of all consideration received by
Tenant under any Transfer (excluding Permitted Transfers), which are in excess
of (i) the rents payable by Tenant under this Lease, plus (ii) the unamortized
cost of the Initial Improvements, and any other Alterations to the Premises
paid for by Tenant (such amortization to be made on a straight-line basis over
the initial Term), and Tenant shall hold such amounts in trust for Landlord and
pay them to Landlord within twenty (20) days after receipt.


 


15.                                 CONDEMNATION.  
If more than 50% of the Premises is taken for any public or quasi—public
use by right of eminent domain or private purchase in lieu thereof (a “Taking”), and the Taking prevents
or materially interferes with the use of the remainder of the Premises for the
purpose for which they were leased to Tenant, either party may terminate this
Lease by delivering to the other written notice thereof within thirty (30) days
after the Taking, in which case rent shall be abated during the unexpired
portion of the Term, effective as of the date of such Taking. If (a) less than
50% of the Premises are subject to a Taking or (b) more than 50% of the
Premises are subject to a Taking, but the Taking does not prevent or materially
interfere with the use of the remainder of the Premises for the purpose for
which they were leased to Tenant, then neither party may terminate this Lease,
but the rent payable during the unexpired portion of the Term shall be reduced
to such extent as may be fair and reasonable under the circumstances. All
compensation awarded for any Taking shall be the property of Landlord and
Tenant assigns any interest it may have in any such award to Landlord.
Specifically, and without limiting the generality of the foregoing, said
assignment is intended to include: (i) the “bonus value” represented by the
difference, if any, between rent under this Lease and market rent for the
unexpired Term; (ii) the value of improvements to the Premises, whether said
improvements were paid for by Landlord or by Tenant; and (iii) the value of any
and all other items and categories of property for which payment of
compensation may be made in any such proceeding. Notwithstanding the foregoing,
Tenant shall be entitled to receive any award of compensation for (1) loss of
or damage to the goodwill of Tenant’s business and lost profits (but only to the
extent the same does not constitute “bonus value”), (2) the taking of trade
fixtures and equipment owned and paid for by Tenant (meaning the trade
fixtures, furniture, and personal property placed in the Premises by Tenant and
described on Exhibit “C”),
and (3) any moving or relocation expenses which Tenant is entitled under the
law to recover directly from the public agency which acquires the Premises.
Tenant hereby waives sections 1265.110 through 1265.160 of the California Code
of Civil Procedure.


 


16

















 


16.                                 SURRENDER OF PREMISES, HOLDING OVER.


 


(a)                                  No
act by Landlord shall be an acceptance of a surrender of the Premises, and no
agreement to accept a surrender of the Premises shall be valid unless it is in
writing and signed by Landlord. At the end of the Term or the termination of
Tenant’s right to possess the Premises, Tenant shall (1) deliver to Landlord
the Premises with all improvements located thereon in good repair and
condition, reasonable wear and tear (subject however to Tenant’s maintenance
obligations) excepted, and with the HVAC System and hot water equipment, any
remaining light fixtures (including ballasts), and overhead doors and related
equipment in good working order, (2) deliver to Landlord all keys to the
Premises, and (3) remove all signage placed on the Premises, the Building, or
the Land by or at Tenant’s request. All fixtures, alterations, additions, and
improvements (whether temporary or permanent) shall be Landlord’s property and
shall remain on the Premises except as provided in the next two sentences.
Tenant may remove all trade fixtures, furniture, and personal property placed
in the Premises by Tenant and described on Exhibit
“C” (but Tenant shall not remove any such item which was paid
for, in whole or in part, by Landlord). Additionally, Tenant shall remove such
alterations, additions, improvements, fixtures, equipment, wiring, furniture,
and other property as Landlord may request in writing (excluding the Initial
Improvements described on Exhibit “B”),
provided such request is made within six (6) months after the end of the Term.
All items so requested to be moved which are not so removed shall, at the
option of Landlord, be deemed abandoned by Tenant and may be appropriated,
sold, stored, destroyed, or otherwise disposed of by Landlord without notice to
Tenant and without any obligation to account for such items and Tenant shall
pay for the costs incurred by Landlord in connection therewith. Any such
disposition shall not be considered a strict foreclosure or other exercise of
Landlord’s rights in respect of the security interest granted under Section 26
below. All work required of Tenant under this Section 16.(a) shall be
coordinated with Landlord and be done in a good and workmanlike manner, in
accordance with all applicable Laws, and so as not to damage the Building or
unreasonably interfere with other tenants’ use of their premises. Tenant shall,
at its expense, repair all damage caused by any work performed by Tenant under
this Section 16.(a). Without limiting the generality of the foregoing, delivery
of the Premises in compliance with this Section 16.(a) shall require that
Tenant cause the following (which is not an exclusive list) to be true as of
the date of surrender:


 


(i)                                     All
interior lights are operational and burning.


 


(ii)                                  All
exhaust, ceiling and overhead fans are operational.


 


(iii)                               Warehouse
floor is broom swept and clean of all trash and materials.


 


(iv)                              Warehouse
floor is cleaned of excessive oils, fluids and other foreign materials.


 


17

















 


(v)                                 All
electrical, plumbing, and other utilities which are terminated are
disconnected, capped and/or terminated according to applicable building codes
and all other governmental requirements.


 


(vi)                              Overhead
interior and exterior doors are operational and in good condition.


 


(vii)                           Any
bolts secured to floor are cut off flush and sealed with epoxy.


 


(viii)                        All
furniture, trash and debris are removed.


 


(ix)                                All
pictures, posters, signage, stickers and all similar items are removed from all
walls, windows, doors and all other interior and exterior surfaces of the
Premises.


 


(x)                                   Carpet
areas are vacuumed.


 


(xi)                                All
uncarpeted office floors are swept and any excess wax buildup on tile and vinyl
floors is removed.


 


(xii)                             All
Tenant installed computer cable is removed to point of origin.


 


(xiii)                          All
doors, windows, and miscellaneous hardware are operational if Landlord so
requires.


 


(xiv)                         All
heating, air conditioning and mechanical equipment is operational and in good
working condition.


 


(xv)                            Ceiling
tiles, grid, light lenses, air grills and diffusers are in place with no holes
or stains.


 


(xvi)                         There are
no broken windows or other glass items.


 


(xvii)                      Bathroom
walls, floors, and fixtures are clean.


 


(xviii)                   All plumbing
fixtures are intact and operational and do not leak.


 


(xix)                           Inside
walls are reasonably clean and any holes in the walls or roof are properly and
permanently patched.


 


(xx)                              If
Tenant fails to vacate the Premises at the end of the Term, then Tenant shall
be a Tenant at sufferance and Tenant shall pay, in addition to the other rent
due hereunder, a daily Base Rent equal to (i) for the first sixty (60) days,
One Hundred Fifty Percent (150%) of the daily Base Rent payable during the last
month of the Term, and (ii) thereafter and until such time as the Premises are
surrendered, Two


 


18

















 


Hundred Percent (200%) of the
daily Base Rent payable during the last month of the Term.  Additionally, Tenant shall defend,
indemnify, and hold harmless Landlord from any damage, liability and expense
(including attorneys’ fees and expenses) incurred because of such holding
over.  No payments of money by Tenant to
Landlord after the Term shall reinstate, continue or extend the Term, and no
extension of this Term shall be valid unless it is in writing and signed by
Landlord and Tenant.


 


17.                                 QUIET ENJOYMENT.   Provided Tenant has fully performed its
obligations under this Lease, Tenant shall peaceably and quietly hold and enjoy
the Premises for the Term, without hindrance from any party claiming by,
through, or under Landlord.


 


18.                                 EVENTS OF DEFAULT.   Each of the following events shall
constitute an “Event of Default”
under this Lease:


 


(a)                                  Tenant
fails to pay any rent when due or any payment or reimbursement required under
any other lease with Landlord when due.


 


(b)                                 The
filing of a petition by or against Tenant or any guarantor of Tenant’s
obligations hereunder (1) in any bankruptcy or other insolvency proceeding; (2)
seeking any relief under any debtor relief Law; (3) for the appointment of a
liquidator, receiver, trustee, custodian, or similar official for all or
substantially all of Tenant’s property or for Tenant’s interest in this Lease;
or (4) for reorganization or modification of Tenant’s capital structure
(however, if any such petition is filed against Tenant, then the filing of such
petition shall not constitute an Event of Default, unless it is not dismissed
within 60 days after the filing thereof).


 


(c)                                  Tenant
fails to discharge any lien placed upon the Premises in violation of Section 22
below within thirty (30) days after any such lien or encumbrance is filed
against the Premises.


 


(d)                                 Tenant
fails to comply with any term, provision or covenant of this Lease (other than
those listed above in this Section 18), and such failure continues for thirty
(30) days after written notice thereof to Tenant.


 


19.                                 REMEDIES.


 


(a)                                  If
an Event of Default occurs, Landlord shall have the right at any time to give a
written termination notice to Tenant and, on the date specified in such notice,
Tenant’s right to possession shall terminate and this Lease shall
terminate.  Upon such termination,
Landlord shall have the right to recover from Tenant:


 


(i)                                     The
worth at the time of award of all unpaid rent which had been earned at the time
of termination;


 


(ii)                                  The
worth at the time of award of the amount by which all unpaid rent 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;


 


19

















 


(iii)                               The
worth at the time of award of the amount by which all unpaid rent for the
balance of the Lease Term after the time of award exceeds the amount of such
rental loss that Tenant proves could be reasonably avoided; and


 


(iv)                              All
other amounts necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform all of Tenant’s obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom.  The “worth at the
time of award” of the amounts referred to in clauses (i) and (ii) above shall
be computed by allowing interest at the Interest Rate set forth in Section
23.(k).  The “worth at the time of
award” of the amount referred to in clause (iii) above shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%).  For the purpose of determining unpaid rent under clauses (i),
(ii) and (iii) above, the rent reserved in this Lease shall be deemed to be the
total rent payable by Tenant under Sections 2 and 3 hereof.  For purposes of computing the amount of rent
hereunder that would have accrued after the time of award, the amounts of
Tenant’s obligations to pay increases in Operating Expenses and Taxes shall be
projected based upon the average rate of increase, if any, in such items from
the Commencement Date through the time of award.


 


(b)                                 Even
though Tenant has breached this Lease, this Lease shall continue in effect for
so long as Landlord does not terminate Tenant’s right to possession, and
Landlord shall have all of its rights and remedies, including the right,
pursuant to California Civil Code Section 1951.4, to recover all rent as it
becomes due under this Lease, if Tenant has the right to sublet or assign,
subject only to reasonable limitations. 
Acts of maintenance or preservation or efforts to relet the Premises or
the appointment of a receiver upon initiative of Landlord to protect Landlord’s
interest under this Lease shall not constitute a termination of Tenant’s right
to possession unless written notice of termination is given by Landlord to
Tenant.


 


(c)                                  If
Tenant shall fail to perform any act required to be performed by it hereunder
or to pay any sum of money required to be paid by it hereunder (other than Base
Rent), or shall fail to cure any default and such failure shall continue beyond
any applicable notice and grace period set forth herein, then Landlord may, at
its option, and without waiving or releasing Tenant from any of its obligations
hereunder, make any such payment or perform any such act on behalf of
Tenant.  All sums so paid and all costs
incurred by Landlord in taking such action shall be deemed additional rent and
shall be paid to Landlord on demand.


 


(d)                                 The
remedies provided for in this Lease are in addition to all other remedies
available to Landlord at law or in equity by statute or otherwise.  Tenant, to the greatest extent permitted by
law, waives redemption or relief from forfeiture under Section 1174 and 1179 of
the California Code of Civil Procedure, or under any other present or future
law, in the event Tenant is evicted or Landlord takes possession of the
Premises by reason of any default of Tenant hereunder.


 


20

















 


20.                                 LANDLORD’S DEFAULT.    If Landlord fails to perform any of its
obligations hereunder within thirty (30) days after written notice from Tenant
specifying such failure, Tenant’s exclusive remedy shall be an action for
damages.  Unless Landlord fails to so
cure such default after such notice, Tenant shall not have any remedy or cause
of action by reason thereof.  In the
event Landlord shall be delayed, hindered or prevented from the performance of
any act required hereunder of Landlord by reason of acts of God, strikes,
lockouts, labor disputes, weather, labor troubles, inability to procure
materials, the acts of Tenant or other causes beyond the reasonable control of
Landlord, then the performance of such act shall be excused for the period of
the delay and the period for the performance of any such act shall be extended
for a period equivalent to the period of such delay.  Liability of Landlord to Tenant for any default by Landlord shall
be limited to the actual and direct, but not consequential, special or
punitive, damages therefor and shall be recoverable only from the interest of
Landlord in the Building and the Land, and neither Landlord nor Landlord’s
partners, shareholders, officers, directors, employees, agents or attorneys
shall have any personal liability therefor.


 


21.                                 MORTGAGES.


 


(a)                                  This
Lease shall be subordinate to any deed of trust, mortgage or other security
instrument (a “Mortgage”),
and any ground lease, master lease, or primary lease (a “Primary Lease”) that now or
hereafter covers any portion of the Premises (the mortgagee under any Mortgage
or the lessor under any Primary Lease is referred to herein as “Landlord’s Mortgagee”), and to
increases, renewals, modifications, consolidations, replacements, and
extensions thereof.  However, any
Landlord’s Mortgagee may elect to subordinate its Mortgage or Primary Lease (as
the case may be) to this Lease by delivering written notice thereof to
Tenant.  The provisions of this Section
21 shall be self-operative, and no further instrument shall be required to
effect such subordination; however, Tenant shall from time to time within twenty
(20) days after request therefor, execute any instruments that may be required
by any Landlord’s Mortgagee to evidence the subordination of this Lease to any
such Mortgage or Primary Lease.  If
Tenant fails to execute the same within such 20-day period, Landlord may
execute the same as attorney-in-fact for Tenant.  Tenant also agrees to modify this Lease as reasonably requested
by Landlord’s Mortgagee which does not cause increased expense to Tenant, a
decrease in Tenant’s rights under this Lease, or otherwise materially adversely
affect Tenant’s interest under this Lease.


 


(b)                                 With
respect to any Mortgage or Primary Lease to which this Lease is now or shall
hereafter become subordinate, Landlord shall use commercially reasonable
efforts to obtain from the Landlord’s Mortgagee, for the benefit of Tenant, a
non-disturbance agreement, in the usual form of such Landlord’s Mortgagee,
providing generally that as long as Tenant is not in default under this Lease,
this Lease will not be terminated if such Landlord’s Mortgagee acquires title
to the Project by reason of foreclosure proceedings, acceptance of a deed in
lieu of foreclosure, or termination of the leasehold interest of Landlord,
provided that Tenant attorns to such Landlord’s Mortgagee in accordance with
its requirements.  Except for making such
commercially reasonable efforts, Landlord will be under no duty or obligation
hereunder with respect


 


21

















 


to
any Mortgage or Primary Lease, nor will the failure or refusal of any
Landlord’s Mortgagee(s) to grant a non-disturbance agreement render Landlord
liable to Tenant, or affect this Lease, in any manner.  Tenant will bear all costs and expenses
(including attorneys’ fees) of the Landlord Mortgagee(s) in connection with
Landlord’s reasonable efforts to obtain a non-disturbance agreement.


 


(c)                                  Tenant shall attorn to any party succeeding to Landlord’s interest in
the Premises, whether by purchase, foreclosure, deed in lieu of foreclosure,
power of sale, termination of lease, or otherwise, upon such party’s request,
and shall execute such agreements confirming such attornment as such party may
reasonably request.  Tenant shall not
seek to enforce any remedy it may have for any default on the part of Landlord
without first giving written notice by certified mail, return receipt
requested, specifying the default in reasonable detail to any Landlord’s
Mortgagee whose address has been given to Tenant, and affording such Landlord’s
Mortgagee a reasonable opportunity to perform Landlord’s obligations hereunder.


 


(d)                                 Notwithstanding any such attornment or
subordination of a Mortgage or Primary Lease to this Lease, the Landlord’s
Mortgagee shall not be liable for any acts of any previous landlord, shall not
be obligated to install the Initial Improvements, and shall not be bound by any
amendment to which it did not consent in writing nor any payment of rent made
more than one month in advance.


 


22.                                 ENCUMBRANCES.    Tenant has no authority,
express or implied, to create or place any lien or encumbrance of any kind or
nature whatsoever upon, or in any manner to bind Landlord’s property or the
interest of Landlord or Tenant in the Premises or the Building or to charge the
rent 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 shall pay or cause to
be paid all sums due for any labor performed or materials furnished in
connection with any work performed on the Premises by or at the request of
Tenant.  Tenant shall give Landlord
immediate written notice of the placing of any lien or encumbrance against the
Premises.


 


23.                                 MISCELLANEOUS.


 


(a)                                  Words of any gender used in this Lease shall
include any other gender, and words in the singular shall include the plural,
unless the context otherwise requires. 
The captions inserted in this Lease are for convenience only and in no
way affect the interpretation of this Lease. 
The following terms shall have the following meanings: “Laws” shall mean
all federal, state, and local laws, rules, and regulations; all court orders,
governmental directives, and governmental orders; and all restrictive covenants
affecting Tenant or the Premises, and “Law” shall mean any of the foregoing; “affiliate” shall mean any person or entity which,
directly or indirectly, controls, is controlled by, or is under common control
with the party in question; and “Tenant Party” shall include Tenant, any assignees claiming
by, through, or under Tenant, any subtenants claiming by, through, or under
Tenant, and any of their respective agents, contractors, employees, and
invitees.


 


22

















 


(b)                                 Landlord may transfer and assign, in whole or
in part, its rights and obligations in the Building and property that are the
subject of this Lease, in which case Landlord shall have no further liability
hereunder provided that Landlord’s assignee assumes all of Landlord’s
obligations under this Lease.  Each
party shall furnish to the other, promptly upon demand, a corporate resolution,
proof of due authorization by partners, or other appropriate documentation
evidencing the due authorization of such party to enter into this Lease.


 


(c)                                  Tenant shall, from time to time, within 20
days after request of Landlord, deliver to Landlord, or Landlord’s designee, a
certificate of occupancy for the Premises, financial statements for itself and
any guarantor of its obligations hereunder, evidence reasonably satisfactory to
Landlord that Tenant has performed its obligations under this Lease, and an estoppel
certificate stating that this Lease is in full effect, the date to which rent
has been paid, the unexpired Term and such other factual matters pertaining to
this Lease as may be requested by Landlord. 
Tenant’s obligation to furnish the above-described items in a timely
fashion is a material inducement for Landlord’s execution of this Lease.
Tenant’s failure to deliver said statement in the time required shall be
conclusive upon Tenant that: (i) this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) there are
no uncured defaults in Landlord’s performance and Tenant has no right of
offset, counterclaim or deduction against rent under this Lease and (iii) no
more than one month’s Base Rent has been paid in advance.


 


(d)                                 This Lease constitutes the entire agreement
of the Landlord and Tenant with respect to the subject matter of this Lease,
and contains all of the covenants and agreements of Landlord and Tenant with
respect thereto.  Landlord and Tenant
each acknowledge that 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 not expressly set forth
in this Lease are of no effect.  This
Lease may not be altered, changed or amended except by an instrument in writing
signed by both parties hereto.


 


(e)                                  All obligations of Tenant hereunder not fully
performed by the end of the Term shall survive, including, without limitation,
all payment obligations with respect to Taxes and insurance and all obligations
concerning the condition and repair of the Premises. Tenant shall, prior to
vacating the Premises, pay to Landlord the prorated amount, as estimated by
Landlord, of Tenant’s obligation hereunder for Operating Expenses for the year
in which the Term ends.  All such
amounts shall be used and held by Landlord for payment of such obligations of
Tenant hereunder, with Tenant being liable for any additional costs therefor
upon demand by Landlord or with any excess to be returned to Tenant after all
such obligations have been determined and satisfied as the case may be.


 


(f)                                    The parties acknowledge and agree that no
rule of construction to the effect that any ambiguities are to be resolved
against the drafting parties shall be employed in the interpretation of this
Lease.  This Lease shall be construed
and


 


23

















 


interpreted
in accordance with the laws of the State of California.  If any provision of this Lease is illegal,
invalid or unenforceable, then the remainder of this Lease shall not be
affected thereby, and in lieu of each such provision, there shall be added, as
a part of this Lease, a provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be legal, valid and
enforceable.  Time is of the essence of
each provision of this Lease.


 


(g)                                 All references in this Lease to “the date
hereof” or similar
references shall be deemed to refer to the last date, in point of time, on
which all parties hereto have executed this Lease.


 


(h)                                 Landlord and Tenant each warrant to the other
that it has not dealt with any broker or agent in connection with this Lease
except for Colliers International. 
Tenant and Landlord shall each indemnify the other against all costs,
attorneys’ fees, and other liabilities for commissions or other compensation
claimed by any broker or agent claiming the same by, through, or under the
indemnifying party.  Landlord shall pay
Colliers International a real estate commission as per separate agreement.


 


(i)                                     If and when included within the term “Tenant”, as used in this instrument, there is more
than one person, firm or corporation, all shall jointly arrange among
themselves for their joint execution of a notice specifying an individual at a
specific address within the continental United States for the receipt of
notices and payments to Tenant.  All parties
included within the terms “Landlord” and “Tenant”, respectively, shall be bound by notices given in accordance with the
provisions of Section 24 to the same effect as if each had received such
notice.


 


(j)                                     The terms and conditions of this Lease are
confidential and Tenant shall not disclose the terms of this Lease to any third
party except as may be required by law or to enforce its rights hereunder.


 


(k)                                  Tenant shall pay interest on all past-due
rent from the date due until paid at an annual rate of interest (the “Interest
Rate”) equal to the
greater of (i) eighteen percent (18%) per year, or (ii) a rate equal to the sum
of five (5) percentage points over the publicly announced reference rate (the “Reference
Rate”) charged on such
due date by the San Francisco Main Office of Bank of America NT & SA (or
any successor bank thereto) (or if there is no such publicly announced rate,
the rate quoted by such bank in pricing ninety (90) day commercial loans to
substantial commercial borrowers); provided, however, Tenant’s total liability
for interest payments under this Lease shall not exceed the limits, if any,
imposed on such payments by the usury laws of the State of California.


 


(l)                                     This Lease may be executed in any number of
counterparts, each of which shall be an original, but such counterparts
together shall constitute one and the same instrument.


 


(m)                               In case any suit or other proceeding shall be brought for an unlawful
detainer of the Premises or for the recovery of any rent due under the


 


24

















 


provisions
of this Lease or because of the failure of performance or observance of any
other term or covenant herein contained on the part of Landlord or Tenant, the
unsuccessful party in such suit or proceeding shall pay to the prevailing party
therein reasonable attorneys’ fees and costs which shall include fees and costs
of any appeal, all as fixed by the court. 
Any such attorneys’ fees and other expenses incurred by either party in
enforcing a judgment in its favor under this Lease shall be recoverable
separately from and in addition to any other amount included in such judgment,
and such attorneys’ fees obligation is intended to be severable from the other
provisions of this Lease and to survive and not be merged into any such
judgment.


 


(n)                                 Each party hereto shall not seek a jury
trial, hereby waives trial by jury, and hereby further waives any objection to
venue in the County of Solano and agrees and consents to personal jurisdiction
of the courts of the State of California, in any action or proceeding or
counterclaim brought by any party hereto against the other on any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises,
or any claim of injury or damage, or the enforcement of any remedy under any
statute, emergency or otherwise, whether any of the foregoing is based on this
Lease or on tort law.  No party will
seek to consolidate any such action in which a jury has been waived with any
other action in which a jury trial cannot or has not been waived.  It is the intention of the parties that
these provisions shall be subject to no exceptions.  By execution of this Lease the parties agree that this provision
may be filed by any party hereto with the clerk or judge before whom any action
is instituted, which filing shall constitute the written consent to a waiver of
jury trial pursuant to and in accordance with Section 631 of the California
Code of Civil Procedure.  No party has
in any way agreed with or represented to any other party that the provisions of
this Section 23.(n) will not be fully enforced in all instances.  The provisions of this Section 23.(n) shall
survive the expiration or earlier termination of this Lease.


 


24.                                 NOTICES.   
Each provision of this instrument or of any applicable Laws and other
requirements with reference to the sending, mailing or delivering of notice or
the making of any payment hereunder shall be deemed to be complied with when and
if the following steps are taken:


 


(a)                                  All rent shall be payable to Landlord at the
address for Landlord set forth below or at such other address as Landlord may
specify from time to time by written notice delivered in accordance
herewith.  Tenant’s obligation to pay
rent shall not be deemed satisfied until such rent has been actually received
by Landlord.


 


(b)                                 All payments required to be made by Landlord
to Tenant hereunder shall be payable to Tenant at the address set forth below,
or at such other address within the continental United States as Tenant may
specify from time to time by written notice delivered in accordance herewith.


 


(c)                                  Any notice or document required or permitted
to be delivered hereunder or under the laws of the State of California, including,
but not limited to, notice under the provisions of Section 1161 of the
California Code of Civil Procedure


 


25

















 


and Section 1946 of the
California Civil Code (each, a “Notice”), shall be made in writing and shall be
deemed to be delivered upon the earlier to occur of (1) tender of delivery (in
the case of a hand delivered notice), (2) deposit in the United States Mail,
postage prepaid, certified mail, return receipt requested, or (3) receipt by
facsimile transmission, in each case, addressed to the parties hereto at the
respective addresses set out next to their signatures below, or at such other
address as they have theretofore specified by written notice delivered in
accordance herewith; or, in the case of notice given to Tenant subsequent to
Tenant’s vacating, deserting, abandoning or surrendering the Premises, if
delivered to the Premises or any place where Tenant or any agent or employee of
Tenant may be found.  Tenant hereby
appoints as its agent to receive the service of process in any action, or any
notice required by law to be given prior to the commencement of any action, for
recovery of possession of the Premises or any part thereof, and to receive
service of all dispossessory or distraint proceedings and notices thereunder,
the person in charge of or occupying the Premises at the time, and, if no
person shall be in charge of or occupying the same, then such service may be
made by attaching the same on the main entrance of the Premises.  Tenant hereby agrees that service of notice
in accordance with the terms of this Lease shall be in lieu of the methods of
service specified in Section 1162 of the California Code of Civil
Procedure.  The provisions of subdivision
(a) of Section 1013 of the California Code of Civil Procedure, extending the
time within which a right may be exercised or an act may be done, shall not
apply to a notice given pursuant to this Lease.  Landlord may act through its property manager for the Project,
through its legal counsel or through any other person who may from time to time
be designated by Landlord in writing.


 


25.                                 HAZARDOUS WASTE.   The term “Hazardous Substances”, as used in
this Lease, shall mean pollutants, contaminants, toxic or hazardous wastes, or
any other substances, the removal of which is required or the use of which is
restricted, prohibited or penalized by any “Environmental
Law”, which term shall mean any Law relating to health,
pollution, or protection of the environment. 
Tenant hereby agrees that (a) no activity will be conducted on the
Premises that will produce any Hazardous Substances; (b) the Premises will not
be used in any manner for the storage of any Hazardous Substances, except for
de minimis quantities of general office supplies customarily used by office
tenants in the ordinary course of Tenant’s business their business, such as
copier toner, liquid paper, glue, ink and cleaning solvents (the “Permitted Materials”), provided
such Permitted Materials are properly stored in a manner and location
satisfying all Environmental Laws; (c) no portion of the Premises will be used
as a landfill or a dump; (d) Tenant will not install any underground tanks of
any type; (e) Tenant will not cause any surface or subsurface conditions to
exist or come into existence that constitute, or with the passage of time may
constitute a public or private nuisance; and (f) Tenant will not permit any
Hazardous Substances to be brought onto the Premises, except for the Permitted
Materials, and if so brought or found located thereon, the same shall be
immediately removed by Tenant, with proper disposal, and all required cleanup
procedures shall be diligently undertaken pursuant to all Environmental
Laws.  If at any time during or after
the Term, the Premises are found to be so contaminated or subject to such
conditions as a result of Tenant’s use of the Premises or breach of this Lease,
Tenant shall defend, indemnify and hold Landlord harmless from all claims,
demands, actions, liabilities, costs, expenses, damages and


 


26

















 


obligations of any nature
arising from or as a result of the use of the Premises by Tenant. Landlord may
enter the Premises and conduct environmental inspections and tests therein as
it may require from time to time, provided that Landlord shall use reasonable
efforts to minimize the interference with Tenant’s business.  Such inspections and tests shall be
conducted at Landlord’s expense, unless they reveal the presence of Hazardous
Substances (other than Permitted Materials) or that Tenant has not complied
with the requirements set forth in this Section 25, in which case Tenant shall
reimburse Landlord for the reasonable cost thereof within ten days after
Landlord’s request therefor.  Nothing in
this Section shall require Tenant to indemnify Landlord for any matters arising
out of or caused by the actions or omissions of Landlord, its employees,
agents, contractors, licensees, or invitees.


 


26.                                 RENEWAL OPTION.    Tenant shall be granted one (1) option to
renew this Lease for an additional term of ten (10) years on the terms and
conditions set forth in EXHIBIT “E”.


 


27.                                 RIGHT OF FIRST
OFFER.    Tenant
shall be granted a conditional right to make a first offer to lease additional
space in the Project on the terms and conditions set forth in EXHIBIT “F”


 


TENANT
ACKNOWLEDGES THAT (1) NO REPRESENTATIONS AS TO THE REPAIR OF THE PREMISES, NOR
PROMISES TO ALTER, REMODEL OR IMPROVE THE PREMISES HAVE BEEN MADE BY LANDLORD
(EXCEPT AS MAY BE SET FORTH IN EXHIBIT “B”
ATTACHED TO THIS LEASE), AND (2) THERE ARE NO REPRESENTATIONS OR WARRANTIES,
EXPRESSED, IMPLIED OR STATUTORY, THAT EXTEND BEYOND THE DESCRIPTION OF THE
PREMISES.


 


SIGNATURES ON FOLLOWING PAGE


 


27

















 


	
  TENANT:

  	
  LANDLORD:

  
	
   

  	
   

  
	
  BEBE STORES,
  INC.,

  	
  LINCOLN PO
  BENICIA LIMITED

  
	
  a California
  corporation

  	
  PARTNERSHIP,

  
	
   

  	
  a Delaware
  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  Lincoln-Benicia
  LLC,

  
	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
  its general
  partner

  
	
   

  	
   

  
	
  By:

  	
  /s/ Manny
  Mashouf

  	
   

  	
   

  	
  By:

  	
  Lincoln MM
  Benicia, Inc.

  
	
   

  	
  Name:

  	
  Manny
  Mashouf

  	
   

  	
   

  	
  a Texas
  corporation,

  
	
   

  	
  Title:

  	
  President
  & CEO

  	
   

  	
   

  	
  its managing
  member

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Lilliemae Stephens

  	
   

  	
  By:

  	
  /s/ John
  Herr

  
	
   

  	
  Name:

  	
  Lilliemae
  Stephens

  	
   

  	
   

  	
  Name:

  	
  John Herr

  
	
   

  	
  Title:

  	
  Vice
  President and General Counsel

  	
   

  	
   

  	
  Title:

  	
  VICE
  PRESIDENT

  
	
   

  	
   

  
	
  Address:

  	
  Address:

  
	
   

  	
   

  
	
  380 Valley
  Drive

  	
  Lincoln
  Property Company

  
	
  Brisbane, CA
  94005

  	
  500 North
  Akard Street

  
	
   

  	
  3300 Lincoln
  Plaza

  
	
   

  	
  Dallas, TX
  75201-3394

  
	
  Attention:
  Manny Mashouf

  	
  Attention:
  Gregory Courtwright

  
	
   

  	
   

  
	
  Telephone:
  (415) 715-3900

  	
  Telephone:
  (214) 740-3300

  
	
  Fax: (415)
  715-3939

  	
  Fax: (214)
  740-3460

  
	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
  Dated:

  	
  10-27-00

  
											



 


28

















 


EXHIBIT
“A-1”


 


LEGAL
DESCRIPTION


 


REAL PROPERTY in the City of
Benicia, County of Solano, State of California, described as follows:


 


PARCEL ONE:


 


Beginning at the most southerly
corner of Lot 6 as shown on the Subdivision Map for “Fleetside Industrial
Park”, recorded July 24, 1985 in Book 45 of Maps, at Pages 57 - 50, Solano
County Records, said point being a point on a curve concave to the southeast
having a radius of 2,032 feet and whose radial bears North 53o 48’ 41” West;
thence North 58o 33’ 10” West 698.33 feet; thence North 33o 26’ 50” East 82.16
feet to the beginning of a non-tangent curve concave to the southeast having a
radius of 11,359.17 feet and whose radial bears North 56o 39’ 25” West; thence
northerly along the curve 123.91 feet through a central angle of 0o 37’ 30” to
a point on a compound curve concave to the southeast having a radius of
5,629.60 feet and whose radial bears North 55o 55’ 35” West; thence northerly
along the curve 629.34 feet (629.35 record) through a central angle of 6o 24’
19”; thence South 52o 07’ 58” East 710.95 feet to a point on a non-tangent
curve concave to the northwest having a radius of 968.00 feet and whose radial
bears North 58o 41’ 58” West; thence southerly along the curve 110.94 feet
through a central angle of 6o 34’ 00”; thence South 37o 52’ 02” West 610.43
feet to the beginning of a tangent curve concave to the southeast having a
radius of 2,032 feet; thence southerly along the curve 59.53 feet through a
central angle of 1o 40’ 43” to the point of beginning.


 


PARCEL TWO:


 


A non-exclusive storm drain
easement for construction, maintenance of storm drainage facilities, works,
structures and lines, including reasonable rights of access thereto, as granted
in the Easement Deed recorded April 9, 1996, Series No. 96-22958, Solano County
Records, and being described as follows:


 


Being a portion of “New Lot 7” as
shown on the Lot Line Adjustment Map recorded Jun 15, 1994, Series No.
1994-58782, Solano County Records, beginning at the most southerly corner of
said “New Lot 7”; thence along the general southwest property line North 52o
07’ 58” West 10.03 feet; thence North 30o 42’ 31” East 8.75 feet; thence South
59o 17’ 29” East 10.00 feet to a point on a curve concave to the northwest
having a radius of 968.00 feet and whose radial bears North 59o 17’ 29” West;
thence southwest along the curve 10.00 feet through a central angle of 0o 35’
31” to the point of beginning.


 


A.P. Nos.:  080-301-200 and 210


 


****


 


A-1

















 


EXHIBIT
“A-2”


 


SITE PLAN OF PREMISES


 


[GRAPHIC]


 


A-2

















 


EXHIBIT
“B”


 


TENANT
WORK LETTER


 


This Tenant
Work Letter is attached to and forms a part of the Lease dated as of October
24, 2000 (the “Lease”), by and among LINCOLN PO BENICIA LIMITED PARTNERSHIP, a
Delaware limited partnership (“Landlord”), and BEBE STORES, INC., a California
corporation (“Tenant”) pertaining to certain premises located in the Lincoln
Distribution Center, Benicia, California. 
Except where clearly inconsistent or inapplicable, the provisions of the
Lease are incorporated into this Tenant Work Letter, and capitalized terms used
without being defined in this Tenant Work Letter shall have the meanings given
them in the Lease.


 


The purpose of
this Tenant Work Letter is to set forth the respective responsibilities of
Landlord and Tenant with respect to the design and construction of the Building
and all alterations, additions and improvements which Tenant may deem necessary
or appropriate to prepare the Premises for occupancy by Tenant under the Lease.


 


Landlord and
Tenant agree as follows:


 


1.                                       Definitions.  Wherever used in the Lease or this Tenant
Work Letter, the following terms are defined as follows:


 


1.1                                 “Building
Shell”  means the portion of the
Premises being constructed by Landlord as part of Landlord’s Work, including
the building structure, exterior walls, exterior glass, floor slab, roof,
parking lot, landscaping and the base for any street monument sign.  The Building Shell does not include any
elevators, stairs, HVAC, roof screens or thermal insulation.  Tenant shall be responsible for installing
the HVAC system for the Building.


 


1.2                                 “Initial
Improvements”  means the
alterations, additions and improvements which Tenant may deem necessary or
appropriate to prepare the Premises for occupancy by Tenant under the Lease
(excluding the Personal Property shown on Exhibit “C” to the Lease).


 


1.3                                 “Landlord’s
Work”  means the work specifically
described in Exhibit B-1 attached hereto. 
Landlord’s Work shall also include bringing telecommunications,
electrical and plumbing service to the Building (i.e., stubbed but not
distributed) and for installing the main fire sprinkler trunks (i.e., installed
but not distributed or “dropped”).


 


1.4                                 “Outside
Opening Date”  means the date six
(6) months following Building Shell Completion; provided, however, that the
Outside Opening Date shall be extended one day for each day that completion of
the Initial Improvements is delayed by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes therefor, governmental actions, civil commotion, fire or other
casualty, and other causes beyond Tenant’s reasonable control.


 


B-1

















 


1.5                                 “Building
Shell Completion”  means the date
when a notice of completion (or equivalent) is issued for the Building Shell by
the City of Benicia.  Tenant agrees and
acknowledges that Building Shell Completion may occur notwithstanding the fact
that certain tasks to be performed by Landlord have yet to be completed.  For instance, Tenant agrees that Building
Shell Completion may occur notwithstanding the fact that Landlord has not
completed certain “punch list” items, the parking lot and landscape
installation and/or street improvements, so long as such uncompleted items do
not materially affect Tenant’s ability to commence without interruption the
construction of the Initial Improvements.


 


1.6                                 “Tenant
Delay”  means any delay in Building
Shell Completion caused by or attributable to (a) any failure by Tenant to
perform its obligations under this Tenant Work Letter by or within the time
specified for such performance, or (b) any act, neglect, failure or omission of
Tenant or any of Tenant’s agents, employees, contractors or subcontractors
which interferes with Landlord’s ability to perform the Landlord’s Work.


 


1.7                                 “Tenant
Improvement Work”  means the work of
constructing the Initial Improvements.


 


2.                                       Delivery
of Premises.


 


2.1                                 Landlord’s
Work.  Landlord shall, at its sole
cost of expense, perform Landlord’s Work.


 


2.2                                 Tenant’s
Early Entry.  On reasonable prior
notice, Landlord will permit Tenant and Tenant’s Agents (as defined below) to
enter the Premises from time to time prior to Building Shell Completion as may
be reasonably necessary or appropriate. 
Tenant shall indemnify, protect, defend and hold Landlord and the other
Indemnitees harmless from and against any and all claims, losses, liability,
damages, costs or expenses (including, without limitation, attorneys’ fees and
costs) suffered or incurred by the Indemnified Parties arising from such entry.


 


3.                                       Design
and Approval of the Initial Improvements.


 


3.1                                 Selection
of Tenant’s Architect; Construction Drawings.


 


(a)                                  Tenant
shall retain an architect/space planner (“Tenant’s Architect”) to prepare the
Construction Drawings.  Tenant’s
Architect shall be subject to the written approval of Landlord, which approval
will not be unreasonably withheld, conditioned or delayed; provided, however,
Landlord approves Berger/Detmer as Tenant’s Architect.  Tenant shall retain engineering consultants
approved by Landlord, which approval shall not be unreasonably withheld,
conditioned or delayed, to prepare all plans and engineering working drawings
relating to the structural, mechanical, electrical, plumbing, HVAC, life-safety
and sprinkler work in the Premises in connection with the Initial
Improvements.  The plans and drawings to
be prepared by Tenant’s Architect and the engineers hereunder shall be known,
collectively, as the “Construction Drawings”.


 


B-2

















 


(b)                                 All
Construction Drawings shall be subject to Landlord’s approval, which approval
shall not be unreasonably withheld, conditioned or delayed.  Landlord’s sole interest in reviewing and
approving the Construction Drawings is to protect the Building and Landlord’s
interests, and no such review or approval by Landlord shall be deemed to create
any liability of any kind on the part of Landlord, or constitute a
representation on the part of Landlord or any person consulted by Landlord in
connection with such review and approval that the Construction Drawings are
correct or accurate, or are in compliance with any applicable Laws.  Prior to execution of the Lease, Landlord
has supplied Tenant with a set of drawings of the Building which Tenant may use
in connection with the preparation of the Construction Drawings, but Tenant
agrees that Landlord shall have no liability for the completeness or accuracy
thereof, and Tenant’s Architect shall be responsible for performing all
necessary field measurements and confirming the completeness and accuracy of
such drawings.


 


3.2                                 Space
Plans.  Prior to drafting any
Construction Drawings, Tenant shall furnish Landlord with Tenant’s final space
plans for the Premises (“Space Plans”). 
The Space Plans shall show locations of all proposed improvements,
including partitions, cabinetry, equipment and fixtures, shall identify
materials and finishes by location, and shall specify the location of any
proposed structural floor penetrations, any special HVAC requirements, the location
and description of any special plumbing requirements, and any special
electrical requirements.  In addition,
the Space Plans shall show telephone and telecommunications facilities, and
computer and electronic data facilities. 
Landlord shall approve or disapprove the Space Plans by written notice
given to Tenant within five (5) business days after receipt of the Space
Plans.  Landlord shall not unreasonably
withhold or condition its approval of the Space Plans. If Landlord disapproves
the Space Plans, Landlord shall return the Space Plans to Tenant with a
statement of Landlord’s reasons for disapproval, or specifying any required
corrections and/or revisions.  Landlord
shall approve or disapprove of any revisions to the Space Plans by written
notice given to Tenant within five (5) business days after receipt of such
revisions.  This procedure shall be
repeated until Landlord approves the Space Plans.


 


3.3                                 Final
Working Drawings.  Following
Landlord’s approval of the Space Plans, Tenant shall cause Tenant’s Architect
and the Engineers to prepare and submit for Landlord’s approval complete and
detailed construction plans and specifications, including a fully coordinated
set of architectural, structural, mechanical, fire protection, electrical and
plumbing working drawings for the Tenant Improvement Work, in a form which is
sufficiently complete to permit subcontractors to bid on the work, obtain all
required Permits (as hereinafter defined) and commence construction (the “Final
Working Drawings”).  Tenant shall
furnish Landlord with four (4) copies signed by Tenant of such Final Working
Drawings.  Landlord shall approve or
disapprove of the Final Working Drawings by giving written notice to Tenant
within five (5) business days after receipt thereof.  Landlord shall not unreasonably withhold, condition or delay its
approval of the Final Working Drawings, provided that, without limiting the
generality of the foregoing, Landlord shall be entitled to withhold its consent
to the Final Working Drawings if in Landlord’s good faith judgment, the Final
Working Drawings are inconsistent with, or do not conform to, the Space
Plans.  If Landlord


 


B-3

















 


disapproves the Final Working
Drawings, Landlord shall return the Final Working Drawings to Tenant with a
statement of Landlord’s reasons for disapproval and/or specifying any required
corrections or revisions.  Landlord
shall approve or disapprove of any such revisions to the Final Working Drawings
within five (5) business days after receipt of such revisions.  This procedure shall be repeated until
Landlord approves the Final Working Drawings (as so approved, the “Approved
Working Drawings”).


 


4.                                       Construction
of Initial Improvements.


 


4.1                                 Contracts
with Tenant’s Contractor and Subcontractors.


 


(a)                                  Tenant
shall retain a licensed general contractor as the contractor for the
construction of the Initial Improvements (“Tenant’s Contractor”).  Tenant’s Contractor must be experienced in
the performance of work comparable to the work of the Initial Improvements in
buildings comparable to the Building, and shall be subject to Landlord’s prior
approval, which approval shall not be unreasonably withheld, conditioned or
delayed.  All subcontractors, laborers,
materialmen and suppliers used by Tenant (such subcontractors, laborers,
materialmen and suppliers, together with Tenant’s Contractor, are collectively
referred to herein as “Tenant’s Agents”) must be approved in writing by
Landlord, which approval shall not be unreasonably withheld, conditioned or
delayed.


 


(b)                                 Tenant
shall furnish Landlord with true and correct copies of all construction
contracts between or among Tenant, Tenant’s Contractor and all subcontractors
relating to the Tenant Improvement Work, provided that Landlord’s review of
such contracts shall not relieve Tenant from its obligations under this Tenant
Work Letter nor shall such review be deemed to constitute Landlord’s
representation that such contracts comply with the requirements of this Tenant
Work Letter.  All such contracts shall
expressly provide that (i) the work to be performed thereunder shall be subject
to the terms and conditions of this Tenant Work Letter, and (ii) the Tenant
Improvement Work (or in the case of a subcontractor, the portion thereof
performed by such subcontractor) shall be warranted in writing to Tenant and
Landlord to be free from any defects in workmanship and materials for a period
of not less than one (1) year from the date of completion of the Tenant
Improvement Work.  Tenant agrees to give
to Landlord any assignment or other assurances which may be necessary to permit
Landlord to directly enforce such warranties (such warranties shall include,
without additional charge, the repair of any portion of the Building or Common
Areas which may be damaged as a result of the removal or replacement of the
defective Initial Improvements).  Tenant
shall cause Tenant’s Agents to engage only labor that is harmonious and
compatible with other labor working in the Building.  In the event of any labor disturbance caused by persons employed
by Tenant or Tenant’s Contractor, Tenant shall immediately take all actions
necessary to eliminate such disturbance. 
If at any time any of Tenant’s Agents interferes with any other occupant
of the Building, or hinders or delays any other work of improvement in the
Building, or performs any work which may or does impair the quality, integrity
or performance of any portion of the Building, including any building systems,
Tenant shall cause such subcontractor, laborer, materialman or supplier to
leave the Building and remove all tools, equipment


 


B-4

















 


and materials immediately upon
written notice delivered to Tenant, and, without limiting Tenant’s indemnity
obligations set forth in Section 11 of the Lease, Tenant shall reimburse
Landlord for all costs, expenses, losses or damages incurred or suffered by
Landlord resulting from the acts or omissions of Tenant’s Agents in or about
the Building.


 


4.2                                 Permits.  Tenant shall obtain all building permits and
other permits, authorizations and approvals which may be required in connection
with, or to satisfy all applicable Laws applicable to, the construction of the
Initial Improvements in accordance with the Approved Working Drawings (the
“Permits”).  Tenant agrees that neither
Landlord nor Landlord’s consultants shall be responsible for obtaining any
Permits or the certificate of occupancy for the Premises, and that obtaining
the same shall be Tenant’s responsibility; provided, however, that Landlord
will cooperate with Tenant in executing permit applications and performing
other ministerial acts reasonably necessary to enable Tenant to obtain any such
Permit or certificate of occupancy.  Any
amendments or revisions to the Approved Working Drawings that may be necessary
to obtain any such Permits or certificate of occupancy, or which may be
required by city officials or inspectors to comply with code rulings or
interpretations, shall be prepared by Tenant’s Architect, at Tenant’s expense, and
submitted to Landlord for Landlord’s review and approval as a Change Order
under Section 6 below.  If Landlord
disapproves of such amendments or revisions, Landlord shall return the same to
Tenant with a statement of Landlord’s reasons for disapproval, or specifying
any required corrections.  This
procedure shall be repeated until Landlord approves the amendments or revisions
and all Permits have been obtained for the Approved Working Drawings, as so
amended.


 


4.3                                 Commencement
of Work.  At least ten (10) days
prior to the commencement of construction of the Initial Improvements, or the
delivery of any construction materials for the Tenant Improvement Work to the
Building, whichever is earlier, Tenant shall submit to Landlord a notice
specifying the date Tenant will commence construction of the Initial
Improvements, the estimated date of completion of the Initial Improvements and
the construction schedule provided by Tenant’s Contractor.  In addition, prior to the commencement of
construction of the Initial Improvements, or the delivery of any construction
materials for the Tenant Improvement Work to the Building, whichever is
earlier, Tenant shall submit to Landlord the following: (a) all Permits
required to commence construction of the Initial Improvements; (b) a
certificate from Tenant stating that the costs which have theretofore been
incurred in connection with the design and construction of the Initial
Improvements, which costs of construction form a basis for the amount of the
construction contract; and (c) original certificates of insurance policies
obtained pursuant to this Tenant Work Letter, together with any endorsements
referred to in Section 4.6 below, confirming to Landlord’s reasonable
satisfaction compliance with the insurance requirements of this Tenant Work
Letter.


 


4.4                                 Performance
of Work.


 


(a)                                  Following
Building Shell Completion, Tenant shall be permitted to enter the Premises for
the sole purpose of constructing the Initial


 


B-5

















 


Improvements, provided that
Tenant’s occupancy of the Premises prior to the Commencement Date shall be
subject to all of the terms, covenants and conditions of the Lease (including,
without limitation, Tenant’s obligations under Section 11 (regarding Tenant’s
indemnity obligations).  Notwithstanding
any provision of the Lease to the contrary, Tenant shall pay for all utility
and other costs incurred by Landlord to the extent they relate to Tenant’s work
prior to the Commencement Date. 
Further, if Tenant occupies any part of the Premises prior to the
Commencement Date for purposes of doing business (as opposed to constructing
the Initial Improvements), then Tenant shall pay all Base Rent and Tenant’s
Proportionate Share of Operating Expenses and Real Property Taxes at the rate
for the first Lease Year prorated for any partial month.


 


(b)                                 Without
limiting the provisions of Section 4.4(a) above, all work performed by Tenant’s
Contractor shall strictly conform to the Approved Working Drawings, shall
comply with all applicable Laws (including building codes) and all applicable
standards of the American Insurance Association and the National Electrical
Code and all building material manufacturer’s specifications, shall comply with
all reasonable non-arbitrary rules and regulations from time to time adopted by
Landlord to govern construction in or about the Building, and shall be
performed in a good and professional manner and so as not to interfere with the
performance of any other work within the Building, or with Landlord’s
maintenance or operation of the Building. 
At all times during construction of the Initial Improvements, Landlord
and Landlord’s employees and agents shall have the right to enter the Premises
to perform Landlord’s Work, inspect the Tenant Improvement Work, and to require
the correction of any faulty work or any material deviation from the Approved
Working Drawings by written notice to Tenant. 
Tenant shall deliver notice to Landlord at least two (2) business days prior
to Tenant’s closing-up of any Tenant Improvement Work affecting the life
safety, telecommunications, heating, ventilation and air conditioning,
plumbing, electrical or other building systems in the Premises, in order to
give Landlord or Landlord’s agents an opportunity to inspect and approve the
same.  No inspection or approval by
Landlord of any such work shall constitute an endorsement thereof or any
representation as to the adequacy thereof for any purpose or the conformance
thereof with any applicable Laws, and Tenant shall be fully responsible and
liable therefor.  Tenant shall reimburse
Landlord for the cost of any repairs, corrections or restoration which must be
made, in Landlord’s good faith judgment, to the Premises or any other portion
of the Building, if caused by Tenant’s Contractor or any other of Tenant’s
Agents.


 


4.5                                 Outside
Opening Date.  Tenant agrees to
complete the Tenant Improvement Work and open for business in the Premises on
or before the Outside Opening Date.


 


4.6                                 Insurance.  At all times during the construction of the Initial
Improvements, in addition to the insurance required to be maintained by Tenant
under the Lease, Tenant shall require all of Tenant’s Agents to maintain (i)
Commercial General Liability Insurance with limits of not less than $2,000,000
combined single limit for bodily injury and property damage, including personal
injury and death, and Products and Completed Operations Coverage;  (ii) Comprehensive automobile liability
insurance with a policy limit of not less than $1,000,000 each accident for
bodily injury and


 


B-6

















 


property damage, providing
coverage at least as broad as the Insurance Services Office (ISO) Business Auto
Coverage form covering Automobile Liability, code 1 “any auto”, and insuring
against all loss in connection with the ownership, maintenance and operation of
automotive equipment that is owned, hired or non-owned; (iii) Worker’s
Compensation with statutory limits and Employer’s Liability Insurance with
limits of not less than $100,000 per accident, $500,000 aggregate disease
coverage and $100,000 disease coverage per employee.  In addition, Tenant shall carry “Builder’s Risk” insurance on a
replacement cost, agreed value basis, in an amount equal to at least the
initial sum of the construction contract(s) for the construction of the Initial
Improvements, and shall include loss or damage to the work of Tenant’s
Contractor and any subcontractors (the amount of this insurance to be adjusted
as needed to reflect any subsequent material changes), it being understood and
agreed that the Initial Improvements shall be insured by Tenant pursuant to
Section 9 of the Lease immediately upon completion thereof.  Tenant’s liability insurance shall be
written on an “occurrence” basis and shall name Landlord and Landlord’s
Mortgagee(s) as additional insureds (by endorsement reasonably acceptable to
Landlord).  The “Builder’s Risk”
insurance shall name Landlord and such other parties as Landlord may reasonably
specify as the loss payee(s), as their interest may appear, with respect to all
proceeds received therefrom.  All of the
insurance required to be carried by Tenant hereunder shall provide that it is
primary insurance, and not excess over or contributory with any other valid,
existing, and applicable insurance in force for or on behalf of Landlord, shall
provide that Landlord shall receive thirty (30) days’ written notice from the
insurer prior to any cancellation or material reduction of coverage, and shall
be placed with companies which are rated A:VII or better by Best’s Insurance
Guide and licensed to business in the State of California.  All deductibles and self-insured retentions
under Tenant’s policies are subject to Landlord’s reasonable approval, and all
insurance, except Workers’ Compensation, maintained by Tenant’s Agents shall
preclude subrogation claims by the insurer against anyone insured
thereunder.  Tenant’s compliance with
the provisions of this Section shall in no way limit Tenant’s liability under
any of the other provisions of the Lease.


 


4.7                                 Liens.  Tenant shall keep the Premises and the
Building free from any liens arising out of work performed, materials furnished
or obligations incurred by Tenant; provided, however, Tenant shall have the
right, at its sole cost and expense, to contest in good faith any such
mechanics’ or other liens so long as Tenant has posted a release bond in an
amount equal to one hundred fifty percent (150%) of the amount of the lien and
otherwise in accordance with applicable Laws. 
Should Tenant fail to remove any such lien (or record a bond as provided
above) within five (5) business days after notice to do so from Landlord,
Landlord may, in addition to any other remedies, record a bond pursuant to
California Civil Code Section 3143 and all costs and obligations incurred by
Landlord in so doing shall immediately become due and payable by Tenant to
Landlord as additional rent under the Lease. 
Landlord shall have the right to post and keep posted on the Premises
any notices that may be required or permitted by applicable Laws, or which
Landlord may deem to be proper, for the protection of Landlord and the Building
from such liens.  Promptly following
completion of construction, Tenant shall provide Landlord a copy of a final
unconditional lien release from Tenant’s Contractor and each of Tenant’s Agents
who performed work or supplied


 


B-7

















materials for the Initial Improvements.  Upon completion of construction, Tenant shall promptly record a
Notice of Completion in accordance with California Civil Code Section
3093 and provide a copy thereof to Landlord.


 


5.                                       Responsibility
for Design and Construction Costs. 
Landlord’s Work shall be performed by Landlord at Landlord’s sole cost
and expense and the Tenant Improvement Work shall be performed by Tenant at
Tenant’s sole cost and expense.  Except
as otherwise provided in the Lease, Tenant shall not be obligated to pay for
any chargebacks, reimbursables, fees, bonds, security deposits or barricades in
connection with Landlord’s Work or the Initial Improvements.


 


6.                                       Change
Orders.  Landlord will not
unreasonably withhold its approval of (a) any request by Tenant, or by Tenant’s
Contractor with Tenant’s approval, to amend or change the Approved Working
Drawings, or (b) any change or amendment to the Approved Working Drawings that
may be necessary to obtain any Permits, or which may be required by city
officials or inspectors to comply with code rulings or interpretations (any of
the foregoing, a “Change Order”).  No
material changes or modifications to the Approved Working Drawings shall be
made unless by written Change Order signed by Landlord and Tenant.  Tenant shall pay all costs attributable to
Change Orders, including reasonable costs incurred by Landlord in reviewing
proposed Change Orders.  Landlord agrees
to respond to any request for approval of a Change Order within three (3)
business days following Landlord’s receipt of such request.


 


7.                                       Ownership
of Initial Improvements.  The
Initial Improvements shall be deemed, effective upon installation, to be a part
of the Premises and the Building and shall be deemed to be the property of
Landlord (subject to Tenant’s right to use the same during the Term of the
Lease), and shall be surrendered at the expiration or earlier termination of
the Term, unless Landlord shall have conditioned its approval of the Final
Working Drawings or any Change Order on Tenant’s agreement to remove any items
thereof, in which event, prior to the expiration or termination of the Term,
the specified items shall be removed at Tenant’s expense, any damage caused by
such removal shall be repaired, and the Premises shall be restored to their
condition existing prior to the installation of the items in question, normal
wear and tear excepted.  The removal, repair
and restoration described above shall, at Landlord’s sole election, be
performed either by Tenant or by Landlord; and if such work shall be performed
by Landlord, Tenant shall pay to Landlord, within twenty (20) days following
Landlord’s demand, the reasonable cost and expense of such work.


 


B-8

















 


EXHIBIT
B-1


 


DESCRIPTION
OF LANDLORD’S WORK


 


Landlord’s Work is shown on
those certain plans prepared by Tulloch Construction dated January 16, 1998,
and identified as Job No. 2147.


 


B-9

















 


EXHIBIT
“C”


 


TENANT’S
PERSONAL PROPERTY


 


All furniture,
movable equipment and other personal property that is not attached to the
floors, walls or ceiling of the Premises; and any other fixture, equipment, or
other item, regardless of the manner of attachment, that is used primarily in
Tenant’s trade or business and that can be removed as a separate physical unit
without material damage to the Building and without unreasonable interference
with other tenants’ use and enjoyment of their leased premises, including,
without limitation, the following:


 


1.                                       the
personal property and fixtures of Tenant’s Customers, Contractors or Employees;
and


 


2.                                       lighting
fixtures.


 


 


[To be completed by Tenant after execution of
Lease, with final Exhibit C to be slip sheeted into original executed Lease]


 


C-1

















 


EXHIBIT
“D”


 


RULES
AND REGULATIONS


 


1.                                       Landlord
shall have the right to prescribe the weight, position and manner of
installation of heavy equipment which, if considered necessary by Landlord,
shall be installed in a manner which shall insure satisfactory weight
distribution.  The time, routing and
manner of moving such heavy equipment shall be subject to prior approval by
Landlord.


 


2.                                       Tenant,
or the employees, agents, visitors or licensees of Tenant, shall not at any
time place, leave or discard any rubbish, paper, articles or objects of any
kind whatsoever outside the doors of the Premises or the Property.  No animals or birds shall be brought or kept
in or about the Premises or the Property.


 


3.                                       Canvassing,
soliciting or peddling in or about the Premises or the Property is prohibited
and Tenant shall cooperate to prevent same.


 


4.                                       Landlord
shall have the right to exclude any person from the Property other than during
customary business hours, and any person in the Property will be subject to
identification by employees and agents of Landlord.  All persons in or entering the Property shall be required to
comply with the security policies of the Property.  If Tenant desires any additional security service for the
Premises or the Property, Tenant shall have the right (with the prior written
consent of Landlord) to obtain such additional service at Tenant’s sole cost
and expense.  Tenant shall keep doors to
unattended areas locked and shall otherwise exercise reasonable precautions to
protect its property from theft, loss or damage.  Landlord shall not be responsible for the theft, loss or damage
of any property or for any error with regard to the exclusion from or admission
to the Premises or the Property of any person. 
In case of invasion, mob, riot or public excitement, Landlord reserves
the right to prevent access to the Premises or the Property during the
continuance of same by closing the doors or taking other measures for the
safety of the tenants and protection of the Premises or the Property and
property or persons therewith.


 


5.                                       Tenant
shall not cause or permit any odors to permeate in or emanate from the Premises
or the Property, or permit or suffer the Premises or the Property to be
occupied or used in a manner offensive or objectionable to Landlord or other
occupants of the Premises or the Property by reason of light, radiation,
magnetism, noise, odors, and/or vibrations, or interfere in any way with other
tenants or those having business in the Premises or the Property.


 


6.                                       All
keys shall be returned to Landlord upon the termination of this Lease and
Tenant shall give to Landlord the explanations of the combinations of all
safes, vaults and combination locks remaining with the Premises.  Landlord may at all times keep a pass key to
the Premises.  All entrance doors to the
Premises shall be left closed at all times and left locked when the Premises
are not in use.


 


D-1

















 


7.                                       Tenant
shall give immediate notice to Landlord in case of any known emergency at the
Premises or the Property.


 


8.                                       Tenant
shall not advertise for temporary laborers giving the Premises or the Property
as an address, nor pay such laborers at a location in the Premises or the
Property.


 


9.                                       No
portion of the Premises or any part of the Property shall at any time be used
or occupied as sleeping or lodging quarters.


 


10.                                 The
toilet rooms, urinals, wash bowls and other apparatus in the Premises shall not
be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be thrown therein and the
expense of any breakage, stoppage or damage resulting from the violation of
this rule shall be borne by the Tenant who or whose employees or invitees shall
have caused it.


 


11.                                 Landlord
reserves the right to exclude or expel from the Property any person who, in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs,
or who shall in any manner do any act in violation of any of the Rules and
Regulations of the Premises or the Property.


 


12.                                 Landlord
reserves the right to rescind any of these rules and regulations and to make
such other and further rules and regulations as in its reasonable judgment
shall, from time to time, be required for the safety, protection, care and
cleanliness of the Property, the operation thereof, the preservation of good
order therein and the protection and comfort of the tenants and their agents,
employees, and invitees, which rules and regulations shall be binding upon it
in like manner as if originally herein prescribed.


 


13.                                 Tenant
shall park trailers and other oversized vehicles only in areas designated by
Landlord for the parking of trailers or oversized vehicles.


 


14.                                 Tenant
shall not utilize the Premises for outside storage except with the written
consent of Landlord.


 


D-2

















 


EXHIBIT
“E”


 


RENEWAL
OPTION


 


If, at the end
of the primary term of this Lease, Tenant is not in default of any of the
terms, conditions, or covenants of the Lease after notice and the expiration of
applicable cure periods, Tenant, but not any assignee or subtenant of Tenant,
is hereby granted one (1) option to renew this Lease for an additional term of
ten (10) years upon the same terms and conditions contained in this Lease with
the following exceptions:


 


1.                                       Renewal
option term will contain no further renewal options unless granted by Landlord
in writing; and


 


2.                                       Base
rent for the renewal term shall be based on ninety-five percent (95%) of the
then prevailing rental rates for properties of equivalent quality, size,
utility and location, with the length of the Lease term and credit standing of
Tenant to be taken into account; provided, however, that in no event will the
base rent for any year of the renewal term be less than the base rent payable
by Tenant for the twelve (12) month period immediately preceding the
commencement of the renewal term (without regard to any periods of rent
abatement on account of casualty, etc.). 
If Tenant desires to renew this Lease, Tenant will notify Landlord in
writing of its intention to renew no later than six (6) months prior to the
expiration date of the Lease, the time of such exercise being of the essence;
Landlord shall, within the next fifteen (15) days, after receipt of such
notice, deliver to Tenant the proposed rent and terms with respect to the
renewal term.  Tenant shall have fifteen
(15) days to accept or reject such proposed rent and terms.  In the event Tenant rejects such proposed
rent and terms and Landlord and Tenant are thereafter unable to agree upon the
rent and terms to be applicable during the renewal term within the thirty (30)
days after such rejection by Tenant after reasonably and in good faith
attempting to reach such an agreement, Tenant’s renewal option shall terminate
and thereafter be of no force or effect.


 


E-1

















 


EXHIBIT
“F”


 


RIGHT
OF FIRST OFFER


 


Subject to the
conditions set forth in this Exhibit “F”, Tenant shall have a right of first
offer to lease the remainder of the Building in which the Premises is located
(the “First Offer Space”),
in the event the First Offer Space becomes available for lease to third parties
during the Term (excluding the Renewal Term) following the initial leasing
thereof after the Commencement Date. 
Prior to leasing the First Offer Space to a third party, Landlord will
give notice to Tenant (an “Offering Notice”) specifying Landlord’s good faith
estimate of (i) the Base Rent which Landlord proposes to charge for the First
Offer Space, which Base Rent shall equal Landlord’s good faith estimate of the
prevailing market rate for the First Offer Space for a term equal to the
remainder of the Term (taking into account the Renewal Term), (ii) the
approximate date upon which the First Offer Space is anticipated to be
available for delivery, and (iii) any other material conditions or provisions
relating to the leasing of the First Offer Space which vary from the provisions
of this Lease.  If Tenant wishes to
lease the First Offer Space on the terms specified by Landlord in the Offering
Notice, Tenant shall so notify Landlord within ten (10) business days after
receipt thereof, which notice shall be unconditional and irrevocable.  Tenant may exercise its right of first offer
only with respect to all of the First Offer Space identified in the Offering
Notice, and only if Tenant intends to occupy such First Offer Space in
connection with its own reasonably foreseeable needs.


 


If Tenant
timely exercises its right to lease the First Offer Space, then except as
specified in this Exhibit “F” or in the Offering Notice (which shall govern to
the extent of any conflict with this Lease), the First Offer Space shall become
a portion of the Premises on all of the terms and conditions of this Lease for
the remainder of the Term (including any Renewal Term), provided that (i) Base
Rent for the First Offer Space shall be determined as specified above, (ii)
Tenant’s Proportionate Share of Operating Expenses and Taxes shall be adjusted
to reflect the addition of the First Offer Space, and (iii) the First Offer
Space shall be delivered in its then existing “as is” condition, without
obligation on the part of Landlord to make any repairs or construct any
improvements to the First Offer Space in connection with Tenant’s contemplated
use, or to demolish existing improvements therein, and Tenant shall be responsible
for the construction and installation, in accordance with the provisions of
Section 6 of the Lease, of any tenant improvements it desires to install within
the First Offer Space, at Tenant’s sole cost and expense.  Tenant shall commence paying Base Rent and
all additional rent with respect to the First Offer Space on the date of
delivery of the First Offer Space to Tenant in the condition required
hereunder.  Landlord shall promptly
prepare and Landlord and Tenant shall promptly execute an amendment to this
Lease reflecting the addition of the First Offer Space.  Tenant’s right of first offer under this
Exhibit “F” shall be a one-time right as to the First Offer Space.  If Tenant fails to timely notify Landlord
that it wishes to lease the First Offer Space, or if Tenant fails to execute
and deliver said lease amendment to Landlord within ten (10) business days
following receipt thereof by Tenant, Landlord may thereafter lease the First
Offer Space to any person on any terms and conditions it may deem appropriate,
including terms and conditions more favorable than the terms and conditions set
forth in the Offering Notice,


 


F-1

















 


and Tenant shall have no
further rights with respect to the First Offer Space, either at such time or at
any future time.


 


If Tenant
timely exercises its right to lease the First Offer Space, and Landlord fails
to deliver possession of all or any portion of the First Offer Space to Tenant
on or before the scheduled date for delivery of possession for any reason, this
Lease shall not be void or voidable and Landlord shall not be deemed in default
or otherwise liable to Tenant for any claims, damages, or liabilities in
connection therewith or by reason thereof, but Tenant shall have no obligation
to pay Base Rent or Tenant’s Proportionate Share of Operating Expenses or Taxes
with respect to the First Offer Space until possession of the First Offer Space
has been delivered to Tenant. 
Notwithstanding anything to the contrary set forth herein, if Tenant is
in default under this Lease beyond applicable notice and cure periods at the
time an Offering Notice would otherwise be required to be sent under this
Exhibit, or any other time following Tenant’s exercise of its right to lease
the First Offer Space and prior to the date upon which possession of the First
Offer Space is to be delivered to Tenant, Landlord shall have, in addition to
any other remedies, the right to terminate Tenant’s rights under this Exhibit
“F”, and in such event Landlord shall not be required to deliver the Offering
Notice or to deliver possession of the First Offer Space to Tenant.  If not earlier terminated, the rights of
Tenant pursuant to this Exhibit “F” shall automatically terminate upon the
Expiration Date.  Nothing contained in
this Exhibit “F” shall be deemed to impose any obligation on Landlord to
refrain from negotiating with existing or future tenants of the First Offer
Space, to withhold the First Offer Space from the market, or to take any other
action or omit to take any other action in order to make the First Offer Space
available to Tenant.


 


F-2

















 


FIRST
AMENDMENT OF LEASE


 


THIS FIRST
AMENDMENT OF LEASE (this “Amendment”) is made as of the “Effective Date” (defined
in Section 1.2 below), by and between LINCOLN PO BENICIA LIMITED PARTNERSHIP, a
Delaware limited partnership (“Landlord”),
and BEBE STORES, INC., a California corporation (“Tenant”).


 


R E C I T A L S:


 


A.            Landlord and Tenant entered into a
certain Lease Agreement dated as of October 24, 2000 (the “Lease”), for certain
premises located in the Lincoln Distribution Center, Benicia, California, as
more particularly described in the Lease (the “Premises”).  Capitalized terms used but not defined
herein shall have their respective meanings set forth in the Lease.


 


B.            As provided in the Tenant Work
Letter, attached to the Lease as Exhibit “B”, Landlord shall perform certain
improvements to the Premises (referred to in the Tenant Work Letter as
“Landlord’s Work”).  Landlord and Tenant
desire to modify the definition of Landlord’s Work under the Lease as more
particularly described herein.


 


NOW, THEREFORE, in
consideration of the agreements of Landlord and Tenant herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Landlord and Tenant hereby agree as follows:


 


1.             Addition to Landlord’s Work.  In addition to the Landlord’s Work described in Exhibit B-1
attached to the Lease, Landlord shall, at its cost (except as specified below),
(i) provide electrical service to the Premises at 1200 amps, 277/480 volts
(such service to be provided to a main panel and meter section within the
Premises); and (ii) construct and install a full height demising wall of
approximately 400 linear feet separating the Premises from the adjacent 96,000
square feet in the Building.  Within
thirty (30) days following receipt of reasonably detailed invoices therefor,
Tenant shall reimburse Landlord, as additional rent under the Lease, for the
cost of labor and materials (per bid from Tulloch Construction) associated with
the installation of the sheet rock on Tenant’s side of such demising wall.


 


2.             Miscellaneous. 
Except as modified by this Amendment, all of the terms, conditions and
provisions of the Lease shall remain in full force and effect and are hereby
ratified and confirmed.  This Amendment
contains the entire agreement of Landlord and Tenant with respect to the
subject matter hereof.  Tenant
acknowledges that all prior communications


 


1

















 


from Landlord or its agents are
not and were not, and shall not be construed to be, representations or
warranties of Landlord or its agents as to the matters communicated, and have
not and will not be relied upon by Tenant.


 


IN WITNESS
WHEREOF, the parties have caused this First Amendment of Lease to be executed
as of the day and year first written above.


 


	
  TENANT:

  	
   

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
  BEBE STORES,
  INC.,

  	
   

  	
  LINCOLN PO
  BENICIA LIMITED PARTNERSHIP,

  
	
  a California
  corporation

  	
   

  	
  a Delaware
  limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Lincoln-Benicia
  LLC,

  
	
   

  	
   

  	
   

  	
  a Delaware
  limited liability company,

  
	
   

  	
   

  	
   

  	
  its general
  partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Lincoln MM
  Benicia, Inc.

  
	
  By:

  	
  /s/ Manny
  Mashouf

  	
   

  	
   

  	
   

  	
  a Texas
  corporation,

  
	
   

  	
  Name:

  	
  Manny
  Mashouf

  	
   

  	
   

  	
   

  	
  its managing
  member

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Lilliemae Stephens

  	
   

  	
   

  	
   

  	
  By:

  	
  /s/ John
  Herr

  
	
   

  	
  Name:

  	
  Lilliemae Stephens

  	
   

  	
   

  	
   

  	
  Name:

  	
  John Herr

  
	
   

  	
  Title:

  	
  V.P. & General Counsel

  	
   

  	
   

  	
   

  	
  Title:

  	
  VICE
  PRESIDENT

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
  11/21/00

  	
   

  	
  Dated:

  	
  11-22-00

  
												



 


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