**Exhibit
        10.6**
 
 **RETAIL
        LEASE**
 
 between
 
 **LA
        CAÑADA PROPERTIES, INC.,**
 
 **a
        California corporation,**
 
 **as
        Landlord**
 
 and
 
 **SPORT
        CHALET, INC.,**
 
 a
        Delaware corporation,
 
 **as
        Tenant**
 
 La
        Cañada, California
  
  TABLE
        OF CONTENTS
 
 Page**1.**
              **Premises**
              **2****2.**
              **Improvements**
              **2****3.**
              **Term
                  of this Lease; Options to Extend the Term**
              **2****4.**
              **Rent**
              **4****5.**
              **Taxes
                  and Assessments**
              **5****6.**
              **Utilities**
              **6****7.**
              **Uses**
              **6****8.**
              **Tenant’s
                  Alterations, Additions or Improvements**
              **8****9.**
              **Common
                  Areas**
              **9****10.**
              **Common
                  Area Expenses**
              **10****11.**
              **Maintenance**
              **11****12.**
              **Insurance**
              **13****13.**
              **Indemnity**
              **14****14.**
              **Damage
                  and Destruction**
              **14****15.**
              **Condemnation**
              **15****16.**
              **Assignment
                  and Subletting**
              **15****17.**
              **Subordination
                  and Attornment**
              **16****18.**
              **Tenant
                  Defaults**
              **17****19.**
              **Landlord
                  Defaults**
              **18****20.**
              **Tenant’s
                  Property; Surrender; Holding Over**
              **18****21.**
              **Agreements**
              **19****22.**
              **Quiet
                  Enjoyment**
              **19****23.**
              **Estoppel
                  Statements**
              **19****24.**
              **Force
                  Majeure**
              **19****25.**
              **Signs**
              **19****26.**
              **Real
                  Estate Brokers**
              **19****27.**
              **Memorandum
                  of Lease**
              **19****28.**
              **Notices**
              **19****29.**
              **Attorneys’
                  Fees**
              **19****30.**
              **Waiver**
              **19****31.**
              **Lease
                  Binding Upon Successors**
              **19****32.**
              **Interpretation**
              **20****33.**
              **Interest**
              **20****34.**
              **Invalidity**
              **20****35.**
              **Time
                  of the Essence**
              **20****36.**
              **Governing
                  Law**
              **20****37.**
              **Approvals**
              **20****38.**
              **Counterparts**
              **20****39.**
              **Expedited
                  Dispute Resolution**
              **20****40.**
              **Termination
                  of Existing Lease**
              **20****41.**
              **Renaming
                  of Sport Chalet Drive**
              **21****42.**
              **Waiver
                  of Consequential Damages**
              **21**
  
  **43.**
              **Entire
                  Agreement**
              **21**
 
 Exhibit
        A
        - Site Plan
 Exhibit
        B
        - Legal Description of the Shopping Center
 Exhibit
        C
        - Construction of Premises
 Exhibit
        D
        - Approved Tenant Exterior Sign Specifications
 Exhibit
        E
        - List of Existing Exclusives
 Exhibit
        F
        - Memorandum of Lease
 Exhibit
        G
        - Form of Subordination, Non-Disturbance and Attornment
        Agreement
  
 
 **RETAIL
        LEASE**
 
 THIS
        RETAIL LEASE (this “ Lease ”)
        dated
        as of January 11, 2008, is entered into by and between LA CAÑADA PROPERTIES,
        INC., a California corporation (“ Landlord ”)
        and
        SPORT CHALET, INC., a Delaware corporation (“ Tenant ”).
 
 BASIC
        LEASE PROVISIONS
 
 Premises
                  Address:
              Premises
                  at an address to be determined within the Shopping Center to be
                  commonly
                  known as “La Cañada Flintridge Town Center”, located at the northeast
                  corner of Angeles Crest Highway and Foothill Boulevard, in La Cañada,
                  California.Lease
                  Term:
              “Initial
                  Term”
                  from the “Commencement
                  Date”
                  (as hereinafter defined) through the January 31 first occurring
                  following the expiration of one hundred twenty (120) full months
                  after the
                  Commencement Date, with options to extend the Term for three (3)
                  “Option
                  Terms”
                  (as hereinafter defined) of sixty (60) months
                  each.
 
 Minimum
        Rent:
 
 Period
                  of Term
              
              Minimum
                  RentCommencement
                  Date-Month 60
              
              1/12th
                  of $18.00 per square foot of Premises Floor AreaMonth
                  61-Expiration of Initial Term
              
              1/12th
                  of $19.80 per square foot of Premises Floor AreaFirst
                  Option Term
              
              1/12th
                  of $22.74 per square foot of Premises Floor AreaSecond
                  Option Term
              
              1/12th
                  of $24.84 per square foot of Premises Floor AreaThird
                  Option Term
              
              1/12th
                  of $27.84 per square foot of Premises Floor Area**Minimum
                  Rent during the Third Option Term shall equal the greater of (i)
                  $27.84
                  per square foot of Premises Floor Area, or (ii) the “Fair
                  Market Rental Rate”
                  (as hereinafter defined) as of the commencement of the Third Option
                  Term
                  as determined in accordance withSection
                  3(c)(ii)below.
  Percentage
                  Rent:
              Ten
                  percent (10%) of Tenant’s annual “Gross Sales” for any “Fiscal
                  Year” (as such terms are hereinafter defined) to the extent annual
                  Gross Sales for such Fiscal Year exceed $13,500,000.00 up to
                  $17,000,000.00 in annual Gross Sales, plus eight percent (8%) of
                  annual
                  Gross Sales for any such Fiscal Year to the extent annual Gross
                  Sales for
                  such Fiscal Year exceed $17,000,000.00.Security
                  Deposit:
              NonePermitted
                  Use:
              Display
                  and retail sale and lease of sporting equipment and apparel as
                  are from
                  time to time sold and leased in similar sized retail stores operated
                  by
                  Tenant in Southern California under the trade name “Sport Chalet” and for
                  no other use or purpose, subject to the provisions of Sections 7
                  and 16 below.Approximate
                  FloorArea
                  of the Premises:
              45,000
                  square feet exclusive of the “Mezzanine” and the “Side Yard”
                  (as such terms are hereinafter
                  defined).
  Address
                  of Landlord:
              Address
                  of Tenant:For
                  Delivery By U.S. Mail:
              Sport
                  Chalet, Inc.La
                  Cañada Properties, Inc.
              One
                  Sport Chalet DriveP.O.
                  Box 376
              La
                  Cañada, CA 91011La
                  Cañada, CA 91011
              Attn:
                  Mr. Dennis Trausch
  For
        Delivery Other than By U.S. Mail:
 La
        Cañada
        Properties, Inc.
 800
        Foothill Boulevard
 La
        Cañada, CA 91011
  Tenant’s
        Trade Name:   Sport
        Chalet
  Exhibits:
 A
              Site
                  PlanB
              Legal
                  Description of the Shopping CenterC
              Construction
                  of Premises
  1
 
 D
              Approved
                  Tenant Exterior Sign SpecificationsE
              Presently
                  Existing ExclusivesF
              Memorandum
                  of LeaseG
              Form
                  of Subordination, Non-Disturbance and Attornment
                  Agreement
 
 **1.PREMISES** .
 
 (a)  Landlord
        leases to Tenant and Tenant leases from Landlord certain premises (the
“ Premises ”)
        consisting of all or part of a building (the “ Building ”)
        either
        existing or to be constructed pursuant to this Lease approximately in the
        area
        shown on the “ Site
        Plan ”
        attached hereto as Exhibit
        A and
        incorporated herein by this reference, which Building contains or shall contain
        approximately forty-five thousand (45,000) square feet of “ Floor
        Area ”
(as
        hereinafter defined), together with certain improvements (the “ Improvements ”)
        located therein, for the “ Term ”
(as
        hereinafter defined), at the rental, and upon the terms, conditions and
        provisions set forth in this Lease. The Premises is a part of a larger
“ Shopping
        Center ”
located
        in the City of La Cañada, County of Los Angeles, State of California, shown on Exhibit
        A and
        legally described on Exhibit B attached
        hereto and incorporated herein by this reference. As used herein, the term
        “ Floor
        Area ”
shall
        mean all areas from time to time available, or held for the exclusive use
        and
        occupancy of occupants or future occupants of the Shopping Center (including,
        without limitation, mezzanines used for the customer accessible display or
        sale
        of merchandise, provided that mezzanines used for storage or display of
        merchandise which is not accessible to customers shall not be included in
        Floor
        Area), measured from the exterior surface of exterior walls and from the
        center
        of interior demising partitions. Floor Area shall not include any areas used
        for
        truck parking, loading or unloading, trash storage or sidewalk. The Premises
        shall be constructed with a mezzanine (the “ Mezzanine ”)
        for
        storage and/or display of merchandise which is not accessible to customers;
        provided, that it is acknowledged and agreed by the parties that the Mezzanine
        may not be used for office use. Neither the Mezzanine nor the Side Yard shall
        be
        deemed to constitute Floor Area under this Lease and Tenant shall not be
        liable
        for payment of rent or additional charges with respect to the Mezzanine or
        Side
        Yard. The parties agree and acknowledge that the Site Plan is not yet final
        and
        Landlord shall have the right to make changes to the Site Plan and the Shopping
        Center from time to time, subject to the provisions of Section
        9(c) below.
 
 (b)  The
        Floor
        Area of the Premises shall be the estimated Floor Area stated in Section
        1(a) above,
        unless and until adjusted pursuant hereto. Either party shall have the right
        to
        have a licensed architect measure the Floor Area of the Premises within ninety
        (90) days following initial occupancy by Tenant. If either party determines
        that
        the actual Floor Area of the Premises varies from that set forth in Section
        1(a) ,
        such
        party (the “ Recalculating
        Party ”)
        shall
        give notice to the other party of the Recalculating Party’s determination of the
        actual Floor Area of the Premises, together with reasonably detailed supporting
        documentation for the making of such determination. The other party shall
        have
        the right to confirm such calculation. In the event of a deviation from the
        Floor Area set forth in Section
        1(a) above,
        then such agreed upon amount of Floor Area shall be the Floor Area of the
        Premises for all purposes of this Lease and all calculations under this Lease
        which vary depending upon the amount of Floor Area within the Premises
        (including, without limitation, monthly Minimum Rent), shall be appropriately
        retroactively and prospectively adjusted, and any appropriate adjustment
        payment
        from one party to the other based upon such Floor Area shall be made within
        thirty (30) days of such agreement upon such Floor Area and the parties shall
        execute an amendment to this Lease confirming the Floor Area; provided, however,
        that unless specifically otherwise hereafter approved in writing by Tenant,
        in
        no event shall the Floor Area of the Premises for purposes of this Lease
        be
        deemed to contain more than forty-five thousand five hundred (45,500) square
        feet of Floor Area.
 
 (c)  The
        Premises shall also include, without such space being deemed to constitute
        Floor
        Area and without Tenant having to pay rental therefor, a side yard area adjacent
        to the Building containing approximately two thousand five hundred (2,500)
        square feet of area (the “ Side
        Yard ”),
        approximately in the area shown on Exhibit
        A ,
        which
        Side Yard shall contain a swimming pool (the “ Pool ”)
        and
        other ancillary improvements for use as a part of the Premises consistent
        with
        the Permitted Use under this Lease, to be constructed as shown on Schedule 1
        of Exhibit C
        attached hereto and in accordance with the terms of Exhibit
        C attached
        hereto.
 
 **2.IMPROVEMENTS** .
        Landlord shall, at Landlord’s sole cost and expense, perform certain work in
        connection with the construction of the Premises in accordance with Exhibit
        C attached
        hereto and incorporated herein by this reference (“ Landlord’s
        Work ”).
        Tenant shall, at Tenant’s sole cost and expense, install all improvements,
        furniture, trade fixtures, equipment, personal property and inventory in
        the
        Premises, except to the extent included in Landlord’s Work (collectively,
“ Tenant’s
        Work ”)
        in
        accordance with Exhibit
        C attached
        hereto.
 
 **3.TERM
        OF
        THIS LEASE; OPTIONS TO EXTEND THE TERM** .
 
 (a)  (i)  The
        “ Term ”
of
        this
        Lease shall be the period commencing upon the “ Commencement
        Date ”
(as
        hereinafter defined) and, unless sooner terminated or extended as herein
        provided, expiring on the January 31 first following the expiration of one
        hundred twenty (120) full months following the Commencement Date (such January
        31 is herein referred to as the “ Initial
        Term Expiration Date ”).
        As
        used herein, the term “ Commencement
        Date ”
shall
        mean the date which is the earlier to occur of (A) the date Tenant opens
        to the
        public for business from the Premises, or (B) one hundred twenty (120) days
        after the “ Substantial
        Completion Date ”
(as
        defined in Exhibit
        C ).
        Landlord’s current good faith estimate is that the Substantial Completion Date
        shall occur on or about June 1, 2008.
  2
 
 (ii)  Landlord
        shall provide Tenant with written notice at least sixty (60) days prior to
        the
        then estimated Delivery Date which notice shall specify the then estimated
        Substantial Completion Date (the “ Estimated
        Substantial Completion Date ”).
        Notwithstanding anything to the contrary contained in this Lease, (1) if
        the
        actual Delivery Date is earlier than the Estimated Substantial Completion
        Date,
        then Tenant shall have the right to defer acceptance of delivery of the Premises
        until the Estimated Substantial Completion Date, in which case it shall be
        deemed that the Substantial Completion Date did not occur, for all purposes
        of
        this Lease, until such Estimated Substantial Completion Date; and (2) if
        the
        actual Substantial Completion Date is later than the Estimated Substantial
        Completion Date, then Tenant shall be entitled to one (1) day of abatement
        of
        Minimum Rent and “ Tenant’s
        Share of Common Area Expenses, Taxes and Insurance ”
(as
        hereinafter defined) for each day following the Estimated Substantial Completion
        Date until the actual Substantial Completion Date.
 
 (b)  Tenant
        and its agents, contractors and employees shall have the right, without any
        obligation to pay rent or other charge, to enter the Premises for the purpose
        of
        performance of Tenant’s Work prior to the Commencement Date and no such entry by
        Tenant shall be deemed an acceptance of the Premises, provided that any such
        entry prior to the Substantial Completion Date (i) shall be subject to
        Landlord’s prior written approval (which approval shall not be unreasonably
        withheld, conditioned or delayed) and (ii) shall be coordinated with Landlord’s
        Work so as to avoid interference with Landlord’s Work. Tenant may use such
        utilities as are available during the course of such entry for fixturization
        purposes prior to the Commencement Date. During the course of any entry by
        Tenant for fixturization purposes prior to the Commencement Date, all terms
        and
        conditions of this Lease (but not Tenant’s obligation to make payments in
        respect of rent or other charges under this Lease) shall apply.
 
 (c)  (i)  Landlord
        hereby grants Tenant three (3) separate options (the “ Options ”)
        to
        extend the Term of this Lease for three (3) separate consecutive terms (the
        “ Option
        Terms ”)
        of
        five (5) years each, following expiration of the then existing Term, upon
        all
        the terms and conditions contained in this Lease, except for the payment
        of
        Minimum Rent which shall be as specified in the Basic Lease Provisions with
        the
        Fair Market Rental as to the third Option Term Rate determined in accordance
        with Section
        3(c)(ii) below.
        Tenant shall give written notice of the exercise of each Option to Landlord
        at
        least nine (9) months prior to the expiration of the then applicable Term.
        References in this Lease to the “ Term ”
shall
        mean the initial Term of this Lease, as the same may be extended by any Option
        Terms, as applicable.
 
 (ii)  (1)  If
        Tenant
        exercises the Option to extend the Term for the third Option Term, the Fair
        Market Rental Rate for the Premises as of the commencement of the third Option
        Term for purposes of determining the Minimum Rent for the third Option Term
        shall be determined as follows. For purposes of this Lease, the “ Fair
        Market Rental Rate ”
shall
        mean the fair market rental rate for the Premises as of the commencement
        of the
        third Option Term, based on prevailing rentals then being charged to new
        and
        renewal tenants in comparable retail projects in the vicinity of the Shopping
        Center, for comparably improved space of equivalent quality, size and location
        (or adjusting the rental rate as appropriate for differences therein), taking
        into account the length of the third Option Term, manner of pass-through
        of
        additional rent charges, and any improvements or improvement allowance then
        being offered.
 
 (2)  At
        least
        two hundred forty (240) days before the commencement of the third Option
        Term,
        Landlord shall deliver written notice to Tenant specifying Landlord’s
        determination of the Fair Market Rental Rate (“ Landlord’s
        Determination ”).
        Within fifteen (15) days following Tenant’s receipt of such Landlord’s notice
        specifying Landlord’s Determination of the Fair Market Rental Rate, Tenant shall
        deliver written notice to Landlord either agreeing with Landlord’s Determination
        of the Fair Market Rental Rate or disagreeing therewith and specifying Tenant’s
        determination of the Fair Market Rental Rate (“ Tenant’s
        Determination ”).
        In
        the event Tenant so disagrees with Landlord’s Determination of the Fair Market
        Rental Rate, then Landlord and Tenant shall promptly meet and endeavor in
        good
        faith to reach agreement upon the Fair Market Rental Rate for the third Option
        Term. In the event Landlord and Tenant are unable to agree upon the Fair
        Market
        Rental Rate prior to two hundred (200) days before the commencement of the
        third
        Option Term, Landlord and Tenant shall each appoint, by written notice delivered
        to the other prior to one hundred ninety (190) days before the commencement
        of
        the third Option Term, a real estate appraiser who is a member of the American
        Institute of Real Estate Appraisers (or its equivalent) and who has significant
        current experience appraising rental rates for commercial real property in
        the
        vicinity of the Premises, to participate in the determination of the Fair
        Market
        Rental Rate. The two appraisers so appointed shall be instructed to appoint,
        within twenty (20) days thereafter, a third appraiser who is similarly
        qualified. If either Landlord or Tenant fails timely to appoint a qualified
        appraiser as provided above, then the determination of Fair Market Rental
        Rate
        to be made hereunder shall be made solely by such qualified appraiser as
        may
        have been appointed by the other party, and such determination of the Fair
        Market Rental Rate by such sole appraiser shall be binding upon both Landlord
        and Tenant. If the two appraisers appointed by Landlord and Tenant cannot
        agree
        on the appointment of a third appraiser within the time period provided,
        either
        Landlord or Tenant may seek the appointment of the same by the presiding
        judge
        for the Superior Court with jurisdiction over the area including the Premises.
        Such appraisers shall work together and share information in their efforts
        to
        determine and agree upon the Fair Market Rental Rate. The Fair Market Rental
        Rate shall be determined in accordance with the procedure set forth
        below.
 
 (3)  The
        role
        of the appraisers shall be to select from Landlord’s Determination and Tenant’s
        Determination which is closest to the actual Fair Market Rental Rate as
        determined by the appraisers. The appraisers shall have no power to adopt
        a
        compromise or “middle ground” between the contended Fair Market Rental Rates
        submitted by the parties or to adopt any Fair Market Rental Rate other than
        the
        contended Fair Market Rental Rate submitted by the party which is closest
        to the
        appraisers’ determinations as to actual Fair Market Rental Rate (and if the
        difference between each of the contended Fair Market Rental Rates submitted
        by
        the parties and the Fair Market Rental Rate determined by the appraisers
        is the
        same, the average of Landlord’s Determination and Tenant’s Determination shall
        be adopted). If the appraisers do not agree upon the actual Fair Market Rental
        Rate, then each appraiser shall determine which of Landlord’s Determination or
        Tenant’s Determination is closest to the actual Fair Market Rental Rate
        determined by such appraiser and the contended Fair Market Rental Rate so
        selected by at least two of the appraisers shall be the Fair Market Rental
        Rate.
        The Fair Market Rental Rate as so determined by the appraisers as provided
        herein shall be binding upon both Landlord and Tenant as the Fair Market
        Rental
        Rate, which rate shall be used for purposes of determination of the Minimum
        Rent
        payable during the third Option Term.
  3
 
 (4)  Landlord
        and Tenant will use all reasonable diligence to cause their appointed appraisers
        to perform in good faith and in a timely manner in order to make the
        determination of the Fair Market Rental Rate on or before the commencement
        of
        the third Option Term. In the event such appraisers do not make such
        determination prior to the commencement of the third Option Term, the Lease
        shall nevertheless continue in full force and effect until such determination
        is
        made, and Tenant shall pay Minimum Rent during such period based upon
        calculation of Fair Market Rental Rate using the amount asserted by Landlord
        to
        be the Fair Market Rental Rate. Upon the determination by such appraisers
        of the
        Fair Market Rental Rate, the excess (if any) of the amount paid to Landlord
        by
        Tenant as provided above over the Minimum Rent as so determined hereunder
        applicable to the period from the commencement of the third Option Term to
        the
        date on which the Fair Market Rental Rate was so determined shall be credited
        by
        Landlord against the Minimum Rent next due from Tenant. The payment by Tenant
        of
        Minimum Rent based upon the greater of the amount specified in the Basic
        Lease
        Provisions or the amount of the Fair Market Rental Rate as so determined
        shall
        commence on the first day of the month following the date of such determination
        (but not earlier than the commencement of the third Option Term), and in
        addition to such monthly installments of Minimum Rent, Tenant shall pay to
        Landlord the deficiency, if any, in the amount earlier paid by Tenant as
        Minimum
        Rent based on Landlord’s asserted Fair Market Rental Rate in relation to the
        amount ultimately determined hereunder as the Minimum Rent for the third
        Option
        Term. Landlord and Tenant shall each bear the costs and fees of the appraiser
        appointed by each of them and shall share equally the cost of the third
        appraiser.
 
 **4.RENT** .
 
 (a)  Tenant
        shall pay Landlord “ Minimum
        Rent ”
during
        the Term in the amounts specified in the Basic Lease Provisions.. Minimum
        Rent
        for any partial month occurring during the Term shall be prorated based upon
        the
        number of days within such month. Minimum Rent shall be paid in monthly
        installments, in advance, on the first day of each calendar month, but if
        the
        date on which Tenant’s obligation for the payment of Minimum Rent commences is
        not the first day of a month, then that portion of such Minimum Rent which
        is
        attributable to the days in that month from the first date for which Minimum
        Rent is due until the end of that month shall be paid on the first date for
        which Minimum Rent is due.
 
 (b)  (i)  Commencing
        with the Commencement Date, Tenant shall pay as “ Percentage
        Rent ”
for
        each fiscal year of Tenant during the Term (which fiscal year is presently
        April
        1 to March 31, and is herein referred to as the “ Fiscal
        Year ”),
        an
        amount equal to ten percent (10%) of annual Gross Sales from the Premises
        for
        any Fiscal Year to the extent annual Gross Sales for such Fiscal Year exceed
        $13,500,000.00 up to $17,000,000.00 in annual Gross Sales, plus eight percent
        (8%) of annual Gross Sales from the Premises for any such Fiscal Year to
        the
        extent annual Gross Sales for such Fiscal Year exceed
        $17,000,000.00.
 
 (ii)  As
        used
        herein, “ Gross
        Sales ”
means
        the total gross receipts of all merchandise sold or leased including the
        charges
        for all services performed by Tenant or by any subtenant, licensee or
        concessionaire, wholesale or retail, cash, credit, or otherwise, including,
        without limitation, the value of all consideration other than money received
        therefor (except for trade-ins which are intended for resale by Tenant from
        the
        Premises): (1) where the orders originate, in, at, from or arising out of
        the
        use of the Premises, whether delivery or performance is made from the Premises
        or from some other place and regardless of the place of bookkeeping for,
        payment
        of, or collection of any account, and (2) which Tenant, or any subtenant,
        licensee or concessionaire, in the customary course of its business, would
        attribute to its operations at the Premises. Excluded from Gross Sales are:
        (I) any exchange or transfer of merchandise between stores or warehouses of
        Tenant or any subtenant, licensee or concessionaire made solely for the
        convenient operation of Tenant’s or any subtenant’s, licensee’s or
        concessionaire’s business and not to consummate a sale made in or from the
        Premises; (II) returns to shippers or manufacturers; (III) cash or
        credit refunds to customers on transactions otherwise included in Gross Sales;
        (IV) sales of fixtures and equipment, which are not stock for sale or
        trade; (V) sales, luxury or excise taxes, gross receipt taxes, and other
        taxes now or hereafter imposed upon the sale or value of merchandise or
        services, whether added separately to the selling price of the merchandise
        or
        services and collected from customers or included in the retail selling price;
        (VI) the sums and credits received in settlement of claims for loss or damage
        to
        merchandise; (VII) receipts from public telephones, vending machines, ticket
        sales (including, without limitation, tickets to sporting or other entertainment
        events and/or ski lift and/or travel package tickets) to the extent paid
        to a
        third party operator or venue or if sold by Tenant at no or nominal profit,
        and
        fees for fishing, hunting or other sporting licenses paid to governmental
        authorities; (VIII) interest, carrying charges, or other finance charges
        in
        respect of sales made on credit; (IX) sales to employees at a discount, not
        exceeding three percent (3%) of total Gross Sales in any Fiscal Year; (X)
        accounts receivable, not to exceed three percent (3%) of Gross Sales in any
        Fiscal Year, which have been determined to be uncollectible for federal income
        tax purposes during such Fiscal Year, provided, however, that if any such
        amounts are actually collected in a later Fiscal Year, such amount so collected
        shall be included in the Gross Sales for such later Fiscal Year; (XI) sublease
        rents or other consideration received in connection with an assignment,
        sublease, license, concession or other grant of a right of occupancy with
        respect to any portion of the Premises; (XII) sales of merchandise ordered
        by
        catalogue regardless of place of order or delivery; and (XIII) charges paid
        to
        all credit card companies.
 
 (iii)  Tenant
        shall furnish Landlord within sixty (60) days after the end of each Fiscal
        Year
        during the Term, a statement, certified by Tenant, setting forth the Gross
        Sales
        made during such Fiscal Year including a calculation of any Percentage Rent
        owing for such Fiscal Year together with a payment of the amount of any
        Percentage Rent owing for such Fiscal Year.
  4
 
 (iv)  During
        the Term, Tenant shall keep at the Premises or at its home or regional office,
        complete, accurate books of account and records with respect to the business
        conducted in or from the Premises and shall retain such books and records
        and
        reasonable supporting documentation for at least two (2) years from the end
        of
        the period to which they are applicable. Landlord’s acceptance of Percentage
        Rent shall be without prejudice to Landlord’s examination and audit rights.
        Landlord may at any reasonable time during normal business hours, upon ten
        (10)
        days’ prior notice to Tenant, cause a complete audit to be made of such books,
        records and other materials which Tenant is required to retain (including,
        without limitation, the books and records of any subtenant, licensee or
        concessionaire) for all or any part of the two (2) years immediately preceding
        the giving of such notice. Landlord may require Tenant to produce such
        information about such books and records as is necessary for a proper
        examination and audit thereof and to make such books and records available
        to
        Landlord for examination and audit; provided, however, that nothing contained
        in
        this Lease shall be deemed to provide Landlord with the right to review any
        of
        Tenant’s records with respect to any other store locations other than as may be
        necessary for determination of Gross Sales from the Premises. Any such audit
        shall be conducted in a manner so as to minimize interference with Tenant’s
        business operations. If such audit discloses any underpayment by Tenant of
        Percentage Rent, Tenant shall pay to Landlord the amount of such underpayment
        within thirty (30) days following Tenant’s receipt of such audit. If such audit
        discloses any overpayment by Tenant of Percentage Rent, Landlord shall refund
        to
        Tenant the amount of such overpayment together with delivery to Tenant of
        such
        audit. If such audit discloses that Tenant’s annual statement of Gross Sales
        understates Gross Sales made during the applicable Fiscal Year by three percent
        (3%) or more, Tenant shall pay Landlord within thirty (30) days after demand,
        Landlord’s reasonable cost in conducting such audit (as evidenced by invoices or
        other reasonable supporting documents delivered to Tenant). Landlord shall
        not
        conduct such an audit of Tenant’s records more than once in any given Fiscal
        Year. Failure of Landlord to conduct such an audit within two (2) years
        following submission to Landlord of the applicable annual Gross Sales statement
        shall constitute the waiver by Landlord of any right to audit Gross Sales
        specified within such annual Gross Sales statement. Any information obtained
        by
        Landlord as a result of any such audit shall be held in strict confidence
        by
        Landlord, except that such information may be disclosed by Landlord to a
        proposed lender or purchaser with respect to a prospective sale or financing
        of
        the Shopping Center or when Landlord is required to comply with lawful orders
        of
        a court or governmental agency.
 
 (v)  Notwithstanding
        anything to the contrary contained in this Lease, if Tenant during the Term
        of
        this Lease operates or causes or permits to be operated a “Sport Chalet” store
        (or a store operating under such other trade name under which the majority
        of
        current “Sport Chalet” stores are then operating) within the city boundaries of
        Glendale, Eagle Rock or Pasadena (as such city boundaries exist as of the
        date
        hereof), and the Gross Sales from the Premises are reduced following the
        opening
        of such other store, then the Percentage Rent thereafter payable under this
        Lease during such period as such other store is operating within such city
        boundaries shall be the greater of (1) the amount of Percentage Rent payable
        under this Lease for the year preceding the opening of such other store,
        or (2)
        the Percentage Rent due without regard to the provisions of this clause
        (v).
 
 (c)  All
        amounts payable by Tenant to Landlord pursuant to this Lease other than Minimum
        Rent, including, without limitation, Percentage Rent and “ Tenant’s
        Share of Common Area Expenses, Taxes and Insurance ”
(as
        hereinafter defined), shall be deemed to constitute “ Additional
        Rent ”.
        For
        purposes of this Lease, “ Tenant’s
        Share of Common Area Expenses, Taxes and Insurance ”
shall
        mean the aggregate of (i) Tenant’s Share of Common Area Expenses, (ii) Tenant’s
        Share of Taxes pursuant to Section
        5 below,
        and (iii) Tenant’s Share of insurance costs pursuant to Section
        12(a) below.
        References in this Lease to “ Rent ”
shall
        mean Minimum Rent and Additional Rent.
 
 (d)  Tenant
        acknowledges that the late payment by Tenant to Landlord of any sums due
        under
        this Lease will cause Landlord to incur costs not contemplated by this Lease,
        the exact amount of such costs being extremely difficult and impracticable
        to
        fix. Such costs include, without limitation, processing and accounting charges,
        and late charges that may be imposed on Landlord by the terms of any encumbrance
        or note secured by all or any portion of the Shopping Center. Therefore,
        if
        Tenant fails to pay any rent within ten (10) days of the due date under this
        Lease for any reason, Tenant shall pay to Landlord, as additional rent, the
        sum
        of five percent (5%) of the overdue amount as a late charge; provided, however,
        that as to the initial such late payment in any twelve (12) consecutive calendar
        month period during the Term, such late charge shall not be payable unless
        such
        failure to pay when due is not cured within five (5) days after Tenant’s receipt
        of written notice thereof from Landlord. Landlord’s acceptance of any late
        charge shall not constitute a waiver of Tenant’s default with respect to the
        overdue amount or prevent Landlord from exercising any of the other rights
        and
        remedies available to Landlord under this Lease, at law or in
        equity.
 
 (e)  Notwithstanding
        anything to the contrary contained in this Lease, Landlord hereby agrees
        that
        Tenant shall not be obligated to pay in excess of the “ Cap
        Amount ”
(as
        hereinafter defined) for Tenant’s Share of Common Area Expenses, Taxes and
        Insurance during the Term. As used herein, the “ Cap
        Amount ”
shall
        mean Six Dollars ($6.00) per square foot of Premises Floor Area per annum
        during
        the period prior to the expiration of the initial calendar year of the Term
        (prorated for any partial year including the Commencement Date), and such
        Cap
        Amount shall be increased five percent (5%) per annum (calculated on a
        cumulative and compounding basis) over the prior year’s Cap Amount from and
        after the expiration of the initial calendar year during the Term; except
        that
        the Cap Amount for the initial year of the first Option Term (if the Term
        is
        extended by the first Option Term) shall be the actual amount of Tenant’s Share
        of Common Area Expenses, Taxes and Insurance during such year. Such limitation
        on Tenant’s obligation for Tenant’s Share of Common Area Expenses, Taxes and
        Insurance shall be calculated as if Tenant’s obligation for Tenant’s Share of
        Common Area Expenses, Taxes and Insurance were paid during any period of
        time in
        which Tenant’s obligation to make payments in respect of Tenant’s Share of
        Common Area Expenses, Taxes and Insurance is suspended and/or abated pursuant
        to
        this Lease.
  5
 
 **5.TAXES
        AND
        ASSESSMENTS** .
 
 (a)  Landlord
        shall pay, on or before the due date, all taxes and assessments levied against
        the Shopping Center (including, without limitation, the land underlying the
        Shopping Center) during the Term.
 
 (b)  Tenant
        shall pay to Landlord, as additional rent, “ Tenant’s
        Share ”
(as
        hereinafter defined) of the real estate taxes, general and special assessments
        and other governmental charges (collectively, “ Taxes ”)
        levied
        upon and assessed against the Shopping Center, for each tax year of the Term
        from and after the Commencement Date; provided, however, impact or development
        fees in connection with development of the Shopping Center shall not be included
        within the definition of Taxes. Such taxes shall be payable by the later
        to
        occur of (i) thirty (30) days following Tenant’s receipt from Landlord of the
        applicable Tax bill together with a calculation of the amount of such Tax
        owing
        by Tenant in accordance with this Section
        6 ,
        and
        (ii) fourteen (14) days prior to delinquency. Following written request from
        Tenant, Landlord shall furnish Tenant with proof of payment of Taxes. In
        the
        event of assessments which may be paid in installments by reason of bonding
        or
        otherwise, Landlord may elect to make payment under the installment plan.
        In any
        event, Tenant’s payment obligations under this Section shall be as if Landlord
        made payment over the longest period of time permitted by the assessment
        and
        Tenant shall bear no liability as to installments which are not due during
        the
        Term of this Lease.
 
 (c)  For
        purposes of this Section
        5 ,
        “ Tenant’s
        Share ”
is
        defined as a fraction, the numerator of which is the Floor Area within the
        Premises and the denominator of which is the Floor Area within the Shopping
        Center (provided that, except as set forth in this subparagraph (c), in no
        event
        shall such denominator be less than the amount of Floor Area shown within
        the
        building areas of the Shopping Center on the Site Plan). Such computation
        shall
        be made separately for each tax year.
 
 (d)  Should
        the first or final tax year occurring during the Term include a period of
        time
        prior to or following the Term, as applicable, Tenant shall be responsible
        to
        Landlord for a pro rata portion of its tax obligation as described herein,
        based
        on the portion of such tax year included in the Term of this Lease. This
        Section
        includes Tenant’s total responsibility for Taxes for the Shopping Center,
        including, without limitation, for the Common Areas thereof.
 
 (e)  There
        shall be excluded from the tax bill to which Tenant contributes for the purposes
        of computing Tenant’s Share (i) income, excess profits, estate, business,
        inheritance, succession, documentary transfer, franchise, capital, or similar
        taxes or assessments upon Landlord (as opposed to the Shopping Center or
        portions thereof); (ii) special taxes and assessments to pay for the initial
        construction of the Shopping Center or of off-site improvements (including,
        without limitation, sewer and/or street improvements) that serve the Shopping
        Center and are required as a condition to the development of the Shopping
        Center; and (iii) any increase in Taxes resulting from the second (2 nd )
        or any
        subsequent “ change
        in ownership ”
(as
        defined in Division 1, Part 0.5, Chapter 2 of the California Revenue and
        Taxation Code) of all or any part of the Shopping Center occurring during
        any of
        (1) the initial five (5) years of the Term, (2) the remainder of the Initial
        Term after the expiration of the initial five (5) years of the Term, and/or
        (3)
        any Option Term.
 
 (f)  Any
        rebates, refunds, or abatements of Taxes received by Landlord (net of Landlord’s
        reasonable costs to obtain the same) subsequent to payment of the applicable
        Taxes by Tenant shall, to the extent attributable to Tenant’s Share of any such
        Taxes previously paid by Tenant, be refunded to Tenant on a pro rata basis
        within thirty (30) days of receipt thereof by Landlord or credited against
        Tenant’s next payment of Taxes if such credit will be applied within such thirty
        (30)-day period. Any such rebate, refund or abatement realized by Landlord
        (net
        of Landlord’s reasonable costs to obtain the same) prior to payment by Tenant
        shall result in an immediate reduction in the Taxes upon which Tenant’s Share is
        calculated.
 
 (g)  Tenant
        shall have such rights to contest in good faith the validity or amount of
        Taxes
        as are permitted by law, either in its own name or in the name of Landlord
        (if
        required by the taxing authority), in either case with Landlord’s reasonable
        cooperation (but at no cost or expense to Landlord), subject to obtaining
        Landlord’s prior written consent therefor, which consent shall not be
        unreasonably withheld, conditioned or delayed. Any resultant refund, rebate
        or
        reduction shall be used first to repay the reasonable expenses of obtaining
        such
        relief. Landlord shall provide Tenant with government notices of assessment
        (or
        reassessment) in time sufficient to reasonably permit Tenant, at Tenant’s
        election, to make contest. The term “ contest ”
as
        used
        in this Section
        5(g) means
        contest, appeal, abatement or other proceeding, prescribed by applicable
        law to
        obtain tax reduction or tax refund, howsoever denominated.
 
 (h)  Tenant
        shall pay prior to delinquency all taxes, assessments, fees and charges imposed
        on its furniture, trade fixtures, equipment, inventory and other personal
        property (collectively, “ Tenant’s
        Personal Property ”)
        in the
        Premises. If any such Tenant’s Personal Property is assessed jointly with the
        property of Landlord, such assessment shall be reasonably and equitably
        allocated between Landlord and Tenant.
 
 **6.UTILITIES** .
        Landlord shall provide to the Premises at all times necessary utilities services
        including electric, water, gas, telephone and other necessary utility lines
        and
        sewerage lines capable of adequately providing for Tenant’s needs, but in no
        event of less capacity than specified in Exhibit C attached
        hereto. Landlord shall cause all such utilities to be separately metered
        for the
        Premises and shall be responsible for any utilities hook-up, connection,
        installation, development, impact or similar fees with respect to the Premises.
        Tenant shall pay applicable use charges for all such utilities serving the
        Premises during the Term directly to the applicable utility provider. Landlord
        shall not be liable for any interruption in utilities service to the Premises
        due to any cause (other than the gross negligence or willful misconduct of
        Landlord or any of Landlord’s employees, agents or contractors), but Landlord
        shall reasonably cooperate with Tenant to endeavor to avoid any such
        interruption in utilities service to the Premises.
  6
 
 **7.USES** .
 
 (a)  Promptly
        following the completion of Tenant’s Work, Tenant shall open for business from
        the Premises for one (1) day for the Permitted Use set forth in the Basic
        Lease
        Provisions under the trade name of “Sport Chalet” or such other trade name as is
        then being used by the majority of Tenant's current “Sport Chalet” stores.
        Landlord hereby represents and warrants to Tenant that the operation for
        business from the Premises for the retail sale and/or lease of sporting
        equipment (including, without limitation, ski, snowboard and diving equipment),
        sporting goods, sports apparel and active wear (including, without limitation,
        ski and/or snowboard apparel), and/or athletic footwear will not violate
        any
        agreements respecting exclusive use rights or restrictions on use within
        the
        Shopping Center or any portion thereof. In the operation of business from
        the
        Premises, Tenant shall not permit any waste of the Premises or any objectionable
        noises, odors or nuisances.
 
 (b)  Following
        such initial opening for business from the Premises, the trade name under
        which
        the Premises is operated for business may be changed to an alternate trade
        name
        used by the majority of Tenant’s store locations or such other trade name as may
        be approved in writing by Landlord (which approval shall not be unreasonably
        withheld, conditioned or delayed), and the use of the Premises may be changed
        to
        an alternate lawful retail use with the prior written consent of Landlord
        (which
        consent shall not be unreasonably withheld, conditioned or delayed); provided,
        however, that use of the Premises shall not be changed to a use which violates
        a
        restriction or covenant of Landlord then in effect respecting exclusivity
        of use
        set forth in any lease, occupancy agreement or other agreement setting forth
        easements, covenants, conditions, restrictions and/or matters of record with
        respect to all or any other part of the Shopping Center entered into prior
        to
        the date of this Lease and which are specified on Exhibit
        E attached
        hereto and incorporated herein by this reference (provided that Landlord
        shall
        deliver to Tenant, promptly following any request by Tenant, a list of such
        then
        effective restrictions and covenants).
 
 (c)  Tenant
        will be open for business from the Premises during such days and hours as
        it
        deems reasonable and practicable in its sole business judgment for the operation
        of its business. In entering into this Lease, Landlord is not relying upon
        Tenant’s operation of its business from the Premises for in excess of such one
        (1) day period. Nothing in this Lease shall be construed to require a business
        to be continuously operated in the Premises or to require the Premises to
        be
        continuously occupied. However, in the event that following such initial
        opening, the Premises ceases to be operated for a period in excess of one
        hundred twenty (120) consecutive days or for more than one hundred fifty
        (150)
        days in any period of twelve (12) consecutive months (other than any cessation
        of operations resulting from a casualty, condemnation or other “ Force
        Majeure Event ”,
        as
        hereinafter defined), Landlord shall thereafter prior to re-opening of the
        Premises for business have the right to terminate this Lease effective upon
        sixty (60) days prior written notice to Tenant; provided, however, that in
        the
        event Tenant or a Transferee commences operation for business with the general
        public from the Premises during such sixty (60) day period, then Landlord's
        election to terminate shall be nullified and this Lease shall continue in
        full
        force and effect.
 
 (d)  Notwithstanding
        anything to the contrary contained in this Lease, Landlord agrees that no
        other
        portion of the Shopping Center or any adjacent or contiguous property owned
        by
        Landlord or any entity controlling, controlled by, or under common control
        with,
        Landlord (collectively, any “ Adjacent
        Property ”)
        shall
        be operated for the primary purpose of, and no other Shopping Center or Adjacent
        Property occupant shall devote in excess of the lesser of (i) five percent
        (5%)
        of the Floor Area within its store, or (ii) one thousand (1,000) square feet
        of
        Floor Area within its store, to the sale or lease of sporting equipment or
        sporting goods (including, without limitation, ski, snowboard and diving
        equipment), or sports apparel (including, without limitation, ski and/or
        snowboard apparel) and/or athletic footwear, and Landlord shall use commercially
        reasonable efforts to enforce compliance with the agreements of Landlord
        set
        forth in this sentence. The covenants contained in this Section shall terminate
        if, after the initial opening of the Premises for business pursuant to this
        Lease, the Premises is not used for the primary purpose of the retail sale
        of
        sporting equipment or sporting goods (including, without limitation, ski,
        snowboard and diving equipment), or sports apparel (including, without
        limitation, ski and/or snowboard apparel) and/or athletic footwear for a
        continuous period of one hundred twenty (120) days, unless because of a
        casualty, condemnation or other Force Majeure Event.
 
 (e)  Landlord
        covenants and agrees that the Shopping Center shall be constructed, leased,
        operated, maintained and managed as a first class shopping center and that
        no
        premises (and no portion of any premises) in the Shopping Center (excluding
        any
        existing uses as of the date hereof) shall be used or occupied for any of
        the
        following: any unlawful use; funeral establishment; automobile sale, leasing,
        repair or display establishment or used car lot, including body repair
        facilities; auction or bankruptcy sale; pawn shop; outdoor circus, carnival
        or
        amusement park, or other entertainment facility; bowling alley; primarily
        pool
        or billiard establishment; shooting gallery; refinery; adult bookstore or
        facility selling, renting or displaying pornographic or adult books, literature,
        or videotapes (materials shall be considered “adult” or “pornographic” for such
        purpose if the same are not available for sale or rental to children under
        18
        years old because they explicitly deal with or depict human sexuality), provided
        that sale, rental or display of such items as an incidental part of a permitted
        business (from not more than ten percent (10%) of the sales area of such
        business and so as to constitute less than ten percent (10%) of the gross
        sales
        of such business) shall be permitted; massage parlor; any residential use,
        including but not limited to living quarters, sleeping apartments or lodging
        rooms; theater; auditorium, meeting hall, ballroom, school or other place
        of
        public assembly; unemployment agency; gymnasium, health club, exercise or
        dance
        studio; dance hall; cocktail lounge or bar (except as an incident to a permitted
        restaurant), disco or night club; bingo or similar games of chance, but lottery
        tickets and other items commonly sold in retail establishments may be sold
        as an
        incidental part of business; video game or amusement arcade, except as an
        incidental part of another primary business: skating or roller rink; car
        wash,
        car repair; second hand store, auction house, or flea market; sit-down, full
        service restaurant in the Shopping Center and located within one hundred
        feet
        (100’) of the Premises; or non-retail use (which shall not prohibit in the
        Shopping Center office use incident to a permitted retail operation or such
        uses
        commonly referred to as “quasi-retail” or “service retail” such as by way of
        example and without limitation, a travel agency, real estate office, insurance
        agency or accounting service, so long as same do not exceed ten percent (10%)
        of
        the Floor Area of the Shopping Center). Tenant shall not use the Premises
        for
        any of the foregoing prohibited uses.
  7
 
 (f)  Provided
        Tenant obtains Landlord’s prior written consent, which consent shall not be
        unreasonably withheld, conditioned or delayed, Tenant shall have a right
        to use
        the roof of the Building for any antennae or other communications equipment
        or
        other roof-top mounted equipment as Tenant may deem desirable for the operation
        of its business; provided, however, that no roof penetrations shall be made
        without obtaining Landlord’s consent, which consent shall not be unreasonably
        withheld, conditioned or delayed and may be conditioned on Tenant’s use of
        Landlord’s designated roofing contractor so long as the fee charged is
        commercially reasonable for the work performed, and Tenant shall, at its
        own
        expense, promptly repair any damage or wear to the roof resulting from such
        use
        of Tenant’s equipment and remove such roof-mounted communications equipment at
        the expiration of the Term or earlier termination of this Lease and repair
        any
        damage resulting from such removal. Tenant shall coordinate any such roof
        work
        with Landlord so as not to impair any roof warranty then in effect.
 
 (g)  Landlord
        shall disclose to Tenant any information Landlord has regarding present and
        future zoning affecting the Premises and regarding the condition of the
        Premises, including, structural, mechanical and environmental conditions.
        If not
        heretofore provided to Tenant, Landlord shall promptly hereafter deliver
        to
        Tenant a copy of the “Phase I” environmental study of the Shopping Center
        completed on or about November 1, 2006, and a copy of the “Phase II”
environmental study of the Shopping Center completed on or about June 17,
        1998.
        Any further invasive testing desired by Tenant with respect to the Shopping
        Center shall be performed at Tenant’s cost, subject to Landlord’s prior written
        approval, which approval shall not be unreasonably withheld, conditioned
        or
        delayed. Landlord covenants, represents and warrants that as of the delivery
        of
        possession of the Premises to Tenant, the Premises shall not contain any
        “ Hazardous
        Substances ”
(as
        hereinafter defined), and no other part of the Shopping Center shall contain
        any
        Hazardous Substances in such quantity as would constitute a violation of
        applicable federal, state or local governmental laws, statutes, rules,
        regulations, ordinances, codes, orders or other requirements (collectively,
        any
“ Laws ”)
        or
        would adversely affect Tenant’s use or occupancy of the Premises, operation of
        business from the Premises, or access to or parking serving the Premises.
        Landlord shall not incorporate or permit or suffer to be incorporated, knowingly
        or unknowingly, any material containing any Hazardous Substances into the
        Premises. Landlord shall use commercially reasonable efforts to prevent any
        action by any person other than Tenant and/or any of Tenant’s employees, agents
        and/or contractors that would cause the Premises to be in violation of
        applicable Laws relating to Hazardous Substances, or would subject the Premises
        to any remedial obligations under such Laws. In the event Hazardous Substances
        are or become located in, upon, under or about the Premises and/or any other
        portion of the Shopping Center, other than as a result of the acts or omissions
        of Tenant and/or any of Tenant’s employees, agents and/or contractors, Landlord
        shall, to the extent required by applicable governmental authorities, remediate
        such contamination, at no cost to Tenant, upon discovery of such contamination.
        Each party shall immediately notify the other party in reasonable detail
        of any
        existing, pending or threatened regulatory action, third party claims, and/or
        contamination relating to Hazardous Substances with respect to the Shopping
        Center of which such notifying party becomes aware (other than by notice
        from
        the other party). Landlord shall indemnify, defend and hold harmless Tenant
        from
        and against any and all damages, claims, actions, penalties, demands, losses,
        liabilities, costs and/or expenses (including, without limitation, reasonable
        attorneys’ fees and expenses), arising out of or in connection with the presence
        of Hazardous Substances in, upon, under or about the Premises and/or any
        other
        portion of the Shopping Center which are not caused to be so present as a
        result
        of the acts or omissions of Tenant and/or any of Tenant’s employees, agents
        and/or contractors. The obligations of Landlord pursuant to the provisions
        of
        the immediately preceding sentence shall survive the expiration of the Term
        or
        earlier termination of this Lease. As used in this Lease, the term “ Hazardous
        Substance ”
means
        any asbestos, petroleum product or by-product or hazardous or toxic substance,
        material or waste which is or becomes regulated by any local government
        authority, the State of California or the United States.
 
 (h)  Tenant
        shall not incorporate or permit any material containing any Hazardous Substances
        to be incorporated into the Premises, provided that nothing contained herein
        shall be deemed to prohibit Tenant's use within the Premises of items in
        customary amounts customarily used in the operation of a store for the permitted
        use under this Lease but constituting Hazardous Substances as defined herein
        (including, by way of example and without limitation, customary cleaning
        fluids
        and/or lead diving weights). Tenant shall prevent any action by Tenant and/or
        any of Tenant’s employees, agents and/or contractors that will cause the
        Premises to be in violation of applicable Laws relating to Hazardous Substances,
        or would subject the Premises to any remedial obligations under such Laws.
        In
        the event Hazardous Substances are or become located in, upon, under or about
        the Premises and/or any other portion of the Shopping Center, as a result
        of the
        acts or omissions of Tenant and/or any of Tenant’s employees, agents and/or
        contractors, Tenant shall remediate such contamination, at no cost to Landlord,
        upon discovery of such contamination. Tenant agrees to immediately notify
        Landlord in reasonable detail of any existing, pending or threatened regulatory
        action, third party claims, and/or contamination relating to Hazardous
        Substances with respect to the Shopping Center resulting from the acts or
        omissions of Tenant and/or any of Tenant’s employees, agents and/or contractors.
        Tenant shall indemnify, defend and hold harmless Landlord from and against
        any
        and all damages, claims, actions, penalties, demands, losses, liabilities,
        costs
        and/or expenses (including, without limitation, reasonable attorneys’ fees and
        expenses), arising out of or in connection with the presence or release of
        Hazardous Substances in, upon, under or about the Premises and/or any other
        portion of the Shopping Center which are caused to be so present or released
        as
        a result of the acts or omissions of Tenant and/or any of Tenant’s employees,
        agents and/or contractors. The obligations of Tenant pursuant to the immediately
        preceding sentence shall survive the expiration of the Term or earlier
        termination of this Lease.
 
 **8.TENANT’S
        ALTERATIONS, ADDITIONS OR IMPROVEMENTS** .
 
 (a)  Tenant
        may make non-structural alterations and improvements to the interior of the
        Premises costing not more than $50,000 per work of alterations and/or
        improvements, without the prior approval of Landlord. Tenant shall not make
        any
        alterations to any structural or exterior portions of the Premises without
        first
        obtaining the prior written approval of Landlord, which approval shall not
        be
        unreasonably withheld, conditioned or delayed, and shall be deemed granted
        if
        Tenant is not notified in writing of a reasonable basis for Landlord’s
        withholding of such approval within fifteen (15) days of Tenant’s request
        therefor. Upon the expiration of the Term or sooner termination of this Lease,
        Tenant may remove its furniture, fixtures and equipment so long as Tenant
        promptly repairs any damage resulting from such removal. Tenant’s alterations
        and improvements to the Premises (except Tenant’s trade fixtures, equipment and
        personal property), shall become Landlord’s property upon expiration of the Term
        or earlier termination of this Lease, and Landlord will accept the Premises
        as
        altered without any obligation upon Tenant to restore the Premises to its
        former
        condition; except, however, that Landlord may require removal upon the
        expiration of the Term or earlier termination of this Lease of alterations
        or
        improvements made subsequent to performance of Landlord’s Work provided that
        Landlord may only so require removal of items which Landlord notified Tenant
        at
        the time of Landlord’s approval of the installation thereof (or within ten (10)
        days of Landlord’s first learning of the installation thereof if not requiring
        Landlord’s approval for installation) that such items would be subject to such
        requirement for removal, and provided further that in no event shall Tenant
        be
        required to remove any of the Tenant’s Work (or any repair or replacement
        thereof) prior to, upon or after the expiration of the Term or earlier
        termination of this Lease. Tenant shall be responsible for all damage resulting
        from any construction, alterations or additions in or to the Premises during
        the
        Term made by Tenant (collectively, any “ Tenant
        Construction Work ”),
        whether or not Landlord’s consent therefor is necessary or was obtained. All
        Tenant Construction Work shall be performed in accordance with all necessary
        governmental approvals and permits, which Tenant shall obtain at its sole
        expense and in accordance with all applicable Laws. All Tenant Construction
        Work
        shall be performed in a good and workmanlike manner and diligently prosecuted
        to
        completion.
  8
 
 (b)  Tenant
        shall provide Landlord with at least ten (10) days prior written notice of
        any
        alterations or improvements work to be performed by Tenant during the Term.
        During the pendency of any work of construction which may result in the
        imposition of a mechanic’s or materialman’s lien upon the Premises, Landlord may
        post in the Premises in a reasonable manner and/or record notices of
        non-responsibility in accordance with applicable Laws. The provisions of
        this Section
        8(b) shall
        apply to Tenant’s Work and to work in the Premises by or on behalf of Tenant
        during the Term.
 
 (c)  Neither
        Tenant nor Landlord shall permit any mechanic’s, materialman’s or other lien
        against the Premises or the Shopping Center in connection with any labor,
        materials or services furnished or claimed to have been furnished by or on
        behalf of such party. If any such lien shall be filed against the Premises
        or
        Shopping Center, the party charged with causing the lien shall cause the
        same to
        be discharged within thirty (30) days after notice, provided, however, that
        either party may contest any such lien, so long as the enforcement thereof
        is
        stayed. Each party shall indemnify, defend and hold harmless the other from
        and
        against any and all costs, losses, liabilities, claims, demands and expenses
        (including, without limitation, reasonable attorneys’ fees and expenses) arising
        as a result of any mechanic’s, materialman’s or other lien filed against the
        Premises or the Shopping Center in connection with any labor, materials or
        services furnished or claimed to have been furnished on behalf of the
        indemnifying party.
 
 **9.COMMON
        AREAS** .
 
 (a)  As
        used
        in this Lease, the term “ Common
        Areas ”
shall
        mean those portions of, and facilities within, the Shopping Center which
        are
        intended for the common non-exclusive use of the occupants, their customers,
        agents and employees including, without limitation, parking areas, driveways,
        malls, walkways, loading zones and landscaping. Prior to the Commencement
        Date,
        Landlord shall construct the Common Areas of the Shopping Center substantially
        as shown on Exhibit
        A attached
        hereto (other than any Common Areas adjacent to any undeveloped pad sites
        not
        reasonably required for the operation of Tenant’s business from the
        Premises).
 
 (b)  Tenant,
        as well as its agents, employees and customers shall have and are granted
        nonexclusive access to, and use of all Common Areas. Tenant’s use of the Common
        Areas shall be subject to such reasonable non-discriminatory rules and
        regulations as Landlord deems necessary or advisable for proper and efficient
        use, operation and maintenance of the Common Areas, provided that in no event
        shall such rules and regulations increase the monetary obligations owing
        from
        Tenant to Landlord under this Lease or otherwise materially increase the
        obligations or diminish the rights of Tenant under this Lease. In no event
        shall
        there ever be a charge for use of the parking facilities within the Shopping
        Center. Landlord may from time to time establish, subject to Tenant’s prior
        written approval (which approval shall not be unreasonably withheld, conditioned
        or delayed), such employee parking systems and/or employee parking areas
        reasonably designated by Landlord (which shall be free of any charge to Tenant
        or its employees) as are not unreasonably burdensome to the operation of
        Tenant’s business, and provide sufficient means of transportation and security
        for access to and use of such employee parking. Landlord shall use commercially
        reasonable efforts to prevent use of the Common Areas by other than Shopping
        Center tenants, occupants and their customers. Landlord shall cause the Common
        Areas to be maintained and operated in a first-class, professional manner
        and
        condition as is customary and appropriate for the operation of first-class
        retail centers comparable to the Shopping Center in the vicinity of the Shopping
        Center. So long as access, parking and other essential services are reasonably
        available so as to avoid any material adverse affect upon the operation of
        Tenant’s business from the Premises, Landlord may at any time temporarily close
        any of the Common Areas to make repairs or to such extent as may, in Landlord’s
        reasonable opinion, be necessary to prevent a dedication thereof or the accrual
        of rights to any person or to the public therein, and perform such other
        acts in
        and to the Common Areas as, in Landlord’s good business judgment, are advisable
        to improve the use thereof by occupants and tenants, their employees and
        invitees, so long as the same is effected in a manner to minimize interference
        with the operation of business of the occupants of the Shopping Center
        including, without limitation, Tenant. Subject to compliance with applicable
        governmental requirements and restrictions, including without limitation,
        the
        conditions of approval affecting the Shopping Center, Landlord shall maintain
        the Common Areas well lighted until at least thirty (30) minutes after Tenant’s
        normal business hours (but until at least 11:00 P.M. every day, and until
        midnight during the month of December). If lighting is required after such
        time
        in excess of customary security lighting, expenses in connection with
        electricity to service such additional after-hours lighting shall be prorated
        between the occupants of the Shopping Center who remain open during such
        after-hours lighting period. In operation of business from the Premises,
        Tenant
        shall comply with any governmentally required carpooling requirements as
        to
        Tenant’s employees. Notwithstanding anything to the contrary contained in this
        Lease, Landlord shall not allocate more square footage of the Shopping Center
        to
        the food service category than is stated in the existing conditions of approval
        heretofore granted with respect to the Shopping Center by the City of La
        Cañada
        in the existing Conditional Use Permit issued for the Shopping
        Center.
  9
 
 (c)  Landlord
        shall have the right, from time to time, to make changes to the Common Areas
        from as depicted on the Site Plan, provided that, (i) Landlord shall not
        make
        changes to the area designated as “Primary Common Areas” on the Site Plan (the
“ Primary
        Common Areas ”)
        unless
        the prior written consent of Tenant is first obtained, which consent may
        be
        granted or withheld, in Tenant’s sole and absolute discretion, and (ii) Landlord
        shall not make changes to the other portions of the Common Areas unless the
        prior written consent of Tenant is first obtained, which consent shall not
        be
        unreasonably withheld, conditioned or delayed. Landlord shall not change
        the
        dimensions or location of the Premises. Notwithstanding anything to the contrary
        contained in this Lease, Landlord hereby agrees that (A) in no event shall
        the
        number of parking spaces contained within the entire Shopping Center be less
        than the greater of that required by applicable Laws or five (5) parking
        spaces
        per each one thousand (1,000) square feet of Floor Area within the Shopping
        Center, (B) in no event shall Landlord change the size, configuration or
        number
        of parking spaces within the Primary Common Areas, unless the prior written
        consent of Tenant is first obtained, which consent may be granted or withheld,
        in Tenant’s sole and absolute discretion, and (C) in no event shall any kiosks
        be located within the Primary Common Areas, unless the prior written consent
        of
        Tenant is first obtained, which consent may be granted or withheld, in Tenant’s
        sole and absolute discretion,.
 
 (d)  Tenant
        shall have the right during the Term to use the sidewalk area in front of
        the
        Premises storefront for purposes of the display and/or sale of Tenant's
        merchandise therefrom, provided that any such sales activity (as opposed
        to
        displays) shall require the prior written consent of Landlord, which consent
        shall not be unreasonably withheld, conditioned or delayed, and any such
        display
        and/or sale shall be conducted in a professional manner, so as not to materially
        and adversely affect pedestrian or vehicular traffic within the Shopping
        Center,
        and Tenant shall be responsible for the clean up of any trash in the adjacent
        Common Areas resulting from such sidewalk use.
 
 **10.COMMON
        AREA EXPENSES** .
 
 (a)  As
        used
        in this Lease, the term “ Common
        Area Expenses ”
shall
        mean all costs actually incurred by Landlord for the operation, maintenance
        and
        repair of the Common Areas, including, without limitation, maintenance and
        repair (and, during any of the Option Terms, resurfacing) of the parking
        areas
        (except that the cost of such resurfacing during the Option Terms shall be
        amortized over its useful life and only the yearly amortization included
        in
        Common Area Expenses); cleaning, sweeping, repainting and restriping the
        parking
        areas; maintenance of refuse receptacles, landscaping, common utility lines
        serving all tenants of the Shopping Center, directional signs and other markers;
        Common Area utility costs; costs of Landlord’s policies of all risk and
        commercial general liability insurance for the Common Areas maintained pursuant
        to Section 12(b) below;
        and a reasonable fee (the “ Management
        Fee ”)
        for
        management, supervision and administration of the Shopping Center not to
        exceed
        ten percent (10%) of the total of other items of Common Area Expenses exclusive
        of such insurance costs. In no event shall Common Area Expenses include any
        of
        the following: (1) any
        structural repairs or any other expenditures which, in accordance with generally
        accepted accounting principles, are not fully chargeable to current account
        in
        the year the expenditure is incurred, except that any capital expenditures
        (w)
        required for parking area resurfacing in the Option Terms, (x) in the nature
        of
        other repairs or replacements to the Common Areas reasonably required to
        keep
        the Common Areas in the condition required under this Lease, (y) intended
        to
        result in costs savings, or (z) required to comply with applicable governmental
        requirements for the Common Areas not in effect as of the Commencement Date,
        shall be amortized over their respective reasonably anticipated useful lives
        and
        to the extent that such useful life occurs during the Term of this Lease,
        then
        annual amortization of such cost may be included in Common Area Expenses
        during
        the applicable year of the Term; (2) except
        for the Management Fee, fees, costs or expenses relating to management,
        administration or supervision of all or any part of the Shopping Center
        (including, without limitation, individual compensation or other expenses
        with
        respect to officers, executives or on- or off-site management or administrative
        personnel of Landlord, or third parties engaged by Landlord to provide such
        services, or any other costs or expenses relating to administrative,
        bookkeeping, accounting, management or similar services or functions with
        respect to the Shopping Center); (3) rent or
        other amounts payable under any ground lease or master lease, or interest,
        amortization or other repayment of indebtedness or costs, fees, points or
        other
        expenses in connection with any financing or refinancing of all or any part
        of
        the Shopping Center; (4) cost of
        correcting defects in the initial design or construction of the Shopping
        Center
        or any expansion thereof; (5) costs of
        correcting any non-compliance of the Shopping Center or any part thereof
        with
        applicable Laws as of the Commencement Date; (6) any
        costs relating to removal or remediation of Hazardous Substances, except
        routine
        parking lot maintenance; (7) cost for
        which Landlord is reimbursed, receives a credit or is otherwise compensated
        (other than tenant reimbursements for Common Area Expenses); (8) costs of
        repair or restoration required due to casualty damage or condemnation, other
        than the commercially reasonable deductible amount of any insured loss, but
        earthquake insurance deductibles shall not be includable in Common Area
        Expenses; (9) reserves
        for anticipated future expenses beyond the current year; (10) legal
        and other professional fees, or advertising or promotional expenses (including,
        but not limited to, those relating to Christmas or other seasonal decorations
        or
        promotional events); (11) interest
        or penalties incurred as a result of Landlord’s failure to pay any bill as it
        shall become due or costs resulting from the negligence or wilful misconduct
        of
        Landlord, its employees, agents and/or contractors; (12) costs of
        leasing any item which if purchased, rather than leased, would be excluded
        from
        Common Area Expenses pursuant hereto; (13) any
        amount paid to any corporation or other entity related to Landlord or to
        the
        managing agent of Landlord which is in excess of the amount which would have
        been paid in the absence of such relationship; (14) costs
        related to the operation of Landlord as an entity rather than the operating
        of
        the Shopping Center (including, without limitation, costs of formation of
        the
        entity, internal accounting, legal matters and/or preparation of tax returns)
        or
        costs associated with marketing or selling Shopping Center or any interest
        therein, or converting the Shopping Center to a different form of
        ownership; (15) leasing
        commissions, attorneys’ fees, costs and disbursements, and other expenses
        (including, without limitation, advertising) incurred in connection with
        leasing, renovating, or improving space for tenants or other occupants or
        prospective tenants or occupants of the Shopping Center or development of
        other
        properties, or costs (including, without limitation, permit, license, and
        inspection fees) incurred in renovating or otherwise improving or decorating,
        painting or redecorating space for tenants or other occupants or vacant
        space; (16) costs of
        any services sold to tenants or other occupants for which Landlord is entitled
        to be reimbursed by such tenants or other occupants as an additional charge
        or
        rental over and above the basic rent and escalations payable under the lease
        with such tenant or other occupant, and costs associated with valet parking
        (including, without limitation, wages and other expenses); (17) any
        depreciation or amortization of the Building or other buildings and improvements
        within the Shopping Center; (18) expenses
        in connection with goods, services or other benefits of a type provided to
        some
        tenants but not available to Tenant (such as, by way of illustration and
        not in
        limitation, special services provided to food service tenants) or which Tenant
        is required to separately pay for or provide pursuant to this Lease (such
        as, by
        way of illustration and not in limitation, HVAC maintenance for other occupants’
premises if Tenant is maintaining the HVAC system serving the Premises at
        Tenant’s expense); and (19) repairs
        and/or maintenance of any pylon or other sign which does not include any
        Tenant
        signage but does include signage of other tenants or occupants of the Shopping
        Center.
  10
 
 (b)  From
        and
        after the Commencement Date during the Term, Tenant shall pay as additional
        rent
“ Tenant’s
        Share ”
(as
        hereinafter defined) of the Common Area Expenses. As used herein, “ Tenant’s
        Share ”
of
        Common Area Expenses is defined as that fraction of the Common Area Expenses,
        the numerator of which is the Floor Area within the Premises and denominator
        of
        which is the Floor Area within the Shopping Center (provided that in no event
        shall such denominator be less than the amount of Floor Area shown within
        the
        building areas of the Shopping Center on Exhibit
        A ,
        provided, however, if any tenant or occupant separately maintains portions
        of
        the Common Area, then such costs shall be excluded from Common Area Expenses
        and
        the denominator shall not include the Floor Area of such tenants or occupants;
        provided further, that if any undeveloped pad building areas are excluded
        from
        such denominator, then Common Area Expenses shall not include costs allocable
        to
        an equitable share of Common Area surrounding such undeveloped pad buildings).
        Tenant’s payment under the provisions of this Section
        10(b) shall be
        due and payable not sooner than thirty (30) days following receipt by Tenant
        of
        an itemized billing from Landlord, which billing shall be no more frequently
        than monthly, nor less frequently than annually during the Term; provided,
        however, that Landlord shall have the right to estimate Common Area Expenses
        and
        Tenant’s Share thereof, based on Landlord’s reasonable good faith estimate of
        Common Area Expenses for the coming year. Beginning with the first full calendar
        month following thirty (30) days after Tenant’s receipt of Landlord’s written
        estimate, Tenant shall include one-twelfth (1/12th) of its annual obligation
        for
        Tenant’s Share of Common Area Expenses based upon such estimate with each
        payment of Minimum Rent thereafter until actual expenditures are thereafter
        computed by Landlord. Within ninety (90) days following the close of each
        calendar year, Landlord shall calculate actual expenditures for Common Area
        Expenses for such calendar year and Tenant’s Share thereof and provide such
        accounting to Tenant (the “ Annual
        Statement ”).
        If
        the Annual Statement shows that Tenant’s payments of estimated Tenant’s Share of
        Common Area Expenses exceeds actual Tenant’s Share of Common Area Expenses for
        such calendar year, Landlord shall accompany said Annual Statement with a
        payment to Tenant of the amount of such excess. If the Annual Statement shows
        that Tenant’s payments of estimated Tenant’s Share of Common Area Expenses were
        less than actual Tenant’s Share of Common Area Expenses for such calendar year,
        Tenant shall pay such difference to Landlord within thirty (30) days of Tenant’s
        receipt of the Annual Statement.
 
 (c)  Landlord
        shall keep at the Shopping Center or at another location in Southern California,
        complete, accurate books of account and records with respect to the Common
        Area
        Expenses, and shall retain such books and records and reasonable supporting
        documentation for at least two (2) years from the date Landlord submits its
        Annual Statement for such year. Tenant’s payment of Tenant’s Share of Common
        Area Expenses shall be without prejudice to Tenant’s examination and audit
        rights. Tenant may at any reasonable time during normal business hours, upon
        ten
        (10) days’ prior notice to Landlord, cause a complete audit to be made of such
        books, records and other materials which Landlord is required to retain for
        any
        year occurring wholly or in part during the Term within two (2) years following
        Tenant’s receipt of the Annual Statement for such year, provided that if Tenant
        discovers any errors made in any year of the Term, then Tenant may audit
        and
        inspect Landlord’s books and records for all prior years of the Term as to the
        applicable line item(s) of expenses for which such error was found, and any
        overpayment with respect to such prior year(s) shall be refunded by Landlord
        as
        provided herein. No such audit or examination shall be conducted by an auditor
        being paid on a contingency basis or based upon a percentage of any recovery
        by
        Tenant. Tenant may require Landlord to produce such information about such
        books
        and records as is necessary for a proper examination and audit thereof and
        to
        make such books and records available to Tenant for examination and audit.
        Any
        such audit shall be conducted in a manner so as to minimize interference
        with
        Landlord’s business operations. If such audit discloses any overpayment by
        Tenant of Tenant’s Share of Common Area Expenses, Landlord shall refund to
        Tenant the amount of such overpayment within thirty (30) days following
        Landlord’s receipt of such audit. If such audit discloses any underpayment by
        Tenant of Tenant’s Share of Common Area Expenses, Tenant shall pay the amount of
        such deficiency to Landlord together with delivery to Landlord of such audit.
        If
        such audit discloses an overpayment by Tenant of Tenant’s Share of Common Area
        Expenses by three percent (3%) or more, Landlord shall pay to Tenant within
        thirty (30) days after demand, Tenant’s reasonable cost in conducting such audit
        (as evidenced by invoices or other reasonable supporting documents delivered
        to
        Landlord).
 
 **11.MAINTENANCE** .
 
 (a)  Tenant
        will, at its sole cost and expense, keep, maintain, repair and replace (when
        necessary) the interior portions of the Premises (which Landlord is not
        obligated to repair in accordance with Section
        11(b) below)
        in first-class condition and make all needed repairs thereto, including plate
        glass, doors, windows, exposed interior utility lines, meters, pipes, conduits,
        fixtures and other equipment and systems (including, without limitation,
        HVAC
        equipment) serving exclusively the Premises and equipment and personal property
        of Tenant within the Premises, the Pool and elevators exclusively serving
        the
        Premises. Tenant shall permit no waste, damage or injury to the Premises.
        Tenant
        shall perform all necessary repairs, alterations and improvements to cause
        the
        Premises to comply with all applicable Laws, except that Landlord (and not
        Tenant) shall be responsible for making any capital repairs, alterations
        or
        improvements to the Premises required to cause the Premises to comply with
        applicable Laws to the extent that such compliance is not required as a result
        of Tenant’s particular use of the Premises or Tenant's particular Alterations to
        the Premises, but the cost of such capital item may be includable in Common
        Area
        Expenses on an amortized basis as provided in Section
        10(a) above.
        Notwithstanding anything to the contrary contained in this Lease, if at any
        time
        during the Term of this Lease, Tenant is required to make any replacements
        to
        the HVAC equipment serving the Premises or other mechanical or utility systems
        serving the Premises having a useful life extending beyond the expiration
        of the
        Term of this Lease, then Landlord shall reimburse Tenant for a fraction of
        the
        costs of the applicable replacement item, the numerator of which is the number
        of months in the reasonably anticipated useful life of the applicable
        replacement item beyond the expiration of the Term of this Lease and the
        denominator of which is the total number of months in the reasonably anticipated
        useful life of the applicable replacement item, which reimbursement shall
        be
        made by Landlord to Tenant within thirty (30) days following Tenant’s submission
        to Landlord of request therefor accompanied by reasonable evidence of the
        costs
        of such replacement item.
  11
 
 (b)  Landlord
        will, at its sole cost and expense, keep, maintain, repair and replace in
        first-class and professional manner and repair consistent with the standards
        of
        first-class shopping centers comparable to the Shopping Center located in
        the
        vicinity of the Shopping Center, and (subject to Tenant’s obligation to perform
        necessary repairs, alterations or improvements to the Premises to comply
        with
        applicable Laws where such compliance is required as a result of Tenant’s
        particular use of, or alterations to, the Premises) perform any repairs,
        improvements or alterations required by applicable Laws to, the foundation,
        footings, roof, roof membrane, exterior walls (provided that Common Area
        Expenses may include (i) graffiti removal from and touch-up painting of exterior
        walls, and (ii) complete painting of exterior walls not more often than once
        per
        each five (5) year period during the Term, provided that the cost of such
        complete painting shall be amortized over a five (5) year period and Common
        Area
        Expenses shall only include one-fifth (1/5th) of the cost thereof during
        each
        year of such amortization) and structural portions of, the Premises (excluding
        front doors, windows, and plate glass), utility lines, meters, pipes, conduits,
        fixtures and other equipment and systems (except if exposed within the Premises
        and serving exclusively the Premises), exterior sprinkler systems, gutters
        and
        downspouts, plus all Common Areas of the Shopping Center. Tenant may give
        Landlord notice of such repairs as may be required under the terms of this
        Section, and Landlord shall proceed forthwith to effect the same with reasonable
        diligence, but in no event later than thirty (30) days after having received
        notice (or such greater period of time as is reasonably necessary to complete
        such repairs in the event such repairs are not reasonably susceptible of
        completion within thirty (30) days, provided Landlord shall, following receipt
        of such notice from Tenant, promptly commence such repairs and diligently
        prosecute the same to completion). In event of an “emergency” (which, as used in
        this Lease, shall mean a situation posing an imminent risk of material property
        damage, injury to persons or interruption of business operations in the
        Premises), Tenant shall have the right, but not the obligation, to undertake
        immediate repairs of such nature as would normally be Landlord’s responsibility,
        and notify Landlord promptly after such repairs have been undertaken (including,
        without limitation, notice by telephone, to the extent reasonably practicable).
        If Landlord fails to repair any portion of the Premises which is Landlord’s
        responsibility, within the thirty (30) day period set forth above (or such
        greater period of time as is reasonably necessary to complete such repairs
        in
        the event such repairs are not reasonably susceptible of completion within
        thirty (30) days, provided that following receipt of such notice from Tenant,
        Landlord promptly commences such repairs and diligently prosecutes the same
        to
        completion) and upon delivery of an additional notice to Landlord, or in
        the
        case of any emergency as above stated, Tenant may without notice perform
        the
        repairs or maintenance and Landlord shall reimburse Tenant for the reasonable
        cost of such repairs within thirty (30) days following Landlord’s receipt from
        Tenant of invoices and/or other reasonable evidence of the amount of such
        costs;
        provided, however, that in the event Landlord in good faith disputes whether
        Tenant properly performed an obligation of Landlord hereunder or the cost
        of
        such performance, Landlord shall have the right to dispute the same by
        institution of a reference proceeding in accordance with the provisions of Section 39 below.
        If it is determined pursuant to such proceeding that Tenant did not properly
        perform an obligation of Landlord in accordance herewith or that the cost
        of
        such performance was unreasonable, then Tenant shall not have any right to
        reimbursement for the cost of performance as herein provided (or, as to a
        determination of unreasonable cost, Tenant shall not be entitled to
        reimbursement of the portion of the cost of such performance determined to
        be
        unreasonable). If it is determined pursuant to such proceeding that Tenant
        properly performed an obligation of Landlord hereunder, then Landlord shall
        within thirty (30) days following such determination, reimburse Tenant for
        the
        reasonable cost of such performance as determined pursuant to such action,
        plus
        interest thereon at the “ Interest
        Rate ”
(as
        hereinafter defined) from the date of Tenant’s expenditure until Landlord’s
        reimbursement. Should Landlord fail to pay such amount as is owing in accordance
        herewith (A) within thirty (30) days of receipt of invoice and/or other
        reasonable evidence of the amount of such costs (if Landlord does not institute
        an action within such thirty (30) day period to in good faith dispute as
        herein
        provided), or (B) within thirty (30) days after such determination by such
        action, as applicable, Tenant may deduct and offset such amount (including
        interest at the Interest Rate from the time such expenditure was made by
        Tenant
        until paid by Landlord) from Minimum Rent, Percentage Rent, Tenant’s Share of
        Common Area Expenses, Taxes and Insurance and other monetary obligations
        of
        Tenant owing to Landlord hereunder, provided that in no event shall such
        deduction or offset exceed twenty-five percent (25%) of Minimum Rent for
        the
        applicable month, or such greater percentage as is necessary to allow Tenant
        full recovery of the amount owing over the remainder of the Term.
 
 (c)  Landlord
        and its authorized representatives may enter the Premises during usual business
        hours, upon not less than twenty-four (24) hours’ prior written notice to Tenant
        to (i) inspect the same; and (ii) show the same to prospective mortgagees,
        buyers and, in the final six (6) months of the Term, tenants. Landlord may,
        upon
        reasonable prior notice to Tenant (except that no such prior notice shall
        be
        required in an emergency situation of imminent personal injury or material
        property damage where notice is not reasonably practicable under the
        circumstances), enter the Premises to make additions, alterations or repairs
        to
        the Premises as Landlord is required to make in accordance with this Lease
        or in
        order to comply with applicable Laws, provided, however, that all such
        additions, alterations and/or repairs shall be performed in a manner so as
        to
        minimize interference with the operation of Tenant’s business from the Premises.
        In addition, in event of an emergency, Landlord shall have the right, but
        not
        the obligation, to undertake immediate repairs of such nature as would normally
        be Tenant’s responsibility, and notify Tenant promptly after such repairs have
        been undertaken (including, without limitation, notice by telephone, to the
        extent reasonably practicable). If Tenant fails to repair any portion of
        the
        Premises which is Tenant’s responsibility, within thirty (30) days after notice
        from Landlord of the necessity for such repair (or such greater period of
        time
        as is reasonably necessary to complete such repairs in the event such repairs
        are not susceptible of completion within thirty (30) days, provided that
        following receipt of such notice from Landlord, Tenant promptly commences
        such
        repairs and diligently prosecutes the same to completion), or in the case
        of any
        emergency as above stated, Landlord may perform the repairs or maintenance
        and
        Tenant shall reimburse Landlord for the reasonable cost of such repairs within
        thirty (30) days following Tenant’s receipt from Landlord of invoices or other
        reasonable evidence of the amount of such costs; provided, however, that
        in the
        event Tenant in good faith disputes whether Landlord properly performed an
        obligation of Tenant hereunder or that the cost of such performance was
        unreasonable, Tenant shall have the right to dispute the same by institution
        of
        a reference proceeding in accordance with the provisions of Section
        39 below.
        If it is determined pursuant to such proceeding that Landlord did not properly
        perform an obligation of Tenant in accordance herewith or that the cost of
        such
        performance was unreasonable, then Landlord shall not have any right to
        reimbursement for the cost of performance as herein provided (or, as to a
        determination of unreasonable cost, Landlord shall not be entitled to
        reimbursement of the portion of the cost of such performance determined to
        be
        unreasonable). If it is determined pursuant to such proceeding that Landlord
        properly performed an obligation of Tenant hereunder, then Tenant shall within
        thirty (30) days following such determination, reimburse Landlord for the
        reasonable cost of such performance as determined pursuant to such action,
        plus
        interest thereon at the Interest Rate from the date of Landlord’s expenditure
        until Tenant’s reimbursement.
  12
 
 **12.INSURANCE** .
 
 (a)  (i)  Landlord
        shall maintain at all times during the Term an “ All
        Risk Policy ”
(as
        hereinafter defined) insuring against damage to any portion of the Premises,
        and
        appurtenances thereto. Such insurance shall be in the full amount of replacement
        cost (subject only to reasonable deductible amounts and exclusive of footings,
        foundation and excavation), without deduction for physical depreciation and
        shall provide that the proceeds of any loss shall be payable in the manner
        provided for in this Lease. Such policy shall be obtained from an insurer
        licensed to do business within the State of California having a policy holder’s
        rating of at least A- and a financial rating of not less than VIII in the
        most
        recently published Best’s Insurance Guide. Landlord shall, within ten (10) days
        following receipt of written request therefor from Tenant (but not more often
        than annually), provide Tenant with a certification of such insurance coverage,
        which certificate shall indicate, among other things, that Tenant is a
        certificate holder along with Landlord and that the Premises and all the
        improvements and Landlord’s fixtures appurtenant thereto, have been insured to
        their full replacement value, without deduction for physical depreciation.
        As
        used herein, the term “ All
        Risk Policy ”
shall
        mean a policy of fire and other property insurance in the form commonly referred
        to in the industry as “all risk” with extended endorsement (false arrest, libel,
        slander, invasion of privacy, theft, vandalism and malicious mischief coverage)
        and including such other coverage as Landlord reasonably deems appropriate
        or as
        required by Landlord’s lender; provided that although Landlord may elect to
        obtain coverage for flood and earthquake in addition to such policy, Tenant
        shall not be required to pay any part of the premium allocable to such
        coverages.
 
 (ii)  From
        and
        after the Commencement Date during the Term, Tenant shall reimburse Landlord
        for
“ Tenant’s
        Share ”
(as
        hereinafter defined) of the premium costs of the insurance described in Section
        12(a)(i) above.
        Tenant’s schedule of payments for reimbursement shall be established in the same
        manner as described in Section
        5 above,
        for Tenant’s Share of Taxes. “ Tenant’s
        Share ”
for
        purposes of this Section
        12(a)(ii) shall be
        a fraction, the numerator of which is the Floor Area within the Premises
        and the
        denominator of which is the Floor Area of the improvements covered by the
        insurance policy which is the subject of the premium.
 
 (iii)  From
        the
        date of delivery of the Premises to Tenant, Tenant will maintain or cause
        to be
        maintained (which may be, without limitation, by self-insurance), at its
        sole
        cost, an All Risk Policy insuring against damage to Tenant’s improvements and
        any personal property or equipment in the Premises. Such insurance shall
        be in
        the full amount of replacement cost (subject only to reasonable deductible
        amounts), without deduction for physical depreciation.
 
 (b)  (i)  From
        the
        date of delivery of the Premises to Tenant, Tenant will maintain at its sole
        cost commercial general liability insurance covering the Premises and Tenant’s
        use thereof against claims from personal injury, bodily injury, death and
        property damage occurring in or about the Premises, such insurance in each
        case
        to afford protection to a combined single limit of at least Five Million
        Dollars
        ($5,000,000.00) (such insurance extending to any liability of Tenant arising
        out
        of the indemnities provided for in Section
        13 below),
        and naming Landlord as an additional insured thereunder. In addition, from
        the
        date of delivery of the Premises to Tenant and thereafter during the Term,
        Tenant shall maintain worker’s compensation insurance as required by applicable
        Laws and a commercially reasonable policy of employer’s liability insurance
        coverage.
 
 (ii)  From
        the
        date of delivery of the Premises to Tenant, Landlord will maintain, as a
        Common
        Area Expense, commercial general liability insurance covering the Common
        Areas
        against claims from personal injury, bodily injury, death and property damage
        occurring in or about the Common Areas, such insurance in each case to afford
        protection to a combined single limit of at least Five Million Dollars
        ($5,000,000.00) (such insurance extending to any liability of Landlord arising
        out of the indemnities provided for in Section
        13 below),
        and naming Tenant as an additional insured thereunder.
 
 (iii)  The
        policies maintained by Landlord and Tenant pursuant to this Section
        12(b) shall
        each (1) include a cross-liability endorsement (or equivalent) providing
        that
        Landlord and Tenant, although insureds, may recover on account of the negligence
        of the other, and (2) provide that such insurance is not contributory with
        the
        coverage which the other party may carry and is primary insurance coverage
        and
        not excess insurance coverage or overage insurance coverage.
  13
 
 (c)  (i)  The
        policies of insurance maintained by Landlord and Tenant pursuant to this
        Lease
        shall (1) provide that the insurer will give at least thirty (30) days’ written
        notice of any cancellation, reduction in coverage, lapse or failure to renew,
        to
        the insured party or parties thereunder, and (2) be obtained from an insurer
        with a policy holder’s rating of at least A- and a financial rating of not less
        than VIII in the most recently published Best’s Insurance Guide and is subject
        to increase in accordance with customary industry practice for comparable
        tenants of comparable premises for a comparable use. Landlord and Tenant
        agree
        to deliver to the other certificates of insurance evidencing the existence
        in
        force of the policies of insurance described in this Lease. Each of such
        certificates shall provide that such insurance shall not be canceled, reduced
        in
        coverage, lapse or materially amended unless thirty (30) days’ prior written
        notice of such cancellation, reduction in coverage, lapse or amendment is
        given
        to the party designated on such certificate as the holder thereof.
 
 (ii)  Any
        insurance required by this Section
        12 may be
        satisfied by blanket, umbrella and/or excess liability insurance, covering
        additional items or locations or insureds, so long as the coverage afforded
        (including, without limitation, coverage as to additional insureds) will
        not be
        reduced or diminished by reason of the use of such blanket, umbrella and/or
        excess liability policy of insurance.
 
 (d)  Landlord
        and Tenant waive any rights each may have against the other on account of
        any
        loss or damage caused to Landlord or Tenant, as the case may be, their
        respective property, the Premises or its contents or to the other portions
        of
        the Shopping Center, arising from any risk generally covered by all-risk
        insurance if such waiver does not invalidate such policies or prohibit recovery
        thereunder. The parties each, for their respective insurance, waive any right
        of
        subrogation that any insurer may have against Landlord or Tenant. Landlord
        and
        Tenant shall use their respective reasonable good faith efforts to obtain
        such
        waiver.
 
 **13.****INDEMNITY** .
 
 (a)  Tenant
        shall indemnify, defend and hold harmless Landlord, and Landlord’s members,
        partners, shareholders, officers, directors, employees, agents, successors
        and
        assigns (collectively, the “ Landlord
        Indemnified Parties ”),
        from
        and against, any and all claims, damages, judgments, suits, causes of action,
        losses, liabilities, penalties, fines, expenses and costs (collectively,
        “ Tenant
        Covered Claims ”),
        which
        Tenant Covered Claims shall include, without limitation, reasonable attorneys’
fees and expenses, to the extent arising or resulting from (i) the
        negligence or wilful misconduct of Tenant or Tenant’s agents, employees and/or
        contractors; and/or
        (ii) Tenant’s
        use of the Premises including, without limitation, any occurrence within
        the
        Premises following delivery of possession of the Premises to Tenant and prior
        to
        the expiration of the Term or earlier termination of this Lease except to
        the
        extent resulting from the negligence or wilful misconduct of Landlord or
        Landlord’s agents, employees and/or contractors. In case any action or
        proceeding is brought against Landlord or any Landlord Indemnified Parties
        by
        reason of any such Tenant Covered Claims, Tenant, upon notice from Landlord,
        agrees to promptly defend the same at Tenant’s sole cost and expense by counsel
        approved in writing by Landlord, which approval shall not be unreasonably
        withheld, conditioned or delayed.
 
 (b)  Landlord
        shall indemnify, defend and hold harmless Tenant and Tenant’s members, partners,
        shareholders, officers, directors, employees, agents, successors and assigns
        (collectively, the “ Tenant
        Indemnified Parties ”),
        from
        and against, any and all claims, damages, judgments, suits, causes of action,
        losses, liabilities, penalties, fines, expenses and costs (collectively,
        “ Landlord
        Covered Claims ”),
        which
        Landlord Covered Claims shall include, without limitation, reasonable attorneys’
fees and expenses, to the extent arising or resulting from (i) the
        negligence or wilful misconduct of Landlord or Landlord’s agents, employees
        and/or contractors; and/or
        (ii) any
        occurrence within the Common Areas except to the extent resulting from the
        negligence or wilful misconduct of Tenant or Tenant’s agents, employees and/or
        contractors. In case any action or proceeding is brought against Tenant or
        any
        Tenant Indemnified Parties by reason of any such Landlord Covered Claims,
        Landlord, upon notice from Tenant, agrees to promptly defend the same at
        Landlord’s sole cost and expense by counsel approved in writing by Tenant, which
        approval shall not be unreasonably withheld, conditioned or
        delayed.
 
 (c)  The
        obligations of the parties pursuant to this Section
        13 shall
        survive the expiration of the Term or sooner termination of this
        Lease.
 
 14.DAMAGE
        AND DESTRUCTION
 
 (a)  If
        the
        Premises is damaged or destroyed by fire or other casualty required to be
        covered by the All Risk Policy referred to in Section
        12(a)(i) or to
        the extent of ten percent (10%) or less of the then Premises replacement
        cost by
        a casualty not required to be covered by the All Risk Policy, then, unless
        either party terminates this Lease pursuant to this Section
        14 ,
        Landlord shall promptly commence to repair and/or reconstruct the Premises
        to
        substantially its prior condition (the parties hereby agreeing that Landlord
        shall not be obligated for the repair and/or restoration of any items of
        Tenant’s Work or alterations made by Tenant not covered by the insurance
        maintained by Landlord pursuant to this Lease).
 
 (b)  In
        the
        event the Premises is damaged or destroyed to the extent of more than ten
        percent (10%) of their then replacement cost by a casualty not required to
        be
        covered by the All Risk Policy, then Landlord shall elect, by written notice
        to
        Tenant delivered within sixty (60) days following the occurrence of such
        casualty damage either (i) to repair and reconstruct the Premises, in which
        event, Landlord shall promptly commence and diligently perform such work
        in
        accordance with Section
        14(a) above,
        or (ii) to terminate this Lease, provided that Tenant shall have the right
        to
        nullify any such election to terminate by Landlord by agreeing in written
        notice
        to Landlord delivered within ten (10) business days following Tenant’s receipt
        of such termination notice, to pay for the costs of repair and reconstruction
        of
        the Premises to the extent in excess of ten percent (10%) of the then Premises
        replacement cost, in which event Tenant shall be responsible for such excess
        costs and shall pay such excess costs pursuant to a construction disbursement
        procedure reasonably acceptable to the parties and Landlord shall promptly
        commence and diligently perform such work in accordance with Section
        14(a) above.
  14
 
 (c)  Following
        any casualty to the Premises and/or the Shopping Center which materially
        adversely affects the operation of Tenant’s business from the Premises or access
        thereto or parking therefor, Landlord shall within sixty (60) days following
        such casualty, deliver written notice to Tenant reasonably estimating in
        good
        faith the time necessary to complete the repair and/or restoration necessitated
        by such casualty. In the event the time estimated for completion of such
        repair
        exceeds three hundred (300) days following the occurrence of such casualty,
        then
        Tenant shall have the right to terminate this Lease by written notice delivered
        to Landlord within fifteen (15) days following Tenant’s receipt of such estimate
        notice. In addition, in the event that Tenant does not terminate this Lease
        pursuant to the previous sentence and such repair in fact is not completed
        within three hundred (300) days following the occurrence of the casualty
        (or
        such longer period as may have been estimated by Landlord in such notice),
        Tenant shall have the right to terminate this Lease upon thirty (30) days
        prior
        written notice to Landlord, provided that if such repair is completed within
        such thirty (30) day period, such termination shall be nullified and this
        Lease
        shall continue in full force and effect. In addition to the foregoing, in
        the
        event of any casualty to the Premises occurring during the final eighteen
        (18)
        months of the Term, requiring in excess of ninety (90) days to repair, either
        party may terminate this Lease by written notice to the other within thirty
        (30)
        days of the occurrence of the casualty, except that if Landlord so elects
        to
        terminate this Lease and Tenant has an available Option to extend the Term
        remaining, then Tenant may nullify such election to terminate by exercising
        such
        Option to extend the Term within thirty (30) days following receipt of such
        termination notice from Landlord, in which event such casualty shall be treated
        in the manner of casualties occurring other than during the final eighteen
        (18)
        months of the Term. Unless this Lease is so terminated in accordance with
        this Section
        14(c) ,
        this
        Lease shall continue in full force, and Landlord shall perform its repair
        obligation under the other provisions of this Section
        14 .
        Upon
        any termination of this Lease under this Article
        14 ,
        the
        Minimum Rent, Percentage Rent, and Tenant’s Share of Common Area Expenses, Taxes
        and Insurance and any other amounts owing from Tenant to Landlord pursuant
        to
        this Lease shall be adjusted as of the date of such termination and the parties
        shall be released without further obligation to the other coincident with
        the
        surrender of possession of the Premises to Landlord, except for items which
        have
        accrued and are unpaid.
 
 (d)  If
        neither party terminates this Lease pursuant to foregoing provisions of this Section
        14 ,
        and if
        the operation of Tenant’s business from the Premises or parking therefor or
        access thereto is interfered with as a result of any damage or destruction,
        Tenant’s obligation for the payment of Minimum Rent, Percentage Rent, Tenant’s
        Share of Common Area Expenses, Taxes and Insurance and any other amounts
        owing
        from Tenant to Landlord pursuant to this Lease during the period the Premises
        are so rendered unfit shall be equitably abated from the date of the casualty
        based upon the extent of the interference resulting from such casualty (or
        shall
        be fully abated for such period if the operation of Tenant’s business from the
        remaining portion of the Premises is not reasonably practicable) and Tenant
        shall resume full payment upon the date which is sixty (60) days following
        completion of the restoration work by Landlord (or such earlier date upon
        which
        Tenant reopens for business to the general public from the
        Premises).
 
 (e)  The
        parties waive such rights of termination as may be granted to them in the
        event
        of casualty damage to the Premises by the laws of the State of California,
        it
        being their agreement that the rights of termination set forth in this Lease
        shall be exclusive.
 
 **15.CONDEMNATION** .
 
 (a)  If
        during
        the Term, all or any portion of the Premises is taken by right of eminent
        domain
        or condemnation by a competent governmental authority or by conveyance in
        lieu
        thereof (collectively, any “ Taking ”),
        or if
        such a portion of the Shopping Center is so Taken as Tenant reasonably
        determines shall have a material adverse effect upon the operation of Tenant’s
        business from the Premises (including, without limitation, material impairment
        of parking therefor or access thereto), Tenant may terminate this Lease upon
        written notice to the Landlord within thirty (30) days following the date
        of
        such Taking. In the event Tenant does not so terminate this Lease, Landlord
        shall promptly and diligently restore the Premises, Common Areas and/or other
        portions of the Shopping Center as are so Taken, as the case may be, to as
        near
        their condition as existed prior to such Taking as is reasonably possible.
        In
        the event of a Taking which does not result in the termination of this Lease,
        Tenant’s obligations for Minimum Rent, Percentage Rent, Tenant’s Share of Common
        Area Expenses, Taxes and Insurance and any other amounts owing from Tenant
        to
        Landlord under this Lease shall be equitably abated following such Taking
        based
        upon the extent of the interference with the operation of Tenant’s business from
        the Premises and Tenant shall resume full payment upon the date which is
        sixty
        (60) days following the completion of the restoration work by Landlord (or
        such
        earlier date upon which Tenant reopens for business to the general public
        from
        the Premises). In the event of a temporary Taking not extending beyond the
        Term,
        but which adversely affects Tenant’s operation from its Premises, Tenant shall
        have the right to elect either to terminate this Lease in accordance herewith
        or
        to not terminate this Lease and receive all compensation awarded by the
        condemning authority with respect to such temporary Taking of the Premises
        relating to the use thereof during the Term of this Lease but not in excess
        of
        the Rent due hereunder and not beyond the Term of this Lease.
 
 (b)  Landlord
        shall be entitled to that portion of the award payable in connection with
        any
        such Taking attributable to the diminution in value of Landlord’s reversionary
        interest in the Premises and Tenant shall be entitled to that portion of
        the
        award payable in connection with such Taking attributable to diminution in
        value
        of Tenant’s leasehold, damage to Tenant’s business and loss of goodwill and
        Tenant’s relocation costs.
 
 (c)  The
        parties waive such rights of termination as may be granted to them in the
        event
        of condemnation of the Premises by the laws of the State of California, it
        being
        their agreement that the rights of termination set forth in this Lease shall
        be
        exclusive.
  15
 
 **16.ASSIGNMENT
        AND SUBLETTING** .
 
 (a)  Except
        as
        otherwise specifically provided herein, Tenant shall not assign Tenant’s
        interest in this Lease or sublet any portion of the Premises (collectively,
        “ Transfer ”)
        without obtaining in each instance the prior consent of Landlord, which consent
        shall not be unreasonably withheld, conditioned or delayed. Landlord’s consent
        to any Transfer shall not constitute a waiver of the necessity for such consent
        to any subsequent Transfer. Notwithstanding a Permitted Transfer or other
        Transfer consented to by Landlord, Tenant shall remain liable for the full
        performance of every obligation under this Lease to be performed by Tenant.
        Any
        permitted assignee or subtenant pursuant to this Section
        16 may
        change the trade name under which the business operating from the Premises
        is
        operated and/or the use of the Premises in accordance with the provisions
        of Section
        7(b) above,
        including, without limitation, the requirement that Landlord’s consent thereto
        is first obtained, which consent shall not be unreasonably withheld, conditioned
        or delayed. The acceptance by Landlord of rent or any other sum due hereunder
        from any person or entity other than Tenant shall not be deemed to be a waiver
        of any provision contained herein or a consent to any assignment or sublease.
        Tenant shall reimburse Landlord for its costs and expenses (including, without
        limitation, reasonable attorneys’ fees and expenses) incurred in connection with
        any proposed assignment or subletting (whether or not Landlord consent is
        granted), other than a Permitted Transfer, within thirty (30) days following
        receipt of request for reimbursement accompanied by reasonable supporting
        documentation with respect thereto, but not to exceed a maximum reimbursement
        of
        One Thousand Dollars ($1,000.00).
 
 (b)  Notwithstanding
        anything to the contrary contained herein, in the event of any proposed Transfer
        (other than a Permitted Transfer) which is an assignment of this Lease or
        a
        sublet of all or substantially all of the Premises for all or substantially
        all
        of the remaining Term of this Lease, Landlord shall have the right, exercisable
        by written notice to Tenant delivered within fifteen (15) days following
        receipt
        of Tenant’s request for Landlord’s consent to the proposed Transfer, to
        terminate this Lease effective as of the proposed Transfer effective date,
        subject to Landlord’s payment to Tenant on or before such termination effective
        date an amount equal to the unamortized cost (as of the termination effective
        date, based upon monthly straight line amortization over the Initial Term
        of
        this Lease) of Tenant’s Work, as such cost shall be reasonably evidenced by
        documentation provided by Tenant to Landlord. However, Tenant shall have
        the
        right to nullify any such election to terminate by Landlord by agreeing,
        in
        written notice delivered to Landlord within fifteen (15) days following receipt
        of such termination notice from Landlord, to withdraw Tenant’s request for
        consent to such proposed Transfer, in which event this Lease shall continue
        in
        full force and effect as if Tenant had never submitted such request for
        Landlord’s consent to such proposed Transfer.
 
 (c)  In
        the
        event of any Transfer (other than a Permitted Transfer), Tenant shall pay
        to
        Landlord fifty percent (50%) of any “ Excess
        Consideration ”
        received by Tenant from such Transfer, as and when received. As used herein,
        “ Excess
        Consideration ”
means
        the total rent and other consideration of any kind or nature payable by the
        Transferee (other than for sale or use of trade fixtures and other personal
        property items) less the total amount of rent payable by the Tenant under
        this
        Lease from and after the effective date of the Transfer after Tenant’s recapture
        from the rent payable by such Transferee of Tenant’s actual out-of-pocket costs
        reasonably incurred in connection with the applicable Transfer, including,
        without limitation, reasonable attorneys’ fees, reasonable brokerage
        commissions, costs of improvements made for the benefit of the Transferee,
        allowances granted to the Transferee or other monetary concessions granted
        to
        any such Transferee.
 
 (d)  Notwithstanding
        anything to the contrary contained in this Section
        16 above,
        Tenant may, without Landlord’s consent (but upon reasonable prior notice to
        Landlord) at any time (i) assign this Lease or sublease the whole or any
        part of
        the Premises to any entity controlled by, controlling or under common control
        with Tenant or to any entity resulting from the consolidation or merger of
        Tenant into or with such other entity or the acquisition of substantially
        all of
        the assets of Tenant by such entity, or (ii) license, grant a concession
        of or
        otherwise permit the use of one or more portions of the Premises which are
        not
        separately demised and do not exceed an aggregate of twenty-five percent
        (25%)
        of the Floor Area of the Premises to licensees, concessionaires or users
        which
        are not inconsistent with Tenant’s permitted use of the Premises (including,
        without limitation, any licensee selling ski and/or other sports-oriented
        vacation tours or packages). Any such assignment or subletting, licensing,
        or
        granting of permission for use pursuant to the immediately preceding sentence
        is
        referred to in this Lease as a “ Permitted
        Transfer ”
and
        any
        assignee, subtenant, licensee or other user under a Permitted Transfer is
        referred to in this Lease as a “ Permitted
        Transferee ”.
        In
        addition, the sale or transfer of all or any part of Tenant’s stock or other
        equity interests shall not constitute an assignment or other transfer requiring
        Landlord’s consent.
 
 (e)  In
        the
        event of any transfer of Landlord’s interest in the Premises, following the
        assumption of Landlord’s remaining obligations under this Lease by such
        transferee, Landlord shall be automatically relieved of any and all obligations
        and liabilities accruing with respect to the period from and after the date
        of
        such transfer and assumption.
 
 **17.SUBORDINATION
        AND ATTORNMENT** .
 
 (a)  Upon
        notice by Landlord, Tenant shall subordinate its rights under this Lease
        to any
        lease(s) wherein Landlord is the lessee and to the lien of any mortgage(s)
        or
        deed(s) of trust (collectively, “ Instrument ”),
        regardless of whether such Instrument now exists or is hereafter created,
        to all
        advances thereunder, to any interest thereon, and to all modifications,
        consolidations, renewals, replacements and extensions thereof, provided the
        lessors, mortgagees or beneficiaries agree to provide Tenant with an agreement
        of non-disturbance in a commercially reasonable form reasonably acceptable
        to
        Tenant and Landlord, agreeing to recognize this Lease and Tenant’s rights
        hereunder in the event of termination or foreclosure under the Instrument
        so
        long as Tenant is not in default under this Lease beyond the expiration of
        any
        applicable notice and cure periods. Tenant agrees to execute any agreement
        evidencing such subordination and non-disturbance in the form attached hereto
        as Exhibit
        G and
        incorporated herein by this reference or such other commercially reasonable
        form
        as is reasonably acceptable to Tenant, at Landlord’s request. Any such lessor,
        mortgagee or beneficiary may elect to have this Lease prior to its instrument,
        and in the event of such election and upon notification by such lessee,
        mortgagee or beneficiary to Tenant, this Lease shall be deemed prior to said
        Instrument, whether this Lease is dated prior or subsequent to said Instrument.
        Notwithstanding anything to the contrary contained in this Lease, it shall
        be a
        condition precedent to the performance of each of Tenant’s obligations under
        this Lease (including, without limitation, Tenant’s obligation for the payment
        of Minimum Rent, Percentage Rent and Tenant’s Share of Common Area Expenses,
        Taxes and Insurance), that Tenant obtain from each lessor, mortgagee or
        beneficiary under an Instrument presently encumbering the Shopping Center,
        an
        agreement of non-disturbance in the form attached hereto as Exhibit
        G or in
        other commercially reasonable form reasonably acceptable to Tenant and
        Landlord.
  16
 
 (b)  If
        Landlord’s interest in the Premises is transferred (except in a sale-leaseback
        financing transaction), or if any proceedings are brought for the foreclosure
        of, or in the event of the exercise of the power of sale under, any Instrument,
        or if any lease in a sale-leaseback transaction wherein Landlord is the lessee
        is terminated, Tenant shall attorn to and recognize such purchaser, assignee,
        mortgagee or beneficiary as Landlord under this Lease, provided such purchaser,
        assignee, mortgagee or beneficiary has executed or agrees to execute an
        agreement of subordination, non-disturbance and attornment in the form attached
        hereto as Exhibit
        G or in
        other commercially reasonable form reasonably acceptable to Tenant and Landlord,
        recognizing this Lease and Tenant’s rights hereunder.
 
 **18.TENANT
        DEFAULTS** .
 
 (a)  The
        occurrence of either of the following shall constitute a default by Tenant
        pursuant to this Lease: (i) Tenant’s failure to pay rent when due under this
        Lease, where such failure continues for five (5) days after notice that such
        payment is due; and (ii) Tenant’s failure to observe or perform any covenant,
        term or condition of this Lease (other than the payment of rent) where such
        failure continues for thirty (30) days after notice thereof from Landlord
        to
        Tenant; provided that if such failure cannot reasonably be cured within such
        thirty (30) day period, Tenant shall not be in default hereunder so long
        as
        Tenant commences such cure within such thirty (30) day period and thereafter
        diligently prosecutes such cure to completion.
 
 (b)  In
        the
        event of any default by Tenant pursuant to Section
        18(a) above,
        in addition to any other remedies available to Landlord at law or in equity,
        Landlord shall have the immediate option to terminate this Lease and all
        rights
        of Tenant hereunder by giving written notice of such intention to terminate.
        In
        the event that Landlord shall elect so to terminate this Lease, then Landlord
        may recover from Tenant:
 
 (i)  The
        worth
        at the time of award of any unpaid rent which had been earned at the time
        of
        such termination; plus
 
 (ii)  The
        worth
        at the time of award of the amount by which the unpaid rent which would have
        been earned after termination until the time of award exceeds the amount
        of such
        rental loss Tenant proves could have been reasonably avoided; plus
 
 (iii)  The
        worth
        at the time of award of the amount by which the unpaid rent for the balance
        of
        the Term after the time of award exceeds the amount of such rental loss that
        Tenant proves could have been reasonably avoided; plus
 
 (iv)  Any
        other
        amount necessary to compensate Landlord for all the detriment proximately
        caused
        by Tenant’s failure to perform its obligations under this Lease or which in the
        ordinary course of things would be likely to result therefrom.
 
 The
        term
“ rent ”
as
        used
        in Section
        18(b) shall be
        deemed to mean Minimum Rent only. As used in Sections
        18(b)(i) and (ii) above,
        the “worth at the time of award” is computed by allowing interest at the
        Interest Rate. As used in Section
        18(b)(iii) above,
        the “worth at the time of award” is computed by discounting such amount at the
        discount rate of the Federal Reserve Bank of San Francisco at the time of
        award
        plus one percent (1%).
 
 (c)  In
        the
        event of any default by Tenant pursuant to Section
        18(a) above
        and Tenant’s abandonment of the Premises, (i) Landlord shall also have the right
        to reenter the Premises and remove all persons and property therefrom by
        summary
        proceedings or otherwise; such property may be removed and stored in a public
        warehouse or elsewhere at the cost of and for the account of Tenant or disposed
        of in a reasonable manner by Landlord, and/or (ii) Landlord shall have the
        remedy described in California Civil Code Section 1951.4 (lessor may continue
        lease in effect after lessee’s breach and abandonment and recover rent as it
        becomes due, if lessee has right to sublet or assign, subject only to reasonable
        limitations).
 
 (d)  In
        the
        event Landlord shall elect to reenter as provided in Section
        18(c) above,
        or shall take possession of the Premises pursuant to legal proceedings or
        pursuant to any notice provided by law, and if Landlord does not elect to
        terminate this Lease, then Landlord may from time to time, without terminating
        this Lease, either recover all rental as it becomes due or relet the Premises
        or
        any part thereof for such term or terms and at such rental or rentals and
        upon
        such other terms and conditions as Landlord in its reasonable discretion
        may
        deem advisable. In the event that Landlord shall elect to relet, then rentals
        received by Landlord from such reletting shall be applied to the payment
        of any
        indebtedness owed by Tenant to Landlord and the residue, if any, shall be
        held
        by Landlord and applied in payment of future rent as the same may become
        due and
        payable hereunder. Should that portion of such rentals received from such
        reletting during any month, which is applied to the payment of rent hereunder,
        be less than the rent payable during that month by Tenant hereunder, then
        Tenant
        shall pay such deficiency to Landlord. Such deficiency shall be calculated
        and
        paid monthly. Tenant shall also pay to Landlord, as soon as ascertained,
        any
        costs and expenses reasonably incurred by Landlord in such reletting. No
        reentry
        or taking possession of the Premises by Landlord pursuant to this Section
        18 ,
        shall
        be construed as an election to terminate this Lease unless a written notice
        of
        such intention be given by Landlord to Tenant or unless the termination thereof
        be decreed by a court of competent jurisdiction. Landlord may at any time
        after
        such reletting elect to terminate this Lease for any such default by
        Tenant.
  17
 
 (e)  All
        rights, options and remedies of Landlord contained in this Lease shall be
        construed and held to be cumulative, and no one of them shall be exclusive
        of
        the other, and Landlord shall have the right to pursue any one or all of
        such
        remedies or any other remedy or relief which may be provided by law, whether
        or
        not stated in this Lease. Landlord’s failure to insist upon strict performance
        of any term, covenant or condition of this Lease or to exercise any right
        or
        remedy it has shall not be deemed a waiver or relinquishment for the future
        of
        such performance, right or remedy unless in writing signed by Landlord. No
        waiver by Landlord shall constitute a waiver of any subsequent
        breach.
 
 (f)  Landlord
        waives such liens, if any, to which it may have a right with respect to the
        merchandise, furniture, trade fixtures and other personal property of Tenant
        located on or about the Premises and shall from time to time execute such
        documents as Tenant may reasonably request to acknowledge such
        waiver.
 
 **19.LANDLORD
        DEFAULTS** .
 
 (a)  Except
        as
        otherwise expressly provided in this Lease, Landlord shall be in default
        under
        this Lease if Landlord fails to perform any of its obligations hereunder
        and
        said failure continues for a period of thirty (30) days after Tenant gives
        Landlord notice thereof (unless such failure cannot reasonably be cured within
        thirty (30) days) and Landlord shall have commenced to cure within said thirty
        (30) days and continues diligently to pursue the curing of the same). Tenant
        shall give to any holder of indebtedness secured by a first lien upon the
        Premises whose address has previously been provided to Tenant, a copy of
        any
        notice of default served upon the Landlord. Tenant further agrees that any
        such
        holder of indebtedness shall have the right to cure any Landlord default
        within
        the time period provided for such cure by Landlord pursuant to this Lease.
        If
        such default is not cured within the specified time period, Tenant may exercise
        any right or remedy available to it at law or in equity or under this Lease.
        Tenant shall have the right to cure any such default upon written notice
        to
        Landlord (but no such additional notice shall be required in an emergency
        situation) and Landlord shall reimburse Tenant for the reasonable cost thereof
        within thirty (30) days following receipt from Tenant of invoices or other
        reasonable evidence of the amount of such costs; provided, however, in the
        event
        Landlord in good faith disputes whether Tenant properly performed an obligation
        of Landlord, Landlord may dispute the same by institution of a reference
        proceeding pursuant to Section
        39 below
        within thirty (30) days following Tenant’s request for reimbursement. If it is
        determined pursuant to such proceeding that Tenant’s cure was proper, Landlord
        shall, within ten (10) days following such determination, reimburse Tenant
        for
        the cost of such cure (plus interest at the Interest Rate from the date of
        Tenant’s expenditure until reimbursement). Should Landlord fail to pay Tenant
        any amount due Tenant (a) within thirty (30) days following receipt of Tenant’s
        invoices or other evidence (if Landlord does not institute a reference
        proceeding disputing such cure), or (b) within ten (10) days after determination
        by reference, Tenant may, notwithstanding anything to the contrary contained
        in
        this Lease, deduct and offset such amount (including, without limitation,
        interest at the Interest Rate from the time of Tenant’s expenditure until
        repaid) from any monetary obligation of Tenant owing Landlord hereunder,
        provided that in no event shall such deduction or offset exceed twenty-five
        percent (25%) of Minimum Rent for the applicable month, or such greater
        percentage as is necessary to allow Tenant full recovery of the amount owing
        over the remainder of the Term. Notwithstanding anything to the contrary
        contained in this Lease, Tenant shall have the right to offset any unpaid
        reference or court award from any monetary obligation due under this Lease.
        Any
        amount due from Landlord to Tenant shall bear interest at the Interest Rate
        from
        the date due until paid. All rights, options and remedies of Tenant contained
        in
        this Lease shall be construed and held to be cumulative, and no one of them
        shall be exclusive of the other, and Tenant shall have the right to pursue
        any
        one or all of such remedies or any other remedy or relief which may be provided
        by law, whether or not stated in this Lease. Tenant’s failure to insist upon
        strict performance of any term, covenant or condition of this Lease or to
        exercise any right or remedy it has shall not be deemed a waiver or
        relinquishment for the future of such performance, right or remedy unless
        in
        writing signed by Tenant. No waiver by Tenant shall constitute a waiver of
        any
        subsequent breach.
 
 (b)  In
        the
        event that Landlord shall be liable to Tenant for damages sustained by Tenant
        as
        a result of Landlord’s breach of this Lease, it is expressly understood and
        agreed that any money judgment resulting from any default or other claim
        arising
        under this Lease shall be satisfied only out of Landlord’s interest in the
        Shopping Center, the proceeds thereof and therefrom and the rent payable
        under
        this Lease, and no other real, personal or mixed property of Landlord, wherever
        situated, shall be subject to levy on any such judgment obtained against
        Landlord and if such interest is insufficient for the payment of such judgment,
        Tenant will not institute any further action, suit, claim or demand, in law
        or
        in equity, against Landlord for or on account of such deficiency. Tenant
        hereby
        waives, to the extent waivable under law, any right to satisfy such money
        judgment against Landlord except from Landlord’s interest in the Shopping
        Center, the proceeds thereof and therefrom and the rent payable under this
        Lease.
 
 **20.TENANT’S
        PROPERTY; SURRENDER; HOLDING OVER** .
 
 (a)  Any
        furniture, trade fixtures and other equipment and personal property of Tenant
        not permanently affixed to the Premises shall be Tenant’s property. Tenant may
        remove its personal property which it has stored or placed in the Premises.
        Tenant, at its sole expense, shall immediately repair any damage to the Premises
        caused by installation or removal of any personal property unless such damage
        is
        caused by the negligence or wilful misconduct of Landlord and/or any of
        Landlord’s employees, agents, representatives and/or contractors. Any personal
        property of Tenant not removed from the Premises within thirty (30) days
        following the expiration of the Term or any earlier termination of this Lease
        shall become Landlord’s property.
  18
 
 (b)  Tenant
        shall surrender possession of the Premises upon the expiration of the Term
        or
        earlier termination of this Lease, broom clean, free of debris, in good order
        and state of repair (excepting Landlord’s obligations under this Lease and
        ordinary wear and tear), and deliver the keys as Landlord designates. In
        the
        event Tenant holds over in the Premises following the expiration of the Term
        or
        earlier termination of this Lease, Tenant’s occupancy shall be considered a
        tenancy from month to month (terminable upon thirty (30) days’ notice by either
        party) on all terms and conditions of this Lease, except that Tenant’s
        obligation for monthly Minimum Rent during such holdover shall equal (i)
        during
        the initial month of such holding over, one hundred twenty-five percent (125%)
        of the monthly Minimum Rent in effect immediately preceding the expiration
        of
        the Term or earlier termination of the Lease, and (ii) from and after the
        expiration of the initial month of such holding over, one hundred fifty percent
        (150%) of the monthly Minimum Rent in effect immediately preceding the
        expiration of the Term or earlier termination of the Lease. If Tenant fails
        to
        surrender the Premises upon the expiration of the Term or earlier termination
        of
        this Lease despite demand to do so by Landlord notifying Tenant of a successor
        tenant, Tenant shall indemnify, defend and hold harmless Landlord from and
        against any and all claims, demands, losses, liabilities, costs and/or expenses
        (including, without limitation, reasonable attorneys’ fees and expenses) arising
        as a result thereof, including, without limitation, any claim made by any
        succeeding tenant founded on or resulting from such failure to
        surrender.
 
 21.AGREEMENTS .
        The
        parties hereby acknowledge that this Lease shall be subordinate to existing
        matters of record (the “ Agreements ”),
        subject to Section
        7(a) above.
        This Lease shall not be subordinate to any new Agreement or any amendment
        or
        supplement to the existing Agreements, which is not first approved by Tenant
        in
        writing, which approval shall not be unreasonably withheld, conditioned or
        delayed.
 
 22.QUIET
        ENJOYMENT .
        Upon
        payment by Tenant of the rent and the observance and performance of all of
        the
        agreements, covenants, terms and conditions on Tenant’s part to be observed and
        performed, Tenant shall quietly enjoy the Premises for the Term without
        hindrance or interruption by Landlord or any other person or persons lawfully
        or
        equitably claiming by, through or under Landlord, subject to the terms of
        this
        Lease.
 
 23.ESTOPPEL
        STATEMENTS .
        Within
        twenty (20) days after each written request from either party in connection
        with
        a sale, financing, assignment or other transfer of such party’s interest in this
        Lease, the non-requesting party shall execute and deliver to the requesting
        party or its designee (and the requesting party and each designee may rely
        thereon) an estoppel certificate certifying that this Lease is unmodified
        (except for any amendments specifically stated) and in full force and effect,
        setting forth the date through which Minimum Rent has been paid, and
        acknowledging that there are not, to such party’s actual knowledge, any uncured
        defaults on the part of the other party hereunder or specifying such defaults
        if
        any are claimed, and certifying, to such party’s actual knowledge, as to such
        other factual matters as may be reasonably requested.
 
 24.FORCE
        MAJEURE .
        If
        either party is delayed or hindered in or prevented from the performance
        of any
        act required hereunder because of strikes, lockouts, inability to procure
        labor
        or materials, failure of power, restrictive Laws, riots, insurrection, war,
        fire
        or other casualty or other reason of a similar or dissimilar nature beyond
        the
        reasonable control of the party delayed, financial inability excepted (any
        “ Force
        Majeure Event ”),
        performance of such act shall be excused for the period of the Force Majeure
        Event, and the period for the performance of such act shall be extended for
        an
        equivalent period. Delays or failures to perform resulting from lack of funds
        shall not be Force Majeure Events.
 
 25.SIGNS .
        Tenant
        shall be entitled to the maximum lawful Building signage (including, without
        limitation, the right to identification on at least two (2) sides of the
        Building), and monument/pylon signage within the Shopping Center in accordance
        with Exhibit
        D attached
        hereto and incorporated herein by this reference.
 
 26.REAL
        ESTATE BROKERS .
        Landlord and Tenant agree and acknowledge that The Clover Company has acted
        as
        broker in connection with this Lease (the “ Broker ”)
        and
        Landlord agrees that Landlord shall pay the commission due such Broker in
        connection herewith and indemnify, defend, and hold Tenant harmless from
        any
        commission claims of such Broker. Other than the Broker, Tenant warrants
        that it
        has not dealt with a broker regarding this Lease, and shall indemnify, defend
        and save Landlord harmless from all claims, actions, damages, expenses and
        liability whatsoever, including, without limitation, reasonable attorneys’ fees
        and expenses, arising from any claim for commission or finder’s fee regarding
        this Lease. Other than the Broker, Landlord warrants that it has not dealt
        with
        a broker regarding this Lease, and shall indemnify, defend and save Tenant
        harmless from all claims, actions, damages, expenses and liability whatsoever,
        including, without limitation, reasonable attorneys’ fees and expenses, arising
        from any claim for commission or finder’s fee regarding this Lease.
 
 27.MEMORANDUM
        OF LEASE .
        This
        Lease shall not be recorded. However, a memorandum hereof in the form attached
        hereto as Exhibit F shall be
        executed, in recordable form, by both parties concurrently herewith and recorded
        by Landlord, at Landlord’s expense, with the official charged with recordation
        duties for the county in which the Shopping Center is located. Tenant shall
        execute a termination of such memorandum of this Lease in form and substance
        reasonably acceptable to Landlord, which termination instrument Landlord
        may
        record upon the expiration of the Term or earlier termination of this
        Lease.
 
 28.NOTICES .
        Any
        notice, demand, request, approval, consent or other instrument which is,
        or is
        required to be, given under this Lease shall be in writing and shall be deemed
        to have been given (a) two (2) days after when mailed by United States
        registered or certified mail return receipt requested, postage prepaid, or
        (b)
        when received, if sent by overnight courier or delivery service, addressed
        to
        Landlord or Tenant at the respective addresses set forth in the Basic Lease
        Provisions or such other address or addresses as either party may designate
        by
        notice to the other in accordance with this Section
        28 .
 
 29.ATTORNEYS’
        FEES .
        In the
        event either party shall institute any action or proceeding against the other
        party relating to this Lease, the unsuccessful party in such action or
        proceeding shall reimburse the successful party for its disbursements incurred
        in connection therewith and for its reasonable attorneys’ fees as fixed by the
        court. In addition to the foregoing award of attorneys’ fees to the successful
        party, the successful party in any lawsuit on this Lease shall be entitled
        to
        its attorneys’ fees incurred in any post-judgment proceedings to collect or
        enforce the judgment. This provision is separate and several and shall survive
        the merger of this Lease into any judgment on this Lease.
  19
 
 30.WAIVER .
        No
        waiver of any breach of any of the terms, covenants, agreements, restrictions
        or
        conditions of this Lease shall be valid unless in writing and signed by the
        party to be charged with such waiver, nor shall any waiver be construed as
        a
        waiver of any succeeding breach of any of the same or other covenants,
        agreements, restrictions, or conditions hereof.
 
 31.LEASE
        BINDING UPON SUCCESSORS .
        Subject
        to the provisions of Section
        16 above,
        each of the terms, covenants and conditions of this Lease shall extend to
        and be
        binding upon and shall inure to the benefit of not only Landlord and Tenant,
        but
        each of their respective heirs, administrators, legal representatives,
        successors and assigns. Whenever in this Lease reference is made to either
        Landlord or Tenant, the reference shall be deemed to include, wherever
        applicable, the heirs, legal representatives and administrators, successors
        and
        assigns, as if such parties were named in every case.
 
 32.INTERPRETATION .
        Captions of the sections or parts of this Lease are for convenience only
        and
        shall not be considered or referred to in resolving questions of interpretation
        or construction. The words “ Landlord ”
and
        “ Tenant ”
when
        used herein shall be applicable to one or more persons as the case may be,
        and
        the singular shall include the plural, and the neuter shall include the
        masculine and feminine, and if there be more than one, the obligations hereof
        shall be joint and several. The word “ persons ”
        wherever used shall include individuals, firms, associations and corporations.
        The language in all parts of this Lease shall in all cases be construed as
        a
        whole and in accordance with its fair meaning and shall not be construed
        strictly for or against Landlord or Tenant.
 
 33.INTEREST .
        Any
        amount owing from one party to the other under this Lease which is not paid
        within ten (10) days of the date when due shall thereafter bear interest
        at the
        Interest Rate. As used herein, the term “ Interest
        Rate ”
means
        a
        per annum rate of interest equal to the lesser of (1) two percent (2%) per
        annum
        over the then most recent annual prime or reference rate of interest announced
        by Bank of America N.A. (or in the event Bank of America N.A. ceases to publish
        a prime or reference rate, the prime rate of a comparable national banking
        institution reasonably agreed upon by the parties), or (2) the maximum rate
        permitted by applicable law.
 
 34.INVALIDITY .
        If any
        provision of this Lease shall prove to be invalid, void or illegal, it shall
        in
        no way affect, impair or invalidate any other provision hereof.
 
 35.TIME
        OF
        THE ESSENCE .
        Time is
        expressly declared to be “of the essence” in this Lease and in each and every
        provision hereof wherein time for performance is a factor.
 
 36.GOVERNING
        LAW .
        This
        Lease shall be governed by, and construed in accordance with, the laws of
        the
        State of California.
 
 37.APPROVALS .
        Except
        to the extent specifically otherwise provided in this Lease, whenever the
        approval or consent of either of the parties hereto is required under this
        Lease, such approval or consent shall not be unreasonably withheld, conditioned
        or delayed.
 
 38.COUNTERPARTS .
        This
        Lease may be executed in any number of counterparts, each of which shall
        be
        deemed an original, but all of which, taken together, shall constitute one
        and
        the same instrument.
 
 39.EXPEDITED
        DISPUTE RESOLUTION .
        At the
        election of either Landlord or Tenant, any dispute with respect to the subject
        matter of this Lease (except an unlawful detainer action by Landlord) shall
        be
        resolved by a referee pursuant to the provisions of California Code of Civil
        Procedure Section 638 et  seq .,
        for a
        determination to be made which shall be binding upon the parties as if tried
        before a court or jury. The parties agree specifically as to the
        following:
 
 (a)  Within
        five (5) business days after service of a demand by a party hereto, the parties
        shall agree upon a single referee who shall then try all issues, whether
        of fact
        or law, and then report a finding or judgment thereon. If the parties are
        unable
        to agree upon a referee either party may seek to have one appointed, pursuant
        to
        California Code of Civil Procedure Section 640, by the presiding judge of
        the
        County Superior Court where the Shopping Center is located.
 
 (b)  The
        compensation of the referee shall be such charge as is customarily charged
        by
        the referee for like services. The cost of such proceedings shall initially
        be
        borne equally by the parties. However, the prevailing party in such proceedings
        shall be entitled, in addition to all other costs, to recover its contribution
        for the cost of the reference as an item of damages and/or recoverable
        costs.
 
 (c)  If
        a
        reporter is requested by either party, then a reporter shall be present at
        all
        proceedings, and the fees of such reporter shall be borne by the party
        requesting such reporter. Such fees shall be an item of recoverable costs.
        Only
        a party shall be authorized to request a reporter.
 
 (d)  The
        referee shall apply all California Rules of Procedure and Evidence and shall
        apply the substantive law of California in deciding the issues to be heard.
        Notice of any motions before the referee shall be given, and all matters
        shall
        be set at the convenience of the referee.
  20
 
 (e)  The
        referee’s decision under California Code of Civil Procedure Section 644, shall
        stand as the judgment of the court, subject to appellate review as provided
        by
        the laws of the State of California.
 
 (f)  The
        parties agree that they shall in good faith endeavor to cause any such dispute
        to be decided within four (4) months. The date of hearing for any proceeding
        shall be determined by agreement of the parties and the referee, or if the
        parties cannot agree, then by the referee.
 
 (g)  The
        referee shall have the power to award damages and all other relief.
 
 **40.****TERMINATION
        OF EXISTING LEASE**.
        THE
        PARTIES ACKNOWLEDGE THAT LANDLORD CURRENTLY LEASES TO TENANT CERTAIN EXISTING
        PREMISES OCCUPIED BY TENANT LOCATED ACROSS FOOTHILL BOULEVARD FROM THE SHOPPING
        CENTER (THE “EXISTING PREMISES”) PURSUANT TO AN EXISTING LEASE (THE “EXISTING
        LEASE”). TENANT’S EXISTING LEASE FOR THE EXISTING PREMISES SHALL TERMINATE
        THIRTY (30) DAYS FOLLOWING THE OPENING OF THE PREMISES FOR BUSINESS UNDER
        THIS
        LEASE. TENANT SHALL NOT BE LIABLE FOR RENT OR OTHER CHARGES UNDER THE EXISTING
        LEASE DURING SUCH THIRTY (30) DAY PERIOD FOLLOWING THE OPENING OF THE PREMISES
        FOR BUSINESS UNDER THIS LEASE. TENANT SHALL SURRENDER POSSESSION OF THE EXISTING
        PREMISES IN THE CONDITION REQUIRED FOR SURRENDER UNDER THE EXISTING LEASE
        ON OR
        BEFORE SUCH EFFECTIVE DATE OF THE TERMINATION OF THE EXISTING LEASE. HOWEVER,
        IF
        TENANT FAILS TO SO SURRENDER POSSESSION OF THE EXISTING PREMISES BY THE
        TERMINATION EFFECTIVE DATE OF THE EXISTING LEASE, THEN TENANT’S CONTINUED
        OCCUPANCY OF THE EXISTING PREMISES SHALL THEREAFTER CONSTITUTE A HOLDING
        OVER
        UNDER THE EXISTING LEASE.
 
 **41.****RENAMING
        OF SPORT CHALET DRIVE** . **** Landlord
        agrees to reasonably cooperate with Tenant in attempting to cause the City
        Council of La Cañada and any other applicable governmental authorities whose
        consent therefor is required, to rename the street which is so identified
        on
Exhibit A as “Sport Chalet Drive”, provided that Tenant shall be solely
        responsible for all costs and expenses of attempting to cause such renaming
        and
        in no event shall this Lease be contingent upon such renaming.
 
 42.WAIVER
        OF
        CONSEQUENTIAL DAMAGES .
        Notwithstanding anything to the contrary contained in this Lease, in no event
        shall either party be liable to the other party for any consequential damages
        in
        connection with this Lease or any breach of this Lease, provided that amounts
        which Landlord is entitled to collect as damages from Tenant under California
        Civil Code Section 1951.2 in the event of a default by Tenant not cured within
        the applicable period for cure under Section
        18 above
        shall not be deemed to constitute consequential damages for purposes
        hereof..
 
 43.ENTIRE
        AGREEMENT .
        This
        Lease contains the entire agreement of the parties hereto with respect to
        the
        matters covered thereby, and no other agreement, statement or promise made
        by
        any party hereto, or to any employee, officer or agent of any party hereto,
        which is not contained herein, shall be binding or valid. All prior or
        contemporaneous agreements or writings between or among the parties are
        specifically merged into this Lease. This Lease may not be amended, modified
        or
        supplemented except by written instrument executed by Landlord and
        Tenant.
 
 IN
        WITNESS WHEREOF, the parties hereto have executed this Lease as of the date
        first written above.
 
 **LANDLORD:**
              ****
              **TENANT:**LA
                  CAÑADA PROPERTIES, INC.,
              
              SPORT
                  CHALET, INC.,a
                  California corporation
              
              a
                  Delaware corporationBy:
              /s/
                  Eric Olberz
              
              By:
              /s/
                  Dennis Trausch
  Print
                  Name:
              
              
              Print
                  Name:
  Its:
              
              
              Its:By:
  Print
                  Name:
  Its:




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