Document:

exv10w3

Exhibit 10.3

PROMISSORY NOTE

Galveston, Texas

			
	$13,000,000.00
	 	August 20, 2010

     FOR VALUE RECEIVED, PACIFIC SUNWEAR STORES CORP., a California corporation (“Borrower”),
promises to pay to the order of AMERICAN NATIONAL INSURANCE COMPANY, a Texas insurance company
(American National Insurance Company, its successors or assigns being hereinafter called “Lender”)
the sum of THIRTEEN MILLION AND NO/100 DOLLARS ($13,000,000.00), together with interest on all
principal remaining unpaid from time to time from the date of the initial funding of this Note
(“Disbursement Date”) at the rate of six and one-half percent (6.5%) per annum (the “Contract
Rate”). Interest only accruing from the date of the initial funding of this Note, through and
including the last day of the month in which the Disbursement Date occurs, shall be collected upon
the date of the recordation of the Mortgage (hereinafter defined), and thereafter, principal and
interest payments on the Note, based upon a twenty-five (25) year amortization of the principal
balance on the date hereof, in monthly installments of EIGHTY-SEVEN THOUSAND SEVEN HUNDRED
SEVENTY-SIX AND 93/100 DOLLARS ($87,776.93) shall be payable on the first (1st) day of
each and every month commencing on October 1, 2010 until September 1, 2017 (the “Maturity Date”).
As said installments are paid, they are to be applied first to late charges and other fees, costs
and charges, if any, reimbursable to Lender as provided herein or in the Loan Documents
(hereinafter defined), then to interest accrued, and the balance, if any, to unpaid principal. On
the Maturity Date the entire principal amount outstanding on this Note, along with interest accrued
but unpaid thereon, and all other amounts due to Lender arising out of this Note, shall be all due
and payable.

     Both principal and interest are payable at the office of American National Insurance Company,
One Moody Plaza, Galveston, Texas, 77550, Attn: Mortgage and Real Estate Investment Department, or
at such place as Lender may from time to time designate in writing. All payments of interest, or
principal and interest shall be made to Lender not later than 12:00 o’clock noon, local time, on
the date designated in the Note and at the place of payment designated by Lender herein, and any
payment received after such hour shall be deemed to have been paid to and received by Lender on
Lender’s next succeeding business day.

     Borrower understands that the monthly installments of interest and principal on this Note
referred to above are based upon a hypothetical twenty five (25) year amortization; that such
installments will not amortize fully the principal balance by the Maturity Date; that the final
installment will be a “balloon” payment; and that Lender has no obligation to refinance such
“balloon” payment.

     This Note is given for a loan of $13,000,000.00 (“Loan”) to be advanced by Lender to Borrower,
and Borrower’s obligations under the Loan and this Note are secured by that certain Mortgage,
Security Agreement, Financing Statement and Fixture Filing (the “Mortgage”) of even date herewith
from Borrower in favor of Lender encumbering the property located in

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Johnson County, Kansas described in Exhibit “A” attached hereto and made a part hereof
(“Property”), and which property is a part of the Property, as that term is defined in the
Mortgage. This Note, the Mortgage, and all other instruments of indebtedness and security executed
by Borrower to evidence or secure the Loan represented by this Note shall sometime be collectively
referred to as the “Loan Documents.”

     It is expressly agreed that if (a) Borrower shall be in default in the payment when due of any
principal, interest or installment of interest or principal and interest or any other sums due and
payable pursuant to the terms and conditions of this Note or of any other Loan Document; or (b)
there shall be an Event of Default under the Mortgage, or (c) Borrower shall be in default after
the expiration of any applicable grace period expressly provided therein, under the terms,
conditions, covenants, agreements, representations or warranties contained in any other Loan
Document, including, without limitation, any other document securing this Note; or (d) any
Borrower, or any drawer, acceptor, endorser, guarantor, surety or accommodation party or other
person liable upon or for the payment of the indebtedness evidenced by this Note (each hereinafter
called “Other Liable Party” or “Other Liable Parties”) (i) admits in writing its inability to pay
its debts generally as they become due, (ii) files a petition in bankruptcy as a Debtor or seeking
reorganization or an arrangement or otherwise to take advantage of any state or federal bankruptcy
or insolvency law, (iii) makes an assignment for the benefit of creditors, (iv) files a petition
for or consents to the appointment of a receiver of any of its assets or a part thereof, (v)
without its consent, a petition in bankruptcy is filed against it, or an order, decree or judgment
is entered by a court of competent jurisdiction appointing a receiver over its property, or
approving a petition filed against it seeking a reorganization or an arrangement of it under any
bankruptcy or insolvency law, and such petition, order, decree or judgment is not vacated, set
aside or stayed within ninety (90) days from the date of entry, or (vi) dies, dissolves, or its
existence as a legal entity terminates, any or all of the foregoing (a) through (d) hereinafter an
“Event of Default.” Lender may, in any of such events, at its option, accelerate the maturity of
the Note and declare the entire balance of this Note, both principal and interest, immediately due
and payable and/or may enforce such other rights as are available to Lender under the terms and
conditions of any document securing this Note or otherwise available at law or in equity. All
rights and remedies available to Lender shall be cumulative and not exclusive and the exercise or
beginning to exercise of any one of such rights or remedies shall not preclude the simultaneous or
later exercise of any or all of such rights or remedies.

     Borrower hereby agrees to pay all expenses incurred, including, but not limited to, reasonable
attorney’s fees, if placed in the hands of an attorney for collection or if collected through
probate, bankruptcy or other judicial proceedings.

     Should any regular installment of interest, or principal and interest due under this Note,
which shall not include principal and interest due at the Maturity Date, not be paid in full on or
before the fifth (5th) day of the month in which such payment is due, Borrower acknowledges that
the Lender will incur extra expenses for the handling of the delinquent payment and servicing the
indebtedness evidenced hereby, and that the exact amount of these extra expenses is extremely
difficult and impractical to ascertain, but that a charge of five percent (5%) of the amount of the
delinquent payment (“Late Charge”) would be a fair approximation of the expense

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so incurred by Lender. If applicable law requires a lesser charge, however, then the maximum
charge permitted by such law may be charged by Lender for said purpose. Therefore, Borrower shall,
in such event, without further notice, and without prejudice to the right of Lender to collect any
other amounts provided to be paid hereunder or under the Mortgage, or any other Loan Document, or
to declare an Event of Default, pay to Lender immediately upon demand the Late Charge to compensate
Lender for expenses incurred in handling delinquent payments. Borrower acknowledges and agrees
that such late payment charge is reasonable, is calculated to reimburse Lender for its
administrative costs incurred as a result of such late payment and is not intended as a penalty.
Borrower represents and warrants to Lender that it will not seek to, or in fact, challenge the
imposition of any such late charge as a penalty or unreasonable change under State or Federal law,
and Borrower expressly waives such challenge.

     Prior to an Event of Default, unpaid principal shall bear interest from the date hereof at the
Contract Rate. From and after any Event of Default and continuing so long as Lender has not agreed
in writing to a waiver or cure of such Event of Default, all unpaid principal (whether or not
overdue) and unpaid interest shall bear interest at the lesser of “Maximum Nonusurious Rate” (as
hereinafter defined) or if there is no Maximum Nonusurious Rate, at a per annum rate equal to
Seventeen Percent (17%) (hereinafter referred to as the “Default Rate”), whether or not Lender has
exercised its option to accelerate the maturity of this Note and to declare the entire unpaid
principal indebtedness and accrued interest due and payable. Provided, however, after any Event of
Default, Lender, in its sole and absolute discretion, may elect to charge a rate of interest or
impose a handling or late charge which are less than the amount which would result from applying
the Default Rate provided for in the preceding sentence. Any such election by Lender to charge
such lesser amount shall not constitute a waiver of Lender’s right to impose the Default Rate
during the existence of any future defaults. Borrower acknowledges and agrees that the increases
in interest rate contemplated herein are expressly designed to cover the additional but
unforeseeable costs and risks associated with an event of default under this Note, the Mortgage or
any other Loan Document, as well as the loss of the use of funds incurred by Lender as a result of
untimely payment. Borrower waives any right to challenge such interest rate increased as a penalty
under State or Federal law.

     Provided that on the Disbursement Date Borrower shall have paid to Lender a prepayment fee
equal to one percent (1%) of the original principal amount of this Note contemporaneous with
execution and delivery of this Note, this Note may be prepaid in whole but not in part, at any time
with thirty (30) days prior written notice to Lender specifying the date of prepayment.

     Borrower, and all Other Liable Parties, jointly and severally waive presentment for payment,
protest and demand, notice of non-payment, protest, notice of protest, notice of acceleration,
notice of the intent to accelerate, the filing of suit, and diligence in collecting this Note or
enforcing any of the security herefor, and agree to the substitution, exchange or release of any
such security or the release of any party primarily or secondarily liable hereon, and further agree
that it will not be necessary for the holder hereof, in order to enforce payment of this Note by
it, to first institute suit or exhaust its remedies against Borrower or any Other Liable Party, or
to enforce its rights against any security herefor, and consent to any one or more rearrangements,

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modifications, extensions or postponements of the time, amount or manner of payment of this Note on
any terms or any other indulgences with respect thereto, without notice thereof to any of them and
without discharging or reducing any of their liability hereunder. The Lender may transfer this
Note, and the rights and privileges of Lender under this Note shall inure to the benefit of the
Lender’s representatives, successors, and assigns.

     Upon an Event of Default and so long as any such Event of Default is continuing, Lender may
apply payments received on any amounts due hereunder or under the terms of any other Loan Document,
in such manner as Lender may determine. Upon any such Event of Default, if Lender so elects,
notice of election being expressly waived, the principal remaining unpaid with accrued interest
shall at once become due and payable.

     No single or partial exercise of any power hereunder or any instrument or agreement now or
hereafter securing this Note shall preclude other or further exercise thereof or the exercise of
any other power. Lender shall at all times have the right to proceed against any portion of the
security held for this Note in such order and in such manner as Lender may deem fit, without
waiving any rights with respect to any other security. No delay or omission on the part of Lender
in exercising any right hereunder or under any instrument now or hereafter securing this Note shall
operate as a waiver of such right or of any other right under this Note. The release of any party
liable under this Note shall not operate to release any other party liable hereon. No extension of
the time for the payment of this Note or any installment hereof made by agreement with any person
now or hereafter liable for the payment of this Note shall operate to release, discharge, modify,
change or affect the original liability under this Note of any of the undersigned not a party to
such agreement.

     Borrower agrees to pay all costs of collection when incurred, including reasonable attorneys’
fees, whether or not suit is filed, and all costs incurred in realizing upon any collateral
securing this Note.

     This Note shall be governed by and construed in accordance with Kansas law and applicable
federal law. It is the intention of Lender and Borrower that this Note and all provisions hereof
and of all documents securing this Note conform in all respects to the laws of the State of Kansas
and applicable federal law pertaining to usury. Notwithstanding any provision in this Note or in
any other documents executed in connection therewith to the contrary, it is expressly provided that
in no case or event should the aggregate amounts, which by applicable law are deemed to be interest
with respect to this Note, the Mortgage or any other document securing or executed in connection
with this Note ever exceed the “Maximum Nonusurious Rate” (as defined below). In this connection,
it is expressly stipulated and agreed that it is the intention of Lender and the Borrower to
contract in strict compliance with applicable usury laws of the State of Kansas and/or of the
United States (whichever permits the higher rate of interest) from time to time in effect. Nothing
in this Note, the Mortgage or any other document securing this Note shall ever be construed to
create a contract to pay, as consideration for the use, forbearance or detention of money, interest
at a rate in excess of the Maximum Nonusurious Rate. If under any circumstances the aggregate
amounts contracted for, charged or paid with respect to this Note, whether by fulfillment of any
provision hereof or of any mortgage,

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loan agreement or other document now or hereafter evidencing, securing or pertaining to the
indebtedness evidenced hereby, which by applicable law are deemed to be interest, would produce an
interest rate greater than the Maximum Nonusurious Rate, Borrower and any other person obligated to
pay this Note, stipulates that the amounts will be deemed to have been paid, charged or contracted
for as a result of an error on the part of Borrower, any other person obligated for the payment of
this Note and the Lender and upon discovery of the error or upon notice thereof from the Borrower
or the party making such payment, the Lender or the party receiving such excess payment shall, at
its option, refund the amount of such excess payment or credit the excess payment against any other
amount due under this Note. In addition, all sums paid or agreed to be paid to the holder of this
Note for the use, forbearance or detention of monies shall be, to the extent permitted by
applicable law, amortized, prorated, allocated and spread through the full stated term of this Note
so that the amount of interest on account of the indebtedness evidenced hereby does not exceed the
maximum permitted by law. The provisions of this paragraph shall control all existing and future
agreements between Borrower and Lender. The term “Maximum Nonusurious Rate” as used herein shall
mean the highest rate of interest permissible under applicable law, but not more than a per annum
rate of seventeen percent (17%). If the Maximum Nonusurious Rate is increased or removed by
statute or other governmental action subsequent to the date of this Note, then the new Maximum
Nonusurious Rate, if any, will be applicable to this Note from the effective date of the new
Maximum Nonusurious Rate, unless such application is precluded by the statute or governmental
action or by the general law of the jurisdiction governing this Note.

     Borrower warrants and represents to Lender and all holders of the indebtedness evidenced
hereby, that (i) all loans evidenced by this Note shall be “business loans” as that term is used in
the Depository Institutions Deregulatory and Monetary Control Act of 1980, as amended, (ii) that
this transaction is specifically exempt under Section 226.3(a) of Regulation Z issued by the Board
of Governors of the Federal Reserve System, and Title I and Title V of the Consumer Credit
Protection Act, and (iii) that such loans are for business, commercial, investment or other similar
purposes and not primarily for personal, family, household or agricultural use.

     Lender may, as necessary, to foreclose upon the Mortgage given to secure this Note, take a
judgment against Borrower. Except as hereinafter provided, Borrower shall not be personally liable
for the payment of principal or interest that may become due and payable under the Note, the
Mortgage, or any other Loan Documents. Lender agrees not to seek, take or obtain against Borrower
a deficiency judgment for amounts remaining unpaid under the Note and the other Loan Documents
after all the security for the Note (including, without limitation, hazard insurance proceeds and
condemnation awards with respect to the Property) has been applied to payment of all amounts due
Lender under the Note and the other Loan Documents. Notwithstanding the foregoing limitation of
liability, Borrower shall be fully liable (i) for fraud or misrepresentation made in connection
with this Note or any instrument governing, securing or pertaining to the payment of this Note or
the apparent purpose of which is to deprive Lender of the security for this Note; (ii) for failure
to pay taxes, assessments, charges for labor or materials or any other charges which can create
liens on any portion of the Property; (iii) for the misapplication of (a) proceeds of insurance
covering any portion of the Property, or (b) proceeds

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of the sale or condemnation of any portion of the Property, or (c) rentals and security deposits
received by or on behalf of Borrower subsequent to the date on which Lender gives written notice of
the posting of foreclosure notices or the exercise of Lender’s assignment of rents; (iv) for
failure to maintain, repair or restore the Property in accordance with any instrument governing,
securing, or pertaining to the payment of this Note; (v) for any act or omission knowingly or
intentionally committed or permitted by Borrower which results in the waste, damage or destruction
to the Property, but only to the extent such events are not covered by insurance proceeds which are
received by Lender; (vi) for the return to Lender of all unearned advanced rentals and security
deposits paid by tenants of the Property or any guarantors of the leases of such tenants which are
not rightfully refunded to or which are forfeited by such tenants or guarantors; (vii) for the
return of, or reimbursement for, all personal property included within the Mortgaged Property taken
from the Property by or on behalf of Borrower; (viii) for any liability of Borrower pursuant to the
provision contained in the Mortgage securing this Note pertaining to hazardous or toxic materials
or substances; (ix) for any liability of Borrower pursuant to the Certificate and Indemnity
Regarding Hazardous Substances executed by Borrower and delivered to Lender in connection with the
indebtedness evidenced by this Note; (x) for any delay, after an Event of Default which is not
cured in deeding over the Property to the Lender, or cooperate in a consensual foreclosure within
90 days of Lender’s request; (xi) for failure to maintain or alter the Property in compliance with
the Americans with Disabilities Act, as it may be amended from time to time; and (xii) for all
court costs and reasonable attorneys’ fees incurred in connection with the enforcement of one or
more of the above subparagraphs (i) through (xi), inclusive.

     Time is of the essence of this Note. Where the context so requires references to any gender
shall include the others and references to the singular shall include the plural and vice versa.
If any term, covenant, condition, agreement, representation or warranty of the Note or the
application thereof to any person or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Note, or the application of such term, covenant, condition,
agreement, representation or warranty to persons or circumstances other than those as to which it
is held invalid or unenforceable, shall not be affected thereby and each term, covenant, condition,
agreement, representation or warranty of this Note shall be valid and enforced to the fullest
extent permitted by law.

TO THE FULLEST EXTENT PERMITTED BY LAW BORROWER AND LENDER WAIVE ALL RIGHTS TO TRIAL BY JURY OF ANY
SUITS, CLAIMS, COUNTERCLAIMS, ACTIONS OR OTHER PROCEEDINGS OF ANY KIND ARISING UNDER OR RELATING TO
THIS NOTE, THE MORTGAGE, ANY OF THE OTHER LOAN DOCUMENTS AND THE LOAN SECURED HEREBY, INCLUDING,
WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN
DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED THERETO, IN

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EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.

[Signature Page Follows]

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     IN WITNESS WHEREOF, this Note has been executed and delivered as of the day and year first
above written.

BORROWER:

	 	 	 	 	 
	PACIFIC SUNWEAR STORES CORP.,

a California corporation

 	 	 
	By:  	
/s/ Craig E. Gosselin	 	 
	 	Name:  	Craig E. Gosselin	 	 
	 	Title:  	President	 	 

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EXHIBIT “A”

LEGAL DESCRIPTION OF PROPERTY

LOT 1, PACIFIC SUNWEAR, AMENDED 1ST PLAT A SUBDIVISION IN THE CITY OF OLATHE, JOHNSON COUNTY,
KANSAS.

APN: DP557300000001

9exv10w4

Exhibit 10.4

MORTGAGE, SECURITY AGREEMENT, FINANCING

STATEMENT AND FIXTURE FILING

     This Mortgage, Security Agreement, Financing Statement and Fixture Filing (hereinafter termed
“Mortgage”) is entered into by PACIFIC SUNWEAR STORES CORP., a California corporation, having a
mailing address of 3450 East Miraloma Avenue, Anaheim, California 92806, Attn: Craig Gosselin
(hereinafter termed “Borrower”), in favor of AMERICAN NATIONAL INSURANCE COMPANY, a Texas insurance
company, having a mailing address of One Moody Plaza, Galveston, Texas 77550, Attn: Mortgage and
Real Estate Investments (hereinafter termed “Lender”).

     Borrower does by these presents irrevocably grant, bargain, sell, convey, mortgage, and
warrant unto Lender all of Borrower’s estate, right, title and interest in, to and under and grants
to Lender a security interest in any and all of the following described property which is (except
where the context otherwise requires) herein collectively called the “Property,” whether now owned
or held or hereafter acquired:

     (A) That certain real property more particularly described in Exhibit “A” attached
hereto and incorporated herein by this reference, together with all of the easements, rights,
privileges, franchises and appurtenances thereunto belonging or in any wise appertaining (the
“Premises”), and all of the estate, right, title, interest, claim and demand whatsoever of Borrower
therein or thereto, either at law or in equity, in possession or in expectancy, now or hereafter
acquired, including, without limitation, any interest in and to the fee estate of such real
property, whether resulting from the City Lease (as defined herein) or otherwise;

     (B) All structures, buildings and improvements of every kind and description now or at any
time hereafter located on the Premises (the “Improvements”), including all equipment, apparatus,
machinery, fixtures, fittings, and appliances and any additions to, substitutions for, changes in
or replacements of the whole or any part thereof, including such of the foregoing as

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may be used in connection with the generating or distributing of air, water, heat, electricity,
light, fuel or refrigeration or for ventilating or sanitary purposes or for the exclusion of vermin
or insects, or for the removal of dust, refuse or garbage, now or at any time hereafter affixed to,
attached to, placed upon or used in any way in connection with the use, enjoyment, occupancy or
operation of the Premises or the Improvements, or any portion thereof;

     (C) All articles of personal property (except inventory as defined in Article 9 of the UCC)
and any additions to, substitutions for, changes in or replacements of the whole or any part
thereof, including without limitation all safes, built-in furniture and installations, shelving,
partitions, doors and door-stops, vaults, elevators, dumb-waiters, awnings, window shades, Venetian
blinds, light fixtures, fire hoses and brackets and boxes for the same, fire and life safety
systems, fire sprinkler systems, alarm systems, drapes and drapery rods and brackets, screens,
linoleum, carpets, plumbing, laundry tubs and trays, iceboxes, refrigerators, heating, ventilating
and air-conditioning equipment, stoves, ovens, water heaters, incinerators, furniture and
furnishings, communication systems, all equipment for the generation or distribution of air, water,
heat, electricity, light, fuel or refrigeration or for sanitary or drainage purposes or for the
removal of dust, refuse or garbage, all specifically designed installations and furnishings and all
of said articles of property, the specific enumerations herein not excluding the general, now or at
any time hereafter affixed to, attached to, placed upon or used in any way in connection with the
use, enjoyment, occupancy or operation of the Premises or the Improvements, or any portion thereof,
and owned by Borrower or in which Borrower now has or hereafter acquires an interest, and all
building materials and equipment now or hereafter delivered to and intended to be installed or
placed in or about the Premises or the Improvements (all of the foregoing, collectively, being the
“Personal Property”);

     (D) All right, title and interest of Borrower in and to all streets, roads and public places,
opened or proposed, all ways, waters, water courses, water rights and powers, liberties,
privileges, sewers, pipes, conduits, wires and other facilities furnishing utility or other
services to the Property, and all easements and rights of way, public or private, tenements,
hereditaments, rights and appurtenances, now or hereafter used in connection with, belonging or
appertaining to, the Premises (all of the foregoing being, collectively, the “Appurtenances”);

     (E) All of the rents, royalties, issues, profits, revenue, income and other benefits of the
Premises, or arising from the use or enjoyment of all or any portion thereof or from any lease or
agreement pertaining thereto, including, without limitation, any and all rents, royalties, issues,
earnings, profits, revenue, income and other benefits generated by Borrower, any lessee, operator
or concessionaire for the letting or other use of any room or space in the Premises or the
Improvements, and all right, title and interest of Borrower in and to all leases, subleases,
operating and/or concession agreements of, or relating to the Property now or hereafter entered
into and all right, title and interest of Borrower thereunder, including, without limitation, cash
or securities deposited thereunder to secure performance by the lessees of their obligations
thereunder, whether said cash or securities are to be held until the expiration of the terms of
said leases or applied to one or more of the installments of rent coming due immediately prior to
the expiration of said terms (all of the foregoing being, collectively, the “Rents and Profits”);

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     (F) All governmental permits relating to construction on the Property (to the extent
assignable) (collectively, the “Intangible Property”);

     (G) All causes of action, claims, compensation and recoveries for any condemnation or taking
of the Property, or any portion thereof, or for any conveyance in lieu thereof, whether direct or
consequential, or for any damage or injury to the Property, or any portion thereof, or for any loss
or diminution in value of the Property for any reason, whether direct or consequential (all of the
foregoing being, collectively, the “Claims”);

     (H) All architectural, structural, mechanical and engineering plans and specifications
prepared for construction of the Improvements and all studies, data and drawings relating thereto,
and also all contracts and agreements of Borrower relating to the aforesaid plans and
specifications or to the construction of the Improvements (all of the foregoing being,
collectively, the “Plans”);

     (I) All deposits and advance payments, and refunds owing therefrom, of any kind or nature paid
by or on behalf of Borrower, or owing to Borrower, with respect to the Property, and claims
thereto, including, but not limited to, refunds of secured real property taxes and personal
property taxes and prepaid insurance premiums, other than prepaid premiums paid under a general
policy which covers Borrower and some of its affiliates, (all of the foregoing being, collectively,
the “Deposits”);

     (J) All proceeds (including claims and demands therefor) of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance and condemnation awards (all of the foregoing being, collectively, the
“Proceeds”).

Notwithstanding the foregoing, the Property shall not include any trademarks or other intellectual
property of Pacific Sunwear of California, Inc., or any of its subsidiaries (other than the
Intangible Property).

FOR THE PURPOSE OF SECURING, in such order of priority as Lender may elect:

     (1) Due, prompt and complete observance, performance and discharge of each and every
obligation, covenant and agreement contained in that certain promissory note (the “Note”) of even
date herewith in the face amount of $13,000,000.00, executed by Borrower to the order of Lender and
any and all modifications, extensions or renewals thereof, whether hereafter evidenced by the Note
or otherwise;

     (2) Payment of all other sums, with interest thereon at the rate of interest provided in the
Note becoming due or payable under the provisions hereof;

     (3) Payment of such additional sums and interest thereon which may hereafter be loaned to
Borrower, or its successors or assigns, by Lender, when evidenced by a promissory note or notes
reciting that they are secured by this Mortgage; and

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     (4) Due, prompt and complete observance, performance and discharge of each and every
obligation, covenant and agreement of Borrower contained herein or in any other instrument
heretofore or hereafter executed by Borrower related to or arising out of the indebtedness
represented by the Note (the “Indebtedness”).

ARTICLE I

COVENANTS OF BORROWER

Borrower covenants, warrants and agrees to and with Lender as follows:

     1.01 Borrower will pay the principal and interest and all other sums becoming due with respect
to the Note at the time and place and in the manner specified in the Note, according to the terms
thereof.

     1.02 Borrower has, on the date this Mortgage is recorded, good and marketable leasehold title
to the Property subject to no lien, charge or encumbrance except such as are listed on the attached
“Exhibit”B”, which is incorporated herein by reference for all purposes (the “Permitted
Exceptions”). Borrower owns or, upon acquisition thereof, will own the Personal Property free and
clear of liens and claims; and this Mortgage is and will remain a valid and enforceable lien on the
Property subject only to the exceptions referred to above. Borrower has full power and lawful
authority to grant, assign, transfer and mortgage its interest in the Property in the manner and
form hereby done or intended. Borrower will preserve its interest in and title to the Property and
will forever warrant and defend the same to Lender and will forever warrant and defend the validity
and priority of the lien hereof against the claims of all persons and parties whomsoever, other
than Permitted Exceptions. Borrower shall promptly and completely observe, perform and discharge
each and every obligation, covenant and agreement affecting the Property whether the same is prior
and superior or subject and subordinate hereto, including, if the security hereunder is or will be
a condominium, community apartment, stock co-operative or part of a planned development, each and
every provision under any Declaration of Covenants, Conditions and Restrictions pertaining to the
condominium, community apartment, stock co-operative or planned development project.

     1.03 (a) Borrower will, at its own cost and without expense to Lender, do, execute,
acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers and assurances as Lender shall from time to time
require for the better assuring, conveying, assigning, transferring and confirming unto Lender the
property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which
Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Mortgage, or filing, registering
or recording this Mortgage and, on demand, Borrower will execute and deliver, and hereby authorizes
Lender to execute in the name of Borrower to the extent Borrower may lawfully do so, one or more
financing statements, chattel mortgages or comparable security instruments to evidence more
effectively the lien hereof upon the Personal Property, the Appurtenances, the Rents and Profits,
the Intangible Property, the Claims, the Plans, the Proceeds and the Deposits.

4

 

          (b) Borrower forthwith upon the recordation of this Mortgage, and thereafter from time to
time, will cause this Mortgage and any security instruments creating a lien or evidencing the lien
hereof upon the Personal Property, the Appurtenances, the Rents and Profits, the Intangible
Property, the Claims, the Plans, the Proceeds and the Deposits, and each instrument of further
assurance, to be filed, registered or recorded in such manner and in such places as may be required
by any present or future law in order to publish notice of and fully to protect the lien hereof
upon the title and the security interest of Lender in and to the Property.

          (c) Borrower will pay all filing, registration and recording fees, and all expenses incident
to the execution and acknowledgment of this Mortgage, and any deed of trust or mortgage
supplemental hereto, any security instrument with respect to the Personal Property, the
Appurtenances, the Rents and Profits, the Intangible Property, the Claims, the Plans, the Proceeds
and the Deposits and any instrument of further assurance, and all federal, state, county and
municipal stamp taxes and other taxes, duties, imposts, assessments and charges arising out of or
in connection with the execution and delivery of the Note, this Mortgage, any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the Personal Property or any
instrument of further assurance (other than income taxes of Lender).

     1.04 Borrower will keep the Property insured against loss or damage with fire and extended
coverage property damage insurance on an all-risks basis, and insurance against any other risks or
hazards that, in the opinion of Lender, should be insured against to the amount of the full
insurable value thereof on a replacement cost basis, excluding land value, with a replacement cost
endorsement without deduction for depreciation, and in such form and with such other coverages and
endorsements as may be approved or required by Lender from time to time. Borrower shall also carry
and maintain business interruption insurance, without a coinsurance provision, in an amount
sufficient to cover principal and interest payments under the Note for a period of not less than
twelve (12) months and property tax and insurance expenses for a period of not less than twelve
(12) months, and in such form and with such other endorsements as may be approved or required by
Lender. In addition, in the event the Department of Housing and Urban Development designates the
Property to be in a Special Flood Hazard Area, Borrower hereby undertakes that it will acquire
flood insurance in an amount satisfactory to and with loss payable to Lender. Borrower will also
carry comprehensive public liability insurance, in such form, amounts (initial minimum $1,000,000)
and with such reasonable companies as Lender may from time to time require, with Lender included
thereon as a named insured under a standard mortgagee endorsement of the character above described.
Notwithstanding anything to the contrary contained in this Mortgage, following the recordation of
this Mortgage, Lender reserves the right to require additional coverages (or changes to current
coverages that are commercially reasonable) or endorsements in the future (such as earthquake,
tornado, hurricane or terrorism coverages), provided that such coverages or endorsements are
commercially reasonable for the area in which the Property is located and available to Borrower on
a cost-effective and commercially reasonable basis. All insurance policies shall be issued by
companies acceptable to Lender and have a “Best’s Key Rating Guide” financial size rating of Class
“A-/X” or higher. Said insurance policies shall be endorsed with a standard non-contributory
mortgage clause, shall contain no coinsurance provisions and may only be canceled or modified upon
not less than thirty (30) days’ prior written notice to Lender. Loss under said insurance shall be
payable to Lender and shall be applied in the same manner as provided in

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Section 1.05(b) hereof. The original policy or policies evidencing all insurance referred to in
this paragraph, together with receipts for the payment of premiums thereon, shall be delivered to
and held by Lender. In the event that Lender approves the use of a “blanket” policy, a certified
copy of such blanket policy, together with an original certificate approved by Lender indicating
Lender to be the insured mortgagee under such policy with coverages in the approved amounts shall
be delivered to Lender. Lender shall not, by the fact of approving, disapproving, accepting,
preventing, obtaining or failing to obtain any insurance, incur any liability for the form or legal
sufficiency of insurance contracts, solvency of insurance companies or payment of lawsuits.

     1.05 (a) Borrower, upon obtaining knowledge of the institution of any proceedings for the
condemnation of the Premises and Improvements or any portion thereof or knowledge of any casualty
damage to the Property or damage of any other kind, will immediately notify Lender. Lender may
participate in any proceedings and join Borrower in adjusting any loss covered by insurance. All
compensation, awards, proceeds, damages, claims, rights of action and payments to which Borrower
may become entitled shall be paid over to Lender. Subject to the provisions of Section 1.05(b)
hereof, Lender shall have the sole and absolute discretion, notwithstanding the fact that the
security given hereby may not be impaired by a partial condemnation, to apply any part or all of
the amount collected in connection with any condemnation proceeding: (i) upon any indebtedness
secured hereby and in such order as Lender may determine, or (ii) without reducing the indebtedness
secured hereby, to the reimbursement of Lender for expenses incurred by it in the restoration of
the Property. Such application shall not cure or waive any default or notice of default hereunder
or invalidate any act done pursuant to such notice. Lender shall be under no obligation to
question the amount of any compensation, awards, proceeds, damages, claims, rights of action or
payments, and may accept the same in the amount in which the same shall be paid.

          (b) Lender shall make available to Borrower any such proceeds for the rebuilding or
restoration of the Property so damaged or condemned, provided Lender determines, in its reasonable
discretion, that its security under this Mortgage has not been impaired, and provided Borrower
shall have fulfilled all of the following conditions: (i) no default or Event of Default shall
have occurred and be continuing under the Note, this Mortgage or any instrument heretofore or
hereafter executed by Borrower having reference to or arising out of the Note; (ii) Borrower shall
not be in default under any of the terms, covenants and conditions of any of the leases, subleases,
licenses or other occupancy agreements affecting the Property which have been approved by Lender;
(iii) Borrower shall have in force business interruption insurance covering principal and interest
payments under the Note for a period of not less than twelve (12) months and property tax and
insurance expenses for a period of not less than twelve (12) months; (iv) Lender, acting
reasonably, shall be satisfied that the insurance or award proceeds shall be sufficient to fully
restore and rebuild the Property free and clear of all liens except the lien of this Mortgage and
Permitted Exceptions or, in the event that available proceeds are, in Lender’s reasonable opinion,
insufficient to restore and rebuild the Property, Borrower has deposited with Lender funds that,
together with the available insurance or award proceeds are sufficient in Lender’s reasonable
judgment to restore and rebuild the Property and Borrower at all times thereafter maintains
sufficient funds on deposit to complete rebuilding, as certified by a licensed architect approved
by Lender, acting reasonably; (v) construction and completion of the restoration and rebuilding of
the Property shall be completed in accordance with plans and

6

 

specifications and drawings submitted to and approved by Lender, which plans, specifications and
drawings shall not be modified in any material respect without Lender’s prior written consent which
shall not be unreasonably withheld; (vi) Lender shall have timely approved all prime contractors
and principal subcontractors, and the general contract and principal subcontracts Borrower proposes
to enter into with respect to the restoration and rebuilding; (vii) any and all monies that are
made available for restoration and rebuilding hereunder shall be disbursed through Lender or a
title insurance or trust company satisfactory to Lender, in accordance with standard construction
lending practice, including, if requested by Lender, monthly lien waivers and title insurance
date-downs, or in any other manner approved by Lender in Lender’s sole discretion, with funds being
disbursed not more often than once per month; (viii) Borrower shall provide builder’s risk
insurance meeting Lender’s requirements, naming Lender as an additional insured; (ix) if the
proceeds derive from insurance, the insurer must not have asserted, and must not subsequently
assert, any defense or right of offset against Borrower or any tenant of the Property under the
terms of the applicable policy or policies; and (x) Lender, acting reasonably, shall be satisfied
that the quality of the materials and workmanship of the repair or reconstruction of the Property
will be at least equal to the quality of the materials and workmanship of the repair or
reconstruction of the Property prior to such damage or condemnation. The excess of said proceeds
above the amount necessary to complete such restoration or rebuilding, if any, shall be disbursed
to Lender to be applied against the principal balance of the Note as a partial prepayment thereof
to Borrower. Lender’s security hereunder shall be deemed impaired if the value of the Property
after restoration and rebuilding is less than the value of the Property prior to such restoration
or rebuilding, as determined in Lender’s reasonable discretion.

     1.06 (a) Borrower, from time to time prior to when the same shall become delinquent, will pay
and discharge all taxes of every kind and nature, including real and personal property taxes and
income, franchise, withholding, profits and gross receipts taxes, all general and special
assessments, including assessments on appurtenant water stock, levies, permits, inspection and
license fees, imposed upon or assessed against the Property or any part thereof or and all water
and sewer rents and charges and all other public charges, whether of a like or different nature,
imposed upon or assessed against Borrower or the Property or any part thereof or upon the revenues,
rents, issues, income and profits of the Property, or arising in respect of the occupancy, use or
possession of the Property. Borrower will, upon the request of Lender, deliver to Lender receipts
evidencing the payment of all such taxes, assessments, levies, fees, rents and other public
charges.

          (b) Borrower will pay to Lender, together with each payment of an installment of principal
and/or interest under the Note, a pro rata portion of the taxes, assessments and insurance premiums
next to become due, as estimated by the Lender. The determination of the amounts so payable and of
the fractional parts thereof to be deposited with Lender, so that the aggregate of such deposits
shall be sufficient for this purpose, shall be made by Lender in its reasonable discretion. Said
amounts shall be held by Lender without interest and applied to the payment of the obligations in
respect of which said amounts were deposited, in such order or priority as Lender shall determine,
on or before the respective dates on which the same or any of them would become delinquent. If one
(1) month prior to the due date of any of the aforementioned obligations the amount then on deposit
therefor shall be insufficient for the

7

 

payment of such obligation in full, Borrower, within ten (10) days after demand, shall deposit the
amount of the deficiency with Lender. Nothing herein contained shall be deemed to affect any right
or remedy of Lender under any other provision of this Mortgage or under any statute or rule of law
to pay any such amount and to add the amount so paid together with interest at the Default Rate to
the indebtedness hereby secured. Lender is hereby granted a security interest in the amounts held
by it pursuant to this Section 1.06(b) for the purpose of securing payment of impositions and the
amounts owing by Borrower and which Lender may pay under this Section 1.06(b) and the sale of the
Property, or any interest therein, voluntarily, involuntarily or by operation of law, shall not
release said interest or Lender’s right to apply said amounts as herein provided. Notwithstanding
anything to the contrary contained herein, so long as the insurance on the Improvements is part of
a blanket insurance policy maintained by Pacific Sunwear of California, Inc. (“Pac Sun”), or its
affiliate, then provided that Borrower demonstrates to Lender’s reasonable satisfaction the term of
such policy, the amount of such annual insurance premium, the insured value of the Improvements
insured by such blanket policy and the amount of the total insured value of all improvements
insured by such blanket policy, the amount of the insurance premium to be paid by Borrower during
the term of such blanket policy hereunder shall be the “Annual Insurance Percentage”. The “Annual
Insurance Percentage” for any such period shall be one hundred three percent (103%) of the sum of
the annual premium (or other periodic premium) for such blanket insurance policy multiplied by the
positive fraction that has as its numerator such insured value of the Improvements insured by such
blanket policy and as the denominator such amount of the total insured value of all improvements
insured by such blanket policy. Borrower shall pay such amount in installments equal 1/12th each
on a monthly basis on the due date for the monthly installment payments under the Note. Within
fifteen (15) days after delivery of an invoice for the insurance premium to Lender, then Lender
shall disburse to Borrower the lesser of (i) the amount deposited by Borrower for insurance
premiums, less previous disbursements for insurance premiums, or (ii) the Annual Insurance
Percentage of the amount of the invoice.

          (c) Borrower will pay, from time to time when the same shall become due, all lawful claims and
demands of mechanics, materialmen, laborers and others which, if unpaid, might result in or permit
the creation of a lien on the Property or any part thereof, or on the revenues, rents, issues,
income and profits arising therefrom, and in general will do or cause to be done everything
necessary so that the lien hereof shall be fully preserved subject to Permitted Exceptions, at the
sole cost of Borrower, without expense to Lender.

     1.07 All right, title and interest of Borrower in and to all extensions, improvements,
betterments, renewals, substitutes and replacements of and all additions and appurtenances to the
Property, hereafter acquired by, or released to, Borrower or constructed, assembled or placed by
Borrower on the Premises, and all conversions of the security constituted thereby, immediately upon
such acquisition, release, construction, assembling, placement or conversion, as the case may be,
and in each such case, without any further deed of trust, mortgage, conveyance, assignment or other
act by Borrower, shall become subject to the lien of this Mortgage as fully and completely, and
with the same effect, as though now owned by Borrower and specifically described in the granting
clause hereof, but at any and all times Borrower will execute and deliver to Lender any and all
such further assurances, mortgages, deeds of trust, conveyances or

8

 

assignments thereof as Lender may reasonably require for the purpose of expressly and specifically
subjecting the same to the lien of this Mortgage.

     1.08 Pursuant to K.S.A. 84-9-502, upon recording this Mortgage, this Mortgage shall also
constitute a “fixture filing” for the purposes of the UCC (as defined herein) against all of the
Premises which is or is to become fixtures. Information concerning the security interest granted
may be obtained at the addresses of Debtor (Borrower) and Secured Party (Lender) set forth in the
first paragraph of this Mortgage. For purposes of this Mortgage constituting a fixture filing, the
City of Olathe, Kansas is the record owner of the Premises. This Mortgage shall be self-operative
and constitute a Security Agreement with respect to the Personal Property, the Appurtenances, the
Rents and Profits, the Intangible Property, the Claims, the Plans, the Deposits and the Proceeds;
provided, however, during an Event of Default Borrower hereby agrees to execute and deliver on
demand and hereby irrevocably constitutes and appoints Lender the attorney-in-fact of Borrower, to
execute, deliver and, if appropriate, to file with the appropriate filing officer or office such
security agreements, financing statements or other instruments as Lender may request or require in
order to impose or perfect the lien or security interest hereof more specifically thereon.

     1.09 (a) The Rents and Profits are hereby absolutely and unconditionally assigned,
transferred, conveyed and set over to Lender to be applied by Lender in payment of the principal
and interest and all other sums payable on the Note, and of all other sums payable under this
Mortgage. Prior to the happening of any Event of Default as set forth in Article II hereof,
Borrower shall be entitled to collect and receive all Rents and Profits (including security
deposits). Nothing contained in this Section 1.09(a) or elsewhere in this Mortgage shall be
construed to make Lender a mortgagee in possession unless and until Lender actually takes
possession of the Property either in person or through an agent or receiver.

          (b) Borrower will not, without Lender’s prior written consent: (i) execute an assignment of
any of its right, title or interest in the Rents and Profits, other than to Lender, or (ii) except
where the lessee is in default thereunder, terminate or consent to the cancellation or surrender of
any lease of the Property or of any part thereof, now existing or hereafter to be made, or (iii)
modify any lease of the Property or any part thereof so as to shorten the unexpired term thereof or
so as to decrease the amount of the rent payable thereunder, or (iv) accept prepayments of any
installments of rent to become due under any of said leases in excess of one (1) month’s rental or
prepayments in the nature of security for the performance of the lessee’s obligations thereunder in
excess of an amount equal to one (1) month’s rental.

          (c) Borrower will at all times, promptly and faithfully perform, or cause to be performed, all
of the covenants, conditions and agreements contained in the leases of the Property now or
hereafter existing on the part of the lessor, wherein Borrower is the lessor, to be kept and
performed. Further, Borrower will not, without the prior written consent of Lender, enter into any
lease or other rental or occupancy agreement; provided, however that Lender will not unreasonably
withhold its consent to a proposed lease or renewal where the tenant is an independent third party
and the terms thereof can reasonably be demonstrated to have been negotiated at arm’s length at
then prevailing market values unless the tenant executes a subordination and attornment agreement
in a form reasonably acceptable to Lender.

9

 

          (d) Borrower shall furnish to Lender, within thirty (30) days after a request by Lender to do
so, a written statement containing the names of all lessees of the Property with respect to leases
where Borrower is the lessor, the terms of their respective leases, the spaces occupied and the
rentals payable thereunder and a copy of each such lease.

          (e) Borrower shall not enter into any new lease affecting all or any part of the Property
unless and until Borrower has provided to Lender, not later than twenty (20) days prior to the
execution thereof, a copy of such proposed new lease and has obtained Lender’s prior written
approval of such new lease.

     1.10 To the extent not provided by applicable law, each lease of the Property or any part
thereof shall provide that, in the event of the enforcement by Lender of the remedies provided for
by law or by this Mortgage, the lessee thereunder will, if requested by Lender or by any person
succeeding to the interest of Borrower as the result of said enforcement, automatically become the
lessee of any such successor in interest, without any change in the terms or other provisions of
the respective lease; provided, however, that said successor in interest shall not be bound by (i)
any payment of rent or additional rent for more than one (1) month in advance, except prepayments
in the nature of security for the performance by said lessee of its obligations under said lease
not in excess of an amount equal to one (1) month’s rental, or (ii) any amendment or modification
in the lease made without the consent of Lender or any successor in interest. Each lease shall
also provide that, upon request by said successor in interest, the lessee shall execute and deliver
an instrument or instruments confirming its attornment.

     1.11 Without the prior written consent of Lender being first had and obtained, Borrower will
not execute or deliver any pledge, security agreement, mortgage or deed of trust covering all or
any portion of the Property (“Subordinate Mortgage”). If Lender consents to any other or further
Subordinate Mortgage or in the event the foregoing prohibition is determined by a court of
competent jurisdiction to be unenforceable under the provisions of any applicable law, Borrower
will not execute or deliver any Subordinate Mortgage unless it shall contain, among other
provisions, express covenants to the effect that:

          (a) the Subordinate Mortgage is in all respects subject and subordinate to this Mortgage;

          (b) if any action or proceeding shall be brought to foreclose the Subordinate Mortgage
(regardless of whether the same is a judicial proceeding or pursuant to a power of sale contained
therein), no tenant of any portion of the Property will be named as a party defendant, nor will any
action be taken with respect to the Property which would terminate any occupancy or tenancy of the
Property, or any portion thereof, without the consent of Lender;

          (c) The Rents and Profits, if collected through a receiver or by the holder of the Subordinate
Mortgage, shall be applied first to the obligations secured by this Mortgage, including principal
and interest due and owing on or to become due and owing on the Note, and

10

 

then to the payment of maintenance expenses, operating charges, taxes, assessments and
disbursements incurred in connection with the ownership and maintenance of the Property;

          (d) if any action or proceeding shall be brought to foreclose the Subordinate Mortgage, prompt
notice of the commencement thereof will be given to Lender.

     1.12 (a) Borrower will not commit any waste on the Premises or make any change in the use of
the Property that will in any way increase any ordinary fire or other hazard arising out of
construction of the Improvements or operation of the Property, nor will Borrower make any
application to any federal, state or local governmental authority (“Governmental Authority”) for a
change in zoning or a change in any other law, ordinance, statute, rule, order, decree, directive
or regulation (“Laws”) affecting the Property except changes which benefit the Premises, nor will
Borrower consent to any such change without the written consent of Lender. Borrower will at all
times comply in all material respects with all Laws of any Governmental Authority having or
exercising jurisdiction over construction of the Improvements or otherwise affecting the Property
or any portion thereof, including, but not limited to, compliance in full with any legislation and
regulations relating to the handicapped and regulations of the Environmental Protection Agency, and
maintain and keep the Improvements in good operating order and condition and will promptly make,
from time to time, all repairs, renewals, replacements, additions and improvements which are
necessary to comply in all material respects with such Laws. After completion of the Improvements,
they shall not be removed, demolished or substantially altered, nor shall any additions to the
Improvements be made other than the erection or removal of non load-bearing demising walls, without
the prior written consent of Lender, which shall not be unreasonably withheld, nor shall any of the
Personal Property be removed except where appropriate replacements free of superior title, liens
and claims are immediately made having a value at least equal to the value of the Personal Property
so removed; provided that Borrower may in good faith and the ordinary course of it business make
changes to the Improvements that do not adversely affect the structural integrity provided such
changes, when taken in the aggregate with all related changes, cost no more than $100,000.

          (b) Upon the occurrence of an Event of Default, or in the event Lender, in its reasonable
discretion, determines that the Property is not being properly maintained and Borrower fails to
cure within 30 days, Borrower will pay to Lender, together with each payment of an installment of
principal and/or interest under the Note, a maintenance reserve deposit in such amount as Lender
reasonably concludes is appropriate for the purpose of funding needed capital improvements to the
Property. Said amounts shall be held by Lender, without interest, and shall form a maintenance
reserve for the Property (the “Maintenance Reserve”). Upon the written request of Borrower, Lender
shall, provided no Event of Default is occurring, allow disbursements from funds held from time to
time in the Maintenance Reserve as payments against invoices for capital improvements to the
Property made after the date this Mortgage is recorded (“capital improvement” meaning, generally,
an item that is capitalized for financial accounting purposes rather than being considered an
annual expense item). Nothing herein contained shall be deemed to affect any right or remedy of
Lender under any other provision of this Mortgage or under any statute or rule of law to pay any
such amount and to add the amount so paid together with interest at the Default Rate to the
indebtedness hereby secured. Lender is hereby granted a security interest in the amounts held by
it in the Maintenance Reserve pursuant

11

 

to this Section 1.12(b) for the purpose of securing payment of impositions and the amounts owing by
Borrower and which Lender may pay under this Section 1.12(b) and the sale of the Property, or any
interest therein, voluntarily, involuntarily or by operation of law, shall not release said
interest or Lender’s right to apply said amounts as herein provided.

     1.13 Borrower, if a corporation, partnership (limited or general), limited liability company,
or other form of entity that is not a natural person, will, so long as it is the owner of the
Property, do all things necessary to preserve and keep in full force and effect its existence under
the laws of the state of its organization and will comply in all material respects with all Laws of
any Governmental Authority or court applicable to Borrower or the Property or any part thereof.

     1.14 (a) Borrower will keep adequate records and books of account on an accrual basis and will
permit Lender, or their agents, accountants and attorneys, upon five (5) days prior written notice,
to visit and inspect the Property and examine Borrower’s records and books of account, and make
copies thereof, and to discuss Borrower’s affairs, finances and accounts relating to the Property
with the officers, agents or principals of Borrower at such times during normal business hours as
may be specified by Lender in the written notice.

          (b) Borrower will deliver to Lender, within ninety (90) days after the close of each fiscal
year, annual audited financial statements of Borrower, including operations for the Property
(balance sheet, statements of income and expense, cash flow and utilization of cash) which annual
financial statements shall set forth, in comparative form, the annual statement of operations of
the Property (balance sheet, income and expenses, cash flow and utilization of cash) for the
previous year, including rental from tenants and calculation of tenant expense contributions.
During the continuation of an Event of Default, Borrower will further deliver to Lender with
reasonable promptness such other information with respect to the Property as Lender may reasonably
request from time to time, including, without limitation, a schedule of gross receipts collected
from each tenant obligated to pay additional rent based on a percentage of gross receipts. All
statements submitted shall be prepared in accordance with generally accepted accounting principles,
or another format approved by Lender, which approval if granted may be revoked following an Event
of Default. All financial statements submitted by Borrower with respect to the Property shall be
accompanied by the certificate of Borrower dated within five (5) days of the delivery of such
statements to Lender, stating that such annual statements are true and correct in all material
respects. Upon the occurrence of an Event of Default, and for so long thereafter as any sums are
owing under the Note, Lender shall have the right to require that the foregoing financial
statements be delivered monthly or quarterly on an unaudited basis and the further right to require
that such annual statements be audited and certified by a certified public accountant, at the
expense of Borrower. Borrower agrees to pay to Lender an administrative charge of $200 for each
month, or portion thereof, that any required operating statements are late, in order to compensate
Lender for the increased administrative expense and effort occasioned by tardy financial
information.

          (c) Borrower, within three (3) business days upon request in person or within five (5)
business days upon request by mail, will furnish a written statement duly acknowledged of the
amount due on the Note, whether for principal or interest, and whether any offsets or defenses
exist against the indebtedness secured hereby.

12

 

          (d) Any change in the property manager that is managing the Property for Borrower as of the
date this Mortgage is recorded requires the prior consent of Lender, and Borrower agrees to provide
any information reasonably requested by Lender as to the reasons for a proposed change in
management, the expected benefits to flow therefrom, and the credentials of the proposed new
manager.

     1.15 Borrower shall pay all taxes (except federal and state income taxes) and any other
governmental charges or impositions imposed by any Governmental Authority on Lender by reason of
their interests in the Note or this Mortgage.

     1.16 Lender shall be subrogated, notwithstanding their release of record, to any mechanic’s or
vendor’s lien or liens, superior titles, mortgages, deeds of trust, liens, encumbrances, rights,
equities and charges of all kinds heretofore or hereafter existing on the Property to the extent
that the same are paid or discharged from the proceeds of the loan evidenced by the Note.

     1.17 Borrower will, if the Note is mutilated, destroyed, lost or stolen, deliver to Lender, in
substitution therefor, a new promissory note containing the same terms and conditions as the Note
with a notation thereon of the unpaid principal and accrued but unpaid interest. Borrower shall be
furnished with satisfactory evidence of the mutilation, destruction, loss or theft of the Note, and
also such security or indemnity as may be reasonably requested by Borrower; provided, however, that
if the original Lender named herein is the then Lender under this Mortgage, an unqualified
indemnity from the original Lender named herein shall be deemed to be satisfactory security or
indemnification.

     1.18 If the Note provides any charge for prepayment, Borrower agrees to pay said charge even
if and notwithstanding the fact that Borrower shall have defaulted in payments due under the Note
or in the performance of any agreement hereunder and Lender, by reason thereof, shall have declared
all sums secured hereby immediately due and payable.

     1.19 Without affecting the liability of Borrower or of any other person who is or shall become
bound by the terms of this Mortgage or who is or shall become liable for the performance of any
obligation secured hereby, Lender may, in such manner upon such terms and at such times as it deems
best and without notice or demand, release any party now or hereafter liable for the performance of
any such obligation, extend the time for such performance, accept additional security therefor, and
alter, substitute or release any property securing such performance. No exercise or non-exercise
by Lender of any of its rights under this Mortgage, no dealing by Lender with any person, firm or
corporation and no change, impairment, loss or suspension of any right or remedy of Lender shall in
any way affect any of the obligations of Borrower hereunder or any security furnished by Borrower,
or give Borrower any recourse against Lender.

     1.20 Borrower covenants that: (a) to the best of Borrower’s knowledge, after due and diligent
inquiry (which shall mean Borrower has conducted an inquiry or investigation of matters actually
known to Borrower as the owner of the Property, as well as the procuring by Borrower

13

 

of the investigation and report required by Lender in connection with the making of the loan
evidenced by the Note) no substances, including, without limitation, asbestos or any substance
containing asbestos and deemed hazardous under any Environmental Law (defined below), the group of
organic compounds known as polychlorinated biphenyls, flammable explosives, radioactive materials,
chemicals known to cause cancer or reproductive toxicity, pollutants, effluents, contaminants,
emissions or related materials and any items included, within the definition of hazardous or toxic
waste, materials or substances (“Hazardous Substances”) under any law relating to environmental
conditions and industrial hygiene, including, without limitation, the Resource Conservation and
Recovery Act of 1976 (“RCRA”), 42 U.S.C. §6901 et seq., the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), 42 U.S.C. §§9601-9657,
the Hazardous Materials Transportation Act, 49 U.S.C. §6901 et seq., the Federal
Water Pollution Control Act, 33 U.S.C. §1251 et seq., the Clean Air Act, 42 U.S.C.
§741 et seq., the Clean Water Act, 33 U.S.C. §7401 et seq., the
Toxic Substances Control Act, 15 U.S.C. §§2601-2629, the Safe Drinking Water Act, 42 U.S.C.
§§300f-300j, the Air Quality Control Act, K.S.A. 65-3001 et seq., the Water
Pollution Control Act, K.S.A. 65-3301 et seq., the Solid and Hazardous Waste Act,
K.S.A. 65-3401 et seq., the Central Interstate Low-Level Radioactive Waste Compact,
K.S.A. 65-34a01, the Asbestos Control Act, K.S.A. 65-5301 et seq., and the Kansas
Storage Tank Act, K.S.A. 34,100 et seq., as any of the foregoing have heretofor or
will hereafter be amended, and all similar federal, state and local environmental statutes,
ordinances and the regulations, orders and decrees now or hereafter promulgated thereunder
(collectively, “Environmental Laws”), shall be installed, used, generated, manufactured, treated,
handled, refined, produced, processed, stored or disposed of, by Borrower in, on or under the
Property in violation of Environmental Laws; (b) that no activity shall be undertaken on the
Property which would cause (i) the Property to become a hazardous waste treatment, storage or
disposal facility as such terminology is defined and classified under any Environmental Law, (ii) a
release or threatened release of Hazardous Substances from the Property in violation of any
Environmental Law, or (iii) the discharge of Hazardous Substances into any watercourse, body of
surface or subsurface water or wetland, or the discharge into the atmosphere of any Hazardous
Substances which would require a permit under any Environmental Law and for which no such permit
has been issued; (c) that no activity shall be undertaken or permitted to be undertaken, by the
Borrower on the Property which would result in a violation under any Environmental Law, and (d) to
obtain and deliver to Lender, within a reasonable time following completion of the actions as have
been required to be taken by the appropriate governmental agency, certifications of engineers or
other professionals reasonably acceptable to Lender, in form and substance reasonably satisfactory
to Lender, certifying that all necessary and required actions to clean up, remove, contain, prevent
and eliminate all releases or threats of release of Hazardous Substances on or about the Property
to the levels required by the appropriate governmental agencies have been taken, and that upon
completion of such action, the Property is, to the knowledge of such professional, then in
compliance with applicable Environmental Laws as then in effect and applicable to such actions.
Notwithstanding the foregoing, Borrower and tenants of Borrower may use and store commercially
reasonable quantities of Hazardous Substances on the Property to the extent that such use and
storage is necessary for the proper operation of the Property or in the ordinary course of the
businesses conducted on the Property by such tenants, provided that the use and storage of such
Hazardous Substances is in accordance with Environmental Laws and that no release or threatened
release which would violate Environmental Laws occurs.

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     1.21 Upon no less than three (3) business days notice to the Borrower, Lender shall have the
right to enter and inspect the Property during normal business hours, or to cause a licensed
environmental engineer to enter and inspect the Property, which inspection shall be conducted to
determine the existence, location, nature and magnitude of any past or present release or
threatened release of any Hazardous Substances (as that term is defined in Section 1.20 hereof)
into, onto, beneath or from the Property on either of the following: (1) upon reasonable belief of
the existence of a past or present release or threatened release of any Hazardous Substance into,
onto, beneath or from the Property not previously disclosed in writing to the Lender in conjunction
with the making, renewal or modification of the Note, or (2) after the commencement of non-judicial
or judicial foreclosure proceedings against the Property. Lender shall cause any physical damage
to the Property due to the inspection to be promptly repaired and restore the Property to
substantially the same condition as it existed prior to such damage.

In the case of an emergency, no prior notice for the exercise of the foregoing rights by Lender
shall be required. If Lender, or the licensed environmental engineer selected by Lender, is
refused the right of entry and inspection by the Borrower, or by a tenant of the Property, or the
Lender, or such licensed governmental engineer, is otherwise unable to enter and inspect the
Property without a breach of the peace, then Lender may, upon petition, obtain a court order from a
court of competent jurisdiction to exercise the Lender’s rights hereunder. In this regard,
Borrower hereby consents to the appointment of a receiver by the court empowered by law to appoint
a receiver for the Property, in an action brought by Lender to enforce its rights hereunder.

     1.22 Except as hereinafter provided, Borrower shall not be personally liable for the payment
of principal or interest that may become due and payable under the Note and the other Loan
Documents. Lender agrees not to seek, take or obtain against Borrower a deficiency judgment for
amounts remaining unpaid under the Note and the other Loan Documents after all the security for the
Note (including, without limitation, hazard insurance proceeds and condemnation awards with respect
to the Property) has been applied to payment of all amounts due Lender under the Note and the other
Loan Documents. Notwithstanding the foregoing limitation of liability, Borrower shall be fully
liable (i) for fraud or misrepresentation made in connection with the Note or any instrument
governing, securing or pertaining to the payment of the Note or the apparent purpose of which is to
deprive Lender of the security for the Note; (ii) for failure to pay taxes, assessments, charges
for labor or materials or any other charges which can create liens on any portion of the Property;
(iii) for the misapplication of (a) proceeds of insurance covering any portion of the Property, or
(b) proceeds of the sale or condemnation of any portion of the Property, or (c) rentals and
security deposits received by or on behalf of Borrower subsequent to the date on which Lender gives
written notice of the posting of foreclosure notices or the exercise of Lender’s assignment of
rents; (iv) for failure to maintain, repair or restore the Premises and the Improvements in
accordance with any instrument governing, securing, or pertaining to the payment of this Note; (v)
for any act or omission knowingly or intentionally committed or permitted by Borrower which results
in the waste, damage or destruction to the Premises and the Improvements, but only to the extent
such events are not covered by insurance proceeds which are received by Lender; (vi) for the return
to Lender of all unearned advanced rentals and security deposits paid by tenants of the Premises

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and the Improvements or any guarantors of the leases of such tenants which are not rightfully
refunded to or which are forfeited by such tenants or guarantors; (vii) for the return of, or
reimbursement for, all personal property included within the Property taken from the Premises by or
on behalf of Borrower; (viii) for any liability of Borrower pursuant to the provision contained in
this Mortgage pertaining to Hazardous Substances; (ix) for any liability of Borrower pursuant to
the Certificate and Indemnity Regarding Hazardous Substances executed by Borrower and delivered to
Lender in connection with the indebtedness evidenced by this Note; (x) for any delay, after an
Event of Default which is not cured in deeding over the Property to the Lender, or cooperate in a
consensual foreclosure within 90 days of Lender’s request; (xi) for failure to maintain or alter
the Property in compliance with the Americans with Disabilities Act, as it may be amended from time
to time; and (xii) for all court costs and reasonable attorneys’ fees incurred in connection with
the enforcement of one or more of the above subparagraphs (i) through (xi), inclusive. The
foregoing shall not affect Lender’s right to proceed against by any such guarantor under any
guaranty agreement executed by any such guarantor in connection with the loan indebtedness
evidenced by the Note (the “Loan”).

     Nothing in the foregoing shall be deemed to release, affect or impair the indebtedness
evidenced by the Note or the security therefor, or Lender’s rights to enforce its remedies under
the documents executed in connection with the Loan (the “Loan Documents”), including any remedy for
injunctive or other equitable relief.

     1.23 As of the date of this Mortgage, Borrower is and until the obligations of Borrower under
the Note and the Loan Documents have been fully paid and performed and this Mortgage has been
reconveyed, Borrower shall remain, in full compliance with all applicable laws and regulations of
the United States of America that prohibit, regulate or restrict financial transactions, including
but not limited to, conducting any activity or failing to conduct any activity, if such action or
inaction constitutes a money laundering crime, including any money laundering crime prohibited
under the Money Laundering Control Act (18 U.S.C. §§ 1956, 1957), or the Bank Secrecy Act (31
U.S.C. §§ 5311 et seq.), and any amendments or successors thereto and any
applicable regulations promulgated thereunder. Borrower represents and warrants to Lender, its
successors and assigns, that, as of the date hereof: (a)(i) neither Borrower nor any member nor any
general partner of such member of Borrower, nor any officer, director or shareholder of Borrower,
is or will become a “Person” described by Section 1 of The Anti-Terrorism Executive Order 13,224 of
September 23, 2001 blocking property and prohibiting transactions with Persons who commit, threaten
to commit, or support terrorism, 66 Fed. Reg. 49,049 (2001), or described in any rule or regulation
implementing the same and, (ii) to the best knowledge and belief of the Borrower, neither Borrower
nor any general partner or member of Borrower, nor any officer, director, or shareholder of
Borrower, engages or will engage in any dealings or transactions, or be otherwise associated with,
any such Persons; and (b) Borrower and all general partners and members and any general partner of
such members of Borrower, and all officers, directors, and shareholders of Borrower, are in
compliance, and will remain in compliance, with the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA Patriot Act”).
Borrower acknowledges that it understands and has been advised by legal counsel on the requirements
of the applicable laws referred to above including, without limitation, the Money Laundering
Control Act (18 U.S.C. §§ 1956, 1957), the Bank Secrecy Act (31 U.S.C. §§ 5311 et
seq.) and

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the USA Patriot Act. Borrower shall notify Lender immediately upon receipt of any information
indicating a breach of this Section 1.23, of if Borrower or any general partner or member of
Borrower, or any officer, director or shareholder of Borrower or the constituent owner of Borrower
is custodially detained on charges relating to money laundering, whereupon Lender shall be entitled
to take all actions necessary so that Lender is in compliance with all anti-money laundering
regulations. Any and all loss, damage, liability, penalty, fine or expense, including reasonable
attorneys’ fees and reasonable investigatory expenses incurred by Lender in connection with any
default by Borrower under this Section 1.23, shall be included in the indebtedness secured hereby,
and shall immediately become due and payable by Borrower to Lender.

     1.24 City Lease Provisions. Borrower hereby covenants and agrees that Borrower shall
at all times fully perform and comply with all agreements, covenants, terms and conditions required
to be performed or complied with by it pursuant to that certain Lease Agreement dated as of July 1,
2007 by and between the City of Olathe, Kansas, as Lessor and Borrower, as Lessee (the “City
Lease”). Borrower further covenants and agrees:

          (a) Any default, past any applicable notice and/or cure period, by Borrower under the City
Lease shall be an Event of Default under this Mortgage.

          (b) Borrower shall pay or cause to be paid, not later than the date upon which the same
becomes due and payable by Borrower pursuant to the provisions of the City Lease (i) all base rent,
additional rent and other payments required to be paid by the lessee under the City Lease and (ii)
all real estate taxes, assessments, water and sewer rates and charges, and all other governmental
levies and charges of every kind whatsoever, general and special, ordinary and extraordinary,
unforeseen as well as foreseen, which shall be assessed, levied, confirmed, imposed, or become a
lien upon or against the property demised by the City Lease, or which shall become payable with
respect thereto (collectively the “Impositions”), provided that nothing contained herein shall
limit the right of Lender to require that deposits be made into an escrow for real estate taxes,
regular or special assessments, and insurance premiums pursuant to Section 1.06 of this Mortgage.
Within ten (10) days after demand by Lender, Borrower shall deliver to Lender a copy of the
official receipt evidencing such payment or other proof of payment of such rent and Impositions
satisfactory to Lender, and failure of Borrower to deliver to Lender the receipts or to submit
other proof satisfactory to Lender shall constitute a default under this Mortgage. Lender will
accept as proof of payment of rent payable under the City Lease a certification executed by an
officer of Borrower to the effect that such rent has been paid. To the extent that the City Lease
or this Borrower shall grant to Borrower the privilege to postpone or defer the payment of any
Impositions, the failure of Borrower to pay the same shall not constitute a default under this
Mortgage so long as Borrower shall faithfully comply with all of the terms, covenants and
conditions under the City Lease and this Mortgage with respect to the exercise of such privilege.

          (c) Borrower shall promptly perform and observe all of the terms, covenants and conditions
required to be performed and observed by Borrower, under the City Lease within the stated
opportunity to cure periods provided in the City Lease, or such lesser opportunity to

17

 

cure periods as are provided in the default provisions of this Mortgage, and shall do all things
necessary to preserve and to keep unimpaired Borrower’s rights under the City Lease.

          (d) If Borrower shall fail to pay any base rent or additional rent required under the City
Lease or any Impositions, or to make any other payment required to be paid by Borrower under the
City Lease at the time or in the manner provided in the City Lease, or if Borrower shall fail to
perform or observe any other term, covenant, condition required to be performed or observed by
Borrower under the City Lease, without limiting the generality of any other provision of this
Mortgage and without releasing Borrower from any of its obligations under this Mortgage, Lender
shall have the right, but not the obligation, to pay base rent or additional rent and/or any
Impositions, or other payment, and may take such action as may be appropriate to cause such other
term, covenant or condition to be promptly performed or observed on behalf of Borrower, to the end
that Borrower’s rights under the City Lease shall be kept unimpaired from default, and Borrower
shall permit Lender to enter upon the property demised by the City Lease with or without notice and
to do anything which Lender shall deem necessary or prudent for such purpose.

          (e) If Lender shall make any payment or take action in accordance with the preceding
paragraph, Lender, within thirty (30) days thereafter, shall give to Borrower written notice of the
making of any such payment or the taking of any such action. All moneys expended by Lender in
connection therewith including, but not limited to, legal expenses, together with interest thereon
at the Default Rate (as defined in the Note) compounded monthly from the date of each such
expenditure, shall be paid by Borrower to Lender upon demand by Lender, and shall be secured by
this Mortgage. Lender shall have, in addition to any other right or remedy of Lender, the same
rights .and remedies in the event of nonpayment of any such sums by Borrower as in the case of a
default by Borrower in the payment of the Note. If, pursuant to the City Lease, lessor under the
City Lease shall deliver to Lender a duplicate copy of any notice given by such landlord to
Borrower, such notice shall constitute full protection to Lender for any action taken or omitted to
be taken by Lender, in good faith, in reliance thereon.

          (f) Borrower shall (i) promptly notify Lender in writing of any default by Borrower under the
City Lease or of the receipt by Borrower of any notice (other than notices customarily sent on a
regular periodic basis) from the lessor under the City Lease including, without limitation, any
notice claiming any default by Borrower in the performance or observance of any of the terms,
covenants, or conditions to be performed or observed by Borrower under the City Lease; (2) promptly
notify Lender in writing of the receipt by Borrower of any notice from the lessor under the City
Lease of termination of the City Lease pursuant to the provisions of the City Lease; and (iii)
promptly cause a copy of each such notice received by Borrower to be delivered to Lender.

          (g) If the City Lease provides for arbitration, Borrower shall promptly notify Lender in
writing of any request made by either party to the City Lease for arbitration proceedings pursuant
to the City Lease and of the institution of any arbitration proceedings, as well as of all
proceedings thereunder, and shall promptly deliver to Lender a copy of the determination of the
arbitrators in each such arbitration proceeding. Lender shall have the right

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to participate in such arbitration proceedings in association with Borrower or on its own behalf as
an interested party.

          (h) Borrower, shall, from time to time, but not more often than once every six (6) months,
within thirty (30) days after written demand from Lender, obtain from the lessor under the City
Lease and deliver to Lender a certificate stating that such City Lease is in full force and effect,
is unmodified, that no notice of default or termination has been given to Borrower, stating the
date to which all rent and charges have been paid and stating whether or not there are any defaults
thereunder and specifying the nature of such defaults, if any.

          (i) Borrower shall not, without the prior written consent of Lender, consent to any agreement
which releases the Borrower from any of its obligations under the City Lease, or consent to or
permit any waiver or modification or cancellation of any provision of the City Lease nor to the
subordination of the City Lease to any mortgage of the fee interest of the lessor of the property
demised by the City Lease. Notwithstanding the foregoing or anything else to the contrary herein,
Borrower may, without the prior written consent of Lender, exercise any option or obligation to
purchase the property demised by the City Lease, through payment in full of the Bonds (as defined
in the Lease).

          (j) If at any time Borrower, or any party claiming by, through or under Borrower and/or any
trustee in bankruptcy, shall have the right to assume or reject the City Lease pursuant to Section
365, 11 U.S.C. sec. 101 et seq., as the same may be amended (the “Code”) or any
successor statute, then Lender shall have (and is hereby granted) the exclusive right to exercise
such right to assume or reject. In the event that the foregoing grant is held to be unenforceable
by a court of competent jurisdiction, then and in such case Borrower hereby covenants and agrees
that Borrower, any party claiming by, through and under Borrower, and/or any trustee in bankruptcy
shall not exercise any rights to assume or reject the City Lease without having first obtained the
prior written consent of Lender.

          (k) Borrower shall irrevocably and unconditionally assign, transfer and set over to Lender all
of Borrower’s claims and rights to the payment of damages arising under the Code from any rejection
of the City Lease by the lessor under the City Lease. This Mortgage and all the liens, terms,
covenants, conditions of this Borrower shall extend to and cover Borrower’s possessory rights under
Section 365(h) of the Code and to any claim for damages due to the rejection or disaffirmance of
the City Lease or other termination of the City Lease. Lender shall have the right to proceed in
its own name or in the name of Borrower in respect to any claim, suit, action or proceeding
relating to the rejection of the City Lease, including but not limited to the right to file and
prosecute, to the exclusion of Borrower, any proofs of claim, complaints, motions, applications,
notices and other documents. Borrower shall agree to execute any and all powers, authorizations,
consents and other documents required by Lender in connection with any such litigation. Borrower
shall not commence any suit, action, proceeding or case, or file any application or make any
motion, in respect of the City Lease in any such case under the Code without the prior written
consent of Lender. Borrower shall, upon demand, pay to Lender all costs and expenses (including
but not limited to attorneys’ fees) paid or incurred by Lender in connection with the prosecution
or conduct of each such litigation.

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          (l) Borrower, irrevocably, hereby designates, makes, constitutes and appoints Lender (and all
persons designated by Lender) as Borrower’s true and lawful attorney and agent-in-fact, with power
upon the occurrence of an Event of Default under this Mortgage or default under the City Lease,
without notice to Borrower and at such time or times thereafter as Lender, at its sole election,
may determine, in the name of Borrower, Lender or in both names: (i) to exercise all of the
Borrower’s rights, interests and remedies in and under the City Lease; (ii) to acquire the land and
other property subject to the City Lease in the manner provided for in the City Lease; (iii) to
initiate such legal proceedings and to settle, adjust or compromise any legal proceedings deemed
necessary by Lender in its sole discretion in order to enforce the provisions of the City Lease or
prevent the termination thereof; (iv) to commence or institute arbitration proceedings, or to
participate in any arbitration proceedings commenced or instituted, pursuant to the City Lease
deemed commenced or instituted; (v) to approve all arbitration determinations, awards or findings
made pursuant to the provisions of the City Lease; (vi) to do any and all things necessary, in
Lender’s sole opinion, to preserve and keep unimpaired Lender’s rights under this Mortgage and/or
the City Lease; and (vii) to do all acts and things necessary, in Lender’s sole discretion, to
carry out any or all of the foregoing.

          (m) Borrower shall execute and deliver, on request of Lender such instruments as Lender may
deem useful or required to permit Lender to cure any default under the City Lease or to permit
lender to take such other action as Lender considers desirable to cure or remedy the matter in
default and preserve the interest of Lender in the property demised by the City Lease.

          (n) If the City Lease shall be terminated prior to the natural expiration of its term due to
default by Borrower, and if Lender shall acquire from the lessor under the City Lease a new City
Lease, Borrower shall have no right, title, or interest in or to such new City Lease or the
leasehold estate created thereby.

          (o) Borrower shall not sell, transfer or assign the City Lease or any portion of Borrower’s
interest therein without the prior written consent of Lender.

          (p) In case of a sale in foreclosure, any such sale may be made subject to the requirement
that the purchaser shall assume the performance of all of the terms, covenants, and conditions of
the City Lease by instrument in writing to be delivered to the lessor under the City Lease. Any
such sale shall also be made subject to all of the provisions of the City Lease and to any curable
default or defaults then existing thereunder.

          (q) Unless Lender shall expressly consent in writing, the leasehold title to the property
demised by the City Lease and the fee estate shall not merge, but they shall always remain separate
and distinct, notwithstanding the union of said estates in the lessor under the City Lease,
Borrower, or in a third party by purchase or otherwise.

          (r) Any greater or additional interest or estate that Borrower shall acquire in the property
demised by the City Lease, such as the fee estate, shall ipso facto be encumbered
by this Mortgage with the same force and effect as if part of the mortgaged estate on the date
hereof.

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          (s) Borrower shall exercise any and all applicable renewal options under the City Lease during
the term of the Note and shall provide Lender with evidence, reasonably satisfactory to Lender, of
the acceptance of Borrower’s exercise of such renewal options at least nine (9) months prior to the
last day of the then existing term of the City Lease.

          (t) Borrower agrees to deposit with Lender, upon Lender’s request therefor, Borrower’s
original copy of said City Lease, and all amendments thereto, to be retained by Lender until all
indebtedness secured hereby has been fully paid.

          (u) The generality of the provisions of sections in this Mortgage relating to the City Lease
shall not be limited by other provisions of this Mortgage setting forth particular obligations of
Borrower which are also required of the Borrower as the lessee under the City Lease.

          (v) The improvements on the property demised by the City Lease shall not be demolished without
the prior written consent of Lender. Borrower further covenants that, except as otherwise
permitted pursuant to the terms of this Mortgage, it will not make, authorize, or permit to be made
any material alterations to the Buildings without the prior written approval of the Lender and that
all such permitted material alterations, if any, shall be performed by Borrower in the manner set
forth in the City Lease, and subject to the further condition that no structural alteration shall
be undertaken without the prior written consent of Lender consistent with the terms of this
Mortgage. Any bond for the completion or payment of any such material alteration, furnished to or
for the benefit of the lessor under the City Lease shall also name Lender as a party for whose
benefit such bond is issued, or a similar bond shall be furnished to and for the benefit of Lender.

          (w) Borrower shall warrant and defend the leasehold estate created by the City Lease for the
entire remainder of the term set forth in the City Lease, against each and every person or persons
lawfully claiming, or who may claim the same or any part of the City Lease, subject only to the
payment of the rents reserved in the City Lease and to the performance and observance of all the
terms, covenants, conditions and warranties of the City Lease.

ARTICLE II

EVENTS OF DEFAULT

     The following shall constitute events of default (“Events of Default”) hereunder:

     2.01 The failure to make any payment of interest on the Note, or to make any payment of an
installment of principal, on or before the day the same shall become due and payable, or the
failure to make any other payments required under the Note on or before the day the same shall
become due and payable, whether at maturity or by acceleration or as part of any prepayment or
otherwise, in each case, as is provided in the Note and in this Mortgage, or the failure to make
the payment of any insurance premium or tax required by Sections 1.04 and 1.06(a) to be paid, or
the failure to make the deposits required by Section 1.06(b) or Section 1.12 (b), on or before the
day the same shall become due and payable.

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     2.02 A default by Borrower in the due, prompt and complete observance and performance of
any obligation, covenant and agreement contained in Sections 1.03, 1.04, 1.05 or 1.06(c), and the
failure to cure said default within ten (10) business days after written notice to Borrower of the
occurrence thereof.

     2.03 A default by Borrower in the due, prompt and complete observance and performance of any
obligation, covenant and agreement contained in the Note or in this Mortgage but not specified in
Sections 2.01 or 2.02, and the failure to cure said default within thirty (30) days after written
notice to Borrower of the occurrence thereof, or if not susceptible of cure during such thirty (30)
day period, the failure of Borrower to commence during such thirty (30) day period and to
diligently prosecute the cure of same.

     2.04 The appointment pursuant to an order of a court of competent jurisdiction of a trustee,
receiver or liquidator of Borrower or of the Property or any part thereof.

     2.05 The filing by Borrower of a petition in bankruptcy or a petition for an arrangement or a
reorganization pursuant to the Federal Bankruptcy Act or any similar law, federal or state, or the
adjudication of Borrower as a bankrupt or as insolvent by a decree of a court of competent
jurisdiction, and the same is not discharged within 120 days after the date of filing, or the
making of an assignment for the benefit of creditors, or the admission by Borrower in writing of
its inability to pay its debts generally as they become due, or the giving of consent by Borrower
to the appointment of a receiver or receivers of all or any part of its property.

     2.06 The filing by any of the creditors of Borrower of a petition in bankruptcy against
Borrower or a petition for reorganization of Borrower pursuant to the Federal Bankruptcy Act or any
similar law, federal or state, and the same is not discharged within ninety (90) days after the
date of filing thereof.

     2.07 The occurrence of any of the events enumerated in Sections 2.04 through 2.06 with regard
to any guarantor of the Note, or the property of any such guarantor, or the revocation, limitation
or termination of the obligations of any guarantor of the Note, except in accordance with the
express written terms of the instrument of guaranty; or, if Borrower is a trust or trustee of a
trust, the occurrence of any of the events enumerated in Sections 2.04 through 2.06 with regard to
such trustee or any owner, or general partner of any owner, of more than ten percent (10%) of the
beneficial interests of such trust.

     2.08 The sale, conveyance, transfer, disposition or further encumbering of the Property, or
any part thereof or any interest therein, either voluntarily, involuntarily, or otherwise, or
agreement so to do (collectively, a “Transfer”), without the prior written consent of Lender, which
consent shall be granted, withheld or conditioned in the sole and entire discretion of Lender. In
the event of any request for approval of a Transfer, along with any such request, Borrower shall
pay to Lender a transfer fee equal to one percent (1%) of the then outstanding principal balance of
the Note (“Transfer Fee”). Lender shall have the right to approve, decline or consent to any such
requested Transfer in its sole and entire discretion. Any permitted transferee shall assume all
payment and performance obligations under the Note, this Mortgage and the other Loan Documents
pursuant to an assumption agreement prepared in recordable form by

22

 

Lender’s legal counsel. Borrower shall pay Lender’s reasonable out-of-pocket expenses in
connection with approving and documenting such Transfer, including the fees and costs of Lender’s
local legal counsel, premiums for title insurance policies or endorsements, and recordation fees,
whether or not the Transfer is completed.

     2.09 Except as provided in Section 2.08, in the event Borrower is a corporation or trust, the
Transfer of more than five percent (5%) of the issued and outstanding capital stock of Borrower or
of the beneficial interest of such trust without the prior written consent of Lender; or, in the
event Borrower is a limited or general partnership or a joint venture, a change of any general
partner or any joint venturer, either voluntarily, or otherwise, or the Transfer of any such
general partnership or joint venture interests without the prior written consent of Lender; or, in
the event Borrower is a limited liability company, a change of Manager (meaning either an actual
change of the Manager or a change in ownership or control of the Manager), voluntarily or
otherwise, or the Transfer of more than five percent (5%) of the membership interests in Borrower
without the prior written consent of Lender; or, any change in Borrower’s form of legal entity, or
the form of any legal entity which is the general partner or Manager of Borrower. No Transfer or
series of Transfers may be utilized to frustrate Lender’s rights in situations where the
substantive effect of such Transfer or series of Transfers amounts to a disposition of the
Property, or control thereof, for a valuable consideration to parties other than Borrower. Nothing
contained herein shall limit in any manner, and all of the following shall be permitted without
Lender’s consent, (i) a sale or transfer of all or substantially all of the assets of Pac Sun that
includes the Borrower or (ii) a merger or consolidation or other acquisition of Pac Sun; provided
the transferee of such assets or surviving company in such merger or consolidation or other
acquisition has a net worth equal to or greater than three hundred million dollars
($300,000,000.00) and further provided that Borrower demonstrates such valuation to Lender’s
reasonable satisfaction within fifteen days prior to the occurrence of any such merger,
consolidation or other acquisition.

ARTICLE III

REMEDIES

     Upon the occurrence of any Event of Default, Lender may shall have the following rights and
remedies:

     3.01 Acceleration of Indebtedness. Upon occurrence of an Event of Default or at any
time thereafter, Lender may at its option and without demand or notice to Borrower, accelerate the
maturity of the Note and declare the indebtedness secured hereby immediately due and payable.
Unless otherwise provided herein, Borrower hereby waives presentment for payment, protest and
demand, notice of protest, demand, dishonor and default, notice of intent to declare the
indebtedness secured hereby immediately due and payable and notice of the declaration that the
Indebtedness is immediately due and payable, and any and all rights Borrower may have to a hearing
before any judicial authority prior to the exercise by Lender of any of its rights under this
Mortgage or any other agreements securing or executed in connection with the Indebtedness, all to
the extent authorized by law.

23

 

     3.02 Foreclosure; Waiver of Redemption Laws. Lender may institute an action of
mortgage foreclosure, or take such other action at law or in equity for the enforcement of this
Mortgage and realization on the Premises or any other security herein or elsewhere provided for, as
the law may allow, and may proceed therein to final judgment and execution for the entire unpaid
balance of the Indebtedness with interest at the rate(s) stipulated in the Note together with all
other sums due by Borrower in accordance with the provisions of the Note and this Mortgage,
including, without limitation, all sums which may have been loaned by Lender to Borrower after the
date of this Mortgage with respect to the Premises, and all sums which may have been advanced by
Lender for taxes, water or sewer rents, other lienable charges or claims, insurance or repairs or
maintenance, and all costs of suit. Borrower authorizes Lender at its option to foreclose this
Mortgage subject to the rights of any tenants and the failure to make any such tenants parties
defendant to any such foreclosure proceedings and to foreclose their rights will not be asserted by
Borrower as a defense to any proceedings instituted by Lender to recover the Indebtedness secured
hereby or any deficiency remaining unpaid after the foreclosure sale of the Premises. Borrower
hereby waives the benefit of all laws now existing or hereafter enacted providing for redemption or
a right of redemption from any sale made in collecting the indebtedness secured hereby.

     3.03 Appointment of a Receiver; Possession/Operation of Property by Lender or
Receiver. Upon the occurrence of an Event of Default, Lender shall have the right, after such
notice to Borrower as is required by applicable law, to the appointment of a receiver for the
Property. Either Lender or a receiver appointed at any time thereafter, in addition to all other
rights herein conferred upon them may, but will not be obligated to, enter upon and take into
possession of any or all of the Property, and exclude Borrower therefrom, and hold, use,
administer, manage and operate the same to the full extent that Borrower could do so, with or
without legal action, or, in the alternative, Lender or such receiver shall be entitled as of right
to appointment of a receiver without regard to the solvency of Borrower, or any other person liable
for the debt secured hereby, and without regard to the value of the Property in relation to the
indebtedness secured hereby, and waiving all rights for any valuation with respect thereto, and
regardless of whether Lender has an adequate remedy at law; either Lender or said receiver, as the
case may be, may rent the Property, or any part thereof, for such term or terms and on such other
terms and conditions as Lender or such receiver may see fit, collect all rentals (which term shall
also include sums payable for use and occupation) and, after deducting all costs of collection and
administration expense, apply the net rentals to the payment of taxes, water and sewer rents, other
lienable charges and claims, insurance premiums and all other carrying charges, and to the
reasonable costs of maintenance, repair or restoration of the Property, or in reduction of the
principal or interest, or both, in such order and amounts as Lender or said receiver may elect; and
for that purpose and without limiting any other assignment contained herein or in the other loan
documents Borrower hereby grants, grants a security interest in and assigns to Lender all rentals
due and to become due under any existing or future lease or leases or rights to use and occupation
of the Property, as well as all rights and remedies provided in such lease or leases or at law or
in equity for the collection of the rentals. Any lease or leases, or modifications thereof,
entered into by Lender or said receiver pursuant to this paragraph shall survive foreclosure of
this Mortgage and/or the repayment of the debt, except to the extent any applicable lease may
provide otherwise. If the Property includes any type of business enterprise, the Lender or such
receiver may operate and manage such business without any liability of

24

 

Lender or such receiver to Borrower resulting therefrom (excepting failure to use ordinary care in
the operation and management of the Property); and Lender or its designee or such receiver may
collect, receive and receipt for all proceeds accruing from such operation and management, and, at
Borrower’s expense, make repairs and purchase needed additional property, and exercise every power,
right and privilege of Borrower with respect to the Mortgaged Property. When and if the expenses of
such operation and management have been paid and the Indebtedness has been paid, the Property shall
be returned to Borrower (providing there has been no foreclosure sale). This provision is a right
created by this Mortgage and cumulative of, and is not in any way to affect, the right of the
Lender to the appointment of a receiver or any other right given the Lender by law.

     3.04 Related Judicial Proceedings. Upon the occurrence of an Event of Default, or at
any time thereafter, or upon the breach of any covenant, term or condition herein contained,
Lender, in lieu of or in addition to its other rights and remedies hereunder, may sue Borrower for
damages on, arising out of said default or breach, or for specific performance of any provision
contained herein, or to enforce any other appropriate legal or equitable right.

     3.05 Action for Sums Due. Lender shall have the right, from time to time, to bring an
appropriate action to recover any sums required to be paid by Borrower under the terms of this
Agreement as they become due, without regard to whether or not the principal Indebtedness or any
other sums secured by the Note and this Mortgage shall be due, and without prejudice to the right
of Lender thereafter to bring an action to foreclose this Agreement or any other action for any
default by Borrower existing at the time the earlier action was commenced.

     3.06 Sale. Any real estate or interest or estate therein sold to satisfy the
Indebtedness may be sold in one parcel, as an entirety, or in such parcels and in such manner or
order as Lender, in its sole discretion, may elect.

     3.07 UCC Rights. On the happening of any Event of Default or at any time thereafter,
Lender shall have and may exercise with respect to the Collateral all rights, remedies and powers
of a Secured Party under the Uniform Commercial Code as adopted in the State of Kansas (“UCC”) with
reference to the Property, as applicable, or any other items in which a security interest has been
granted herein, including without limitation the right and power to sell at public or private sale
or sales or otherwise dispose of, lease or utilize the Property, as applicable, and any part or
parts thereof in any manner to the fullest extent authorized or permitted under the UCC after
default by Borrower without regard to preservation of the Collateral or its value and without the
necessity of a court order, and apply the proceeds thereof first toward the payment of all costs
and expenses and reasonable attorneys’ fees incurred by Lender and the balance toward the payment
of the Indebtedness whether or not then due, and in such order or manner as Lender may elect. Upon
any Event of Default, Lender shall have, among other rights, the right to take possession of the
Property, as applicable, and to enter upon any premises where the same may be situated for the
purpose of repossessing the same, without being guilty of trespass and without liability for
damages occasioned thereby, as long as Lender does not commit a breach of peace, and to take any
action deemed appropriate or desirable by Lender, at its option and its sole discretion, to repair,
restore or otherwise prepare the Property, as applicable, for sale or lease or other use or
disposition as authorized herein. To the extent permitted by law, Borrower

25

 

expressly waives any notice of sale or any other disposition of the Property, as applicable, and
any rights or remedies of Borrower or the formalities subscribed by law relative to the sale or
disposition of the Property, as applicable, or to the exercise of any other right or remedy of
Lender existing after default. To the extent that such notice is required and cannot be waived,
Borrower agrees that if such notice is mailed postage prepaid to Borrower at the address shown
herein at least ten (10) days before the time of the sale or disposition, such notice shall be
deemed reasonable and shall fully satisfy any requirement for giving said notice.

     Borrower agrees that Lender may proceed to sell or dispose of both the real and personal
property covered herein in accordance with the rights and remedies granted under this Agreement
with respect to the real property covered hereby. Borrower hereby grants Lender the right, at its
option, after default by Borrower to transfer at any time to itself or its nominee the Property, as
applicable, or any part thereof and to receive the monies, income, proceeds and benefits
attributable to the same and to hold the same as Property, as applicable, or to apply it on the
Indebtedness, whether or not then due, and in such order and manner as Lender may elect. Borrower
covenants and agrees that all recitals and any document transferring, assigning, leasing or making
other disposition of the Property, as applicable, or any part thereof shall be full proof of the
matters stated therein and no other proof shall be required to establish the legal propriety of the
sale or other action taken by Lender and that all prerequisites of sale shall be presumed
conclusively to have been performed or to have occurred.

     3.08 Marshaling. All rights to a marshaling of the assets of Borrower, including,
without limitation, such rights with respect to the Property, as applicable, and the Premises, are
hereby waived.

     3.09 Application of Proceeds. Unless otherwise required by applicable law, the
proceeds of any and all foreclosure sales of the Property shall be applied as follows: (a) to the
payment of all necessary actions and expenses incident to the execution of said sale or sales, and
to the actions and expenses of any receiver with respect to the Property; (b) to the payment of the
Indebtedness in such order as determined by Lender, to the amount of the accrued interest and
principal legally due thereon and all other sums secured hereby, and to the payment of reasonable
attorneys’ fees as in the Note provided; and (c) the remainder, if any, shall be paid to Borrower
or such other person or persons entitled thereto by law.

     3.10 Waiver of Appraisement Laws. To the extent permitted by applicable law, Borrower
waives the benefit of all laws now existing or hereafter enacted providing for (a) any appraisement
before sale of any portion of the Property (commonly known as Appraisement Laws), or (b) any
extension of time for the enforcement of the collection of the Indebtedness or any creation or
extension of a period of redemption from any sale made in collecting the Indebtedness (commonly
known as Stay Laws and Redemption Laws).

     3.11 Prerequisites of Sales. In case of any foreclosure sale of the Property, all
prerequisites to the sale shall be presumed to have been performed, and in any conveyance given
hereunder, all statements of facts, or other recitals therein made as to the nonpayment of money
secured or as to the request of the Lender or any receiver, or as to the advertisement of sale, or

26

 

time, place and manner of sale, or as to any other preliminary fact or thing, shall be taken in all
courts of law or equity as prima facie evidence that the facts so stated or recited are true.

ARTICLE IV

DEFEASANCE OF MORTGAGE

If Borrower shall well and truly pay, or cause to be paid, all of the indebtedness evidenced and
secured hereby and does keep and perform each and every covenant, duty, condition, and stipulation
herein imposed on Borrower, in the Note contained, or in any other document securing, evidencing or
relating to the indebtedness evidenced and secured hereby, then this Mortgage and the grants and
conveyances contained herein shall become null and void, and the Property shall revert to Borrower
and the entire estate, right, title and interest of Lender will thereupon cease; and Lender in such
case shall, upon the request of Borrower, deliver to Borrower proper documents acknowledging
satisfaction of this document; otherwise, this Mortgage shall remain in full force and effect.

ARTICLE V

MISCELLANEOUS

     5.01 In the event any one or more of the provisions contained in this Mortgage or in the Note
or in any instrument heretofore or hereafter executed by Borrower having reference to or arising
out of the indebtedness represented by the Note shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Mortgage, but this Mortgage shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein or therein.

     5.02 Borrower agrees to pay Lender or its authorized loan servicing agent for each and any
Lender Statement furnished at Borrower’s request the lesser of the maximum fee allowed by the law
of the Governing Jurisdiction (as defined below) or $25.00. Such fee shall be computed as of the
time said statement is furnished.

     5.03 All notices given under this Agreement shall be in writing, and sent to the other party
at its address set forth below or at such other address as such party may designate by notice to
the other party and shall be deemed given (i) three (3) Business Days (as defined below) after
mailing, by certified or registered U.S. Mail, return receipt requested, postage prepaid, (ii) one
(1) Business Day after delivery, fee prepaid, to a national overnight delivery service (such as
Federal Express, Purolater Courier, U.P.S. Next Day Air), or (iii) when received, if delivered by
hand, as evidenced by a signed receipt:

	 	 	 	 	 

	 

	 	If to Borrower:
	 	c/o Pacific Sunwear of California, Inc.
	 

	 	 	 	3450 East Miraloma Avenue
	 

	 	 	 	Anaheim, CA 92806
	 

	 	 	 	Attention: Craig Gosselin, SVP and General Counsel

27

 

	 	 	 	 	 

	 

	 	If to Lender:
	 	AMERICAN NATIONAL INSURANCE COMPANY
	 

	 	 	 	One Moody Plaza
	 

	 	 	 	Galveston, Texas 77550
	 

	 	 	 	Attention: Mortgage and Real Estate Investment Department

A “Business Day” is any day on which commercial banks are not authorized or required by law to
close in the Governing Jurisdiction. Borrower and Lender reserve the right to change the addresses
herein stated for purposes of notice from time to time by serving written notice to the other as
provided herein.

     5.04 Borrower hereby requests that a copy of any Notice of Default and Notice of Sale as may
be required by law be mailed to it at its address herein contained.

     5.05 The granting of consent by Lender to any transaction as required by the terms hereunder
shall not be deemed a waiver of the right to require consent to future or successive transactions.

     5.06 All of the grants, obligations, covenants, agreements, terms, provisions and conditions
herein shall run with the land and shall apply to, bind and inure to the benefit of the successors
and assigns of Borrower and the endorsees, transferees, successors and assigns of Lender.

     5.07 This Mortgage may be executed in any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same deed.

     5.08 This Mortgage is to be construed and enforced according to the laws of the Governing
Jurisdiction except that, with respect to any portion of the Property located outside of the
Governing Jurisdiction, the laws of the state in which such portion of the Property is located
shall be applicable thereto but only to the extent required for Lender to exercise its rights and
remedies in order to realize upon its interests in the Property.

     5.09 This Mortgaged shall be governed in all respects by the laws of the State of Kansas
(“Governing Jurisdiction”), without regarding to any conflicts of law provisions.

     5.10 Notwithstanding anything to the contrary in this Mortgage or the other Loan Documents to
the contrary, the maximum principal amount of the Indebtedness and other obligations secured by
this Mortgage (not including the costs of protecting and preserving the Premises and the lien of
this Mortgage paid by Lender pursuant to this Mortgage and the other Loan Documents) shall not
exceed the sum of $13,000,000.00.

[Signature Page Follows]

28

 

     IN WITNESS WHEREOF, this Mortgage, Security Agreement, Financing Statement and Fixture Filing
has been executed and delivered as of the day and year first above written.

	 	 	 	 	 
	BORROWER:

PACIFIC SUNWEAR STORES CORP.,

a California corporation

 	 	 
	By:  	/s/
Craig E. Gosselin	 	 
	 	Name:  	Craig E. Gosselin	 	 
	 	Title:  	President	 	 
	
NOTARIZED SIGNATURES REQUIRED	 	 

29

 

LOCAL FORM OF ACKNOWLEDGMENT

	 	 	 	 	 	 	 

	STATE OF CALIFORNIA

	)	 	 	 
	 

	)	 	 	 
	COUNTY OF ________________________________

	)	 	 	 

     On ____________, 2010, before me, ______________________________, Notary Public, personally
appeared ________________________, who proved to me on the basis of satisfactory evidence to be the
person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

     I swear under PENALTY OF PERJURY under the laws of the State of California that the foregoing
paragraph is true and correct.

     WITNESS my hand and official seal.

     Signature ________________________                    
                            
                            
                            [SEAL]

30

 

EXHIBIT “A”

LEGAL DESCRIPTION

LEASEHOLD INTEREST IN AND TO LOT 1, PACIFIC SUNWEAR, AMENDED 1ST PLAT A SUBDIVISION IN THE CITY OF
OLATHE, JOHNSON COUNTY, KANSAS.

APN: DP557300000001

31

 

EXHIBIT “B”

PERMITTED EXCEPTIONS

     1. Taxes and assessments for the year 2010 and subsequent years, none now due and payable.

     2. Easements, restrictions and setback lines as per plat, recorded in Plat Book 121, Page 48,
Book 200610, Page 000560 and Book 200704, Page 004309.

     3. An easement granted to Cities Services Gas Company in the document recorded in Book of
Misc. 35, Page 10, partially disclaimed in Volume 1989, Page 853 of Official Records.

     4. Terms and conditions of the Development Agreement by and between Board of Johnson County
Commission, to Alan W. Stevens and Theresa A. Black, husband and wife, as evidenced by the document
filed August 1, 2001 in Book 7197, Page 630.

     5. Terms and conditions of the Sewer District Agreement and Covenants by and between Board of
Johnson County Commission, to Alan W. Stevens and Theresa A. Black, husband and wife, as evidenced
by the document filed August 1, 2001 in Book 7197, Page 646.

     6. An easement granted to Kansas City Power & Light Company in the document recorded in Book
7283, Page 209 of Official Records.

     7. Sanitary Sewer Easement granted to the City of Olathe, Kansas filed September 13, 2005, in
Book 200509, Page 004235.

     8. An easement for Kansas City Power & Light Company in the document recorded in Book 200702,
Page 004585 of Official Records.

     9. A document entitled “Statement of Planned Zoning by City of Olathe” recorded in Book
200609, Page 000239 of Official Records.

     10. A document entitled “Main Extension Petition and Agreement” creating a benefit area
recorded in Book 200705, Page 011197 of Official Records.

     11. Permanent Sewer Easement granted to Sun Life Assurance Company of Canada in the document
recorded October 8, 2007 in Book 200710, Page 002364 of Official Records.

Corrected Permanent Sewer Easement to Sun Life Assurance Company of Canada recorded May 22, 2008 in
Book 200805, Page 006991.

     12. The following matters disclosed by an ALTA/ACSM survey made by George Butler Associates,
Inc. on July 16, 2010, designated Job No. 12253: None

32

 

     13. Terms and provisions of Lease Agreement with purchase rights and options dated July 1,
2007, by and between City of Olathe, Kansas, a municipal corporation, and Pacific Sunwear Stores
Corp., a California corporation, notice of which is given by Memorandum of Lease Agreement dated
July 17, 2007, recorded August 20, 2007, in Book 200708, Page 006496, as amended and subordinated
by Subjection of Fee To Mortgage Instrument, Modification to Mortgage, Amendment to Lease Agreement
and Subordination of Bond Documents recorded _________, in Book ___, Page ___.

     Assignment of Lease Agreement to U.S. Bank National Association, as Trustee, recorded August
20, 2007, in Book 200708, Page 006497.

     14. Terms and provisions of Trust Indenture dated as of July 1, 2007, by and between City of
Olathe, Kansas and U.S. Bank National Association, as Trustee, as subordinated by Subjection of Fee
To Mortgage Instrument, Modification to Mortgage, Amendment to Lease Agreement and Subordination of
Bond Documents recorded _________, in Book ___, Page ___.

33

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