Document:

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                                                                    EXHIBIT 10.1

                                                                  EXECUTION COPY

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                             CITY OF OLATHE, KANSAS

                                       AND

                         U.S. BANK NATIONAL ASSOCIATION,
                                   AS TRUSTEE

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

                                 TRUST INDENTURE

                            DATED AS OF JULY 1, 2007

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

                                  RELATING TO:

                                   $24,500,000
                      (AGGREGATE MAXIMUM PRINCIPAL AMOUNT)
                             CITY OF OLATHE, KANSAS
                            INDUSTRIAL REVENUE BONDS
                                (PACSUN PROJECT)
                                   SERIES 2007

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                                TRUST INDENTURE

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>                                                                                                      Page
<S>                                                                                                            <C>
                  Parties ....................................................................................... 1
                  Recitals ...................................................................................... 1
                  Granting Clauses .............................................................................. 1

                                                     ARTICLE I

                                                    DEFINITIONS

Section 101.      Definitions of Words and Terms..................................................................3
Section 102.      Rules of Interpretation.........................................................................7

                                                    ARTICLE II

                                                     THE BONDS

Section 201.      Title and Amount of Bonds.......................................................................7
Section 202.      Nature of Obligation............................................................................7
Section 203.      Denomination, Number and Dating of Bonds........................................................8
Section 204.      Method and Place of Payment of Bonds............................................................8
Section 205.      Execution and Authentication of Bonds...........................................................9
Section 206.      Registration, Transfer and Exchange of Bonds....................................................9
Section 207.      Persons Deemed Owners of Bonds.................................................................10
Section 208.      Authorization of the Bonds.....................................................................10
Section 209.      Authorization of Additional Bonds..............................................................11
Section 210.      Mutilated, Lost, Stolen or Destroyed Bonds.....................................................12
Section 211.      Cancellation and Destruction of Bonds Upon Payment.............................................12

                                                    ARTICLE III

                                                REDEMPTION OF BONDS

Section 301.      Redemption of Bonds Generally..................................................................12
Section 302.      Redemption of Bonds............................................................................12
Section 303.      Effect of Call for Redemption..................................................................12
Section 304.      Notice of Redemption...........................................................................13

                                                    ARTICLE IV

                                                   FORM OF BONDS

Section 401.      Form Generally.................................................................................13
Section 402.      Form of Bond...................................................................................13
Section 403.      Form of Certificate of Authentication..........................................................21

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<TABLE>
                                                     ARTICLE V

                                     CUSTODY AND APPLICATION OF BOND PROCEEDS

<S>                                                                                                              <C>
Section 501.      Creation of Construction Fund..................................................................22
Section 502.      Deposits into the Construction Fund............................................................22
Section 503.      Disbursements from the Construction Fund.......................................................22
Section 504.      Completion of the Project......................................................................22
Section 505.      Disposition Upon Acceleration..................................................................23

                                                    ARTICLE VI

                                                REVENUES AND FUNDS

Section 601.      Creation of the Bond Fund......................................................................23
Section 602.      Deposits Into the Bond Fund....................................................................23
Section 603.      Application of Moneys in the Bond Fund.........................................................23
Section 604.      Payments Due on Saturdays, Sundays and Holidays................................................24
Section 605.      Nonpresentment of Bonds........................................................................24
Section 606.      Repayment to the Corporation from the Bond Fund................................................24

                                                    ARTICLE VII

                                   SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS

Section 701.      Moneys to be Held in Trust.....................................................................24
Section 702.      Investment of Moneys in Construction Fund and Bond Fund........................................25
Section 703.      Record Keeping.................................................................................25

                                                   ARTICLE VIII

                                         GENERAL COVENANTS AND PROVISIONS

Section 801.      Payment of Principal and Interest..............................................................25
Section 802.      Authority to Execute Indenture and Issue Bonds.................................................26
Section 803.      Performance of Covenants.......................................................................26
Section 804.      Instruments of Further Assurance...............................................................26
Section 805.      Payment of Taxes and Charges...................................................................26
Section 806.      Insurance......................................................................................26
Section 807.      Maintenance and Repair.........................................................................26
Section 808.      Recordings and Filings.........................................................................26
Section 809.      Inspection of Project Books....................................................................27
Section 810.      Enforcement of Rights Under the Lease..........................................................27
Section 811.      Subordination of Indenture to the Lease........................................................27

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                                      (ii)
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<TABLE>
                                                     ARTICLE IX

                                                DEFAULT AND REMEDIES
<S>                                                                                                              <C>
Section 901.      Events of Default; Notice; Opportunity to Cure.................................................27
Section 902.      Acceleration of Maturity in Event of Default...................................................27
Section 903.      Surrender of Possession of Trust Estate; Rights and Duties of Trustee in Possession............28
Section 904.      Appointment of Receivers in Event of Default...................................................28
Section 905.      Exercise of Remedies by the Trustee............................................................28
Section 906.      Limitation on Exercise of Remedies by Bondowners...............................................29
Section 907.      Right of Bondowners to Direct Proceedings......................................................29
Section 908.      Application of Moneys in Event of Default......................................................29
Section 909.      Remedies Cumulative............................................................................30
Section 910.      Waivers of Events of Default...................................................................30

                                                     ARTICLE X

                                                    THE TRUSTEE

Section 1001.     Acceptance of the Trusts.......................................................................31
Section 1002.     Fees, Charges and Expenses of the Trustee......................................................33
Section 1003.     Notice to Bondowners if Default Occurs.........................................................33
Section 1004.     Intervention by the Trustee....................................................................33
Section 1005.     Successor Trustee Upon Merger, Consolidation or Sale...........................................33
Section 1006.     Resignation of Trustee.........................................................................34
Section 1007.     Removal of Trustee.............................................................................34
Section 1008.     Appointment of Successor Trustee...............................................................34
Section 1009.     Vesting of Trusts in Successor Trustee.........................................................34
Section 1010.     Right of Trustee to Pay Taxes and Other Charges................................................34
Section 1011.     Trust Estate May be Vested in Co-trustee.......................................................35
Section 1012.     Annual Accounting..............................................................................35
Section 1013.     Performance of Duties Under the Lease..........................................................35

                                                    ARTICLE XI

                                              SUPPLEMENTAL INDENTURES

Section 1101.     Supplemental Indentures Not Requiring Consent of Bondowners....................................36
Section 1102.     Supplemental Indentures Requiring Consent of Bondowners........................................36
Section 1103.     Corporation's Consent to Supplemental Indentures...............................................37

                                                    ARTICLE XII

                                                SUPPLEMENTAL LEASES

Section 1201.     Supplemental Leases Not Requiring Consent of Bondowners........................................37
Section 1202.     Supplemental Leases Requiring Consent of Bondowners............................................37

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                                     (iii)
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<TABLE>
                                                    ARTICLE XIII

                                      SATISFACTION AND DISCHARGE OF INDENTURE
<S>                                                                                                              <C>
Section 1301.     Satisfaction and Discharge of this Indenture...................................................37
Section 1302.     Bonds Deemed to be Paid........................................................................38

                                                    ARTICLE XIV

                                             MISCELLANEOUS PROVISIONS

Section 1401.     Consents and Other Instruments by Bondowners...................................................39
Section 1402.     Limitation of Rights Under this Indenture......................................................39
Section 1403.     Notices........................................................................................39
Section 1404.     Severability...................................................................................40
Section 1405.     Execution in Counterparts......................................................................40
Section 1406.     Governing Law..................................................................................40
Section 1407.     Electronic Storage.............................................................................40

                  Signatures and Seals
                  Acknowledgments

</TABLE>

                                      (iv)
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                                 TRUST INDENTURE

      THIS TRUST INDENTURE dated as of July 1, 2007 (the "Indenture"), between
the CITY OF OLATHE, KANSAS, a municipal corporation organized and existing under
the laws of the State of Kansas (the "City"), and U.S. BANK NATIONAL
ASSOCIATION, a national banking association duly organized and existing and
authorized to accept and execute trusts of the character herein set forth under
the laws of the United States of America, with its designated corporate trust
office located in Los Angeles, California, as Trustee (the "Trustee");

      WITNESSETH:

      WHEREAS, the City is authorized under the provisions of K.S.A. 12-1740 to
12-1749d, inclusive, as amended (the "Act"), to purchase, acquire, construct,
improve, equip and remodel certain facilities within its jurisdiction for
commercial purposes, and to enter into leases and lease-purchase agreements with
any person, firm or corporation for said facilities, and to issue revenue bonds
for the purpose of paying the cost of any such facilities, and to pledge the
income and revenues to be derived from the operation of such facilities to
secure the payment of the principal of and interest on such bonds;

      WHEREAS, pursuant to the Act, the governing body of the City adopted
Resolution No. 06-1085 on June 6, 2006, expressing the intent of the City to
issue its industrial revenue bonds in one or more series in an aggregate amount
not to exceed $135,000,000 for one or more projects for Waterford Glen, LLC, a
Kansas limited liability company, the first series to be issued in a series of
Industrial Revenue Bonds (PacSun Project), Series 2007 (the "Bonds"), in the
aggregate maximum principal amount of $24,500,000, for the purpose of acquiring,
purchasing, constructing, installing a commercial project, consisting of a
distribution facility, including land, buildings, structures, improvements and
fixtures (the "Project"), and authorizing the City to lease the Project to
Pacific Sunwear Stores Corp., a California corporation (the "Corporation");

      WHEREAS, pursuant to such Resolution and Ordinance No. 07-34 adopted by
the City on May 1, 2007, the City is authorized to execute and deliver this
Indenture for the purpose of issuing and securing the Bonds and to enter into
the Lease Agreement of even date herewith (the "Lease"), with the Corporation
under which the City, as lessor, will acquire, purchase, construct and remodel
the Project and will lease the Project to the Corporation, as lessee, in
consideration of rentals which will be sufficient to pay the principal of and
interest on the Bonds; and

      WHEREAS, all things necessary to make the Bonds, when authenticated by the
Trustee and issued as in this Indenture provided, the valid and legally binding
obligations of the City, and to constitute this Indenture a valid and legally
binding pledge and assignment of the Trust Estate herein made for the security
of the payment of the principal of and interest on the Bonds, have been done and
performed, and the execution and delivery of this Indenture and the execution
and issuance of the Bonds, subject to the terms hereof, have in all respects
been duly authorized;

      NOW, THEREFORE, THIS TRUST INDENTURE WITNESSETH:

                                GRANTING CLAUSES

      That the City, in consideration of the premises, the acceptance by the
Trustee of the trusts hereby created, the purchase and acceptance of the Bonds
by the Owners thereof, and of other good and valuable

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consideration, the receipt of which is hereby acknowledged, and in order to
secure the payment of the principal of and interest on all of the Bonds issued
and outstanding under this Indenture from time to time according to their tenor
and effect, and to secure the performance and observance by the City of all the
covenants, agreements and conditions herein and in the Bonds contained, does
hereby pledge and assign to the Trustee and its successors and assigns forever
(subject to the qualifications set forth herein), the property described in
paragraphs (a), (b) and (c) below (said property being herein referred to as the
"Trust Estate"), to-wit:

            (a) All right, title and interest in and to the Project together
      with the tenements, hereditaments, appurtenances, rights, privileges and
      immunities thereunto belonging or appertaining;

            (b) All right, title and interest of the City in, to and under the
      Lease, and all rents, revenues and receipts derived by the City from the
      Project including, without limitation, all rentals and other amounts to be
      received by the City and paid by the Corporation under and pursuant to and
      subject to the provisions of the Lease; and

            (c) All moneys and securities from time to time held by the Trustee
      under the terms of this Indenture, and any and all other real or personal
      property of every kind and nature from time to time hereafter, by delivery
      or by writing of any kind, pledged, assigned or transferred as and for
      additional security hereunder by the City or by anyone in its behalf, or
      with its written consent, to the Trustee, which is hereby authorized to
      receive any and all such property at any and all times and to hold and
      apply the same subject to the terms hereof.

      TO HAVE AND TO HOLD, all and singular, the Trust Estate with all rights
and privileges hereby pledged and assigned or agreed or intended so to be, to
the Trustee and its successors and assigns forever;

      IN TRUST NEVERTHELESS, upon the terms and subject to the conditions herein
set forth, for the equal and proportionate benefit, protection and security of
all Owners from time to time of the Bonds outstanding under this Indenture,
without preference, priority or distinction as to lien or otherwise of any of
the Bonds over any other of the Bonds except as expressly provided in or
permitted by this Indenture;

      PROVIDED, HOWEVER, that if the City shall well and truly pay, or cause to
be paid, the principal of and interest on the Bonds, at the time and in the
manner mentioned in the Bonds, according to the true intent and meaning thereof,
or shall provide for the payment thereof (as provided in ARTICLE XIII hereof),
and shall pay or cause to be paid to the Trustee all other sums of money due or
to become due to it in accordance with the terms and provisions hereof, then
upon such final payments this Indenture and the rights thereby granted shall
cease, determine and be void; otherwise, this Indenture shall be and remain in
full force and effect.

      THIS INDENTURE FURTHER WITNESSETH, and it is hereby expressly declared,
covenanted and agreed by and between the parties hereto, that all Bonds issued
and secured hereunder are to be issued, authenticated and delivered and that all
the Trust Estate is to be held and applied under, upon and subject to the terms,
conditions, stipulations, covenants, agreements, trusts, uses and purposes as
hereinafter expressed, and the City does hereby agree and covenant with the
Trustee and with the respective Owners from time to time of the Bonds or
coupons, as follows:

                                      -2-
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                                    ARTICLE I

                                   DEFINITIONS

      SECTION 101. DEFINITIONS OF WORDS AND TERMS. In addition to words and
terms defined in SECTION 1.1 of the Lease, which definitions shall be deemed to
be incorporated herein, and terms defined elsewhere in this Indenture, the
following words and terms as used in this Indenture shall have the following
meanings, unless some other meaning is plainly intended:

      "ACT" means K.S.A. 12-1740 to 12-1749d, inclusive, as amended.

      "ADDITIONAL BONDS" means any Bonds issued pursuant to SECTION 209 of this
Indenture.

      "AUTHORIZED CITY REPRESENTATIVE" means the City Manager, Director of
Strategic Financial Management, City Clerk or such other person at the time
designated to act on behalf of the City as evidenced by a written certificate
furnished to the Corporation and the Trustee containing the specimen signature
of such person and signed on behalf of the City by its Mayor. Such certificate
may designate an alternate or alternates each of whom shall be entitled to
perform all duties of the Authorized City Representative.

      "AUTHORIZED CORPORATION REPRESENTATIVE" means the person at the time
designated to act on behalf of the Corporation as evidenced by written
certificate furnished to the City and the Trustee containing the specimen
signature of such person and signed on behalf of the Corporation by authorized
officers. Such certificate may designate an alternate or alternates each of whom
shall be entitled to perform all duties of the Authorized Corporation
Representative.

      "BOND" or "BONDS" means the Industrial Revenue Bonds (PacSun Project),
Series 2007, in the aggregate maximum principal amount of $24,500,000, issued
pursuant to SECTION 208 of this Indenture and any Additional Bonds authenticated
and delivered under and pursuant to this Indenture.

      "BOND FUND" means "The City of Olathe, Kansas, Industrial Revenue Bond
Fund - PacSun Project, Series 2007" created in SECTION 601 of this Indenture.

      "BONDOWNER" means the registered owner of any Bond.

      "BOND PURCHASE AGREEMENT" means the agreement by that name with respect to
the Bonds by and among the City, the Corporation and the purchaser identified
therein.

      "BUSINESS DAY" shall mean a day which is not (a) a Saturday, Sunday or any
other day on which banking institutions in New York, New York, or the city or
cities in which the corporate trust office of the Trustee is located are
required or authorized to close, or (b) a day on which the New York Stock
Exchange is closed.

      "CITY" means the City of Olathe, Kansas, a municipal corporation organized
and existing under the laws of the State of Kansas, and its successors and
assigns.

      "CORPORATION" means Pacific Sunwear Stores Corp., a California
corporation, and its successors or assigns.

                                      -3-
<PAGE>

      "COMPLETION DATE" means the date of execution of the certificate required
pursuant to SECTION 504 hereof.

      "CONSTRUCTION FUND" means "The City of Olathe, Kansas, Construction Fund -
PacSun Project, Series 2007" created in SECTION 501 of this Indenture.

      "CUMULATIVE OUTSTANDING PRINCIPAL AMOUNT" means an amount equal to the
aggregate of all amounts paid into the Construction Fund in accordance with the
provisions of this Indenture, the Bond Purchase Agreement and the Lease, as
reflected in the bond registration records maintained by the Trustee or in the
Table of Cumulative Outstanding Principal Amount set forth in the form of Bond
in SECTION 402 hereof.

      "EVENT OF DEFAULT" means any Event of Default as defined in SECTION 901
hereof.

      "GOVERNMENT SECURITIES" means direct obligations of, or obligations the
payment of principal of and interest on which are unconditionally guaranteed by,
the United States of America.

      "INDENTURE" means this Trust Indenture, as from time to time amended and
supplemented by Supplemental Indentures in accordance with the provisions of
ARTICLE XI hereof.

      "INVESTMENT SECURITIES" means any of the following securities:

            (a) any bonds or other obligations which as to principal and
      interest constitute direct obligations of, or are unconditionally
      guaranteed by, the United States of America, including obligations of any
      of the federal agencies set forth in clause (b) below to the extent they
      are unconditionally guaranteed by the United States of America;

            (b) obligations of the Federal National Mortgage Association, the
      Government National Mortgage Association, the Federal Financing Bank, the
      Federal Intermediate Credit Corporation, Federal Banks for Cooperatives,
      Federal Land Banks, Federal Home Loan Banks, Farmers Home Administration
      and Federal Home Loan Mortgage Association;

            (c) direct and general obligations of any state of the United States
      of America, to the payment of the principal of and interest on which the
      full faith and credit of such state is pledged, provided that at the time
      of their purchase under this Indenture such obligations are rated in
      either of the two highest rating categories by a nationally-recognized
      bond rating agency;

            (d) certificates of deposit, whether negotiable or nonnegotiable,
      issued by any financial institution organized under the laws of any state
      of the United States of America or under the laws of the United States of
      America (including the Trustee), provided that such certificates of
      deposit shall be either (1) continuously and fully insured by the Federal
      Deposit Insurance Corporation, or (2) continuously and fully secured by
      such securities as are described above in clauses (a) through (c),
      inclusive, which shall have a market value (exclusive of accrued interest)
      at all times at least equal to the principal amount of such certificates
      of deposit and shall be lodged with the Trustee or a custodian bank, trust
      company or national banking association. The bank, trust company or
      national banking association holding each such certificate of deposit
      required to be so secured shall furnish the Trustee written evidence
      satisfactory to it that the aggregate market value of all such obligations
      securing each such certificate of deposit will at all times be an amount
      at least equal to the principal

                                      -4-
<PAGE>

      amount of each such certificate of deposit and the Trustee shall be
      entitled to rely on each such undertaking;

            (e) Shares of a fund registered under the Investment Company Act of
      1940, as amended, whose shares are registered under the Securities Act of
      1933, as amended, having assets of at least $100,000,000, whose only
      assets are obligations described in (a) above, and which shares, at the
      time of purchase, are rated by Standard & Poor's and Moody's in one of the
      two highest rating categories (without regard to any refinements or
      gradation of rating category by numerical modifier or otherwise) assigned
      by such rating agencies for obligations of that nature; and

            (f) Any other investment approved in writing by the Owner of the
      Bonds.

      "LEASE" means the Lease Agreement dated as of July 1, 2007, between the
City, as Lessor, and the Corporation, as Lessee, as from time to time amended
and supplemented by Supplemental Leases in accordance with the provisions
thereof and of ARTICLE XII of this Indenture.

      "OUTSTANDING," when used with reference to Bonds, means, as of a
particular date, all Bonds theretofore authenticated and delivered, except:

            (a) Bonds theretofore cancelled by the Trustee or delivered to the
      Trustee for cancellation;

            (b) Bonds deemed to be paid in accordance with the provisions of
      SECTION 1302 hereof; and

            (c) Bonds in exchange for or in lieu of which other Bonds have been
      authenticated and delivered pursuant to this Indenture.

      "OWNER" shall have the same meaning as Bondowner.

      "PAYING AGENT" means the Trustee and any other bank or trust company
designated by this Indenture upon written notice to the Corporation as paying
agent for the Bonds at which the principal of or interest on the Bonds shall be
payable.

      "PROJECT" means the project referred to in the recitals of this Indenture,
including the Project Site and the Project Improvements and all additions,
modifications, improvements, replacements and substitutions made to the Project
pursuant to the Lease as they may at any time exist, exclusive of Excluded
Property.

      "PROJECT COSTS" means all costs of acquisition, purchase, construction,
improvement, financing and remodeling of the Project, including, without
limitation, the following:

            (a) all costs and expenses necessary or incident to the acquisition
      of the Project Site and any Project Improvements located thereon at the
      execution of the Lease and which the Corporation conveys to the City;

            (b) fees and expenses of architects, appraisers, surveyors and
      engineers for estimates, surveys, soil borings and soil tests and other
      preliminary investigations and items necessary to the commencement of
      acquisition, purchase, construction, improvement and remodeling,
      preparation of

                                      -5-
<PAGE>

      plans, drawings and specifications and supervision of construction and
      renovation, as well as for the performance of all other duties of
      architects, appraisers, surveyors and engineers in relation to the
      acquisition, purchase, construction, improvement and remodeling of the
      Project or the issuance of the Bonds;

            (c) all costs and expenses of every nature incurred in acquisition,
      purchase, construction, improvement and remodeling the Project
      Improvements and otherwise improving the Project Site, including the
      actual cost of labor, materials and furnishings as payable to contractors,
      builders and materialmen in connection with the acquisition, purchase,
      construction, improvement and remodeling of the Project;

            (d) interest accruing on the Bonds during the period of the
      acquisition, purchase, construction, improvement and remodeling of the
      Project;

            (e) the cost of the title insurance policies and the cost of any
      insurance maintained during the construction period in accordance with
      ARTICLE VII of the Lease, respectively;

            (f) reasonable expenses of administration, supervision and
      inspection properly chargeable to the Project, underwriting expenses,
      legal fees and expenses, fees and expenses of accountants and other
      consultants, publication and printing expenses, and initial fees and
      expenses of the Trustee to the extent that said fees and expenses are
      necessary or incident to the issuance and sale of the Bonds or the
      acquisition, purchase, construction, improvement and remodeling of the
      Project;

            (g) all other items of expense not elsewhere specified in this
      definition as may be necessary or incident to: (1) the authorization,
      issuance and sale of the Bonds; (2) the acquisition, purchase,
      construction, improvement and remodeling of the Project; and (3) the
      financing thereof; and

            (h) reimbursement to the Corporation or those acting for it for any
      of the above enumerated costs and expenses incurred and paid by them
      before or after the execution of the Lease;

provided, however, the Project Costs shall not include any of the foregoing
items if such item was paid or incurred prior to June 6, 2006, with the
following two exceptions (i) costs and expenses relating to architectural and
engineering services for the Project constitute Project Costs within the meaning
of this definition regardless of the date such costs were paid to the extent
such costs are properly capitalizable in accordance with generally accepted
accounting principles, and (ii) costs and expenses necessary or incidental to
the acquisition by the City of the Project Site constitute Project Costs within
the meaning of this definition regardless of the date such costs were paid.

      "REFUNDING BONDS" shall have the meaning set forth in SECTION 209 hereof.

      "SUPPLEMENTAL INDENTURE" means any indenture supplemental or amendatory to
this Indenture entered into by the City and the Trustee pursuant to ARTICLE XI
hereof.

      "SUPPLEMENTAL LEASE" means any supplement or amendment to the Lease
entered into pursuant to ARTICLE XII hereof.

                                      -6-
<PAGE>

      "TAX ABATEMENT AGREEMENT" means the Performance Agreement dated as of July
1, 2007, by and between the City and the Corporation.

      "TRUST ESTATE" means the Trust Estate described in the Granting Clauses of
this Indenture.

      "TRUSTEE" means U.S. Bank National Association in the City of Los Angeles,
California, a national banking association duly organized and existing under the
laws of the United States of America, and its successor or successors and any
other corporation which at the time may be substituted in its place pursuant to
and at the time serving as Trustee under this Indenture.

      SECTION 102. RULES OF INTERPRETATION.

      (a) Unless the context shall otherwise indicate, the words importing the
singular number shall include the plural and vice versa, and words importing
persons shall include firms, associations and corporations, including public
bodies, as well as natural persons.

      (b) Wherever in this Indenture it is provided that either party shall or
will make any payment or perform or refrain from performing any act or
obligation, each such provision shall, even though not so expressed, be
construed as an express covenant to make such payment or to perform, or not to
perform, as the case may be, such act or obligation.

      (c) All references in this instrument to designated "Articles," "Sections"
and other subdivisions are, unless otherwise specified, to the designated
Articles, Sections and subdivisions of this instrument as originally executed.
The words "herein," "hereof," "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article, Section or
subdivision.

      (d) The Table of Contents and the Article and Section headings of this
Indenture shall not be treated as a part of this Indenture or as affecting the
true meaning of the provisions hereof.

                                   ARTICLE II

                                    THE BONDS

      SECTION 201. TITLE AND AMOUNT OF BONDS. No Bonds may be issued under this
Indenture except in accordance with the provisions of this Article. The Bonds
authorized to be issued under this Indenture shall be designated as "City of
Olathe, Kansas Industrial Revenue Bonds (PacSun Project), Series 2007." The
maximum total principal amount of Bonds that may be issued hereunder is hereby
expressly limited to $24,500,000, plus the principal amount of any Additional
Bonds.

      SECTION 202. NATURE OF OBLIGATION. The Bonds and the interest thereon
shall be special obligations of the City payable solely out of the rents,
revenues and receipts derived by the City from the Project and not from any
other fund or source of the City, and are secured by a pledge and assignment of
the Trust Estate to the Trustee in favor of the Owners of the Bonds, as provided
in this Indenture. The Bonds and the interest thereon shall not constitute
general obligations of the City or the State of Kansas, and neither the City nor
said State shall be liable thereon, and the Bonds shall not constitute an
indebtedness within the meaning of any constitutional or statutory debt
limitation or restriction, and are not payable in any manner by taxation.

                                      -7-
<PAGE>

      SECTION 203. DENOMINATION, NUMBER AND DATING OF BONDS.

      (a) The Bonds shall be initially issuable in the form of one fully
registered Bond without coupons in the maximum principal denomination of up to
$24,500,000. The Bond shall be substantially in the form hereinafter set forth
in ARTICLE IV of this Indenture.

      (b) The Bond shall be dated by the Trustee as of the date of initial
delivery thereof as provided herein. If the Bond is at any time thereafter
transferred, any Bond replacing such Bond shall be dated as of the date of
authentication thereof.

      SECTION 204. METHOD AND PLACE OF PAYMENT OF BONDS.

      (a) The principal of and interest on the Bonds shall be payable in any
coin or currency of the United States of America which on the respective dates
of payment thereof is legal tender for payment of public and private debts.

      (b) Payment of the principal of the Bonds shall be made upon the
presentation and surrender of such Bond at the corporate trust office of any
Paying Agent named in the Bond; PROVIDED, that so long as the Corporation is the
sole Bondowner, the Trustee shall make payments of principal on the Bonds by
internal bank transfer or by wire transfer to an account at a commercial bank or
savings institution designated by such Bondowner and located in the continental
United States; PROVIDED, FURTHER, that upon any payment by internal bank
transfer or by wire transfer of principal on the Bonds, the Trustee shall record
the amount of such principal payment on the registration books for the Bonds
maintained by the Trustee on behalf of the City. If the Bonds are presented to
the Trustee together with such payment, the Trustee may enter the amount of such
principal payment on the Table of Cumulative Outstanding Principal Amount on the
Bonds in the manner provided by SECTION 402 hereof. Notwithstanding the
foregoing, the registration books maintained by the Trustee shall be the
official record of the Cumulative Outstanding Principal Amount on the Bonds at
any time, and the Bondowner is not required to present the Bonds for action by
the Trustee, as bond registrar, with each payment of principal on the Bonds.
Payment of the interest on the Bonds shall be made by the Trustee on each
interest payment date to the person appearing on the registration books of the
City hereinafter provided for as the registered owner thereof on the fifteenth
day (whether or not a Business Day) of the calendar month next preceding such
interest payment date by check or draft mailed to such registered owner at such
owner's address as it appears on such registration books. In the event that the
Corporation is the sole Bondowner, the Trustee is authorized to make interest
payments on the Bonds by internal bank transfer or by wire transfer to an
account at a commercial bank or savings institution designated by such Bondowner
and located in the continental United States. In addition, at the written
request of any registered owner of Bonds in the aggregate principal amount of at
least $1,000,000, the principal and interest on the Bonds shall be paid by
electronic transfer to such owner upon written notice to the Trustee from such
owner containing the electronic transfer instructions (which shall be in the
continental United States) to which such owner wishes to have such transfer
directed and such written notice is given by such owner to the Trustee not later
than the fifteenth day (whether or not a Business Day) of the calendar month
next preceding such interest payment date. Any such written notice for
electronic transfer shall be signed by such owner and shall include the name of
the bank, its address, its ABA routing number and the name, number and contact
name related to such owner's account at such bank to which the payment is to be
credited.

                                      -8-
<PAGE>

      SECTION 205. EXECUTION AND AUTHENTICATION OF BONDS.

      (a) The Bonds shall be executed on behalf of the City by the manual or
facsimile signature of its Mayor and attested by the manual or facsimile
signature of its City Clerk, and shall have the corporate seal of the City
affixed thereto or imprinted thereon. In case any officer whose signature or
facsimile thereof appears on the Bonds shall cease to be such officer before the
delivery of the Bonds, such signature or facsimile thereof shall nevertheless be
valid and sufficient for all purposes, the same as if such person had remained
in office until delivery. Any Bond may be signed by such persons as at the
actual time of the execution of such Bond shall be the proper officers to sign
such Bond although at the date of such Bond such persons may not have been such
officers.

      (b) The Bonds shall have endorsed thereon a Certificate of Authentication
substantially in the form set forth in SECTION 403 hereof, which shall be
manually executed by the Trustee. No Bonds shall be entitled to any security or
benefit under this Indenture or shall be valid or obligatory for any purposes
unless and until such Certificate of Authentication shall have been duly
executed by the Trustee. Such executed Certificate of Authentication upon any
Bond shall be conclusive evidence that such Bond has been duly authenticated and
delivered under this Indenture. The Certificate of Authentication on any Bond
shall be deemed to have been duly executed if signed by any authorized officer
or employee of the Trustee.

      SECTION 206. REGISTRATION, TRANSFER AND EXCHANGE OF BONDS.

      (a) The Trustee shall keep books for the registration and for the transfer
of Bonds as provided in this Indenture.

      (b) The Bonds may be transferred only upon the books kept for the
registration and transfer of Bonds upon surrender thereof to the Trustee duly
endorsed for transfer or accompanied by an assignment duly executed by the
registered owner or such owner's attorney or legal representative, in such form
as shall be satisfactory to the Trustee. The Bonds have not been registered
under the Securities Act of 1933, as amended, or any state securities law, and
the Bonds may not be transferred unless (i) the City consents in writing to such
transfer, and (ii) and the City and the Trustee are furnished a written legal
opinion from counsel acceptable to the City and the Corporation, to the effect
that such transfer is exempt from the registration requirements of the
Securities Act of 1933, as amended, and any applicable state securities law. The
Bonds may be transferred to any successor to the Corporation or any entity owned
or under common ownership with the Corporation, as Lessee under the Lease
without the necessity of obtaining the City's consent or such an opinion. In
connection with any such transfer of the Bonds the Trustee shall receive an
executed representation letter signed by the proposed assignee containing
substantially the same representations contained in the representation letter
delivered to the Trustee from the Owner upon the initial issuance of the Bonds.
Upon any such transfer, the City shall execute and the Trustee shall
authenticate and deliver in exchange for such Bonds a new fully registered Bond
or Bonds, registered in the name of the transferee, of any denomination or
denominations authorized by this Indenture, in an aggregate principal amount
equal to the outstanding principal amount of such Bonds, of the same maturity
and bearing interest at the same rate.

      (c) In all cases in which Bonds shall be exchanged or transferred
hereunder the provisions of any legend restrictions on the Bonds shall be
complied with and the City shall execute and the Trustee shall authenticate and
deliver at the earliest practicable time Bonds in accordance with the provisions
of this Indenture. All Bonds surrendered in any such exchange or transfer shall
forthwith be cancelled by the Trustee. The City or the Trustee may make a
reasonable charge for every such exchange or transfer of Bonds sufficient to
reimburse it for any tax, fee or other governmental charge required to be paid
with

                                      -9-
<PAGE>

respect to such exchange or transfer, and such charge shall be paid before any
such new Bond shall be delivered. Neither the City nor the Trustee shall be
required to make any such exchange or transfer of Bonds during the 15 days
immediately preceding an interest payment date on the Bonds or, in the case of
any proposed redemption of Bonds, during the 15 days immediately preceding the
selection of Bonds for such redemption or after such Bonds or any portion
thereof have been selected for redemption.

      SECTION 207. PERSONS DEEMED OWNERS OF BONDS. As to any Bond, the person in
whose name the same shall be registered as shown on the bond registration books
required by SECTION 206 hereof shall be deemed and regarded as the absolute
owner thereof for all purposes, and payment of or on account of the principal of
and interest on any such Bond shall be made only to or upon the order of the
registered owner thereof or a legal representative thereof. All such payments
shall be valid and effectual to satisfy and discharge the liability upon such
bond, including the interest thereon, to the extent of the sum or sums so paid.

      SECTION 208. AUTHORIZATION OF THE BONDS.

      (a) There shall be issued and secured by this Indenture a series of Bonds
in the aggregate maximum principal amount of $24,500,000 for the purpose of
providing funds for paying the costs of the Project, which Bonds shall be
designated "City of Olathe, Kansas Industrial Revenue Bonds (PacSun Project),
Series 2007." The Bonds shall be dated as provided in SECTION 203(b) hereof,
shall become due on January 1, 2018 (subject to prior redemption as hereinafter
provided in ARTICLE III) and shall bear interest as specified in SECTION 208(e)
hereof, payable on the dates specified in SECTION 208(e) hereof.

      (b) The Trustee is hereby designated as the City's Paying Agent for the
payment of the principal of and interest on the Bonds.

      (c) The Bonds shall be executed without material variance from the form
and in the manner set forth in ARTICLE IV hereof and delivered to the Trustee
for authentication, but prior to or simultaneously with the authentication and
delivery of the Bonds by the Trustee, there shall be filed with the Trustee the
following:

            (1) An original or certified copy of Ordinance No. 07-34 passed by
      the governing body of the City on May 1, 2007, authorizing the issuance of
      the Bonds and the execution of this Indenture and the Lease;

            (2) An original executed counterpart of this Indenture;

            (3) An original executed counterpart of the Lease;

            (4) A request and authorization to the Trustee on behalf of the
      City, executed by the Authorized City Representative, to authenticate the
      Bonds and deliver the same to the purchaser identified in the Bond
      Purchase Agreement upon payment to the Trustee, for the account of the
      City, of the purchase price thereof specified in the Bond Purchase
      Agreement. The Trustee shall be entitled to conclusively rely upon such
      request and authorization as to names of the purchaser and the amount of
      such purchase price;

            (5) An opinion of counsel nationally recognized on the subject of
      municipal bonds to the effect that the Bonds constitute valid and legally
      binding limited and special revenue obligations of the City; and

                                      -10-
<PAGE>

            (6) Such other certificates, statements, receipts and documents as
      the City shall reasonably require for the delivery of the Bonds.

      (d) When the documents specified in SUBSECTION (c) of this Section shall
have been filed with the Trustee, and when the Bonds shall have been executed
and authenticated as required by this Indenture, the Trustee shall deliver the
Bonds to or upon the order of the purchaser thereof, but only upon payment to
the Trustee of the purchase price of the Bonds, as specified in the Bond
Purchase Agreement. The proceeds of the sale of the Bonds shall be immediately
paid over to the Trustee, and the Trustee shall deposit and apply such proceeds
as provided in ARTICLE V hereof.

      (e) The Bonds shall bear interest at the rate of 7% per annum on the
Cumulative Outstanding Principal Amount of the Bonds, and such interest shall be
payable in arrears on each January 1 and July 1, commencing on January 1, 2008,
and continuing thereafter until the said Cumulative Outstanding Principal Amount
is paid in full. Interest shall be calculated on the basis of a year of 360 days
consisting of twelve months of 30 days each. Principal shall be payable at
maturity unless redeemed prior to said date in accordance with ARTICLE III.

      SECTION 209. AUTHORIZATION OF ADDITIONAL BONDS.

      (a) Additional Bonds may be issued under and equally and ratably secured
by this Indenture on a parity with the Bonds, and any other Additional Bonds
which remain Outstanding after the issuance of such Additional Bonds, at any
time or from time to time, upon compliance with the conditions hereinafter
provided in this Section, for the purpose of providing funds for (i) refunding
all or part of the Bonds then Outstanding, including the payment of any premium
thereon and interest to accrue to the designated redemption date and any
expenses in connection with such refunding, (ii) to provide funds to pay the
costs of completing the Project, (iii) to provide funds to pay all or any part
of the costs of repairing, replacing or restoring the Project in the event of
damage, destruction or condemnation thereto or thereof, and (iv) to provide
funds to pay all or any part of the costs of acquisition, purchase,
construction, improvement and remodeling to the Project as the Corporation may
deem necessary or desirable. Additional Bonds issued for purposes described in
clause (i) above shall also be referred to as "Refunding Bonds."

      (b) Before any Additional Bonds shall be issued under the provisions of
this Section, the City shall (i) pass an ordinance authorizing the issuance of
such Additional Bonds, fixing the amount thereof and describing the Bonds to be
refunded, authorizing the City to enter into a Supplemental Indenture for the
purpose of issuing such Additional Bonds and, if required, authorizing the City
to enter into a Supplemental Lease with the Corporation, and (ii) except in the
case of Refunding Bonds, for which consent shall not be required, obtain the
written consent to the issuance of the proposed Additional Bonds from the Owners
of 100% of the Bonds Outstanding as reflected on the bond registration books
maintained by the Trustee immediately preceding the issuance of such Additional
Bonds.

      (c) Such Additional Bonds shall be dated, shall be stated to mature in
such year or years, shall bear interest at such rate or rates not exceeding the
maximum rate then permitted by law, and shall be redeemable at such times and
prices, all as may be provided by the Supplemental Indenture authorizing the
issuance of such Additional Bonds. Except as to any difference in the date, the
maturity or maturities, the rate or rates of interest or the provisions for
redemptions, such Additional Bonds shall be on a parity with and shall be
entitled to the same benefit and security of this Indenture as the Bonds, and
any other Additional Bonds which remain Outstanding after the issuance of such
Additional Bonds.

                                      -11-
<PAGE>

      (d) Except as provided in this Section, the City will not otherwise issue
any obligations on a parity with the Bonds, but the City may, at the written
request of the Corporation, issue other obligations specifically subordinate and
junior to the Bonds, without the written consent of all or any of the Owners.

      SECTION 210. MUTILATED, LOST, STOLEN OR DESTROYED BONDS. In the event any
Bond shall become mutilated, or be lost, stolen or destroyed, the City shall
execute and the Trustee shall authenticate and deliver a new Bond of like
series, date and tenor as the Bond mutilated lost, stolen or destroyed; provided
that, in the case of any mutilated Bond, such mutilated Bond shall first be
surrendered to the Trustee, and in the case of any lost, stolen or destroyed
Bond, there shall be first furnished to the City and the Trustee evidence of
such loss, theft or destruction satisfactory to the City and the Trustee,
together with indemnity satisfactory to them. In the event any such Bond shall
have matured, instead of issuing a substitute Bond, the City and the Trustee may
require the payment of an amount sufficient to reimburse the City and the
Trustee for any tax or other governmental charge that may be imposed in relation
thereto and any other reasonable fees and expenses incurred in connection
therewith.

      SECTION 211. CANCELLATION AND DESTRUCTION OF BONDS UPON PAYMENT.

      (a) All Bonds which have been paid or redeemed or which the Trustee has
purchased or which have otherwise been surrendered to the Trustee under this
Indenture, either at or before maturity shall be cancelled by the Trustee
immediately upon the payment, redemption or purchase of such Bonds and the
surrender thereof to the Trustee.

      (b) All Bonds cancelled under any of the provisions of this Indenture
shall be destroyed by the Trustee. The Trustee shall execute a certificate in
triplicate describing the Bonds so destroyed, and shall file executed
counterparts of such certificate with the City and the Corporation.

                                   ARTICLE III

                               REDEMPTION OF BONDS

      SECTION 301. REDEMPTION OF BONDS GENERALLY. The Bonds shall be subject to
redemption prior to maturity in accordance with the terms and provisions set
forth in this Article. Additional Bonds shall be subject to redemption prior to
maturity in accordance with the terms and provisions contained in this Article
and as may be specified in the Supplemental Indenture authorizing such
Additional Bonds.

      SECTION 302. REDEMPTION OF BONDS. The Bonds shall be subject to redemption
and payment in whole or in part, as follows:

            (a) At any time prior to the stated maturity thereof, by the City,
      at the option of and upon written instructions from the Corporation, at a
      price equal to the principal amount thereof, plus accrued interest
      thereon, without premium or penalty, to the date of payment.

            (b) At any time prior to the stated maturity thereof, to the extent
      amounts are deposited into the Bond Fund in accordance with SECTION 602
      hereof, at a price equal to the principal amount thereof, plus accrued
      interest thereon, without premium or penalty, to the date of payment.

      SECTION 303. EFFECT OF CALL FOR REDEMPTION. Prior to or on the date fixed
for redemption, funds or Government Securities shall be placed with the Trustee
which are sufficient to pay the Bonds called for

                                      -12-
<PAGE>

redemption and accrued interest thereon, if any, to the redemption date. Upon
the happening of the above conditions and appropriate written notice having been
given, the Bonds or the portions of the principal amount of Bonds thus called
for redemption shall cease to bear interest on the specified redemption date,
and shall no longer be entitled to the protection, benefit or security of this
Indenture and shall not be deemed to be Outstanding under the provisions of this
Indenture.

      SECTION 304. NOTICE OF REDEMPTION. In the event the Bonds are to be called
for redemption as provided in SECTION 302(a) or (b) hereof, the Corporation
shall deliver written notice to the City and the Trustee that it has elected to
redeem all or a portion of the Bonds in accordance with SECTION 302(a) or (b)
hereof at least ten days prior to the scheduled redemption date. The Trustee
shall then deliver written notice to the Owner at least five days prior to the
scheduled redemption date by first class mail stating the date upon which the
Bonds will be redeemed and paid.

                                   ARTICLE IV

                                  FORM OF BONDS

      SECTION 401. FORM GENERALLY. The Bonds and the Trustee's Certificate of
Authentication to be endorsed thereon shall be issued in substantially the form
set forth in this article. Additional Bonds and the Trustee's Certificate of
Authentication to be endorsed thereon shall be in substantially the form set
forth in this Article, with such necessary or appropriate variations, omissions
and insertions as are permitted or required by this Indenture or any
Supplemental Indenture. The Bonds may have endorsed thereon such legends or text
as may be necessary or appropriate to conform to any applicable rules and
regulations of any governmental authority or any custom, usage or requirements
of law with respect thereto.

      SECTION 402. FORM OF BOND.

                    [Remainder of page intentionally blank.]

                                      -13-
<PAGE>

                                 (FORM OF BOND)

This Bond has not been registered under the Securities Act of 1933, as amended,
or any state securities laws, and this Bond may not be transferred unless (i)
the City consents in writing to such transfer, and (ii) the City and the Trustee
are furnished a written legal opinion from counsel acceptable to the City and
the Corporation, to the effect that such transfer is exempt from the
registration requirements of the Securities Act of 1933, as amended, and any
applicable state securities laws. This Bond may be transferred to any successor
of the Corporation or any entity owned by or under common ownership with the
Corporation without the necessity of obtaining the City's consent or such an
opinion.

                            UNITED STATES OF AMERICA
                                 STATE OF KANSAS
                                COUNTY OF JOHNSON

                             CITY OF OLATHE, KANSAS

                             INDUSTRIAL REVENUE BOND
                                (PACSUN PROJECT)
                                   SERIES 2007

      THE CITY OF OLATHE, KANSAS, a municipal corporation organized and existing
under the laws of the State of Kansas (the "City"), for value received, promises
to pay, but solely from the source hereinafter referred to, to

                          PACIFIC SUNWEAR STORES CORP.

or registered assigns, on January 1, 2018, the principal amount of

                TWENTY-FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS

or such lesser amount as may be outstanding hereunder as reflected in the bond
registration books maintained by the Trustee. The registered owner shall note
the principal amount outstanding hereunder in the Table of Cumulative
Outstanding Principal Amount attached hereto, provided, however, that the
registration books maintained by the Trustee shall be the official record of the
Cumulative Outstanding Principal Amount of this Bond, in any coin or currency of
the United States of America which on the date of payment thereof is legal
tender for the payment of public and private debts, and in like manner to pay to
the registered owner hereof, either by check or draft mailed to the registered
owner at a stated address as it appears on the bond registration books of the
City kept by the Trustee under the within mentioned Indenture or, in certain
situations authorized in the Indenture, by internal bank transfer or by wire
transfer to an account in a commercial bank or savings institution located in
the continental United States, interest on the Cumulative Outstanding Principal
Amount (as hereinafter defined) at the rate of 7% per annum payable in arrears
on each January 1 and July 1, commencing on January 1, 2008, and continuing
thereafter until the said Cumulative Outstanding Principal Amount is paid in
full. Interest shall be computed on the basis of a year of 360 days consisting
of 12 months of 30 days each. Principal on this Bond shall be payable on the
maturity date set forth above, unless such principal shall have been paid as a
result of a redemption of this Bond prior to such maturity date.

                                      -14-
<PAGE>

      As used herein, the term "Cumulative Outstanding Principal Amount" means
an amount equal to the aggregate of all amounts paid into the Construction Fund
in accordance with the terms of the hereinafter defined Indenture, as reflected
in the bond registration books maintained by the Trustee.

      The Trustee shall keep and maintain a record of the amounts deposited into
the Construction Fund pursuant to the terms of the Indenture as "Principal
Amount Deposited into Construction Fund" and shall enter the aggregate principal
amount of this Bond then outstanding on its records as the "Cumulative
Outstanding Principal Amount" on its records maintained for this Bond. On each
date upon which a portion of the Cumulative Outstanding Principal Amount is paid
to the registered owner hereof, pursuant to the optional redemption provisions
of the Indenture, the Trustee shall enter on its records the principal amount
paid on the Bond as "Principal Amount Paid Pursuant to Optional Redemption
Provisions," and shall enter the then outstanding principal amount of this Bond
as "Cumulative Outstanding Principal Amount" on its records. The registered
owner may from time to time enter the respective amounts deposited into the
Construction Fund pursuant to the terms of the Indenture under the column headed
"Principal Amount Deposited Into Construction Fund" on the attached Table of
Cumulative Outstanding Principal Amount (the "Table") and may enter the
aggregate principal amount of this Bond then outstanding under the column headed
"Cumulative Outstanding Principal Amount" on the attached Table. On each date
upon which a portion of the Cumulative Outstanding Principal Amount is paid to
the registered owner hereof pursuant to the optional redemption provisions of
the Indenture, the registered owner may enter the principal amount paid on this
Bond under the column headed "Principal Amount Paid Pursuant to Optional
Redemption Provisions" on the Table and may enter the then outstanding principal
amount of this Bond under the column headed "Cumulative Outstanding Principal
Amount" on the Table. However, the records maintained by the Trustee as to
amounts deposited into the Construction Fund or principal amounts paid on this
Bond shall be the official records of the Cumulative Outstanding Principal
Amount for all purposes.

      THIS BOND is a duly authorized Bond of the City designated "City of
Olathe, Kansas Industrial Revenue Bonds (PacSun Project), Series 2007," in the
aggregate maximum principal amount of $24,500,000 (the "Bonds"), to be issued
for the purpose of providing funds to pay the cost of acquiring, purchasing,
constructing, installing and remodeling a commercial project, consisting of a
distribution facility, including land, buildings, structures, improvements and
fixtures (the "Project"), to be leased to Pacific Sunwear Stores Corp., a
California corporation (the "Corporation"), under the terms of a Lease Agreement
dated as of July 1, 2007 (said Lease Agreement, as amended and supplemented from
time to time in accordance with the provisions thereof, being herein called the
"Lease"), between the City and the Corporation, all pursuant to the authority of
and in full compliance with the provisions, restrictions and limitations and
Constitution and statutes of the State of Kansas, including particularly K.S.A.
12-1740 to 12-1749d, inclusive, as amended, and pursuant to proceedings duly had
by the governing body of the City.

      THE BONDS are issued under and are equally and ratably secured and
entitled to the protection given by a Trust Indenture dated as of July 1, 2007
(said Trust Indenture, as amended and supplemented from time to time in
accordance with the provisions thereof, being herein called the "Indenture"),
between the City and U.S. Bank National Association (the "Trustee"). Subject to
the terms and conditions set forth therein, the Indenture permits the City to
issue Additional Bonds (as defined therein) secured by the Indenture on a parity
with the Bonds. Reference is hereby made to the Indenture for a description of
the provisions, among others, with respect to the nature and extent of the
security for the Bonds, the rights, duties and obligations of the City, the
Trustee and the owners of the Bonds, and the terms upon which the Bonds are
issued and secured.

                                      -15-
<PAGE>

      THIS BOND shall be subject to redemption and payment in whole or in part,
as follows:

            (a) At any time prior to the stated maturity thereof, by the City,
      at the option of and upon instructions from the Corporation, at a price
      equal to the principal amount thereof, plus accrued interest thereon,
      without premium or penalty, to the date of payment.

            (b) At any time prior to the stated maturity thereof, to the extent
      amounts are deposited into the Bond Fund in accordance with SECTION 602 of
      the Indenture, at a price equal to the principal amount thereof, plus
      accrued interest thereon, without premium or penalty, to the date of
      payment.

In the event the Bonds are to be called for redemption as provided in paragraphs
(a) or (b) above, the Corporation shall deliver written notice to the City and
the Trustee that it has elected to redeem all or a portion of the Bonds in
accordance with paragraph (a) or (b) above at least ten days prior to the
scheduled redemption date. The Trustee shall then deliver written notice to the
Owner of this Bond at least five days prior to the scheduled redemption date by
first class mail stating the date upon which the Bonds will be redeemed and
paid.

      THE BONDS are special obligations of the City payable solely out of the
rents, revenues and receipts derived by the City from the Project and not from
any other fund or source of the City, and are secured by a pledge and assignment
of the Project and of such rents, revenues and receipts, including all rentals
and other amounts to be received by the City under and pursuant to the Lease,
all as provided in the Indenture. The Bonds do not constitute general
obligations of the City or the State of Kansas, and neither the City nor said
State shall be liable thereon, and the Bonds shall not constitute an
indebtedness within the meaning of any constitutional or statutory debt
limitation or restriction, and are not payable in any manner by taxation.
Pursuant to the provisions of the Lease, rental payments sufficient for the
prompt payment when due of the principal of and interest on the Bonds are to be
paid by the Corporation directly to the Trustee for the account of the City and
deposited in a special account created by the City and designated the "City of
Olathe, Kansas, Industrial Revenue Bond Fund - PacSun Project, Series 2007."

      THE OWNER of this Bond shall have no right to enforce the provision of the
Indenture or to institute action to enforce the covenants therein, or to take
any action with respect to any event of default under the Indenture, or to
institute, appear in or defend any suit or other proceedings with respect
thereto, except as provided in the Indenture. In certain events, on the
conditions, in the manner and with the effect set forth in the Indenture, the
principal of all the Bonds issued under the Indenture and then Outstanding may
become or may be declared due and payable before the stated maturity thereof,
together with interest accrued thereon. Modifications or alterations of this
Bond or the Indenture may be made only to the extent and in the circumstances
permitted by the Indenture.

      SUBJECT TO the requirements for transfer set forth above in the legend
contained on the face of this Bond, this Bond is transferable, as provided in
the Indenture, only upon the books of the City kept for that purpose at the
above-mentioned office of the Trustee by the registered owner hereof in person
or by such person's duly authorized attorney, upon surrender of this Bond
together with a written instrument of transfer satisfactory to the Trustee duly
executed by the registered owner or such person's duly authorized attorney, and
thereupon a new fully registered Bond or Bonds, without coupons, and in the same
aggregate principal amounts, shall be issued to the transferee in exchange
therefor as provided in the Indenture, and upon payment of the charges therein
prescribed. The City, the Trustee and any Paying Agent may deem and treat the
person in whose name this Bond is registered as the absolute owner hereof for
the purpose of receiving payment of, or on account of, the principal or
redemption price hereof and interest due hereon and for all other purposes.

                                      -16-
<PAGE>

      THE BONDS are issuable in the form of one fully registered Bond without
coupons in the maximum principal denomination of $24,500,000.

      THIS BOND shall not be valid or become obligatory for any purposes or be
entitled to any security or benefit under the Indenture until the Certificate of
Authentication hereon shall have been executed by the Trustee.

      IT IS HEREBY CERTIFIED AND DECLARED that all acts, conditions and things
required to exist, happen and be performed precedent to and in the execution and
delivery of the Indenture and the issuance of this Bond do exist, have happened
and have been performed in due time, form and manner as required by the
Constitution and laws of the State of Kansas.

                    [Remainder of page intentionally blank.]

                                      -17-
<PAGE>

      IN WITNESS WHEREOF, the City of Olathe, Kansas, has caused this Bond to be
executed in its name by the manual or facsimile signature of its Mayor, attested
by the manual or facsimile signature of its City Clerk and its corporate seal to
be affixed hereto or imprinted hereon, and has caused this Bond to be dated as
of July ____, 2007.

                                                CITY OF OLATHE, KANSAS

                                                By:
                                                   ---------------------------
                                                             Mayor
(SEAL)

ATTEST:

By:
   ---------------------------
           City Clerk

                                      -18-
<PAGE>

                TABLE OF CUMULATIVE OUTSTANDING PRINCIPAL AMOUNT

<TABLE>
<CAPTION>
                                        Principal Amount           Cumulative
              Principal Amount          Paid Pursuant to           Outstanding            Notation
               Deposited Into              Redemption               Principal               Made
Date          Construction Fund            Provisions                Amount                  By
----          -----------------         ----------------           -----------            --------
<S>           <C>                       <C>                        <C>                    <C>

</TABLE>

                                      -19-
<PAGE>

================================================================================

                              (FORM OF ASSIGNMENT)
                        (NOTE RESTRICTIONS ON TRANSFERS)

  FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

________________________________________________________________________________

             Print or Typewrite Name, Address and Social Security or
               other Taxpayer Identification Number of Transferee

the within Bond and all rights thereunder, and hereby irrevocably constitutes
and appoints _____________________________ attorney to transfer the within Bond
on the books kept by the Trustee for the registration and transfer of Bonds,
with full power of substitution in the premises.

Dated: ______________________.

                                     ___________________________________________
                                     NOTICE:  The signature to this assignment
                                     must correspond with the name as it appears
                                     upon the face of the within Bond in every
                                     particular.

                                     Signature Guaranteed By:

[Seal of Bank]                       -------------------------------------------
                                     (Name of Bank)

                                      By:
                                         ---------------------------------------
                                      Title:
                                            ------------------------------------

================================================================================

                                      -20-
<PAGE>

      SECTION 403. FORM OF CERTIFICATE OF AUTHENTICATION.

                (FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION)

================================================================================

                          CERTIFICATE OF AUTHENTICATION

      This Bond is the Industrial Revenue Bond (PacSun Project), Series 2007,
described in the Trust Indenture. The effective date of registration of this
Bond is set forth below.

                                                 U.S. BANK NATIONAL ASSOCIATION,
                                                 as Trustee

________________________                         By:
                                                    ----------------------------
            Date                                 Name:
                                                      --------------------------
                                                 Title:
                                                        ------------------------

================================================================================

                               (End of ARTICLE IV)

                                      -21-
<PAGE>

                                    ARTICLE V

                    CUSTODY AND APPLICATION OF BOND PROCEEDS

      SECTION 501. CREATION OF CONSTRUCTION FUND. There is hereby created and
ordered to be established in the custody of the Trustee a special trust fund in
the name of the City to be designated the "City of Olathe, Kansas, Construction
Fund - PacSun Project, Series 2007" (herein called the "Construction Fund").

      SECTION 502. DEPOSITS INTO THE CONSTRUCTION FUND. The proceeds of the sale
of the Bonds, including Additional Payments provided for in the Bond Purchase
Agreement, when received, excluding such amounts required to be paid into the
Bond Fund pursuant to SECTION 602 hereof, shall be deposited by the Trustee into
the Construction Fund. Any money received by the Trustee from any other source
for the purpose of acquisition, purchasing, construction, improving or
remodeling of the Project shall also be deposited into the Construction Fund.

      SECTION 503. DISBURSEMENTS FROM THE CONSTRUCTION FUND.

      (a) The moneys in the Construction Fund shall be disbursed by the Trustee
for the payment of Project Costs upon receipt of requisition certificates signed
by the Corporation in accordance with the provisions of ARTICLE IV of the Lease,
and the Trustee hereby covenants and agrees to disburse such moneys in
accordance with such provisions. All disbursements from the Construction Fund
which are payable to the Corporation shall be made by internal bank transfer or
wire transfer as designated by the Corporation in writing to the Trustee. The
Trustee shall disburse moneys in the Construction Fund in each case within two
(2) Business Days after receipt by the Trustee of an executed written
requisition certificate. The Trustee shall notify the registered owner of the
Bonds by telephone when the Trustee is prepared to disburse moneys pursuant to
any requisition certificate. Any moneys received by the Trustee by 11:00 a.m.
for deposit in the Construction Fund for which the Trustee has received a
requisition certificate shall be disbursed from the Construction Fund on the
same Business Day.

      (b) In paying any requisition under this Section, the Trustee may rely as
to the completeness and accuracy of all statements in such requisition
certificate if such requisition certificate is signed by the Authorized
Corporation Representative. If the City so requests in writing, a copy of each
requisition certificate submitted to the Trustee for payment under this Section
shall be promptly provided by the Trustee to the City.

      (c) If required, the City covenants and agrees to take all necessary and
appropriate action promptly in approving and ordering all such disbursements.
The Trustee is hereby authorized and directed to issue checks for each
disbursement in the manner and as provided for by the aforesaid provisions of
the Lease.

      (d) The Trustee shall keep and maintain adequate records pertaining to the
Construction Fund and all disbursements therefrom, and shall provide a statement
of receipts and disbursements with respect thereto to the Corporation on a
monthly basis. After the Project has been completed and a certificate of payment
of all costs filed as provided in SECTION 504 hereof, the Trustee shall file a
final statement of receipts and disbursements with respect thereto with the City
and the Corporation.

      SECTION 504. COMPLETION OF THE PROJECT. The completion of the Project and
payment of all costs and expenses incident thereto shall be evidenced by the
filing with the Trustee of the certificate

                                      -22-
<PAGE>

required by the provisions of SECTION 4.5 of the Lease. As soon as practicable
any balance remaining in the Construction Fund shall without further
authorization be deposited in the Bond Fund.

      SECTION 505. DISPOSITION UPON ACCELERATION. If the principal of the Bonds
shall have become due and payable pursuant to SECTION 902 of this Indenture,
upon the date of payment by the Trustee of any moneys due as hereinafter
provided in ARTICLE IX provided, any balance remaining in the Construction Fund
shall without further authorization be deposited in the Bond Fund by the Trustee
with advice to the City and to the Corporation of such action.

                                   ARTICLE VI

                               REVENUES AND FUNDS

      SECTION 601. CREATION OF THE BOND FUND. There is hereby created and
ordered established in the custody of the Trustee a special trust fund in the
name of the City to be designated the "City of Olathe, Kansas, Industrial
Revenue Bond Fund - PacSun Project, Series 2007" (herein called the "Bond
Fund").

      SECTION 602. DEPOSITS INTO THE BOND FUND. The Trustee shall deposit into
the Bond Fund, as and when received, (a) all accrued interest on the Bonds paid
by the purchaser of the Bonds; (b) all rent payments payable by the Corporation
to the City specified in SECTION 5.1 of the Lease and amounts due under SECTION
5.2 of the Lease; (c) any amount in the Construction Fund to be transferred to
the Bond Fund pursuant to SECTION 504 hereof upon completion of the Project; (d)
the balance of any Net Proceeds (as defined in the Lease) of condemnation awards
or insurance received by the Trustee pursuant to ARTICLE IX of the Lease; (e)
the amounts to be deposited in the Bond Fund pursuant to SECTIONS 9.1(b) and
9.1(c) of the Lease; (f) all interest and other income derived from investments
of Bond Fund moneys as provided in SECTION 702 hereof; and (g) all other moneys
received by the Trustee under and pursuant to any of the provisions of the Lease
when accompanied by directions from the person depositing such moneys that such
moneys are to be paid into the Bond Fund, including, without limitation, amounts
payable into the Bond Fund by the City pursuant to SECTION 801 hereof.

      SECTION 603. APPLICATION OF MONEYS IN THE BOND FUND.

      (a) Except as provided in SECTION 606 and SECTION 908 hereof or in SECTION
4.6(a) of the Lease, moneys in the Bond Fund shall be expended solely for the
payment of the principal of and the interest on the Bonds as the same mature and
become due or upon the redemption thereof prior to maturity; provided, however,
that any amounts received by the Trustee as Additional Rent under SECTION 5.2 of
the Lease and deposited to the Bond Fund as provided in SECTION 602 above, shall
be expended by the Trustee for such items of Additional Rent as they are
received or due without further authorization from the City.

      (b) The City hereby authorizes and directs the Trustee to withdraw
sufficient funds from the Bond Fund to pay the principal of and the interest on
the Bonds as the same become due and payable and to make said funds so withdrawn
available to the Paying Agent for the purpose of paying said principal and
interest.

      (c) Whenever the amount in the Bond Fund from any source whatsoever is
sufficient to redeem all of the Bonds Outstanding and to pay interest to accrue
thereon prior to such redemption, the City covenants and agrees, upon request of
the Corporation, to take and cause to be taken the necessary steps to redeem all
such Bonds on the next succeeding redemption date for which the required
redemption notice

                                      -23-
<PAGE>

may be given or on such later redemption date as may be specified by the
Corporation. The Trustee may use any moneys in the Bond Fund to redeem a part of
the Bonds Outstanding in accordance with and to the extent permitted by ARTICLE
III hereof so long as the Corporation is not in default (beyond any applicable
notice and cure periods) with respect to any payments under the Lease and to the
extent said moneys are in excess of the amount required for payment of Bonds
theretofore matured or called for redemption and past due interest, if any, in
all cases when such Bonds have not been presented for payment.

      SECTION 604. PAYMENTS DUE ON SATURDAYS, SUNDAYS AND HOLIDAYS. In any case
where the date of maturity of principal of or interest, if any, on the Bonds or
the date fixed for redemption of any Bonds shall be a Saturday, a Sunday or a
legal holiday or a day on which banking institutions in the city of payment are
authorized by law to close, then payment of principal or interest, if any, need
not be made on such date but may be made on the next succeeding Business Day not
a Saturday, a Sunday or a legal holiday or a day upon which banking institutions
are authorized by law to close with the same force and effect as if made on the
date of maturity or the date fixed for redemption, and no interest, if any,
shall continue to accrue for the period from and after such date.

      SECTION 605. NONPRESENTMENT OF BONDS. In the event any Bond shall not be
presented for payment when the principal thereof becomes due, either at maturity
or otherwise, or at the date fixed for redemption thereof, if funds sufficient
to pay such Bond shall have been made available to the Trustee, all liability of
the City to the Owner thereof for the payment of such Bond shall forthwith
cease, determine and be completely discharged, and thereupon it shall be the
duty of the Trustee to hold such fund or funds, without liability for interest
thereon, for the benefit of the Owner of such Bond who shall thereafter be
restricted exclusively to such fund or funds for any claim of whatever nature on
his part under this Indenture or on, or with respect to, said Bond. If any Bond
shall not be presented for payment within five years following the date when
such Bond becomes due, whether by maturity or otherwise, the Trustee shall repay
to the Corporation the funds theretofore held by it for payment of such Bond,
and such Bond shall, subject to the defense of any applicable statute of
limitation, thereafter be an unsecured obligation of the Corporation, and the
Owner thereof shall be entitled to look only to the Corporation for payment, and
then only to the extent of the amount so repaid, and the Corporation shall not
be liable for any interest thereon and shall not be regarded as a trustee of
such money.

      SECTION 606. REPAYMENT TO THE CORPORATION FROM THE BOND FUND. After
payment in full of the principal of and interest, if any, on the Bonds (or
provision has been made for the payment thereof as provided in this Indenture),
and the fees, charges and expenses of the Trustee, the City and any Paying Agent
and any other amounts required to be paid under this Indenture and the Lease,
all amounts remaining in the Bond Fund shall be paid to the Corporation upon the
expiration or sooner termination of the Lease.

                                   ARTICLE VII

                  SECURITY FOR DEPOSITS AND INVESTMENT OF FUNDS

      SECTION 701. MONEYS TO BE HELD IN TRUST. All moneys deposited with or paid
to the Trustee for account of the Bond Fund or the Construction Fund under any
provision of this Indenture, and all moneys deposited with or paid to any Paying
Agent under any provision of this Indenture, shall be held by the Trustee or
Paying Agent in trust and shall be applied only in accordance with the
provisions of this Indenture and the Lease, and, until used or applied as herein
provided, shall constitute part of the Trust Estate and be subject to the lien
hereof. Neither the Trustee nor any Paying Agent shall be under any liability
for interest or any moneys received hereunder except such as may be agreed upon.

                                      -24-
<PAGE>

      SECTION 702. INVESTMENT OF MONEYS IN CONSTRUCTION FUND AND BOND FUND.
Moneys held in the Construction Fund and the Bond Fund shall, pursuant to
written direction of the Corporation, signed by the Authorized Corporation
Representative, be separately invested and reinvested by the Trustee in
Investment Securities which mature or are subject to redemption by the owner
prior to the date such funds will be needed. In the event the Corporation fails
to provide written directions concerning investment of moneys held in the
Construction Fund and the Bond Fund, the Trustee shall invest in Investment
Securities described in paragraph (e) of the definition of Investment
Securities, provided they mature or are subject to redemption prior to the date
such funds will be needed. Any such Investment Securities shall be held by or
under the control of the Trustee and shall be deemed at all times a part of the
fund in which such moneys are originally held, and the interest accruing thereon
and any profit realized from such Investment Securities shall be credited to
such fund, and any loss resulting from such Investment Securities shall be
charged to such fund. After the Trustee has notice pursuant to SECTION 1001(h)
of this Indenture of the existence of an Event of Default, the Trustee shall
invest moneys in the Bond Fund and the Construction Fund in Investment
Securities. The Trustee shall sell and reduce to cash a sufficient amount of
such Investment Securities whenever the cash balance in any Fund is insufficient
for the purposes of such Fund. In determining the balance in any Fund,
investments in such Fund shall be valued at the lower of their original cost or
their fair market value as of the most recent Payment Date. The Trustee may make
any and all investments permitted by the provisions of this Section through its
own bond department or any affiliate or short-term investment department.

      The City and the Corporation (by its execution of the Lease) acknowledge
that to the extent regulations of the Comptroller of the Currency or other
applicable regulatory authority grant the City or the Corporation the right to
receive brokerage confirmations of the security transactions made by the Trustee
as they occur, the City and the Corporation waive receipt of such confirmations
to the extent permitted by law. The Trustee will furnish the Corporation and the
City (if requested by it) with periodic account transaction statements which
will include detail for all investment transactions made by the Trustee
hereunder.

      SECTION 703. RECORD KEEPING. The Trustee shall maintain records designed
to show compliance with the provisions of this Article and with the provisions
of ARTICLE VI for at least six years after the payment of all of the Outstanding
Bonds.

                                  ARTICLE VIII

                        GENERAL COVENANTS AND PROVISIONS

      SECTION 801. PAYMENT OF PRINCIPAL AND INTEREST. The City covenants and
agrees that it will, but solely from the rents, revenues and receipts derived
from the Project as described herein, deposit or cause to be deposited in the
Bond Fund sufficient sums payable under the Lease promptly to meet and pay the
principal of and the interest on the Bonds as they become due and payable at the
place, on the dates and in the manner provided herein and in the Bonds according
to the true intent and meaning thereof, and to this end the City covenants and
agrees that it will use its best efforts to cause the Project to be continuously
and sufficiently leased as a revenue and income-providing undertaking, and that,
should there be a default under the Lease with the result that the right of
possession of the Project is returned to the City, the City shall fully
cooperate with the Trustee and with the Bondowners to the end of fully
protecting the rights and security of the Bondowners and shall diligently
proceed in good faith and use its best efforts to secure another tenant for the
Project to the end that at all times sufficient rents, revenues and receipts
will be derived from the Project promptly to meet and pay the principal of and
the interest on the Bonds as they become due and payable.

                                      -25-
<PAGE>

Nothing herein shall be construed as requiring the City to operate the Project
as a business other than as lessor or to use any funds or revenues from any
source other than funds and revenues derived from the Project.

      SECTION 802. AUTHORITY TO EXECUTE INDENTURE AND ISSUE BONDS. The City
covenants that it is duly authorized under the Constitution and laws of the
State of Kansas to execute this Indenture, to issue the Bonds and to pledge and
assign the Trust Estate in the manner and to the extent herein set forth; that
all action on its part for the execution and delivery of this Indenture and the
issuance of the Bonds has been duly and effectively taken; that the Bonds in the
hands of the Owners thereof are and will be valid and enforceable obligations of
the City according to the import thereof.

      SECTION 803. PERFORMANCE OF COVENANTS. The City covenants that it will
faithfully perform at all times any and all covenants, undertakings,
stipulations and provisions contained in this Indenture, in the Bonds and in all
proceedings of its governing body pertaining thereto. The Trustee may take such
action as it deems appropriate to enforce all such covenants, undertaking,
stipulations and provisions of the City hereunder.

      SECTION 804. INSTRUMENTS OF FURTHER ASSURANCE. The City covenants that it
will do, execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, such Supplemental Indentures and such further acts,
instruments, financing statements and other documents as the Trustee may
reasonably require for the better pledging and assigning unto the Trustee the
property and revenues herein described to the payment of the principal of and
interest, if any, on the Bonds. The City covenants and agrees that, except as
herein and in the Lease provided, it will not sell, convey, mortgage, encumber
or otherwise dispose of any part of the Project or the rents, revenues and
receipts derived therefrom or from the Lease, or of its rights under the Lease.

      SECTION 805. PAYMENT OF TAXES AND CHARGES. The City represents that
pursuant and subject to the provisions of SECTION 5.2 of the Lease, the
Corporation has agreed to pay, as the same respectively become due, all taxes,
assessments and other governmental charges at any time lawfully levied or
assessed upon or against the Project or any part thereof.

      SECTION 806. INSURANCE. The City represents that pursuant and subject to
the provisions of ARTICLE VII of the Lease, the Corporation has agreed at its
own expense to keep the Project constantly insured to the extent provided for
therein.

      SECTION 807. MAINTENANCE AND REPAIR. The City represents that pursuant and
subject to the provisions of SECTION 6.1 of the Lease, the Corporation has
agreed at its own expense to cause the Project to be maintained and kept in good
condition, repair and working order, and that pursuant and subject to SECTION
8.3 of the Lease the Corporation may, at its own expense, make from time to time
additions, changes and alterations to the Project under the terms and conditions
set forth therein.

      SECTION 808. RECORDINGS AND FILINGS. Upon request of the Owner of the
Bonds or the Trustee, the City will cooperate in causing this Indenture and all
Supplemental Indentures, the Lease and all Supplemental Leases (or, at the
Corporation's option, a memorandum thereof) and all appropriate financing and
continuation statements and other security instruments to be recorded and filed
in such manner and in such places as may be required by law in order to fully
preserve and protect the security of the Owners of the Bonds and the rights of
the Trustee hereunder.

                                      -26-
<PAGE>

      SECTION 809. INSPECTION OF PROJECT BOOKS. The City covenants and agrees
that all books and documents in its possession relating to the Project and the
rents, revenues and receipts derived from the Project shall at all times be open
to inspection by such accountants or other agencies as the Trustee may from time
to time designate.

      SECTION 810. ENFORCEMENT OF RIGHTS UNDER THE LEASE. The City covenants and
agrees that it shall enforce all of its rights and all of the obligations of the
Corporation (at the expense of the Corporation) under the Lease to the extent
necessary to preserve the Project in good order and repair, and to protect the
rights of the Trustee and the Bondowners hereunder with respect to the pledge
and assignment of the rents, revenues and receipts coming due under the Lease.
The City agrees that the Trustee, as assignee of the rentals and other amounts
to be received by the City and paid by the Corporation under the Lease, or in
its name or in the name of the City, may enforce all rights of the City to
receive such rentals and other amounts and all obligations of the Corporation to
pay such rentals and other amounts under and pursuant to the Lease for and on
behalf of the Bondowners, whether or not the City is in default hereunder,
subject to and in accordance with the conditions and limitations set forth in
the Lease.

      SECTION 811. SUBORDINATION OF INDENTURE TO THE LEASE. This Indenture and
the rights and privileges hereunder of the Trustee and the Owners of the Bonds
are specifically made subject and subordinate to the rights and privileges of
the Corporation (as long as no default by the Corporation under the Lease is
continuing beyond any applicable grace period) set forth in the Lease. So long
as not otherwise provided in this Indenture, the Corporation shall be suffered
and permitted to possess, use and enjoy the Project and appurtenances so as to
carry out its obligations under the Lease.

                                   ARTICLE IX

                              DEFAULT AND REMEDIES

      SECTION 901. EVENTS OF DEFAULT; NOTICE; OPPORTUNITY TO CURE. If any of the
following events occur, it is hereby defined as and declared to be and to
constitute an "Event of Default":

            (a) Default in the due and punctual payment of the principal on any
      Bond, whether at the stated maturity or accelerated maturity thereof, or
      at the date fixed for redemption thereof for a period of five (5) business
      days following written notice to the City and the Corporation by the
      Trustee or by the Owners of 25% in aggregate principal amount of the Bonds
      Outstanding;

            (b) Default in the due and punctual payment of the interest on any
      Bond, whether at the stated maturity or accelerated maturity thereof, or
      at the date fixed for redemption thereof for a period of 5 days following
      written notice to the City and the Corporation by the Trustee or by the
      Owners of 25% in aggregate principal amount of the Bonds Outstanding; or

            (c) The occurrence of an Event of Default as specified in SECTION
      12.1(b) or (c) of the Lease shall have occurred.

      SECTION 902. ACCELERATION OF MATURITY IN EVENT OF DEFAULT. If an Event of
Default shall have occurred and be continuing, the Trustee may, and upon the
written request of the Owners of not less than 25% in aggregate principal amount
of Bonds then Outstanding, shall, by notice in writing delivered to the City and
the Corporation, declare the principal of all Bonds then Outstanding and the
interest accrued

                                      -27-
<PAGE>

thereon immediately due and payable, and such principal and interest shall
thereupon become and be immediately due and payable.

      SECTION 903. SURRENDER OF POSSESSION OF TRUST ESTATE; RIGHTS AND DUTIES OF
TRUSTEE IN POSSESSION. If an Event of Default shall have occurred and be
continuing, the City, upon demand of the Trustee, shall forthwith surrender the
possession of, and it shall be lawful for the Trustee, by such officer or agent
as it may appoint, to take possession of all or any part of the Trust Estate,
together with the books, papers and accounts of the City pertaining thereto, and
including the rights and the position of the City under the Lease, and to hold,
operate and manage the same, and from time to time make all needful repairs and
improvements as shall be deemed wise by the Trustee; the Trustee may lease the
Project or any part thereof, in the name and for account of the City, and
collect, receive and sequester the rents, revenues and receipts therefrom, and
out of the same and any moneys received from any receiver of any part thereof
pay, and set up proper reserves for the payment of all proper costs and expenses
of so taking, holding and managing the same, including without limitation (a)
reasonable compensation to the Trustee, his agents and counsel, (b) any
reasonable charges of the Trustee hereunder, (c) any taxes and assessments and
other charges prior to the lien of this Indenture, which the Trustee may deem it
wise to pay, and (d) all expenses of such repairs and improvements, and the
Trustee shall apply the remainder of the moneys so received in accordance with
the provisions of SECTION 908 hereof. Whenever all that is due upon the Bonds
shall have been paid and all defaults made good, the Trustee shall surrender
possession of the Trust Estate to the City, its successors or assigns, the same
right of entry, however, to exist upon any subsequent Event of Default. While in
possession of such property, the Trustee shall render annually to the City and
the Corporation a summarized statement of receipts and expenditures in
connection therewith.

      SECTION 904. APPOINTMENT OF RECEIVERS IN EVENT OF DEFAULT. If an Event of
Default shall have occurred and be continuing, and upon the filing of a suit or
other commencement of judicial proceedings to enforce the rights of the Trustee
and of the Bondowners under this Indenture, the Trustee shall be entitled, as a
matter of right, to the appointment of a receiver or receivers of the Trust
Estate or any part thereof, pending such proceedings, with such powers as the
court making such appointment shall confer.

      SECTION 905. EXERCISE OF REMEDIES BY THE TRUSTEE.

      (a) Upon the occurrence of an Event of Default, the Trustee may pursue any
available remedy at law or in equity by suit, action, mandamus or other
proceeding to enforce the payment of the principal of interest on the Bonds then
Outstanding, and to enforce and compel the performance of the duties and
obligations of the City as herein set forth.

      (b) If an Event of Default shall have occurred and be continuing, and if
requested to do so by the Owners of 25% in aggregate principal amount of Bonds
then Outstanding and indemnified as provided in SECTION 1001(l) hereof, the
Trustee shall be obligated to exercise such one or more of the rights and powers
conferred by this Article as the Trustee, being advised by counsel, shall deem
most expedient in the interests of the Bondowners.

      (c) All rights of action under this Indenture or under any of the Bonds
may be enforced by the Trustee without the possession of any of the Bonds or the
production thereof in any trial or other proceedings relating thereto, and any
such suit or proceeding instituted by the Trustee shall be brought in its name
as Trustee without necessity of joining as plaintiffs or defendants any Owners
of the Bonds, and any recovery of judgment shall, subject to the provisions of
SECTION 908 hereof, be for the equal benefit of all the Owners of the
Outstanding Bonds and coupons.

                                      -28-
<PAGE>

      SECTION 906. LIMITATION ON EXERCISE OF REMEDIES BY BONDOWNERS. No Owner of
any Bond shall have any right to institute any suit, action or proceeding in
equity or at law for the enforcement of this Indenture or for the execution of
any trust hereunder or for the appointment of a receiver or any other remedy
hereunder, unless (a) a default has occurred of which the Trustee has been
notified as provided in SECTION 1001(h) or of which by said subsection the
Trustee is deemed to have notice, (b) such default shall have become an Event of
Default, (c) the Owners of 25% in aggregate principal amount of Bonds then
Outstanding shall have made written request to the Trustee, shall have offered
it reasonable opportunity either to proceed and to exercise the powers
hereinbefore granted or to institute such action, suit or proceeding in its own
name, and shall have offered to the Trustee indemnity as provided in SECTION
1001(l), and (d) the Trustee shall thereafter fail or refuse to exercise the
powers herein granted or to institute such action, suit or proceeding in its own
name; such notification, request and offer of indemnity are hereby declared in
every case, at the option of the Trustee, to be conditions precedent to the
execution of the powers and trusts of this Indenture, and to any action or cause
of action for the enforcement of this Indenture, or for the appointment of a
receiver or for any other remedy hereunder it being understood and intended that
no one or more Owners of the Bonds shall have any right in any manner whatsoever
to affect, disturb or prejudice this Indenture by their action or to enforce any
right hereunder except in the manner herein provided, and that all proceedings
at law or equity shall be instituted, had and maintained in the manner herein
provided and for the equal benefit of the Owners of all Bonds then Outstanding.
Nothing in this Indenture contained shall, however, affect or impair the right
of any Bondowner to payment of the principal of and interest on any Bond at and
after the maturity thereof or the obligation of the City to pay the principal of
and interest on each of the Bonds issued hereunder to the respective Owners
thereof at the time, place, from the source and in the manner herein and in the
Bonds expressed.

      SECTION 907. RIGHT OF BONDOWNERS TO DIRECT PROCEEDINGS. Anything in this
Indenture to the contrary notwithstanding, the Owners of a majority in aggregate
principal amount of Bonds then Outstanding shall have the right, at any time, by
an instrument or instruments in writing executed and delivered to the Trustee,
to direct the time, method and place of conducting all proceedings to be taken
in connection with the enforcement of the terms and conditions of this
Indenture, or for the appointment of a receiver or any other proceedings
hereunder; provided that such direction shall not be otherwise than in
accordance with the provisions of law and of this Indenture, including SECTION
1001(l) hereof.

      SECTION 908. APPLICATION OF MONEYS IN EVENT OF DEFAULT.

      (a) All moneys received by the Trustee pursuant to any right given or
action taken under the provisions of this Article shall, after payment of the
cost and expenses of the proceedings resulting in the collection of such moneys
and of the fees, expenses, liabilities and advances incurred or made by the
Trustee, be deposited in the Bond Fund and all moneys so deposited in the Bond
Fund shall be applied as follows:

            (1) Unless the principal of all the Bonds shall have become or shall
      have been declared due and payable, all such moneys shall be applied:

            FIRST -- To the payment to the persons entitled thereto of all
      installments of interest, if any, then due and payable on the Bonds, in
      the order in which such installments of interest became due and payable,
      and, if the amount available shall not be sufficient to pay in full any
      particular installment, then to the payment ratably, according to the
      amounts due on such installment, to the persons entitled thereto, without
      any discrimination or privilege;

                                      -29-
<PAGE>

            SECOND -- To the payment to the persons entitled thereto of the
      unpaid principal of any of the Bonds which shall have become due and
      payable (other than Bonds called for redemption for the payment of which
      moneys are held pursuant to the provisions of this Indenture), in the
      order of their due dates, and, if the amount available shall not be
      sufficient to pay in full Bonds due on any particular date, together with
      such interest, then to the payment, ratably, according to the amount of
      principal due on such date, to the persons entitled thereto without any
      discrimination or privilege;

            (2) If the principal of all the Bonds shall have become due or shall
      have been declared due and payable, all such moneys shall be applied to
      the payment of the principal and interest, if any, then due and unpaid on
      all of the Bonds, without preference or priority of principal over
      interest or of interest over principal or of any installment of interest
      over any other installment of interest or of any Bond over any other Bond,
      ratably, according to the amounts due respectively for principal and
      interest, to the person entitled thereto, without any discrimination or
      privilege; and

            (3) If the principal of all the Bonds shall have been declared due
      and payable, and if such declaration shall thereafter have been rescinded
      and annulled under the provisions of SECTION 910, then, subject to the
      provisions of SUBSECTION (2) of this Section in the event that the
      principal of all the Bonds shall later become due or be declared due and
      payable, the moneys shall be applied in accordance with the provisions of
      SUBSECTION (1) of this Section.

      (b) Whenever moneys are to be applied pursuant to the provisions of this
Section, such moneys shall be applied at such times and from time to time as the
Trustee shall determine, having due regard to the amount of such moneys
available and which may become available for such application in the future.
Whenever the Trustee shall apply such moneys, it shall fix the date (which shall
be an interest payment date unless it shall deem another date more suitable)
upon which such application is to be made and upon such date interest on the
amounts of principal to be paid on such dates shall cease to accrue.

      (c) Whenever all of the Bonds and interest thereon, if any, have been paid
under the provisions of this Section, and all fees, expenses and charges of the
City and the Paying Agent have been paid, any balance remaining in the Bond Fund
shall be paid to the Corporation as provided in SECTION 606 hereof.

      SECTION 909. REMEDIES CUMULATIVE. No remedy by the terms of this Indenture
conferred upon or reserved to the Trustee or to the Bondowners is intended to be
exclusive of any other remedy, but each and every such remedy shall be
cumulative and shall be in addition to any other remedy given to the Trustee or
to the Bondowners hereunder or now or hereafter existing at law or in equity or
by statute. No delay or omission to exercise any right, power or remedy accruing
upon any Event of Default shall impair any such right, power or remedy or shall
be construed to be a waiver of any such Event of Default or acquiescence
therein; every such right, power or remedy may be exercised from time to time
and as often as may be deemed expedient. In case the Trustee shall have
proceeded to enforce any right under this Indenture by the appointment of a
receiver, by entry, or otherwise, and such proceedings have been discontinued or
abandoned for any reason, or shall have been determined adversely, then and in
every such case the City, the Corporation, the Trustee and the Bondowners shall
be restored to their former positions and rights hereunder, and all rights,
remedies and powers of the Trustee shall continue as if no such proceedings had
been taken.

      SECTION 910. WAIVERS OF EVENTS OF DEFAULT. The Trustee may in its
discretion waive any Event of Default hereunder and its consequences and rescind
any declaration of maturity of principal of and interest, if any, on Bonds, and
shall do so upon the written request of the Owners of at least 50% in aggregate
principal amount of all the Bonds then Outstanding, provided, however, that
there shall not be

                                      -30-
<PAGE>

waived without the consent of the Owners of all the Bonds Outstanding (a) any
Event of Default in the payment of the principal of any Outstanding Bonds when
due (whether at the date of maturity or redemption specified therein), or (b)
any Event of Default in the payment when due of the interest on any such Bonds,
unless prior to such waiver or rescission, all arrears of interest, or all
arrears of payments of principal when due, as the case may be, and all
reasonable expenses of the Trustee and the City, in connection with such
default, shall have been paid or provided for. In case of any such waiver or
rescission, or in case any proceeding taken by the Trustee on account of any
such default shall have been discontinued or abandoned or determined adversely,
then and in every such case the City, the Corporation, the Trustee and the
Bondowners shall be restored to their former positions, rights and obligations
hereunder, respectively, but no such waiver or rescission shall extend to any
subsequent or other default, or impair any right consequent thereon.

                                    ARTICLE X

                                   THE TRUSTEE

      SECTION 1001. ACCEPTANCE OF THE TRUSTS. The Trustee hereby accepts the
trusts imposed upon it by this Indenture, and agrees to perform said trusts as a
corporate trustee ordinarily would perform said trusts under a corporate
indenture, but only upon and subject to the following express terms and
conditions, and no implied covenants or obligations shall be read into this
Indenture against the Trustee:

            (a) The Trustee, prior to the occurrence of an Event of Default and
      after the curing or waiver of all Events of Default which may have
      occurred, undertakes to perform such duties and only such duties as are
      specifically set forth in this Indenture. If any Event of Default shall
      have occurred and be continuing, subject to SECTION 1001(1) below, the
      Trustee shall exercise such of the rights and powers vested in it by this
      Indenture, and shall use the same degree of care and skill in their
      exercise, as a prudent corporate trust department would exercise or use
      under the circumstances in the conduct of its own affairs.

            (b) The Trustee may execute any of the trusts or powers hereunder or
      perform any duties hereunder either directly or through agents, attorneys
      or receivers and shall not be responsible for any misconduct or negligence
      on the part of any agent, attorney or receiver appointed or chosen by it
      with due care, and the Trustee shall be entitled to act upon the opinion
      or advice of counsel, who may be counsel to the City or to the
      Corporation, concerning all matters of trust hereof and the duties
      hereunder, and may in all cases pay such reasonable compensation to all
      such agents, attorneys and receivers as may reasonably be employed in
      connection with the trusts hereof. The Trustee shall not be responsible
      for any loss or damage resulting from any action or nonaction by it taken
      or omitted to be taken in good faith in reliance upon such opinion or
      advice of counsel.

            (c) Except as provided in the Lease and particularly SECTION 10.8
      thereof, the Trustee shall not be responsible for any recital herein or in
      the Bonds (except with respect to the Certificate of Authentication of the
      Trustee endorsed on the Bonds), or for the recording or rerecording,
      filing or refiling of this Indenture or any security agreement in
      connection therewith, or for insuring the Project or collecting any
      insurance moneys, or for the validity of the execution by the City of this
      Indenture or of any Supplemental Indentures or instruments of further
      assurance, or for the sufficiency of the security of the Bonds. The
      Trustee shall not be responsible or liable for any loss suffered in
      connection with any investment of funds made by it in accordance with
      ARTICLE VII hereof.

                                      -31-
<PAGE>

            (d) The Trustee shall not be accountable for the use of any Bonds
      authenticated and delivered hereunder. The Trustee, in its individual or
      any other capacity, may become the owner or pledgee of Bonds with the same
      rights which it would have if it were not Trustee.

            (e) The Trustee may rely and shall be protected in acting or
      refraining from acting upon any resolution, certificate, statement,
      instrument, opinion, report, notice, request, direction, consent, order,
      affidavit, letter, telegram or other paper or document provided for under
      this Indenture believed by it to be genuine and correct and to have been
      signed, presented or sent by the proper person or persons. Any action
      taken by the Trustee pursuant to this Indenture upon the request or
      authority or consent of any person who, at the time of making such request
      or giving such authority or consent is the Owner of any Bond, shall be
      conclusive and binding upon all future Owners of the same Bond and upon
      Bonds issued in exchange therefor or upon transfer or in place thereof.

            (f) As to the existence or nonexistence of any fact or as to the
      sufficiency or validity of any instrument, paper or proceeding, or
      whenever in the administration of this Indenture the Trustee shall deem it
      desirable that a matter be proved or established prior to taking,
      suffering or omitting any action hereunder, the Trustee shall be entitled
      to rely upon a certificate signed by the Authorized City Representative as
      sufficient evidence of the facts therein contained, and prior to the
      occurrence of a default of which the Trustee has been notified as provided
      in SUBSECTION (h) of this Section or of which by said subsection it is
      deemed to have notice, the Trustee shall also be at liberty to accept a
      similar certificate to the effect that any particular dealing, transaction
      or action is necessary or expedient, but may at its discretion secure such
      further evidence deemed necessary or advisable, but shall in no case be
      bound to secure the same.

            (g) The permissive right of the Trustee to do things enumerated in
      this Indenture shall not be construed as a duty, and the Trustee shall not
      be answerable for other than its gross negligence or willful misconduct.

            (h) The Trustee shall not be required to take notice or be deemed to
      have notice of any default hereunder except failure by the City to cause
      to be made any of the payments to the Trustee required to be made in
      ARTICLE VI hereof, unless the Trustee shall be specifically notified in
      writing of such default by the City or by the Owners of at least 25% in
      aggregate principal amount of all Bonds then Outstanding.

            (i) At any and all reasonable times and subject to the Corporation's
      reasonable and standard security procedures, the Trustee and its duly
      authorized agents, attorneys, experts, engineers, accountants and
      representatives shall have the right, but shall not be required, to
      inspect any and all of the Project, and all books, papers and records of
      the City pertaining to the Project and the Bonds, and to take such
      memoranda from and in regard thereto as may be desired, all subject to the
      rights of the Corporation under the Lease. The Trustee shall treat all
      proprietary information of the Corporation as confidential.

            (j) The Trustee shall not be required to give any bond or surety in
      respect to the execution of its trusts and powers hereunder or otherwise
      in respect of the Project.

            (k) The Trustee shall have the right, but shall not be required, to
      demand, in respect of the authentication of any Bonds, the withdrawal of
      any cash, the release of any property, or any

                                      -32-
<PAGE>

      action whatsoever within the purview of this Indenture, any showings,
      certificates, opinions, appraisals or other information, or corporate
      action or evidence thereof, in addition to that by the terms hereof
      required, as a condition of such action by the Trustee deemed desirable
      for the purpose of establishing the right of the City to the
      authentication of any Bonds, the withdrawal of any cash, or the taking of
      any other action by the Trustee.

            (l) Before taking any action under this Indenture, the Trustee may
      require that satisfactory indemnity be furnished to it for the
      reimbursement of all costs and expenses to which it may be put and to
      protect it against all liability which it may incur in or by reason of
      such action, except liability which is adjudicated to have resulted from
      its negligence or willful misconduct by reason of any action so taken.

      SECTION 1002. FEES, CHARGES AND EXPENSES OF THE TRUSTEE. The Trustee shall
be entitled to payment of and/or reimbursement for reasonable fees for its
ordinary services rendered hereunder and all advances, agent and counsel fees
and other ordinary expenses reasonably and necessarily made or incurred by the
Trustee in connection with such ordinary services and, in the event that it
should become necessary that the Trustee perform extraordinary services, it
shall be entitled to reasonable extra compensation therefor and to reimbursement
for reasonable and necessary extraordinary expenses in connection therewith;
provided that if such extraordinary services or extraordinary expenses are
occasioned by the neglect or misconduct of the Trustee, it shall not be entitled
to compensation or reimbursement therefor. The Trustee shall be entitled to
payment and reimbursement for the reasonable fees and charges of the Trustee as
Paying Agent for the Bonds. Pursuant to the provisions of SECTION 5.2 of the
Lease, the Corporation has agreed to pay to the Trustee all reasonable fees,
charges and expenses of the Trustee under this Indenture. The Trustee agrees
that the City shall have no liability for any reasonable fees, charges and
expenses of the Trustee, and the Trustee agrees to look only to the Corporation
for the payment of all reasonable fees, charges and expenses of the Trustee and
any Paying Agent as provided in the Lease. Upon the occurrence of an Event of
Default and during its continuance, the Trustee shall have a lien with right of
payment prior to payment on account of principal of or interest on any Bond,
upon all moneys in its possession under any provisions hereof for the foregoing
reasonable advances, fees, costs and expenses incurred.

      SECTION 1003. NOTICE TO BONDOWNERS IF DEFAULT OCCURS. If a default occurs
of which the Trustee is by SECTION 1001(h) hereof required to take notice or if
notice of default be given as in said SUBSECTION (h) provided, then the Trustee
shall give written notice thereof to the last known Owners of all Bonds then
Outstanding as shown by the bond registration books required by SECTION 206 to
be kept at the principal office of the Trustee.

      SECTION 1004. INTERVENTION BY THE TRUSTEE. In any judicial proceeding to
which the City is a party and which, in the opinion of the Trustee and its
counsel, has a substantial bearing on the interests of Owners of the Bonds, the
Trustee may intervene on behalf of Bondowners and, subject to the provisions of
SECTION 1001(l) hereof, shall do so if requested in writing by the Owners of at
least 25% of the aggregate principal amount of Bonds then Outstanding.

      SECTION 1005. SUCCESSOR TRUSTEE UPON MERGER, CONSOLIDATION OR SALE. Any
corporation or association into which the Trustee may be merged or converted or
with or into which it may be consolidated, or to which it may sell or transfer
its corporate trust business and assets as a whole or substantially as a whole,
or any corporation or association resulting from any merger, conversion, sale,
consolidation or transfer to which it is a party, shall be and become successor
Trustee hereunder and shall be vested with all the trusts, powers, rights,
obligations, duties, remedies, immunities and privileges hereunder as was its

                                      -33-
<PAGE>

predecessor, without the execution or filing of any instrument or any further
act on the part of any of the parties hereto.

      SECTION 1006. RESIGNATION OF TRUSTEE. The Trustee and any successor
Trustee may at any time resign from the trusts hereby created by giving 30 days'
written notice to the City, the Corporation and the Bondowners, and such
resignation shall take effect at the end of such 30 days, or upon the earlier
appointment of a successor Trustee by the Bondowners or by the City.

      SECTION 1007. REMOVAL OF TRUSTEE. The Trustee may be removed at any time,
with or without cause, by an instrument or concurrent instruments in writing
delivered to the Trustee, the City and the Corporation and signed by the Owners
of a majority in aggregate principal amount of bonds then Outstanding.

      SECTION 1008. APPOINTMENT OF SUCCESSOR TRUSTEE. In case the Trustee
hereunder shall resign or be removed, or shall otherwise become incapable of
acting hereunder, or in case it shall be taken under the control of any public
officer or officers or of a receiver appointed by a court, a successor Trustee
reasonably acceptable to the City and the Corporation may be appointed by the
Owners of a majority in aggregate principal amount of Bonds then Outstanding, by
an instrument or concurrent instruments in writing; provided, nevertheless, that
in case of such vacancy, the City, by an instrument executed and signed by its
Mayor and attested by its Clerk under its seal, may appoint a temporary Trustee
to fill such vacancy until a successor Trustee shall be appointed by the
Bondowners in the manner above provided. Any such temporary Trustee so appointed
by the City shall hold such appointment no longer than 90 days without
Corporation approval and shall immediately and without further acts be
superseded by the successor Trustee so appointed by such Bondowners. Every such
Trustee appointed pursuant to the provisions of this Section shall be a trust
company or bank in good standing and qualified to accept such trust having a
reported capital, surplus and undivided profits of not less than $5,000,000.

      SECTION 1009. VESTING OF TRUSTS IN SUCCESSOR TRUSTEE. Every successor
Trustee appointed hereunder shall execute, acknowledge and deliver to its
predecessor and also to the City and the Corporation an instrument in writing
accepting such appointment hereunder, and thereupon such successor shall,
without any further act, deed or conveyance, become fully vested with all the
trusts, powers, rights, obligations, duties, remedies, immunities and privileges
of its predecessor; but such predecessor shall, nevertheless, on the written
request of the City, execute and deliver an instrument transferring to such
successor Trustee all the trusts, powers, rights, obligations, duties, remedies,
immunities and privileges of such predecessor hereunder; every predecessor
Trustee shall deliver all securities and moneys held by it as Trustee hereunder
to its successor. Should any instrument in writing from the City be required by
any successor Trustee for more fully and certainly vesting in such successor the
trusts, powers, rights, obligations, duties, remedies, immunities and privileges
hereby vested in the predecessor, any and all such instruments in writing shall,
on request, be executed, acknowledged and delivered by the City.

      SECTION 1010. RIGHT OF TRUSTEE TO PAY TAXES AND OTHER CHARGES. In case any
tax, assessment or governmental or other charge upon, or insurance premium with
respect to, any part of the Project is not paid as required herein or in the
Lease (subject to applicable notice and cure periods), the Trustee may pay such
tax, assessment or governmental charge or insurance premium, without prejudice,
however, to any rights of the Trustee or the Bondowners hereunder arising in
consequence of such failure; any amount at any time so paid under this Section,
with interest thereon from the date of payment at the rate of 10% per annum,
shall become an additional obligation secured by this Indenture, and the same
shall be given a preference in payment over any payment of principal of or
interest on the Bonds, and shall be paid out of the proceeds of rents, revenues
and receipts collected from the Project, if not otherwise caused to be paid; but
the Trustee

                                      -34-
<PAGE>

shall be under no obligation to make any such payment unless it shall have been
requested to do so by the Owners of at least 25% of the aggregate principal
amount of Bonds then Outstanding and shall have been provided adequate funds for
the purpose of such payment.

      SECTION 1011. TRUST ESTATE MAY BE VESTED IN CO-TRUSTEE.

      (a) It is the purpose of this Indenture that there shall be no violation
of any law of any jurisdiction (including particularly the State of Kansas)
denying or restricting the right of banking corporations or associations to
transact business as trustee in such jurisdiction. It is recognized that in case
of litigation under this Indenture or the Lease, and in particular in case of
the enforcement of either on default or in case the Trustee deems that by reason
of any present or future law of any jurisdiction it may not exercise any of the
powers, rights or remedies herein granted to the Trustee, or take any other
action which may be desirable or necessary in connection therewith, it may be
necessary or desirable that the Trustee appoint an additional individual or
institution as a co-trustee or separate trustee, and the Trustee is hereby
authorized to appoint such co-trustee or separate trustee.

      (b) In the event that the Trustee appoints an additional individual or
institution as a co-trustee or separate trustee (which appointment shall be
subject to the approval of the Corporation), each and every remedy, power,
right, claim, demand, cause of action, immunity, title, interest and lien
expressed or intended by this Indenture to be exercised by the Trustee with
respect thereto shall be exercisable by such co-trustee or separate trustee but
only to the extent necessary to enable such co-trustee or separate trustee to
exercise such powers, rights and remedies, and every covenant and obligation
necessary to the exercise thereof by such co-trustee or separate trustee shall
run to and be enforceable by either of them.

      (c) Should any deed, conveyance or instrument in writing from the City be
required by the co-trustee or separate trustee so appointed by the Trustee for
more fully and certainly vesting in and confirming to such co-trustee such
properties, rights, powers, trusts, duties and obligations, any and all such
deeds, conveyances and instruments in writing shall, on request, be executed,
acknowledged and delivered by the City.

      (d) In case any co-trustee or separate trustee shall die, become incapable
of acting, resign or be removed, all the properties, rights, powers, trusts,
duties and obligations of such co-trustee or separate trustee, so far as
permitted by law, shall vest in and be exercised by the Trustee until the
appointment of a successor to such co-trustee or separate trustee.

      SECTION 1012. ANNUAL ACCOUNTING. The Trustee shall render an annual
accounting to the City, the Corporation and to any Bondowner requesting the same
within 90 days following the end of each annual period and, upon the request of
the Corporation or the Bondowner, a monthly accounting to the Corporation and
the Bondowner within 30 days following the end of each monthly period, showing
in reasonable detail all financial transactions relating to the Trust Estate
made by the Trustee during the accounting period and the balance in any funds or
accounts created by this Indenture as of the beginning and close of such
accounting period.

      SECTION 1013. PERFORMANCE OF DUTIES UNDER THE LEASE. The Trustee hereby
accepts and agrees to perform all duties assigned to it under the Lease.

                                      -35-
<PAGE>

                                   ARTICLE XI

                             SUPPLEMENTAL INDENTURES

      SECTION 1101. SUPPLEMENTAL INDENTURES NOT REQUIRING CONSENT OF BONDOWNERS.
The City and the Trustee may from time to time, without the consent of or notice
to any of the Bondowners, enter into such Supplemental Indenture or Supplemental
Indentures as shall not be inconsistent with the terms and provisions hereof,
for any one or more of the following purposes:

      (a) To cure any ambiguity or formal defect or omission in this Indenture,
or to make any other change not prejudicial to the Bondowners;

      (b) To grant to or confer upon the Trustee for the benefit of the
Bondowners any additional rights, remedies, powers or authority that may
lawfully be granted to or conferred upon the Bondowners or the Trustee or either
of them;

      (c) To more precisely identify the Project or to substitute or add
additional property thereto;

      (d) To subject to this Indenture additional revenues, properties or
collateral; or

      (e) To issue Refunding Bonds as provided in SECTION 209 hereof, provided
such Refunding Bonds contain substantially similar or superior terms than the
original Bonds.

      SECTION 1102. SUPPLEMENTAL INDENTURES REQUIRING CONSENT OF BONDOWNERS.

      (a) Exclusive of Supplemental Indentures covered by SECTION 1101 hereof
and subject to the terms and provisions contained in this Section, and not
otherwise, the Owners of not less than 50% in aggregate principal amount of the
Bonds then Outstanding shall have the right, from time to time, anything
contained in this Indenture to the contrary notwithstanding, to consent to and
approve the execution by the City and the Trustee of such other Supplemental
Indenture or Supplemental Indentures as shall be deemed necessary and desirable
by the City for the purpose of modifying, amending, adding to or rescinding, in
any particular, any of the terms or provisions contained in this Indenture or in
any Supplemental Indenture; provided, however, that nothing in this Section
contained shall permit or be construed as permitting (1) an extension of the
maturity or a shortening of the redemption date of the principal of or the
interest, if any, on any Bond issued hereunder, (2) a reduction in the principal
amount of any Bond or the rate of interest thereon, if any, (3) a privilege or
priority of any Bond or Bonds over any other Bond or Bonds, or (4) a reduction
in the aggregate principal amount of Bonds the Owners of which are required for
consent to any such Supplemental Indenture.

      (b) If at the time the City shall request the Trustee to enter into any
such Supplemental Indenture for any of the purposes of this Section, the Trustee
shall cause notice of the proposed execution of such Supplemental Indenture to
be mailed to each Bondowner as shown on the bond registration books required by
SECTION 206 hereof. Such notice shall briefly set forth the nature of the
proposed Supplemental Indenture and shall state that copies thereof are on file
at the principal corporate trust office of the Trustee for inspection by all
Bondowners. If within 60 days or such longer period as may be prescribed by the
City following the mailing and final publication of such notice, the Owners of
not less than 50% in aggregate principal amount of the Bonds Outstanding at the
time of the execution of any such Supplemental Indenture shall have consented to
and approved the execution thereof as herein provided, no Owner of any Bond
shall have any right to object to any of the terms and provisions contained
therein, or the operation thereof, or in

                                      -36-
<PAGE>

any manner to question the propriety of the execution thereof, or to enjoin or
restrain the Trustee or the City from executing the same or from taking any
action pursuant to the provisions thereof.

      SECTION 1103. CORPORATION'S CONSENT TO SUPPLEMENTAL INDENTURES. Anything
herein to the contrary notwithstanding, a Supplemental Indenture under this
Article which affects any rights of the Corporation shall not become effective
unless and until the Corporation shall have consented in writing to the
execution and delivery of such Supplemental Indenture, provided that receipt by
the Trustee of a Supplemental Lease executed by the Corporation in connection
with the issuance of Additional Bonds under SECTION 209 hereof shall be deemed
to be the consent of the Corporation to the execution of a Supplemental
Indenture pursuant to SECTION 209 hereof, respectively. In this regard, the
Trustee shall cause notice of the proposed execution and delivery of any such
Supplemental Indenture (other than a Supplemental Indenture proposed to be
executed and delivered pursuant to SECTION 209 hereof) together with a copy of
the proposed Supplemental Indenture to be mailed to the Corporation at least 15
days prior to the proposed date of execution and delivery of any such
Supplemental Indenture.

                                   ARTICLE XII

                               SUPPLEMENTAL LEASES

      SECTION 1201. SUPPLEMENTAL LEASES NOT REQUIRING CONSENT OF BONDOWNERS. The
City and the Trustee shall, without the consent of or notice to the Bondowners,
consent to the execution of any Supplemental Lease or Supplemental Leases by the
City and the Corporation as may be required (a) by the provisions of the Lease
and this Indenture, (b) for the purpose of curing any ambiguity or formal defect
or omission in the Lease, (c) so as to more precisely identify the Project or
substitute or add additional property thereto, (d) in connection with the
issuance of Refunding Bonds under SECTION 209 hereof, (e) in connection with any
other change therein which, in the judgment of the Trustee, is not to the
material prejudice of the Trustee or the Bondowners.

      SECTION 1202. SUPPLEMENTAL LEASES REQUIRING CONSENT OF BONDOWNERS. Except
for Supplemental Leases as provided for in SECTION 1201 hereof, neither the City
nor the Trustee shall consent to the execution of any Supplemental Lease or
Supplemental Leases by the City or the Corporation without the mailing of notice
and the obtaining of the written approval or consent of the Owners of not less
than 50% in aggregate principal amount of the Bonds at the time Outstanding
given and obtained as provided in SECTION 1102 hereof. If at any time the City
and the Corporation shall request the consent of the Trustee to any such
proposed Supplemental Lease, the Trustee shall cause notice of such proposed
Supplemental Lease to be mailed in the same manner as provided in SECTION 1102
hereof with respect to Supplemental Indentures. Such notice shall briefly set
forth the nature of such proposed Supplemental Lease and shall state that copies
of the same are on file in the principal office of the Trustee for inspection by
all Bondowners.

                                  ARTICLE XIII

                     SATISFACTION AND DISCHARGE OF INDENTURE

      SECTION 1301. SATISFACTION AND DISCHARGE OF THIS INDENTURE.

      (a) When the principal of and interest on all the Bonds shall have been
paid in accordance with their terms or provision has been made for such payment,
as provided in SECTION 1302 hereof, and provision

                                      -37-
<PAGE>

shall also be made for paying all other sums payable hereunder, including the
reasonable fees and expenses of the Trustee, the City and Paying Agent to the
date of retirement of the Bonds, then the right, title and interest of the
Trustee in respect hereof shall thereupon cease, determine and be void, and
thereupon the Trustee shall cancel, discharge and release this Indenture and
shall execute, acknowledge and deliver to the City such instruments of
satisfaction and discharge or release as shall be requisite to evidence such
release and the satisfaction and discharge of this Indenture, and shall assign
and deliver to the City any property at the time subject to this Indenture which
may then be in its possession, except amounts in the Bond Fund required to be
paid to the Corporation under SECTION 606 hereof and except funds or securities
in which such funds are invested held by the Trustee for the payment of the
principal of and interest on the Bonds.

      (b) The City is hereby authorized to accept a certificate by the Trustee
that the whole amount of the principal and interest, if any, so due and payable
upon all of the Bonds or coupons then Outstanding has been paid or such payment
provided for in accordance with SECTION 1302 hereof as evidence of satisfaction
of this Indenture, and upon receipt thereof shall cancel and erase the
inscription of this Indenture from its records.

      SECTION 1302. BONDS DEEMED TO BE PAID.

      (a) Bonds shall be deemed to be paid within the meaning of this Article
when payment of the principal of and interest thereon to the due date thereof
(whether such due date be by reason of maturity or upon redemption as provided
in this Indenture, or otherwise), either (1) shall have been made or caused to
be made in accordance with the terms thereof, or (2) shall have been provided
for by depositing with the Trustee in trust and irrevocably set aside
exclusively for such payment (i) moneys sufficient to make such payment or (ii)
Government Securities maturing as to principal and interest in such amount and
at such times as will insure the availability of sufficient moneys to make such
payment. At such time as a Bond shall be deemed to be paid hereunder, as
aforesaid, it shall no longer be secured by or entitled to the benefits of this
Indenture, except for the purposes of such payment from such moneys or
Government Securities.

      (b) Notwithstanding the foregoing, in the case of Bonds which by their
terms may be redeemed prior to the stated maturities thereof, no deposit under
clause (2) of the immediately preceding paragraph shall be deemed a payment of
such Bonds as aforesaid until, as to all such Bonds which are to be redeemed
prior to their respective stated maturities, proper notice of such redemption
shall have been given in accordance with ARTICLE III of this Indenture or
irrevocable instructions shall have been given to the Trustee to give such
notice.

      (c) Notwithstanding any provision of any other section of this Indenture
which may be contrary to the provisions of this Section, all moneys or
Government Securities set aside and held in trust pursuant to the provisions of
this Section for the payment of Bonds and coupons shall be applied to and used
solely for the payment of the particular Bonds and coupons, if any, with respect
to which such moneys and Government Securities have been so set aside in trust.

                                      -38-
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                                   ARTICLE XIV

                            MISCELLANEOUS PROVISIONS

      SECTION 1401. CONSENTS AND OTHER INSTRUMENTS BY BONDOWNERS.

      (a) Any consent, request, direction, approval, objection or other
instrument required by this Indenture to be signed and executed by the
Bondowners may be in any number of concurrent writings of similar tenor and may
be signed or executed by such Bondowners in person or by agent appointed in
writing. Proof of the execution of any such instrument or of the writing
appointing any such agent and of the ownership of Bonds, if made in the
following manner, shall be sufficient for any of the purposes of this Indenture,
and shall be conclusive in favor of the Trustee with regard to any action taken,
suffered or omitted under any such instrument, namely:

            (1) The fact and date of the execution by any person of any such
      instrument may be proved by the certificate of any officer in any
      jurisdiction who by law has power to take acknowledgements within such
      jurisdiction that the person signing such instrument acknowledged before
      him the execution thereof, or by affidavit of any witness to such
      execution.

            (2) The fact of ownership of Bonds and the amount or amounts,
      numbers and other identification of such Bonds, and the date of holding
      the same shall be proved by the registration books of the City maintained
      by the Trustee pursuant to SECTION 206 hereof.

      (b) In determining whether the Owners of the requisite principal amount of
Bonds Outstanding have given any request, demand, authorization, direction,
notice, consent or waiver under this Indenture, Bonds owned by the Corporation
or any affiliate of the Corporation, unless the Corporation or such affiliate
own 100% of the Bonds Outstanding, shall be disregarded and deemed not to be
Outstanding under this Indenture, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Bonds which the
Trustee knows to be so owned shall be so disregarded. For purposes of this
paragraph, the word "affiliate" means any person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Corporation; for the purposes of this definition, "control" means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms. Notwithstanding the foregoing, Bonds so owned which have been
pledged in good faith shall not be disregarded as aforesaid if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Bonds and that the pledgee is not the Corporation or any
affiliate of the Corporation.

      SECTION 1402. LIMITATION OF RIGHTS UNDER THIS INDENTURE. With the
exception of rights herein expressly conferred, nothing expressed or mentioned
in or to be implied from this Indenture or the Bonds is intended or shall be
construed to give any person other than the parties hereto, and the Owners of
the Bonds, if any, any right, remedy or claim under or in respect to this
Indenture, this Indenture and all of the covenants, conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of the
parties hereto and the Owners of the Bonds, as herein provided.

      SECTION 1403. NOTICES. It shall be sufficient service of any notice,
request, complaint, demand or other paper required by this Indenture to be given
or filed with the City, the Trustee, the Corporation or Bondowners if the same
shall be duly mailed by registered or certified mail addressed:

                                      -39-
<PAGE>

            (a) To the City:

                      City of Olathe, Kansas
                      City Hall
                      100 East Santa Fe
                      Olathe, Kansas  66061
                      Attention:  City Clerk

            (b) To the Corporation:

                      Pacific Sunwear Stores Corp.
                      3450 East Miraloma Avenue
                      Anaheim, California  92806
                      Attention:  Director/Treasurer

            (c) To the Trustee:

                      U.S. Bank National Association
                      633 W. Fifth Street, 24th Floor
                      Los Angeles, California  90071
                      Attention:  Corporate Trust Services

            (d) To the Bondowners if the same shall be duly mailed by registered
      or certified mail addressed to each of the Owners of Bonds at the time
      Outstanding as shown by the bond registration books required by SECTION
      206 hereof to be kept at the principal corporate trust office of the
      Trustee.

      SECTION 1404. SEVERABILITY. If any provision of this Indenture shall be
held or deemed to be invalid, inoperative or unenforceable as applied in any
particular case in any jurisdiction or jurisdictions or in all jurisdictions, or
in all cases because it conflicts with any other provision or provisions hereof
or any constitution or statute or rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the provision
in question inoperative or unenforceable in any other case or circumstance, or
of rendering any other provision or provisions herein contained invalid,
inoperative or unenforceable to any extent whatever.

      SECTION 1405. EXECUTION IN COUNTERPARTS. This Indenture may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument.

      SECTION 1406. GOVERNING LAW. This Indenture shall be governed exclusively
by and construed in accordance with the applicable laws of the State of Kansas.

      SECTION 1407. ELECTRONIC STORAGE. The parties agree that the transaction
described herein may be conducted and related documents may be stored by
electronic means.

                    [Remainder of page intentionally blank.]

                                      -40-
<PAGE>

      IN WITNESS WHEREOF, the City of Olathe, Kansas, has caused this Indenture
to be signed in its name and behalf by its Mayor and the seal of the City to be
hereunto affixed and attested by its City Clerk, and to evidence its acceptance
of the trusts hereby created, U.S. Bank National Association has caused this
Indenture to be signed in its name and behalf by its duly authorized officer and
its official seal to be hereunto affixed and attested by its Secretary or
Assistant Secretary, all as of the date first above written.

                                                  CITY OF OLATHE, KANSAS

                                                  By:      /s/  MICHAEL COPELAND
                                                      --------------------------
                                                           Mayor

[SEAL]

ATTEST:

By:      /s/  DEBRA S. GRAGG
   -----------------------------------------
         City Clerk

Indenture
PacSun Project, Series 2007

                                      S-1
<PAGE>

                                                 U.S. BANK NATIONAL ASSOCIATION,
                                                 as Trustee

                                                 By:   /s/  CLAUDE ACOBA
                                                     --------------------------
                                                       Claude Acoba
                                                       Assistant Vice President

Indenture
PacSun Project, Series 2007

                                      S-2<PAGE>

                                                                    EXHIBIT 10.2

                                                                  EXECUTION COPY

================================================================================

                             CITY OF OLATHE, KANSAS,
                                    AS LESSOR

                                       AND

                          PACIFIC SUNWEAR STORES CORP.,
                                    AS LESSEE

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

                                 LEASE AGREEMENT

                            DATED AS OF JULY 1, 2007

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

                                  RELATING TO:

                                   $24,500,000
                      (AGGREGATE MAXIMUM PRINCIPAL AMOUNT)
                             CITY OF OLATHE, KANSAS
                            INDUSTRIAL REVENUE BONDS
                                (PACSUN PROJECT)
                                   SERIES 2007

================================================================================

THE INTEREST OF THE CITY OF OLATHE, KANSAS (THE "CITY") IN THIS LEASE AGREEMENT
HAS BEEN PLEDGED AND ASSIGNED TO U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE
UNDER THE TRUST INDENTURE DATED AS OF JULY 1, 2007, BETWEEN THE CITY AND THE
TRUSTEE.

<PAGE>

                                LEASE AGREEMENT

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>                                                                                                           <C>
                  Parties.................................................................................      1
                  Recitals ...............................................................................      1

                                                    ARTICLE I

                                                   DEFINITIONS

Section 1.1.      Definitions of Words and Terms..........................................................      1
Section 1.2.      Rules of Interpretation.................................................................      3

                                                    ARTICLE II

                                                 REPRESENTATIONS

Section 2.1.      Representations by the City.............................................................      3
Section 2.2.      Representations by the Corporation......................................................      4

                                                   ARTICLE III

                                               GRANTING PROVISIONS

Section 3.1.      Granting of Leasehold Estate............................................................      5
Section 3.2.      Lease Term..............................................................................      5
Section 3.3.      Possession and Use of the Project.......................................................      5

                                                   ARTICLE IV

                         PURCHASE, CONSTRUCTION, RENOVATION, INSTALLATION OF THE PROJECT

Section 4.1.      Issuance of the Bonds...................................................................      6
Section 4.2.      Purchase, Construction, Renovation, Installation of the Project.........................      6
Section 4.3.      Project Costs...........................................................................      7
Section 4.4.      Payment for Project Costs...............................................................      7
Section 4.5.      Establishment of Completion Date........................................................      7
Section 4.6.      Surplus or Deficiency in Construction Fund..............................................      8
Section 4.7.      Project Property of City................................................................      8

                                                    ARTICLE V

                                                 RENT PROVISIONS

Section 5.1.      Basic Rent..............................................................................      8
Section 5.2.      Additional Rent.........................................................................      9
</TABLE>

                                       (i)

<PAGE>

<TABLE>
<S>                                                                                                            <C>
Section 5.3.      Obligations of Corporation Absolute and Unconditional...................................      9
Section 5.4.      Prepayment of Basic Rent................................................................     10
Section 5.5.      Redemption of Bonds.....................................................................     10

                                                   ARTICLE VI

                                        MAINTENANCE, TAXES AND UTILITIES

Section 6.1.      Maintenance and Repairs.................................................................     10
Section 6.2.      Taxes, Assessments and Other Governmental Charges.......................................     10
Section 6.3.      Utilities...............................................................................     11
Section 6.4.      Ad Valorem Taxes........................................................................     11
Section 6.5.      Payment in Lieu of Taxes................................................................     11
Section 6.6.      Kansas Retailers' Sales Tax.............................................................     11

                                                   ARTICLE VII

                                                    INSURANCE

Section 7.1.      Title Insurance.........................................................................     12
Section 7.2.      Casualty Insurance......................................................................     12
Section 7.3.      Public Liability Insurance..............................................................     13
Section 7.4.      Blanket Insurance Policies..............................................................     14
Section 7.5.      Indemnification of Trustee..............................................................     14

                                                  ARTICLE VIII

                                            ALTERATION OF THE PROJECT

Section 8.1.      Additions, Modifications and Improvements of the Project................................     14
Section 8.3.      Additional Improvements on the Project Site.............................................     14
Section 8.4.      Permits and Authorizations..............................................................     15
Section 8.5.      Mechanics' Liens........................................................................     15
Section 8.6.      Option to Purchase Unimproved Portions of the Project Site..............................     15

                                                   ARTICLE IX

                                      DAMAGE, DESTRUCTION AND CONDEMNATION

Section 9.1.      Damage or Destruction...................................................................     16
Section 9.2.      Condemnation............................................................................     18

                                                    ARTICLE X

                                                SPECIAL COVENANTS

Section 10.1.     No Warranty of Condition or Suitability by the City; Exculpation and Indemnification....     19
Section 10.2.     Surrender of Possession.................................................................     20
Section 10.3.     City's Right of Access to the Project...................................................     20
Section 10.4.     Granting of Easements; Leasehold Mortgages..............................................     20
</TABLE>

                                      (ii)

<PAGE>

<TABLE>
<S>                                                                                                            <C>
Section 10.5.     Indemnification of City and Trustee.....................................................     23
Section 10.6.     Depreciation, Investment Tax Credit and Other Tax Benefits..............................     24
Section 10.7.     Corporation to Maintain its Corporate Existence.........................................     24
Section 10.8.     Security Interests......................................................................     24

                                                   ARTICLE XI

                                  OPTION AND OBLIGATION TO PURCHASE THE PROJECT

Section 11.1.     Option to Purchase the Project..........................................................     24
Section 11.2.     Conveyance of the Project...............................................................     25
Section 11.3.     Relative Position of Option and Indenture...............................................     25
Section 11.4.     Obligation to Purchase the Project......................................................     25

                                                   ARTICLE XII

                                              DEFAULTS AND REMEDIES

Section 12.1.     Events of Default.......................................................................     26
Section 12.2.     Remedies on Default.....................................................................     26
Section 12.3.     Survival of Obligations.................................................................     27
Section 12.4.     Limitation of Liability and Indemnity...................................................     28
Section 12.5.     Performance of the Corporation's Obligations by the City................................     28
Section 12.6.     Rights and Remedies Cumulative..........................................................     28
Section 12.7.     Waiver of Breach........................................................................     28
Section 12.8.     Notice of Defaults Under Section 12.1; Opportunity of Corporation to Cure Defaults......     28
Section 12.9.     Trustee's Exercise of the City's Remedies...............................................     29

                                                  ARTICLE XIII

                                             ASSIGNMENT AND SUBLEASE

Section 13.1.     Assignment; Sublease....................................................................     29
Section 13.2.     Assignment of Revenues by City..........................................................     30
Section 13.3.     Prohibition Against Fee Mortgage of Project.............................................     30
Section 13.4.     Restrictions on Sale or Encumbrance of Project by City..................................     30

                                                   ARTICLE XIV

                                      AMENDMENTS, CHANGES AND MODIFICATIONS

Section 14.1.     Amendments, Changes and Modifications...................................................     31

                                                   ARTICLE XV

                                            MISCELLANEOUS PROVISIONS

Section 15.1.     Notices.................................................................................     31
Section 15.2.     City Shall Not Unreasonably Withhold Consents and Approvals.............................     31
Section 15.3.     Net Lease...............................................................................     32
</TABLE>

                                      (iii)

<PAGE>

<TABLE>
<S>                                                                                                            <C>
Section 15.4.     No Pecuniary Liability..................................................................     31
Section 15.5.     Governing Law...........................................................................     32
Section 15.6.     Binding Effect..........................................................................     32
Section 15.7.     Electronic Storage......................................................................     32
Section 15.8.     Severability............................................................................     32
Section 15.9.     Execution in Counterparts...............................................................     32

                  Signatures and Seals
                  Acknowledgments

                  Exhibit A Project Improvements
                  Exhibit B Project Site
                  Exhibit C Form of Requisition Certificate
</TABLE>

                                      (iv)

<PAGE>

                                 LEASE AGREEMENT

      THIS LEASE AGREEMENT dated as of July 1, 2007 (the "Lease"), between the
CITY OF OLATHE, KANSAS, a municipal corporation organized and existing under the
laws of the State of Kansas (the "City"), as lessor, and PACIFIC SUNWEAR STORES
CORP., a California corporation (the "Corporation"), as lessee;

      WITNESSETH:

      WHEREAS, the City is authorized under the provisions of K.S.A. 12-1740 to
12-1749d, inclusive, as amended (the "Act"), to purchase, acquire, construct,
improve, equip, remodel, sell and lease certain facilities within its
jurisdiction for commercial purposes, and to issue revenue bonds for the purpose
of paying the cost of such facilities, and to pledge the income and revenues to
be derived from the operation of such facilities to secure the payment of the
principal of and interest on such bonds;

      WHEREAS, pursuant to the Act, the governing body of the City has
heretofore passed Ordinance No. 07-34 (the "Ordinance") authorizing the City to
issue its Industrial Revenue Bonds (PacSun Project), Series 2007 (the "Bonds"),
the Bonds to be issued in the aggregate maximum principal amount of $24,500,000
for the purpose of acquiring, purchasing, constructing and installing a
commercial project, consisting of a distribution facility, including land,
buildings, structures, improvements and fixtures as hereinafter more fully
described (the "Project"), and authorizing the City to lease the Project to the
Corporation;

      WHEREAS, pursuant to the Ordinance, the City is authorized to enter into a
Trust Indenture of even date herewith (the "Indenture"), with U.S. Bank National
Association, a national banking association, as trustee (the "Trustee"), for the
purpose of issuing and securing the Bonds, as therein provided, and to enter
into this Lease with the Corporation under which the City will acquire,
purchase, construct, improve and remodel the Project and will lease the Project
to the Corporation in consideration of rental payments by the Corporation which
will be sufficient to pay the principal of and interest on the Bonds; and

      WHEREAS, pursuant to the foregoing, the City desires to lease the Project
to the Corporation and the Corporation desires to lease the Project from the
City, for the rentals and upon the terms and conditions hereinafter set forth.

      NOW, THEREFORE, in consideration of the premises and the mutual
representations, covenants and agreements herein contained, the City and the
Corporation do hereby represent, covenant and agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

      SECTION 1.1. DEFINITIONS OF WORDS AND TERMS. In addition to any words and
terms defined elsewhere in this Lease and the words and terms defined in SECTION
101 of the Indenture which definitions are hereby incorporated herein by
reference, and terms defined, the following words and terms as used in this
Lease shall have the following meanings:

<PAGE>

      "ADDITIONAL RENT" means the additional rental described in SECTIONS 5.2
and 6.2 of this Lease and, in addition, all payments required to be made to the
Johnson County Treasurer in lieu of general ad valorem and personal property
taxes pursuant to the Tax Abatement Agreement.

      "BASIC RENT" means the rental described in SECTION 5.1 of this Lease.

      "EVENT OF DEFAULT" means any Event of Default as described in SECTION 12.1
of this Lease.

      "FULL INSURABLE VALUE" means the lesser of: (i) the actual replacement
cost of the Project less physical depreciation and exclusive of land,
excavations, footings, foundation and parking lots as determined in accordance
with SECTION 7.2(a) hereof, or (ii) an amount at least sufficient to avoid the
effect of any coinsurance provisions of the applicable fire and casualty
insurance policy.

      "INDENTURE" means the Trust Indenture dated as of July 1, 2007, between
the City and the Trustee, as from time to time amended and supplemented in
accordance with the provisions thereof.

      "LEASE" means this Lease Agreement, between the City and the Corporation,
as from time to time amended and supplemented in accordance with the provisions
of this Lease and ARTICLE XII of the Indenture.

      "LEASEHOLD MORTGAGE" means any leasehold mortgage permitted pursuant to
the provisions of SECTION 10.4(b) hereof.

      "LEASE TERM" means the period from the effective date of this Lease until
the expiration thereof pursuant to SECTION 3.2 of this Lease.

      "NET PROCEEDS" means, when used with respect to any insurance or
condemnation award with respect to the Project, the gross proceeds from the
insurance or condemnation award with respect to which that term is used
remaining after payment of all expenses (including attorneys' fees, trustee's
fees and any extraordinary expenses of the City and the Trustee) incurred in the
collection of such gross proceeds.

      "PERMITTED ENCUMBRANCES" means, as of any particular time (a) liens for ad
valorem taxes and special assessments not then delinquent, (b) the Indenture,
(c) this Lease, (d) utility, access and other easements and rights-of-way,
mineral rights, restrictions, exceptions and encumbrances that will not
materially interfere with or impair the operations being conducted on the
Project Site or easements granted to the City, (e) such minor defects,
irregularities, encumbrances, easements, mechanic's liens, rights-of-way and
clouds on title as normally exist with respect to properties similar in
character to the Project and as do not in the aggregate materially impair the
property affected thereby for the purpose for which it was acquired or is held
by the City, (f) any Leasehold Mortgage, and (g) any other lien, encumbrance,
lease, easements, restrictions or covenants consented to by the Owner of 100% of
the principal amount of the Bonds.

      "PLANS AND SPECIFICATIONS" means the plans and specifications prepared for
and showing the Project, as amended by the Corporation from time to time prior
to the Completion Date, the same being duly certified by the Corporation, and on
file at the principal office of the Corporation in Olathe, Kansas and which
shall be available for reasonable inspection by the City, the Trustee and their
duly appointed representatives.

      "PROJECT IMPROVEMENTS" means all buildings, structures, improvements and
fixtures located on or to be acquired, purchased, constructed, improved or
remodeled on the Project Site pursuant to ARTICLE IV

                                      -2-
<PAGE>

hereof, as described in EXHIBIT A attached hereto and by this reference made a
part hereof, and all additions, alterations, modifications and improvements
thereof made pursuant to this Lease.

      "PROJECT SITE" means all of the real estate described in EXHIBIT B
attached hereto and by this reference made a part hereof.

      "TRUSTEE" means U.S. Bank National Association in the City of Los Angeles,
California, a national banking association, duly organized and existing under
the laws of the United States of America, and its successor or successors and
any other corporation which at the time may be substituted in its place pursuant
to and at the time serving as Trustee under the Indenture.

      SECTION 1.2. RULES OF INTERPRETATION.

      (a) Words of the masculine gender shall be deemed and construed to include
correlative words of the feminine and neuter genders.

      (b) Unless the context shall otherwise indicate, words importing the
singular number shall include the plural and vice versa, and words importing
persons shall include firms, associations and corporations, including
governmental entities, as well as natural persons.

      (c) Wherever in this Lease it is provided that either party shall or will
make any payment or perform or refrain from performing any act or obligation,
each such provision shall, even though not so expressed, be construed as an
express covenant to make such payment or to perform, or not to perform, as the
case may be, such act or obligation.

      (d) All references in this instrument to designated "Articles," "Sections"
and other subdivisions are, unless otherwise specified, to the designated
Articles, Sections and subdivisions of this instrument as originally executed.
The words "herein," "hereof," "hereunder" and other words of similar import
refer to this Lease Agreement as a whole and not to any particular Article,
Section or other subdivision.

      (e) The Table of Contents and the Article and Section headings of this
Lease shall not be treated as a part of this Lease or as affecting the true
meaning of the provisions hereof.

      (f) Wherever in this Lease the words "the Corporation shall" are used,
such words shall obligate the Corporation to take such action or to cause such
action to be taken or not taken to the extent such action is not directly within
the control of the Corporation.

                                   ARTICLE II

                                 REPRESENTATIONS

      SECTION 2.1. REPRESENTATIONS BY THE CITY. The City makes the following
representations as the basis for the undertakings on its part herein contained:

      (a) The City is a municipal corporation duly organized and validly
existing under the laws of the State of Kansas (the "State"). Under the
provisions of the Act, the City has lawful power and authority to enter into the
transactions contemplated by this Lease and to carry out its obligations
hereunder. By

                                      -3-
<PAGE>

proper action of its governing body, the City has been duly authorized to
execute and deliver this Lease, acting by and through its duly authorized
officers.

      (b) The City proposes to acquire the Project Site, subject to Permitted
Encumbrances, and proposes to acquire, purchase, construct, improve and remodel
or cause to be acquired, purchased, constructed, improved and remodeled on the
Project Site the Project Improvements. The City proposes to lease the Project to
the Corporation and sell the Project to the Corporation if the Corporation
exercises its option to purchase the Project, all for the purpose of furthering
the public purposes of the Act, and the governing body of the City has found and
determined that the acquisition, purchase, construction, improving and
remodeling of the Project will further the public purposes of the Act.

      (c) To finance the costs of the Project, the City proposes to issue the
Bonds which will be scheduled to mature as set forth in ARTICLE II of the
Indenture and will be subject to redemption prior to maturity in accordance with
the provisions of ARTICLE III of the Indenture.

      (d) The Bonds are to be issued under and secured by the Indenture,
pursuant to which the Project and the net earnings therefrom, including all
rents, revenues and receipts to be derived by the City from the leasing or sale
of the Project, will be pledged and assigned to the Trustee as security for
payment of the principal of and interest on the Bonds.

      (e) The City will not mortgage the Project or pledge the revenues derived
therefrom for any bonds or other obligations other than the Bonds except with
the written consent of the Authorized Corporation Representative.

      (f) The City shall have no authority to operate the Project as a business
or in any other manner except as the lessor thereof.

      (g) The acquisition, purchase, construction, improvement and remodeling of
the Project and the leasing of the Project by the City to the Corporation will
further the public purposes of the Act.

      (h) No member of the governing body of the City or any other officer of
the City has any significant or conflicting interest, financial, employment or
otherwise, in the Corporation or in the transactions contemplated hereby.

      SECTION 2.2. REPRESENTATIONS BY THE CORPORATION. The Corporation makes the
following representations as the basis for the undertakings on its part herein
contained:

      (a) The Corporation is a corporation validly existing and in good standing
under the laws of the State of California and duly qualified to do business in
the State of Kansas.

      (b) The Corporation has lawful power and authority to enter into this
Lease and to carry out its obligations hereunder and by proper corporate action
of its Board of Directors, the Corporation has been duly authorized to execute
and deliver this Lease, acting by and through its duly authorized officers.

      (c) The execution and delivery of this Lease, the consummation of the
transactions contemplated hereby, and the performance of or compliance with the
terms and conditions of this Lease by the Corporation will not conflict with or
result in a material breach of any of the terms, conditions or provisions of, or
constitute a material default under, any mortgage, deed of trust, lease or any
other corporate restrictions or any agreement or instrument to which the
Corporation is a party or by which it or any of its

                                      -4-
<PAGE>

property is bound, or the Corporation's Articles of Incorporation or Bylaws or
any order, rule or regulation applicable to the Corporation or any of its
property of any court or governmental body, or constitute a material default
under any of the foregoing, or result in the creation or imposition of any
prohibited lien, charge or encumbrance of any nature whatsoever upon any of the
property or assets of the Corporation under the terms of any instrument or
agreement to which the Corporation is a party.

      (d) The Project will comply with all presently applicable building and
zoning, health, environmental and safety ordinances and laws, and to the best of
its knowledge, without independent investigation, the Project will comply with
all other applicable laws, rules and regulations.

      (e) The Project is located wholly within the corporate limits of the City
of Olathe, Kansas.

                                   ARTICLE III

                               GRANTING PROVISIONS

      SECTION 3.1. GRANTING OF LEASEHOLD ESTATE. The City hereby rents, leases
and lets the Project to the Corporation, subject to Permitted Encumbrances, and
the Corporation hereby rents, leases and hires the Project from the City,
subject to Permitted Encumbrances, for the rentals and upon and subject to the
terms and conditions herein contained.

      SECTION 3.2. LEASE TERM. This Lease shall become effective upon its
delivery, and subject to sooner termination pursuant to the provisions of this
Lease, shall have an initial term commencing as of the date of this Lease and
terminating on January 1, 2018.

      SECTION 3.3. POSSESSION AND USE OF THE PROJECT.

      (a) The City covenants and agrees that as long as neither the City nor the
Trustee has exercised any of the remedies set forth in SECTION 12.2(c) following
the occurrence and continuance of an Event of Default, the Corporation shall
have sole and exclusive possession of the Project (subject to Permitted
Encumbrances and the City's and the Trustee's right of access pursuant to
SECTION 10.3 hereof) and shall and may peaceably and quietly have, hold and
enjoy the Project during the Lease Term. The City covenants and agrees that it
will not take any action, other than expressly pursuant to ARTICLE XII of this
Lease, to prevent the Corporation from having quiet and peaceable possession and
enjoyment of the Project during the Lease Term and will, at the request and
expense of the Corporation, cooperate with the Corporation in order that the
Corporation may have quiet and peaceable possession and enjoyment of the Project
and will defend the Corporation's enjoyment and possession thereof against all
parties.

      (b) Subject to the provisions of this Section, the Corporation shall have
the right to use the Project for any lawful purpose allowed by law and
contemplated by the Act. The Corporation shall comply with all statutes, laws,
ordinances, orders, judgments, decrees, regulations, directions and requirements
of all federal, state, local and other governments or governmental authorities,
now or hereafter applicable to the Project or to any adjoining public ways, as
to the manner of use or the condition of the Project or of adjoining public
ways. The Corporation shall also comply with the mandatory requirements, rules
and regulations of all insurers under the policies carried under the provisions
of ARTICLE VII hereof. The Corporation shall pay all costs, expenses, claims,
fines, penalties and damages that may in any manner arise out of, or be imposed
as a result of, the failure of the Corporation to comply with the provisions of
this Section. Notwithstanding any provision contained in this Section, however,
the Corporation shall have the

                                      -5-
<PAGE>

right, at its own cost and expense, to contest or review by legal or other
appropriate procedures the validity, legality or application of any such
governmental statute, law, ordinance, order, judgment, decree, regulation,
direction or requirement, or any such requirement, rule or regulation of an
insurer, and during such contest or review the Corporation may refrain from
complying therewith.

                                   ARTICLE IV

                     PURCHASE, CONSTRUCTION, RENOVATION AND
                           INSTALLATION OF THE PROJECT

      SECTION 4.1. ISSUANCE OF THE BONDS.

      (a) In order to provide funds for the payment of the Project Costs, the
City agrees that it will issue, sell and cause to be delivered to the purchaser
thereof the Bonds in accordance with the provisions of the Indenture and the
Bond Purchase Agreement. The proceeds of the sale of the Bonds, when received,
shall be paid over to the Trustee for the account of the City. The Trustee shall
promptly deposit such proceeds, when received, as provided in the Indenture, to
be used and applied as hereinafter provided in this Article and in the
Indenture.

      (b) The City may authorize the issuance of Additional Bonds from time to
time upon the terms and conditions provided in SECTION 209 of the Indenture for
the purposes described therein.

      (c) If the Corporation is not in default hereunder, the City will, at the
request of the Corporation, from time to time, use its best efforts to issue the
amount of Additional Bonds specified by the Corporation; provided that the terms
of such Additional Bonds, the purchase price to be paid therefor and the manner
in which the proceeds therefrom are to be disbursed shall have been approved in
writing by the Corporation; provided further that the Corporation and the City
shall have entered into an amendment to this Lease to provide an increase in for
rent in an amount at least sufficient to pay principal and interest on the
Additional Bonds when due and the City shall have otherwise complied with the
provisions of the Indenture with respect to the issuance of such Additional
Bonds.

      SECTION 4.2. PURCHASE, CONSTRUCTION, RENOVATION AND INSTALLATION OF THE
PROJECT. The City and the Corporation agree that the City will and the
Corporation as the agent of the City shall, but solely from the Construction
Fund except as otherwise provided herein, acquire, purchase, construct, improve
and remodel the Project as follows:

      (a) Concurrently with the execution of this Lease, the City will acquire
the Project Site and any Project Improvements located on the Project Site and
which the Corporation desires to convey to the City, subject to the Permitted
Encumbrances. Concurrently with the execution of this Lease (1) a deed and any
other necessary instruments of transfer will be delivered to the City, (2) said
deed will be placed of record, and (3) the title insurance policies required by
ARTICLE VII hereof or commitments to issue such policies will be delivered to
the Trustee.

      (b) The Corporation will, on behalf of the City, acquire, purchase,
construct, improve and remodel the Project Improvements on the Project Site and
otherwise improve the Project Site substantially in accordance with the Plans
and Specifications. The Corporation may make minor changes in and to the
construction contracts and the Plans and Specifications incorporated therein
without the consent of the City. The Corporation shall notify the City in
writing of major changes. "Major changes" shall be any change that

                                      -6-
<PAGE>

has an estimated cost (increase or decrease) of $1,000,000. The Corporation
agrees that the aforesaid acquisition, purchase, construction, improvement and
remodeling will, with such changes and additions as may be made hereunder,
result in a project suitable for use by the Corporation for its purposes, and
that all real property described therein is necessary in connection with the
Project.

      (c) The Corporation agrees that it will use commercially reasonable and
good faith efforts to cause the acquisition, purchase, construction, improvement
and remodeling of the Project to be completed as soon as practicable with all
reasonable dispatch. In the event such acquisition, purchase, construction,
improvement and remodeling commences prior to the receipt of proceeds from the
sale of the Bonds, the Corporation agrees to advance all funds necessary for
such purpose. The Corporation shall seek reimbursement for all such funds
advanced.

      SECTION 4.3. PROJECT COSTS. The City hereby agrees to pay for, but solely
from the Construction Fund, and hereby authorizes and directs the Trustee to pay
for, but solely from the Construction Fund, all Project Costs upon receipt by
the Trustee of a certificate pursuant to SECTION 4.4 hereof. The term Project
Costs shall have the meaning set forth in the Indenture.

      SECTION 4.4. PAYMENT FOR PROJECT COSTS. All Project Costs as specified in
SECTION 4.3 hereof shall be paid by the Trustee from the Construction Fund as
more fully provided in the Indenture. The City hereby authorizes and directs the
Trustee to make disbursements from the Construction Fund, upon receipt by the
Trustee of certificates in substantially the form attached hereto as EXHIBIT E,
signed by an Authorized Corporation Representative:

            (a) requesting payment of a specified amount of such funds and
      directing to whom such amount shall be paid (whose name and address shall
      be stated);

            (b) describing in reasonable detail each item of Project Costs for
      which payment is being requested;

            (c) stating that each item for which payment is requested is or was
      necessary and appropriate in connection with the purchase, acquisition,
      construction, improvement or remodeling of the Project, has been properly
      incurred and is a proper charge against the Construction Fund, that the
      amount requested either has been paid, or is justly due, and has not been
      the basis of any previous requisition from the Construction Fund; and

            (d) stating that, except for the amounts, if any, stated in said
      certificate, to the best of their knowledge there are no outstanding
      statements which are then due and payable for labor, wages, materials,
      supplies or services in connection with the purchase, acquisition,
      construction, improving or remodeling of the Project which, if unpaid,
      might become the basis of a vendors', mechanics', laborers' or
      materialmen's statutory or other similar lien upon the Project or any part
      thereof, or setting out (i) all disputed statements and the reason for
      such disputes, and (ii) all statements in process but not yet presented to
      the Trustee for payment.

The Trustee may rely conclusively on any such certificate and shall not be
required to make any independent investigation in connection therewith.

      SECTION 4.5. ESTABLISHMENT OF COMPLETION DATE. The Completion Date shall
be evidenced to the Trustee by a certificate signed by the Authorized
Corporation Representative stating (a) that the acquisition, purchase,
construction, improvement and remodeling of the Project has been completed

                                      -7-
<PAGE>

substantially in accordance with the Plans and Specifications in all material
respects, (b) that all costs and expenses incurred in the acquisition, purchase,
construction, improvement and remodeling of the Project have been paid except
costs and expenses the payment of which is not yet due or is being retained or
contested in good faith by the Corporation, and (c) amounts to be retained by
Trustee with respect to item (b) above. Notwithstanding the foregoing, such
certificate shall state that it is given without prejudice to any rights against
third parties which exist at the date of such certificate or which may
subsequently come into being. The Corporation and the City agree to cooperate in
causing such certificate to be furnished to the Trustee.

      SECTION 4.6. SURPLUS OR DEFICIENCY IN CONSTRUCTION FUND.

      (a) Upon receipt of the certificate described in SECTION 4.5 hereof, the
Trustee shall, as provided in SECTION 504 of the Indenture, transfer any
remaining moneys then in the Construction Fund to the Bond Fund to be applied as
directed by the Corporation solely to (1) the payment of principal and premium,
if any, of the Bonds through the payment (including regularly scheduled
principal payments, if any) or redemption thereof at the earliest date
permissible under the terms of the Indenture, or (2) at the option of the
Corporation, to the purchase of Bonds at such earlier date or dates as the
Corporation may elect. Any amount so deposited in the Bond Fund may be invested
as permitted by SECTION 702 of the Indenture.

      (b) If the Construction Fund shall be insufficient to pay fully all
Project Costs and to complete the Project lien free, the Corporation shall pay,
in cash, the full amount of any such deficiency by making payments thereof
directly to the contractors and to the suppliers of materials and services as
the same shall become due, and the Corporation shall save the City and the
Trustee whole and harmless from any obligation to pay such deficiency.

      SECTION 4.7. PROJECT PROPERTY OF CITY. The Project Site and all Project
Improvements located thereon at the execution hereof and which the Corporation
desires to convey to the City, all work and materials on the Project
Improvements as such work progresses, and all additions or enlargements thereto
or thereof, the Project as fully completed, anything under this Lease which
becomes, is deemed to be, or constitutes a part of the Project, and the Project
as repaired, rebuilt, rearranged, restored or replaced by the Corporation under
the provisions of this Lease, except as otherwise specifically provided herein,
shall immediately when erected or installed become the absolute property of the
City, subject only to Permitted Encumbrances.

                                    ARTICLE V

                                 RENT PROVISIONS

      SECTION 5.1. BASIC RENT. The Corporation covenants and agrees to pay to
the Trustee in same day funds for the account of the City during this Lease
Term, for deposit in the Bond Fund on or before 11:00 A.M., Trustee's local
time, on each January 1 and July 1, commencing January 1, 2008, the amount of
principal of and the interest on the Bonds then due in accordance with the
provisions of the Indenture, as Basic Rent for the Project, in an amount which,
when added to any collected funds then on deposit in the Bond Fund and available
for the payment of principal on the Bonds and the interest thereon on such
payment date, shall be equal to the amount payable on such payment date as
principal of the Bonds and the interest thereon as provided in the Indenture.
All payments of Basic Rent provided for in this Section shall be paid directly
to the Trustee and shall be deposited in accordance with the provisions of the
Indenture into the Bond Fund and shall be used and applied by the Trustee in the
manner and for the purposes set forth in this

                                      -8-
<PAGE>

Lease and the Indenture. Subject to the other provisions of this Lease and the
Indenture, at any time that the Corporation is the sole Bondowner, the
Corporation may, at its option, make payments of Basic Rent by tendering a
portion of the principal amount of the Bonds equal to such principal payment
thereon to the Trustee for cancellation.

      SECTION 5.2. ADDITIONAL RENT. The Corporation shall pay as Additional Rent
the following amounts (to the extent such amounts have not already been paid
pursuant to other provisions under this Lease):

      (a) all reasonable fees, charges and expenses, including agent and counsel
fees, of the Trustee and the Paying Agent incurred under the Indenture, as and
when the same become due;

      (b) all costs incident to the payment of the principal of and interest on
the Bonds as the same becomes due and payable, including all costs and expenses
in connection with the call, redemption and payment of all Outstanding Bonds;

      (c) all expenses reasonably incurred in connection with the enforcement of
any rights against the Corporation or the Project under this Lease or the
Indenture by the City, the Trustee or the Bondowners, except for such expenses
as may be incurred solely as a result of the gross negligence or wrongful
misconduct of the City, the Trustee or both;

      (d) an amount sufficient to reimburse the City for all expenses reasonably
incurred by the City hereunder and in connection with the performance of its
obligations under this Lease, the Indenture or the Tax Abatement Agreement;

      (e) all amounts payable under the Tax Abatement Agreement;

      (f) all annual fees of the City or the Kansas Board of Tax Appeals; and

      (g) all other payments of whatever nature which the Corporation has agreed
to pay or assume under the provisions of this Lease.

      SECTION 5.3. OBLIGATIONS OF CORPORATION ABSOLUTE AND UNCONDITIONAL.

      (a) Except as expressly provided herein, the obligations of the
Corporation under this Lease to make payments of Basic Rent and Additional Rent
on or before the date the same become due, and to perform all of its other
obligations, covenants and agreements hereunder shall be absolute and
unconditional, without notice or demand, and without abatement, deduction,
set-off, counterclaim, recoupment or defense or any right of termination or
cancellation arising from any circumstance whatsoever, whether now existing or
hereafter arising, and irrespective of whether the Project shall have been
started or completed, or whether the City's title thereto or to any part thereof
is defective or nonexistent, and notwithstanding any damage to, loss, theft or
destruction of, the Project or any part thereof, any failure of consideration or
frustration of commercial purpose, the taking by eminent domain of title to or
of the right of temporary use of all or any part of the Project, legal
curtailment of the Corporation's use thereof, the eviction or constructive
eviction of the Corporation, any change in the tax or other laws of the United
States of America, the State of Kansas or any political subdivision thereof, any
change in the City's legal organization or status, or any default of the City
hereunder, and regardless of the invalidity of any action of the City, and
regardless of the invalidity of any portion of this Lease.

                                      -9-
<PAGE>

      (b) Nothing in this Lease shall be construed to release the City from the
performance of any agreement on its part herein contained or as a waiver by the
Corporation of any rights or claims the Corporation may have against City under
this Lease or otherwise, but any recovery upon such rights and claims shall be
had from the City separately, it being the intent of this Lease that the
Corporation shall be unconditionally and absolutely obligated to perform fully
all of its obligations, agreements and covenants under this Lease (including the
obligation to pay Basic Rent and Additional Rent) for the benefit of the
Bondowners. The Corporation may, however, at its own cost and expense and in its
own name or in the name of the City, prosecute or defend any action or
proceeding or take any other action involving third persons which the
Corporation deems reasonably necessary in order to secure or protect its right
of possession, occupancy and use hereunder, and in such event the City hereby
agrees to cooperate fully with the Corporation and to take all action necessary
to effect the substitution of the Corporation for the City in any such action or
proceeding if the Corporation shall so request.

      SECTION 5.4. PREPAYMENT OF BASIC RENT. The Corporation may at any time
prepay all or any part of the Basic Rent provided for hereunder. During such
times as the amount held by the Trustee in the Bond Fund shall be sufficient to
pay, at the time required, the principal of and interest on all the Bonds then
remaining unpaid, the Corporation shall not be obligated to make payments of
Basic Rent under the provisions of this Lease.

      SECTION 5.5. REDEMPTION OF BONDS. The City and the Trustee, at the written
direction of the Corporation, at any time the aggregate moneys in the Bond Fund
are sufficient for such purposes, shall (a) if the same are then redeemable
under the provision of ARTICLE III of the Indenture, take all steps that may be
necessary under the applicable redemption provisions of the Indenture to effect
the redemption of all or such part of the then Outstanding Bonds as may be
specified by the Corporation, on such redemption date as may be specified by the
Corporation or (b) cause such moneys in the Bond Fund or such part thereof as
the Corporation shall direct, to be applied by the Trustee for the purchase of
Bonds in the open market for the purpose of cancellation at prices not exceeding
the principal amount thereof, or (c) a combination of (a) and (b) as provided in
such direction.

                                   ARTICLE VI

                        MAINTENANCE, TAXES AND UTILITIES

      SECTION 6.1. MAINTENANCE AND REPAIRS. Throughout the Lease Term the
Corporation shall, at its own expense, keep the Project in as reasonably safe
condition as the operation thereof will permit, and keep the Project in good
repair and in good operating condition, making from time to time such repairs
thereto and renewals and replacements thereof as the Corporation deems
necessary.

      SECTION 6.2. TAXES, ASSESSMENTS AND OTHER GOVERNMENTAL CHARGES.

      (a) The Corporation shall promptly pay and discharge, as the same become
due, all taxes and assessments, general and special, and other governmental
charges of any kind whatsoever that may be lawfully taxed, charged, levied,
assessed or imposed upon or against the Project, or any part thereof or interest
therein (including the leasehold estate of the Corporation therein) or any
buildings, improvements at any time installed thereon by the Corporation, or the
income therefrom or Basic Rent and other amounts payable under this Lease,
including any new taxes and assessments not of the kind enumerated above to the
extent that the same are lawfully made, levied or assessed in lieu of or in
addition to taxes or assessments now customarily levied against real or personal
property, and further including all utility charges,

                                      -10-
<PAGE>

assessments and other general governmental charges and impositions whatsoever,
foreseen or unforeseen, which if not paid when due would materially impair the
security of the Bonds or materially encumber the City's title to the Project;
provided that with respect to any special assessments or other governmental
charges that are lawfully levied and assessed which may be paid in installments,
the Corporation shall be obligated to pay only such installments thereof as
become due and payable during the Lease Term.

      (b) The Corporation shall have the right, in its own name or in the City's
name, to contest the validity, application or amount of any tax, assessment or
other governmental charge which the Corporation is required to bear, pay and
discharge pursuant to the terms of this Article by appropriate legal proceedings
instituted before the tax, assessment or other governmental charge complained of
becomes delinquent if and provided (1) the Corporation, before instituting any
such contest, gives the City written notice of its intention so to do, (2) the
Corporation diligently prosecutes any such contest, at all times effectively
stays or prevents any official or judicial sale therefor, under execution or
otherwise, and (3) the Corporation promptly pays any final judgment enforcing
the tax, assessment or other governmental charge so contested and thereafter
promptly procures record release or satisfaction thereof. The City agrees to
cooperate fully with the Corporation in connection with any and all
administrative or judicial proceedings related to any tax, assessment or other
governmental charge. The Corporation shall hold the City whole and harmless from
any costs and expenses the City may incur related to any of the above.

      SECTION 6.3. UTILITIES. All utilities and utility services used by the
Corporation in, on or about the Project shall be paid for by the Corporation and
shall be contracted for by the Corporation in the Corporation's own name, and
the Corporation shall, at its sole cost and expense, procure any and all
permits, licenses or authorizations necessary in connection therewith.

      SECTION 6.4. AD VALOREM TAXES. The City and the Corporation acknowledge
that under the existing provisions of K.S.A. 79-201a, as amended, the property
purchased, acquired, constructed, reconstructed, improved, furnished, repaired,
enlarged or remodeled with the proceeds of the Bonds is entitled to exemption
from general ad valorem and property taxes (other than special assessments
levied on account of special benefits) on real and personal property, other than
inventory, for a period of ten (10) calendar years after the calendar year in
which the Bonds are issued, provided proper application is made therefor. The
City covenants that it will not voluntarily take any action which may be
reasonably construed as tending to cause or induce the levy or assessment of
such ad valorem or property taxes on the Project so long as any of the Bonds are
Outstanding and unpaid or for said ten (10) year period, whichever shall be the
shorter time, and at the Corporation's request, fully cooperate with the
Corporation in all reasonable ways to prevent any such levy or assessment. The
City shall file the Application for Exemption to effect the property tax
abatement described in K.S.A. 79-201a using information to be provided by the
Corporation. The Corporation agrees to pay any such levies or assessments that
are lawful on the Project.

      SECTION 6.5. PAYMENT IN LIEU OF TAXES. The Corporation agrees that, during
each year the Project is exempt from ad valorem and personal property taxes by
reason thereof, the Corporation will make a payment in lieu of taxes to the City
in the amounts and at the times set forth in the Tax Abatement Agreement
providing for payments in lieu of such ad valorem and personal property taxes.
Such payment shall be made each year at the time ad valorem taxes on the Project
would first be due and payable but for such exemption.

      SECTION 6.6. KANSAS RETAILERS' SALES TAX. The parties have entered into
this Lease Agreement in contemplation that, under the existing provisions of
K.S.A. 79-3606(d) and other applicable laws, sales of tangible personal property
or services purchased in connection with the acquisition, purchase,
construction, improving or remodeling of the Project are entitled to exemption
from the tax imposed by the Kansas

                                      -11-
<PAGE>

Retailers' Sales Tax Act. The parties agree that the City shall, upon the
request of and with the Corporation's assistance, promptly obtain from the State
and furnish to the contractors and suppliers an exemption certificate for the
acquisition, purchase, construction, improving or remodeling of the Project. The
Corporation covenants that said exemption shall be used only in connection with
the purchase of tangible personal property or services becoming a part of the
Project.

                                   ARTICLE VII

                                    INSURANCE

      SECTION 7.1. TITLE INSURANCE. The Corporation will purchase, on behalf of
the City and the Trustee, at its expense, from a Corporation duly qualified to
issue such insurance in the State of Kansas, an owner's policy of title
insurance in the amount of at least $1,000,000. Copies of said policy or a
commitment therefor will be delivered to the Trustee by the Corporation on or
before the date of issuance of the Bonds.

      SECTION 7.2. CASUALTY INSURANCE.

      (a) Subject to the right of the Corporation to increase the deductibles
described herein and to provide for self-insurance as provided in subparagraph
(c) of this Section, the Corporation shall at all times during the construction
period maintain at its sole cost and expense, or cause the contractors under the
construction contracts to maintain, in full force and effect a policy or
policies of Builder's Risk-Completed Value Form Insurance insuring the Project
against fire, lightning and all other risks covered by the extended coverage
endorsement then in use in the State of Kansas to the Full Insurable Value of
the Project (subject to reasonable loss deductible clauses not to exceed
$1,000,000).

      Subject to the rights of the Corporation provided in subparagraph (c) of
this Section, prior to or simultaneously with the expiration of said Builder's
Risk Insurance, the Corporation shall at its sole cost and expense obtain and
shall maintain throughout the Lease Term, a policy or policies of insurance to
keep the Project constantly insured against loss or damage by fire, lightning
and all other risks covered by the extended coverage insurance endorsement then
in use in the State of Kansas in an amount equal to the Full Insurable Value
thereof (subject to reasonable loss deductible clauses not to exceed
$1,000,000). The initial determination of Full Insurable Value shall be made at
the Completion Date, and thereafter, the Full Insurable Value of the Project
shall be provided from time to time at the written request of the City or the
Trustee (but not more frequently than once in every three years) by the
certificate of an Authorized Corporation Representative or the chief financial
officer of the Corporation. The insurance required pursuant to this Section
shall be maintained at the Corporation's sole cost and expense, shall be
maintained with generally recognized responsible insurance company or companies
authorized to do business in the State of Kansas as may be selected by the
Corporation. Copies of the insurance policies required under this Section, or
originals or certificates thereof, shall be delivered by the Corporation to the
Trustee. All such policies of insurance pursuant to this Section, and all
renewals thereof, shall name the City, the Corporation and the Trustee as
insureds as their respective interests may appear, and shall contain a provision
that such insurance may not be canceled by the issuer thereof without at least
30 days' advance written notice to the City, the Corporation and the Trustee,
and shall be payable to the Trustee.

      (b) In the event of loss or damage to the Project, the Net Proceeds of
casualty insurance carried pursuant to this Section shall be paid over to the
Trustee and shall be applied as provided in ARTICLE IX of this Lease.

                                      -12-
<PAGE>

      (c) In lieu of obtaining all or any part of the insurance required by
subparagraph (a) hereof, the Corporation may elect to be self-insured for all or
any part of the foregoing requirements (which right to self insure shall include
the right of the Corporation to increase the deductibles on such policies to an
amount not to exceed $1,000,000) provided the Corporation complies with each of
the following: (i) the Corporation notifies the City and the Trustee in writing
that it has elected to increase one or more of the deductibles on such policies
or to provide such coverages through a self-insurance program, (ii) if the
self-insurance program is maintained by a legal entity other than the
Corporation, the Corporation notifies the City and the Trustee in writing of an
address to which the City and the Trustee may submit claims under such
self-insurance program, and (iii) if the self-insurance program is maintained by
a legal entity other than the Corporation, the provider of such self insurance
program is rated in one of the three highest rating categories by a nationally
recognized rating agency (without regard to any rating modifiers) or if the
self-insurance program is maintained by the Corporation or an affiliate of the
Corporation, the consolidated net worth of such entity is at least equal to
$100,000,000 based upon audited financial statements submitted to the City and
the Trustee prior to the effective date of such self-insurance program.

      SECTION 7.3. PUBLIC LIABILITY INSURANCE.

      (a) Subject to the right of the Corporation to increase the deductibles
described herein and to provide for self-insurance as provided in subparagraph
(c) of this Section, the Corporation shall at its sole cost and expense maintain
or cause to be maintained at all times during the Lease Term general accident
and public liability insurance (including but not limited to coverage for all
losses whatsoever arising from the ownership, maintenance, operation or use of
any automobile, truck or other motor vehicle), under which the City, the
Corporation and the Trustee shall be named as additional insureds, properly
protecting and indemnifying the City and the Trustee, in an amount not less than
$1,000,000 for bodily injury (including death) in any one occurrence (subject to
reasonable loss deductible clauses not to exceed $100,000)), and not less than
$1,000,000 for property damage in any one occurrence (subject to reasonable loss
deductible clauses not to exceed $100,000). The policies of said insurance shall
contain a provision that such insurance may not be canceled by the issuer
thereof without at least 30 days' advance written notice to the City, the
Corporation and the Trustee. Such policies or copies or certificates thereof
shall be furnished to the Trustee.

      (b) In the event of a public liability occurrence, the Net Proceeds of
liability insurance carried pursuant to this Section shall be applied toward the
extinguishment or satisfaction of the liability with respect to which such
proceeds have been paid.

      (c) In lieu of obtaining all or any part of the insurance required by
subparagraph (a) hereof, the Corporation may elect to be self-insured for all or
any part of the foregoing requirements (which right to self insure shall include
the right of the Corporation to increase the deductibles on such policies to an
amount not to exceed $1,000,000) provided the Corporation complies with each of
the following: (i) the Corporation notifies the City and the Trustee in writing
that it has elected to increase one or more of the deductibles on such policies
or to provide such coverages through a self-insurance program, (ii) if the
self-insurance program is maintained by a legal entity other than the
Corporation, the Corporation notifies the City and the Trustee in writing of an
address to which the City and the Trustee may submit claims under such
self-insurance program, and (iii) if the self-insurance program is maintained by
a legal entity other than the Corporation, the provider of such self insurance
program is rated in one of the three highest rating categories by a nationally
recognized rating agency (without regard to any rating modifiers) or if the
self-insurance program is maintained by the Corporation or an affiliate of the
Corporation, the consolidated net worth of such entity is at least equal to
$100,000,000 based upon audited financial statements submitted to the City and
the Trustee prior to the effective date of such self-insurance program.

                                      -13-
<PAGE>

      SECTION 7.4. BLANKET INSURANCE POLICIES. The Corporation may satisfy any
of the insurance requirements set forth in this Article by using blanket
policies of insurance, provided each and all of the requirements and
specifications of this Article respecting insurance are complied with.

      SECTION 7.5. INDEMNIFICATION OF TRUSTEE. The Corporation agrees to
indemnify and save the Trustee harmless against and from all claims by or on
behalf of any person, firm or corporation arising from the conduct or management
of, or from any work or thing done on, the Project during the Lease Term, and
against and from all claims arising during the Lease Term from (a) any condition
of the Project caused or permitted by the Corporation, (b) any breach or default
on the part of the Corporation in the performance of any of its obligations
under this Lease, (c) any contract entered into by the Corporation, its agents,
employees or contracting obligees in connection with the acquisition, purchase,
construction, improving, equipping or remodeling of the Project, (d) any act of
negligence of the Corporation or of any of its agents, contractors, servants,
employees or licensees, (e) any act of negligence of any assignee or sublessee
of the Corporation, or of any agents, contractors, servants, employees or
licensees of any assignee or sublessee of the Corporation and (f) the acceptance
of, and administration of the duties and obligations of the Trustee under the
Indenture and the documents related thereto, including without limitation, this
Lease; provided, however, that the indemnification contained in this SECTION 7.5
shall not extend to the Trustee to the extent that such claim is (i) the result
of work being performed at the Project by employees, agents or contractors of
the Trustee; (ii) the result of the negligence or willful misconduct of the
Trustee, their employees, agents or contractors; or (iii) is for consequential,
punitive or similar type damages. As a condition to such indemnification, the
Trustee will tender the defense of any claim for which it believes it is
entitled to indemnification to the Corporation in sufficient time to avoid a
default on the claim, and will cooperate in the contest or settlement of the
claim so long as it incurs no cost on that account.

                                  ARTICLE VIII

                            ALTERATION OF THE PROJECT

      SECTION 8.1. ADDITIONS, MODIFICATIONS AND IMPROVEMENTS OF THE PROJECT. The
Corporation shall have and is hereby given the right, at its sole cost and
expense, to make such additions, modifications and improvements in and to any
part of the Project as the Corporation from time to time may deem necessary or
desirable for its business purposes. All additions, modifications and
improvements made by the Corporation pursuant to the authority of this Section
shall (a) be made in workmanlike manner and in strict compliance with all laws
and ordinances applicable thereto, (b) when commenced, be prosecuted to
completion with due diligence, and (c) when completed, be deemed a part of the
Project; provided, however, that additions of machinery and equipment installed
in the Project by the Corporation shall remain the property of the Corporation
and may be removed by the Corporation.

      SECTION 8.2. ADDITIONAL IMPROVEMENTS ON THE PROJECT SITE. The Corporation
shall have and is hereby given the right, at its sole cost and expense, to
construct on portions of the Project Site not theretofore occupied by buildings
or improvements such additional buildings and improvements as the Corporation
from time to time may deem necessary or desirable for its business purposes. All
additional buildings and improvements constructed on the Project Site by the
Corporation pursuant to the authority of this Section shall, during the life of
this Lease, remain the property of the Corporation and may be added to, altered
or razed and removed by the Corporation at any time. The Corporation covenants
and agrees (a) to make any repairs and restorations required to be made to the
Project because of the construction of, addition to, alteration or removal of
said additional

                                      -14-
<PAGE>

buildings or improvements, (b) to keep and maintain said additional buildings
and improvements in good condition and repair, ordinary wear and tear excepted,
and (c) to promptly and with due diligence either raze and remove in a good and
workmanlike manner, or repair, replace or restore any of said additional
buildings and improvements as may from time to time be damaged by fire or other
casualty.

      SECTION 8.3. PERMITS AND AUTHORIZATIONS. The Corporation shall not do or
permit others under its control to do any work on the Project related to any
repair, rebuilding, restoration, replacement, modification or addition to the
Project, or any part thereof, unless all requisite municipal and other
governmental permits and authorizations shall have been first procured. All such
work shall be done in a good and workmanlike manner and in compliance with all
applicable building, zoning and other laws, ordinances, governmental regulations
and requirements and in accordance with the requirements, rules and regulations
of all insurers under the policies required to be carried under the provisions
of ARTICLE VII hereof.

      SECTION 8.4. MECHANICS' LIENS.

      (a) Neither the City nor the Corporation shall do or suffer anything to be
done whereby the Project, or any part thereof, may be encumbered by any
mechanics' or other similar lien. Whenever and as often as any mechanics' or
other similar lien is filed against the Project, or any part thereof, purporting
to be for or on account of any labor done or materials or services furnished in
connection with any work in or about the Project, the Corporation shall
discharge the same of record within 90 days after the date of filing. Notice is
hereby given that the City shall not be liable for any labor or materials
furnished the Corporation or anyone claiming by, through or under the
Corporation upon credit, and that no mechanics' or other similar lien for any
such labor, services or materials shall attach to or affect the reversionary or
other estate of the City in and to the Project or any part thereof.

      (b) Notwithstanding paragraph (a) above, the Corporation shall have the
right to contest any such mechanics' or other similar lien if within said 90-day
period stated above it notifies the City and the Trustee in writing of its
intention so to do, and provided the Corporation diligently prosecutes such
contest, at all times effectively stays or prevents any official or judicial
sale of the Project, or any part thereof or interest therein, under execution or
otherwise, and pays or otherwise satisfies any final judgment enforcing such
contested lien claim and thereafter promptly procures record release or
satisfaction thereof. The Corporation shall hold the City whole and harmless
from any loss, costs or expenses the City may incur related to any such contest.
The City shall cooperate fully with the Corporation in any such contest.

      SECTION 8.5. OPTION TO PURCHASE UNIMPROVED PORTIONS OF THE PROJECT SITE.
The City hereby grants to the Corporation the right at any time and from time to
time to purchase any unimproved portion or portions of the Project Site. For the
purposes of this Section "unimproved" shall mean real property upon which no
improvements are located, excluding improvements relating to streets, sidewalks,
bridges, stormwater, grading, utility or other similar improvements. As
conditions to such purchase the City and the Trustee shall receive from the
Corporation at least 30 days prior to the proposed date for completing the
purchase the following (1) a written certificate from the Corporation to the
effect (i) that the Corporation desires to purchase an unimproved portion of the
Project Site, (ii) the proposed date for completing the purchase, and (iii) that
the Corporation is not in default (beyond the expiration of any applicable grace
or cure period) under any of the provisions of this Lease, (2) providing the
City and the Trustee with an adequate legal description of that portion
(together with the interest in such portion) of the property to be purchased and
a copy of a title commitment with respect to such property, (3) a certificate of
an independent engineer or surveyor, dated not more than 30 days prior to the
date of the request stating that, in the opinion of the person signing such
certificate, (i) the unimproved portion of the Project Site is unimproved within
the

                                      -15-
<PAGE>

definition contained in this Section, (ii) the unimproved portion of the Project
Site so proposed to be purchased is not needed for the operation of the Project,
and (iii) the proposed purchase will not impair the usefulness of the Project
for its intended purposes and will not destroy the means of ingress thereto and
egress therefrom, and (4) the written consent of the Owners of all of the Bonds.

      The purchase price for such unimproved portion of the Project Site shall
be determined by the Owners of all of the Bonds and shall be received in writing
by the City and the Trustee at least 10 days prior to the proposed date for
completing the purchase. Such purchase price shall be paid to the Trustee at the
time the City executes and delivers a Special Warranty Deed conveying the
property which is to be purchased to the Corporation. The Trustee shall deposit
such amount (if any) into the Bond Fund. If such amount is more than $1,000,
such amount shall be used by the Trustee to redeem Bonds in accordance with
SECTION 302(a) of the Indenture. If such amount is $1,000 or less the Trustee
shall apply such amount to the next interest payment on the Bonds.

      Upon the City's receipt of written notice from the Trustee that the
Trustee has received all of the items required by this Section, the Mayor and
City Clerk of the City shall execute a Special Warranty Deed conveying such
property to the Corporation and shall deliver such deed to the Corporation. Such
Special Warranty Deed shall be subject to the following: (1) those liens and
encumbrances, if any, to which title to that portion of the Project Site was
subject when conveyed to the City; (2) those liens and encumbrances created by
the Corporation or to the creation or suffering of which the Corporation
consented; (3) those liens and encumbrances resulting from the failure of the
Corporation to perform or observe any of the agreement on its part contained in
this Lease; (4) Permitted Encumbrances other than the Indenture and this Lease;
and (5) if the unimproved portion of the Project Site or any part thereof is
being condemned, the rights and title of any condemning authority.

      Upon any purchase of portions of the Project Site pursuant to this
Section, the portions of the Project Site so purchased shall no longer be
entitled to the benefits of the Tax Abatement Agreement.

                                   ARTICLE IX

                      DAMAGE, DESTRUCTION AND CONDEMNATION

      SECTION 9.1. DAMAGE OR DESTRUCTION.

      (a) Subject to the provisions of any mortgage, if the Project shall be
damaged or destroyed by fire or any other casualty, whether or not covered by
insurance, the Corporation, as promptly as practicable, shall select one of the
following options:

            (1) repair, restore, replace or rebuild the same to as nearly as may
      be practicable their condition and character immediately prior to such
      damage or destruction, and so that upon completion of such repairs,
      restoration, replacement or rebuilding the Project shall be of a value not
      less than the value thereof immediately prior to the occurrence of such
      damage or destruction; or

            (2) construct upon the Project Site new buildings and improvements
      thereafter together with all new fixtures which are to be attached
      thereto, provided that (i) the value thereof shall not be less than the
      value of such destroyed or damaged Project Improvements immediately prior
      to the occurrence of such damage or destruction and (ii) the nature of
      such new buildings, improvements and fixtures will not impair the
      character of the Project as an enterprise permitted by the Act; or

                                      -16-
<PAGE>

            (3) provide for the redemption and/or cancellation of all of the
      Outstanding Bonds, in which event the Corporation shall not be required to
      restore rebuild, repair, replace or reconstruct any portion of the Project

      If the Corporation shall elect to construct any such new buildings and
improvements, for all purposes of this Lease, any reference to the words
"Project Improvements" shall be deemed to also include any such new buildings
and improvements and all additions thereto and all replacements and alterations
thereof.

      The Net Proceeds of casualty insurance required by ARTICLE VII hereof
received with respect to such damage or loss to the Project shall be disbursed
in accordance with the Leasehold Mortgages (in the order of priority) so long as
the Leasehold Mortgages contain provisions governing the disbursement of
casualty insurance proceeds. If there is no Leasehold Mortgage, or if the
Leasehold Mortgage does not contain provisions governing the disbursement of
casualty insurance proceeds, then (i) if such Net Proceeds are less than
$250,000, the Net Proceeds shall be paid to the Corporation to be used in
accordance with this Lease, and (ii) if such Net Proceeds equal or exceed
$250,000, the Net Proceeds shall be paid to the Trustee and shall be applied in
the following manner:

            (A) there shall be paid to the Corporation from the Net Proceeds
      such part thereof as shall equal the cost to the Corporation of making
      such temporary repairs or doing such other work, as, in the Corporation's
      reasonable opinion, may be necessary in order to protect the Project
      pending adjustment of the insurance loss or the making of permanent
      repairs, restoration, replacement or rebuilding;

            (B) there shall be paid to the Corporation from the Net Proceeds
      such part thereof as shall equal the cost to the Corporation of repairing,
      restoring, replacing or rebuilding the Project or any part thereof;

            (C) payment to the Corporation pursuant to subdivisions (A) or (B)
      of this subsection (a)(ii) from such Net Proceeds shall be made to the
      Corporation from time to time as the work progresses, in amounts equal to
      the cost of labor and material incorporated into and used in such work,
      the architects' and engineers' fees, and other charges in connection with
      such work, upon delivery to the City and the Trustee of a certificate of
      the Corporation's architect or general contractor, as the case may be, in
      charge of such work, certifying: (1) that the amounts so to be paid to the
      Corporation are payable to the Corporation in accordance with the
      provisions of this Article and that such amounts are then due and payable
      by the Corporation or have theretofore been paid by the Corporation; (2)
      the progress of the work; (3) that the work has been done in accordance
      with the plans and specifications therefor and all insurance requirements
      of ARTICLE VII hereof; (4) that the sum requested when added to all sums
      previously paid out under this Article for the work does not exceed the
      value of the work done to the date of such certificate; (5) the estimated
      cost of completing the work, in reasonable detail; and (6) that the
      remaining Net Proceeds are sufficient to pay the estimated cost of
      completing the work;

            (D) at the request of the City or the Trustee, the Corporation shall
      furnish to the person requesting the same, at the time of any such
      payment, with an official search, or other evidence reasonably
      satisfactory to such person, that there has not been filed with respect to
      the Project Site or the Project Improvements any mechanic's or other lien
      which has not been discharged of record, in respect of any work, labor,
      services or materials performed, furnished or supplied, in connection

                                      -17-
<PAGE>

      with the work and that all of said materials have been purchased free and
      clear of all security interest or other encumbrances. The Trustee shall
      not pay out any such sum when the Project Site or the Project Improvements
      shall be encumbered with any such security interest or encumbrance. Upon
      the termination of this Lease and the payment in full of the Bonds, any
      monies then held by the Trustee shall be paid over to the Corporation.

      (b) The insurance monies, if any, paid to the Corporation as provided
under this Article, on account of any loss or destruction to the Project, shall
be held by it in trust and applied only for the purposes of repairing,
reconstructing or restoring the Project or constructing new buildings and
improvements.

      (c) If any of the insurance monies paid by the insurance company to the
Trustee or the Corporation as hereinabove provided, shall remain after the
completion of such repairs, restoration, replacement or rebuilding, and this
Lease shall not have terminated, the excess shall be deposited in the Bond Fund,
subject to the rights of any beneficiary. If the Net Proceeds shall be
insufficient to pay the entire cost of such repairs, restoration, replacement or
rebuilding, the Corporation shall pay the deficiency.

      (d) Except as otherwise provided in this Lease, in the event of any such
damage by fire or any other casualty, the provisions of this Lease shall be
unaffected and the Corporation shall remain and continue liable for the payment
of all Basic Rent and Additional Rental and all other charges required hereunder
to be paid by the Corporation, as though no damage by fire or any other casualty
has occurred.

      (e) The City and the Corporation agree that they will cooperate with each
other, to such extent as such other party may reasonably require, in connection
with the prosecution or defense of any action or proceeding arising out of, or
for the collection of any insurance monies that may be due in the event of, any
loss or damage, and that they will execute and deliver to such other parties
such instruments as may be required to facilitate the recovery of any insurance
monies.

      (f) The Corporation agrees to give prompt notice to the City and the
Trustee with respect to all fires and any other casualties occurring in, on, at
or about the Project.

      (g) If the Corporation shall determine that rebuilding, repairing,
restoring or replacing the Project is not practicable and desirable, any Net
Proceeds of casualty insurance required by ARTICLE VII hereof received with
respect to such damage or loss shall be paid into the Bond Fund and shall be
used to redeem Bonds on the earliest practicable redemption date or to pay the
principal of any Bonds as the same become due. The Corporation agrees to be
reasonable in exercising its judgment pursuant to this subsection (g).

      (h) The Corporation shall not, by reason of its inability to use all or
any part of the Project during any period in which the Project is damaged or
destroyed or is being repaired, rebuilt, restored or replaced, nor by reason of
the payment of the costs of such rebuilding, repairing, restoring or replacing,
be entitled to any reimbursement from the City, the Trustee or the Bondowners or
to any abatement or diminution of the rentals payable by the Corporation under
this Lease or of any other obligations of the Corporation under this Lease
except as expressly provided in this Section.

      SECTION 9.2. CONDEMNATION.

      (a) If during the Lease Term, title to, or the temporary use of, all or
any part of the Project shall be condemned by or sold under threat of
condemnation to any authority possessing the power of eminent domain, to such
extent that the claim or loss resulting from such condemnation is greater than
$1,000,000,

                                      -18-
<PAGE>

the Corporation shall, within 90 days after the date of entry of a final order
in any eminent domain proceedings granting condemnation or the date of sale
under threat of condemnation, notify the City, the Trustee and the mortgagee
under any Leasehold Mortgage (if any) in writing as to the nature and extent of
such condemnation or loss of title and whether it is practicable and desirable
to acquire or construct substitute improvements.

      (b) If the Corporation shall determine that such substitution is
practicable and desirable, the Corporation shall proceed promptly with and
complete with reasonable dispatch the acquisition or construction of such
substitute improvements, so as to place the Project in substantially the same
condition as existed prior to the exercise of the said power of eminent domain,
including the acquisition or construction of other improvements suitable for the
Corporation's operations at the Project (which improvements will be deemed a
part of the Project and available for use and occupancy by the Corporation
without the payment of any rent other than herein provided, to the same extent
as if such other improvements were specifically described herein and demised
hereby); provided, that such improvements will be acquired by the City subject
to no liens, security interests or encumbrances prior to the lien and/or
security interest afforded by the Indenture other than Permitted Encumbrances.
In such case, any Net Proceeds received from any award or awards with respect to
the Project or any part thereof made in such condemnation or eminent domain
proceedings, or of the sale proceeds, shall be applied in the same manner as
provided in SECTION 9.1 hereof (with respect to the receipt of casualty
insurance proceeds).

      (c) If the Corporation shall determine that it is not practicable and
desirable to acquire or construct substitute improvements, any Net Proceeds of
condemnation awards received by the Corporation shall be paid into the Bond Fund
and shall be used to redeem Bonds on the earliest practicable redemption date or
to pay the principal of any Bonds as the same becomes due and payable, all
subject to the rights of the mortgagees under the Leasehold Mortgage, if any.

      (d) The Corporation shall not, by reason of its inability to use all or
any part of the Project during any such period of restoration or acquisition nor
by reason of the payment of the costs of such restoration or acquisition, be
entitled to any reimbursement from the City, the Trustee or the Bondowners or to
any abatement or diminution of the rentals payable by the Corporation under this
Lease nor of any other obligations hereunder except as expressly provided in
this Section.

      (e) The City shall cooperate fully with the Corporation in the handling
and conduct of any prospective or pending condemnation proceedings with respect
to the Project or any part thereof, and shall, to the extent it may lawfully do
so, permit the Corporation to litigate in any such proceeding in the name and on
behalf of the City. In no event will the City voluntarily settle or consent to
the settlement of any prospective or pending condemnation proceedings with
respect to the Project or any part thereof without the prior written consent of
the Corporation.

      (f) In no event will the City voluntarily settle or consent to the
settlement of any prospective or pending condemnation proceedings with respect
to the Project or any part thereof without the prior written consent of the
Corporation.

      (g) The City irrevocably assigns to the Corporation all of its rights to
any condemnation proceeds received in its capacity as landlord under this Lease.

                                      -19-
<PAGE>

                                    ARTICLE X

                                SPECIAL COVENANTS

      SECTION 10.1. NO WARRANTY OF CONDITION OR SUITABILITY BY THE CITY;
EXCULPATION AND INDEMNIFICATION. The City makes no warranty, either express or
implied, as to the condition of the Project or that it will be suitable for the
Corporation's purposes or needs. The Corporation releases the City from, agrees
that the City shall not be liable for and agrees to hold the City harmless
against, any loss or damage to property or any injury to or death of any person
that may be occasioned by any cause whatsoever pertaining to the Project or the
use thereof; except to the extent that such loss is the result of the gross
negligence or willful misconduct of the City, its employees, agents or
contractors.

      SECTION 10.2. SURRENDER OF POSSESSION. Upon accrual of the City's right of
re-entry because of the Corporation's default hereunder (beyond any applicable
grace or cure period) or upon the cancellation or termination of this Lease for
any reason other than the Corporation's purchase of the Project pursuant to
ARTICLE XI hereof, the Corporation shall peacefully surrender possession of the
Project to the City in good condition and repair, ordinary wear and tear
excepted; provided, however, the Corporation shall have the right within 90 days
(or such later date as the City may agree to) after the termination of this
Lease to remove from the Project Site any buildings, improvements, furniture,
trade fixtures, machinery and equipment owned by the Corporation and not
constituting part of the Project. All repairs to and restorations of the Project
required to be made because of such removal shall be made by and at the sole
cost and expense of the Corporation, and during said 90-day (or extended) period
the Corporation shall bear the sole responsibility for and bear the sole risk of
loss for said buildings, improvements, furniture, trade fixtures, machinery and
equipment. All buildings, improvements, furniture, trade fixtures, machinery and
equipment owned by the Corporation and which are not so removed from the Project
prior to the expiration of said period shall be the separate and absolute
property of the City.

      SECTION 10.3. CITY'S RIGHT OF ACCESS TO THE PROJECT. In addition to the
inspection rights of the City pursuant to SECTION 3.1 of the Tax Abatement
Agreement, the Corporation agrees that the City and the Trustee and their duly
authorized agents shall have the right at reasonable times during business
hours, subject to the Corporation's usual safety and security requirements, to
enter upon the Project Site after delivering written notice to the Corporation
(a) as may be reasonably necessary to cause to be completed the acquisition,
purchase, construction, improving or remodeling provided for in SECTION 4.2
hereof, (b) to perform such work in and about the Project made necessary by
reason of the Corporation's default (following notice and the expiration of
applicable grace or cure periods) under any of the provisions of this Lease, and
(c) following an Event of Default, to exhibit the Project to prospective
purchasers, lessees or trustees.

      SECTION 10.4. GRANTING OF EASEMENTS; LEASEHOLD MORTGAGES

      (a) If no Event of Default under this Lease shall have happened and be
continuing, the Corporation may at any time or times (1) grant easements,
licenses, rights-of-way (including the dedication of public highways) and other
rights or privileges in the nature of easements that are for the direct use of
the Project, or part thereof, by the grantee, (2) release existing easements,
licenses, rights-of-way and other rights or privileges, all with or without
consideration and upon such terms and conditions as the Corporation shall
determine, or (3) grant or permit the Permitted Encumbrances. The City agrees
that it will execute and deliver and will cause and direct the Trustee to
execute and deliver any instrument necessary or appropriate to confirm and grant
or release any such easement, license, right-of-way or other right or privilege
or any such agreement or other arrangement, upon receipt by the City and the
Trustee of: (i) a copy of the

                                      -20-
<PAGE>

instrument of grant or release or of the agreement or other arrangement, (ii) a
written application signed by an Authorized Corporation Representative
requesting such instrument, and (iii) a certificate executed by an Authorized
Corporation Representative stating that such grant or release is not detrimental
to the proper conduct of the business of the Corporation, will not impair the
effective use or interfere with the efficient and economical operation of the
Project, and will not materially adversely affect the security intended to be
given by or under the Indenture. If no Event of Default shall have happened and
be continuing beyond any applicable grace period, any payments or other
consideration received by the Corporation for any such grant or with respect to
or under any such agreement or other arrangement shall be and remain the
property of the Corporation, but, in the event of the termination of this Lease
or during the continuation of an Event of Default, all rights then existing of
the Corporation with respect to or under such grant shall inure to the benefit
of and be exercisable by the City and the Trustee.

      (b) The Corporation may mortgage the leasehold estate created by this
Lease, without the City's consent, provided and upon condition that:

            (i) a duplicate original or certified copy or photostatic copy of
      each such Leasehold Mortgage, and the note or other obligation secured
      thereby, is delivered to the City within thirty (30) days after the
      execution thereof; and

            (ii) such Leasehold Mortgage shall contain a covenant to the effect
      that the net proceeds of all insurance policies and the condemnation award
      shall be held, used and applied for the purposes and in the manner
      provided for in this Lease.

      (c) Notwithstanding anything contained to the contrary in this Lease, (i)
the Corporation shall have the right to assign this Lease and any subleases to
any leasehold mortgagee or to the designee or nominee of such leasehold
mortgagee, without the consent of the City, and (ii) if the leasehold mortgagee
or its designee or nominee shall acquire ownership of the leasehold estate,
either following foreclosure of such Leasehold Mortgage or in liquidation of the
indebtedness and in lieu of foreclosure thereof, the leasehold mortgagee or its
designee or nominee shall have the further right to further assign this Lease
and any subleases and any purchase money mortgage accepted in connection
therewith, without the consent of the City and such assignee shall enjoy all
rights, powers and privileges granted herein to leasehold mortgagees.

      (d) If (1) the Corporation shall execute and deliver a Leasehold Mortgage,
and (2) the provisions and conditions of subsection (b) above shall have been
fully complied with and observed with respect to such Leasehold Mortgage, and
(3) the Corporation or the mortgagee under such Leasehold Mortgage shall have
notified the City in writing of the making thereof and of the name and address
of such leasehold mortgagee; then:

            (i) this Lease may not be modified, amended, canceled or surrendered
      by agreement between the City and the Corporation, without the prior
      written consent of such leasehold mortgagee;

            (ii) there shall be no merger of this Lease or of the leasehold
      estate created hereby with the fee title to the Project, notwithstanding
      that this Lease or said leasehold estate and said fee title shall be owned
      by the same person or persons, without the prior written consent of such
      leasehold mortgagee;

            (iii) the City shall serve upon each such leasehold mortgagee a copy
      of each notice of default and each notice of termination given to the
      Corporation under this Lease, at the same time as

                                      -21-
<PAGE>

      such notice is served upon the Corporation. No such notice to the
      Corporation shall be effective unless a copy thereof is thus served upon
      each leasehold mortgagee;

            (iv) each leasehold mortgagee shall have the same period of time
      after the service of such notice upon it within which the Corporation may
      remedy or cause to be remedied the default which is the basis of the
      notice plus sixty (60) days; and the City shall accept performance by such
      leasehold mortgagee as timely performance by the Corporation;

            (v) such leasehold mortgagee shall not be required to continue
      possession or continue foreclosure proceedings under paragraph (vii) of
      this subsection if the particular default has been cured;

            (vi) the City may exercise any of its rights or remedies with
      respect to any other default by the Corporation occurring during the
      period of such forbearance provided for under said paragraph (g), subject
      to the rights of the leasehold mortgagee under this Section as to such
      other defaults;

            (vii) in case of default by the Corporation under this Lease, other
      than a default in the payment of money, the City shall take no action to
      effect a termination of this Lease by service of a notice or otherwise,
      without first giving to such leasehold mortgagee a reasonable time within
      which either to obtain possession of the Project and to remedy such
      default in the case of a default which is susceptible of being cured when
      such leasehold mortgagee has obtained possession of the Project, or to
      institute and with reasonable diligence to complete foreclosure
      proceedings or otherwise acquire the Corporation's leasehold estate under
      this Lease in the case of a default which is not so susceptible of being
      remedied by such leasehold mortgagee, provided that the leasehold
      mortgagee shall deliver to the City within thirty (30) days after the
      expiration of the grace period applicable to the particular default, an
      instrument unconditionally agreeing to remedy such default other than a
      default not susceptible of being remedied by such leasehold mortgagee. The
      City's right to terminate this Lease by reason of a default which is not
      susceptible of being remedied by such leasehold mortgagee shall end with
      respect to such default when the leasehold mortgagee obtains possession of
      the Project as aforesaid, which possession shall be deemed to include
      possession by a receiver;

            (viii) if this Lease shall terminate prior to the expiration of the
      Lease Term, the City shall enter into a new lease for the Project with any
      such leasehold mortgagee, or its designee or nominee, for the remainder of
      the term, effective as of the date of such termination, at the same rent
      and upon the same terms, covenants and conditions contained herein, except
      that such new lease shall not guarantee possession of the Project to the
      new tenant as against the Corporation and/or anyone claiming under the
      Corporation, and the City, simultaneously with the execution and delivery
      of such new lease, shall turn over to the new tenant all monies, if any,
      then held by the City under this Lease on behalf of the Corporation, on
      condition that:

                  (A) such leasehold mortgagee shall make written request for
            such new lease within thirty (30) days after the date of such
            termination, and

                  (B) on the commencement date of the term of the new lease,
            such leasehold mortgagee shall cure all defaults of the Corporation
            under this Lease (susceptible of being cured by such leasehold
            mortgagee) which remain uncured on that date, and shall pay or cause
            to be paid all unpaid sums which at such time would have been
            payable under this

                                      -22-
<PAGE>

            Lease but for such termination, and shall pay or cause to be paid to
            the City on that date all expenses, including reasonable counsel
            fees, court costs and disbursements, incurred by the City in
            connection with any such default and termination as well as in
            connection with the execution and delivery of such new lease;

            (ix) if such leasehold mortgagee or its designee or nominee shall
      become the owner of this Lease either following foreclosure of such
      Leasehold Mortgage or in liquidation of the indebtedness and in lieu of
      foreclosure thereof and such leasehold mortgagee or its designee or
      nominee shall have assigned this Lease, such leasehold mortgagee or its
      designee or nominee so assigning shall be released from all liability
      accruing from and after the date of such assignment.

      If more that one leasehold mortgagee shall request such new lease, such
new lease shall be made with and delivered to the leasehold mortgagee (or its
nominee or designee) whose mortgage has priority to those of any others. The
opinion of a reputable title insurance company, licensed to insure title to real
property in the State of Kansas, setting forth the order of priority of such
mortgage liens, may be relied on by the City as conclusive evidence of such
priority.

      SECTION 10.5. INDEMNIFICATION OF CITY AND TRUSTEE. The Corporation shall
indemnify and save the City and the Trustee harmless from and against all claims
by or on behalf of any person, firm or corporation arising from the conduct or
management of, or from any work or thing done in, on or about, the Project
during the Lease Term, and against and from all claims arising during the Lease
Term from (a) any condition of the Project caused by the Corporation, (b) any
breach or default on the part of the Corporation in the performance of any of
its obligations under this Lease, (c) any contract entered into in by the
Corporation or its sublessee, if any, in connection with the acquisition,
purchase, construction, improving or remodeling of the Project, (d) any act of
negligence of the Corporation or of any of its agents, contractors, servants,
employees or licensees, and (e) any act of negligence of any assignee or
sublessee of the Corporation, or of any agents, contractors, servants, employees
or licensees of any assignee or sublessee of the Corporation; provided, however,
the indemnification contained in this SECTION 10.5 shall not extend to the City
or the Trustee if (i) such claim is the result of work being performed at the
Project by employees, agents or contractors of the City, or (ii) such claim is
the result of the gross negligence or willful misconduct of the City or its
employees, agents or contractors, or (iii) with respect to the Trustee, such
claim is the result of the negligence or willful misconduct of the Trustee or
its employees, agents or contractors. The Corporation shall indemnify and save
the City and the Trustee harmless from and against all costs and expenses
(except those which have arisen from the willful misconduct or gross negligence
of the City or the Trustee) incurred in or in connection with any action or
proceeding brought in connection with claims arising from circumstances
described in clauses (a) through (e), and upon notice from the City or the
Trustee, the Corporation shall defend them or either of them in any such action
or proceeding.

      If a claim is made or any action is brought against the City or the
Trustee (collectively, the "Indemnified Parties") for which indemnification may
be sought against the Corporation under this Section 10.5, the Indemnified
Parties will promptly notify the Corporation in writing, and the Corporation
will promptly assume the defense thereof, including with the consent of the
Indemnified Party, which consent may not be unreasonably withheld, the
employment of counsel, the payment of all expenses and the right to negotiate
and consent to settlement. Any one or more of the Indemnified Parties will have
the right to employ separate counsel with respect to any such claim or in any
such action and to participate in the defense thereof, but the fees and expenses
of that counsel will be at the expense of the Indemnified Party or Indemnified
Parties unless the employment of such counsel has been specifically authorized,
in writing, by the Corporation or there is a conflict of interest that would
prevent counsel for the Corporation from adequately representing both the
Corporation and the Indemnified Parties. The Corporation will not be

                                      -23-
<PAGE>

liable for any settlement of any action effected without its written consent,
but if settled with the written consent of the Corporation or if there is a
final judgment for the plaintiff in any such action of which the Corporation is
required to assume the defense, the Corporation agrees to indemnify and hold
harmless the Indemnified Parties from and against any loss or liability by
reason of the settlement or judgment.

      SECTION 10.6. DEPRECIATION, INVESTMENT TAX CREDIT AND OTHER TAX BENEFITS.
The City agrees that any depreciation, investment tax credit or any other tax
benefits with respect to the Project or any part thereof shall be made available
to the Corporation, and the City will fully cooperate with the Corporation in
any effort by the Corporation to avail itself of any such depreciation,
investment tax credit or other tax benefits.

      SECTION 10.7. CORPORATION TO MAINTAIN ITS CORPORATE EXISTENCE. The
Corporation agrees that until the Bonds are paid or payment is provided for in
accordance with the terms of the Indenture, it will maintain its corporate
existence, and will not dissolve or otherwise dispose of all or substantially
all of its assets; provided, however, that the Corporation may, without
violating the agreement contained in this Section, consolidate with or merge
into another domestic corporation (i.e., a corporation incorporated and existing
under the laws of one of the states of the United States) or permit one or more
other domestic corporations to consolidate with or merge into it, or may sell or
otherwise transfer to another domestic corporation all or substantially all of
its assets as an entirety and thereafter dissolve, provided, the surviving,
resulting or transferee corporation expressly assumes in writing all the
obligations of the Corporation contained in this Lease; and, further provided,
that the surviving, resulting or transferee corporation, as the case may be, has
a consolidated net worth (after giving effect to said consolidation, merger or
transfer) at least equal to or greater than that of the Corporation immediately
prior to said consolidation, merger or transfer. The term "net worth", as used
in this Section, shall mean the difference obtained by subtracting total
liabilities (not including as a liability any capital or surplus item) from
total assets of the Corporation and all of its subsidiaries. In any such
consolidation, merger or transfer the Corporation shall comply with the
provisions of SECTION 10.1 hereof to the extent applicable.

      SECTION 10.8. SECURITY INTERESTS. At the written request of the Owner of
the Bonds, the City and the Corporation agree to enter into all instruments
(including financing statements and statements of continuation) necessary for
perfection of and continuance of the perfection of the security interests of the
City and the Trustee in the Project. Upon the written instructions of the Owner
of the Bonds, the Trustee, at the expense of the Corporation, shall file all
instruments the Owner of the Bonds shall deem necessary to be filed and shall
continue or cause to be continued the liens of such instruments for so long as
the Bonds shall be Outstanding. The City and the Corporation shall cooperate
with the Trustee in this regard by executing such continuation statements and
providing such information as the Trustee may require to renew such liens.

                                   ARTICLE XI

                  OPTION AND OBLIGATION TO PURCHASE THE PROJECT

      SECTION 11.1. OPTION TO PURCHASE THE PROJECT. The Corporation shall have,
and is hereby granted, the option to purchase the Project at any time, prior to
the expiration of the Lease Term upon payment in full of all Bonds then
Outstanding or provision for their payment having been made pursuant to ARTICLE
XIII of the Indenture. To exercise such option the Corporation shall give
written notice to the City and to the Trustee, if any, of the Bonds as shall
then be unpaid or provision for their payment shall not have been made in
accordance with the provisions of the Indenture, and shall specify therein the
date of closing such purchase, which date shall be not less than 30 nor more
than 180 days from the date such notice is

                                      -24-
<PAGE>

mailed, and in case of a redemption of the Bonds in accordance with the
provisions of the Indenture the Corporation shall make arrangements satisfactory
to the Trustee for the giving of the required notice of redemption. The purchase
price payable by the Corporation in the event of its exercise of the option
granted in this Section shall be the sum of the following:

            (a) an amount of money which, when added to the amount then on
      deposit in the Bond Fund, will be sufficient to redeem all the then
      Outstanding Bonds on the earliest redemption date next succeeding the
      closing date, including, without limitation, principal and interest to
      accrue to said redemption date and redemption expense; plus

            (b) an amount of money equal to the Trustee's and the Paying Agent's
      agreed to and reasonable fees and expenses under the Indenture accrued and
      to accrue until such redemption of the Bonds; plus

            (c) the sum of $100.

      SECTION 11.2. CONVEYANCE OF THE PROJECT. At the closing of the purchase of
the Project pursuant to this Article, the City will upon receipt of the purchase
price deliver to the Corporation the following:

            (a) If the Indenture shall not at the time have been satisfied in
      full, a release from the Trustee of the Project from the lien and/or
      security interest of the Indenture.

            (b) Documents conveying to the Corporation legal title to the
      Project, as it then exists, subject to the following: (1) those liens and
      encumbrances, if any, to which title to the Project was subject when
      conveyed to the City; (2) those liens and encumbrances created by the
      Corporation or to the creation or suffering of which the Corporation
      consented; (3) those liens and encumbrances resulting from the failure of
      the Corporation to perform or observe any of the agreement on its part
      contained in this Lease; (4) Permitted Encumbrances other than the
      Indenture and this Lease; and (5) if the Project or any part thereof is
      being condemned, the rights and title of any condemning authority.

      SECTION 11.3. RELATIVE POSITION OF OPTION AND INDENTURE. The options and
obligation to purchase the Project granted to the Corporation in this Article
shall be and remain prior and superior to the Indenture and may be exercised
whether or not the Corporation is in default under this Lease, provided that
such default will not result in nonfulfillment of any condition to the exercise
of any such option and further provided that all options herein granted shall
terminate upon the termination of this Lease.

      SECTION 11.4. OBLIGATION TO PURCHASE THE PROJECT. The Corporation hereby
agrees to purchase, and the City hereby agrees to sell, the Project for the sum
of $100 at the expiration of the Lease Term following full payment of the Bonds
or provision for payment thereof having been made in accordance with the
provisions of the Indenture.

                                      -25-
<PAGE>

                                   ARTICLE XII

                              DEFAULTS AND REMEDIES

      SECTION 12.1. EVENTS OF DEFAULT. If any one or more of the following
events shall occur and be continuing, it is hereby defined as and declared to be
and to constitute an "Event of Default" or "default" under this Lease:

            (a) Default in the due and punctual payment of Basic Rent for a
      period of five (5) business days following written notice to the
      Corporation by the City or the Trustee or default in the due and punctual
      payment Additional Rent for a period of 30 days following written notice
      to the Corporation by the City or the Trustee; or

            (b) Default in the due observance or performance of any other
      covenant, agreement, obligation or provision of this Lease on the
      Corporation's part to be observed or performed, and such default shall
      continue for 60 days after the City or the Trustee has given the
      Corporation written notice specifying such default (or such longer period
      as shall be reasonably required to cure such default; provided that (1)
      the Corporation has commenced such cure within said 60-day period, and (2)
      the Corporation diligently prosecutes such cure to completion); or

            (c) The Corporation shall: (1) admit in writing its inability to pay
      its debts as they become due; or (2) file a petition in bankruptcy or for
      reorganization, arrangement, composition, readjustment, liquidation,
      dissolution or similar relief under the Bankruptcy Code as now or in the
      future amended or any other similar present or future federal or state
      statute or regulation, or file a pleading asking for such relief; or (3)
      make an assignment for the benefit of creditors; or (4) consent to the
      appointment of a trustee, receiver or liquidator for all or a major
      portion of its property or shall fail to have the appointment of any
      trustee, receiver or liquidator made without the Corporation's consent or
      acquiescence, vacated or set aside; or (5) be finally adjudicated as
      bankrupt or insolvent under any federal or state law; or (6) be subject to
      any proceeding, or suffer the entry of a final and non-appealable court
      order, under any federal or state law appointing a trustee, receiver or
      liquidator for all or a major part of its property or ordering the
      winding-up or liquidation of its affairs, or approving a petition filed
      against it under the Bankruptcy Code, as now or in the future amended,
      which order or proceeding, if not consented to by it, shall not be
      dismissed, vacated, denied, set aside or stayed within 60 days after the
      day of entry or commencement; or (7) suffer a writ or warrant of
      attachment or any similar process to be issued by any court against all or
      any substantial portion of its property, and such writ or warrant of
      attachment or any similar process is not contested, stayed, or is not
      released within 60 days after the final entry, or levy or after any
      contest is finally adjudicated or any stay is vacated or set aside; or

            (d) The Corporation shall vacate or abandon the Project, or shall
      have been ejected from the Project or any portion thereof by reason of a
      defect in title to the Project, and the same shall remain uncured for and
      unoccupied for a period of 60 days; or

            (e) The occurrence and continuance of an "Event of Default" by the
      Corporation under the Tax Abatement Agreement following any applicable
      notice and grace period provided therein or in this Lease.

      SECTION 12.2. REMEDIES ON DEFAULT. If any Event of Default referred to in
SECTION 12.1 hereof shall have occurred and be continuing, then the City may at
the City's election (subject, however, to any

                                      -26-
<PAGE>

restrictions against acceleration of the maturity of the Bonds or termination of
this Lease in the Indenture), then or at any time thereafter, and while such
default shall continue, take any one or more of the following actions:

      (a) cause all amounts payable with respect to the Bonds for the remainder
of the term of this Lease to become due and payable, as provided in the
Indenture;

      (b) give the Corporation written notice of intention to terminate this
Lease on a date specified therein, which date shall not be earlier than 30 days
after such notice is given, and if all defaults have not then been cured, on the
date so specified, the Corporation's rights to possession of the Project shall
cease and this Lease shall thereupon be terminated, and the City may re-enter
and take possession of the Project; or

      (c) without terminating this Lease, re-enter the Project to take
possession thereof pursuant to legal proceedings or pursuant to any notice
provided for by law, and having elected to re-enter or take possession of the
Project without terminating this Lease, the City shall use reasonable diligence
to relet the Project, or parts thereof, for such term or terms and at such
rental and upon such other terms and conditions as the City may deem advisable,
with the right to make alterations and repairs to the Project (but without
liability on the part of the Corporation to pay for any such alterations), and
no such re-entry or taking of possession of the Project by the City shall be
construed as an election on the City's part to terminate this Lease, and no such
re-entry or taking of possession by the City shall relieve the Corporation of
its obligation to pay Basic Rent or Additional Rent (at the time or times
provided herein), or any of its other obligations under this Lease, all of which
shall survive such re-entry or taking of possession, and the Corporation shall
continue to pay the Basic Rent and Additional Rent provided for in this Lease
until the end of this Lease Term, whether or not the Project shall have been
relet, less the Net Proceeds, if any, of any reletting of the Project after
deducting all of the City's reasonable expenses in or in connection with such
reletting, including without limitation all repossession costs, brokerage
commissions, legal expenses, expenses of employees, alteration costs and
expenses of preparation for reletting. Said Net Proceeds of any reletting shall
be deposited in the Bond Fund. Having elected to re-enter or take possession of
the Project without terminating this Lease, the City may (subject, however, to
any restrictions against termination of this Lease in the Indenture), by notice
to the Corporation given at any time thereafter following an Event of Default,
elect to terminate this Lease on a date to be specified in such notice, which
date shall be not earlier than 30 days after re-entry under (c) above, and if
all defaults shall not have then been cured, on the date so specified this Lease
shall thereupon be terminated. If in accordance with any of the foregoing
provisions of this Article the City shall have the right to elect to re-enter
and take possession of the Project, the City may enter and expel the Corporation
and those claiming through or under the Corporation and remove the property and
effects of both or either (forcibly if necessary) without being guilty of any
manner of trespass and without prejudice to any remedies for arrears of rent or
preceding breach of covenant. The City may take whatever action at law or in
equity which may appear necessary or desirable to collect rent then due and
thereafter to become due, or to enforce performance and observance of any
obligation, agreement or covenant of the Corporation under this Lease, and in
all events, the City shall take such action as directed to by the Owners of a
majority of the Bonds.

      SECTION 12.3. SURVIVAL OF OBLIGATIONS. The Corporation covenants and
agrees with the City and Bondowners that its obligations under this Lease shall
survive the cancellation and termination of this Lease, for any cause, and that
the Corporation shall continue to pay the Basic Rent and Additional Rent and
perform all other obligations provided for in this Lease, all at the time or
times provided in this Lease; provided, however, that upon the payment of all
Basic Rent and Additional Rent required under ARTICLE V hereof, and upon the
satisfaction and discharge of the Indenture under SECTION 1301 thereof, the
Corporation's obligation under this Lease shall thereupon cease and terminate in
full.

                                      -27-
<PAGE>

      SECTION 12.4. LIMITATION OF LIABILITY AND INDEMNITY. Notwithstanding
anything contained to the contrary in this Lease, it is agreed that the City
will look only to the Corporation's interest in and to the Project and any
sublease with respect thereto for the collection of any judgment (or other
judicial process) requiring the payment of money or the making of any
performance by the Corporation in the event of a breach or default under this
Lease by the Corporation, and no other property or assets of the Corporation or
its officers, shareholders, partners or principal, disclosed or undisclosed,
shall be subject to levy, execution or other enforcement procedures for the
satisfaction of any such judgment (or other judicial process).

      SECTION 12.5. PERFORMANCE OF THE CORPORATION'S OBLIGATIONS BY THE CITY. If
the Corporation shall fail to keep or perform any of its obligations as provided
in this Lease in the making of any payment or performance of any obligation,
then the City, or the Trustee in the City's name, may (but shall not be
obligated so to do) upon the continuance of such failure on the Corporation's
part for 30 days after written notice of such failure is given the Corporation
by the City or the Trustee, and without waiving or releasing the Corporation
from any obligation hereunder, as an additional but not exclusive remedy, make
any such payment or perform any such obligation, and all reasonable sums so paid
by the City or the Trustee and all necessary incidental reasonable costs and
expenses incurred by the City or the Trustee in performing such obligations
shall be deemed Additional Rent and shall be paid to the City or the Trustee on
demand, and if not so paid by the Corporation, the City or the Trustee shall
have the same rights and remedies provided for in SECTION 12.2 hereof in the
case of default by the Corporation in the payment of Basic Rent.

      SECTION 12.6. RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies
reserved by the City and the Corporation hereunder and those provided by law
shall be construed as cumulative and continuing rights. No one of them shall be
exhausted by the exercise thereof on one or more occasions. The City and the
Corporation shall each be entitled to specific performance and injunctive or
other equitable relief for any breach or threatened breach of any of the
provisions of this Lease, notwithstanding availability of an adequate remedy at
law, and each party hereby waives the right to raise such defense in any
proceeding in equity.

      SECTION 12.7. WAIVER OF BREACH. No waiver of any breach of any covenant or
agreement herein contained shall operate as a waiver of any subsequent breach of
the same covenant or agreement or as a waiver of any breach of any other
covenant or agreement, and in case of a breach by the Corporation of any
covenant, agreement or undertaking by the Corporation, the City may nevertheless
accept from the Corporation any payment or payments hereunder without in any way
waiving City's right to exercise any of its rights and remedies provided for
herein with respect to any such breach or breaches of the Corporation which were
in existence at the time such payment or payments were accepted by the City.

      SECTION 12.8. NOTICE OF DEFAULTS UNDER SECTION 12.1; OPPORTUNITY OF
CORPORATION TO CURE DEFAULTS.

      (a) Anything herein to the contrary notwithstanding, no default specified
in SECTION 12.1(c) through (e) shall constitute an Event of Default until actual
notice of such default by registered or certified mail shall be given by the
Trustee or by the Owners of 25% in aggregate principal amount of all Bonds
Outstanding to the Corporation and the Corporation shall have had 30 days after
receipt of such notice to correct said default or cause said default to be
corrected, and shall not have corrected said default or caused said default to
be corrected within such period; provided, however, if any such default shall be
such that it cannot be corrected within such period, it shall not constitute an
Event of Default if corrective action is instituted by the Corporation within
such period and diligently pursued until the default is corrected.

                                      -28-
<PAGE>

      (b) Anything herein to the contrary notwithstanding, no default specified
in SECTION 12.1(b) shall constitute an Event of Default until actual notice of
such default by registered or certified mail shall be given (i) at any time the
Corporation is the Owner of 100% in aggregate principal amount of all Bonds
Outstanding, by the Owner of 100% in aggregate principal amount of all Bonds
Outstanding, and (ii) at any time the Corporation is not the Owner of 100% in
aggregate principal amount of all Bonds Outstanding, the Trustee or by the
Owners of 25% in aggregate principal amount of all Bonds Outstanding, to the
Corporation and the Corporation shall have had 30 days after receipt of such
notice to correct said default or cause said default to be corrected, and shall
not have corrected said default or caused said default to be corrected within
such period; provided, however, if any such default shall be such that it cannot
be corrected within such period, it shall not constitute an Event of Default if
corrective action is instituted by the Corporation within such period and
diligently pursued until the default is corrected.

      (c) With regard to any alleged default concerning which notice is given to
the Corporation under the provisions of this Section, the City hereby grants the
Corporation full authority for account of the City to perform any covenant or
obligation, the nonperformance of which is alleged in said notice to constitute
a default, in the name and stead of the City, with full power to do any and all
things and acts to the same extent that the City could do and perform any such
things and acts in order to remedy such default.

      SECTION 12.9. TRUSTEE'S EXERCISE OF THE CITY'S REMEDIES. Whenever any
Event of Default shall have occurred and be continuing, the Trustee may, but
except as otherwise provided in the Indenture shall not be obliged to, exercise
any or all of the rights of the City under this Article, upon notice as required
of the City unless the City has already given the required notice. In addition,
the Trustee shall have available to it all of the remedies prescribed by the
Indenture.

                                  ARTICLE XIII

                             ASSIGNMENT AND SUBLEASE

      SECTION 13.1. ASSIGNMENT; SUBLEASE.

      (a) The Corporation shall have the right to assign, transfer, encumber or
dispose of this Lease or any interest therein or part thereof, with the written
consent of the City, for any lawful purpose under the Act. With respect to any
assignment, the Corporation shall comply with the following conditions:

            (1) Such assignment shall be in writing, duly executed and
      acknowledged by the assignor and in proper form for recording;

            (2) Such assignment shall include the entire then unexpired term of
      this Lease;

            (3) A duplicate original of such assignment shall be delivered to
      the City within ten (10) days after the execution thereof, together with
      an assumption agreement, duly executed and acknowledged by the assignee in
      proper form for recording, by which the assignee shall assume all of the
      terms, covenants and conditions of this Lease on the part of the
      Corporation to be performed and observed; and

            (4) At the time of any such assignment there shall be no damage or
      destruction to the Project which has not been repaired, restored and
      replaced in accordance with the provisions of this

                                      -29-
<PAGE>

      Lease, unless any funds then held by the Corporation for the purposes of
      such repair, restoration and replacement are simultaneously transferred to
      the assignee.

      Upon the satisfaction of the conditions set forth herein, the assignor
shall be relieved of all further liability occurring on and after the effective
date of such assignment. The consent of the City to any assignment, transfer,
encumbrance or disposition described in this subsection (a) shall not be
unreasonably withheld or delayed.

      (b) The Corporation shall have the right, with the written consent of the
City, to sublet all of the Project to a single entity for any lawful purpose
under the Act. The Corporation shall have the right, without the consent of the
City, to sublet any part of the Project to more than one entity in the ordinary
course of its business for any lawful purpose under the Act. No sublease of the
Project shall release or discharge the Corporation from its primary liability
for the payment of the Basic Rent and Additional Rent hereunder and the
performance of each and all of the covenants and agreements herein contained,
and its duties and obligations under this Lease shall continue as if no such
sublease had been made. The Corporation shall, within 10 days after the delivery
thereof, furnish or cause to be furnished to the City and the Trustee a true and
correct copy of each such sublease. Any sublease may provide, at the
Corporation's option, that the City's consent shall not be required in respect
of any further subletting thereunder if such further subletting is for a similar
purpose as the original sublease and is for a purpose permissible under the Act.

      If for any reason this Lease and the leasehold estate of the Corporation
hereunder is terminated by the City by summary proceedings or otherwise in
accordance with the terms of this Lease, the City covenants and agrees that such
termination of this Lease shall not result in a termination of any sublease
affecting the Project or any part or parts thereof and that they shall all
continue for the duration of their respective terms and any extensions thereof
as a direct lease between the City hereunder and the sublessee thereunder, with
the same force and effect as if the City hereunder had originally entered into
such sublease as landlord thereunder. Any such sublessee shall not be named or
joined in any action or proceeding by the City under this Lease to recover
possession of the Project or for any other relief if such sublessee is not then
in default under the terms of its sublease beyond any applicable grace period
for curing the same. The City shall, upon request, execute, acknowledge and
deliver such agreements evidencing and agreeing to the foregoing in a form
reasonably satisfactory to the Corporation.

      Any consent of the City required by this subsection (b) shall not be
unreasonably withheld or delayed.

      SECTION 13.2. ASSIGNMENT OF REVENUES BY CITY. The City shall assign and
pledge any rents, revenues and receipts receivable under this Lease, to the
Trustee pursuant to the Indenture as security for payment of the principal of,
interest and premium, if any, on the Bonds and the Corporation hereby consents
to such pledge and assignment.

      SECTION 13.3. PROHIBITION AGAINST FEE MORTGAGE OF PROJECT. The City shall
not mortgage its fee interest in the Project, but may assign its interest in and
pledge any moneys receivable under this Lease to the Trustee pursuant to the
Indenture as security for payment of the principal of and interest on the Bonds.

      SECTION 13.4. RESTRICTIONS ON SALE OR ENCUMBRANCE OF PROJECT BY CITY.
During the Lease Term, the City agrees that, except to secure the Bonds to be
issued pursuant to the Indenture, it will not sell, assign, encumber, mortgage,
transfer or convey the Project or any interest therein.

                                      -30-
<PAGE>

                                   ARTICLE XIV

                      AMENDMENTS, CHANGES AND MODIFICATIONS

      SECTION 14.1. AMENDMENTS, CHANGES AND MODIFICATIONS. Except as otherwise
provided in this Lease or in the Indenture, subsequent to the issuance of Bonds
and prior to the payment in full of the Bonds (or provision for the payment
thereof having been made in accordance with the provisions of the Indenture),
this Lease may not be effectively amended, changed, modified, altered or
terminated without the prior written consent of the Trustee, given in accordance
with the provisions of the Indenture.

                                   ARTICLE XV

                            MISCELLANEOUS PROVISIONS

      SECTION 15.1. NOTICES. All notices, certificates or other communications
required or desired to be given hereunder shall be in writing and shall be
deemed duly given when (i) mailed by registered or certified mail, postage
prepaid, or (ii) sent by overnight delivery or other delivery service which
requires written acknowledgment of receipt by the addressee, addressed as
follows:

            (a) To the City:            City of Olathe, Kansas
                                        City Hall
                                        100 East Santa Fe
                                        Olathe, Kansas  66061
                                        Attention: City Clerk

            (b) To the Corporation:     Pacific Sunwear Stores Corp.
                                        3450 East Miraloma Avenue
                                        Anaheim, California 92806
                                        Attention: Director/Treasurer

            (c) To the Trustee:         U.S. Bank National Association
                                        Corporate Trust Services
                                        633 W. Fifth Street, 24th Floor
                                        Los Angeles, California 90071

      All notices given by certified or registered mail as aforesaid shall be
deemed fully given as of the date they are so mailed. A duplicate copy of each
notice, certificate or other communication given hereunder by either the City or
the Corporation to the other shall also be given to the Trustee. The City, the
Corporation and the Trustee may from time to time designate, by notice given
hereunder to the others of such parties, such other address to which subsequent
notices, certificates or other communications shall be sent. Any notice may be
given by the attorney for such party.

      SECTION 15.2. CITY SHALL NOT UNREASONABLY WITHHOLD CONSENTS AND APPROVALS.
Wherever in this Lease it is provided that the City shall, may or must give its
approval or consent, exercise its discretion, or execute supplemental agreements
or schedules, the City shall not unreasonably, arbitrarily or unnecessarily
withhold, delay, condition, or refuse to give such approvals or consents,
exercise its discretion, or refuse to execute such supplemental agreements or
schedules and the City shall act in a good faith manner in administering and
enforcing this Lease.

                                      -31-
<PAGE>

      SECTION 15.3. NET LEASE. The parties hereto agree (a) that this Lease
shall be deemed and construed to be a net lease, (b) that the payments of Basic
Rent are designed to provide the City and the Trustee funds adequate in amount
to pay all principal of and interest accruing on the Bonds as the same become
due and payable, and (c) that if after the principal of and interest on the
Bonds and all costs incident to the payment of the Bonds have been paid in full
the Trustee or the City holds unexpended funds received in accordance with the
terms hereof such unexpended funds shall, after payment therefrom of all sums
then due and owing by the Corporation under the terms of this Lease, and except
as otherwise provided in this Lease and the Indenture, become the absolute
property of and be paid over forthwith to the Corporation.

      SECTION 15.4. NO PECUNIARY LIABILITY. No provision, covenant or agreement
contained in this Lease, the Indenture or the Bonds, or any obligation herein or
therein imposed upon the City, or the breach thereof, shall constitute or give
rise to or impose upon the City a pecuniary liability or a charge upon the
general credit or taxing powers of the City of Olathe or the State of Kansas.
Such limitation shall not apply to any liability or charge directly resulting
from the City's breach of any provision, covenant or agreement contained herein.
In no event shall either the City or the Corporation be liable for any
consequential, punitive or similar damages resulting from the breach of any
provision, covenant or agreement contained herein or otherwise arising under
this Lease.

      SECTION 15.5. GOVERNING LAW. This Lease shall be construed in accordance
with and governed by the laws of Kansas.

      SECTION 15.6. BINDING EFFECT. This Lease shall be binding upon and shall
inure to the benefit of the City and the Corporation and their respective
successors and assigns.

      SECTION 15.7. ELECTRONIC STORAGE. The parties agree that the transactions
described herein may be conducted and related documents may be stored by
electronic means.

      SECTION 15.8. SEVERABILITY. If for any reason any provision of this Lease
shall be determined to be invalid or unenforceable, the validity and
enforceability of the other provisions hereof shall not be affected thereby.

      SECTION 15.9. EXECUTION IN COUNTERPARTS. This Lease may be executed
simultaneously in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute but one and the same instrument.

                    [Remainder of page intentionally blank.]

                                      -32-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed in their respective corporate names and their respective corporate
seals to be hereunto affixed and attested by their duly authorized officers, all
as of the date first above written.

                                        CITY OF OLATHE, KANSAS

                                        By: /s/  MICHAEL COPELAND
                                            -------------------------------
                                            Mayor

(Seal)

ATTEST:

By: /s/  DEBRA S. GRAGG
    ----------------------------
    City Clerk

Lease Agreement
PacSun Project, Series 2007

                                       S-1

<PAGE>

                                        PACIFIC SUNWEAR STORES CORP.,
                                        a California corporation

                                        By: /s/  GERALD M. CHANEY
                                            -------------------------------
                                            Gerald M. Chaney
                                            Senior Vice President and
                                            Chief Financial Officer

Lease Agreement
PacSun Project, Series 2007

                                       S-2

<PAGE>

                                    EXHIBIT A

                              PROJECT IMPROVEMENTS

      All buildings, structures, improvements and fixtures located on or to be
acquired or purchased for the construction, improvement or remodeling of the
Project Site pursuant to ARTICLE IV hereof and paid for in whole or in part from
the proceeds of Bonds and all additions, alterations, modifications and
improvements thereof made pursuant to this Lease.

                                       A-1

<PAGE>

                                    EXHIBIT B

                                  PROJECT SITE

      Lot 1, PACIFIC SUNWEAR AMENDED 1ST PLAT, a subdivision in the City of
Olathe, Johnson County, Kansas

                                       B-1

<PAGE>

                                    EXHIBIT C

                        [FORM OF REQUISITION CERTIFICATE]

                                                        Requisition No. ________
                                                        Date: __________________

                             REQUISITION CERTIFICATE

TO:   U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE UNDER A TRUST INDENTURE DATED
      AS OF JULY 1, 2007, BETWEEN THE CITY OF OLATHE, KANSAS, AND THE TRUSTEE,
      AND LEASE AGREEMENT DATED AS OF JULY 1, 2007, BETWEEN THE CITY OF OLATHE,
      KANSAS, AND PACIFIC SUNWEAR STORES CORP.

      The undersigned hereby requests that a total of $_____________ be paid for
Project Costs (as defined in said Lease) in such amounts, to such payees and for
such purposes as set forth on SCHEDULE 1 attached hereto.

      I hereby state and certify that: (i) the amounts requested are or were
necessary and appropriate in connection with the acquisition, purchase,
construction, improving or remodeling of the Project, have been properly
incurred and are a proper charge against the Construction Fund, and have been
paid by or are justly due to the persons whose names and addresses are stated on
Schedule 1, and have not been the basis of any previous requisition from the
Construction Fund; (ii) as of this date, except for the amounts referred to
above, there are no, to the best of my knowledge, outstanding statements which
are due and payable for labor, wages, materials, supplies or services in
connection with the acquisition, purchase, construction, improving or remodeling
of said buildings and improvements which, if unpaid, might become the basis of a
vendors', mechanics', laborers' or materialmen's statutory or similar lien upon
the Project or any part thereof; and (iii) no part of the several amounts paid
or due as stated above has been or is being made the basis for the withdrawal of
any moneys from the Construction Fund in any previous or pending application for
payment made pursuant to said Lease.

      For any payee which is the Corporation the undersigned hereby instructs
the Trustee to make such payment by wire transfer to the following account:
_____________________________, ABA No. ______________, Credit Account No.
_______________ (Pacific Sunwear Stores Corp.).

                                        PACIFIC SUNWEAR STORES CORP.

                                        By: ____________________________________
                                        Name: __________________________________
                                        Title: _________________________________

                                       C-1

<PAGE>

                      SCHEDULE 1 TO REQUISITION CERTIFICATE

<TABLE>
<CAPTION>
Amount            Payee and Address         Description of Project Costs
------            -----------------         ----------------------------
<S>               <C>                       <C>
$
-------

</TABLE>

                                       C-2

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