MELT INC (Form: SB-2, Received: 10/24/2003 17:44:51)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM SB-2

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

MELT INC.

(Exact name of registrant as specified in its charter)

Nevada		2024		47-0925451
State or jurisdiction of incorporation or organization		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

14 John Dykes Avenue, Vaucluse, NSW Australia 2030 Tel: 011-61-421-348-610

(Address and telephone number of registrant's principal executive offices)

Clive Barwin, President
14 John Dykes Avenue, Vaucluse, NSW Australia 2030 Tel: 011-61-421-348-610

(Name, address and telephone number of agent for service)

Copy of communications to:

William L. Macdonald
Clark, Wilson
Suite 800 - 885 West Georgia Street
Vancouver, British Columbia, Canada V6C 3H1
Telephone: 604-687-5700

Approximate date of proposed sale to the public: From time to time after the effective date of this Registration Statement.

If any securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933. [X]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered ⁽¹⁾	Amount to be registered	Proposed maximum offering price per share ⁽²⁾	Proposed maximum aggregate offering price (US$)	Amount of registration fee ⁽²⁾
Common Stock to be offered for resale by selling stockholders	13,230,000	$0.10 ⁽²⁾	$1,323,000	$107.03
Total Registration Fee				$107.03

^{(1)

An indeterminate number of additional shares of common stock shall be issuable pursuant to Rule 416 to prevent dilution resulting from stock splits, stock dividends or similar transactions and in such an event the number of shares registered shall automatically be increased to cover the additional shares in accordance with Rule 416 under the Securities Act.

^{(2)

Estimated in accordance with Rule 457(c) solely for the purpose of computing the amount of the registration fee based on a bona fide estimate of the maximum offering price.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON THE DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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PROSPECTUS

Subject to Completion

___________, 2003

MELT INC.

A NEVADA CORPORATION

13,230,000 SHARES OF COMMON STOCK OF MELT INC.

_________________________________

This prospectus relates to 13,230,000 shares of common stock of Melt Inc., a Nevada corporation, which may be resold by selling stockholders named in this prospectus. The shares were acquired by the selling shareholders directly from us in private offerings that were exempt from registration requirements of the Securities Act of 1933. We have been advised by the selling stockholders that they may offer to sell all or a portion of their shares of common stock being offered in this prospectus from time to time. The selling stockholders will sell their shares of our common stock at a price of $0.10 per share until shares of our common stock are quoted on the OTC Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market prices or privately negotiated prices. Our common stock is presently not traded on any market or securities exchange, and we have not applied for listing or quotation on any public market. We will not receive any proceeds from the resale of shares of common stock by the selling stockholders. We will pay for expenses of this offering.

Our business is subject to many risks and an investment in our common stock will also involve a high degree of risk. You should invest in our common stock only if you can afford to lose your entire investment. You should carefully consider the various Risk Factors described beginning on page 7 before investing in our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The information in this prospectus is not complete and may be changed. The selling stockholders may not sell or offer these securities until this registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

The date of this prospectus is

__________,

2003.

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The following table of contents has been designed to help you find important information contained in this prospectus. We encourage you to read the entire prospectus.

TABLE OF CONTENTS}

PAGE NUMBER

PROSPECTUS SUMMARY

6

RISK FACTORS

7

RISKS RELATED TO OUR BUSINESS

7

We have had negative cash flows from operations and if we are not able to obtain further financing our business operations may fail

7

We have only commenced our business operations in July, 2003 and we have a limited operating history. If we cannot successfully manage the risks normally faced by start-up companies, our business may fail

8

The fact that we have not earned any revenues since our incorporation and we are a development stage company raises substantial doubt about our ability to continue as a going concern or to establish and operate a successful business. If we are unable to establish and generate revenues our business will fail and you may lose some or all of your investment in our common stock.

8

We have not generated any revenues from our business operations and we will need to raise additional funds in the near future. If we are not able to obtain future financing when required, we might be forced to discontinue our business

8

All of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers

9

If we are unable to protect our trade name, our efforts to increase public recognition of our brand may be impaired

9

The establishment and maintenance of brand identity of our products is critical to our future success. If we are unable to promote and maintain our brands our business could be materially affected

9

We will be subject to risks associated with the retail frozen desert industry

9

Because we face intense competition, an investment in our company is highly speculative

10

Because we depend on a small group of qualified people, if we cannot hire and retain qualified personnel, we might be forced to discontinue our operations

10

Because our officers, directors and principal shareholders control a majority of our common stock, investors will have little or no control over our management or other matters requiring shareholder approval

10

Because we do not have sufficient insurance to cover our business losses, we might have uninsured losses, increasing the possibility that you would lose your investment

10

Because we can issue additional common shares, purchasers of our common stock may incur immediate dilution and may experience further dilution

11

RISKS ASSOCIATED WITH OUR COMMON STOCK

11

There is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be unable to sell their shares

11

Because we do not intend to pay any dividends on our common shares, investors seeking dividend income or liquidity should not purchase shares in this offering

11

NASD sales practice requirements may also limit a stockholder's ability to buy and sell our stock

11

FORWARD-LOOKING STATEMENTS

12

SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE

12

THE OFFERING

12

DETERMINATION OF OFFERING PRICE

12

USE OF PROCEEDS

13

DILUTION

13

DIVIDEND POLICY

13

SELLING STOCKHOLDERS

13

PLAN OF DISTRIBUTION

16

TRANSFER AGENT AND REGISTRAR

18

LEGAL PROCEEDINGS

18

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

18

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

19

DESCRIPTION OF COMMON STOCK

20

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

20

INTEREST OF NAMED EXPERTS AND COUNSEL

21

EXPERTS

21

DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

21

DESCRIPTION OF PROPERTY

21

DESCRIPTION OF BUSINESS

21

MANAGEMENT'S DISCUSSION AND ANALYSIS

23

PLAN OF OPERATIONS

24

NEW ACCOUNTING PRONOUNCEMENTS

26

APPLICATION OF CRITICAL ACCOUNTING POLICIES

27

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

27

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

28

EXECUTIVE COMPENSATION

28

REPORTS TO SECURITY HOLDERS

30

FINANCIAL STATEMENTS

30

WHERE YOU CAN FIND MORE INFORMATION

40

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As used in this prospectus, the terms "we", "us", "our", and "Melt" mean Melt Inc. and our wholly owned subsidiary, Melt (California) Inc., unless otherwise indicated.

All dollar amounts refer to US dollars unless otherwise indicated.

PROSPECTUS SUMMARY

Our Business

Our company, Melt Inc., intends to develop, own and operate gourmet gelaterias under the "Melt" trade name, offering for sale Italian gelato (ice cream) and related products, pastries and confections. We intend to open store locations initially in southern California. We were incorporated on July 18, 2003 under the laws of the State of Nevada. Our registered office in Nevada is located at 6100 Neil Road, Suite 500, Reno, Nevada 89511. Our principal executive offices are located at 14 John Dykes Avenue, Vaucluse, New South Wales, Australia 2030. Our telephone number is 011-61-421-348-610.

We have one wholly-owned subsidiary, Melt (California) Inc., a California corporation incorporated on August 6, 2003. Its registered office is located at 5651 Dolly Avenue, Buena Park, CA 90621.

Number of Shares Being Offered

This prospectus covers the resale by the selling stockholders named in this prospectus of up to 13,230,000 shares of our common stock. The offered shares were acquired by the selling stockholders in private placement transactions, which were exempt from the registration requirements of the Securities Act of 1933. The selling stockholders will sell their shares of our common stock at $0.10 per share until our common stock is quoted on the OTC Bulletin Board, or listed for trading or quotation on any other public market, and thereafter at prevailing market prices or privately negotiated prices. Our common stock is presently not traded on any market or securities exchange and we have not applied for listing or quotation on any public market. Please see the "Plan of Distribution" section at page 16 of this prospectus for a detailed explanation of how the common shares may be sold.

Number of Shares Outstanding

There were 18,730,000 shares of our common stock issued and outstanding as at September 15, 2003.

Use of Proceeds

We will not receive any of the proceeds from the sale of the shares of our common stock being offered for sale by the selling stockholders. We will incur all costs associated with this registration statement and prospectus.

Summary of Financial Data

The summarized consolidated financial data presented below is derived from and should be read in conjunction with our audited consolidated financial statements from July 18, 2003 (date of inception) to the period ended September 15, 2003 including the notes to those financial statements which are included elsewhere in this prospectus along with the section entitled "Management's Discussion and Analysis" beginning on page 24 of this prospectus.

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From July 18, 2003

(Date of Inception) to

September 15, 2003
⁽¹⁾

Revenue

$Nil

Net Loss for the Period

$9,800

Loss Per Share - basic and diluted

$(0.03)

As at

September 15, 2003

Working Capital

$301,750

Total Assets

$317,550

Total Number of Issued Shares of Common Stock

18,730,000

Deficit

$9,800

Total Stockholders' Equity

$301,750

(1) Our company was incorporated on July 18, 2003 and has not completed a full financial fiscal year.

RISK FACTORS

An investment in our common stock involves a number of very significant risks. You should carefully consider the following risks and uncertainties in addition to other information in this prospectus in evaluating our company and its business before purchasing shares of our company's common stock. Our business, operating results and financial condition could be seriously harmed due to any of the following risks. The risks described below are not the only ones facing our company. Additional risks not presently known to us may also impair our business operations. You could lose all or part of your investment due to any of these risks.

RISKS RELATED TO OUR BUSINESS

We have had negative cash flows from operations and if we are not able to obtain further financing our business operations may fail.

To date we have had negative cash flows from operations and we have been dependent on sales of our equity securities to meet our cash requirements. We incurred a loss of $(9,800) for the period ended September 15, 2003. As of September 15, 2003, we had working capital of $301,750. We do not expect positive cash flow from operations in the near term. As of September 15, 2003, we received an aggregate of $311,550 gross proceeds from two private placement financings in which we sold shares of our common stock. We have estimated that we will require $1,500,000 to carry out our business plan in the year ended December 31, 2004. We anticipate that the funds we have raised in the last private placements may be sufficient to satisfy our cash requirements for the balance of the year ended December 31, 2003. However, there is no assurance that actual cash requirements will not exceed our estimates. In particular, additional capital may be required in the event that:

- we incur unexpected costs in the opening of our initial retail locations;

- we are unable to create a substantial market for our products; or

- we incur any significant unanticipated expenses.

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The occurrence of any of the aforementioned events could adversely affect our ability to meet our business plans.

We will depend almost exclusively on outside capital to pay for the continued development of our retail locations, products and the marketing of our business. Such outside capital may include the sale of additional stock and/or commercial borrowing. There can be no assurance that capital will continue to be available if necessary to meet these continuing development costs or, if the capital is available, that it will be on terms acceptable to us. The issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, our business and future success may be adversely affected.

We have only commenced our business operations in July, 2003 and we have a limited operating history. If we cannot successfully manage the risks normally faced by start-up companies, our business may fail.

We have a limited operating history. Our operating activities since our incorporation on July 18, 2003 consisted primarily of developing our business plan and establishing our subsidiary. Our prospects are subject to the risks and expenses encountered by start up companies, such as uncertainty regarding level of future revenue and inability to budget expenses and manage growth accordingly, uncertainty regarding acceptance of our products and retail operations and inability to access sources of financing when required and at rates favorable to us. Our limited operating history and the highly competitive nature of the retail confectionery industry make it difficult or impossible to predict future results of our operations. We may not establish a customer following that will make us profitable, which might result in the loss of some or all of your investment in our common stock.

The fact that we have not earned any revenues since our incorporation and we are a development stage company raises substantial doubt about our ability to continue as a going concern or to establish and operate a successful business. If we are unable to establish and generate revenues our business will fail and you may lose some or all of your investment in our common stock.

We are in the development stage and have not generated any revenues since our inception on July 18, 2003. We will, in all likelihood, continue to incur operating expenses without significant revenues until our retail operations become fully operational and gain significant popularity with customers in southern California. As at September 15, 2003, we raised $311,550 through the sale of shares of our common stock. We estimate our total operating expenses and costs of sales, not including expenses in completing construction of retail outlets, to be approximately $2,800,000 through the year ended December 31, 2004, excluding any depreciation. At this rate we will not be able to maintain our operations without generating significant revenues from our operations. Our primary source of funds has been the sale of our common stock. We cannot assure that we will be able to generate enough interest in potential consumers for our products. If we cannot attract a significant number of customers, we will not be able to generate any significant revenues or income. These circumstances raise substantial doubt about our ability to continue as a going concern as described in an explanatory paragraph to our independent auditors' report on the financial statements for the period ended September 15, 2003. If we are unable to establish and generate revenues our business will fail and you may lose some or all of your investment in our common stock.

We have not generated any revenues from our business operations and we will need to raise additional funds in the near future. If we are not able to obtain future financing when required, we might be forced to discontinue our business.

Since we commenced our business operations on July 18, 2003, we have not generated any revenue while we have incurred $15,000 for the organization of our company and development of our business plan. We intend to spend a further $150,000 to complete the construction of our first retail location. Because we cannot anticipate when we will be able to generate significant revenues from our business operations, we may need to raise additional funds to continue develop our business for other locations, to respond to competitive pressures, or to respond to unanticipated requirements or expenses. We do not currently have any arrangements for financing and we can

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provide no assurance to investors that we will be able to find such financing if required. Obtaining additional financing would be subject to a number of factors, including investor acceptance of our retail gelato bar and our business model. The most likely source of future funds presently available to us is through the sale of equity capital. Any sale of share capital will result in dilution to existing shareholders. Furthermore, there is no assurance that we will not incur debt in the future, that we will have sufficient funds to repay our future indebtedness or that we will not default on our future debts, jeopardizing our business viability. Finally, we may not be able to borrow or raise additional capital in the future to meet our needs or to otherwise provide the capital necessary to conduct business, which might result in the loss of some or all of your investment in our common stock.

All of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers.

At the present time, we do not currently maintain a permanent place of business within the United States. In addition, all of our directors and officers are nationals and/or residents of countries other than the United States, and all or a substantial portion of such persons' assets are located outside the United States. As a result, it may be difficult for investors to enforce within the United States any judgments obtained against us or our officers or directors, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state thereof. Consequently, you may be effectively prevented from pursuing remedies under U.S. federal securities laws against them.

If we are unable to protect our trade name, our efforts to increase public recognition of our brand may be impaired.

We currently have made an application for the trade name "mmelt" and the trade "melt-gelato Italiano". The acquisition and maintenance of trade names generally is regulated by governmental agencies and their designees. The regulation of trade names in the United States and in foreign countries is subject to change. This could impair our efforts to build brand recognition and to increase customer recognition. Furthermore, the relationship between regulations governing trade names and laws protecting trademarks and similar proprietary rights is unclear. Therefore, we may be unable to prevent third parties from acquiring and using names that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights.

The establishment and maintenance of brand identity of our products is critical to our future success. If we are unable to promote and maintain our brands our business could be materially affected.

Since we expect that substantially all of our revenues will be generated from customer retail purchases at our retail outlets, market acceptance of our products is critical to our future success. Factors such as market positioning, retail locations, the availability and price of competing products (in particular, frozen deserts), and the introductions of new products will affect the market acceptance of our business.

We believe that establishing and maintaining brand identity of our products will increase the appeal of our products and retail locations to prospective customers. Promotion and enhancement of our gelato and related products will depend largely on our success in continuing to provide high quality products. In order to attract and retain customers and to promote and maintain our "Melt" brand in response to competitive pressures, we may increase our financial commitment to creating and maintaining a distinct brand loyalty among our customers. If we are unable to provide high quality products, or otherwise fail to promote and maintain our "Melt" brand, incur excessive expenses in an attempt to improve, or promote and maintain our brand, our business, results of operations and financial condition could be materially and adversely affected.

We will be subject to risks associated with the retail frozen desert industry.

Specialty retail food businesses are often affected by changes in consumer and competitive conditions, including changes in consumer tastes; national, regional, and local economic conditions and demographic trends; and the type, number, and location of competing businesses. Adverse publicity resulting from food quality, illness, injury, or other health concerns or operating issues stemming from one of our products may adversely affect our retail operations. In addition, factors such as inflation, increased food, labor, and employee benefit costs, regional

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weather conditions and the unavailability of experienced management and hourly employees may also adversely affect the retail frozen desert industry in general, and our operations, financial results and prospectus in particular.

Because we face intense competition, an investment in our company is highly speculative.

The retail confectionery industry is characterized by intense and substantial competition. We believe that our business will have to compete with large and established ice cream retailers such as Ben & Jerry's, Hagendas, Dreyers, Baskin Robins, Dairy Queen and Stone Cold Creamery Company (information on these companies does not form part of this prospectus), as well as other small to medium sized ice cream and gelato business entities that provide similar products.

A number of our competitors are well established, substantially larger and have substantially greater market recognition, greater resources and broader distribution capabilities than we have. These existing and future competitors may be able to respond more quickly to new or changing opportunities, product and customer requirements than us and may be able to undertake more extensive promotional activities, offer more retail locations to customers and adopt more aggressive pricing policies than we do. Increased competition by these existing and future competitors could materially and adversely affect our profitability.

Because we depend on a small group of qualified people, if we cannot hire and retain qualified personnel, we might be forced to discontinue our operations.

Since our inception on July 18, 2003, our president, chief executive officer, secretary and director, Mr. Clive Barwin, and our vice-president and director, Mr. Brandon Barwin, have handled all of the responsibilities in the area of corporate administration, business development and research. In addition, Mr. Clive Barwin has also provided us with capital raising services. The loss of the services of any of these directors, executive officers or key personnel, or the inability to identify, hire, train and retain other qualified directors, executive officers or personnel in the future would have a material adverse affect on our business, financial condition and operating results. We do not maintain any life insurance policies on any of these directors, executives, or key personnel for our benefit. The shares owned by Messrs. Barwin are not being registered for resale under this registration statement. When allowed if they sell all or most of their common stock, they may no longer have an incentive to remain with us, which would damage our business.

Because our officers, directors and principal shareholders control a majority of our common stock, investors will have little or no control over our management or other matters requiring shareholder approval.

Our officers and directors and their affiliates, in the aggregate, beneficially own

29.4

%

of issued and outstanding shares of our common stock. As a result, they have the ability to control matters affecting minority shareholders, including the election of our directors, the acquisition or disposition of our assets, and the future issuance of our shares. Because our officers, directors and principal shareholders control the company, investors may not be able to replace our management if they disagree with the way our business is being run. Because control by these insiders could result in management making decisions that are in the best interest of those insiders and not in the best interest of the investors, you may lose some or all of the value of your investment in our common stock.

Because we do not have sufficient insurance to cover our business losses, we might have uninsured losses, increasing the possibility that you would lose your investment.

We may incur uninsured liabilities and losses as a result of the conduct of our business. We do not currently maintain any comprehensive liability or property insurance. Even if we obtain such insurance in the future, we may not carry sufficient insurance coverage to satisfy potential claims. We do not carry any business interruption insurance. Should uninsured losses occur, any purchasers of our common stock could lose their entire investment.

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Because we can issue additional common shares, purchasers of our common stock may incur immediate dilution and may experience further dilution.

We are authorized to issue up to 100,000,000 common shares, of which 18,730,000 are issued and outstanding. Our board of directors has the authority to cause our company to issue additional shares of common stock or issue warrants or options to purchase shares of common stock without the consent of any of our shareholders. Consequently, our shareholders may experience more dilution in their ownership of our company in the future.

RISKS ASSOCIATED WITH OUR COMMON STOCK

There is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be unable to sell their shares.

There is currently no active trading market for our common stock and such a market may not develop or be sustained. We currently plan to apply to have our common stock quoted on the National Association of Securities Dealers Inc.'s OTC Bulletin Board upon the effectiveness of this registration statement of which this prospectus forms a part. However, we cannot provide our investors with any assurance that our common stock will be traded on the OTC Bulletin Board or, if traded, that a public market will materialize. If our common stock is not quoted on the OTC Bulletin Board or if a public market for our common stock does not develop, then investors may not be able to resell the shares of our common stock that they have purchased and may lose all of their investment. If we establish a trading market for our common stock, the market price of our common stock may be significantly affected by factors such as actual or anticipated fluctuations in our operation results, general market conditions and other factors. In addition, the stock market has from time to time experienced significant price and volume fluctuations that have particularly affected the market prices for the shares of developmental stage companies, which may materially adversely affect the market price of our common stock.

Because we do not intend to pay any dividends on our common shares, investors seeking dividend income or liquidity should not purchase shares in this offering.

We do not currently anticipate declaring and paying dividends to our shareholders in the near future. It is our current intention to apply net earnings, if any, in the foreseeable future to increasing our working capital. Prospective investors seeking or needing dividend income or liquidity should, therefore, not purchase our common stock. We currently have no revenues and a history of losses, so there can be no assurance that we will ever have sufficient earnings to declare and pay dividends to the holders of our shares, and in any event, a decision to declare and pay dividends is at the sole discretion of our board of directors, who currently do not intend to pay any dividends on our common shares for the foreseeable future.

NASD sales practice requirements may also limit a stockholder's ability to buy and sell our stock.

In addition to the "penny stock" rules promulgated by the Securities and Exchange Commission (see the "Market for Common Equity and Related Stockholder Matters" section at page 27 for a discussion of penny stock rules), the NASD has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

Please read this prospectus carefully. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different information. You should not assume that

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the information provided by the prospectus is accurate as of any date other than the date on the front of this prospectus.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "will", "should", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors" on pages 7 to 12, that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The safe harbor for forward-looking statements provided in the Private Securities Litigation Reform Act of 1995 does not apply to the offering made in this prospectus.

SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE

Any member of the public may read and copy any materials filed by us with the Securities and Exchange Commission at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

THE OFFERING

This prospectus covers the resale by the selling stockholders named in this prospectus of up to 13,230,000 shares of common stock which were issued pursuant to several private placement offerings made by us pursuant to Regulation S promulgated under the Securities Act.

The selling stockholders will sell their shares of our common stock at $0.10 per share until our common stock is quoted on the OTC Bulletin Board, or listed for trading or quotation on any other public market, and thereafter at prevailing market prices or privately negotiated prices. We will not receive any proceeds from the resale of shares of our common stock by the selling stockholder.

DETERMINATION OF OFFERING PRICE

The selling stockholders will sell their shares of our common stock at a price of $0.10 per share until shares of our common stock are quoted on the OTC Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market prices or privately negotiated prices. The offering price of $0.10 per share has been determined arbitrarily and does not have any relationship to any established criteria of value, such as book value or earning per share. Additionally, because we have no significant operating history and have not generated any revenue to date, the price of the common stock is not based on past earnings, nor is the price of the common stock indicative of the current market value of the assets owned by us. No valuation or appraisal has been prepared for our business and potential business expansion. Our common stock is presently not traded on any market or securities exchange and we have not applied for listing or quotation on any public market.

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USE OF PROCEEDS

The shares of common stock offered by this prospectus are being registered for the account of the selling stockholders named in this prospectus. As a result, all proceeds from the sales of the common stock will go to the selling stockholders and we will not receive any proceeds from the resale of the common stock by the selling stockholders. We will, however, incur all costs associated with this registration statement and prospectus.

DILUTION

The common stock to be sold by the selling stockholders is 13,230,000 shares of the 18,730,000 shares of common stock that is currently issued and outstanding. Accordingly, there will be no dilution to our existing stockholders.

DIVIDEND POLICY

We have not declared or paid any cash dividends since inception. We intend to retain future earnings, if any, for use in the operation and expansion of our business and do not intend to pay any cash dividends in the foreseeable future. Although there are no restrictions that limit our ability to pay dividends on our common stock, we intend to retain future earnings for use in our operations and the expansion of our business.

SELLING STOCKHOLDERS

The selling stockholders may offer and sell, from time to time, any or all of the common stock issued. Because the selling stockholders may offer all or only some portion of the 13,230,000 shares of common stock to be registered, no estimate can be given as to the amount or percentage of these shares of common stock that will be held by the selling stockholders upon termination of the offering.

The following table sets forth certain information regarding the beneficial ownership of shares of common stock by the selling stockholders as of September 15, 2003, and the number of shares of common stock covered by this prospectus. The number of shares in the table represents an estimate of the number of shares of common stock to be offered by the selling stockholder.

Other than the relationships described below, none of the selling stockholders had or have any material relationship with us. None of the selling stockholders is a broker-dealer or an affiliate of a broker-dealer to our knowledge.

Name of Selling

Stockholder and Position, Office or Material

Relationship with Melt Inc.

Common

Shares owned by the Selling Stockholder
⁽²⁾

Total Shares to be Registered Pursuant to this Offering

Number of Shares Owned

by Selling Stockholder After

Offering and Percent of Total

Issued and Outstanding
⁽¹⁾

# of

Shares

% of

Class

Keith John Taylor

900,000

900,000

Nil

0%

Darryl Fain

900,000

900,000

Nil

0%

Ashley Goldberg

900,000

900,000

Nil

0%

First Rock Trustees Limited Re The Sunshine Trust
⁽³⁾

900,000

900,000

Nil

0%

Roy Martin Shotland

900,000

900,000

Nil

0%

Pacific Packaging Inc.
⁽⁴⁾

900,000

900,000

Nil

0%

Mark Hoffman

900,000

900,000

Nil

0%

The Rosenbaum Family Trust
⁽⁵⁾

800,000

800,000

Nil

0%

Lance Rosenberg

800,000

800,000

Nil

0%

Spinite Pty Ltd.
⁽⁶⁾

800,000

800,000

Nil

0%

Nolan Goldstein

900,000

900,000

Nil

0%

The Diamond Trust
⁽⁷⁾

900,000

900,000

Nil

0%

The Marble Trust
⁽⁸⁾

900,000

900,000

Nil

0%

The Norwood Trust
⁽⁹⁾

1,800,000

1,800,000

Nil

0%

Sussan Aalam

1,000

1,000

Nil

0%

Rosil Bosco

1,000

1,000

Nil

0%

Silvia Bosco

1,000

1,000

Nil

0%

Karen Egan

1,000

1,000

Nil

0%

Gregory Gillan

1,000

1,000

Nil

0%

Joanne Gillan

1,000

1,000

Nil

0%

Paul Gillan

1,000

1,000

Nil

0%

Nicole Gillan

1,000

1,000

Nil

0%

Austin Gillan

1,000

1,000

Nil

0%

Maria Gillan

1,000

1,000

Nil

0%

Jennifer Elizabeth Grant

1,000

1,000

Nil

0%

Zeth John Grant

1,000

1,000

Nil

0%

Noel Lynam

1,000

1,000

Nil

0%

Craig Maltz

1,000

1,000

Nil

0%

Sungjin Moon

1,000

1,000

Nil

0%

Ian Leonard Plasto

1,000

1,000

Nil

0%

Loren Pogroske

1,000

1,000

Nil

0%

Alireza Saffari

1,000

1,000

Nil

0%

Heeva Shahriari

1,000

1,000

Nil

0%

Darya Shahriari

1,000

1,000

Nil

0%

Alyson Sharpe

1,000

1,000

Nil

0%

Lance Suntup

1,000

1,000

Nil

0%

Yan Ping Zhao

1,000

1,000

Nil

0%

Kurt Dalton

1,000

1,000

Nil

0%

Andre Charles Dalton

1,000

1,000

Nil

0%

Andre Dalton

1,000

1,000

Nil

0%

Exit Out Pty Ltd.
⁽¹⁰⁾

1,000

1,000

Nil

0%

Lee-Anne Plasto

1,000

1,000

Nil

0%

World Wide Investments (Qld) Pty Ltd.
⁽¹¹⁾

1,000

1,000

Nil

0%

A.T.D. Finance Pty. Ltd.
⁽¹⁰⁾

1,000

1,000

Nil

0%

Total:

13,230,000

13,230,000

(1) Assumes all of the shares of common stock offered are sold. Based on 18,730,000 common shares issued and outstanding on September 15, 2003.

(2) Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. Shares of common stock subject to options, warrants and convertible preferred stock currently exercisable or convertible, or exercisable or convertible within sixty (60) days, are counted as outstanding for computing the percentage of the person holding such options or warrants but are not counted as outstanding for computing the percentage of any other person.

16

(3) First Rock Trustees, the trustee of The Sunshine Trust, exercises dispositive and voting power with respect to the shares of common stock that The Sunshine Trust currently owns.

(4) Farrel Barwin exercises dispositive and voting power with respect to the shares of common stock that Pacific Packaging Inc. currently owns.

(5) Julie Rosenberg, the trustee of The Rosenbaum Family Trust, exercises dispositive and voting power with respect to the shares of common stock that The Rosenbaum Family Trust currently owns.

(6) Ali Saffari exercises dispositive and voting power with respect to the shares of common stock that Spinite Pty Ltd. currently owns.

(7) Schindlers Reg Treuunternehmen, the trustee of The Diamond Trust, exercises dispositive and voting power with respect to the shares of common stock that The Diamond Trust currently owns.

(8) Schindlers Reg Treuunternehmen, the trustee of The Marble Trust, exercises dispositive and voting power with respect to the shares of common stock that The Marble Trust currently owns.

(9) Schindlers Reg Treuunternehmen, the trustee of The Norwood Trust, exercises dispositive and voting power with respect to the shares of common stock that The Norwood Trust currently owns.

(10) Andre Dalton exercises dispositive and voting power with respect to the shares of common stock that Exit Out Pty. Ltd. and A.T.D. Finance Pty. Ltd. currently own.

(11) Kurt Dalton exercises dispositive and voting power with respect to the shares of common stock that World Wide Investments (Qld) Pty Ltd. currently owns.

We may require the selling security holder to suspend the sales of the securities offered by this prospectus upon the occurrence of any event that makes any statement in this prospectus or the related registration statement untrue in any material respect or that requires the changing of statements in these documents in order to make statements in those documents not misleading.

PLAN OF DISTRIBUTION

The selling stockholders may, from time to time, sell all or a portion of the shares of common stock on any market upon which the common stock may be quoted, in privately negotiated transactions or otherwise. Our common stock is not currently listed on any national exchange or electronic quotation system. To date, no actions have been taken to list our shares on any national exchange or electronic quotation system. Because there is currently no public market for our common stock, the selling stockholders will sell their shares of our common stock at a price of $0.10 per share until shares of our common stock are quoted on the OTC Bulletin Board, or listed for trading or quoted on any other public market, and thereafter at prevailing market prices or privately negotiated prices. The shares of common stock may be sold by the selling stockholders by one or more of the following methods, without limitation:

(a) block trades in which the broker or dealer so engaged will attempt to sell the shares of common stock as agent but may position and resell a portion of the block as principal to facilitate the transaction;

(b) purchases by broker or dealer as principal and resale by the broker or dealer for its account pursuant to this prospectus;

(c) an exchange distribution in accordance with the rules of the exchange or quotation system;

(d) ordinary brokerage transactions and transactions in which the broker solicits purchasers;

(e) privately negotiated transactions; and

17

(f) a combination of any aforementioned methods of sale.

The shares may also be sold in compliance with the Securities and Exchange Commission's Rule 144.

In the event of the transfer by any selling stockholder of his or her shares to any pledgee, donee or other transferee, we will amend this prospectus and the registration statement of which this prospectus forms a part by the filing of a post-effective amendment in order to have the pledgee, donee or other transferee in place of the selling stockholder who has transferred his or her shares.

In effecting sales, brokers and dealers engaged by the selling stockholders may arrange for other brokers or dealers to participate. Brokers or dealers may receive commissions or discounts from the selling stockholders or, if any of the broker-dealers act as an agent for the purchaser of such shares, from the purchaser in amounts to be negotiated which are not expected to exceed those customary in the types of transactions involved. Broker-dealers may agree with the selling stockholders to sell a specified number of the shares of common stock at a stipulated price per share. Such an agreement may also require the broker-dealer to purchase as principal any unsold shares of common stock at the price required to fulfil the broker-dealer commitment to the selling stockholders if such broker-dealer is unable to sell the shares on behalf of the selling stockholders. Broker-dealers who acquire shares of common stock as principal may thereafter resell the shares of common stock from time to time in transactions which may involve block transactions and sales to and through other broker-dealers, including transactions of the nature described above. Such sales by a broker-dealer could be at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. In connection with such resales, the broker-dealer may pay to or receive from the purchasers of the shares, commissions as described above.

The selling stockholders and any broker-dealers or agents that participate with the selling stockholders in the sale of the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act in connection with these sales. In that event, any commissions received by the broker-dealers or agents and any profit on the resale of the shares of common stock purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act.

From time to time, the selling stockholders may pledge their shares of common stock pursuant to the margin provisions of their customer agreements with their brokers. Upon a default by a selling stockholder, the broker may offer and sell the pledged shares of common stock from time to time. Upon a sale of the shares of common stock, the selling stockholders intend to comply with the prospectus delivery requirements, under the Securities Act, by delivering a prospectus to each purchaser in the transaction. We intend to file any amendments or other necessary documents in compliance with the Securities Act which may be required in the event any selling stockholder defaults under any customer agreement with brokers.

To the extent required under the Securities Act, a post effective amendment to this registration statement will be filed, disclosing, the name of any broker-dealers, the number of shares of common stock involved, the price at which the common stock is to be sold, the commissions paid or discounts or concessions allowed to such broker-dealers, where applicable, that such broker-dealers did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus and other facts material to the transaction.

We and the selling stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations under it, including, without limitation, Rule 10b-5 and, insofar as the selling stockholders are distribution participants and we, under certain circumstances, may be a distribution participant, under Regulation M. All of the foregoing may affect the marketability of the common stock.

All expenses of the registration statement including, but not limited to, legal, accounting, printing and mailing fees are and will be borne by us. Any commissions, discounts or other fees payable to brokers or dealers in connection with any sale of the shares of common stock will be borne by the selling stockholders, the purchasers participating in such transaction, or both.

Any shares of common stock covered by this prospectus which qualify for sale pursuant to Rule 144 under

18

the Securities Act, as amended, may be sold under Rule 144 rather than pursuant to this prospectus.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is The Nevada Agency and Trust Company (50 West Liberty Street, Suite 880, Reno, Nevada 49501, telephone: (775) 322-0626).

LEGAL PROCEEDINGS

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

All directors of our company hold office until the next annual meeting of the stockholders or until their successors have been elected and qualified. The officers of our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our directors and executive officers, their ages, positions held, and duration as such, are as follows:

Name

Position Held with the

Company

Age

Date First Elected

or Appointed

Clive Barwin

President, CEO, Secretary and Director

49

July 18, 2003

Brandon Barwin

Vice-President and Director

38

August 1, 2003

Business Experience

The following is a brief account of the education and business experience of each director and executive officer during at least the past five years, indicating each person's principal occupation during the period, and the name and principal business of the organization by which he was employed.

Clive Barwin, President, CEO, Secretary and Director

For the past five years Clive Barwin has acted as a consultant to various computer hardware and software development and marketing companies, and assisted in the establishment of New York Pretzel Company, a retail food concept that manufactured and sold soft pretzels in Canada. In 2002 he also syndicated a real estate venture for the construction of a retail and residential development, 732 Military Road Pty Ltd., in Sydney, Australia.

In 1992 Clive Barwin founded DataWave Systems Inc., a start up high tech company to develop and commercialize wireless technology for the electronic kiosk industry. He was President and CEO from 1992 to 1998, during which time he took the company public on the Vancouver Stock Exchange, and on the Over-the-Counter Bulletin Board. Under his stewardship the company grew from one employee to over 90, with offices in Vancouver, New Jersey, Los Angeles, Orlando, and Texas.

From 1983 to 1992 Clive Barwin was the founder, President and CEO of Modatech Systems Inc., a high tech company started to develop and commercialize software to automate the sales forces of large multi-national companies. The company went public on the Vancouver Stock Exchange, Toronto Stock Exchange and the Over-the-Counter Bulletin Board. He grew the company from one employee to over

19

150, with offices in Vancouver, Toronto, Los Angeles, New York, Dallas, and Chicago.

Brandon Barwin, Vice-President and Director

Brandon Barwin has been employed in the operations of DataWave Systems Inc. from March 1998 to the present, where he is responsible for all areas of operations which included rollout and installation of over 1000 computerized retail kiosks thought the U.S.

In 2001 Brandon Barwin was promoted to Director of Operations for DataWave and was given the added responsibility of growing the Point of Sale Activation program for Canada. Within 14 months over 2000 new locations had been installed with annual sales transactions from the terminals exceeding one hundred and twenty five million dollars.

Brandon Barwin was the founder, President and CEO of a furniture retail store at Victoria, British Columbia, called Clicks Furniture from November 1989 to January 1998. In addition to Clicks, Brandon assisted in his other family business called Standard Furniture.

Brandon Barwin worked at McDonalds Restaurants Canada from January 1981 to October 1988, as a Regional Manager for the majority of that time.

Committees of the Board

We do not have a separate audit committee at this time. Our entire board of directors acts as our audit committee.

Family Relationships

Brandon Barwin, our vice-president and a director, is a fourth cousin of Clive Barwin, our President, CEO and director.

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:

1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or

4. being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of September 15, 2003, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and executive officers. Each person has sole voting and

20

investment power with respect to the shares of common stock, except as otherwise indicated. Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.

Name and Address of

Beneficial Owner

Amount and Nature of

Beneficial Ownership

Percentage

of Class
⁽¹⁾

Clive Barwin

14 John Dykes Avenue,

Vaucluse, NSW 2030

Australia

2,700,000

14.4%

Brandon Barwin

34 - 11491 7th Avenue,

Richmond, British Columbia, Canada

V7E 4J5

1,000,000

5.3%

Glynis Sive

14 John Dykes Avenue,

Vaucluse, NSW 2030

Australia

1,800,000

9.6%

Directors and Officers

(as a group)

3,700,000

19.8%

(1) Based on 18,730,000 shares outstanding as of September 15, 2003.

Changes in Control

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our company.

DESCRIPTION OF COMMON STOCK

We are authorized to issue 100,000,000 shares of common stock with a par value of $0.001. As at September 15, 2003 we had 18,730,000 common shares outstanding. Upon liquidation, dissolution or winding up of the corporation, the holders of common stock are entitled to share ratably in all net assets available for distribution to stockholders after payment to creditors. The common stock is not convertible or redeemable and has no preemptive, subscription or conversion rights. There are no conversion, redemption, sinking fund or similar provisions regarding the common stock. Each outstanding share of common stock is entitled to one vote on all matters submitted to a vote of stockholders. There are no cumulative voting rights.

Each stockholder is entitled to receive the dividends as may be declared by our board of directors out of funds legally available for dividends and, in the event of liquidation, to share pro rata in any distribution of our assets after payment of liabilities. Our board of directors is not obligated to declare a dividend. Any future dividends will be subject to the discretion of our board of directors and will depend upon, among other things, future earnings, the operating and financial condition of our company, its capital requirements, general business conditions and other pertinent factors. It is not anticipated that dividends will be paid in the foreseeable future.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE

We engaged the firm of Farber and Hass, LLP, Certified Public Accountants, to audit our financial statements for the period ended September 15, 2003. There has been no change in the accountants and no disagreements with Farber and Hass, LLP, Certified Public Accountants, on any matter of accounting principles or practices, financial statement disclosure, or auditing scope procedure.

21

INTEREST OF NAMED EXPERTS AND COUNSEL

No expert or counsel named in this prospectus as having prepared or certified any part of this prospectus or having given an opinion upon the validity of the securities being registered or upon other legal matters in connection with the registration or offering of the common stock was employed on a contingency basis or had, or is to receive, in connection with the offering, a substantial interest, directly or indirectly, in the registrant or any of its parents or subsidiaries. Nor was any such person connected with the registrant or any of its parents, subsidiaries as a promoter, managing or principal underwriter, voting trustee, director, officer or employee.

EXPERTS

The financial statements of Melt Inc. included in this registration statement have been audited by Farber and Hass, LLP, Certified Public Accountants, to the extent and for the period set forth in their report (which contains an explanatory paragraph regarding our company's ability to continue as a going concern) appearing elsewhere in the registration statement, and are included in reliance upon such report given upon the authority of said firm as experts in auditing and accounting.

DISCLOSURE OF SEC POSITION OF

INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Our Articles of Incorporation and Bylaws do not specifically provide for the indemnification of the directors and officers of our company for any duties or obligations arising out of any acts or conduct of the officer or director performed for or on behalf of our company. However, we will reimburse each such person for all legal and other expenses reasonably incurred by him in connection with any such claim or liability, including power to defend such persons from all suits or claims as provided for under the provisions of the General Corporate Law of Nevada.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company under Nevada law or otherwise, our company has been advised that the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

DESCRIPTION OF PROPERTY

Our executive and head offices are located at 14 John Dykes Avenue, Vaucluse, New South Wales, Australia 2030. The offices are provided to us at no charge by Mr. Barwin and are located in his residence. This facility functions as our main administrative facility. We believe our current premises are adequate for our current management functions and we do not anticipate that we will require any additional premises in the foreseeable future.

We have entered into a lease agreement for our first retail location in Westfield Shopping Town in Palm Desert, California. The lease has a term of seven years commencing on November 1, 2003, for which we will pay $4,333 per month to lease 172.25 square feet of retail space.

DESCRIPTION OF BUSINESS

We were incorporated in the state of Nevada on July 18, 2003 and intend to commence operations as a gelato bar and coffee shop through our wholly-owned subsidiary, Melt (California) Inc. with the launch of our first retail outlet on November 15, 2003. Our wholly-owned subsidiary, Melt (California) Inc., was incorporated in the State of California on August 6, 2003. We are currently a development stage company.

22

Our Current Business

We are currently a development stage company. Through our subsidiary, Melt (California) Inc. we intend to own and operate retail gelato bars and coffee shop businesses under the name of "Melt-Gelato Italiano".

Anticipated Sources of Revenue

We anticipate that the majority of our revenue will be generated through the sale of thirty-two flavors of Italian gelato. We also anticipate revenues from the sale of gelato smoothies, Italian iced drinks, specialty coffees and assorted pastries and confections. We will sell our products to consumers through retail locations. Our first location is in Westfield Shopping Town in Palm Desert, California. It is a kiosk style retail outlet of approximately 170 square feet. We anticipate that this initial location will open on November 15, 2003.

Principal Products and Markets

Our primary product will be Italian style gelato. We also intend to sell related confections, specialty coffees and pastries in keeping with our gelato bar/coffee shop concept. We intend to offer our products to the western United States retail market. Our target customer will be all families and individuals interested in frozen deserts.

Principal Suppliers

We have entered into an agreement with P.G.I. of Saugatuk, Inc. for the supply of the Italian gelato to our retail locations. We will initially be dependent upon this one supplier for the provision of gelato to be sold by us but we are negotiating for 2 more suppliers. Our reliance on this supplier, as well as industry supply conditions generally, subject us to various risks, including the possibility of a shortage or lack of availability of Italian gelato, quality control problems, increases in costs and lack of control over delivery schedules, any of which would adversely affect our business. In situations where we are unable to rectify supply or quality problems associated with the gelato supplied to us, costly delays could result. Although we believe that our supplier has current manufacturing capabilities to enable it to produce and supply sufficient quantities of gelato, there is no assurance that this will be adequate for future growth. To lessen this risk, we intend to initially contract additional suppliers and later will consider manufacturing our own gelato when we have opened at least six retail locations, which may make manufacturing economically feasible.

Competition

The retail confectionery industry is characterized by intense and substantial competition. We believe that our business will have to compete with large and established ice cream retailers such as Ben & Jerry's, Hagendas, Dreyers, Baskin Robins, Dairy Queen and Stone Cold Creamery Company (information on these companies does not form part of this prospectus), as well as other small to medium sized ice cream and gelato business entities that provide similar products.

A number of our competitors are well established, substantially larger and have substantially greater market recognition, greater resources and broader distribution capabilities than we have. These existing and future competitors may be able to respond more quickly to new or changing opportunities, product and customer requirements than us and may be able to undertake more extensive promotional activities, offer more retail locations to customers and adopt more aggressive pricing policies than we do. Increased competition by these existing and future competitors could materially and adversely affect our profitability.

Growth Strategy

Our plan envisions establishing 12 retail locations in various high traffic areas in our first period of operations ending 31
^st
December 2004. This will be dependent upon actual sales meeting our sales projections. Also depending upon the success of our initial locations, we plan on considering a financial program to facilitate

23

our expansion in the United States. The seven main states in which we plan to open locations are California, Arizona, Texas, Nevada, New York, Florida and Washington.

Governmental Regulations

We are in the perishable food industry. The development, manufacture and marketing of products sold by us will be subject to extensive regulation by various government agencies, including the U. S. Food and Drug Administration and the U.S. Federal Trade Commission ("FTC"), as well as various state and local agencies. These agencies regulate production processes, product attributes, packaging, labelling, advertising, storage and distribution. These agencies establish and enforce standards for safety, purity and labelling. In addition, other governmental agencies (including the U.S. Occupational Safety and Health Administration), establish and enforce health and safety standards and regulations in the workplace, including those in our retail locations. Our retail locations will be subject to inspection by federal, state, and local authorities. We will seek to comply at all times with all such laws and regulations. We will obtain and maintain all necessary permits and licenses relating to our operations, and will ensure that our facilities and practices comply with applicable governmental laws and regulations. Nevertheless, there is no guarantee that we will be able to comply with any future laws and regulations. Our failure to comply with applicable laws and regulations could subject us to civil remedies including fines, injunctions, recalls or seizures as well as potential criminal sanctions.

As a result of such regulations we may encounter a variety of difficulties or extensive costs, which could delay or preclude us from marketing our products. There can be no assurance that all necessary approvals will be granted or that if granted, any approval will be received on a timely basis. If approvals are not obtained or are delayed, this could have an adverse affect on our business, results of operation and prospects.

Employees

Our President, CEO, secretary and our director, Mr. Clive Barwin, and our vice-president and director, Brandon Barwin, are the key employees of our company. They handle all of the responsibilities in the area of corporate administration, business development and research. In addition, Mr. Clive Barwin also provides us with capital raising services. We are in the process of hiring six employees to operate our first retail location in the Westfield Shopping Town in Palm Desert, California.

Intellectual Property

We are not aware that our products or proprietary rights infringe the proprietary rights of third parties. However, from time to time, we may receive notices from third parties asserting that we have infringed their trademarks, copyrights or other intellectual property rights. In addition, we may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any such claims could be time-consuming, result in costly litigation, cause service stoppages or lead us to enter into royalty or licensing agreements rather than disputing the merits of such claims. An adverse outcome in litigation or similar proceedings could subject us to significant liabilities to third parties, require expenditure of significant resources to develop non-infringing products, require disputed rights to be licensed from others, or require us to cease the marketing or use of our products, any of which could have a material adverse effect on our business, operating results and financial condition.

MANAGEMENT'S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with our consolidated audited financial statements and the related notes that appear elsewhere in this registration statement. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this registration statement, particularly in the section entitled "Risk Factors" beginning on page 7 of this registration statement.

24

Our consolidated audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Overview

From the date of our incorporation on July 18, 2003 to date, we have not generated any revenues.

The period covered by our audited financial statements is from our incorporation date at July 18, 2003 to September 15, 2003 during which we had no operations and generated no revenue. For this period our operating expenses consisted of organizational fees, which consisted primarily of organizational costs for incorporating our company and our subsidiary; and professional fees, which consist primarily of legal fees and accounting and auditing fees for the audit. The amount incurred by us during the period from July 18, 2003 to September 15, 2003 was $9,000. We estimate that our professional fees going forward will be approximately $30,000 for the twelve month period ending September 30, 2004.

PLAN OF OPERATIONS

Our primary objective in the twelve-month period ending September 30, 2004 will be to further develop and expand our retail store locations and increase sales in such locations as they open.

Retail Locations

Our business plan envisions opening twelve retail locations during our first fifteen months of operation to December 31, 2004. Our first retail location is in the Westfield Shopping Centre in Palm Desert, California. This is a kiosk style location of approximately 170 square feet that we anticipate will open on November 15, 2003. In addition to kiosks, we also plan to open traditional "in-line" retail stores. Of our first twelve retail locations, we anticipate that five will be kiosks and seven will be in-line stores.

Promotion

Our primary promotional campaign will be undertaken through a rewards program. With each store opening we intend to give away approximately 5,000 Club Melt reward cards, which will entitle the prospective customer to a free gelato, and a 10% bonus accumulation for each purchase thereafter. We will also plan to provide and encourage free sample tasting of all our flavors, which will allow prospective customers to taste and understand our product offering.

Other Expenses

We also incurred expenses unrelated to our business operations including legal expenses relating to the preparation of this registration statement. We expect to incur a total of $30,000 in legal expenses related to the preparation and filing of this registration statement. After the effectiveness of this registration statement, we expect our ongoing legal expenses to be significantly reduced, averaging less than $2,000 per month.

In our management's opinion, we need to achieve the following events or milestones in the next twelve months in order for us to become a going concern :

- we must complete the construction of at least six retail locations.

- we must successfully market our "Melt" brand of gelato.

- we must attract customers to our retail locations.

25

Purchase or Sale of Equipment

We anticipate that we will expend $175,000 on average on equipment and leasehold improvements for each retail location that we may open.

Personnel

As of September 15, 2003, Clive Barwin and Brandon Barwin, are the key employees of our company. They handle all of the responsibilities in the area of corporate administration, business development and research. In addition, Clive Barwin, our president and CEO also provides us with capital raising services. We are in the process of hiring six employees for our first retail location, which we anticipate will be opening on November 15, 2003. In the fifteen months ending December 31, 2004 we plan to raise our total number of permanent employees to approximately seventy-two, which would consist of six employees for each retail location that we open. We anticipate the cost of each employee to be employed at our retail locations will be approximately $1,500 per month and we may choose to compensate our employees with consideration other than cash, such as shares of our common stock or option to purchase shares of our common stock.

If our sales and marketing program is successful in building a customer following for our products, we may be required to hire new personnel to expand our operations sooner than anticipated.

Future Operations

Presently, we have no revenues to meet our operating and capital expenses. We have incurred operating losses since inception, and this is likely to continue into the year 2004. Management projects that we will require at least $1,500,000 to fund our ongoing operating expenses and working capital requirements for the next fifteen months to December 31, 2004, broken down as follows:

Estimated Funding Required for the Fifteen Months Ending December 31, 2004

Operating expenses

Cost of sales

$1,825,000

Marketing

$175,000

General and Administrative

$1,000,000

Capital Cost of opening 12 retail locations (average of $175,000 per location)

$1,700,000

Working capital

$150,000

Total

$4,850,000

On September 15, 2003, we effected an equity private placement of $311,550. These funds will enable us to address our current and ongoing expenses and continue with the marketing and promotion activity connected with the launch of our initial retail location. We anticipate that these funds will be sufficient to satisfy our cash requirements to December 31, 2003. If we require any additional monies after that date, we plan to raise any such additional capital primarily through the private placement of our securities.

Due to the uncertainty of our ability to meet our current operating and capital expenses, in their report on the consolidated financial statements for the period ended September 15, 2003, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our consolidated

26

financial statements contain additional note disclosures describing the circumstances that lead to this disclosure by our independent auditors.

There is substantial doubt about our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further financing, successful and sufficient market acceptance of our products, the continuing successful development of our "Melt" branded retail locations, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will not be able to meet our other obligations as they become due.

NEW ACCOUNTING PRONOUNCEMENTS

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure," which amends SFAS No. 123 to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 expands the disclosure requirements of SFAS No. 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition provisions of SFAS No. 148 are effective for fiscal years ended after December 15, 2002. The transition provisions do not currently have an impact on our company's financial position and results of operations as our company has no stock-based employee compensation. Our company will adopt the disclosure requirements of SFAS No. 148 if stock-based compensation is awarded to employees.

In June 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities". The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Our company has adopted SFAS No. 146. The effect of adoption of this standard does not currently have an impact on our company's results of operations and financial position.

In December 2002, the FASB issued SFAS 148, "Accounting for Stock-Based Compensation-Transition and Disclosure", an amendment of FASB Statement No. 123, "Accounting for Stock-Based Compensation". This Statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The Company does not expect any effect on its financial position or results of operations from the adoption of this Statement.

In January 2003, the FASB issued Interpretation 46, "Consolidation of Variable Interest Entities, an interpretation of ARB No. 51". This Interpretation requires a company to consolidate the financial statements of a "Variable Interest Entity" ("VIE"), sometimes also known as a "special purpose entity", even if the entity does not hold a majority equity interest in the VIE. The Interpretation requires that if a business enterprise has a "controlling financial interest" in a VIE, the assets, liabilities, and results of the activities of the VIE should be included in consolidated financial statements with those of the business enterprise, even if it holds a minority equity position.

27

This Interpretation was effective immediately for all VIE's created after January 31, 2003; for the first fiscal year or interim period beginning after June 15, 2003 for VIE's in which a company holds a variable interest that it acquired before February 1, 2003. The Company does not expect any effect on its financial position or results of operations from the adoption of this Interpretation.

In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity". This Statement establishes standards for how an issuer of debt or equity classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. This Statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The Company does not expect any effect on its financial position or results of operations from the adoption of this Statement.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles used in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions are affected by management's application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our financials.

Going Concern

The consolidated audited financial statements included with this prospectus have been prepared on the going concern basis which assumes that adequate sources of financing will be obtained as required and that our assets will be realized and liabilities settled in the ordinary course of business. Accordingly, the consolidated audited financial statements do not include any adjustments related to the recoverability of assets and classification of assets and liabilities that might be necessary should we be unable to continue as a going concern.

In order to continue as a going concern, we require additional financing. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to continue as a going concern, we would likely be unable to realize the carrying value of our assets reflected in the balances set out in the preparation of the consolidated financial statements.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Other than as listed below, we have not been a party to any transaction, proposed transaction, or series of transactions in which the amount involved exceeds $60,000, and in which, to our knowledge, any of our directors, officers, five percent beneficial security holder, or any member of the immediate family of the foregoing persons has had or will have a direct or indirect material interest.

The promoter of our company is our President, CEO and director, Clive Barwin.

On September 15, 2003, we issued 2,700,000 shares of our common stock at $0.0165 per share to Clive Barwin, our President, CEO, secretary and director, in a private placement transaction.

On September 15, 2003, we issued 1,000,000 shares of our common stock at $0.0165 per share to Brandon Barwin, our vice-president and director, in a private placement transaction.

On September 15, 2003, we issued 1,800,000 shares of our common stock at $0.0165 per share to Glynis Sive, wife of Clive Barwin, in a private placement transaction.

28

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is currently no trading market for our common stock. We do not have any common stock subject to outstanding options or warrants and there are no securities outstanding that are convertible into our common stock. None of our issued and outstanding common stock is eligible for sale pursuant to Rule 144 under the Securities Act of 1933. We are registering 13,230,000 shares of our common stock under the Securities Act of 1933 for sale by the selling securities holders named in this prospectus. There are currently 47 holders of record of our common stock.

We have not declared any dividends on our common stock since the inception of our company on July 18, 2003. There is no restriction in our Articles of Incorporation and Bylaws that will limit our ability to pay dividends on our common stock. However, we do not anticipate declaring and paying dividends to our shareholders in the near future.

Shares of our common stock are subject to rules adopted by the Securities and Exchange Commission that regulate broker-dealer practices in connection with transactions in "penny stocks". "Penny stock" is defined to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. If we establish a trading market for our common stock, our common stock will most likely be covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors." The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standarized risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities.

EXECUTIVE COMPENSATION

No executive officer of our company received an annual salary and bonus that exceeded $100,000 during the period from inception (July 18, 2003) to the period ended September 15, 2003. The following table shows the compensation received by our CEO and president for the period from inception (July 18, 2003) to the period ended September 15, 2003.

29

SUMMARY COMPENSATION TABLE

Annual Compensation

Long Term Compensation
⁽¹⁾

Awards

Payouts

Name and Principal

Position

Year

Salary

Bonus

Other

Annual

Compen-

sation
⁽¹⁾

Securities

Underlying

Options/

SARs

Granted

Restricted

Shares or

Restricted

Share

Units

LTIP

Payouts

All Other

Compen-

sation

Clive Barwin

President, CEO, Secretary and Director
⁽²⁾

2003

Nil

Nil

Nil

Nil

Nil

Nil

Nil

(1)

The value of perquisites and other personal benefits, securities and property for the executive officers that do not exceed the lesser of $50,000 or 10% of the total of the annual salary and bonus is not reported herein.

(2) Clive Barwin became our President, CEO and secretary on July 18, 2003.

We plan on providing salaries to Clive Barwin and Brandon Barwin of $60,000 per year once we begin to receive revenues from operations.

Stock Options and Stock Appreciation Rights

From the date of inception (July 18, 2003) and up to September 15, 2003, we did not grant any stock options or stock appreciation rights to any of our directors or officers and there were no stock options or stock appreciation rights outstanding on September 15, 2003.

Compensation Of Directors

We reimburse our directors for expenses incurred in connection with attending board meetings. We did not pay any other director's fees or other cash compensation for services rendered as a director since our inception to September 30, 2003.

We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors are expected in the future to receive stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director. No director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.

Employment Contracts and Termination of Employment and Change in Control Arrangements

We have not entered into any employment agreement or consulting agreement with our directors and executive officers.

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors.

30

We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control, where the value of such compensation exceeds $60,000 per executive officer.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the Board of Directors or a committee thereof.

REPORTS TO SECURITY HOLDERS

We are not required to deliver an annual report to our stockholders but will voluntarily send an annual report, together with our annual audited financial statements. We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Our Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at http://www.sec.gov.

The public may read and copy any materials filed by us with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. We are an electronic filer. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Internet address of the site is http://www.sec.gov.

FINANCIAL STATEMENTS

Our consolidated financial statements are stated in United States Dollars (US$) and are prepared in conformity with generally accepted accounting principles of the United States of America.

The following financial statements pertaining to Melt Inc. are filed as part of this registration statement:

Audited Financial Statements

Auditor's Report of Farber and Hass, LLP, Certified Public Accountants, dated September 25, 2003.

Consolidated Balance Sheet as at September 15, 2003.

Consolidated Statement of Operations for the period from July 18, 2003 (Date of Inception) to September 15, 2003.

Consolidated Statement of Cash Flows for the period from July 18, 2003 (Date of Inception) to September 15, 2003.

Consolidated Statement of Stockholder's Deficit for the period from July 18, 2003 (Date of Inception) to September 15, 2003.

Notes to the Consolidated Financial Statements.

F-31

INDEPENDENT AUDITORS' REPORT

To The Board of Directors and Stockholders Melt Inc. and Subsidiary:

We have audited the accompanying consolidated balance sheet at September 15, 2003 and the related consolidated statements of operations, stockholders' (deficit) and cash flows of Melt Inc. and Subsidiary (a Development Stage Company; the "Company") for the period July 18, 2003 (date of inception) to September 15, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respect, the financial position of the Company at September 15, 2003 and the results of its operations and its cash flows for the period then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company forecasts that it will need to raise significant capital to continue operations. This condition raises substantial doubt about its ability to continue as a going concern. Management's plans regarding this matter is described in Note 5. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Farber & Hass, LLP.

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

Oxnard, California

September 25, 2003

F-32

MELT INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

SEPTEMBER 15, 2003

ASSETS

CURRENT ASSETS

Cash in trust account

$ 311,550

Prepaid expenses - accounting fees

6,000

TOTAL CURRENT ASSETS

$ 317,550

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accrued professional fees

$ 10,600

Amount due to officer

4,400

Accrued taxes

800

TOTAL CURRENT LIABILITIES

15,800

STOCKHOLDERS' EQUITY

Common stock subscribed, par value $0.001 per share

Authorized - 100,000,000 shares

$ 311,550

Deficit accumulated during the development stage

(9,800

)

TOTAL STOCKHOLDERS' EQUITY

301,750

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$ 317,550

See Accompanying Notes and Independent Auditors' Report.

F-33

MELT INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE PERIOD FROM JULY 18, 2003

(DATE OF INCEPTION) TO SEPTEMBER 15, 2003

REVENUE

$ 0

PROFESSIONAL FEES

9,000

LOSS FROM OPERATIONS

(9,000)

INCOME TAXES

800

NET (LOSS)

$ (9,800

)

NET (LOSS) PER COMMON SHARE

Basic and diluted

$ ( .00

)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic and diluted

18,730,000

See Accompanying Notes and Independent Auditors' Report.

F-34

MELT INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM JULY 18, 2003

(DATE OF INCEPTION) TO SEPTEMBER 15, 2003

Common Stock

Paid-In

Capital

Deficit Accumulated During The Development

Stage

Shares

Amounts

July 18, 2003 (Date of inception)

0

$ 0

$ 0

$ 0

Issuance of common stock for cash September 15, 2003

18,730,000

18,730

292,820

0

Net (loss) for the period from July 18, 2003 to September 15, 2003

0

0

0

(9,800

)

Balance, September 15, 2003

18,730,000

$ 18,730

$ 292,820

$ (9,800

)

See Accompanying Notes and Independent Auditors' Report.

F-35

MELT INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM JULY 18, 2003

(DATE OF INCEPTION) TO SEPTEMBER 15, 2003

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss)

$ (9,800)

Changes in operating assets and liabilities:

(6,000)

Prepaid expenses

11,400

Accrued expenses and taxes

NET CASH USED IN OPERATING ACTIVITIES

$ (4,400)

CASH FLOWS FROM INVESTING ACTIVITIES

0

CASH FLOW

S FROM FINANCING ACTIVITIES:

311,550

Net proceeds from issuance of common stock

4,400

Borrowings from officer

NET CASH PROVIDED BY FINANCING ACTIVITIES

315,950

NET INCREASE IN CASH IN TRUST ACCOUNT AND BALANCE AT SEPTEMBER 15, 2003

$ 311,550

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid

$ 0

Taxes paid

$ 0

See Accompanying Notes and Independent Auditors' Report.

F-36

MELT INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 15, 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Melt Inc. (hereinafter referred to as the Company) was organized on July 18, 2003, under the laws of the State of Nevada. The Company operates as a holding company for subsidiary operations.

Melt (California) Inc. (hereinafter referred to as Melt (CA) was organized on August 6, 2003, under the laws of the State of California. Melt (CA) will operate gourmet gelaterias in the State of California under the trade name of Melt-Gelato Italiano.

Going Concern

These consolidated financial statements are presented on the basis that the Company is a going concern. Going concern contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time. The Company forecasts that it will need to raise significant capital in the near future to continue its operations and complete its business plan. This factor raises substantial doubt as to the Company's ability to continue as a going concern.

Principles of Consolidation

The consolidated financial statements include the accounts of Melt Inc. and its wholly owned subsidiary, Melt (California) Inc. All material inter-company accounts and transactions have been eliminated.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all cash in the trust account to be cash equivalents.

Income Taxes

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary differences between the amount of taxable income and pretax financial income and between the tax bases of assets and liabilities and their reported amounts in the financial statements. Deferred tax assets and liabilities are included in the financial statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled as prescribed in FASB Statement No. 109, "Accounting for Income Taxes". As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. The income taxes during the period represents the minimum California Franchise tax.

See Accompanying Notes and Independent Auditors' Report.

F-37

MELT INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 15, 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Net (Loss) Per Share

The Company adopted Statement of Financial Accounting Standards No. 128 that requires the reporting of both basic and diluted (loss) per share. Basic (loss) per share is computed by dividing net (loss) available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. In accordance with FASB 128, any anti-dilutive effects on net (loss) per share are excluded.

Pervasiveness of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the Untied States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE 2 DEVELOPMENT STAGE OPERATIONS

As of September 15, 2003, the Company was in the development stage of operations. According to the Financial Accounting Standards Board of the Financial Accounting Foundation, a development stage Company is defined as a company that devotes most of its activities to establishing a new business activity. In addition, planned principal activities have not commenced, or have commenced and have not yet produced significant revenue.

NOTE 3 INCOME TAXES

A reconciliation of net loss to net taxable loss is as follows:

Net loss per financial statements

$ 9,800

Net tax adjustments:

California taxes

(800)

Professional fees considered organization costs and are not deductible, but amortizable over 5 years

(9,000)

Amortization of organization costs

(750

)

Net taxable loss

$ 750

See Accompanying Notes and Independent Auditors' Report.

F-38

MELT INC. AND SUBSIDIARY

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 15, 2003

NOTE 3 INCOME TAXES (CONTINUED)

Deferred Taxes

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment.

The components of deferred tax assets are as follows:

Net operating loss carryforward

$ 113

Unamortized organization costs

2,137

2,250

Less valuation allowance

(2,250

)

Net deferred tax asset

$ 0

A reconciliation of the valuation allowance is as follows:

Balance at date of inception

$ 0

Addition for the period

2,250

Balance, at September 15, 2003

$ 2,250

Tax Carryforwards

The Company has a $750 net operating loss carryforward that expires in 2023.

NOTE 4 STOCKHOLDERS' EQUITY

On September 15, 2003, the Company issued 18,730,000 of common stock in two private placements to foreign investors, subject to certain trading restrictions. The initial private placement consisted of 18,700,000, which were issued as Founders' shares at $0.0165 per share. The second private placement consisted of 30,000 shares issued at $0.10 per share. The Company has only one class of stock designated as common.

NOTE 5 MANAGEMENT PLANS (UNAUDITED)

Management's plans to eliminate the going concern situation include, but are not limited to, raising

F-39

additional equity through private placements of its common stock, secure sufficient debt and generate profits from its initial retail business.

NOTE 6 SUBSEQUENT EVENTS (UNAUDITED)

The Company entered into a lease agreement for its initial retail location in Palm Desert, California. The lease is for 7 years, commencing November 1, 2003, at $4,333 per month. The lease agreement provides for escalations in rent over the term.

The Company is in the process of filing a Form SB-2 with the U.S. Securities and Exchange Commission to register approximately 13.2 million of its outstanding common stock held by non-affiliates.

See Accompanying Notes and Independent Auditors' Report.

40

WHERE YOU CAN FIND MORE INFORMATION

We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Our Securities and Exchange Commission filings are available to the public over the Internet at the SEC's website at http://www.sec.gov.

You may also read and copy any materials we file with the Securities and Exchange Commission at the SEC's public reference room at 450 Fifth Street N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms.

We have filed with the Securities and Exchange Commission a registration statement on Form SB-2, under the Securities Act with respect to the securities offered under this prospectus. This prospectus, which forms a part of that registration statement, does not contain all information included in the registration statement. Certain information is omitted and you should refer to the registration statement and its exhibits. With respect to references made in this prospectus to any contract or other document of Melt, the references are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. You may review a copy of the registration statement at the SEC's public reference room. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our filings and the registration statement can also be reviewed by accessing the SEC's website at http://www.sec.gov.

No finder, dealer, sales person or other person has been authorized to give any information or to make any representation in connection with this offering other than those contained in this prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by Melt Inc. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby by anyone in any jurisdiction in which such offer or solicitation is not authorized or in which the person making such offer or solicitation is not qualified to do so or to any person to whom it is unlawful to make such offer or solicitation. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date of this prospectus.

41

PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

Item 24 INDEMNIFICATION OF DIRECTORS AND OFFICERS

Nevada corporation law provides that:

- a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action, suit or proceeding if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful;

- a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper; and

- to the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein, the corporation shall indemnify him against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense.

We may make any discretionary indemnification only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made:

- by our stockholders;

- by our board of directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding;

- if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion;

- if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion; or

- by court order.

42

Our Articles of Incorporation and Bylaws do not specifically provide for the indemnification of the directors and officers of our company for any duties or obligations arising out of any acts or conduct of the officer or director performed for or on behalf of our company. However, we will reimburse each such person for all legal and other expenses reasonably incurred by him in connection with any such claim or liability, including power to defend such persons from all suits or claims as provided for under the provisions of the General Corporate Law of Nevada.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company under Nevada law or otherwise, we have been advised the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than payment by us for expenses incurred or paid by a director, officer or controlling person of our company in successful defense of any action, suit, or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction, the question of whether such indemnification by it is against public policy in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

Item 25 OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses payable by us in connection with the issuance and distribution of the securities being registered hereunder. No expenses shall be borne by the selling stockholder. All of the amounts shown are estimates, except for the SEC Registration Fees.

SEC registration fees

$107.03

Printing and engraving expenses

$1,000
⁽¹⁾

Accounting fees and expenses

$5,000
⁽¹⁾

Legal fees and expenses

$15,000
⁽¹⁾

Transfer agent and registrar fees

$1,000
⁽¹⁾

Fees and expenses for qualification under state securities laws

$0

Miscellaneous

$1,000

⁽¹⁾

Total

$23,107.03

^{(1)

We have estimated these amounts

Item 26 RECENT SALES OF UNREGISTERED SECURITIES

On September 15, 2003, we issued 18,730,000 common shares to the following 44 subscribers for gross offering proceeds of $311,550 in an offshore transaction relying on Regulation S and/or Section 4(2) of the Securities Act of 1933. None of the subscribers were U.S. persons at that term is defined in Regulation S:

Name of Stockholder

Number of Common Shares Subscribed

Proceeds Received

$

Clive Barwin

2,700,000

44,550.00

Brandon Barwin

1,000,000

16,500.00

Glynis Sive

1,800,000

29,700.00

Ashley Goldberg

900,000

14,850.00

First Rock Trustees Limited Re The Sunshine Trust

900,000

14,850.00

Keith John Taylor

900,000

14,850.00

Darryl Ian Fain

900,000

14,850.00

Roy Martin Shotland

900,000

14,850.00

Pacific Packaging Inc.

900,000

14,850.00

Mark Hoffman

900,000

14,850.00

The Rosenbaum Family Trust

800,000

13,200.00

Lance Rosenberg

800,000

13,200.00

Spinite Pty Ltd.

800,000

13,200.00

Nolan Goldstein

900,000

14,850.00

Schindlers Reg Treuunternehmen as Trustees of The Marble Trust

900,000

14,850.00

Schindlers Reg Treuunternehmen as Trustees of The Diamond Trust

900,000

14,850.00

Schindlers Reg Treuunternehmen as Trustees of The Norwood Trust

1,800,000

29,700.00

Sussan Aalam

1,000

100.00

Rosil Bosco

1,000

100.00

Silvia Bosco

1,000

100.00

Karen Egan

1,000

100.00

Gregory Gillan

1,000

100.00

Joanne Gillan

1,000

100.00

Paul Gillan

1,000

100.00

Nicole Gillan

1,000

100.00

Austin Gillan

1,000

100.00

Maria Gillan

1,000

100.00

Jennifer Elizabeth Grant

1,000

100.00

Zeth John Grant

1,000

100.00

Noel Lynam

1,000

100.00

Craig Maltz

1,000

100.00

Sungjin Moon

1,000

100.00

Ian Leonard Plasto

1,000

100.00

Loren Pogroske

1,000

100.00

Alireza Saffari

1,000

100.00

Heeva Shahriari

1,000

100.00

Darya Shahriari

1,000

100.00

Alyson Sharpe

1,000

100.00

Lance Suntup

1,000

100.00

Yan Ping Zhao

1,000

100.00

Kurt Dalton

1,000

100.00

Andre Charles Dalton

1,000

100.00

Andre Dalton

1,000

100.00

Exit Out Pty Ltd

1,000

100.00

Lee-Anne Plasto

1,000

100.00

World Wide Investments (Qld) Pty Ltd.

1,000

100.00

A.T.D. Finance Pty. Ltd

1,000

100.00

Total

18,730,000

$311,550

Item 27 EXHIBITS

The following Exhibits are filed with this Prospectus:

Exhibit

Number

Description

3.1**

Articles of Incorporation

3.2**

Bylaws

5.1**

Opinion of Clark, Wilson regarding the legality of the securities being registered.

10.1**

Lease Agreement between Melt (California) Inc. and Westfield Corporation Inc., dated October 14, 2003

10.2**

Supply Agreement between Melt (California) Inc. and P.G.I. of Saugatuk, Inc., dated September 30, 2003

21.

Subsidiaries of Melt Inc.

Melt (California) Inc.

23.1**

Consent of Farber and Hass, LLP, Certified Public Accountants

** Filed herewith

Item 28 UNDERTAKINGS

The undersigned company hereby undertakes that it will:

(1) file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to include:

(a) any prospectus required by Section 10(a)(3) of the Securities Act;

(b) reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of

46

securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and

(c) any additional or changed material information with respect to the plan of distribution not previously disclosed in the registration statement;

(2) for the purpose of determining any liability under the Securities Act, each of the post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering thereof; and

(3) remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company pursuant to the foregoing provisions, or otherwise, our company has been advised that in the opinion of the Commission that type of indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against said liabilities (other than the payment by our company of expenses incurred or paid by a director, officer or controlling person of our company in the successful defense of any action, suit or proceeding) is asserted by the director, officer or controlling person in connection with the securities being registered, our company will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of the issue.

For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

47

SIGNATURES

In accordance with the requirements of the Securities Act, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form SB-2 and authorized this registration statement to be signed on its behalf by the undersigned, in the City of Vancouver, British Columbia, Canada, on July 16, 2003.

MELT INC.

/s/

Clive Barwin

By: Clive Barwin, President, CEO, Secretary and Director

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Dated: October 22, 2003

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person who signature appears below constitutes and appoints Clive Barwin as his true and lawful attorney-in-fact and agent, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent or any of them, or of their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities and on the dates stated.

Signatures

/s/

Clive Barwin

By: Clive Barwin, President, CEO, Secretary and Director

(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

Dated: October 22, 2003

/s/

Brandon Barwin

By: Brandon Barwin, Vice-President and Director

Dated: October 22, 2003}}

Exhibit 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

We consent to the reference to our firm under the caption "Experts" and to the use of our report dated September 25, 2003 on the September 15, 2003 consolidated financial statements of Melt Inc. in the Registration Statement Form SB-2 of Melt Inc. for the registration of 13,230,000 shares of its common stock.

/s/ Farber & Hass LLP

Oxnard, California

October 21, 2003

MELT INC.

* * * * *

BY-LAWS

* * * * *

ARTICLE I

OFFICES

Section 1. The registered office shall be 6100 Neil Road, Suite 500, Reno, Nevada 89511.

Section 2. The corporation may also have offices at such other places both within and without the State of Nevada as the board of directors may from time to time determine or the business of the corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. All annual and special meetings of the stockholders may be held at such time and place within or without the State of Nevada as shall be stated in the notice of the meeting, or in a duly executed waiver of notice thereof.

Section 2. Annual meetings of stockholders shall be held on such date as is determined by the board of directors, at which the stockholders shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting.

Section 3. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the articles of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting.

Section 4. Notices of meetings shall be in writing and signed by the president or a vice president, or the secretary, or an assistant secretary, or by such other natural person or persons as the directors shall designate. Such notice shall state the purpose or purposes for which the meeting is called and the time when and the place where it is to be held. A copy of such notice shall be either delivered personally to or shall be mailed, postage prepaid, to each stockholder of record entitled to vote at such meeting not less than ten nor more than sixty days before such meeting. If mailed, it shall be directed to a stockholder at his address as it appears upon the records of the corporation and upon such mailing of any such notice, the service thereof shall be complete, and the time of the notice shall begin to run from the date upon which such notice is deposited in the mail for transmission to such stockholder. Personal delivery of any such notice to any officer of a corporation or association, or to any member of a partnership shall constitute delivery of such notice to such corporation, association or partnership. In the event of the transfer of stock after delivery or mailing of the notice of and prior to the holding of the meeting it shall not be necessary to deliver or mail notice of the meeting to the transferee.

Section 5. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice.

Section 6. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the articles of incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally notified.

Section 7. When a quorum is present or represented at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the articles of incorporation a different vote is required in which case such express provision shall govern and control the decision of such question.

Section 8. Every stockholder of record of the corporation shall be entitled at each meeting of stockholders to one vote for each share of stock standing in his name on the books of the corporation.

Section 9. At any meeting of the stockholders, any stockholder may be represented and vote by a proxy or proxies appointed by an instrument in writing. In the event that any such instrument in writing shall designate two or more persons to act as proxies, a majority of such persons present at the meeting, or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated unless the instrument shall otherwise provide. No such proxy shall be valid after the expiration of six months from the date of its execution, unless coupled with an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed seven years from the date of its execution. Subject to the above, any proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed proxy bearing a later date is filed with the secretary of the corporation.

Section 10. Any action, which may be taken by the vote of the stockholders at a meeting, may be taken without a meeting if authorized by the written consent of stockholders holding at least a majority of the voting power, unless the provisions of the statutes or of the articles of incorporation require a greater proportion of voting power to authorize such action in which case such greater proportion of written consents shall be required. Shareholders shall not be entitled to dissent in the event of the acquisition of a controlling interest by an acquiring person as contemplated in Sections 78.378 through 78.3793 of the Nevada Revised Statutes.

ARTICLE III

DIRECTORS

Section 1. The number of directors shall be neither more than nine nor less than one. The directors shall be elected at the annual meeting of the stockholders, and except as provided in Section 2 of this article, each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders.

Section 2. Vacancies, including those caused by an increase in the number of directors, may be filled by a majority of the remaining directors though less than a quorum. When one or more directors shall give notice of his or their resignation to the board, effective at a future date, the board shall have power to fill such vacancy or vacancies to take effect when such resignation or resignations shall become effective, each director so appointed to hold office during the remainder of the term of office of the resigning director or directors.

Section 3. The business of the corporation shall be managed by its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the articles of incorporation or by these by-laws directed or required to be exercised or done by the stockholders.

MEETINGS OF THE BOARD OF DIRECTORS

Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Nevada.

Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.

Section 6. Regular meetings of the board of directors may be held without notice at such time and place as shall from time to time be determined by the board.

Section 7. Special meetings of the board of directors may be called by the president or secretary on the written request of two directors. Written notice of special meetings of the board of directors shall be given to each director at least ten days before the date of the meeting.

Section 8. A majority of the board of directors, at a meeting duly assembled, shall be necessary to constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the articles of incorporation. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof.

COMMlTTEES OF DIRECTORS

Section 9. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which, to the extent provided in the resolution, shall have and may exercise the powers of the board of directors in the management of the business and affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers on which the corporation desires to place a seal. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors.

Section 10. The committees shall keep regular minutes of their proceedings and report the same to the board when required.

COMPENSATION OF DIRECTORS

Section 11. The directors may be paid their expenses, if any, of attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings.

ARTICLE IV

NOTICES

Section 1. Notices to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by facsimile telecommunication and, with the consent of the director to whom notice will be given, by electronic mail.

Section 2. Whenever all parties entitled to vote at any meeting, whether of directors or stockholders, consent, either by a writing on the records of the meeting or filed with the secretary, or by presence at such meeting and oral consent entered on the minutes, or by taking part in the deliberations at such meeting without objection, the doings of such meeting shall be as valid as if had at a meeting regularly called and noticed, and at such meeting any business may be transacted which is not excepted from the written consent or to the consideration of which no objection for want of notice is made at the time, and if any meeting be irregular for want of notice or of such consent, provided a quorum was present at such meeting, the proceedings of said meeting may be ratified and approved and rendered likewise valid and the irregularity or defect therein waived by a writing signed by all parties having the right to vote at such meetings; and such consent or approval of stockholders may be by proxy or attorney, but all such proxies and powers of attorney must be in writing.

Section 3. Whenever any notice whatever is required to be given under the provisions of the statutes, of the articles of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE V

OFFICERS

Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, secretary and a treasurer. Any natural person may hold two or more offices.

Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, secretary and a treasurer, none of whom need be a member of the board.

Section 3. The board of directors may appoint vice presidents, assistant secretaries and assistant treasurers and such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board.

Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors.

Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled by the board of directors.

THE PRESIDENT

Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation, and shall see that all orders and resolutions of the board of directors are carried into effect.

Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation.

THE VICE PRESIDENT

Section 8. If the board of directors appoints any vice president, the vice president shall, in the absence or disability of the president, perform the duties and exercise the powers of the president and shall perform such other duties as the board of directors may from time to time prescribe.

THE SECRETARY

Section 9. The secretary shall attend all meetings of the board of directors and all meetings of the stockholders and record all the proceedings of the meetings of the corporation and of the board of directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation and, when authorized by the board of directors, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the treasurer or an assistant secretary.

THE TREASURER

Section 10. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the board of directors.

Section 11. He shall disburse the funds of the corporation as may be ordered by the board of directors taking proper vouchers for such disbursements, and shall render to the president and the board of directors, at the regular meetings of the board, or when the board of directors so requires, an account of all his transactions as treasurer and of the financial condition of the corporation.

Section 12. If required by the board of directors, he shall give the corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.

ARTICLE VI

CERTIFICATES OF STOCK

Section 1. Every stockholder shall be entitled to have a certificate, signed by the president or a vice president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation, certifying the number of shares owned by him in the corporation. If the corporation is authorized to issue shares of more than one class or more than one series of any class, there shall be set forth upon the face or back of the certificate, or the certificate shall have a statement that the corporation will furnish to any stockholders upon request and without charge, a full or summary statement of the designations, preferences and relative, participating, optional or other special rights of the various classes of stock or series thereof and the qualifications, limitations or restrictions of such rights, and, if the corporation shall be authorized to issue only special stock, such certificate shall set forth in full or summarize the rights of the holders of such stock.

Section 2. Whenever any certificate is countersigned or otherwise authenticated by a transfer agent or transfer clerk, and by a registrar, then a facsimile of the signatures of the officers or agents, the transfer agent or transfer clerk or the registrar of the corporation may be printed or lithographed upon such certificate in lieu of the actual signatures. If the corporation uses facsimile signatures of the officers and agents on its stock certificates, it cannot act as registrar of its own stock, but its transfer agent and registrar may be identical if the institution acting in those dual capacities countersigns or otherwise authenticates any stock certificates in both capacities. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the corporation, such certificate or certificates may nevertheless be adopted by the corporation and be issued and delivered as though the person or persons who signed such certificate or certificates, or whose facsimile signature or signatures shall have been used thereon, had not ceased to be an officer or officers of such corporation.

PROHIBITION

Section 3. The number of stockholders is limited to 50, not including persons who are in the employment of the corporation and persons, who, having been formerly in the employment of the corporation were, while in that employment, and having continued after the termination of that employment to be shareholders of the corporation, two or more persons holding one or more shares jointly being counted as a single stockholder.

Section 4. Any invitation to the public to subscribe for any shares or other securities of the corporation is prohibited.

Section 5. Shares cannot be transferred without the previous consent of the directors expressed by resolution of the board. The directors are not required to give any reason for refusing to consent to a proposed transfer.

Section 6. Sections 3, 4 and 5 shall cease to apply at such time as the directors of the corporation determine it to be in the best interests of the corporation to effect an offering of its securities to the public, said determination to be conclusively deemed to have been made at such time as the board of directors pass a resolution providing for the issuance of securities of the corporation to the public.

LOST CERTIFICATES

Section 7. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed.

TRANSFER OF STOCK

Section 8. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.

CLOSING OF TRANSFER BOOKS

Section 9. The directors may prescribe a period not exceeding sixty days prior to any meeting of the stockholders during which no transfer of stock on the books of the corporation may be made, or may fix a day not more than sixty days or less than 10 days prior to the holding of any such meeting as the day as of which stockholders entitled to notice of and to vote at such meeting shall be determined; and only stockholders of record on such day shall be entitled to notice or to vote at such meeting.

REGISTERED STOCKHOLDERS

Section 10. The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Nevada.

ARTICLE VII

GENERAL PROVISIONS

DIVIDENDS

Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the articles of incorporation, if any, may be declared by the board of directors at any regular or special meeting pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the articles of incorporation.

Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the directors may modify or abolish any such reserves in the manner in which it was created.

CHECKS

Section 3. All checks or demands for money and notes of the corporation shall be signed by such officer or officers or such other person or persons as the board of directors may from time to time designate.

FISCAL YEAR

Section 4. The fiscal year of the corporation shall be fixed by resolution of the board of directors.

ARTICLE VIII

AMENDMENTS

Section 1. These by-laws may be altered or repealed at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration or repeal be contained in the notice of such special meeting.

I, THE UNDERSIGNED, being the secretary of Melt Inc. DO HEREBY CERTIFY the foregoing to be the by-laws of said corporation, as adopted at a meeting of the directors held on the 18th day of July, 2003.

/s/ Clive Barwin
(Secretary)

WESTFIELD SHOPPINGTOWN PALM DESERT

LEASE

City of Palm Desert
State of California

THIS LEASE is made as of this 14th day of October, 2003, by and between WEA PALM DESERT LP , a Delaware limited partnership, whose address is 11601 Wilshire Boulevard, 12th Floor, Los Angeles, California 90025 ("Landlord"), and MELT (CALIFORNIA) INC ., a California corporation, whose address is: 5651 Dolly Avenue, Buena Park, California 90621 ("Tenant").

Landlord, in consideration of the rent to be paid and the covenants to be performed by Tenant, does hereby, subject to the provisions of this Lease, demise and lease unto Tenant, and Tenant hereby rents and hires from Landlord, those certain premises identified on Exhibit A-2 attached hereto and made a part hereof ("the Premises") which is in and part of the development commonly known as " WESTFIELD SHOPPINGTOWN PALM DESERT ", a general site plan of which development is shown on Exhibit A-1 attached hereto and made a part hereof. The term "Development" as used herein shall include the real property shown on Exhibit A-1, the Department Stores, the locations of which are shown on Exhibit A-1, any Floor Area not included in the definition of Shopping Center, the parking facilities and the Shopping Center. Wherever the term "Shopping Center" is used, it shall be deemed to include the areas shown on Exhibit A-1 and shall be deemed to exclude the Department Stores, free standing units, all premises having an exterior entrance, all basement space not used for retail purposes, and the parking facilities. In the event Landlord elects to enlarge the Shopping Center, any additional area may be included by Landlord in the definition of "Shopping Center" for purposes of this Lease. The term "Department Store" shall be deemed to include any retail store operating or proposed to be operated in the Development the gross leasable Floor Area of whose premises is Twenty Thousand (20,000) square feet or greater. The term "Floor Area" is defined in Section 27.12. Said site plan shows, among other things, the principal improvements which comprise or will comprise the Development. The Premises is described as follows:

Store No. 9021 , being approximately 172 square feet.

Notwithstanding anything contained in this Lease to the contrary, all charges payable based upon the Floor Area of the Premises shall be calculated and payable on the basis of one hundred fifty percent (150%) of the Floor Area of the Premises.

DATA SHEET

The following references furnish data to be incorporated in the specified sections of this Lease and shall be construed as if set forth in this Lease:

(1) Section 1.02: Term:

Latest Rental Commencement Date: November 1, 2003.

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Expiration Date of Term: January 31, 2011.

(2) Section 2.01: Minimum Annual Rental:

SEE ADDENDUM.

(3) Section 2.02: Percentage Rental:

SEE ADDENDUM.

(4) Address for Rental Payments: Payee: WEA Palm Desert LP Address: P.O. Box 60000 File #73759, San Francisco, California 94160-3759.

(5) Section 2.05: Trash Removal Charge: Paid Direct

(6) Section 6.01: Alterations by Tenant: An aggregate of None ($.00) permitted in each lease year.

(7) Section 7.01: Permitted Use: For the retail sale of Italian ice cream (gelato), gelato based smoothies and shakes, Italian style (granata) iced non-coffee drinks, gelato based desserts made with espresso, sodas and juices, cakes, pastries, cookies and bagels, iced drinks, (sodas and juices not to exceed ten percent (10%) of the retail sales area. The Premises shall be used solely for the use stated above and for no other use or purpose.

(8) Section 16.01: Trade Name: MELT - Gelato Italino

(9) Section 16.02: Promotional Program: Two Thousand Two Hundred Twenty and No/100 Dollars ($2,220.00) per annum.

Initial Assessment: None

(10) Section 26.01: Security Deposit: Four Thousand Three Hundred Thirty-Three and No/100 Dollars ($4,333.00).

(11) Section 27.05: Legal Notice Address:

Landlord:

Tenant: To the Premises and:

WEA Palm Desert LP

Melt (California) Inc.

11601 Wilshire Boulevard, 12th Floor

5651 Dolly Avenue

Los Angeles, California 90025

Buena Pork, California 90621

Attention: Legal Department

Attention: Clive Barwin - President, Melt

Billing Address:

Melt (California) Inc.

5651 Dolly Avenue

Buena Pork, California 90621

Attention: Clive Barwin - President, Melt

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(12) Guarantor: MELT INC. , a Nevada limited liability corporation, in accordance with the provisions of the Guaranty attached hereto

EXHIBITS

The following exhibits are attached hereto, and such exhibits, as well as all drawings and documents prepared pursuant thereto, shall be deemed to be a part hereof:

EXHIBIT "A-1"	SITE PLAN
EXHIBIT "A-2":	FLOOR PLAN
EXHIBIT "B":	CONSTRUCTION OF PREMISES
EXHIBIT "C"	ADDITIONAL INSURED ENTITIES
EXHIBIT "D"	AIR CONDITIONING EXHIBIT

ARTICLE I

GRANT AND TERM

Section 1.01 CONDITIONS OF GRANT .

The exterior walls, the floor above, the roof and the area beneath the Premises are not demised hereunder, and the use thereof, together with the right to locate, both vertically and horizontally, install, maintain, use, repair and replace pipes, utility lines, ducts, conduits, flues, refrigerant lines, drains, sprinkler mains and valves, access panels, wires and structural elements leading through the Premises serving other parts of the Development is hereby reserved unto Landlord. Landlord agrees to use reasonable efforts to locate any such items in locations that do not materially interfere with Tenant's use of the Premises.

Section 1.02 TERM.

The "Term" of this Lease shall commence on the date (the "Commencement Date") of the execution of this Lease by Landlord and Tenant. Tenant's obligation for payment of Minimum Annual Rental, Percentage Rental and Additional Rent shall commence upon the date (the "Rental Commencement Date") which is the earliest to occur of (a) the date on which Tenant opens its store in the Premises for business to the public, or (b) the "Latest Rental Commencement Date" specified in the Data Sheet, if so specified, or (c) in the event of new construction where a grand opening date shall be set by Landlord, the date set forth in a notice sent by Landlord to Tenant specifying the "Grand Opening Date", provided that such date shall not be sooner than ninety (90) days from the date the notice is mailed by Landlord. In the case of (c) above, Tenant shall cooperate with Landlord to effect the Grand Opening Date as set forth in such notice, and Tenant shall delay opening of the Premises until the Grand Opening Date, if required by such notice. Any occupancy of the Premises by Tenant following the Commencement Date and prior to the Rental Commencement Date shall be subject to all terms and conditions of this Lease other than payment of Rental. The Term of this Lease shall end on the expiration date set forth in the Data Sheet, unless sooner terminated in accordance with this Lease. Unless otherwise approved in writing by Landlord, Tenant shall open its store in the Premises for business to the public (with improvements pursuant to Exhibit B hereto completed and the Premises-fully fixtured, stocked with current season merchandise in place and staffed, with Tenant prepared to engage in selling merchandise and/or services as provided pursuant to

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Article VII) by the Rental Commencement Date. For the purposes of this Lease, the first lease year shall be the period commencing on the Rental Commencement Date and ending on January 31 next following; after the first lease year, the term "lease year" shall mean a fiscal year of twelve (12) consecutive calendar months ending on January 31 of each calendar year.

Section 1.03 LATE OPENING.

In the event Tenant shall fail to open its store for business by the Rental Commencement Date, the parties agree that it is and will be impracticable and extremely difficult to determine the actual damages suffered by Landlord. Therefore, the parties have agreed that in order to compensate Landlord for its loss, Tenant shall pay to Landlord as Additional Rent, upon demand, the sum of Five Hundred Dollars ($500.00) per day for each day Tenant delays its initial opening in accordance with Section 1.02 above, after and including the Rental Commencement Date. This remedy shall be in addition to any and all other remedies provided in this Lease or by law to Landlord in the event of default by Tenant. Such Additional Rent shall be deemed to be in lieu of Percentage Rental only (as that term is defined in Section 2.02) that might have been earned during the period of Tenant's failure to open. The amount has been determined based upon numerous considerations including the fact that Landlord will have expended considerable sums of money in reliance upon and based upon Tenant opening for business on the Rental Commencement Date.

ARTICLE II

RENTAL

Section 2.01 MINIMUM ANNUAL RENTAL.

(a) From and after the Rental Commencement Date, Tenant shall pay to Landlord as the "Minimum Annual Rental" the sum set forth in the Data Sheet for each lease year during the Term in equal consecutive monthly installments in advance on or before the first day of each month, without prior demand or notice. Minimum Annual Rental, Percentage Rental, Additional Rent and all other sums payable to Landlord pursuant to this Lease shall be paid to Landlord in currency of the United States or other customary commercial manner at the address set forth in the Data Sheet under "Address for Rental Payments," or such other place as Landlord may designate, without any deductions or offsets whatsoever.

(b) Should the Rental Commencement Date occur on a day other than the first day of a calendar month, then the Minimum Annual Rental for such fractional month shall be one three hundred sixty-fifth (1/365th) of the Minimum Annual Rental multiplied by the number of days remaining in the month. Should any lease year contain less than twelve (12) calendar months, said Minimum Annual Rental shall be prorated.

Section 2.02 PERCENTAGE RENTAL.

(a) In addition to the payment of the Minimum Annual Rental as provided in Section 2.01 and other sums set forth in this Lease, from and after the Rental Commencement Date, Tenant shall pay to Landlord, for each three (3) months of the Term, "Percentage Rental" equal to the product of the Percentage Rental Rate times the amount by which Tenant's Gross Sales (as defined in Section 2.03) resulting from business conducted in, on or from the Premises during

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such three (3) months, exceed the "Quarterly Breakpoint" as set forth in the Data Sheet. Each such three (3) month period of the Term hereof may be referred to as a "Lease Quarter."

Such Percentage Rental shall be paid by Tenant to Landlord quarterly without prior notice or demand within thirty (30) days after the expiration of each Lease Quarter following the Rental Commencement Date.

(b) Percentage Rental shall be computed on all Gross Sales made during the Lease Quarter or Quarters elapsed in the lease year in excess of the product of (i) the Quarterly Breakpoint and (ii) the number of Lease Quarters elapsed in the lease year. Should the Rental Commencement Date occur on a day other than the first day of a Lease Quarter or should the Term expire on a day other than the end of a full Lease Quarter, then the Percentage Rental due for such partial Lease Quarter shall equal the product of the Percentage Rental Rate times the amount by which Tenant's Gross Sales exceed the product obtained by multiplying the Quarterly Breakpoint by a fraction, the numerator of which is the number of calendar days in such partial Lease Quarter and the denominator of which is ninety (90).

(c) If, at the end of any lease year, the total amount of quarterly installments of Percentage Rental paid by Tenant based on Gross Sales for such lease year exceeds the total amount of Percentage Rental required to be paid by Tenant for such lease year based on Gross Sales in excess of four (4) times the Quarterly Breakpoint (hereinafter referred to as the "Annual Breakpoint"), Tenant shall receive a credit equivalent to such excess which shall be credited by Landlord to the next monthly payments due from Tenant to Landlord under this Lease. If at the end of the final year the total amount of Percentage Rental paid by Tenant exceeds the total amount of Percentage Rental required to be paid by Tenant for such lease year, such excess shall be refunded to Tenant after Tenant has vacated the Premises and the Premises are in the condition required by Section 10.02(b) below, and any other sums due Landlord from Tenant under this Lease have been paid in full or deducted therefrom. If at the end of any lease year, the total amount of quarterly installments of Percentage Rental paid by Tenant for such lease year is less than the total amount of Percentage Rental required to be paid by Tenant for such Lease year, Tenant shall pay the amount of such deficiency on or before the thirtieth (30th) day after the last day of such lease year. Should any lease year contain less than four (4) calendar quarters, then the Annual Breakpoint and Quarterly Breakpoint shall be adjusted proportionately for such partial lease year.

(d) It is expressly understood and agreed that Landlord does not consider Minimum Annual Rental in itself a fair and adequate rental for the Premises and would not have entered into this Lease unless Tenant had obligated itself to pay Percentage Rent, which Landlord expects to supplement the Minimum Annual Rental and the Additional Rent to provide a fair and adequate rental return. Therefore, if Tenant fails to continuously operate its business in accordance with the terms of this Lease, fails to keep the required store hours, or vacates the Premises prior to the expiration of the Term hereof, Landlord will suffer damages in an amount which is not readily ascertainable and thus Landlord, in any such event, shall have the right, at its option, to collect as liquidated damages, and not as a penalty, in addition to all other charges and Minimum Annual Rental due hereunder, one-thirtieth (l/30th) of an amount equal to the greater of (a) the amount of Minimum Annual Rental due for the month in which Tenant failed to operate as required by this Lease, or (b) the average monthly amount of Minimum Annual Rental

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and Percentage Rent payable for the immediately preceding lease year, for each day or portion thereof during which Tenant fails to operate as required by this Lease including, without limitation, Tenant's failure to maintain the required store hours, and, in addition, Landlord shall have the right to treat any of such events as a material default and breach of this Lease.

Section 2.03 GROSS SALES.

(a) The term "Gross Sales" as used herein shall be construed to include the entire amount of the actual sales price (including all finance charges by Tenant or anyone on Tenant's behalf) whether for cash, credit or otherwise, of all sales, rentals, leases, licenses or other transfer of merchandise or services and other receipts whatsoever of all business conducted in or from the Premises, by Tenant, all subtenants, assignees, licensees, concessionaires or otherwise, including, without limitation: mail, catalogue; closed circuit television, computer, other electronic or telephone orders received or filled at the Premises; all deposits not refunded to purchasers; orders taken, although said orders may be filled elsewhere; gross receipts from vending machines, electronic games or similar devices, whether coin-operated or otherwise; and the entire amount of the actual sales price and all other receipts for sales and services by Tenant, any subtenants, assignees, licensees, concessionaires or otherwise in or from the Premises. A "sale" shall be deemed to have been consummated for the purposes of this Lease, and the entire amount of the sales price shall be included in Gross Sales, at such time as (i) the transaction is initially reflected in the books or records of Tenant or any subtenant, assignee, licensee or concessionaire (if a concessionaire makes the sale), or (ii) Tenant or any subtenant, assignee, licensee or concessionaire receives all or any portion of the sales price, or (iii) the applicable goods or services are delivered to the customer, whichever first occurs, irrespective of whether payment is made in installments, the sale is for cash or for credit, or all or any portion of the sales price has actually been paid at the time of inclusion in Gross Sales or at any other time. Subject to Section 2.03(b) below, no deduction shall be allowed for direct or indirect discounts, rebates, credits or other reductions to employees or others, unless such discounts, rebates, credits or other reductions are generally offered to the public on a uniform basis.

(b) Notwithstanding anything to the contrary contained in Section 2.03(a) above, Gross Sales shall not include the following:

(1) The portion of the sales price of all merchandise returned by customers and accepted for credit to the extent of the credit;

(2) Goods returned to sources, including shippers or manufacturers, or transferred to another store or warehouse owned by or affiliated with Tenant (where such exchange of goods or merchandise is made solely for the convenient operation of the business of Tenant and not for purposes of consummating a sale which has theretofore been made in or from the Premises and/or for the purpose of depriving Landlord of the benefit of a sale which otherwise would be made in or from the Premises);

(3) Alteration workroom charges and delivery charges at Tenant's cost of sales;

(4) Receipts from public telephones, stamp machines, public toilet locks, or vending machines installed solely for use by Tenant's employees;

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(5) Sales taxes, so-called luxury taxes; consumers' excise taxes, gross receipts taxes and other similar taxes now or hereafter imposed upon the sale of merchandise or services, but only if collected separately from the selling price of goods, merchandise or services and collected from customers; and

(6) Sales of trade fixtures, equipment or property which are not stock in trade.

(c) If, in each of at least two of the fifth (5th), sixth (6th) and seventh (7th) lease years of the Term, Tenant has not been obligated to pay Percentage Rental, Landlord may terminate this Lease upon notice to Tenant given at any time within six (6) months after the earlier of the receipt by Landlord, or the due date, of Tenant's annual statement of Gross Sales for the seventh (7th) lease year (or for the sixth (6th) lease year if Tenant has not been obligated to pay such amount of Percentage Rental for both the fifth (5th) and sixth (6th) lease years), in the event of which election by Landlord, this Lease shall be terminated and of no further force or effect, effective ninety (90) days following the giving of such notice; provided, however, that Tenant shall have the right to nullify such termination and maintain this Lease in full force and effect by entering into an agreement with Landlord (within thirty (30) days following Landlord's delivery of such notice of termination) increasing the Minimum Annual Rental payable under this Lease from and after Landlord's election to terminate to an amount equal to one hundred twenty-five percent (125%) of the amount of Minimum Annual Rental otherwise due under this Lease.

Section 2.04 TENANT'S TAX OBLIGATION.

(a) Commencing with the Rental Commencement Date, and continuing for the balance of the Term, Tenant shall pay to Landlord as Additional Rent that portion of "Taxes" (as hereinafter defined) levied or assessed during or with respect to each fiscal tax year falling in whole or in part during the Term following the Rental Commencement Date, which the number of square feet of Floor Area in the Premises bears to the total number of square feet of constructed gross leased and occupied Floor Area of all buildings in the Shopping Center, plus an amount equal to fifteen percent (15%) of the total of such Taxes. As used herein, the term "Taxes" shall mean any and all taxes, surcharges, assessments, levies, fees and other governmental charges and impositions of every kind or nature, regular or special, direct or indirect, presently foreseen or unforeseen or known or unknown, levied or assessed by municipal, county, state, federal or other governmental taxing or assessing authority (i) upon, against or with respect to the real estate upon which the Development, or any part of it, is located and to any improvements located in the Shopping Center or the Development, and (ii) any other taxes which Landlord becomes obligated to pay with respect to the Development, irrespective of whether the same are assessed as real or personal property. Taxes shall not include Landlord's income or franchise taxes. To the extent that any such Taxes are the obligation of Tenant pursuant to Section 8.03 or Section 22.01, the same shall not be included in Tenant's proportionate share pursuant to this Section 2.04. Prior to the proration of such Taxes as provided in this Section 2.04, there shall be deducted therefrom all amounts received from the Department Stores and/or any other tenant within the Development not included in the definition of Shopping Center towards such Taxes. The Taxes payable by Tenant pursuant to this Section 2.04(a) which are levied or assessed for the fiscal tax year in which the Rental Commencement Date occurs and for the fiscal tax year in which the Term of this Lease ends shall be prorated on a daily basis.

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(b) Should the state where the Development is located or any political subdivision thereof or any governmental, taxing or assessing authority, directly or indirectly by way of substitution for or in lieu of or in addition to or in any other way directly or indirectly used or intended to provide revenues to fund all or any part of revenues theretofore provided or services theretofore funded by all or any part of the Taxes otherwise required to be paid in whole or in part by Tenant pursuant to this Section 2.04 or Section 8.03 or Section 22.01, whether presently foreseen or unforeseen or known or unknown, either (i) impose a tax of any kind or nature upon, against, in connection with or with respect to the rentals or other charges payable by or to Landlord by the Tenant or other tenants in or occupants of the Shopping Center and/or the Development or on the income of Landlord derived from the Shopping Center and/or the Development or on the revenues of the Shopping Center and/or the Development or on Landlord's (or the individuals or entities which constitute the partners of Landlord, if Landlord is a partnership) ownership of the Shopping Center and/or the Development or any portion thereof or interest therein, or any direct or indirect tax whatsoever other than the Taxes otherwise required to be paid in whole or in part by Tenant pursuant to this Section 2.04, Section 8.03 or Section 22.01, and/or (ii) impose a tax of any kind or nature upon, against or with respect to the parking facilities or the number of parking spaces in the, Development, such tax shall be deemed to constitute a part of Taxes payable by Tenant under this Lease and Tenant shall pay to Landlord its proportionate share thereof (or all thereof, with respect to taxes relating to items (i) through (iii) of Section 22.01) as determined and billed by Landlord and/or (iii) reappraise, or determine that the method utilized by Landlord in determining property Taxes to be incorrect, or redetermine the method upon which property taxes are imposed against the Shopping Center and/or the Development from time to time by virtue of a change in the ownership of Landlord's interest or otherwise by operation of law and/or (iv) impose a charge for assessments, taxes, fees, levies and charges imposed by governmental agencies for services such as fire protection, sidewalk and road maintenance, refuse removal and other public services generally provided without charge to property owners or occupants prior to the date of this Lease, the Same shall be deemed as a part of Taxes payable by Tenant hereunder for the purposes of this Lease. For the purposes of this Section 2.04, the term "Shopping Center" shall include any land upon which temporary offsite utility systems and parking serving the Shopping Center and/or the Development are located.

(c) Tenant's proportionate share of Taxes, as reasonably determined by Landlord, shall be paid to Landlord as Additional Rent, in monthly installments on or before the first day of each month (or such longer period as Landlord may determine), in advance, in an amount estimated by Landlord and billed by Landlord to Tenant; provided that Landlord shall have the right initially to determine monthly estimates and to revise the estimates from time to time. Upon receipt of all tax bills pertaining to Taxes payable by Tenant, Landlord shall furnish Tenant with a written statement of the actual amount of Tenant's proportionate share of the Taxes for such year. In the event any applicable tax bill is not available at the time Landlord bills Tenant for Taxes, Landlord may estimate the amount of such, tax. If the total amount paid by Tenant under this Section 2.04 for any calendar, fiscal or lease year during the Term following the Rental Commencement Date shall be less than the actual amount due from Tenant for such year, as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due within thirty (30) days after demand therefor by Landlord; and if the total amount paid by Tenant hereunder for any such calendar, fiscal or lease year shall exceed such actual amount due from Tenant for such year, such excess shall be credited against

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the next monthly payments due from Tenant to Landlord under this Lease. If at the end of the final lease year the total amount paid by Tenant hereunder for such lease year shall exceed such actual amount due from Tenant for such year, such excess shall be refunded to Tenant after 'Tenant has vacated the Premises in good condition at the conclusion of this Lease and any other sums due Landlord from Tenant under this Lease have been paid in full or deducted therefrom. A copy of a tax bill or statement or assessment notice submitted by Landlord to Tenant shall at all times be sufficient evidence of the amount of Taxes' assessed or levied against the property to which such bill relates. Tenant's obligations under this Section 2.04 shall survive the expiration of the Term or earlier termination of this Lease.

(d) Landlord reserves the right to contest any Taxes levied or assessed during the Term upon, against or with respect to the Shopping Center and/or the Development or any portion thereof or interest therein. Tenant shall pay to Landlord that proportion of all costs incurred by Landlord in connection therewith based on the formula specified in Section 2.04(a). Notwithstanding any such contest, or any related negotiation or appeal, Tenant shall pay, as provided for in this Section 2.04, its proportionate share of Taxes. If, as a result of any such contest, negotiation or appeal, Taxes shall be increased, Tenant's proportionate share of Taxes shall be computed on the basis of the amount of Taxes finally determined to be payable by Landlord, including any of Landlord's reasonable costs in any such contest. If, as a result of any such contest, negotiation or appeal, Taxes shall ,be decreased, Landlord's statement to Tenant of Taxes following such decrease shall include an adjustment for any prior tax years affected by such decrease reflecting the amount of such decrease in Taxes. Tenant's proportionate share of any such adjustment, less all costs and expenses, including, but not limited to, attorney fees, expenses of accountants, consultants and appraisers, and administrative expenses incurred by Landlord in connection with such contest, negotiation or appeal and not previously paid by Tenant, shall be treated as a credit against Taxes payable by Tenant following such decrease.

Section 2.05 TRASH REMOVAL CHARGE.

Tenant; at Tenant's expense, shall at all times keep the Premises (including, without limitation, the service areas adjacent to the Premises, display windows and signs) orderly, neat, safe, clean and free from rubbish and dirt, and shall store all trash and other solid waste within the Premises or in such areas as may be designated by Landlord for such storage. Tenant shall not burn any trash or garbage at any time in or about the Development. Landlord may direct the use of solid waste disposal contractors at such intervals as Landlord may require. Tenant shall be solely responsible for and shall promptly pay in a manner and at the place provided in this Lease, all fees and charges for trash removal required to properly service the Premises irrespective of whether such charges are initially paid in advance by Landlord, or otherwise. Landlord, at its sole option, may elect to furnish any or all services required for trash removal from the Premises, the cost of which will be, at Landlord's election, either paid as Additional Rent to Landlord (which payment shall include a fifteen percent (15%) administrative fee to Landlord), each calendar month during the Term of this Lease in the manner specified in Section 2.01 for the payment of Minimum Annual Rental, based upon Landlord's allocation thereof amongst Shopping Center occupants determined in its sole and absolute discretion, or (ii) included in Operating Costs and Expenses paid by Tenant pursuant to this Lease.

At any time during the Term hereof, Landlord may, upon thirty (30) days' prior written notice to Tenant, discontinue furnishing trash removal services to the Premises without thereby

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affecting this Lease in any manner or otherwise incurring any liability to Tenant except that Landlord will no longer be required to furnish trash removal services to the Premises. If Landlord does not provide such services, Tenant shall arrange for the regular pickup of all trash, garbage and other solid waste.

Section 2.06 ADDITIONAL RENT.

In addition to Minimum Annual Rental and Percentage Rental hereunder, Tenant shall pay, as "Additional Rent" (whether or not so designated herein), in a manner and at the place provided in this Lease, all sums of money required to be paid by Tenant under this Lease. If such amounts or charges are not paid at the time and in the manner as provided in this Lease, they shall nevertheless be collectible as Additional Rent with the next installment of Minimum Annual Rental thereafter falling due, but nothing herein contained shall be deemed to suspend or delay the payment of any amount of money or charge at the time the same becomes due and payable hereunder or to limit any other remedy of Landlord. All amounts of Minimum Annual Rental, Percentage Rental and Additional Rent (also collectively referred to in this Lease as "Rental") payable in a given month shall be deemed to comprise a single rental obligation of Tenant to Landlord.

Section 2.07 LATE CHARGE.

Unless specifically stated otherwise in this Lease, all Rental or other charges required to be paid by Tenant pursuant to this Lease shall be due and payable ten (10) days after demand, without any notice from Landlord and without any deductions or offsets whatsoever. The parties hereby agree that late payment by Tenant of any Rental owing under this Lease will cause Landlord to incur certain costs and expenses not contemplated under this Lease, the exact amount of which costs are extremely difficult and impracticable to fix. Such costs and expenses may include, for example, administrative and collection costs, and processing and accounting expenses. Therefore, in the event Tenant fails to pay any monthly installment of Rental on the date said payment is due, then Tenant shall pay a late charge of ten percent (10%) of the amount in default as liquidated damages for failure to make prompt payment. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs and expenses Landlord will incur by reason of late payment by Tenant. Acceptance of such late charge by Landlord shall in no event constitute a waiver of Tenant's default with respect to such overdue amount, nor prevent Landlord from exercising any of the other rights and remedies granted in this Lease. In the event Tenant pays the late charge set forth hereunder but fails to pay contemporaneously therewith all unpaid amounts of Rental, Landlord's acceptance of this late charge payment shall not constitute a waiver of Tenant's default with respect to Tenant's nonpayment nor prevent Landlord from exercising all other rights and remedies available to Landlord under this Lease, at law or in equity.

Section 2.08 TENANT'S PAYMENT OBLIGATIONS.

(a) Landlord may, at its option and its sole discretion, apply any payments received from Tenant to any Rental, or other charges which are then due and payable. If Landlord shall not make any specific application of a payment received from Tenant, then any payment received from Tenant shall be applied first to the other charge, then to Rental which has been overdue for the longest period of time. No designation of any payment by Tenant for application to a specific portion of Tenant's financial obligations hereunder shall be binding upon Landlord.

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Any sums received by Landlord after termination of this Lease shall not constitute rent but shall be received only as reimbursement for use and occupancy of the Premises.

(b) Tenant covenants to pay all charges under this Lease, including, without limitation, Minimum Annual Rental, Percentage Rent and Additional Rent and other charges, independent of any obligation of Landlord. No breach of this Lease by Landlord shall relieve Tenant of its obligation and duty to pay all such charges when due under the terms of this Article II.

ARTICLE III

RECORDS AND BOOKS OF ACCOUNT

Section 3.01 TENANT'S RECORDS.

Tenant shall prepare and keep full, complete and proper books and source documents, in accordance with Generally Accepted Accounting Principles, of the Gross Sales, whether for cash, credit or otherwise, of each separate department at any time operated within the Premises and of the operations of each subtenant, concessionaire, licensee and/or assignee, and shall require and cause all such parties to prepare and keep books, source documents, records and accounts sufficient to substantiate those kept by Tenant ("Records"). The Records to be kept by Tenant shall include, without limitation, true copies of all state and local sales and use tax returns and reports, records of inventories and receipts of merchandise, records of bank deposits of the entire receipts from transactions at the Premises, daily receipts from all sales (including those from mail or telephone orders), and other pertinent original sales records and records of any other transactions conducted in or from the Premises by Tenant and any other persons conducting business from the Premises. Pertinent original sales records shall include, without limitation, a point of sale system of record keeping and such other reasonable documentation which would normally be examined by an independent accountant pursuant to Generally Accepted Auditing Standards in performing an audit of Tenant's sales sufficient to provide determination and verification of Gross Sales and the exclusions and deductions therefrom. Tenant's Records shall be preserved by Tenant at the Premises for at least three (3) years after expiration of each lease year or partial lease year. All of books, source documents, records and documentation maintained pursuant hereto shall at all reasonable times be open to the inspection of, and may be copied or extracted from, in whole or in part, by Landlord or Landlord's authorized representative or agent for a period of at least three (3) years after the expiration of each lease year.

Section 3.02 REPORTS BY TENANT.

Tenant shall furnish to Landlord, within fifteen (15) days after the expiration of each month or each lease year, a complete statement, certified by Tenant, of the amount of Gross Sales, as defined in Section 2.03 of this Lease, made from the Premises during such period. Tenant shall furnish to Landlord, within thirty (30) days after the expiration of each lease year, a complete statement, certified by Tenant, showing in all reasonable detail the amount of such Gross Sales made by Tenant from the Premises during the preceding lease year or partial lease year. Tenant shall require all subtenants, concessionaires, licensees and/or assignees, if any, to furnish a similar statement if Tenant or any subtenant, concessionaire, licensee and/or assignee fails to furnish to Landlord any monthly or annual statement of Gross Sales within the time

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required by this Section 3.02, then Tenant shall pay within ten (10) days of demand therefor by Landlord as Additional Rent, a special handling fee of One Hundred Dollars ($100.00) per statement per day until such statement is delivered to Landlord. This remedy shall be in addition to any and all other remedies provided ill this Lease or by law to Landlord. In addition, if Tenant or any subtenant, concessionaire, licensee and/or assignee, if any, fails to furnish any two (2) consecutive monthly or annual statements of Gross Sales within the time required by this Section 3.02, then, without limiting any of the Landlord's other rights under this Lease, Landlord shall have the right upon ten (10) days' prior written notice to conduct an audit as set forth in Section 4.02 below and any and all charges occasioned by reason thereof shall be the sole obligation of Tenant and payable on demand.

ARTICLE IV

AUDIT

Section 4.01 RIGHT TO EXAMINE BOOKS.

Notwithstanding the acceptance by Landlord of payments of Minimum Annual Rental or Percentage Rental or installments thereof, Landlord shall have the right to audit all rentals and other charges actually due hereunder. Within ten (10) days following Landlord's request, Tenant shall make available to Landlord at the Premises or at Tenant's principal business office in the United States for examination, extracting and/or copying all books, source documents, accounts, records and sales tax reports of Tenant and any subtenants, concessionaires, licensees and/or assignees, including Tenant's state and federal income tax returns, in order to verify the amount of Gross Sales made in and from the Premises.

Section 4.02 AUDIT.

(a) At its option, Landlord may at any time upon ten (10) days' prior written notice to Tenant, cause a complete audit (including a physical inventory) to be made by an auditor selected by Landlord of the entire records and operations of Tenant and/or any subtenants, concessionaires, licensees and/or assignees relating to the Premises for the period covered by any statement issued or required to be issued by Tenant or a concessionaire as above set forth in Article III. In connection with the audit, Landlord or its representative will have the right to inspect records from any other store operated by Tenant or an affiliate of Tenant, but only if such inspection is reasonably necessary to verify Tenant's Gross Sales reports. Tenant shall make available to Landlord's auditor at the Premises or at Tenant's principal business office in the United States, within ten (10) days following Landlord's notice requiring such audit, all of the books, source documents, accounts, records and sales tax reports of Tenant and any of its concessionaires which such auditor deems necessary or desirable for the purpose of making such audit, including Tenant's state and federal income tax returns. If such audit discloses that Tenant's Gross Sales as previously reported for the period audited were understated, Tenant shall immediately pay to Landlord the additional percentage rental due for the period audited. Further, if such understatement was in excess of two percent (2%) of Tenant's actual Gross Sales as disclosed by such audit, Tenant shall immediately pay to Landlord the cost of such audit, and if such understatement was in excess of ten percent (10%) of Tenant's Gross Sales as disclosed by such audit, Landlord may declare this Lease terminated and the Term ended, in which event this Lease shall cease and terminate on the date specified in such notice with the same force and effect as though the date set forth in such notice were the date set forth in this Lease for

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expiration of the Term, and Tenant shall vacate and surrender the Premises on or before such date in the condition required by this Lease for surrender upon the expiration of the Term.

(b) If upon examination or audit Landlord's accountant or representative determines that sufficient documentation is not maintained, retained, recorded or available to verify Tenant's actual Gross Sales, Tenant shall pay for the cost of such audit and, in addition, should Landlord deem it necessary, Tenant shall reconstruct, at its sole cost and expense, all Records for the determination of Gross Sales for any period being audited.

If such audit shall disclose that the Records, in Landlord's determination, are inadequate to disclose such Gross Sales, Landlord shall be entitled to collect as Additional Rent an amount equal to ten percent (10%) of the Minimum Annual Rental payable by Tenant during the period in question.

(c) If Tenant subleases, licenses, or in any manner allows the Premises to be used by another party (the "Subtenant"), Tenant is responsible for ensuring that the Subtenant's Records conform to the requirements of this Lease. The failure of Subtenant to maintain its Records as required under this Lease, or to correctly report Gross Sales, will be deemed a failure on the part of Tenant to conform to the requirements of this Lease and shall subject Tenant to the remedies set forth in Section 4.02(a) or Section 4.02(b) above, including termination of this Lease.

ARTICLE V

CONSTRUCTION OF PREMISES

Section 5.01 CONSTRUCTION OF PREMISES.

(a) Any improvements to be made to the Premises shall be substantially as set forth in Exhibit B attached hereto Each of the parties hereto shall perform the obligations imposed upon such party in said Exhibit at the times and in the manner therein provided. It is understood and agreed by Tenant that any minor changes from any plans or specifications covering Landlord's Work as defined in said Exhibit shall not affect or change this Lease or invalidate the same.

(b) Without limiting the generality of the incorporation by reference of all exhibits and/or addenda to this Lease, Tenant's failure to furnish the plans and specifications required pursuant to Exhibit B ("Plans and Specifications") to Landlord within the time periods and in the form required by Exhibit B, or failure to perform any other obligation under Exhibit B, shall constitute a default under this Lease pursuant to Article XIX below, which shall entitle Landlord to all remedies set forth in Article XIX below. In addition, if Landlord determines that Landlord and Tenant are unable to agree upon the Plans and Specifications, Landlord may at its option, terminate this Lease upon ten (10) days' notice to Tenant, in which event this Lease shall terminate on the date specified in such notice and Tenant shall remain liable as provided in this Lease. No deviation from the final Plans and Specifications, once approved by Landlord, shall be made by Tenant without Landlord's prior written consent. Approval of the final Plans and Specifications by Landlord shall not constitute the assumption of any responsibility by Landlord for their accuracy, efficacy or sufficiency, and Tenant shall be solely responsible for such items. Any occupancy of the Premises by Tenant prior to the Rental Commencement Date shall be solely for the purpose of inspection, measurement and obtaining information necessary to

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prepare Plans and Specifications and to construct its leasehold improvements, and shall be subject to all terms and conditions of this Lease applicable to such entry prior t6 the Rental Commencement Date pursuant to Section 1.02 above. Storefront barricades, reasonably acceptable to Landlord, attractively screening the Premises from view during construction shall be erected and maintained by Tenant at all times prior to Tenant's opening for business to the general public and shall be removed by Tenant prior to such opening.

Section 5.02 CERTIFICATE OF OCCUPANCY.

Within the earlier of (a) ten (10) days after completion of construction of Tenant's Work in accordance with the final Plans and Specifications as approved by Landlord (as described in Section 5.01 and Exhibit B); or (b) ten (10) days after Tenant opens the Premises for business, Tenant shall deliver to Landlord the original of the Certificate of Occupancy for the Premises issued by the appropriate governmental agency, original execution copies of all mechanics' lien releases or other lien releases on account of Tenant's Work, notarized and unconditional, in such form as Landlord shall have approved, copies of all building permits indicating inspection and approval by the issuer of said permits, and an architect's certification that Tenant's Work has been constructed in accordance with the final Plans and Specifications and is fully complete in accordance with Exhibit B.

Section 5.03 CONDITION OF PREMISES.

Except as otherwise specifically provided in this Lease (including, without limitation, in Exhibit B attached hereto), Tenant hereby agrees that upon delivery of possession of the Premises to Tenant, Tenant shall accept such delivery of possession of the Premises in its then existing "AS IS" condition, and Tenant acknowledges (i) that Tenant shall have inspected the Premises and shall be fully aware of the condition of the Premises as of delivery of possession; (ii) that Landlord shall have no obligation to improve or alter the Premises for the benefit of Tenant; (iii) that, except 'as may be expressly provided in this Lease, neither Landlord nor any of Landlord's employees, agents, representatives, contractors nor brokers has made any representation or warranty of any kind respecting (a) the condition of the Premises, Shopping Center and/or Development, (b) the suitability thereof for Tenant's use or the conduct of Tenant's business, or (c) occupancy or operation within the Shopping Center or Development by any other person or entity Tenant irrevocably waives any claim based upon or related to any such claimed representation by Landlord or any claimed representation by Landlord as to traffic to be expected at the Premises or sales to be expected at the Premises. Tenant's taking possession of the Premises shall constitute Tenant's formal acceptance of the same and acknowledgment that the Premises are in the condition called for under this Lease, subject to all field conditions existing at the time of delivery of possession. In no event shall Landlord be liable for damages or otherwise as a result of any failure to make the Premises available within the time and/or in the condition provided in this Lease and no such failure shall permit Tenant to rescind or terminate this Lease.

Section 5.04 ULTIMATE RENTAL COMMENCEMENT DATE.

Notwithstanding anything to the contrary contained herein, if for any reason whatsoever (including, without limitation, excusable delay), the Rental Commencement Date shall not have commenced prior to such date as shall be two (2) years from the Commencement Date then this Lease shall be automatically terminated without further act of either party hereto and each of the parties hereto shall be released from any further obligation hereunder.

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ARTICLE VI

ALTERATIONS, CHANGES AND ADDITIONS

Section 6.01 ALTERATIONS BY TENANT.

Tenant shall not make or cause to be made any alterations, additions or improvements to the Premises without the prior written approval of Landlord (for example, but without limiting the generality of the foregoing, Tenant shall not install or cause to be installed any signs, floor covering, interior or exterior lighting, plumbing fixtures, shades, canopies, awnings, electronic detection devices, antennas, mechanical, electrical or sprinkler systems, or make any changes to the storefront). However, Tenant may make such alterations, additions and improvements to the interior of the Premises as do not in the aggregate exceed in any lease year the amount set forth in the Data Sheet, provided (a) the same are cosmetic and not structural in nature, do not affect a utility system, the storefront or storefront sign and are not inconsistent with the final Plans and Specifications approved by Landlord; (b) that Tenant complies with the provisions concerning contractors, labor relations, compliance with law, reporting of costs and insurance and bonds and the provisions of Exhibit B; and (c) that Tenant shall submit to Landlord fifteen (15) days written notice prior to undertaking any of the foregoing. Tenant shall present to Landlord Plans and Specifications for any other alterations, additions or improvements at the time approval is sought, in accordance with criteria and procedures as provided in Exhibit B.

Section 6.02 REMOVAL BY TENANT.

All alterations, decorations, additions rod improvements made by Tenant shall be deemed to have attached to the Premises and to have become the property of Landlord upon such attachment. Upon the expiration or earlier termination of this Lease, Tenant shall not remove any of such alterations, decorations, additions and improvements, except that trade fixtures, equipment and other personal property installed by Tenant ("Property") and not affixed to the Premises may be removed if all Rental and other charges due hereunder are paid in full and Tenant is not otherwise in default hereunder; provided that Tenant immediately repairs any damage caused by such removal. Further, Landlord may designate by written notice to Tenant those alterations, decorations, additions and improvements which shall be removed by Tenant at the expiration or termination of this Lease, and Tenant shall, at its own cost and expense, promptly remove the same and immediately repair any damage to the Premises caused by such removal. If Tenant shall fail to remove any of its Property, Landlord may, at Landlord's option, retain either any or all of the property, and title thereto shall thereupon vest in Landlord without compensation to Tenant; or remove all or any portion of the Property from the Premises and dispose of the Property in any manner, without compensation to Tenant. In the latter event, Tenant shall, upon demand; pay to Landlord the actual expense of such removal and disposition and the repair of any damage to the Premises resulting from or caused by such removal. The obligations contained in this Section 6.02 shall survive the expiration or earlier termination of this Lease.

Section 6.03 CHANGES AND ADDITIONS.

(a) Landlord reserves the right at any time, and from time to time, to make alterations to, and to build additional stories on, the building in which the Premises is located, and to construct other buildings and improvements in the Shopping Center and/or the Development, including any modifications of the Common Areas in connection therewith, to enlarge or reduce

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the Shopping Center and/or the Development, to add decks or elevated parking facilities, and to sell or lease any part of the land comprising the Development, as shown on Exhibit A-1, for the construction thereon of a building or buildings to be occupied by a Department Store which may or may not be part of the Development. Landlord also reserves the right at any time, and from time to time, to change, modify, or abolish any temporary off-site utility serving the Shopping Center and/or Development. The purpose of Exhibit A-1 is to show the approximate location of the Shopping Center while the purpose of Exhibit A-2 is to show the approximate location of the Premises within the Shopping Center. Landlord reserves the right at any time to relocate, reduce, enlarge, or reconfigure the various buildings, parking areas and other common areas shown on said exhibits; provided, however, that no such changes shall reduce the parking areas below the number of parking spaces required by law.

(b) Landlord shall have the exclusive right to use all or any part of the roof of the Premises for any purpose; to erect additional stories or other structures aver all or any part of the Premises; to erect in connection with the construction thereof temporary scaffolds and other aids to construction an the exterior of the Premises, provided that access to the Premises shall not be denied; and to install, maintain, use, repair and replace within the Premises pipes, ducts, conduits, wires and all other mechanical equipment serving other parts of the Shopping Center, the same to be in locations as will not unreasonably deny Tenant's use thereof. Landlord may make any use it desires of the side or rear walls of the Premises (including, without limitation, freestanding columns and footings for all columns), provided that such use shall not encroach on the interior of the Premises unless (i) all work carried on by Landlord with respect to such encroachment shall be done during hours when the Premises are not open for business and otherwise shall be carried out in such a manner as not to unreasonably interfere with Tenant's operations in the Premises, and (ii) Landlord, at its expense, shall repair all damage to the Premises resulting from such work.

Section 6.04 RIGHTS OF LANDLORD.

(a) Landlord hereby reserves the right at any time following the Commencement Date to change the location of the Premises in the Shopping Center, as the same may be expanded from time to time; provided such relocated premises shall contain approximately the same number of square feet as the original Premises. In the event Landlord elects to exercise such right, it shall so advise Tenant by sixty (60) days prior written notice, and Tenant hereby agrees to be bound by such election and to execute, upon receipt from Landlord, whatever amendments or other instruments as may be required to correctly reflect the foregoing. Landlord shall pay the costs of renovating the relocated Premises so that the same are reasonably comparable to the original Premises (including leasehold improvements) and of moving and reinstalling Tenant's trade fixtures and storefront sign. Landlord shall have no liability for such relocation or the closing of the Premises other than as specifically set forth in this paragraph and Tenant waives any such claims including, without limitation, claims for last profits.

(b) In the event Landlord elects to expand or renovate the Shopping Center in a manner that Landlord in its sole judgment believes makes it desirable for Landlord to obtain possession of the Premises, Landlord, upon one hundred eighty (180) days prior notice in writing to Tenant, may terminate this Lease. In the event of such termination, within thirty (30) days following the date that Tenant shall have vacated the Premises, paid all rents and performed all other accrued obligations under this Lease through to the effective date of such termination,

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Landlord shall pay to Tenant a sum equal to the then unamortized cost of Tenant's leasehold improvements paid for by Tenant exclusive of any construction allowance which has been paid to Tenant and the value of any construction chargebacks forth in Exhibit B that have been waived by Landlord, such amortization to be as determined with reference to Tenant's federal income tax returns but in no event more than an amount based on straight-line depreciation. Upon written request from Landlord, Tenant shall furnish to Landlord such information as Landlord may reasonably require in connection with the determination of such costs.

ARTICLE VII

CONDUCT OF BUSINESS BY TENANT

Section 7.01 PERMITTED USE.

Tenant shall use the Premises only for the purpose of conducting the business specifically set forth in the Data Sheet and for no other use or purpose. If any governmental license or permit shall be required for the proper and lawful conduct of Tenant's business or other activity conducted in the Premises, or if a failure to procure such a license or permit might or would in any way adversely affect Landlord; the Shopping Center and/or the Development, then Tenant, at Tenant's expense, shall duly procure and thereafter maintain such license or permit and submit the same for inspection by Landlord Tenant, at Tenant's expense, shall at all times comply with the requirements of each such license or permit.

Section 7.02 OPERATION OF BUSINESS.

(a) Tenant agrees to be open for business and to operate in all of the Premises during the entire Term following the Rental Commencement Date, and to actively and diligently conduct its business at all times in a first class and reputable manner, maintaining at all times a full staff of employees and a complete stock of current season merchandise. Tenant shall install and maintain at all times a display of merchandise in the display windows, if any, of the Premises and shall keep the same well lighted. Tenant shall be obligated to be open for business and to operate continuously during all hours established by Landlord as Shopping Center business hours. In the event Landlord has approved Tenant's remaining open for business after normal Shopping Center hours, then such approval shall be conditioned upon Tenant paying, as Additional Rent, all additional costs incurred by Landlord as a result thereof. Tenant's obligation to be open for business shall include, but not be limited to, opening for business not more than fifteen (15) minutes late, closing for business not more than fifteen (15) minutes early, and closing for business for not more than fifteen (15) minutes during Shopping Center business hours. If Tenant fails to comply with any of the provisions of this Section 7.02(a), then Tenant shall pay within ten (10) days of demand therefor by Landlord Additional Rent in the amount of One Hundred Fifty Dollars ($150.00) per day until such time as Tenant is in compliance with this Section 7.02(a). This remedy shall be in addition to any and all other remedies provided in this Lease or by law to Landlord. Failure by Tenant to be open for business and to operate shall entitle Landlord, in addition to other remedies provided in this Section 7.02 , this Lease or by law, to mandatory injunctive relief. Without limiting the generality of the foregoing, in the event the hours during which the Shopping Center is legally permitted to be open to the public are regulated by any lawful authority, then Landlord shall be the sole judge of which hours and days shall be Shopping Center business hours.

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(b) Tenant, at Tenant's expense, shall promptly comply with all present and future laws, ordinances, orders, rules, regulations and requirements of all governmental authorities having jurisdiction affecting or applicable to the Premises or the cleanliness, safety, occupancy and use of the same, whether or not any such law, ordinance, order, rule, regulation or requirement is substantial, or foreseen or unforeseen, or ordinary or extraordinary, or shall necessitate changes or improvements (other than structural changes or improvements) or interfere with the use and enjoyment of the Premises. Tenant shall not do or permit anything to be done in or about the Premises, nor bring anything therein, which will in any way conflict with any such law, ordinance, order, rule, regulation or requirement affecting the occupancy or use of the Premises, the Shopping Center or the Development which has been or may hereafter be enacted or promulgated by governmental authorities, or in any way obstruct or interfere with the rights of others, nor shall Tenant use or allow the Premises to be used for any improper, immoral or objectionable purposes or do any act tending to injure the reputation of the Shopping Center and/or the Development. Tenant shall not give samples, approach customers or otherwise solicit business in the parking or other Common Areas or any part of the Development other than in the Premises, nor shall Tenant distribute any handbills or other advertising matter in the parking area or other Common Areas or any part of the Development other than in the Premises.

No auction, liquidation, going out of business, fire or bankruptcy sale may be conducted or advertised by sign or otherwise in the Premises. Tenant shall not permit the operation of any coin operated or vending machines or pay telephones in the Premises, other than in the areas reserved solely for the use of Tenant's employees. Tenant shall not sell or display any merchandise within five feet (5) of the storefront leaseline or opening unless such sale or display shall be expressly approved on the Plans and Specifications or otherwise approved by Landlord, in writing, except that Tenant shall be permitted to display merchandise in the display windows, if any. Tenant shall not use the areas adjacent to the Premises for business purposes or any other purpose. Tenant shall not store anything in service or exit corridors. All receiving and delivery of goods and merchandise for the Premises, and all removal of merchandise, supplies, equipment, trash and debris and all storage of trash and debris from the Premises shall be made only by way of or in the areas provided by Landlord. Tenant shall be solely responsible for prompt disposal within the Premises or in such areas as may be provided for such disposal by Landlord of all trash and debris from the Premises. Tenant shall not use or permit the use of any portion of the Premises as sleeping quarters, lodging rooms, for any unlawful purpose, or for cooking, except as specifically permitted in Section 7.01. Tenant shall not install any radio, television, communication dish or other similar device or related equipment exterior to the Premises, shall not cause or make any penetration of the roof of the Premises or the building in which the Premises is located and shall not erect any aerial or antenna on the roof or exterior walls of any building within the Development.

If Tenant shall fail to comply with any of the provisions of this Section 7.02(b) then Tenant shall pay, within ten (10) days of demand therefor by Landlord, Additional Rent in the amount of One Hundred Dollars ($100.00) per day until such time as Tenant is in compliance. This remedy shall be in addition to any and all other remedies provided in this Lease or by law to Landlord.

(c) If Tenant is permitted pursuant to this Lease to engage in the sale of food and/or beverages from the Premises, whether in the area designated as a Food Court or otherwise, the

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same shall be offered only pursuant to a menu approved in writing by the Landlord and attached as an exhibit to this Lease which shall not be changed without Landlord's prior written consent. Further, in such event, Tenant shall provide to Landlord upon demand proof satisfactory to Landlord that monthly cleaning and maintenance of all grease traps, pans and hood ventilators located in the Premises has been performed by a suitable contractor. A suitable contractor shall be one who is bondable and capable of performing Tenant's obligations hereunder. If Tenant is permitted to engage in the sale of food and/or beverages from the Premises and the Premises is not located within a Food Court area, Tenant shall be solely responsible for prompt collection of all trash and debris within a radius of thirty feet (30') of the Premises. Tenant shall further be solely responsible for prompt disposal within the Premises or in such areas as may be provided for such disposal by Landlord of all such trash and debris. If Tenant fails to effect such prompt collection and disposal, Landlord may provide for such collection and disposal and, in such event, Tenant shall pay to Landlord the cost of such collection and disposal plus a fifteen percent (15%) administrative fee to Landlord within ten (10) days after receipt of a written statement setting forth such cost.

Section 7.03 HAZARDOUS MATERIALS.

(a) For the purposes of this Section 7.03 the following terms shall have the following meanings: (i) the term "Hazardous Material" shall mean: (aa) any material or substance that, whether by its nature or use, is subject to regulation under any Environmental Requirement, or (bb) any material, substance or waste which is toxic, ignitable, explosive, corrosive or reactive, or (cc) asbestos, or (dd) petroleum and petroleum based products, or (ee) formaldehyde, or (ff) polychlorinated biphenyls (PCBs), (gg) freon and other chlorofluorcorbons or (hh) such other material as is designated in a notice from Landlord to Tenant (whether such notice is provided before or after Tenant first commences to use such material); (it) the term "Environmental Requirement" shall include the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. 9601 et seq.), the Hazardous Materials Transportation Act (49 U.S.C. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. 6901 et seq.), the Toxic Substances Control Act (15 U.S.C. 2601 et seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), all as presently in effect and as the same may hereafter be amended, any regulation pursuant thereto, or any other present or future law, ordinance, rule, regulation, order or directive addressing environmental, health or safety issues of or by any Governmental Authority; and (iii) the term "Governmental Authority" shall mean the Federal government, or any state or other political subdivision thereof, any local government, or any agency, court or body of the Federal government, any state or other political subdivision thereof, exercising executive, legislative, judicial, regulatory or administrative functions.

(b) Tenant hereby represents and warrants to Landlord that it will insure that (i) no Hazardous Material will be generated, manufactured, sold, transported or located at, on; in, under or about the Premises; (ii) no Hazardous Material will be generated, manufactured, sold, transported or located at, in, on, under or about the Premises in a manner which violates any Environmental Requirement, or which requires cleanup or corrective action of any kind under any Environmental Requirement and (iii) no Hazardous Material will be transported, released, emitted, sold, discharged, leached, dumped or disposed of from the Premises onto or into any other property. However, the above prohibition concerning Hazardous Materials shall not prevent Tenant from selling regular consumer products which contain small, safe amounts of

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such Hazardous Materials or maintaining small, safe amounts of cleaning solutions at the Premises.

(c) Tenant shall comply and shall cause any other person on or about the Premises, including, without limitation, employees, invitees, contractors, subcontractors, licensees, subtenants or agents, to comply in all respects with all Environmental Requirements, and shall cause itself and its employees, invitees, contractors, subcontractors, licensees, subtenants or agents not to generate, store, handle, manufacture, process, sell, dispose of, transport or otherwise use Hazardous Materials at, in, on, under or about the Premises in a manner that could lead or potentially lead to the imposition on Landlord on the Shopping Center or the Development of any liability or lien of any nature whatsoever.

(d) Tenant shall (i) notify Landlord promptly' in the event of any spill or other release of any Hazardous Material at, in, on, under or about the Premises which is required to be reported to a Governmental Authority under any Environmental Requirement; (ii) promptly forward to Landlord copies of any notices received by Tenant relating to the alleged violations of any Environmental Requirement; and (iii) promptly pay when due any fine or assessment against Tenant, Landlord or the Shopping Center or the Development relating to any Environmental Requirement or the existence of Hazardous Materials at the Premises.

(e) If, at any time, it is determined that the operation or use of the Premises violates any applicable Environmental Requirement, or that there are Hazardous Materials located at, in, on, under or about the Premises which require special handling in collection, storage, treatment or disposal, or any other form of cleanup or corrective action, Tenant shall within ten (10) days after receipt of notice thereof from any Governmental Authority or from Landlord take, at its sole cost and expense, such actions as may be necessary to fully comply in all respects with all Environmental Requirements provided, however, that if such compliance cannot reasonably be completed within such ten (10) day period, Tenant shall commence such necessary action within such ten (10) day period and shall thereafter diligently and expeditiously proceed to fully comply in all respects and in a timely fashion with all Environmental Requirements. If Tenant fails to timely take, or to diligently and expeditiously proceed to complete in a timely fashion, any such action, Landlord may, in its sole and absolute discretion, make advances or payments towards the performance or satisfaction of the same, but shall in no event be under any obligation to do so. All sums so advanced or paid by Landlord (including, without limitation, counsel and consultant fees and expenses, investigation and laboratory fees and expenses, and fines or other penalty payments) and all sums advanced or paid in connection with any judicial or administrative investigation or proceeding relating thereto, will immediately, upon demand, become due and payable from Tenant. If Tenant fails to make such payment within ten (10) days of such demand, Tenant shall be in default under this Lease and Landlord may, without any further notice to Tenant terminate this Lease or resort to any other of its rights upon default set forth in Article XIX. Tenant will execute and deliver, promptly upon request, such instruments as Landlord may deem useful or necessary to permit Landlord to take such action, and such notes, mortgages, or other security as Landlord may require to secure all sums to be advanced or paid by Landlord.

(f) If a lien is filed against the Premises, the Development or the Shopping Center by any Governmental Authority resulting from the need to expend or the actual expending of

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monies arising from an Environmental Requirement, or a liability regarding Hazardous Materials related to an action or omission, whether intentional or unintentional, of Tenant or for which Tenant is responsible, then Tenant shall, within ten (10) days from the date that the Tenant is first given notice that such lien has been placed (or within such shorter period of time as may be specified by Landlord if such Governmental Authority has commenced steps to cause the property to be sold pursuant to such lien) either (i) immediately pay the claim and remove the lien, or (ii) immediately furnish a cash deposit, bond, or such other security with respect thereto as is satisfactory in all respects to Landlord and is sufficient to effect a complete discharge of such lien.

(g) If Landlord reasonably believes that (i) Tenant has permitted a Hazardous Material at the Premises, or (ii) that any other condition violates or threatens to violate any Environmental Requirement, Landlord may, at is option, cause an environmental site assessment of the Premises or portions thereof to be conducted to confirm Tenant's compliance with the provisions of this Section, and Tenant shall cooperate in all reasonable ways with Landlord in connection with any such environmental site assessment and shall pay all costs and expenses incurred in connection therewith.

(h) Tenant shall defend, indemnify, and hold harmless Landlord its affiliates, parent corporation, subsidiaries, partners, management company, successors and assigns, and the employees, agents, officers, directors of any of them from and against any and all loss, claims, demands, penalties, causes of action, fines, liabilities, settlements, damages, costs or expenses of whatever kind or nature, known or unknown, foreseen or unforeseen, contingent or otherwise (including, without limitation, counsel and consultant fees and expenses, investigation and laboratory fees and expenses, court costs, and litigation expenses) directly or indirectly arising out of, or in any way related to (i) any breach by Tenant of any of the provisions of this Section 7.03; (ii) the presence, use, generation, transportation, disposal, spillage, discharge, emission, leakage, release, or threatened release of any Hazardous Material which is at, in, on, under, about, from or affecting the Premises, the Shopping Center or the Development including, without limitation, any damage or injury resulting from any such Hazardous Material to or affecting the Premises, the Shopping Center, the Development or any soil, water, air, vegetation, buildings, personal property, persons or animals; (iii) any personal injury (including wrongful death) or property damage (real or personal) arising out of or related to any such Hazardous Material; (iv) any lawsuit brought or threatened, settlement reached, or order or directive of or by any Governmental Authority relating to such Hazardous Material; or (v) any violation of any Environmental Requirement or any policy or requirement of Landlord hereunder. The indemnities set forth in this subparagraph (h) are limited to actions or omissions of Tenant, its contractors, subcontractors, licensees, concessionaires or others on the Premises at the request of or with the consent of Tenant. Tenant shall indemnify Landlord for all losses, including, but not limited to, damages occasioned by the inability of Landlord to relet the Premises or a reduction in the fair market and/or Rental value of the Premises, Shopping Center or Development. This indemnification shall, notwithstanding any exculpatory or other provision of any nature whatsoever to the contrary set forth in the Lease, or any other document or instrument now or hereafter executed between Landlord and Tenant, constitute the personal recourse undertaking, obligation and liability of the Tenant and any guarantor. The obligations set forth in this Section 7.03 shall survive the termination of the Lease.

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(i) If the Lease is assigned to, or assumed by another party, or in the event of a sublease, it shall be a condition of such assignment, assumption or sublease that the assignee, party assuming or sublessee shall assume the obligations of this Section 7.03 in addition to such obligations of Tenant continuing after and surviving such sublease, assignment or assumption. The obligations and liabilities of Tenant under this Section 7.03 shall survive and continue in full force and effect and shall not be terminated, discharged or released, in whole or in part, irrespective of any assignment, sublease or assumption and irrespective of any other fact or circumstance of any nature whatsoever.

(j) Tenant shall surrender the Premises to Landlord upon the expiration or earlier termination of the Lease free of Hazardous Materials and free of any violation of any Environmental Requirement. Upon surrender, Tenant shall provide Landlord with a report by experts acceptable to Landlord showing the Premises free of Hazardous Materials.

Section 7.04 RADIUS.

Tenant acknowledges that sales from a store owned by it or a related entity as described herein within a ten (10) mile radius may reduce the Gross Sales that might otherwise be made from the Premises. If such a business is operated, the specific effect on Gross Sales may be difficult or impossible to establish with certainty. Therefore, in order to provide Landlord with a fair and adequate rental for the Premises, in the event that during the Term hereof Tenant any person, firm, corporation or other entity who or which controls or is controlled by Tenant, or by any person, firm, corporation or other entity who or which controls Tenant, shall directly, either individually or as a partner or stockholder or otherwise; own, operate or become financially interested in any business similar to or in competition with the business of Tenant described in the Data Sheet, within a radius of ten (10) miles from the Development, then the Gross Sales of any such business or businesses within said area shall be included in the Gross Sales made from the Premises and the Percentage Rental hereunder shall be computed upon the aggregate of the Gross Sales made from the Premises and by any such other business or businesses then conducted within said area. Tenant shall be obligated to provide Landlord with a statement of Tenant's Gross Sales for all such other businesses operated within such area, in accordance with the provisions of Article ill and Landlord shall have a right to examine the books and to audit such other businesses in a manner as set forth in Article IV of this Lease.

This Section 7.04 shall not apply to any such business or businesses open and in operation within said area as of the date of execution of this Lease. Landlord or Landlord's authorized representative or agent shall have the right at all reasonable times during the Term hereof and for a period of at least two (2) years after the expiration of the Term, to inspect, audit, copy and make extracts of the books, source documents, records and accounts pertaining to such other business or businesses for the purpose of determining or verifying the Additional Rent due to Landlord pursuant to this Section.

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ARTICLE VIII

COMMON AREAS

Section 8.01 OPERATION AND MAINTENANCE OF COMMON AREAS.

Following the Rental Commencement Date, Landlord shall Cause to be operated and maintained during the Term all "Common Areas" (as described below) at a level comparable to other regional shopping malls in the region in which the Development is located. The manner in which such areas and facilities shall be operated and maintained, and the expenditures therefor, shall be at the sole discretion of Landlord and the use of such areas and facilities shall be subject to such reasonable regulations as Landlord may make from time to time.

Section 8.02 USE OF COMMON AREAS.

The term "Common Area(s)", as used in this Lease, shall mean, to the extent provided by Landlord, all improved and unimproved areas within the Shopping Center and the Development including, without limitation: (i) parking structures, areas and facilities (collectively, "parking facilities"), traffic control and traffic information signs and equipment, roadways, pedestrian sidewalks, curbs, driveways, a monorail system, if any, public transportation loading and unloading facilities not devoted to a single tenant, truckways, delivery areas, landscaped areas, community rooms, office facilities, elevators, escalators, roofs, skylights, beams, stairs and ramps not contained within any Floor Area, public restrooms and comfort stations, service areas, service and fire exit corridors, passageways and other areas, amenities, facilities and improvements provided by Landlord, and (ii) those areas within the Development and areas adjacent to the Development containing parking facilities, signs, pylons or structures advertising the Development or which from time to time may be provided by the owners of such areas for the convenience and use of Landlord, the tenants of the Shopping Center and the Development, the owners and occupants of the Department Stores and their respective concessionaires, agents, employees, customers, invitees and any other licensees. The use and occupancy by Tenant of the Premises shall include the non-exclusive use of the Common Areas in common with Landlord and with all others for whose convenience and use the Common Areas have been or may hereafter be provided by Landlord or by the owners of Common Areas not within the Shopping Center or the Development as specified in the preceding sentence, subject, however, to such rules and regulations for the use thereof as may be prescribed from time to time by Landlord or the owner of such Common Areas, including the right of Landlord or such owner to impose parking charges, whether by meter or otherwise, and to determine the hours and mode of operation of the elevators and escalators serving the Development and the Shopping Center. In no event, however, shall Tenant, its agents or employees, use the Common Areas for the display or sale of merchandise.

Landlord shall have the right, but not the obligation, from time to time, to modify the Common Areas, remove portions of the Common Areas from common use, to permit entertainment events, advertising displays, educational displays and other displays in the Common Areas that in Landlord's judgment tend to attract the public, to erect buildings or other improvements on the Common Areas, to lease kiosks and to establish, modify and enforce reasonable rules and regulations with respect to all Common Areas. Tenant shall not be entitled to any credit for income earned by Landlord with respect to the Common Area. Tenant and its employees shall not park their cars or any other vehicles in the parking facilities except in

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the areas specifically designated by Landlord for employee parking. Automobile license numbers of employees cars shall be furnished by Tenant to Landlord upon Landlord's request. In the event any vehicle is parked by an employee of Tenant in a parking area not designated for employee parking, (a) Landlord shall have the right to cause the vehicle to be towed, at Tenant's expense, to a location designated by Landlord, and/or (b) Tenant shall pay to Landlord as Additional Rent the sum of Fifty Dollars ($50.00) per day per automobile parked by Tenant or an employee of Tenant in a parking area not designated for employee parking. Tenant shall indemnify, defend and hold harmless Landlord and its employees, agents, contractors and representatives from and against any and all claims of the employee and/or owner of any vehicle so towed. Prior to imposing any charge upon Tenant hereunder, Landlord shall give Tenant written notice of the first violation of this provision and Tenant shall have two (2) days thereafter within which to cause the violation to be discontinued; if the violation is not discontinued within said two day period, then the per day fine shall commence without further action by Landlord. After notice of such first violation, no prior notice of any subsequent violation shall be required. All amounts due under the provisions of this paragraph shall be payable by Tenant within ten (10) days after demand therefor.

Landlord may at any time close any Common Area to make repairs or changes, to prevent the acquisition of public rights in such area or to discourage non-customer parking, to use areas for attendant or valet parking, and may do such other acts in and to the Common Areas as in its judgment may be desirable to improve the convenience thereof.

Section 8.03 COMMON AREA OPERATING COSTS AND EXPENSES.

(a) Tenant shall pay to Landlord as Additional Rent in the manner and at the place hereinafter provided Tenant's proportionate share of the following (collectively "Operating Costs and Expenses"): all costs and expenses of every kind and nature paid or incurred by Landlord in managing, operating, quipping, policing and protecting, lighting, signing, cleaning, painting, heating, ventilating, air conditioning, providing sanitation and sewer and other services, insuring, defending or prosecuting lawsuits (or other legal proceedings), repairing, replacing and maintaining (i) the Common Areas (including the parking facilities), (ii) all buildings and roofs within the Development and (iii) all other areas, facilities, work and storage areas, leased or owned property, and buildings whether located within or outside of, the Development or the Shopping Center (the "project areas") plus an amount equal to fifteen percent (15%) of the total of all of the costs and expenses set forth herein.

By way of example, Operating Costs and Expenses shall include, but shall not be limited to, the full cost of: illumination and maintenance of signs, whether located on or off the site of the Development; trash removal or recycling; snow and ice removal, storm drainage systems and other installations; water, gas, sewage, electricity and other utilities, including any and all usage, service, hook-up, connection, availability and/or standby fees, deposits or charges pertaining to same; maintenance and operation of any temporary or permanent utility (including a sewage disposal system, within or outside the Shopping Center and/or the Development) built, operated and/or maintained for the specific purpose of servicing the Shopping Center and/or the Development, together with hook-up or connection fees and service charges; compliance with all rules, regulations and orders of governmental authorities including those pertaining to environmental safety (e.g. the cost of monitoring air quality and project life safety systems) and any amounts payable to municipal and/or other governmental bodies in connection with

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environmental impacts; capital improvements designed to protect the health and safety of the tenants in the Shopping Center and/or the Development; cleaning, lighting, striping and landscaping curbs, gutters, sidewalks, drainage and irrigation ditches, conduits, pipes and canals located on or adjacent to the Development; premiums and other costs for all liability, casualty and property insurance maintained by Landlord (including rent insurance, self-insurance and the payment of deductible amounts under insurance policies) and for any payment or reserve made by Landlord for claims for damage to person (including loss of life) or property; personal property taxes; audit fees and expenses; supplies; maintenance and replacement of equipment supplying music to the Shopping Center and/or the Development; taxes and assessments levied or assessed by any municipal, county, state, federal or other taxing or assessing authority upon, against or with respect to the Common Areas and/or the land thereunder and the land on which the Development is situated; and all property and improvements (including any land upon which may be located any temporary or permanent utility, within or outside the Development), built, operated and/or maintained for the specific purpose of servicing the Shopping Center and/or the Development which may at any time comprise or serve the Shopping Center and/or the Development, whether located on or off the site of the Development, irrespective of whether the same is taxed or assessed as real or personal property; depreciation of maintenance equipment used in the operation or maintenance of Common Areas or project areas; and total compensation and benefits (including premiums for worker's compensation and other insurance) paid to or on behalf of employees involved in the performance of the work specified in this Section 8.03. The preceding is for definitional purposes only and shall not impose any obligation upon Landlord to incur such expenses or provide such services. In the event any item of Operating Costs and Expenses serves or benefits one or more properties in addition to all or part of the Development, the expense attributable to such item included in Operating Costs and Expenses shall be equitably prorated by Landlord.

(b) The proportionate share so to be paid by Tenant shall be that portion of Operating Costs and Expenses which the number of square feet of Floor Area in the Premises bears to the total number of square feet of gross leased and occupied Floor Area of all buildings in the Shopping Center. The gross leased and occupied Floor Area in effect for the whole of any lease year shall be the average of the gross leased and occupied Floor Area in effect on the first day of each calendar month in such lease year, Prior to the proration of Operating Costs and Expenses, there shall be deducted therefrom all amounts received from the Department Stores (and from any other tenant within the Development not included in the definition of Shopping Center) toward such costs and expenses.

(c) Tenant's proportionate share of Operating Costs and Expenses for each lease year during the Term following the Rental Commencement Date shall be paid as Additional Rent to Landlord in monthly installments on the first day of each calendar month, in advance, in an amount estimated by Landlord from time to time. Subsequent to the end of each calendar or fiscal or lease year (at Landlord's option), Landlord shall furnish Tenant with a statement of Tenant's proportionate share of such Operating Costs and Expenses for such period showing the method of computing such share. If the total amount paid by Tenant under this Section for any such lease year shall be less than the actual amount due from Tenant for such lease year as shown on such statement, Tenant shall pay to Landlord the difference between the amount paid by Tenant and the actual amount due, within thirty (30) days after the furnishing of each such statement. If the total amount paid by Tenant hereunder for any such lease year shall exceed such

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actual amount due from Tenant for such year, such excess shall be credited against the next payment due from Tenant to Landlord under this Lease. If at the end of the final lease year the total amount paid by Tenant hereunder for such lease year shall exceed such actual amount due from Tenant for such lease year, such excess shall be refunded to Tenant after Tenant has vacated the Premises in good condition at the conclusion of this Lease and any other sums due Landlord from Tenant under this Lease have been paid in full or deducted therefrom. Landlord may estimate the annual budget and charge the same to Tenant on a monthly basis, subject to revision by Landlord of the budget from time to time and final annual adjustment based upon actual Operating Costs and Expenses.

ARTICLE IX

SIGNS

Section 9.01 TENANT'S SIGNS.

Tenant shall affix a sign to the exterior surface of the storefront of the Premises located inside the Shopping Center. Tenant shall pay all costs of fabricating, constructing, operating and maintaining such sign including, without limitation, all charges for electricity. Tenant shall keep said sign well lighted during such hours as Landlord shall designate and shall maintain said sign in good condition and repair during the entire Term of this Lease. Said sign shall conform to the criteria for signs contained in Exhibit B, and the size content design and location thereof shall be subject to the prior written approval of Landlord. Except as hereinabove mentioned, Tenant shall not place or cause to be placed, erected or maintained on any exterior door wall window or the roof of the Premises, or on the interior or exterior surface of the glass of any window or door of the Premises, or on any sidewalk or other location outside the Premises, or on or within any display window space in the Premises, or within five feet (5) of the front of the storefront leaseline whether or not there is display window space in the Premises, or within any entrance to the Premise; any sign (flashing, moving, hanging, handwritten, or otherwise), decal, placard, decoration, flashing, moving or hanging lights, lettering, or any other advertising matter of any kind or description; provided, however, that subject to the prior written approval of Landlord with respect to design and placement, Tenant may place decals for safety purposes on glass storefronts where warranted. No symbol, design, name, mark or insignia adopted by Landlord for the Shopping Center or the Development shall be used without the prior written consent of Landlord. No illuminated sign located in the interior of the Premises and visible from outside the Premises shall be permitted without the prior written approval of Landlord. All signs located in the Premises shall be in good taste so as not to detract from the general appearance of the Premises, the Shopping Center. In the event Tenant shall be in default of this Section 9.01, Tenant shall pay as Additional Rent the sum of One Hundred Dollars ($100.00) for each day of default in order to reimburse Landlord for the additional administrative expenses resulting therefrom.

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ARTICLE X

MAINTENANCE OF PREMISES

Section 10.01 LANDLORD'S OBLIGATIONS FOR MAINTENANCE.

Landlord shall keep and maintain the roof (excluding any skylights, Tenant rooftop HVAC units and/or roof penetrations made by Tenant, any of which shall only be permitted with Landlord's prior written consent), foundation and the exterior surface of the exterior walls of the building in which the Premises are located (exclusive of storefronts, doors, door frames, door checks, other entrances, windows and window frames which are not part of Common Areas) in good repair, except that Landlord shall not be called upon to make any such repairs occasioned by the act or omission or negligence of Tenant, its agents, employees, invitees, licensees or contractors. Landlord shall not be called upon to make any other improvements or repairs of any kind upon the Premises and appurtenances, except as may be required under Articles XVII and XVIII hereof, and nothing contained in this Section 10.01 shall limit Landlord's right to reimbursement from Tenant for maintenance, repair costs and replacement costs conferred elsewhere in this Lease. In no event shall Landlord be liable for consequential damages or Tenant's lost profits claimed to be caused by any failure of maintenance or repair by Landlord.

Section 10.02 TENANT'S OBLIGATIONS FOR MAINTENANCE.

(a) Except as provided in Section 10.01 of this Lease, Tenant, at Tenant's expense, shall keep and maintain in first-class appearance, in a condition equal to or better than that which existed when Tenant initially opened the Premises for business, reasonable wear and tear excepted, and in good condition and repair (including replacement of parts and equipment, if necessary), the Premises and every part thereof and any and all appurtenances thereto wherever located, including, without limitation, the interior surfaces of the exterior walls, the exterior and interior portion of all doors, door frames, door checks, other entrances, windows, window frames, plate glass, storefronts, all plumbing and sewage facilities within the Premises (including free flow to the main sewer line), fixtures, ventilation, heating and air conditioning and electrical systems exclusively serving the Premises (whether or not located in the Premises), sprinkler systems, walls, floors and ceilings (including floor and ceiling coverings), and all other repairs, replacements, renewals and restorations, interior and exterior, ordinary and extraordinary, foreseen and unforeseen, and all other work performed by or on behalf of Tenant pursuant to Exhibit B and Article VI hereof.

(b) Tenant shall keep and maintain the Premises in a clean, sanitary and safe condition in accordance with applicable law and all directions, rules and regulations of the health officer, fire marshal, building inspector or other proper officials of the governmental agencies having jurisdiction and Tenant shall comply with all requirements of law, ordinances and otherwise, affecting the Premises, all at Tenant's sole cost and expense. Tenant also agrees to comply with requirements of any insurance underwriters, inspection bureaus or a similar agency designated by Landlord with respect to the Premises. At the end of the Term, Tenant shall surrender the Premises in good order, condition and repair, reasonable wear and tear excepted. Tenant, at its own expense, shall install and maintain such fire extinguishers and other fire protection devices as may he required from time to time by any agency having jurisdiction thereof or by the insurance underwriter insuring the building in which the Premises are located.

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(c) Tenant shall keep the Premises and all other parts of the Development free from any and all liens arising out of any work performed, materials furnished or obligations incurred by or on behalf of Tenant. Within ten (10) days after written request therefor by Landlord, Tenant shall (a) bond against or discharge any mechanics' or materialmens lien or (b) furnish Landlord with a copy of the recorded waiver of lien, recorded release of lien, or of the recorded bond discharging such lien. Tenant shall reimburse Landlord as Additional Rent for any and all costs and expenses including, without limitation, attorneys' fees, which may be incurred by Landlord by reason of the filing of any such liens and/or removal of same, such reimbursement to be made within ten (10) days after receipt by Tenant from Landlord of a statement setting forth the amount of such costs and expenses such reimbursement to be paid to Landlord in the manner and at the place provided in this Lease. Tenant shall give Landlord at least fifteen (15) days' written notice prior to commencing or causing to be commenced any work on the Premises (whether prior or subsequent to the Commencement Date), so that Landlord shall have reasonable opportunity to file and post a notice of non-responsibility for Tenant's work.

(d) In the event Tenant fails, refuses or neglects to maintain the Premises as required hereunder or to commence and complete repairs promptly and adequately, to remove or bond against any lien, to pay any cost or expense, to reimburse Landlord, or otherwise to perform any act or fulfill any obligation required of Tenant pursuant to this Section 10.02, Landlord may, but shall not be required to, perform such maintenance or to make or complete any such repairs, remove or bond against such lien, pay such cost or perform such act or the like without prior notice to, but at the sole cost and expense of Tenant. Tenant shall reimburse Landlord, as Additional Rent, for all cost and expense of Landlord thereby incurred within ten (10) days after receipt by Tenant from Landlord of a statement setting forth the amount of such cost and expense.

ARTICLE XI

INSURANCE AND INDEMNITY

Section 11.01 TENANT'S INSURANCE.

(a) Tenant, at its sole cost and expense, shall, during the entire Term hereof, procure and keep in force: (i) Commercial General Liability Insurance with respect to the Premises and the operations of Tenant in, on or about the Premises, in which the limits shall be not less than Three Million Dollars ($3,000,000.00) per occurrence combined single limit, broad form/extended bodily injury, death and property damage, and business automobile liability insurance covering all owned, non-owned and hired or borrowed vehicles of Tenant used in connection with the operation of its business from the Premises, in which the limits shall be not less than One Million Dollars ($1,000,000.00) per occurrence combined single limit, insuring for bodily injury, death and property damage; (ii) plate glass insurance, at full replacement value; (iii) insurance against fire, extended coverage, vandalism, malicious mischief, water damage which does not exclude backup from sewers or drains and/or sprinkler leakage, and such other additional perils including earthquake and flood as now are or hereafter may be included in a standard extended coverage endorsement from time to time in general use in the county in which the Development is located, insuring Tenant's merchandise, trade fixtures, furnishings, equipment and all other items of personal property of Tenant located on or in the Premises, including steam boiler insurance, if applicable, in an amount equal to the full replacement cost

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thereof; (iv) workers' compensation coverage as required by law and including Employer's Liability Insurance in the amount of Two Million Dollars ($2,000,000.00) each accident, Two Million Dollars ($2,000,000.00) each employee, by disease, Two Million Dollars ($2,000,000.00) policy aggregate by disease; (v) with respect to alterations, improvements and the like required or permitted to be made by Tenant under this Lease, contingent liability and builders' risk insurance; in an amount satisfactory to Landlord; (vi) the insurance required under Exhibit B, and (vii) product liability coverage (including, without limitation, if this Lease covers Premises in which food and/or beverages are sold and/or consumed, liquor liability coverage for acts arising out of the serving and/or consumption of food and/or alcoholic beverages on or obtained at the Premises, to the extent obtainable), for not less than Three Million Dollars ($3,000,000.00) combined single limit, bodily injury, death and property damage. In addition, if Landlord deems it necessary to increase the amounts or limits of insurance required to be carried by Tenant hereunder, Landlord may reasonably increase said amounts or limits, and Tenant shall so increase the amounts or limits of the insurance required to be carried by Tenant hereunder and shall provide Landlord with policies or certificates indicating the increased amounts or limits as provided in this Section 11.01.

(b) All policies of insurance required to be carried by Tenant pursuant to this Section 11.01 shall be written by insurance companies of adequate financial capacity satisfactory to Landlord with a Best's rating and Financial Size Category of not less than A-/VII and authorized to do business in the state in which the Development is located. Any such insurance required of Tenant hereunder may be furnished by Tenant under any blanket policy carried by it or under a separate policy therefor. An insurance certificate (and endorsements where same become necessary) together with a copy of the policy declaration page from Tenant's insurer, certifying that such policy has been issued, provides the coverage required by this Section 11.01 and contains all of the provisions specified in this Section 11.01 (including, without limitation, naming of additional insured entities as required by Section l1.01(c) below and a statement that no deductible or self-insured retention applies to such policy), shall be delivered to Landlord, at the address set forth on the Data Sheet prior to the commencement of the Term of this Lease, and such insurance information shall also be provided in connection with all renewals, not less than thirty (30) days prior to the expiration of the term of each such policy. As often as any such policy shall expire or terminate, renewal or additional policies shall be procured and maintained by Tenant in like manner and to like extent. Landlord may, at any time, and from time to time, inspect and copy any and all insurance policies required to be procured by Tenant hereunder.

(c) Each policy evidencing insurance required to be carried by Tenant pursuant to this Section 11.01 shall contain the following clauses and provisions: (i) a provision that such policy and the coverage evidenced thereby shall be primary and non-contributing with respect to any policies carried by Landlord and that any coverage carried by Landlord be excess insurance; (ii) a provision including Landlord and the parties set forth on Exhibit C of this Lease and any other parties designated by Landlord from time to time as additional insured entities; (iii) a waiver by the insurer of any right to subrogation against Landlord and other additional insured entities (as set forth on Exhibit C), its agents, employees and representatives which arises or might arise by reason of any payment under such policy or by reason of any act or omission of Landlord, its agents, employees or representatives; (iv) a severability of interest clause or endorsement; (v) a provision that the insurer will not cancel or change the coverage provided by such policy without giving Landlord thirty (30) days' prior written notice; and (vi) such policy shall be an

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"occurrence form" policy. Any policy of insurance required to be carried by Tenant that names the parties set forth in this Section 11.01(c) (ii) as additional insured entities shall not be subject to a deductible or self insured retention, it being the intent of the parties that such insurance shall fully and completely insure such additional insured entities for all loss or expense.

(d) In the event that Tenant fails to procure or to maintain, at the times and for the duration specified in this Section 11.01, any insurance required by this Section 11.01, or fails to carry insurance required by law or governmental regulation, Landlord may (but shall not be required to) at any time or from time to time, and without notice to Tenant, procure such insurance and pay the premiums therefor, and the cost of same, plus a fifteen percent (15%) administrative fee shall be deemed Additional Rent and shall be payable upon Landlord's demand.

(e) Tenant will not do or suffer to be done, or keep or suffer to be kept, anything in, upon or about the Premises which will violate Landlord's policies of hazard or liability insurance or which will prevent Landlord from procuring such policies in companies acceptable to Landlord. If anything done, omitted to be done or suffered by Tenant to be kept in, upon or about the Premises shall cause the rate of fire or other insurance on the Premises or on other property of Landlord or of others within the Shopping Center to be increased beyond the minimum rate from time to time applicable to the Premises or to any property for the use or uses made thereof, Tenant will pay, as Additional Rent, the amount or any such increase upon Landlord's demand.

(f) In the event Tenant retains any security guard contractor to service the Premises, Tenant shall cause Landlord to receive a customary waiver of subrogation under the worker's compensation insurance policy covering such security guard. Tenant shall provide Landlord with written notice if any such security guard is to carry a firearm upon the Premises or Development, and in such event, Landlord shall have the right to impose additional reasonable insurance requirements upon Tenant and/or such security guard, which shall be complied with by Tenant and Tenant shall provide Landlord with evidence of such compliance prior to the posting of such security guard at the Premises. Notwithstanding the foregoing, Landlord shall have the sole and absolute right to prohibit any person (including any security guard) from carrying a firearm upon the Premises, Shopping Center and/or Development.

Section 11.02 LANDLORD'S INSURANCE.

During the Tern following the Rental Commencement Date, Landlord shall provide (a) in amounts and coverages determined by Landlord (but not less than the replacement cost of the property so insured), with or without deductibles, insurance coverage in the form of an "all-risk" type policy against loss or damage by fire, flood, windstorm, hail, explosion, damage from aircraft and vehicles and smoke damage, and such other risks as are from time to time included in a standard extended coverage endorsement, insuring the Shopping Center and the leasehold improvements to the Premises (exclusive of Tenant's merchandise, trade fixtures, furnishings, equipment, plate glass, signs and all other items of personal property of Tenant); and (b) to the extent the same is available in the market during such period, rental interruption insurance, which insurance may be carried in amounts equal to Tenant's total Rental obligation for twenty-four (24) months under this Lease plus the total of the estimated costs to Tenant of Taxes and Operating Costs and Expenses for such twenty-four (24) months. Tenant shall submit to Landlord a statement setting forth the cost of Tenant's leasehold improvements promptly after

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completion thereof. Landlord at its option may carry a special extended coverage endorsement. The cost of all insurance maintained by Landlord pursuant to this Section shall be included as part of the costs set forth in Section 8.03 of this Lease.

Section 11.03 COVENANT TO HOLD HARMLESS.

Tenant covenants to defend and indemnify Landlord, its partners, shareholders, representatives, management company, agents and employees, and save them harmless (except to the extent of loss or damage resulting from the intentional or willful acts or omissions or the gross negligence of Landlord not required to be insured against by Tenant pursuant to this Article XI) from and against any and all claims" actions, demands, judgments, awards, fines, mechanics' liens or other liens, losses, damages, liability and expense, including attorneys' fees and court costs, in connection with all losses, including loss of life, personal injury and/or damage to property, arising from or out of any occurrence (or arising from or out of Tenant's failure to comply with any provision of this Lease) wholly or in part by any act or omission of Tenant, its concessionaires, agents, contractors, suppliers, employees, servants, customers or licensees and including any product liability claim or any labor dispute involving Tenant or its contractors and agents. In case Landlord or any other party so indemnified shall be made a party to any litigation commenced by or against Tenant, then Tenant shall defend, indemnify, protect and save them harmless and shall pay, as the same becomes due and payable, all costs, expenses and reasonable attorneys' fees and court costs incurred or paid by them in connection with such litigation.

Section 11.04 WAIVER OF RIGHT OF RECOVERY.

Except as otherwise provided in this Lease, neither Landlord nor Tenant shall be liable to the other or to any insurance company (by way of subrogation or otherwise) insuring the other party for any loss or damage to any building, structure or other tangible property, or any resulting loss of income! or losses under worker's compensation laws and benefits, even though such loss or damage might have been occasioned by the negligence of such party, its agents or employees. The provisions of this Section 11.04 shall not limit the indemnification for liability to third parties pursuant to Section 11.03.

ARTICLE XII

UTILITIES

Section 12.01 UTILITY CHARGES.

(a) Tenant shall be solely responsible for and shall promptly pay for all fees, deposits and charges, including use and/or connection fees, hook-up fees, standby fees, and/or penalties for discontinued or interrupted service, and the like, for water, gas, electricity, fire alarm, burglar alarm, telephone, cable television, sewer and sanitation, solid waste disposal and any other service or utility used in or upon or furnished to the Premises, including, without limitation, any services to be supplied by Landlord from a central utility plant or other utility system, as more particularly set forth in Exhibit D, irrespective of whether any of the foregoing are initially paid in advance by Landlord, or otherwise. Landlord, at its sole option, may elect to furnish any or all of such services with a separate charge therefor to Tenant, at a cost in excess of Landlord's cost, such charge to be based upon the services used by Tenant, as reflected by meter, submeter or

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otherwise. Tenant shall pay such charge, as Additional Rent, at such time and upon such terms as installments of Minimum Annual Rental are due.

(b) Except to the extent of Landlord's gross negligence, in no event shall Landlord be liable for damages or otherwise for any interruption, reduction, disruption, curtailment or failure in the supply, quality or character of electricity, services from a central utility plant or any other utility or other service, or if either the quantity, quality or character thereof supplied to or by Landlord is changed or is no longer available for Tenant's requirements, nor shall any such interruption, reduction, disruption, curtailment, failure or change in quantity, quality or character constitute or be deemed to constitute constructive eviction of Tenant, or excuse or relieve Tenant from its obligations under this Lease, including but not limited to the payment of Rental.

(c) Prior to the commencement of Tenant's occupancy of the Premises and/or at any time thereafter until the expiration of the Term, Landlord may, upon thirty (30) days' prior written notice to Tenant, elect to have Tenant obtain, and/or discontinue furnishing, as applicable, any utility to the Premises (including, without limitation, heating, ventilation and air conditioning services), without thereby affecting this Lease in any manner or otherwise incurring any liability to Tenant, and Landlord shall no longer be obligated to furnish such utility to the Premises. If Landlord shall give Tenant notice of intention to so have Tenant obtain, or for Landlord to cease furnishing, a utility to the Premises, Tenant may contract for and receive such utility directly from the public utility corporation then serving the Shopping Center, and if Tenant does so, Landlord shall permit Tenant, at Tenant's sole cost, to use Landlord's risers, wiring, electric and any other installations then serving the Premises for such purpose, if any, to the extent that the same are available, suitable and may be safely so used, consistent with concurrent and anticipated future use by Landlord and other tenants. If Landlord is the initial provider of a utility service to Tenant, Landlord agrees not to discontinue furnishing any utility to Tenant pursuant hereto until such time as Tenant shall be able to receive said utility service from an alternate source of supply. Tenant agrees to act diligently in connecting to such alternate source as soon as it becomes available. Landlord may from time to time during the Term elect to provide, or resume provision of, any utility to the Premises obtained or provided by Tenant pursuant hereto, and thereafter make an election for Tenant to provide such utility pursuant hereto, and thereafter re-elect again pursuant hereto on an ongoing basis.

(d) Notwithstanding any other provisions of this Article, to the extent utilities provided by Landlord are utilities which could be supplied to Tenant as a direct customer of a public utility, the value of such utility used by Tenant shall be computed for the purposes of this Article so as not to exceed the rate schedules which would be applicable if Tenant were at the time a direct customer of such public utility corporation.

(e) Any obligation of Landlord to furnish light, power and services from a central utility plant shall be conditioned upon the availability of adequate energy sources. Landlord shall have the right to reduce heating, cooling and lighting within the Premises and the Common Areas as required by any mandatory or voluntary fuel or energy saving allocation, or similar statute, regulation, order or program.

(f) Tenant shall operate its heating, ventilating and air conditioning ("HVAC") system(s) serving the Premises so as to maintain comfortable conditions during regular Shopping

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Center business hours. Temperatures in the Premises shall be compatible with temperatures in the Shopping Center. Tenant's obligation to connect to the services supplied by Landlord, as set forth in this Section 12.01 and Exhibit B, as well as Tenant's installation, operation and maintenance of its HVAC system(s) within the Premises, shall be as set forth herein, in Exhibit B and in any related exhibit(s).

(g) If Tenant desires to install any equipment which shall exceed the capacity of any utility facilities or which shall require additional utility facilities, Tenant shall not have the right to do so without Landlord's prior written approval of Tenant's Plans and Specifications and specifications therefor. If such installation is approved by Landlord, and if Landlord provides such additional facilities to accommodate Tenant's installation, Tenant agrees to pay Landlord, on demand, the cost of providing such additional utility facilities or utility facilities of greater capacity. Tenant shall in no event use any of the utility facilities in anyway which shall overload or overburden the utility systems.

(h) Landlord reserves the right to cut of f and discontinue furnishing any heating, ventilation, air conditioning or other utility services furnished or submetered by Landlord at any time after notice to Tenant of an event of default under this Lease by Tenant. Landlord shall not be liable for any damages resulting from or arising out of such discontinuance of utility services, and such discontinuance shall not constitute a termination of this Lease or an eviction of Tenant. Tenant hereby releases Landlord from any loss, damage or liability sustained by Tenant as a result of such discontinuance.

ARTICLE XIII

ESTOPPEL STATEMENT, ATTORNMENT AND SUBORDINATION

Section 13.01 ESTOPPEL STATEMENT.

Within ten (10) days after request therefor by Landlord, Tenant shall execute, in recordable form, and deliver to Landlord a statement, in writing, certifying (a) that this Lease is in full force and effect, (b) the Commencement Date, the Rental Commencement Date and the expiration date of this Lease, (c) that Rental and all other charges hereunder are paid currently without any offset or defense thereto, (d) the amount of Rental and all other charges hereunder, if any, paid in advance, (e) whether this Lease has been modified and, if so, identifying the modifications, (t)that there are no uncured defaults by Landlord or stating in reasonable detail those claimed by Tenant (provided that, in fact, such details are accurate and ascertainable), and (g) such other matters as maybe reasonably requested by Landlord. Tenant's failure or refusal to execute timely such statement shall constitute an acknowledgment by Tenant that the statements contained in such statement are true and correct without exception, and may be relied upon by Landlord or by any prospective or existing transferee of all or any part of Landlord's interest in the Development or this Lease or by any of Landlord's lenders.

Section 13.02 ATTORNMENT.

In the event any proceedings are brought for the foreclosure of, or in the event of exercise of the power of sale under any mortgage and/or deed of trust made by Landlord covering the Premises, or in the event Landlord sells, conveys or otherwise transfers its interest in the Shopping Center and/or the Development or any portion thereof containing the Premises, this

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Lease shall remain in full force and effect and Tenant hereby automatically attorns to the new owner. Tenant covenants and agrees, at such new owners request, to execute an instrument evidencing such attornment reasonably satisfactory to the new owner, recognizing the new owner as the landlord under this Lease. Tenant acknowledges that such new owner shall not be bound by (i) any prepayment of more than one (1) month's Rent (except rental deposit but only to he extent received by said successor) or (ii) any material amendment of the Lease made after the later of the Commencement Date, or the date that such successor's lien or interest first arose, unless said successor shall have consented to such amendment or (iii) any claims, offsets or defenses of Tenant arising prior to such attornment, except for those specifically provided in the Lease. Payment by or performance of this Lease by any person, firm or corporation claiming an interest in this Lease or the Premises by, through or under Tenant without Landlord's consent in writing shall not constitute an attornment or create any interest in this Lease or the Premises. At Tenant's request, the new owner shall acknowledge in writing that, subject to the provisions of this Section, Tenant's interest in the Premises and rights under this Lease shall not be disturbed so long as Tenant is not in default under the terms of this Lease beyond the time permitted to cure such default.

Section 13.03 SUBORDINATION.

Tenant further agrees this Lease shall be subordinate to the lien of any mortgage, deed of trust or any ground lease that may be placed upon the Premises or the Shopping Center or the Development and to any and all advances to be made thereunder, and to the interest thereon, and all renewals, modifications, replacement and extensions thereof. The foregoing shall be self-operative and no further instruments shall be required to effect such subordination of this Lease. Tenant also agrees that any mortgagee, beneficiary or ground lessor may elect to have this Lease constitute a prior lien to its mortgage, deed of trust or ground lease, and in the event such election and upon notification by such mortgagee, beneficiary or ground lessor to Tenant to that effect, this Lease shall be deemed a prior lien to such mortgage, deed of trust or ground lease, whether this Lease is dated prior to or subsequent to the date of said mortgage, deed of trust or ground lease. Tenant agrees that upon the demand of Landlord, or any mortgagee, beneficiary or ground lessor, Tenant shall, within ten (10) days of the receipt of said demand, execute whatever instruments may be required to carry out the intent of this Section 13.03 in the form requested by Landlord' or such mortgagee, beneficiary or ground lessor, including, without limitation, an appropriate recordable subordination agreement. In the event Tenant fails to execute such instruments within ten (10) days after demand, Tenant does hereby irrevocably appoint Landlord as its attorney-in-fact and in its place and stead so to do.

Section 13.04 REMEDIES.

Failure of Tenant to execute any statements or instruments necessary or desirable to effectuate the foregoing provisions of this Article within ten (10) days after written demand so to do by Landlord shall constitute a breach of this Lease. In the event of such failure, Landlord, in addition to any other rights or remedies it might have, shall have the right by not less than ten (10) days' notice to Tenant to declare this Lease terminated and the Term ended, in which event this Lease shall cease and terminate on the date specified in such notice with the same force and effect as though the date set forth in such notice were the date originally set forth in this Lease and fixed for the expiration of the Term; upon such termination Tenant shall vacate and surrender the Premises, but shall remain liable as provided in this Lease by reason of said breach.

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Section 13.05 NOTICE TO MORTGAGEE, BENEFICIARY OR GROUND LESSOR.

If Tenant is given notice of the name and address of a mortgagee, beneficiary or ground lessor, then Tenant shall give written notice of any default by Landlord to such mortgagee, beneficiary or ground lessor specifying the default in reasonable detail. Tenant shall afford mortgagee, beneficiary or ground lessor the right to cure such default and if such mortgagee, beneficiary or ground lessor does perform on behalf of Landlord, such default shall be deemed cured.

ARTICLE XIV

ASSIGNMENT AND SUBLETTING

Section 14.01 RESTRICTIONS ON TRANSFER.

(a) Notwithstanding any provision contained herein to the contrary, Tenant agrees not to mortgage, encumber, pledge or hypothecate all or any part of this Lease, Tenant's interest in the Premises, or Tenant's business. Further, Tenant shall not transfer, assign, sublet, enter into franchise, license or concession agreements, change ownership or voting control of, all or any part of this Lease, Tenant's interest in the Premises or Tenant's business (collectively "Transfer") without first procuring the written consent of Landlord, which consent shall not be unreasonably withheld, subject to the terms, covenants and conditions contained in this Lease and to the right of Landlord to elect to terminate this Lease as provided in Section 14.02 below. Any attempted or purported Transfer without Landlord's prior written consent shall be void and of no force or effect and shall not confer any estate or benefit on anyone. Further, any such attempted or purported Transfer shall entitle Landlord immediately to terminate this Lease and all further obligations Landlord hereunder. A consent to one Transfer by Landlord shall not be deemed to be a consent to any subsequent Transfer to any other party. No Transfer of this Lease or agreement entered into with respect thereto, whether with or without Landlord's consent, shall relieve Tenant or any guarantor from liability under this Lease.

(b) Landlord and Tenant agree that it shall not be unreasonable for Landlord to withhold its consent to any proposed Transfer for any of the following reasons, which are not exclusive:

(1) The contemplated use of the Premises by the proposed transferee, assignee or sublessee (hereinafter referred to as the "Transferee") is not substantially identical to the "Use of Premises" permitted under this Lease;

(2) The proposed use of the Premises by the proposed transferee is inconsistent with the retail tenant mix desired by Landlord;

(3) The net worth and/or financial stability of the Transferee is, or may become, inadequate to operate the business permitted to be conducted in the Premises in the manner required by this Lease and/or to meet all of Ten ant's financial and other obligations under this Lease;

(4) The Transferee's reputation (or that of any of its affiliates) would have an adverse effect upon the reputation of the Shopping Center or the other businesses located therein.

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(5) The Percentage Rental that would be reasonably anticipated :from the sales of the Transferee would reasonably be expected to be less than that of Tenant hereunder,

(6) The Transferee would breach any covenant of Landlord respecting radius, location, use or exclusivity in any other lease, financing agreement or other agreement relating to the Shopping Center;

(7) Tenant is in default pursuant to this Lease;

(8) The nature of the Transferee's proposed or likely use of the Premises would involve any risk, greater than that of Tenant's, of the use, release, disposition or mishandling of "Hazardous Materials" (as defined in Section 7.03);

(9) The Transferee is not likely to conduct on the Premises a business of a quality substantially equal to that conducted by Tenant; or

(10) Any ground lessor or mortgagee whose consent to such transfer is required fails to consent thereto

Section 14.02 PROCEDURE FOR TRANSFER.

Should Tenant desire to make a Transfer hereunder, Tenant shall, in each instance, give written notice of its intention to do so to Landlord at least ninety (90) days before the intended effective date of any such proposed Transfer, specifying in such notice whether Tenant proposes to assign or sublet, or enter into license, franchise or concession agreements, the proposed date thereof, and specifically identifying the proposed Transferee, the net worth and previous business experience of the proposed Transferee, including without limitation copies of the proposed Transferee's last two years' income statement, balance sheet and statement of changes in financial position (with accompanying notes and disclosures of all material changes thereto) in audited form , if available, and certified as accurate by the proposed Transferee. Such notice shall be accompanied, in the case of a proposed assignment, subletting, license, franchise or concession agreement, by a copy of the proposed assignment, sublease, license, franchise or concession agreement or, if same is not available, a letter of commitment or a letter of intent. In the case of a proposed sale of Tenant's business, Tenant shall provide a copy of the proposed sale and financing agreements.

Landlord shall, within sixty (60) days after its receipt of such notice of a proposed Transfer, by giving written notice to Tenant of its intention to do so: (a) withhold its consent to the Transfer; (b) consent to the :Transfer; or (c) terminate this Lease, such termination to be effective thirty (30) days after receipt of such notice by Tenant. Failure of Landlord to give Tenant written notice of Landlord's action with respect to any request for Landlord's consent to a proposed Transfer shall not constitute or be deemed Landlord's consent to such Transfer. Landlord's consent to a proposed Transfer shall only be given if and when Landlord has notified Tenant in writing that Landlord consents to such proposed Transfer.

If Landlord shall exercise its termination right hereunder, Landlord shall have the right to enter into a lease or other occupancy agreement directly with the proposed Transferee, and Tenant shall have no right to any of the rents or other consideration payable by such proposed Transferee under such other lease or occupancy agreement, even if such rents and other

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consideration exceed the rent payable under this Lease by Tenant. Landlord shall have the right to lease the Premises to any other tenant, or not lease the Premises, in its sole discretion. Tenant may, however, elect to nullify Landlord's election to terminate this Lease under clause (c) by furnishing Landlord with written notice of Tenant's election to withdraw its proposed Transfer within ten (10) days of Tenant's receipt of Landlord's notice of termination, in which event the Lease shall remain in effect with the existing Tenant. Landlord and Tenant specifically agree that Landlord's election to terminate this Lease under clause (c) may be made in Landlord's sole and absolute discretion and that no test of reasonableness shall be applicable thereto Failure of Tenant to furnish Landlord notice of Tenant's election to nullify shall be deemed Tenant's election to terminate this Lease without further liability of either party. If Landlord withholds its consent to any proposed Transfer pursuant hereto and if Tenant requests in writing within ten (10) days after Tenant's receipt of Landlord's written notice of such withholding of consent, Landlord shall provide to Tenant a statement of its reason(s) for withholding consent to the proposed Transfer within a reasonable time after Landlord's receipt of Tenant's request therefor. Tenant acknowledges and agrees that each of the rights of Landlord set forth herein in the event of a proposed Transfer is a reasonable restriction on Transfer for purposes of applicable laws. Landlord and Tenant agree that Tenant shall have the burden of proving that Landlord's consent to the proposed Transfer was withheld unreasonably. Landlord shall have no liability to Tenant or to any proposed Transferee in damages if it is adjudicated that Landlord's consent shall have been unreasonably withheld and/or that such unreasonable withholding of consent shall have constituted a breach of this Lease or other duty to Tenant, the proposed Transferee or any other person. In such event, Tenant's sole remedy shall be to have the proposed Transfer declared valid, as if Landlord's consent had been duly and timely given (although Tenant shall be entitled to reasonable attorneys' fees if it is the successful party in such litigation, in accordance with the terms of this Lease).

Section 14.03 TRANSFER RENT ADJUSTMENT.

If Tenant shall make a permitted Transfer hereunder, the Minimum Annual Rental specified in Section 2.01 shall be increased, effective as of the date of such Transfer, to the highest of: (a) the total rent payable by the Transferee pursuant to such Transfer; or (b) an amount equal to the total of the Minimum Annual Rental, plus Percentage Rent, required to be paid by Tenant pursuant to this Lease during the 12-month period immediately preceding such Transfer; or (c) a sum equal to the then fair-market rental value of the Premises as reasonably determined by Landlord, the amount of which Landlord shall notify Tenant before the effective date of the Transfer. In no event shall the Minimum Annual Rental, after Transfer, be less than the Minimum Annual Rental immediately before Transfer.

Section 14.04 REQUIRED DOCUMENTS AND FEES.

Each Transfer to which Landlord has consented shall be evidenced by a written instrument in form satisfactory to Landlord, executed by Tenant and the Transferee, under which the Transferee shall agree in writing for the benefit of Landlord (except as otherwise agreed in writing by Landlord) to assume, perform or abide by all of the terms, covenants and conditions of this Lease to be done, kept and performed by Tenant, including the payment of all amounts due or to become due under this Lease directly to Landlord and the obligation to use the Premises only for the purpose specified in this Lease. Tenant shall reimburse Landlord for Landlord's reasonable attorneys' and administrative fees incurred in the processing of, and documentation for, each such requested Transfer, whether or not the Transfer is consummated.

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Section 14.05 TRANSFER OF STOCK OR PARTNERSHIP INTEREST.

If Tenant is a corporation which, under the current laws, rules or guidelines promulgated by the governmental body or agency having jurisdiction and, authority to promulgate the same, is not deemed a public corporation, or is an unincorporated association or partnership, the transfer, assignment or hypothecation, in the aggregate of more than a controlling interest of the total outstanding stock or interest in such corporation, association or partnership shall be deemed a Transfer within the meaning and provisions of this Lease.

Section 14.06 ASSIGNMENT AND SUBLEASE RENTALS.

The following terms and conditions shall apply to any subletting by Tenant of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

(a) Tenant hereby assigns and transfers to Landlord all of Tenant's interest in all rentals and income arising from any sublease of all or a portion of the Premises heretofore or hereafter made by Tenant, and Landlord may collect such rent and income and apply same toward Tenant's obligations under this Lease; provided, however, that until a breach shrill occur in the performance of Tenant's obligations under this Lease, Tenant may, except as otherwise provided in this Lease, receive, collect and enjoy the rents accruing under such sublease. Landlord shall not, by reason' of this or any other assignment of such sublease to Landlord, nor by reason of the collection of the rents from a subtenant, be deemed liable to the subtenant for any failure of Tenant to perform and comply with any of Tenant's obligations to such subtenant under such sublease. Tenant hereby irrevocably authorizes and directs any such subtenant, upon receipt of a written notice from Landlord stating that a breach exists in the performance of Ten ant's obligations under this Lease, to pay to Landlord the rents and other charges due and to become due under the sublease. The subtenant shall rely upon any such statement and request from Landlord and shall pay such rents and other charges to Landlord without any obligation or right to inquire as to whether such breach exists and notwithstanding any notice from or claim from Tenant to the contrary. Tenant shall have no right or claim against said subtenant, or, until the breach has been cured, against Landlord; for any such rents and other charges so paid by said subtenant to Landlord.

(b) In the event of a breach by Tenant in the performance of its obligations under this Lease, Landlord, at its option and without any obligation to do so, may require any subtenant to attorn to Landlord, in which event Landlord shall undertake the obligations of the sublandlord under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however; Landlord shall not be liable for any prepaid rents or security deposit paid by such subtenant to Tenant or for any other prior defaults or breaches of Tenant as sublandlord under such sublease.

ARTICLE XV

WASTE OR NUISANCE

Section 15.01 WASTE OR NUISANCE.

Tenant shall not commit nor permit any of its employees, invitees, contractors, subcontractors, licensees, subtenants or agents to commit any waste upon the Premises and shall

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not place a load upon the floor of the Premises which exceeds the floor load per square foot which such floor was designed to carry. Tenant shall not commit nor permit any of its employees, invitees, contractors, subcontractors, licensees, subtenants or agents to commit any nuisance or other act or thing which may impact Landlord's operation of the Development or disturb the quiet enjoyment of any other occupant or tenant of the Development. Tenant shall not use or permit to be used any medium that might constitute a nuisance, such as loudspeakers, sound amplifiers, tape decks, compact disc players, radios, televisions, or any other sound producing or other device which will carry sound or odors outside the Premises and, upon written notice from Landlord, Tenant shall cause any such noise or odors to cease. Tenant agrees that business machines and mechanical equipment used by Tenant which cause vibration or noise that may be transmitted to the building or buildings comprising the Development or to the Premises to such a degree as to be reasonably objectionable to Landlord or to any occupant, shall be placed and maintained by Tenant at its expense in a manner sufficient to eliminate such vibrations or noise, such as by cork, rubber or spring-type vibration isolators. Tenant shall not allow any use of the Premises or any other portion of the Development in a manner which is a source of annoyance, disturbance or embarrassment to Landlord or to the other tenants of the Development or which is deemed by Landlord, in its sole discretion, as not in keeping with the character of the Development. The Premises shall not be used for any unlawful, immoral or other purpose deemed improper by Landlord.

ARTICLE XVI

TRADE NAME; PROMOTIONAL PROGRAM

Section 16.01 TRADE NAME.

Tenant shall operate its business in the Premises under the name specifically set forth in the Data Sheet ("Trade Name") so long as the same shall not be held to be in violation of any applicable law, and shall not change the advertised name or character of the business operated in the Premises without the prior written approval of Landlord.

Section 16.02 PROMOTIONAL PROGRAM.

(a) Landlord shall provide or cause to be provided a program of advertising and promotional events and services ("Promotional Program") which, in Landlord's sole judgment, will serve to promote the Shopping Center and/or the Development. Landlord shall not be obligated to spend more than is actually collected from tenants in providing the Promotional Program. Any promotional services and personnel provided shall be under the exclusive control and supervision of Landlord, who shall have the sole authority to employ and discharge personnel and to establish a budget for the Promotional Program. Tenant agrees to the mention or nonmention of Tenant's Trade Name in the general advertising and, in either event, Tenant shall, upon the request of Landlord, furnish copy, pictures or an example of its merchandise for promotion in such advertising.

(b) Tenant shall pay to Landlord, as Tenant's share of the cost of the Promotional Program, an annual promotional charge ("Promotional Charge") which originally shall equal the amount set forth in the Data Sheet. All payments, charges, dues and assessments payable under this Section shall be payable in monthly installments on the first day of each month as Additional Rent. Such Promotional Charge payable by Tenant shall be adjusted annually commencing on

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the February 1st immediately succeeding the Rental from the base period of the "Index" (as defined in Section 27.23) to the respective February or the closest subsequent month thereto that the Index is published; provided, however, in no event shall Tenant pay less for any year than the Promotional Charge for the preceding year. The term "base period" shall refer to the month during which the Rental Commencement Date occurs (or, if the Index is not published for the month during which the Rental Commencement Date occurs, then the closest subsequent month thereto). In the event the Premises is located within an expansion and/or specially constructed area within the Shopping Center where a grand opening date shall be set by Landlord, then Tenant shall also pay an initial assessment in the amount set forth in the Data Sheet in addition to the Promotional Charge, such initial assessment payable in one lump sum within thirty (30) days after the Rental Commencement Date.

ARTICLE XVII

DAMAGE AND DESTRUCTION

Section 17.01 RECONSTRUCTION OF DAMAGED PREMISES.

(a) In the event the Premises shall be partially or totally destroyed by fire or other casualty insured under the insurance carried by Landlord pursuant to Section 11.02 of this Lease so as to become partially or totally untenantable, then the damage to the Premises shall be promptly repaired (unless Landlord shall elect not to rebuild as hereinafter provided), whereupon the Minimum Annual Rental and to the extent reimbursed from the proceeds of insurance carried by Landlord under Section 11.02, Additional Rent payable by Tenant to Landlord shall be abated in proportion to the Floor Area of the Premises rendered untenantable, and the Annual Breakpoint and Quarterly Breakpoint shall likewise be proportionately reduced. Payment of full Minimum Annual Rental and Additional Rent so abated shall commence and Tenant shall be obligated to reopen for business on the thirtieth (30th) day following the date that Landlord advises Tenant that the Premises are tenantable (which shall mean that Landlord shall have repaired, restored or reconstructed the Premises, including the leasehold improvements as defined in Exhibit B), unless Tenant opens at an earlier time or remains open following such damage or destruction. Tenant hereby waives the provisions of any statute or other law that may be in effect at the time of the occurrence of any such damage or destruction under which a lease is automatically terminated or pursuant to which a 18 tenant is given the right to terminate a lease by reason of such an event of damage or destruction.

(b) Landlord shall be obligated to cause such repairs to be made unless Landlord, at is sale option, elects to cause Tenant to make such repairs to the leasehold improvements, in which event Tenant shall promptly complete the same and Landlord will make available to Tenant for the sole purpose of reconstruction of Tenant's leasehold improvements such portion of any insurance proceeds received by Landlord from its insurance carrier under a policy carried pursuant to Section 11.02 of this Lease as may be allocated to the leasehold improvements of the Premises by Landlord, In the event of any such repairs, restoration and reconstruction by Tenant, an architect duly registered in the state where the Premises is located (if such registration is required by applicable code or governmental authorities) shall be selected and appointed by Tenant to prepare any necessary drawings and specifications and to supervise the work and direct the payment of such insurance proceeds. Such insurance proceeds shall be payable to Tenant only upon being provided certificates by said architect stating that the payments specified therein

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are properly payable for the purpose of reimbursing Tenant for the expenditures actually made by Tenant in connection with such work. At the election of Landlord or Landlord's mortgagee, direct payments may be made to material suppliers and laborers upon written certification by said architect that such payments are due and payable, In making such repairs, restoration or reconstruction, Tenant, at its expense, shall comply with all laws, ordinances and governmental rules and regulations and shall perform all work or cause such work to be performed with due diligence and in a first-class manner. All permits required in connection with said repairs, restoration and reconstruction shall be obtained by Tenant at Tenant's sole cost and expense. Any amount expended by Tenant in excess of such insurance proceeds received by Landlord and made available to Tenant shall be the sole obligation of Tenant.

(c) In the event of repair, restoration or reconstruction by Landlord, any amount expended by Landlord in repairing the Premises in excess of the proceeds of insurance received by Landlord pursuant to Section 11.02 of this Lease which were allocated to the Premises shall be repayable by Tenant to Landlord within ten (10) days after receipt by Tenant of a statement setting forth the amount of such excess. The party required hereunder to repair, restore or reconstruct the damage to the Premises shall reconstruct such Premises in accordance with the Plans and Specifications originally approved by Landlord or new drawings prepared by Tenant's architect at Tenant's sole cost and expense and acceptable to Landlord and Tenant, and shall otherwise comply with the criteria and procedures of Exhibit B unless Landlord elects otherwise. In no event shall Landlord be required to repair or replace Tenant's merchandise, trade fixtures, signs, furnishings, equipment or other items of personal property, but the same shall be repaired or replaced promptly to a condition at least equal to that prior to the damage or destruction thereof by Tenant.

Section 17.02 LANDLORD'S OPTION TO TERMINATE LEASE.

If (i) more than thirty-five percent (35%) of the Floor Area of the building in which the Premises are located or of the Shopping Center or of the parking facilities or of the Common Areas, shall be damaged or destroyed by fire or, other casualty at any time, or (ii) during the last three (3) years of the Term of this Lease, more than twenty-five percent (25%) of the Floor Area of the Premises or of the building in which the Premises are located or of the Shopping Center or of the parking facilities or of the Common Areas shall be damaged or destroyed by fire or other casualty, or (iii) all or any part of the Shopping Center or said building or the Premises or of the parking facilities or of the Common Areas is damaged or destroyed at any time by the occurrence of any risk not insured under the insurance carried by Landlord pursuant to Section 8.03 or Section 11.02, then Landlord either may elect that the building and/or Premises and/or Shopping Center and/or the parking facilities and/or the Common Areas, as the case may be, shall be repaired and, rebuilt or, at its sole option, may terminate this Lease by giving written notice to Tenant of Landlord's election so to terminate, such notice to be given within ninety (90) days after the occurrence of such damage or destruction.

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ARTICLE XVIII

EMINENT DOMAIN

Section 18.01 TOTAL CONDEMNATION OF PREMISES.

If the whole of the Premises shall be taken by any public authority under the power of eminent domain or sold to a public authority under threat or in lieu of such taking, then the Term of this Lease shall cease as of the day upon which possession is taken by such public authority, and Minimum Annual Rental, Percentage Rental, Additional Rent and other charges shall be paid up to that day with a proportionate refund by Landlord of such Rental payments as may have been paid in advance for a period subsequent to the date of the taking.

Section 18.02 PARTIAL CONDEMNATION.

(a) If less than the whole but more than twenty percent (20%) of the Floor Area of the Premises or more than fifty percent (50%) of the square footage of the parking facilities or of the Common Areas shall be so taken under eminent domain, or sold to public authority under threat or in lieu of such taking, Tenant shall have the right either to terminate this Lease as of the day possession is taken by such public authority, or, subject to Landlord's right of termination as set forth in Section 18.02(c) of this Article, to continue in possession of the remainder of the Premises, upon notifying Landlord in writing within ten (10) days after such taking of Tenant's intention. In the event Tenant elects to remain in possession, all of the terms provided herein shall continue in effect, except that as of the day possession of such percentage of the Premises is taken by public authority, the Minimum Annual Rental and Additional Rent payable by Tenant to Landlord shall be reduced in proportion to the Floor Area. of the Premises taken and the Annual Breakpoint and Quarterly Breakpoint shall likewise be proportionately reduced; thereafter, Landlord shall, at Landlord's cost and expense to the extent of any available condemnation award, make all the necessary repairs or, alterations to the basic building, so as to constitute the remaining Premises a complete architectural unit, and Tenant, at Tenant's sole cost and expense, shall similarly act with respect to Tenant's leasehold improvements, trade fixtures, furnishings and equipment.

(b) If twenty percent (20%) or less of the Floor Area of the Premises shall be so taken, the Term of this Lease shall cease, only on the part so taken, as of the day possession shall be taken by such public authority, and Tenant shall pay Rental and other charges up to that day; thereafter, the Minimum Annual Rental and Additional Rent payable by Tenant to Landlord shall be reduced in proportion to the Floor Area of the Premises so taken and the Annual Breakpoint and Quarterly Breakpoint shall likewise be proportionately reduced. Landlord shall, at Landlord's cost and expense to the extent of any available condemnation award, make all necessary repairs or alterations to the basic building, so as to constitute the remaining Premises a complete architectural unit, and Tenant, at Tenant's sole cost and expense, shall similarly act with respect to Tenant's leasehold improvements, trade fixtures, furnishings and equipment.

(c) If more than twenty-five percent (25%) of the Floor Area of the building in which the Premises are located, or more than twenty-five percent (25%) of the Premises, or more than twenty-five percent (25%) of the square footage of the Shopping Center or of the parking facilities or of the Common Areas shall be taken under power of eminent domain, or sold to public authority under threat or in lieu of such taking, Landlord may, by written notice to Tenant

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delivered on or before the tenth (10th) day following the date of surrender of possession to the public authority, terminate this Lease as of the date possession is taken by public authority. The Minimum Annual Rental, Percentage Rental, Additional Rent and other charges shall be paid up to the day possession is taken by public authority, with an appropriate refund by Landlord of such Rental payments as may have been paid in advance for a period subsequent to that date.

(d) A voluntary sale or transfer of interest of all or any part of the Premises or of the Common Area in the Shopping Center by Landlord to any public or quasi-public body, agency, person or other entity, corporate or otherwise, having the power of eminent domain, either under threat of condemnation or while condemnation proceedings are pending, shall be deemed to be a taking under the power of eminent domain, for the purposes of this Article XVIII.

Section 18.03 LANDLORD AND TENANT DAMAGES.

All damages awarded for such taking under the power of eminent domain or proceeds from any sale under threat or in lieu of such a taking, whether for the whole or part of the Premises or leasehold improvements thereto, shall belong to and be the property of Landlord, irrespective of whether such damages shall be awarded or proceeds obtained as compensation for diminution in value to the leasehold improvements thereto, or to the fee of the Premises, and Tenant shall have no claim against either Landlord or the condemning authority with respect thereto; provided, however, that Landlord shall not be entitled to any award specifically designated as compensation for, depreciation to, and cost of removal of, Tenant's stock and trade fixtures, or (subject to the rights of any mortgagee or beneficiary of any mortgage or deed of trust made by Landlord covering the Premises or the Development) to any award specifically designated as compensation for the unamortized cost of Tenant's leasehold improvements less any Landlord contribution to Tenant's Work, such amortization to be calculated on a straight-line basis over the Term of this Lease. Tenant hereby waives the provisions of any statute or other law that may be in effect at the time of the occurrence of any such taking under which a lease is automatically terminated or pursuant to which a tenant is given the right to terminate a lease by reason of such a taking.

ARTICLE XIX

DEFAULT

Section 19.01 RIGHTS UPON DEFAULT.

(a) Notwithstanding any provision herein to the contrary and irrespective of whether all or any rights conferred upon Landlord by this Article XIX are expressly or by' implication conferred upon Landlord elsewhere in this Lease, in the event of (i) any failure of Tenant to pay any Minimum Annual Rental, Percentage Rental or Additional Rent or any other charges or sums whatsoever due hereunder (including without limitation, amounts due as reimbursement to Landlord for costs incurred by Landlord in performing obligations of Tenant hereunder upon Tenant's failure so to perform) for more than five (5) days after written notice from Landlord to Tenant that such rental or any other charges or sums whatsoever due hereunder were not received on the date require for payment pursuant to this Lease, provided that such notice from Landlord shall be in lieu of, and not in addition to, any notice of default required by applicable laws, or (ii) any default or failure by Tenant to perform any other of the terms, conditions, or covenants of this Lease to be observed or performed by Tenant for more than twenty (20) days

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after written notice from Landlord to Tenant of such default (unless such default cannot be cured within said twenty (20) days in which event Tenant shall not be deemed to be in default hereunder if Tenant shall have commenced to cure said default promptly within twenty (20) days and shall thereafter proceed to prosecute such cure to completion with all reasonable dispatch and diligence, provided that in no event shall such cure period extend beyond one hundred twenty (120) days), provided that such notice from Landlord shall be in lieu of, and not in addition to, any notice of default required by applicable laws, or (iii) any failure by Tenant to move into the Premises and to initially open for business on or before the Rental Commencement Date, or (iv) any failure by Tenant to operate continuously in the manner and during the hours established by Landlord pursuant to Section 7.02(a) hereof or for the purpose specified in the Data Sheet (the Permitted Use), or (v)Tenant's abandonment of the Premises, or permitting this Lease to be taken under any writ of execution or similar writ or order, then Landlord, in addition to or in lieu of other rights or remedies it may have under this Lease or by law, shall have the following rights: Landlord may at its sale discretion: (A) immediately terminate this Lease and Tenant's right to possession of the Premises by giving Tenant written notice that this Lease is terminated, in which event, upon such termination, Landlord shall have the right to recover from Tenant the sum of (1) the worth at the time of award of the unpaid rental which had been earned at the time of termination; (2) the worth at the time of award of the amount by which the unpaid rental which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant affirmatively proves could have been reasonably avoided; (3) the worth at the time of award of the amount by which the unpaid rental for the balance of the Term after the time of award exceeds the amount of such rental loss that Tenant affirmatively proves could be reasonably avoided; (4) any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant's failure to perform Tenant's obligations under this Lease or which in the ordinary course of things would be likely to result therefrom; and (5) all such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time under applicable law; or (B) have this Lease continue in effect for so long as Landlord does not terminate this Lease and Tenant's right to possession of the Premises, in which event Landlord shall have the right to enforce all of Landlord's rights and remedies under this Lease including the right to recover the Minimum Annual Rental, Percentage Rental, Additional Rent and other charges payable by Tenant under this Lease as they become due under this Lease; or (C) without terminating this Lease, Landlord may payor discharge any breach or violation hereof which amount so expended shall be added to the next monthly incremental payment of Minimum Annual Rent, Percentage Rental and Additional Rent due and treated in the same manner as Rental hereunder; or (D) without terminating this Lease, make such alterations and repairs as may be necessary in order to relet the Premises, and relet the Premises or any part thereof for such term or terms (which maybe for a term extending beyond the Term) at such rental or rentals and upon such other terms and conditions as Landlord in its sole discretion may deem advisable.

(b) If Landlord proceeds under Section 19.01(a)(D) above, upon such reletting all Rental and other sums received by Landlord from such reletting shall be applied, first, to the payment of any indebtedness other than Rental due hereunder from Tenant to Landlord; second, to the payment of any costs and expenses of such reletting, including reasonable brokerage fees and attorney fees and of costs of such alterations and repairs; third, to the payment of Rental due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future Minimum Annual Rental and Additional Rent payable by Tenant hereunder, as the same may become due and payable hereunder. If such Minimum Annual Rent, Additional Rent

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and other sums received from such reletting during any month are less than that to be paid during that month by Tenant hereunder, Tenant shall pay such deficiency to Landlord; if such rentals and sums shall be more, Tenant shall have no right to the excess. Such deficiency shall be calculated and paid monthly. No re-entry or taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention is given to Tenant or unless the termination thereof is decreed by a court of competent jurisdiction. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach and shall have the remedies provided herein. Should Landlord at any time terminate this Lease for any breach, in addition to any other remedies it may have, it may recover from Tenant all damages it may incur by reason of such breach, including the cost of recovering the Premises, all of which amount shall be immediately due and payable from Tenant to Landlord. Landlord shall use its reasonable efforts to mitigate its damages hereunder; however, the failure or refusal of Landlord to relet the Premises shall not affect Tenant's liability. The terms "entry" and "re-entry" are not limited to their technical meanings. If Tenant shall default hereunder prior to the date fixed as the commencement of any renewal or extension of this Lease, Landlord may cancel and terminate such renewal or extension agreement by written notice. In the event of re-entry by Landlord, Landlord may remove all persons and property from the Premises and such property may be stored in a public warehouse or elsewhere at the cost of, and for the account of Tenant, without notice or resort to legal process and without Landlord being deemed guilty of trespass, conversion or becoming liable for any loss or damage which may be occasioned thereby. In the event Tenant shall not remove its property from the Premises within ten (10) days after Tenant has vacated the Premises, then such 20 property shall be deemed abandoned by Tenant and Landlord may dispose of the same without Landlord having any liability to Tenant. If Landlord removes such property from the Premises and stores it at Tenant's risk and expense, and if Tenant fails to pay the cost of such removal and storage after written demand therefor and/or to pay any Rental then due, then after the property has been stored for a period of thirty (30) days or more Landlord may sell such property at public or private sale, in the manner and at such times and places as Landlord deems commercially reasonable following reasonable notice to Tenant of the time and place of such sale, The proceeds of any such sale shall be applied first to the payment of the expenses for removal and storage of the property, the preparation for the conducting of such sale, and for 28 attorneys' fees and other legal expenses incurred by Landlord in connection therewith, and the balance shall 29 be applied as provided in this Section 19.01(b).

(c) At any time that Tenant has either failed to pay Rental or other charges within five (5) days after the same shall be due or shall have delivered checks to Landlord for payments pursuant to this Lease which shall have on at least three (3) occasions during the Term of this Lease (whether consecutive or not or whether involving the same check or different checks) been returned by Landlord's bank for any reason, Landlord shall not be obligated to accept any payment from Tenant unless such payment is made by cashier's check or in bank certified funds.

(d) For purposes of subclauses (1) and (2) of Section 19.01 (a), "worth at the time of award" shall be computed by allowing interest at the maximum rate permitted by law (see Section 27.13) and for purposes of subclause (3) of Section 19.01(a), "worth at the time of award" shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank whose jurisdiction includes the Development at the time of award, plus one percent (1 %); the Rental reserved in this Lease shall be deemed to be a monthly rental arrived at (i) by adding

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to the monthly installment of Minimum Annual Rental payable under this Lease an amount equal to the monthly average of all the Percentage Rental based on Gross Sales received by or payable to Landlord hereunder during the period that Tenant was conducting Tenant's business in the Premises in the manner and to the extent required pursuant to this Lease, plus (ii) one twelfth (l/12th) of the annual average of all Additional Rent payable by Tenant hereunder (such as, by way of example, Tenant's share of Operating Costs and Expenses).

(e) Anything to the contrary notwithstanding, Landlord shall not be required to give notice under this Article XIX more than twice in any consecutive twelve month period.

ARTICLE XX

BANKRUPTCY OR INSOLVENCY

Section 20.01 TENANT'S INTEREST NOT TRANSFERABLE.

Except as may specifically be provided pursuant to the Federal Bankruptcy Code, neither Tenant's interest in this Lease, nor any estate hereby created in Tenant nor any interest herein, shall pass to any trustee or receiver or assignee for the benefit of creditors or otherwise by operation of law.

Section 20.02 TERMINATION.

In the event the interest or estate created in Tenant hereby shall be taken in execution or by other process of law, or if Tenant's guarantor, if any, or its executors, administrators, or assigns, if any, shall be adjudicated insolvent or bankrupt pursuant to the provisions of any state act or the Federal Bankruptcy Code or if Tenant is adjudicated insolvent by a court of competent jurisdiction other than the United States Bankruptcy Court, or if a receiver or trustee of the property of Tenant or Tenant's guarantor, if any, shall be appointed by reason of the insolvency or inability of Tenant or Tenant's guarantor, if any, to pay its debts as the same become due or if any assignment shall be made of the property of Tenant or Tenant's guarantor, if any, for the benefit of creditors, then Landlord shall have the right to elect by written notice to Tenant to terminate this Lease and all rights of Tenant hereunder, and Tenant shall vacate and surrender the Premises but shall remain liable as herein provided.

Section 20.03 TENANT'S OBLIGATION TO A VOID CREDITORS PROCEEDINGS.

Tenant or Tenant's guarantor, if any, shall not cause or give cause for the appointment of a trustee or receiver of the assets of Tenant or Tenant's guarantor, if any, and shall riot make any assignment for the benefit of creditors, or become or be adjudicated insolvent. The allowance of any petition under insolvency law except under the Federal Bankruptcy Code or the appointment of a trustee or receiver of Tenant or Tenant's guarantor, if any, or of the assets of either of them, shall be conclusive evidence that Tenant caused, or gave cause therefor, unless such allowance of the petition, or the appointment of a trustee or receiver, is vacated within sixty (60) days after such allowance or appointment. Any act or occurrence described in this Section 20.03 shall be deemed a material breach of Tenant's obligations hereunder, and providing Landlord with the right to elect by written notice to Tenant to terminate this Lease and all rights of Tenant hereunder, and Tenant shall vacate and surrender the Premises but shall remain liable as herein

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provided. Landlord does, in addition, reserve any and all other remedies provided in this Lease or by law.

Section 20.04 ELECTION TO ASSUME LEASE.

(a) This is a lease of real property in a shopping Center within the meaning of Section 365(b)(3) of the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code").

(b) In the event that Tenant becomes a Debtor under Chapter 7, 11 or 13 of the Bankruptcy Code, and the Trustee or Tenant, as Debtor-In-Possession, elects to assume this Lease for the purpose of assignment to a third party or otherwise, such election and assignment, if any, may only be made if all of Landlord's conditions are met. If the Trustee or Tenant, as Debtor-In-Possession, fails to elect to assume or reject this Lease by the sixtieth (60th) day after the entry of the Order for Relief in a case under Chapter 7, 11 and 13 of the Bankruptcy Code, this Lease shall thereafter be deemed rejected and terminated in accordance with Section 365(d)(4) of the Bankruptcy Code. The Trustee or Tenant, as Debtor-In-Possession, shall thereupon immediately surrender possession of the Premises to Landlord and Landlord shall have no further obligation to Tenant or Trustee under the Lease. The acceptance of rent by Landlord after the sixtieth (60th) day shall not be deemed a waiver of Landlord's rights herein and under Section 365(d)(4) of the Bankruptcy Code, and Landlord's right to be compensated for damages in such bankruptcy case shall survive.

Section 20.05 SUBSEQUENT BANKRUPTCY.

In the event that this Lease is assumed by a Trustee appointed for Tenant or by Tenant as Debtor-In-Possession and thereafter Tenant is liquidated or files a subsequent Petition for reorganization or adjustment of debts under Chapter 11 or 13 of the Bankruptcy Code, then, and in either of such events, Landlord may, at its option, terminate this Lease and all rights of Tenant hereunder, by giving Tenant written notice of its election to so terminate, by no later than thirty (30) days after the occurrence of either of such events.

Section 20.06 ASSIGNMENT.

If the Trustee or Debtor-In-Possession has assumed this Lease pursuant to the terms and conditions of Sections 20.02 or 20.03, for the purpose of transferring Tenant's interest under this Lease or the estate created thereby, to any other person, such interest or estate may be so transferred only if Landlord shall acknowledge in writing that the intended transferee has provided adequate assurance of future performance" of all of the terms, covenants and conditions of this Lease to be performed by Tenant.

Section 20.07 OCCUPANCY CHARGES.

When, pursuant to the Bankruptcy Code, the Trustee or Tenant, as Debtor-In-Possession shall be obligated to pay reasonable use and occupancy charges for the use of the Premises or any portion thereof, such charge shall not be less than the Minimum Annual Rental as deemed in this Lease and other monetary obligations of Tenant for the payment of Additional Rent.

Section 20.08 CONSENT.

Neither Tenant's interest in this Lease, nor any lesser interest of Tenant herein, nor any estate of Tenant hereby created, shall pass to any trustee, receiver, transferee for the benefit of

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creditors, or any other person or entity, or otherwise by operation of law under the laws of any state having jurisdiction of the person or property of Tenant unless Landlord shall consent to such transfer in writing. No acceptance by Landlord of Rental or any other payments from any such trustee, receiver, transferee, person or other entity shall be deemed to have waived the need to obtain Landlord's consent for any transfer of Tenant's interest under this Lease.

Section 20.09 ATTORNEY FEES.

If, in the context of Tenant's bankruptcy case, Landlord is compelled at any time to incur any expense, including attorneys' fees, in enforcing or attempting to enforce the terms of this Lease or to enforce or attempt to enforce any actions required under the Bankruptcy Code to be taken by the Trustee o by Tenant, as Debtor-In-Possession, then the sum so paid by Landlord shall be awarded to Landlord by the Bankruptcy Court and shall be immediately due and payable by the Trustee or by Tenant's bankruptcy estate to Landlord in accordance with the terms of the order of the Bankruptcy Court.

Section 20.10 OTHER LAWS.

The provisions of this Article XX concerning the rights of Landlord, and the obligations of Trustee, Tenant, Debtor, Receiver, Debtor-In-Possession and assignee are in addition to such rights and obligations provided by law, including those applicable provisions or the Bankruptcy Code. Nothing contained in this Article XX shall limit or reduce in any manner whatsoever such rights and obligations which are otherwise provided by law.

ARTICLE XXI

ACCESS BY LANDLORD

Section 21.01 RIGHT OF ENTRY.

Landlord and Landlord's agents shall have the right to enter the Premises for any reasonable purpose upon reasonable advance notice to Tenant. Landlord shall have the further right to enter the Premises to make such repairs, alterations, improvements or additions as Landlord may deem necessary or desirable, and Landlord shall be allowed to take all material into and upon the Premises that may be required therefor without the same constituting an eviction of Tenant in whole or in part, and Minimum Annual Rental, Percentage Rental, Additional Rent and other charges reserved hereunder shall not abate while said repairs, alterations, improvements or additions are being made, by reason of loss or interruption of business of Tenant, or otherwise. In exercising such right of entry, Landlord shall use every reasonable effort not to disrupt Tenant's business in the Premises. Landlord or Landlord's agents shall have the further right to enter the Premises at any time without notice in the event of emergency. During the six (6) months prior to the expiration of the Term of this Lease, Landlord may exhibit the Premises to prospective tenants and their representatives, including brokers, for purposes including but not limited to the inspection and measurement of the Premises.

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ARTICLE XXII

TENANT'S PROPERTY

Section 22.01 TAXES ON TENANT'S PROPERTY.

Tenant shall be responsible for, and agrees to pay prior to delinquency, any and all Taxes or other taxes, assessments, levies, fees or other governmental charges and impositions of every kind or nature, regular or special, direct or indirect, presently foreseen or unforeseen or known or unknown, levied or assessed by municipal, county, state, federal or other governmental taxing or assessing authority, upon, against or with respect to (i) Tenant's leasehold interest in the Premises, (ii) all furniture, fixtures, equipment, inventory and any other personal property of any kind owned by, or placed, installed or located in, within, upon or about the Premises by Tenant, any concessionaire or any previous tenant or occupant, and (iii) all alterations, additions, or improvements of whatsoever kind or nature, if any, made to the Premises, by Tenant, any concessionaire or any previous tenant or occupant, irrespective of whether any such tax is assessed, real or personal, and irrespective of whether any such tax is assessed to or against Landlord or Tenant (collectively, "Tenant's Taxes"). Tenant shall provide Landlord with evidence of Tenant's timely payment of such Tenant's Taxes upon Landlord's request. If at any time any of such Tenant's Taxes are not levied and assessed separately and directly to Tenant (for example, if the same are levied or assessed to Landlord, or upon or against the building containing the Premises and/or the land underlying said building), Tenant shall pay to Landlord Tenant's share thereof as determined and billed by Landlord.

Section 22.02 LOSS AND DAMAGE.

Landlord shall not be responsible or liable to Tenant for any loss or damage that may be occasioned by or through the acts or omissions of persons occupying premises or any part of the premises adjacent to or connected with the Premises or any part of the building of which the Premises are a part, or any other area in the Development, or for any loss or damage resulting to Tenant or its property from bursting, stoppage or leaking of water, gas, sewer or steam pipes, or (without limiting the foregoing) for any damage or loss of property within the Premises from any cause whatsoever.

Section 22.03 NOTICE BY TENANT.

Tenant shall give immediate notice to Landlord in case of any damage to or destruction of all or any part of, or of accidents occurring within the Premises, or of defects therein or of any damage to or destruction of any inventory, fixtures or equipment within the Premises.

ARTICLE XXIII

HOLDING OVER

Section 23.01 HOLDING OVER.

If bona fide negotiations have commenced between Landlord and Tenant for renewal of this Lease within one hundred eighty (180) days prior to the expiration of the Term of this Lease, any holding over after the expiration of the Term hereof with the consent of Landlord shall be construed to be a tenancy from month to month and the Minimum Annual Rental payable shall be at an amount equal to one-twelfth (1/12th) of the Minimum Annual Rental required to be paid

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by Tenant for the last full year of the Term of this Lease, together with an amount estimated by Landlord for the monthly Additional Rent payable pursuant to this Lease, and shall otherwise be on the same terms and conditions as herein specified so for as applicable. Any other holding over after expiration of the Term hereof without the written consent of Landlord shall be construed to be a tenancy from month to month pursuant to the terms of this Lease at one-twelfth (1/12th) of an amount equal to twice the Minimum Annual Rental required to be paid by Tenant for the last full lease year of the Term of this Lease, together with an amount estimated by Landlord for the monthly Additional Rent payable pursuant to this Lease, and shall otherwise be on the same terms and conditions as herein specified so for as applicable. Any such holding over without Landlord's consent shall entitle Landlord to reenter the Premises as provided in Section 19.01 of this Lease. Tenant shall indemnify, defend and hold harmless Landlord from and against any and all loss, claims, demands, liabilities, damages (including, without limitation, consequential damages), costs and/or expenses (including, without limitation, attorneys' fees and expenses) resulting from any failure by Tenant to surrender the Premises in the manner and condition required by this Lease upon the expiration of the Tem or earlier termination of this Lease, including, without limitation, any claims made by any proposed new tenant founded upon such failure.

Section 23.02 SUCCESSORS.

All rights and liabilities herein given to, or imposed upon, the parties to this Lease shall inure to and be imposed upon the respective heirs, executors, administrators, successors and assigns of the said parties; and if there shall be more than one Tenant, they shall all be bound jointly and severally by the terms, covenants and agreements herein. No rights, however, shall inure to the benefit or any assignee of Ten ant unless the assignment to such assignee has been approved in advance by Landlord in writing or permitted by Article XIV.

ARTICLE XXIV

RULES AND REGULATIONS

Section 24.01 RULES AND REGULATIONS.

Tenant agrees to comply with and observe all rules and regulations established by Landlord from time to time, provided the same shall apply uniformly to all tenants of the Shopping Center. Tenant's failure to keep and observe said rules and regulations shall constitute a breach of the terms of this Lease in the same manner as if the rules and regulations were contained herein as covenants. In the case of any conflict between said rules and regulations and this Lease, this Lease shall be controlling.

ARTICLE XXV

QUIET ENJOYMENT

Section 25.01 LANDLORD'S COVENANT.

Upon payment by Tenant of Rental herein provided and other charges payable by Tenant under this Lease, and upon the observance and performance of all the covenants, terms and conditions on Tenant's part to be observed and performed, Tenant shall peaceably and quietly hold and enjoy the Premises for the Term hereby demised without hindrance or interruption by

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Landlord or any other person or persons lawfully or equitably claiming by, through or under Landlord, subject nevertheless to the terms and conditions of this Lease, any mortgage and/or deed of trust to which this Lease is subordinated and any reciprocal easement agreement made between Landlord and tenants or others occupying the Department Stores.

ARTICLE XXVI

SECURITY DEPOSIT

Section 26.01 DEPOSIT.

At or before Tenant's execution of this Lease, Tenant shall deposit with Landlord the sum set forth in the Data Sheet as a security deposit and payment and performance guaranty. Landlord shall retain said sum throughout the Term of this Lease as security for the faithful performance by Tenant of all of the terms, covenants and conditions of this Lease. (Such sum is occasionally referred to herein as the "deposit".) If Tenant defaults with respect to any provision of this Lease, including but not limited to the provisions relating to the payment of Rental, Landlord may use, apply or retain all or any part of the deposit for the payment of any Rental or any' other sum in default, or for the payment of any loss or damage which Landlord may suffer by reason of Tenant's default, or to compensate Landlord for any other amount which Landlord may spend or become obligated to spend by reason' of Tenant's default. In no event, except as specifically hereinafter provided, shall Landlord be obliged to apply the same to Rental or other charges in arrears or to damages for Tenant's failure to perform said covenants, conditions and agreements; however, Landlord may so apply the deposit, at its option. Landlord's right to bring a special proceeding to recover or otherwise to obtain possession of the Premises before or after Landlord's declaration of the termination of this Lease for non-payment of Rental or for any other reason shall not in any event be affected by reason of the fact that Landlord holds the deposit.

In the event that Landlord regains possession of the Premises, whether by special proceeding, reentry or otherwise, because of Tenant's default or failure to carry out the covenants, conditions and agreements of this Lease; Landlord may apply such deposit to all damages suffered through the date of said repossession and may retain the deposit to apply to such damages as may be suffered or shall accrue thereafter by reason of Tenant's default or breach. In the event any bankruptcy, insolvency, reorganization or other creditor-debtor proceedings shall be instituted by or' against Tenant, or its successors or assigns, or any guarantor of Tenant hereunder, such deposit shall be deemed to be applied first to the payment of any Rental and/or other charges due Landlord for all periods prior to the institution of such proceedings, and the balance, if any, of such deposit may be retained by Landlord in partial liquidation of Landlord's damages.

The deposit shall not constitute a trust fund. Landlord shall not be obligated to keep such deposit as a separate fund but may commingle the deposit with its own funds. Tenant shall not be entitled to interest on the deposit. In the event Landlord applies the deposit in whole or in part, Tenant shall, within five (5) days after written demand by Landlord, deposit sufficient funds to maintain the deposit in the initial amount. Failure of Tenant to deposit such additional funds shall entitle Landlord to avail itself of the remedies provided in this Lease for non-payment of Rental by Tenant. If Tenant fully and faithfully performs every provision of this Lease to be performed

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by it, the security deposit or any balance thereof, less any sums then due Landlord from Tenant under this Lease, shall be returned to Tenant (or, at Landlord's option to the last assignee of Tenant's interest thereunder) within thirty (30) days following the later of the expiration of the Term of this Lease or Tenant's vacating the Premises.

ARTICLE XXVII

MISCELLANEOUS

Section 27.01 WAIVER; ELECTION OF REMEDIES.

One or more waivers of any covenant or condition by Landlord shall not be construed as a waiver of a subsequent breach of the same covenant or condition, and the consent or approval by Landlord to or of any act by Tenant requiring Landlord's consent or approval shall not be deemed to render unnecessary Landlord's consent or approval to or of any subsequent similar act by Tenant. No breach by Tenant of a covenant or condition of this Lease shall be deemed to have been waived by Landlord unless such waiver is in writing signed by Landlord. The rights and remedies of Landlord under this Lease or under any specific Section, subsection or clause hereof shall be cumulative and in addition to any and all other rights and remedies which Landlord has or may have elsewhere under this Lease or at law or equity, whether or not such Section, subsection or clause expressly so states.

Section 27.02 ENTIRE AGREEMENT.

The Data Sheet and all exhibits and/or addendum(s), and/or rider(s), if any, attached to this Lease are hereby made a part of this Lease, with full force and effect as if set forth herein. This Lease supersedes all prior agreements between the parties and sets forth all the covenants, promises, agreements and conditions, and understandings between Landlord and Tenant concerning the Premises and there are no actual or implied covenants, promises, agreements, conditions or understandings, either oral or written, between them other than as are set forth herein and none thereof shall be used to interpret, construe, supplement or contradict this Lease. Landlord has made no representations or warranties regarding the profitability of the Premises, the Shopping Center or the Development, and Tenant has not entered into this Lease in reliance on any such representations, warranties or financial projections prepared or furnished to Tenant by Landlord; Although the printed provisions of this Lease were drawn by Landlord, the parties hereto agree that this circumstance alone shall not create any presumption, canon of construction or implication favoring the position of either Landlord or Tenant. The parties agree that any deletion of language from this Lease prior to its mutual execution by Landlord and Tenant shall not be construed to have any particular meaning or to raise any presumption, canon of construction or implication, including, without limitation, any implication that the parties intended thereby to state the converse, obverse or opposite of the deleted language. No alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by each party. Tenant shall pay all of Landlord's costs, expenses and reasonable fees of its attorney(s) in connection with any assignment of this Lease, subletting of the Premises or amendment, change or addition to this Lease made at the request of or to accommodate Tenant.

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Section 27.03 INTERPRETATION; USE OF PRONOUNS; AUTHORITY.

Nothing contained herein shall be deemed or construed by the parties hereto, nor by any third party, as creating the relationship of principal and agent or of partnership or of joint ventures between the parties hereto, it being understood and agreed that neither the method of computation of Rental, nor any other provision contained herein, nor any acts of the parties herein, shall be 'deemed to create any relationship between the parties hereto other than the relationship of landlord and tenant. Whenever herein the singular number is used the same shall include the plural, and the masculine gender shall include the feminine and neuter genders. If this Lease is signed on behalf of a corporation, partnership or other entity, such entity is authorized to enter into and the signer is duly authorized to execute this Lease on behalf of such corporation, partnership or entity.

Section 27.04 DELAYS; FORCE MAJEURE.

In the event either party hereto shall be delayed in the performance of its initial construction, or maintenance and/or repair obligations, by reasons of strikes; lockouts; labor disputes; Acts of God; inability to procure labor, materials, or reasonable substitutes therefor; or shall at any time be so delayed by reason of the diminution of power or power failure(s); restrictive governmental laws or controls; judicial orders; enemy or hostile governmental action; civil commotion; fire or other casualty, or reasons of a similar nature not the fault of the party delayed in performing work or doing acts required under the terms of this Lease, then performance of such act shall be excused for the period of the delay and the period for the performance of any such act shall be extended for a period equivalent to the period of such delay; provided, however, that, the time for performance shall in no event be extended due to financial or economic problems of either party, their architects, contractors, agents or employees, or delay caused by the inability of architects, contractors, suppliers or other employees and agents to meet deadlines, delivery or contract dates (unless such inability is caused by Acts of God, or, civil disobedience or strike). Notwithstanding anything to the contrary, the occurrence of any of the events of force majeure herein described shall not excuse Tenant's obligations to pay Minimum Annual Rental, Percentage Rental and Additional Rent (unless the provisions of Article XVII or Article XVIII apply) or excuse such obligations as this Lease may otherwise impose on the party to obey, remedy or avoid such event; moreover should the work performed by Tenant or Tenant's contractor result in a strike, lockout and/or labor dispute, such strike, lockout and/or labor dispute shall not excuse Tenant's performance. Further, Landlord's reduction of heat, light, air conditioning, or any other services whatsoever to the Shopping Center and/or the Development because of any similar or dissimilar event constituting a cause for excusable delay hereunder shall not relieve Tenant from its obligations pursuant to Article VII of this Lease, It shall be a condition of Tenant's right to claim an extension of time as a result hereof that Tenant notify Landlord in writing within ten (10) calendar days after the first occurrence of any such event, and the cause, specifying the nature thereof and the period of time contemplated or necessary for performance.

Section 27.05 NOTICES.

Notwithstanding the fact that certain descriptions elsewhere in this Lease of notices required to be given by one party to the other may omit to state that such notices shall be in writing, any notice, demand, request or other instrument which may be or is required to be given under this Lease shall be in writing and sent by (i) United States certified mail, return receipt requested, postage prepaid, (ii) telegram, mailgram, or other electronic medium using a third

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party carrier, (iii) United States express mail, (iv) air courier (such as Federal Express), (v) personal delivery or (vi) any other method creating a receipt, waybill or other indication of delivery, and shall be addressed (a) if to the Landlord, at the address set forth on the Data Sheet, or such other address or addresses as Landlord may designate by written notice, together with copies thereof to such other parties designated by Landlord and, (b) if to Tenant, at the Premises or the address set forth on the Data Sheet, or such other address or addresses as Tenant shall designate by written notice Landlord may, at its sole discretion, provide such notice to Tenant solely to the Premises and such delivery of notice shall be conclusively, presumed to be notice to the Tenant for all purposes under this Lease or applicable law.

Section 27.06 CAPTIONS AND SECTION NUMBERS.

The captions, section numbers, Article numbers and index appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of such sections or Articles of this Lease nor in any way affect this Lease.

Section 27.07 BROKER'S COMMISSION.

Tenant represents and warrants to Landlord that there are and shall be no claims for brokerage commissions or finder's fees in connection with this Lease, and each party agrees to indemnify the other and hold it harmless from all liabilities arising from any claim for brokerage commissions and finder's fees in connection with this Lease. Such agreement shall survive the termination of this Lease.

Section 27.08 RECORDING.

Tenant shall not record this Lease or any short form or memorandum of this Lease. Tenant, upon the request of Landlord's ground lessor(s), mortgagee(s) or beneficiary(ies) under deed(s) of trust, shall execute and acknowledge a short form or memorandum of this Lease for recording purposes.

Section 27.09 FURNISHING OF FINANCIAL STATEMENTS.

Tenant has provided Landlord at or prior to the date of this Lease with statements reflecting its financial condition as of a date within the last twelve (12) months as an inducement to Landlord to enter into this Lease, and Tenant hereby represents and warrants that its financial condition has not materially changed since the date of those statements. Upon Landlord's written request in connection with a proposed sale, transfer or financing transaction with respect to all or any portion of the Development, Tenant shall promptly furnish Landlord, from time to time, but not more frequently than once in any lease year, with financial statements reflecting Tenant's then current financial condition and written evidence of ownership of controlling stock interest if Tenant is a corporation or controlling partnership interest if Tenant is a partnership. Landlord shall treat such financial statements and information provided to it pursuant to Articles III and IV of this Lease confidentially, and shall not disclose them except to Landlord's lenders or otherwise as reasonably necessary for the operation of the Development or administration of Landlord's business or unless disclosure is required by any judicial or administrative order or ruling.

Section 27.10 WAIVER OF COUNTERCLAIM OR DEFENSES IN ACTION FOR POSSESSION.

Landlord and Tenant agree that in any action brought by Landlord to obtain possession of the Premises, the parties desire an expeditious resolution of such litigation. Accordingly, Tenant

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shall not file and hereby waives the right to file any non-compulsory counterclaim in such action, Tenant also shall not me and hereby waives the right to file any defense to such action for possession other than the defense that the default alleged by Landlord did not occur.

Section 27.11 TRANSFER OF LANDLORD'S INTEREST.

In the event of any transfer or transfers of Landlord's interest in the Premises including a so-called sale-leaseback, the transferor shall be automatically relieved of any and all obligations On the part of Landlord accruing from and after the date of such transfer, provided that (a) the interest of the transferor, as Landlord, in any funds then in the hands of Landlord in which Tenant has an interest shall be turned over, subject to such obligations, to the then transferee and (b) notice of such sale, transfer or lease shall be given to Tenant as required by law. Upon the transfer of any such lease in a sale-leaseback transaction prior to termination of this Lease, the former lessee thereunder shall become and remain liable as Landlord hereunder until a further transfer. No holder of a mortgage to which this Lease is or may be subordinate, and no lessor under a so-called sale-leaseback, shall be responsible in connection with the security deposited hereunder, unless such mortgagee or holder of such deed of trust or lessor shall have actually received the security deposited hereunder.

Section 27.12 FLOOR AREA.

(a) "Floor Area" as used in this Lease means with respect to any leasable area in the Shopping Center and/or the Development, the aggregate number of square feet of floor space of all floor levels therein, including any mezzanine space, measured from (i) the outside faces of all perimeter walls thereof other than any party wall separating such premises from other leasable premises, (ii) the center lines of any such party wall, (iii) the outside face of any interior wall, and (iv) the building and/or leaseline adjacent to any entrance to such premises.

(b) For the purpose of this Lease, in determining the gross leasable Floor Area or the gross leased and occupied Floor Area of the Shopping Center and/or the Development, there shall be excluded therefrom the Floor Area of any premises leased for the operation of a U.S. Government Post Office facility or other governmental facility, and the total Floor Area utilized by Landlord for the operation of a child care center, community room, library, project offices and related rooms, parking facilities, Common Areas and project areas which shall be' deemed amenities to the Shopping Center and/or the Development. No deduction or exclusion from Floor Area shall be made by reason of columns, ducts, stairs, elevators, escalators, shafts or other interior construction or equipment. The gross leased and occupied Floor Area in effect of the whole of any lease year shall be the average of the gross leased and occupied Floor Area in effect on the first day of each calendar month in such lease year.

Section 27.13 INTEREST ON PAST DUE OBLIGATIONS.

Any amount due from Tenant to Landlord hereunder which is not paid when due (including, without limitation, amounts due as reimbursement to Landlord for costs incurred by Landlord in performing obligations of Tenant hereunder upon Tenant's failure to so perform) shall bear interest at the lesser of (a) the "Prime Rate" as published in Wall Street Journal plus three percent (3%); or (b) the highest rate then allowed under the usury laws of the state where the Development is located from the date due until paid, unless otherwise specifically provided herein, but the payment of such interest shall not excuse or cure any default by Tenant under this Lease.

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Section 27.14 LIABILITY OF LANDLORD.

If Landlord shall fail to perform any covenant, term or condition of this Lease upon Landlord's part to be performed, and if as a consequence of such default Tenant shall recover a money judgment against Landlord, such judgment shall be satisfied only out of the proceeds of sale received upon execution of such judgment and levied thereon against the right; title and interest of Landlord in the Development and out of rents or other income from such property receivable by Landlord, or out of the consideration received by Landlord from the sale or other disposition of all or any part of Landlord's right, title and interest in the Development subject, nevertheless to the rights of Landlord's mortgagee, and neither Landlord nor any of the partners comprising the partnership which may be the Landlord herein shall be liable of any deficiency.

Section 27.15 ACCORD AND SATISFACTION.

Payment by Tenant or receipt by Landlord of a lesser amount than the Rental or other charges herein stipulated shall be deemed to be on account of the earliest Rental or other charges due from Tenant to Landlord. No endorsements or statement on any check or any letter accompanying any check or payment as Rental or other charges shall be deemed an accord and satisfaction, and Landlord shall accept such check or payment without prejudice to Landlord's right to recover the balance of any and all Rental or other charges due from Tenant to Landlord or to pursue any other remedy provided in this Lease or by law.

Section 27.16 EXECUTION OF LEASE; NO OPTION.

The submission of this Lease to Tenant shall be for examination purposes only, and does not and shall not constitute a reservation of an option for Tenant to lease; or otherwise create any interest by Tenant in the Premises or any other premises in the Development. Execution of this Lease by Tenant and the return of same to Landlord shall not be binding upon Landlord, notwithstanding any time interval, until Landlord has executed and delivered this Lease to Tenant.

Section 27.17 GOVERNING LAW.

This Lease shall be governed by and construed in accordance with laws of the state where the Premises is situated. If any provision of this Lease 01' the application thereof to any person or circumstances shall, to any extent be invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, in order to achieve the intent of the parties, to the extent possible; in any event, all other provisions of this Lease shall be deemed valid and enforceable to the full extent.

Section 27.18 SPECIFIC PERFORMANCE OF LANDLORD'S RIGHTS.

Landlord shall have the right to obtain specific performance of any and all covenants or obligations of Tenant under this Lease, and nothing contained in this Lease shall be construed as or shall have the effect of abridging such right.

Section 27.19 SURVIVAL OF TENANT'S OBLIGATIONS.

All obligations of Tenant under this Lease which cannot be ascertained to have been fully performed prior to the expiration or earlier termination of this Lease shall survive the expiration or earlier termination of this Lease.

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Section 27.20 CERTAIN RULES OF CONSTRUCTION.

Time is of the essence in Tenant's performance of this Lease. Notwithstanding the fact that certain references elsewhere in this Lease to acts required to be performed by Tenant hereunder, or to breaches or defaults of this Lease by Tenant, omit to state that such acts shall be performed at Tenant's sole cost and expense, or omit to state that such breaches or defaults by Tenant are material, unless the context clearly implies to the contrary, each and every act to be performed or obligation to be fulfilled by Tenant pursuant to this Lease shall be performed or fulfilled at Tenant's sole cost and expense, and all breaches or defaults by Tenant hereunder/shall be deemed material. Tenant shall be fully, responsible and liable for the observance and compliance by concessionaires of and with all the terms and conditions of this Lease, which terms and conditions shall be applicable to concessionaires as fully as if they were the Tenant hereunder; and failure by a concessionaire fully to observe and comply with the terms and conditions of this Lease shall constitute a default hereunder by Tenant. Nothing contained in the preceding sentence shall constitute a consent by Landlord to any concession, subletting or other arrangement prescribed by Article XIV.

Section 27.21 CONFIDENTIALITY.

Any and all information contained in this Lease or provided to or by Tenant and/or Landlord by reason of the covenants and conditions of this Lease, economic or otherwise, shall remain confidential between Landlord and Tenant and shall not be divulged to third parties; provided, however Landlord shall be permitted to divulge the contents of statements and reports derived and received in connection with the provisions of Article III and Article IV in connection with any contemplated sales, transfers, assignments, encumbrances or financing arrangements of Landlord's interest in the Shopping Center and/or the Development or in connection with any administrative or judicial proceedings in which Landlord is involved where Landlord may be required to divulge such information.

Section 27.22 ATTORNEY FEES.

If at any time after the date that this Lease has been executed by Landlord and Tenant, either Landlord or Tenant institutes any action or proceeding against the other relating to the provisions of this Lease or any default hereunder, the non-prevailing party in such action or proceeding shall reimburse the prevailing party for the reasonable expenses of attorneys' fees and all costs and disbursements incurred therein by the prevailing party, including, without limitation, any such fees, costs or disbursements incurred on any appeal from such action or proceeding. Subject to the provisions of local law, the prevailing party shall recover all such fees, costs or disbursements as costs taxable by the court or arbiter in the action or proceeding itself without the necessity for a cross-action by the prevailing party.

Notwithstanding anything to the contrary contained herein, if Landlord is compelled to engage the services of attorneys (either outside counsel or in-house counsel) to enforce the provisions of this Lease, to the extent that Landlord incurs any cost or expense (including such reasonable attorney fees for outside counsel or payroll and overhead expenses for in-house counsel, as the case may be) in connection with such enforcement, including instituting, prosecuting or defending its rights in any action, proceeding or dispute by reason of any default by Tenant, or as otherwise set forth in this Section 27.22 or elsewhere in this Lease, the sum or sums so paid or billed to Landlord, together with all interest, costs and disbursements, shall be

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deemed Additional Rent and shall be due from Tenant immediately upon receipt of an invoice therefor following the occurrence of such expenses.

Section 27.23 INDEX.

As used in this Lease, the term "Index" shall mean the Consumer, Price Index For All Urban Consumers (1982-84:::100), U.S. City Average, All Items; published by the Bureau of Labor Statistics of the U.S. Department of Labor. In the event such Index is not published by the Bureau of Labor Statistics or another governmental agency at any time during the Term of this Lease, the most closely comparable statistics on the purchasing power of the consumer dollar as published by a responsible financial authority and as selected by Landlord shall be used for making any computation under this Lease otherwise to be made on the basis of the Index. If during the Term the Consumer Price Index is changed or discontinued, Landlord shall choose a comparable index, formula or other means of measurement of the relative purchasing power of the dollar and such substitute index, formula or other means shall be utilized in place of the Consumer Price Index as if it had been originally designated in this Lease.

Section 27.24 WAIVER OF TRIAL BY JURY.

Landlord and Tenant desire and intend that any disputes arising between them with respect to or in connection with this Lease be subject to expeditious resolution in a court trial without a jury. Therefore, Landlord and Tenant each hereby waive the right to trial by jury of any cause of action, claim, counterclaim or cross-complaint in any action, proceeding or other hearing brought by either Landlord against Tenant or Tenant against Landlord or any matter whatsoever arising out of, or in any way connected with, this Lease, the relationship of Landlord and Tenant, Tenant's use or occupancy of the Premises or any claim of injury or damage, or the enforcement of any remedy under any law, statute, or regulation, emergency or otherwise, now or hereafter in effect.

Section 27.25 MORTGAGEE CHANGES.

Tenant shall not unreasonably withhold its consent to changes or amendments to this Lease requested by any current or further ground lessor or holder of a mortgage or deed of trust or such similar financing instrument covering Landlord's fee or leasehold interest in the Premises, as the case may be, so long as such changes do not materially alter the economic terms of this Lease or otherwise materially diminish the rights or materially increase the obligations of Tenant.

Section 27.26 REAL ESTATE INVESTMENT TRUST.

If the ownership of the Development is in a real Estate Investment Trust, then Landlord and Tenant agree that Minimum Annual Rental, Percentage Rental and all Additional Rent paid to Landlord under this Lease (collectively referred to in this Section as "Rent") shall qualify as "rents from real property" within the meaning of Section 856(d) of the Internal Revenue Code of 1986, as amended (the "Code") and the U.S. Department of Treasury Regulations promulgated thereunder (the "Regulations"). Should the Code or the Regulations, or interpretations thereof by the Internal Revenue Service contained in Revenue Rulings, be changed so that any Rent no longer qualifies as "rent from real property" for the purposes of Section 856(d) of the Code and the Regulations promulgated thereunder, other than by reason of the application of Section 856(d)(2)(B) or 856(d)(5) of the Code or the Regulations relating thereto, such Rent shall be adjusted so that it will so qualify; provided, however, that any adjustments required pursuant to

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this Section shall be made so as to produce the equivalent (in economic terms) Rent as payable prior to such adjustment.

IN WITNESS WHEREOF, Landlord and Tenant, personally or by their duly authorized agents, have executed this Lease as of the day and year first above written.

MELT (CALIFORNIA) INC.,
a California corporation
By: /s/ Clive Barwin
Its: President and Secretary

By: _______________________
Print Name: ________________
Its: _______________________
TENANT

WEA PALM DESERT LP,
a Delaware limited partnership
By: Westfield American GP LLC,
a Delaware limited liability company,
its general partner

By: Westfield America Limited
Partnership, a Delaware limited
partnership, its sole member

By: Westfield America, Inc.,
a Missouri corporation,
its general partner

Landlord
By: /s/Sigrid Dugall
Title: Assistant Secretary

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WESTFIELD SHOPPINGTOWN PALM DESERT

LEASE ADDENDUM

This document constitutes an Addendum to the Lease made as of the 14th day of October, 2003, by and between WEA PALM DESERT LP, a Delaware limited partnership ("Landlord") and MELT (CALIFORNIA) INC., a California corporation ("Tenant") for Store No. 9021 in the WESTFIELD SHOPPINGTOWN PALM DESERT (the "Development") and is made a part of this Lease as if set forth in full therein.

1. Section 1.02 TERM.

a) In the first (1st) line change "by" to "within fifteen (15) days of".

b) In the fourth (4th) line change "Five Hundred Dollars ($500.00)" to "Fifty Dollars ($50.00)".

c) Landlord intends to deliver the Premises to Tenant on or about October 1, 2003. In the event Landlord delivers the Premises after October 1, 2003, the Latest Rental Commencement Date shall be extended one (1) day for each day of delay caused by Landlord.

2. Section 2.01 MINIMUM ANNUAL RENTAL .

Minimum Annual Rental [Item number (2) on the Data Sheet]:

Rental Commencement Date through January 31, 2005 : Fifty-Two Thousand and No/100 Dollars ($ 52,000.00 ) ;

February 1, 2005 through January 31, 2006 : Fifty-Six Thousand and No/100 Dollars ($ 56,000.00 ) ;

February 1, 2006 through January 31 2007 : Fifty-Seven Thousand Six Hundred Eighty and No/100 Dollars ($ 57,680.00 ) ;

February 1, 2007 through January 31, 2008 : Fifty-Nine Thousand Four Hundred Ten and No/100 Dollars ($ 59,410.00 ) ;

February 1, 2008 through January 31 2009 : Sixty-One Thousand One Hundred Ninety-Three and No/100 Dollars ($ 61,193.00 ) ;

February 1, 2009 through January 31, 2010 : Sixty-Three Thousand Twenty-Eight and No/100 Dollars ($ 63,028.00 ) ; and

February 1, 2010 through end of Term : Sixty-Four Thousand Nine Hundred Nineteen and No/100 Dollars ($ 64,919.00 ).

3. Section 2.02 PERCENTAGE RENTAL.

a) Percentage Rental [Item number (3) on the Data Sheet]:

Percentage Rental Rate: Ten percent (10%) of Gross Sales in excess of the Annual Breakpoint(s) as follows:

Rental Commencement Date through January 31, 2005 : Five Hundred Twenty Thousand and No/100 Dollars ($ 520,000.00 ) ;

February 1, 2005 through January 31, 2006 : Five Hundred Sixty Thousand and No/100 Dollars ($ 560,000.00 ) ;

February 1, 2006 through January 31 2007 : Five Hundred Seventy-Six Thousand Eight Hundred and No/100 Dollars ($ 576,800.00 ) ;

February 1, 2007 through January 31, 2008 : Five Hundred Ninety-Four Thousand One Hundred and No/100 Dollars ($ 594,100.00 ) ;

February 1, 2008 through January 31 2009 : Six Hundred Eleven Thousand Nine Hundred Thirty and No/100 Dollars ($ 611,930.00 ) ;

February 1, 2009 through January 31, 2010 : Six Hundred Thirty Thousand Two Hundred Eighty and No/100 Dollars ($ 630,280.00 ) ; and

February 1, 2010 through end of Term : Six Hundred Forty-Nine Thousand One Hundred Ninety and No/100 Dollars ($ 649,190.00 ).

b) Notwithstanding anything to the contrary contained in this Lease, with respect to each lease year, Percentage Rental shall first be paid for the month in which the aggregate of Gross Sales for such lease year shall have first exceeded the Annual Breakpoint set forth in the Data Sheet, and thereafter shall be paid monthly on all additional Gross Sales made during the remainder of such lease year, such payments to be made in arrears within fifteen (15) days following the month in which such Gross Sales were made; provided, however, that in the case of any lease year containing less than twelve (12) calendar months, the Annual Breakpoint shall be prorated by multiplying the Annual Breakpoint by a fraction, the numerator of which is the number of days in such partial lease year and the denominator of which is three hundred sixty five (365). Furthermore, whenever in this Lease the term "Quarterly Breakpoint" is used or referred to, it shall mean the Annual Breakpoint as set forth herein.

c) The following is added to the end of subsection 2.02(b):

"Tenant's payment of Percentage Rental for the first lease year shall be annualized based on the following calculation: if Gross Sales for the twelve (12) month period beginning with the Rental Commencement Date and terminating on the first (1st) anniversary of the Rental Commencement Date (as evidenced by Tenant's statement of Gross Sales for such period delivered to Landlord within thirty (30) days of the end of such period) shall exceed Tenant's Annual Breakpoint, then, Tenant shall concurrently pay to Landlord as Percentage Rental a sum equal to the product of ten percent (10%) of Gross Sales in excess of the Annual Breakpoint multiplied by a fraction, the numerator of which is the number of days from the Rental Commencement Date until the January 31st thereafter, and the denominator of which is the number 365."

c) In the ninth (9th) line of subsection 2.02(d) change "one thirtieth (1/30th)" to "one sixtieth 1/60th)".

4. Section 2.03 GROSS SALES.

a) In the seventh (7th) line of subsection 2.03(a) after "refunded to purchasers" insert "subject to escheat laws".

b) The following additional exclusions and/or deductions from Gross Sales are added to subsection 2.03(b):

"(7) Uncollected accounts in excess of one percent (1%) of Tenant's Gross Sales per annum as written off by Tenant as bad debts for income tax purposes, provided, however, prior to such an exclusion for bad debts being taken by Tenant, Tenant shall have exhausted all reasonable efforts to collect such bad debts; provided, further, that such bad debt amounts shall be deducted or excluded from Gross Sales in the lease year in which they are written off; if any amount previously written off as a bad debt is later collected, in whole or in part, the amount collected shall be included in Gross Sales in the lease year in which collected; and

(8) Sales to employees at discounted or reduced prices, provided such discounted or reduced price is at least ten percent (10%) less than the retail sales price; however, said exclusion for discounted merchandise shall not exceed two percent (2%) of Tenant's Gross Sales per annum."

c) Subsection 2.03(c) is hereby deleted from this Section.

d) The following is hereby added as subsection 2.03(d):

"(d) In the event that Tenant's Gross Sales for lease year ending January 31, 2005, are less than Three Hundred Fifty Thousand Dollars ($350,000.00), then Tenant shall have the right to terminate this Lease. The right to terminate this Lease shall be exercised by written notice to the other party within sixty (60) days following Landlord's receipt of Tenant's annual statement of Gross Sales (as required by Section 3.02) for said lease year. The termination of the Lease shall be effective sixty (60) days after receipt by Landlord of such notice. The right herein granted to Tenant shall be null and void if Tenant is in default under the terms and conditions of this Lease at the date of Tenant's notice or if Tenant has not been open and operating in accordance with this Lease for the previous twelve month period. Notwithstanding anything in Section 4.02 to the contrary, Landlord shall have the right to audit Tenant's Records to verify Tenant's Gross Sales for such lease year. If such audit determines that Tenant's Gross Sales are equal to or greater than the threshold stated herein, the right to terminate this Lease shall be null and void and the Lease shall continue in effect for the Term. If Tenant exercises its right of termination, Tenant shall, on or before the effective date of such termination pay to Landlord an amount equal to the Rental which would have been payable by Tenant to Landlord for the six (6) months following the effective date of such termination. "

5. Section 2.04 TENANT'S TAX OBLIGATION.

a) Notwithstanding anything to the contrary contained in this Section 2.04, Tenant shall pay Six and 42/100 Dollars ($6.42) per square foot of Floor Area in the Premises as its share of Taxes. The foregoing charge is calculated on the basis of One Hundred Fifty Percent (150%) of the Floor Area of the Premises. Beginning on the January 1 following the Rental Commencement Date and every January 1 thereafter during the Term, the Taxes payable by Tenant herein shall be increased by ten percent (10%) of the amount payable for the prior year.

b) In the last sentence of subsection 2.04(c) after "Tenant's" insert "and Landlord's".

6. Section 2.05 TRASH REMOVAL CHARGE.

Section 2.05 is hereby deleted in its entirety and the following is substituted therefor:

"(a) Tenant, at Tenant's expense, shall at all times keep the Premises (including, without limitation, the service areas adjacent to the Premises, display windows and signs) orderly, neat, safe, clean and free from rubbish and dirt. Tenant shall dispose of all trash (wet or dry) on a daily basis in such receptacles as may be designated by Landlord for such disposal, and until Tenant disposes of such trash, Tenant shall store the trash and other solid waste within the Premises or in such areas as may be designated by Landlord for such storage. Tenant shall not burn any trash or garbage at any time in or about the Development.

(b) Solid waste disposal contractors designated by Landlord shall remove trash from said receptacles at such intervals as Landlord may determine, in Landlord's sole discretion. The Data Sheet will set forth whether the Tenant will initially pay (i) the "Trash Removal Charge" as set forth on the Data Sheet, or (ii) the solid waste disposal contractor designated by Landlord directly. Landlord shall have the right to change the method of payment at any time during the Term by providing Tenant thirty (30) days' prior written notice.

(c) In the event Landlord elects that Tenant pay a Trash Removal Charge, Tenant shall be solely responsible for and shall promptly pay, as Additional Rent hereunder, the sum set forth in the Data Sheet as the "Trash Removal Charge" for each lease year during the Term in equal consecutive monthly installments in advance on or before the first day of each month, without prior demand or notice. Such Trash Removal Charge payable by Tenant shall be adjusted annually commencing on the 1 ^st day of January immediately following the Rental Commencement Date and each January 1 ^st thereafter by the annual percentage increase in the "Index" (as defined in Section 27.23) to the respective January or the closest subsequent month thereto that the Index is published; provided, however, in no event shall Tenant pay less than the Trash Removal Charge payable for the preceding year.

If Landlord elects that Tenant pay the solid waste disposal contractors directly, then Landlord shall instruct such contractor to bill its charges directly to Tenant, and Tenant shall pay such charges directly to the contractor, and no separate Trash Removal Charge shall be payable hereunder.

At any time during the Term, Landlord may, upon thirty (30) days' prior written notice to Tenant, discontinue furnishing trash removal services to the Premises without thereby affecting this Lease in any manner or otherwise incurring any liability to Tenant except that Landlord will no longer be required to furnish trash removal services to the Premises. If Landlord does not provide such services and if Landlord has elected not to retain a third party to provide such services, Tenant shall arrange for the regular pickup of all trash, garbage and other solid waste with a contractor and upon terms approved in writing by Landlord, in its sole discretion."

7. Section 2.07 LATE CHARGE.

Commencing in the seventh (7 ^th ) line change "on the date said payment is due" to "within ten (10) days after Tenant receives written notice from Landlord that such sum is owed (provided that no such notice shall be required if Tenant has received two (2) or more written notices of nonpayment from Landlord under this Section within the preceding twelve (12) months)".

8. Section 5.03 CONDITION OF PREMISES.

Section 5.03 is deleted in its entirety and the following is substituted therefor:

"By its execution of this Lease, Tenant acknowledges that it has inspected the Premises and knows the condition thereof and Tenant agrees to accept the Premises in an "as is" condition. At its sole cost and expense, Tenant shall install a new kiosk and perform all work necessary or desirable to prepare the Premises for its occupancy. Any improvements to be made to the Premises shall be substantially as set forth in Exhibit B and Landlord's kiosk design criteria. Prior to delivery of the Premises to Tenant, Landlord, at Landlord's sole cost and expense agrees to stub in electric and water/sewer to the location. Tenant's failure to furnish the plans and specifications required pursuant to Exhibit B (the "Plans and Specifications") within the time periods and in the form required by Exhibit B, or failure to perform any other obligation under Exhibit B shall constitute a default under this Lease which shall entitle Landlord to all remedies set forth in this Lease or by law. No material deviation from the final Plans and Specifications, once approved by Landlord, shall be made by Tenant without Landlord's prior written consent. Approval of the final Plans and Specifications by Landlord shall not constitute the assumption of any responsibility by Landlord for their accuracy, efficacy or sufficiency, and Tenant shall be solely responsible for such items."

9. Section 6.02 REMOVAL BY TENANT.

a) This Section 6.02 is hereby deleted from the Lease and the following language is inserted in its place: "Upon the expiration or earlier termination of this Lease, Tenant shall remove the kiosk structure and all other fixtures and improvements from the Premises, cap off all utilities serving the Premises and restore the flooring to match the surrounding Common Areas. Further, Tenant shall remove its trade fixtures, equipment and other personal property installed by Tenant ("Property"), and surrender the Premises to Landlord in substantially as good condition as when received, ordinary wear and tear excepted. If Tenant shall fail to remove any of its Property, Landlord may, at Landlord's option, retain either any or all of the Property, and title thereto shall thereupon vest in Landlord without compensation to Tenant, or remove all or any portion of the Property from the Premises and dispose of the Property in any manner, without compensation to Tenant. In such event, Tenant shall, upon demand, pay to Landlord for the repair of any damage to the Common Areas resulting from or caused by such removal. The obligations contained herein shall survive the expiration or earlier termination of this Lease."

b) Notwithstanding anything to the contrary contained herein, the kiosk shall remain the property of Tenant upon termination of this Lease. Any improvements to be made to the Premises shall be substantially as set forth in Exhibit B attached hereto and made a part hereof.

10. Section 6.03 CHANGES AND ADDITIONS.

a) Notwithstanding anything to the contrary in this Lease, except as may be required by applicable law, no changes or alterations by Landlord pursuant to subsection 6.03(a) shall materially, detrimentally affect ingress or egress to and from the Premises or the reasonable visibility of the Premises.

b) In the event Landlord, in exercising its rights pursuant to this Section, interferes with the conduct of Tenant's business to the extent that Tenant cannot operate its business in the Premises and Tenant closes the Premises for business, and such closure exists for more than three (3) consecutive days, then commencing on the fourth (4th) day of such closure, Tenant's Minimum Annual Rental only shall abate until the earlier of the time Tenant reopens the Premises for business or said interference is removed.

11. Section 6.04 RIGHTS OF LANDLORD.

Section 6.04 is hereby deleted in its entirety and the following is substituted therefor:

"Landlord hereby reserves the right at any time following the Commencement Date to change the location of the Premises in the Shopping Center, such right to be exercised upon ten (10) days' prior written notice to Tenant. Tenant agrees that Landlord may effect such relocation, at Landlord's cost and expense, to a site within the Shopping Center which is mutually acceptable to the parties. Such new site shall become the Premises. In connection therewith, Tenant agrees to execute, upon request by Landlord, whatever amendment or other instrument as may be required to document the relocation. The following events may trigger the exercise of Landlord's right hereunder: (i) determination by Landlord that the location of the Premises adversely affects the leasing of any space in the Shopping Center; (ii) determination by Landlord that the location of the Premises impedes pedestrian traffic through the Shopping Center; (iii) the expansion, reduction, removal, alteration, modification or the construction of improvements in the Shopping Center; (iv) restrictive requirements by local codes or Landlord's insurance carrier; or (v) violation of any exclusive or other agreement between Landlord and Department Stores or other occupant of the Shopping Center. In the event Tenant does not desire to relocate the Premises, then Tenant shall have the option to terminate this Agreement upon ten (10) days prior written notice to Landlord. "

12. Section 7.02 OPERATION OF BUSINESS.

a) In the first (1st) line of subsection 7.02(a) before "Tenant" insert "Subject to Section 27.04 and casualty damage, ".

b) In the third (3rd) line of subsection 7.02(a) change "a full staff" to "an adequate staff".

c) The sentence commencing in the fifth (5th) line of subsection 7.02(a) is prefaced with:

"Provided two (2) Department Stores and at least fifty percent (50%) of the tenants in the Shopping Center, including the Premises but excluding Department Stores, are obligated to be open for business,".

d) In the thirteenth (13th) line of subsection 7.02(a) change "ten (10)" to "thirty (30)".

e) In the fourteenth (14th) line of subsection 7.02(a) change "One Hundred Fifty Dollars ($150.00)" to "Fifty Dollars ($50.00)".

f) The following is added to the end of subsection 7.02(a):

"Notwithstanding the foregoing, Tenant shall not be obligated to be open for business on Thanksgiving Day, Christmas Day, New Year's Day and Easter Sunday."

g) In the twelfth (12th) line of subsection 7.02(b) change "tending to injure" to "injuring".

h) In the second (2nd) line of the third paragraph of subsection 7.02(b) change "ten (10)" to "thirty (30)".

i) Commencing in the second (2nd) line of the third paragraph of subsection 7.02(b) change "One Hundred Dollars ($100.00)" to "Fifty Dollars ($50.00)".

13. Section 7.03 HAZARDOUS MATERIALS.

a) In the last line of subsection 7.03(g) after "therewith" insert "if it is determined that Tenant, its agents, employees or anyone acting on behalf of Tenant has violated an Environmental Requirement".

b) In the second (2nd) line of subsection 7.03(j) after "Environmental Requirement" insert "caused by Tenant, its agents, employees or anyone acting on behalf of Tenant".

c) In the third (3rd) line of subsection 7.03(j) change "report by experts acceptable to Landlord showing" to "statement certified by an officer of Tenant reflecting to Tenant's best knowledge".

14. Section 7.04 RADIUS.

This Section is hereby deleted in its entirety from this Lease.

15. Section 8.02 USE OF COMMON AREAS.

a) In the sixth (6th) line of the third paragraph change "Fifty Dollars ($50.00)" to "Twenty-five Dollars ($25.00)".

b) In the eleventh (11th) line of the third paragraph change "first violation" to "first two (2) violations".

c) In the last line of the third paragraph change "ten (10)" to "thirty (30)".

16. Section 8.03 COMMON AREA OPERATING COSTS AND EXPENSES.

a) Notwithstanding anything to the contrary contained in this Section 8.03, Tenant shall pay Nineteen and 02/100 Dollars ($19.02) per square foot of Floor Area in the Premises as its share of Common Area Operating Costs and Expenses. The foregoing charge is calculated on the basis of One Hundred Fifty Percent (150%) of the Floor Area of the Premises. Beginning on the January 1 following the Rental Commencement Date and every January 1 thereafter during the Term, the Common Area Operating Costs and Expenses payable by Tenant herein shall be increased by ten percent (10%) of the amount payable for the prior year.

b) The following new subsection is hereby added to the end of Section 8.03:

"(d) Provided that Tenant is not in default under this Lease and provided further that Tenant complies with the provisions of this Section, during the Term Tenant shall have the right to reasonably review supporting data for Operating Costs and Expenses payable by Tenant. The right of Tenant under this Section may only be exercised one (1) time for any lease year on no less than sixty (60) days' prior written notice to Landlord. Such notice to Landlord must be given no later than twelve (12) months after Tenant's receipt of Landlord's statement as provided in Section 8.03 and may only be exercised as to Operating Costs and Expenses billed to Tenant during the preceding lease year. Prior to the exercise of Tenant's right hereunder, Tenant shall pay to Landlord all amounts due from Tenant to Landlord on account of Operating Costs and Expenses. In no event shall Tenant be entitled to withhold, deduct or offset any monetary obligation of Tenant to Landlord under the Lease (including, without limitation, Tenant's obligation to make all rental payments and all payments for its share of estimated and actual Operating Costs and Expenses) pending the completion of and regardless of the results of any review of records under this Section. Any review to be conducted shall be at the sole cost and expense of Tenant and shall be conducted by a certified public accountant or other qualified person experienced in audit procedures, which person is subject to the advance written approval of Landlord. Tenant hereby acknowledges that it shall have no right to conduct its review using any party who is being compensated in whole or in part on a contingency or "profit-sharing" basis. Landlord hereby approves the use by Tenant of any "in-house" accountant who is employed by Tenant on a full time basis. Tenant acknowledges and agrees that any records reviewed under this paragraph constitute confidential information of Landlord, which information shall not be disclosed to anyone other than the persons performing the review and the principals of Tenant who receive the results of the review. The disclosure of such information to any other person shall constitute a material breach of this Lease. Tenant hereby acknowledges that a confidentiality agreement must be executed prior to the commencement of any review. In the event the results of the review disclose an overpayment or underpayment, such shall be handled in the manner set forth in Section 8.03(c). The right granted Tenant hereunder shall expire at the expiration or earlier termination of this Lease."

10. Section 9.01 TENANT'S SIGNS.

In the last line after "default" insert "following notice from Landlord".

11. Section 10.01 LANDLORD'S OBLIGATIONS FOR MAINTENANCE.

In the first (1st) line after "roof" insert ", roof structure,".

12. Section 10.02 TENANT'S OBLIGATIONS FOR MAINTENANCE.

a) In the seventh (7th) line of subsection 10.02(a) after "Premises" insert "and exclusively serving the Premises".

b) In the ninth (9th) line of subsection 10.02(a) after "sprinkler systems" insert "exclusively serving the Premises".

c) In the third (3rd) line of subsection 10.02(c) change "ten (10)" to "twenty (20)".

d) In the eighth (8th) line of subsection 10.02(c) change "ten (10)" to "thirty (30)".

e) In the first (1st) line before "fails" insert ", following five (5) days notice,".

f) In the seventh (7th) line of subsection 10.02(d) before "cost" insert "reasonable and actual".

g) Commencing in the seventh (7th) line of subsection 10.02(d) change "ten (10)" to "thirty (30)".

13. Section 11.01 TENANT'S INSURANCE.

a) In the third (3rd) line of subsection 11.01(a) change "Three Million Dollars ($3,000,000.00)" to "Two Million Dollars ($2,000,000.00)".

b) The following is added to the end of subsection 11.01(a):

"Notwithstanding the foregoing, Tenant shall only be required to pay those increases in the amounts or limits of insurance required to be carried by Tenant hereunder if such new limits are reasonable and customary in other similar centers in the state in which the Shopping Center is located. Furthermore, Tenant shall have the right to self insure for plate glass insurance."

c) In the fourth (4th) line of subsection 11.01(d) change "without notice" to "upon prior notice".

d) In the last line of subsection 11.01(d) change "payable upon" to "payable within thirty (30) days of".

14. Section 11.03 COVENANT TO HOLD HARMLESS.

a) In the third (3rd) line change "gross negligence" to "negligence".

b) In the ninth (9th) line after "customers" insert "(while in the Premises)".

c) The following is added to the end of Section 11.03:

"Landlord agrees to indemnify and hold Tenant harmless from and against all claims, liabilities, losses, damage and expenses for injury to or death of any person or loss or damage to property in or upon the Shopping Center Common Areas which result from claims by third parties relating to the Shopping Center's Common Areas, except to the extent such claim is based upon an act of Tenant, its agents or employees. In case Tenant or any other party so indemnified shall, without fault, be made a party to any such litigation, then Landlord shall protect and hold them harmless and shall pay all reasonable costs, expenses and attorneys fees incurred or paid by them in connection with such litigation."

15. Section 11.04 WAIVER OF RIGHT OF RECOVERY.

The following sentence is inserted in the fifth (5th) line after "employees.":

"Each party shall obtain such an endorsement on their insurance polices.".

16. Section 12.01 UTILITY CHARGES.

a) Notwithstanding anything to the contrary contained in this Section 12.01, Tenant shall pay Landlord the sum of One Hundred Fifty and No/100 Dollars ($150.00) per month during the Term for the cost of providing electric service to the Premises, which amount shall be paid monthly by Tenant as Additional Rent. Landlord may, upon thirty (30) days prior written notice to Tenant, elect to discontinue furnishing electric service to the Premises without affecting this Lease or otherwise incurring any liability to Tenant. If Landlord shall give Tenant such notice, Tenant may contract for and receive such electric service directly from the public utility company serving the Shopping Center, and if Tenant does so, Landlord shall permit Tenant to use Landlord's service to the Premises, at Tenant's cost.

b) Commencing in the eighth (8th) line of subsection 12.01(a) change "at a cost in excess of Landlord's cost" to "at comparable rates within the immediate geographic area in which the Shopping Center is located".

c) In the first (1st) line of subsection 12.01(b) change "Landlord's gross negligence" to "Landlord, its agents or employees willful acts or negligence".

d) The following is added to the end of subsection 12.01(b):

"Notwithstanding anything contained in this section to the contrary, if as a result of the negligence of Landlord, there is an interruption or discontinuance in the utility or other service supplied by Landlord which results in Tenant's inability to conduct its business at the Premises for a period in excess of forty-eight (48) hours, and Tenant closes its Premises for business, then from and after the forty-ninth (49th) hour after Tenant closes it business Tenant's payment of Minimum Annual Rental only shall abate until such time as said utility or other service supplied is restored or Tenant reopens the Premises for business, whichever first occurs."

e) In the third (3rd) line of subsection 12.01(h) change "an event of default" to "a default in the payment of rental which specifically includes the nonpayment of utilities".

f) The sentence commencing in the third (3rd) line of subsection 12.01(h) is prefaced with: "Except as provided herein this Article XII,".

17. Section 13.01 ESTOPPEL STATEMENT.

a) In the first (1st) line change "ten (10) to "fifteen (15)".

b) In the eighth (8th) line after "other" insert factual".

c) The last sentence is hereby deleted from this Section.

18. Section 13.03 SUBORDINATION.

a) In the eleventh (11th) line change "ten (10)" to "fifteen (15)".

b) The last sentence is hereby deleted from this Section.

19. Section 13.04 REMEDIES.

a) In the second (2nd) line change "ten (10)" to "fifteen (15)".

b) In the fifth (5th) line after "Term ended" insert "unless Tenant cures such failure prior to the end of said fifteen (15) day period".

20. Section 14.01 RESTRICTIONS ON TRANSFER.

The following subsection is hereby added to the end of Section 14.01:

"(c) Notwithstanding anything to the contrary contained in this Article, and provided Tenant is not in default of any of the terms of the Lease and the conditions set forth in this herein this Section 14.01(c) are met, Tenant may, without the prior consent of Landlord, assign this Lease or sublease the entire Premises to: (a) any parent, subsidiary or affiliate of Tenant; (b) any corporation resulting from the consolidation or merger of Tenant into or with any other corporation; or (c) any person, firm or entity purchasing all or substantially all of Tenant's physical assets or outstanding stock. Any assignment or sublease pursuant to (a), (b) or (c) herein shall be referred to as an "Affiliate Transfer". As used herein, "parent, subsidiary or affiliate" shall mean a corporation that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with Tenant, and "control" shall mean ownership of at least 51% of the voting interests together with the right and power, directly or indirectly, to direct or cause the direction of management and policies of a particular corporation.

Any assignment or sublease pursuant to (a), (b) or (c) above shall be subject to all of the following conditions: (i) such assignment or sublease shall remain fully subject to all of the terms, covenants and conditions of this Lease including but not limited to the permitted use as described pursuant to Section 7.01, and the provisions of this Article XIV; (ii) such assignee or sublessee shall have a net worth at the date of such assignment or sublease equal to or greater than the net worth of Tenant as of the date of this Lease or as of the effective date of such assignment or sublease, whichever is greater; (iii) such assignment or sublease shall be for the entire unexpired Term of this Lease; (iv) the person or entity who or which was Tenant prior to the Transfer shall remain liable for the payment of all sums due and the performance of all other terms and conditions of this Lease; (v) the assignee or sublessee shall assume in a written instrument satisfactory to Landlord all obligations under this Lease; and (vi) concurrent with such assignment or subletting, Tenant shall give notice to Landlord as provided in Section 27.05 of the Lease setting forth the name and address of such assignee or subtenant and the terms of such assignment or subletting. In no event shall any public offering, listing, redemption, hypothecation, conversion, exchange or similar public disposition of Tenant's corporate stock be deemed an assignment or require Landlord's consent. The provisions set forth in Sections 14.02 and 14.05 and the increased Minimum Rent provisions set forth in Section 14.03 shall not apply to any Affiliate Transfer.

Further, notwithstanding anything in this Lease to the contrary, the following shall not be deemed an assignment, transfer or violation of this Lease or give rise to any right of Landlord to terminate this Lease or entitle Landlord to payment of any processing or administrative fee or adjustment in Rental: (a) Tenant's going from a publicly held corporation to a privately held corporation; (b) any public or private offering of Tenant's stock; or (c) any transfer of corporate shares by gift bequest or inheritance by, between or among the present shareholders of Tenant, or to their immediate family (i.e. spouses, parents, siblings, children or grandchildren)."

21. Section 14.02 PROCEDURE FOR TRANSFER.

a) In the second line change "ninety (90)" to "thirty (30)".

b) In the eighth (8th) and fourteenth (14th) lines of the third paragraph change "ten (10)" to "fifteen (15)" in each instance.

22. Section 14.03 TRANSFER RENT ADJUSTMENT.

Commencing in the fifth (5th) line delete "; or (c) a sum equal to the then fair-market rental value of the Premises as reasonably determined by Landlord,".

23. Section 14.04 REQUIRED DOCUMENTS AND FEES.

In the last line after "consummated" insert "not to exceed Seven Hundred Fifty Dollars ($750.00) for each Transfer".

24. Section 14.05 TRANSFER OF STOCK OR PARTNERSHIP INTEREST.

Notwithstanding anything to the contrary contained in this Section 14.05, Tenant shall have the right throughout the term of this Lease and any extension thereof to issue and sell or otherwise place additional shares of Tenant, even if such issuance and placement results in a change in control of the corporation, provided: (a) Tenant is not then in default of any material provision of this Lease, (b) Tenant's officers and/or management personnel actively participate in the management or the business at the Premises, (c) such issuance does not adversely affect the value of the net worth of Tenant, (d) Tenant shall remain liable for the performance of all terms and conditions of this Lease and (e) such transfer does not adversely affect the quality and type of business operation which Tenant has conducted from the Premises theretofore.

25. Section 16.01 TRADE NAME.

The following is added to the end of section 16.01:

"Notwithstanding the foregoing, Landlord's consent shall not be required for a change in Tenant's Trade Name to that trade name which is being used by Tenant in substantially all of Tenant's stores; provided Tenant notifies Landlord in writing in advance of such change. Tenant agrees that any change in Trade Name which will require the installation of a new storefront sign, the plans for which shall have Landlord's prior written approval and shall conform to Landlord's criteria for signs."

26. Section 16.02 PROMOTIONAL PROGRAM.

The following is added to the end of subsection 16.02(b): "In no event shall any adjustment of the Promotional Charge exceed one hundred five percent (105%) of the amount due and payable by Tenant for the prior lease year; provided such amount shall be calculated on a cumulative basis over the Term."

27. Section 17.01 RECONSTRUCTION OF DAMAGED PREMISES.

In the fourth (4th) line of subsection 17.01(c) change "ten (10)" to thirty (30)".

28. Section 17.02 LANDLORD'S OPTION TO TERMINATE LEASE.

The following is added to the end of Section 17.02:

"In the event during the last two (2) years of the Term hereof, more than twenty-five percent (25%) of the Floor Area of the Premises shall be damaged or destroyed by fire or other casualty and Tenant shall be prevented from conducting its business in the Premises for thirty (30) consecutive days due to the occurrence of such fire or other casualty, then Tenant may elect to terminate this Lease by giving written notice to Landlord of Tenant's election so to terminate such notice to be given within ninety (90) days after the occurrence of such damage or destruction."

29. Section 19.01 RIGHTS UPON DEFAULT.

a) In the sixth (6th) line of subsection 19.01(a) change "five (5)" to "ten (10)".

b) In the eleventh (11th) line of subsection 19.01(a) change "twenty (20)" to "thirty (30)".

c) In the twelfth (12th) line of subsection 19.01(a) change "twenty (20)" to "thirty (30)".

d) In the fourteenth (14th) line of subsection 19.01(a) change "twenty (20)" to "thirty (30)".

e) In the (16th) line of subsection 19.01(a) change "(120) days)" to "(120) days, subject to Section 27.04)".

f) In the eighteenth (18th) line of subsection 19.01(a) change "on or before" to "within fifteen (15) days of".

g) In the first (1st) line of subsection 19.01(c) delete "either failed to pay Rental or other charges within five (5) days after the same shall be due or".

h) In the second (2nd) line of subsection 19.01(e) change "twice" to "three (3) times".

30. Section 21.01 RIGHT OF ENTRY.

If, as a direct result of the exercise of Landlord's rights hereunder (except to the extent the same result from the breach of this Lease, breach of legal requirements, or the negligence or willful misconduct of Tenant or anyone claiming under Tenant or any of their employees, agents or contractors), there is substantial and material interference with Tenant's ability to conduct its business in the Premises and as a result Tenant is forced to close its business in the Premises for a period in excess of three (3) consecutive business days, then the payment of Minimum Annual Rental only shall abate until such time as Landlord ceases the exercise of such rights or Tenant is able to reopen the Premises for business, whichever shall first occur.

31. Section 23.01 HOLDING OVER.

a) In the eighth (8th) line change "with" to "without".

b) In the tenth (10th) line change "twice" to "One Hundred Fifty percent (150%) of".

32. Section 24.01 RULES AND REGULATIONS.

In the third (3rd) line before "shall constitute" insert "after notice".

33. Section 27.02 ENTIRE AGREEMENT.

In the last line after "accommodate Tenant" insert ", not to exceed Seven Hundred and Fifty Dollars ($750.00) in each instance".

34. Section 27.04 DELAYS; FORCE MAJEURE.

The last sentence of this Section is changed to read as follows: "Tenant shall notify Landlord in writing promptly upon the occurrence of any such event specifying the nature thereof and the period of time contemplated for performance."

35. Section 27.05 NOTICES.

a) In the fourth (4th) line delete "(ii) telegram, mailgram, or other electronic medium using a third party carrier,".

b) In the ninth (9th) line delete "at the Premises or".

c) The last sentence is hereby deleted in its entirety and replaced with: "Notice deemed given when refused or received".

36. Section 27.10 WAIVER OF COUNTERCLAIM OR DEFENSES IN ACTION FOR POSSESSION.

The last sentence is hereby deleted from this Section.

37. Section 27.13 INTEREST ON PAST DUE OBLIGATIONS.

In the first (1st) line change "when due" to "within ten (10) days after Tenant receives written notice from Landlord that such sum is owed (provided that no such notice shall be required if Tenant has received two (2) or more written notices of nonpayment from Landlord under this Lease within the preceding twelve (12) months)".

38. Section 27.16 EXECUTION OF LEASE; NO OPTION.

In the fourth (4th) line after "upon Landlord" insert "or Tenant".

39. Section 27.21 CONFIDENTIALITY.

This Section shall not prohibit Tenant from making reasonably necessary disclosures of the provisions of this Lease to Tenant's employees, representatives, and actual and potential sublessees, assignees, or purchasers, and as required in any judicial proceeding.

40. Section 27.22 ATTORNEY FEES.

The second paragraph is hereby deleted from this Section.

41. Section 27.24 WAIVER OF TRIAL BY JURY.

In the fourth (4th) line after "action," insert "except compulsory counterclaims".

42. The Lease is hereby amended by the addition of a new Section 27.27 as follows:

"Section 27.27 SECURITY MEASURES.

Tenant acknowledges that Tenant shall be solely responsible for instituting adequate security measures to protect the Property of Tenant and its employees, including but not limited to, fixtures, inventory and all other personal property in, on or about the Premises. Any security devices to be installed at the Premises require the prior written consent of Landlord and shall be in conformance with Landlord's design criteria for the Shopping Center. Tenant agrees to save Landlord, its agents and employees harmless from any and all liability due to the loss, damage or theft of such property."

The Lease is hereby amended by the addition of a new Section 27.28 as follows:

"Section 27.28 STORAGE AREA.

As part of this Lease, Landlord shall provide to Tenant approximately thirty two (32') linear foot Storage Area within the distance required by the Health Department for the storage of Tenant's merchandise and supplies for use in the Premises (the "Storage Area"). Tenant agrees that Tenant's use of the Storage Area is subject to all of the terms and conditions of this Lease, including, but not limited to, the relocation provisions of Section 6.04 and Insurance as set forth in Article 11. The term of Tenant's occupancy of the Storage Area shall at all times coincide with the Term of this Lease provided, however, Tenant shall not be obligated to pay Minimum Annual Rental or any Additional Rent for such Storage Area (except for utilities serving the Storage Area). Tenant shall perform all work necessary or desirable to prepare the Storage Area for its use. Tenant shall be required, at its cost, to bring all utilities to the Storage Area. Any improvements to be made to the Storage Area shall be made in accordance with plans and specifications to be provided by Tenant and approved by Landlord.

44. EXHIBIT B.

In the event that the kiosk is constructed on the Premises, Tenant shall be permitted to erect and install its temporary construction barricade in accordance with Landlord's criteria, including compliance with Landlord's barricade graphics program, at Tenant's expense.

In the event Tenant must reimburse Landlord for the cost of installing the temporary construction barricade, Landlord agrees that the charge therefor shall not exceed Fifty Dollars ($50.00) per lineal foot of such barricade.

IN WITNESS WHEREOF, Landlord and Tenant, personally or by their duly authorized agents, have executed this Lease Addendum as of the day and year first above written.

MELT (CALIFORNIA) INC.,
a California corporation
By: /s/ Clive Barwin
Its: President and Secretary

By: _______________________
Print Name: ________________
Its: _______________________
TENANT

WEA PALM DESERT LP,
a Delaware limited partnership
By: Westfield American GP LLC,
a Delaware limited liability company,
its general partner

By: Westfield America Limited
Partnership, a Delaware limited
partnership, its sole member

By: Westfield America, Inc.,
a Missouri corporation,
its general partner

Landlord
By: /s/Sigrid Dugall
Title: Assistant Secretary

EXHIBIT B

DESIGN AND CONSTRUCTION OF THE KIOSK

I. LANDLORD'S WORK

A. The term "Landlord's Work" shall refer to and mean Landlord's total responsibilities for the improvement of the kiosk location. Any item of work required to complete the kiosk which is not hereinafter specifically made the responsibility of Landlord, shall be considered to be a part of Tenant's Work, as further described under Part II of this Exhibit B. Unless otherwise stated, Landlord's Work will be performed at Landlord's sole cost and expense.

1. A basic building structure, with finished Common Areas, constructed of such materials as are permitted by the governing codes.

2. All building finishes outside of the Premises which are not specifically made the responsibility of Tenant or another tenant of the Shopping Center.

B. Landlord shall designate the maximum size and location of Tenant's kiosk in the Premises. Such criteria shall be indicated on the Exhibit A-2 attached to the Lease.

II. TENANT'S WORK

A. The term "Tenant's Work" shall refer to and mean Tenant's responsibilities for the construction and improvement of the kiosk to be installed in the Premises, at Tenant's sole cost and expense. Such responsibilities shall include all work necessary and/or required to complete the kiosk, except those items specifically set forth as Landlord's Work under Part I of this Exhibit B, and shall include, but not be limited to, the following construction, equipment, improvements and/or services:

1. Tenant shall design, construct, install and maintain a finished kiosk in compliance with the following:

a. This Exhibit B.

b. Landlord's standard kiosk criteria manual for the Shopping Center.

c. All applicable laws, codes, regulations and ordinances.

d. All applicable standards of the American Insurance Association, the National Electrical Code, Landlord's insurance carrier, the local building regulations and the requirements of all jurisdictional authorities.

e. Tenant's Final Working Drawings, as approved by Landlord.

In the event of a conflict between any of the above-referenced items, the most stringent requirement shall govern each increment of Tenant's Work.

2. Tenant shall perform any and all demolition and repair work necessary to facilitate Tenant's construction, installation and/or occupancy of the Premises.

3. Tenant shall provide and install, at its sole cost and expense, all trade fixtures, counters, casework, cabinets and display elements, signage, floor coverings, if any, and personal property (including but not limited to, any equipment and security devices) as may be required to complete the Premises.

4. Installation of Tenant signage shall be performed by Tenant as a part of Tenant's Work and shall comply with the following provisions:

a. Tenant shall submit all plans, details and specifications for Tenant's signage, as required by Landlord, prior to fabrication and/or installation of the signs therefor, which shall be subject to the prior approval of Landlord, and where applicable, the prior approval of all jurisdictional authorities, Department Stores within the Shopping Center and/or such other party which Landlord may deem appropriate.

b. All Tenant signage shall be designed and constructed to comply with all governing codes, ordinances and the kiosk signage criteria established by Landlord for the Shopping Center.

5. Tenant shall provide an assigned area within the kiosk for the storage of trash and shall arrange with Landlord for the periodic removal of such trash from the kiosk.

6. Tenant shall provide areas within the kiosk for storage of all merchandise and stock. Tenant may negotiate with Landlord for the use of additional storage areas, remote from the Premises, if available, at a cost determined by Landlord.

7. Tenant shall be required to keep the kiosk clean and neat and provide for general housekeeping, including the maintenance and cleaning of all signage.

8. Tenant shall arrange and pay for all required permits, licenses, variances, occupancy and/or special use permits from the local jurisdictional authorities, as may be required to facilitate Tenant's occupancy of the Premises.

9. Tenant shall not decorate, paint or in any other manner alter, install or affix any device, fixture or attachment upon or to the exterior of the kiosk, without Landlord's prior written consent; and if Tenant shall do any of the foregoing acts in contravention of this provision, Landlord shall have the right to remove any such decoration, paint, alteration, device, fixture or attachment and restore the Premises to the condition thereof prior to such act and the cost of such removal and restoration shall be paid by Tenant to Landlord upon demand.

B. Completion of utility installations and connections to the utility facilities shall be performed by Tenant as a part of Tenant's Work. All such utility connection and extension work shall be subject to Landlord's prior approval and performed in accordance with the following provisions:

1. Tenant shall connect to and extend from the electrical and telephone services provided by Landlord, as may be required to complete such services to and within Tenant's kiosk. All such connection and extension work shall be subject to Landlord's prior approval.

2. Tenant shall perform the following electrical service work:

a. Make application for metered electrical service from the serving utility company and comply with all utility company requirements for such metered service.

b. Installation of a 120/208 volt, 3 phase, 4 wire, 60 cycle, 60 amp (minimum) main electrical service to a location below the kiosk selected by Landlord. Such electrical service shall consist of the following facilities:

(1) Main electrical service distribution equipment within a remote electrical service area, from which Tenant's main electrical service will be available.

(2) A minimum 60 amp fusible disconnect switch or main circuit breaker, as selected by Landlord, located within the remote electrical service area and fully connected to the main distribution equipment.

(3) A minimum 60 amp meter socket located within the remote electrical service area and fully connected to the fusible disconnect switch or main circuit breaker.

(4) Main electrical service conduit and conductors, sized for a minimum 60 amp electrical service, from the remote electrical service area to a floor junction box below the kiosk location. The floor junction box location shall be as selected by Landlord.

(5) Furnish and install all required fuses, fuse clips, etc..., in the main electrical service disconnect switch.

(6) Connect to and extend main electrical service conduit and conductors below the kiosk to a suitable main disconnect switch or main circuit breaker panelboard location within the kiosk.

(7) Provide all required electrical system installations within the kiosk in accordance with all applicable codes, ordinances and as specified in the Landlord's kiosk criteria for the Shopping Center.

c. In the event Tenant requires electrical service in excess of the 60 amp service described above, all costs of providing such increased service shall be fully paid by Tenant. All requests for increased electrical service shall be subject to the Landlord's prior approval. All work shall be performed in a manner acceptable to Landlord and shall include, but not limited to, the procurement and installation of all required main electrical service disconnect switches, meters, meter bases and/or current transformers.

3. Tenant shall perform the following telephone service work:

a. Apply for telephone service to the kiosk from the serving telephone company and comply with all telephone company requirements for such service. Tenant shall pay the serving telephone company directly for such telephone service to the kiosk when billed therefor.

b. Installation of a main telephone service for Tenant's use, consisting of the following facilities:

(1) A remote telephone service main terminal board at a location outside the kiosk selected by Landlord, from which Tenant's main telephone service will be available. Said terminal board shall be provided in accordance with the requirements of the telephone company providing service to the building.

(2) Installation of an empty main telephone service conduit from the remote terminal board to a floor junction box below the kiosk location. The floor junction box location shall be as selected by Landlord.

(3) Provide and install, as required, all telephone service cable from the remote terminal board to and within the kiosk.

(4) Tenant shall provide all necessary telephone service outlets, devices, equipment and instruments within the kiosk.

4. Tenant shall ensure that all slab penetrations made as a part of Tenant's Work are properly sealed and remain watertight to prevent possible damage. Failure to do so shall be at the sole risk and expense of Tenant in the event damage occurs.

5. If Tenant is permitted under the Lease to engage in the preparation and/or sale of food and beverages from the Premises, Tenant shall make all required plumbing system installations to serve the Premises. Where provided, Tenant shall connect to, and extend from, the sanitary sewer and domestic water service mains provided by Landlord for the Premises. All such installations shall comply with all agencies having jurisdiction thereover, including the following provisions:

a. Tenant shall make application for a dedicated metered water service as required.

b. Tenant shall procure and install a dedicated water meter and pressure regulating valve as required.

C. Except as may be expressly provided in the Lease, Tenant shall be responsible for any changes, modifications and/or additions to any item of work provided by Landlord. All such changes, modifications and/or additions shall be subject to the Landlord's prior approval.

D. Tenant shall not install or cause to be installed any structures, antennas or equipment of any kind outside of the kiosk or on the top of the kiosk, without the prior written consent of Landlord.

III. PLANS

A. Concurrent with or prior to the delivery to Tenant of a fully executed counterpart of this Lease, Landlord shall deliver to Tenant one (1) copy of the Landlord's standard kiosk criteria manual for the Shopping Center. Landlord's kiosk criteria manual is provided to familiarize Tenant's architect, engineers and contractors with Landlord's minimum basic design criteria and construction requirements, and to assist in Tenant's plan development and construction of the kiosk. All details and information contained in the Landlord's kiosk criteria manual, whether appearing on Tenant's plans or not, shall be considered a part of Tenant's plans and construction requirements. Tenant's general contractor and all subcontractors must construct Tenant's kiosk in accordance with code, Landlord's approved Tenant plans and the Landlord's kiosk criteria manual. By this reference, the Landlord's kiosk criteria manual is incorporated herein and made a part of this Lease. This Exhibit B and Landlord's kiosk criteria manual are hereinafter collectively referred to as "Tenant's Construction Requirements".

B. Within five (5) calendar days after the date of this Lease or such date as may be required by Landlord for Tenant to achieve its Rental Commencement Date, Tenant shall, at Tenant's sole cost and expense:

1. Engage the services of a licensed architect and licensed electrical engineer (if required), hereinafter referred to as "Tenant's Architect and Engineer", for the purpose of preparing Plans and Specifications for Tenant's Work.

2. Notify Landlord of the identity of Tenant's Architect and Engineers.

C. Tenant agrees that Tenant's Architect and Engineers can act as Tenant's agents for all Tenant design and plan development purposes and obligations of the Exhibit B. Tenant shall pay all fees of its Architect. In addition, Tenant shall pay to Landlord upon receipt of a statement therefore for Coordination and Administration Services a fee of Five Hundred and No/100 Dollars ($500.00) if the kiosk is constructed on the Premises .

D. Within fifteen (15) calendar days after the date of this Lease or such date as may be required by Landlord for Tenant to achieve its Rental Commencement Date, Tenant shall, at Tenant's sole cost and expense, cause Tenant's Architect and Engineers to coordinate, prepare and deliver to Landlord for Landlord's approval, the following:

1. One (1) sample board of Tenant's final kiosk materials and colors.

2. One (1) colored rendering or 8" x 10" colored photograph of Tenant's final kiosk design.

3. Two (2) blueline sets of preliminary plans for Tenant's Work, containing architectural and electrical system details, based on the information provided in the Landlord's kiosk criteria. Both sets of plans shall have been initialed by Tenant, thereby evidencing Tenant's approval thereof.

E. Tenant covenants and agrees that the preliminary plans will have been prepared in strict accordance with Tenant's Construction Requirements. Landlord shall promptly review the plans and notify Tenant's Architect of the matters, if any, in which the preliminary plans fail to meet with Landlord's approval. Promptly upon receipt of any such notice from Landlord, Tenant and/or Tenant's Architect shall cause the preliminary plans to be revised in such manner as is required to obtain Landlord's approval and shall submit the revised preliminary plans for Landlord's approval. Upon Landlord's determination that the preliminary plans are satisfactory, Landlord shall cause one (1) set of the plans to be initialed on Landlord's behalf, thereby evidencing Landlord's approval thereof. Landlord shall return such set so initialed to Tenant and/or Tenant's Architect. The preliminary plans bearing Landlord's approval shall become and are hereinafter referred to as the "Preliminary Plans".

F. Within thirty (30) calendar days after the date of this Lease or such date as may be required by Landlord for Tenant to achieve its Rental Commencement Date, Tenant shall, at Tenant's sole cost and expense, cause Tenant's Architect and Engineers to coordinate, prepare and deliver to Landlord, in one (1) package, one (1) complete sepia set of architectural and electrical system working drawings and specifications. Such working drawings shall have been initialed by Tenant, thereby evidencing Tenant's approval thereof.

G. Tenant covenants and agrees that the working drawings will have been prepared in conformity with the Preliminary Plans and in strict accordance with Tenant's Construction Requirements. Landlord shall promptly review the working drawings and notify Tenant's Architect of the matters, if any, in which the working drawings and specifications fail to conform to the Preliminary Plans and Tenant's Construction Requirements. Within ten (10) calendar days after receipt of any such notice from Landlord, Tenant and/or Tenant's Architect shall cause the working drawings and specifications to be revised in such a manner as is required to obtain Landlord's approval and shall submit one (1) complete sepia set of revised working drawings and specifications for Landlord's approval. Upon Landlord's determination that the working drawings and specifications conform to the Preliminary Plans and Tenant's Construction Requirements, Landlord shall cause one (1) set of the plans and specifications to be initialed on Landlord's behalf, thereby evidencing Landlord's approval thereof. Landlord shall return such set so initialed to Tenant and/or Tenant's Architect. The working drawings and specifications bearing Landlord's final approval shall become and are hereinafter referred to as the "Final Working Drawings".

H. Prior to the commencement of Tenant's construction, Tenant and/or Tenant's general contractor shall submit one (1) full set of Final Working Drawings, endorsed with the approval stamp and permit number of the local municipality's building department, local fire marshal and other governmental entity having jurisdiction over the construction, to Landlord's tenant construction coordinator.

I. After Landlord's approval of the Final Working Drawings, no changes shall be made in the Final Working Drawings except with the prior written approval of Landlord. However, in the course of construction Landlord may make such changes in, on or about the building as may be required as a result of "as built" conditions. During all phases of plan development and prior to bidding plans and/or commencing construction, Tenant shall make a physical on site inspection of the Premises and/or cause Tenant's Architect and/or engineer(s) to do so, to verify the existing location, conditions and physical dimensions of the Premises and conformance of the Final Working Drawings thereto. Failure to do so shall be at the sole risk and expense of Tenant. Landlord's plan review and/or approval is for compliance with Landlord's criteria only, and this approval does not relieve Tenant of responsibility for compliance with the Lease, field verification of dimensions and existing conditions, discrepancies between Final Working Drawings and as-built conditions of the Premises, coordination with other trades and job conditions or compliance with all governing codes and regulations applicable to Tenant's Work. No responsibility for proper engineering, safety and/or design of facilities or compliance with all applicable governing codes and regulations is implied or inferred on the part of Landlord by this plan approval.

J. In the event Tenant fails to comply with any of the requirements stated under Sections A through I inclusive above, Landlord may, at any time thereafter, give Tenant notice that Tenant is in default of the Lease. Such notice shall describe the nature of Tenant's default and shall specify a date not less than thirty (30) calendar days after the giving of such notice by which such default must be cured. Unless prior to such date Tenant makes the required submissions, Tenant shall be deemed incurably in default of the Lease, and Landlord shall be entitled to all remedies specified in the Lease.

IV. GENERAL REQUIREMENTS.

A. Any and all plans, specifications and/or written descriptions submitted by Tenant for Landlord's approval shall:

1. Comply with standards established by Landlord with respect to location and design of conduit, equipment and other facilities.

2. Include a complete description and delineation of all work required of and/or proposed by Tenant.

B. Any contractor or subcontractor participating in Tenant's Work shall be duly licensed and each contract and subcontract shall contain a guaranty that the portion of Tenant's Work performed by such contractor or subcontractor will be free from any and all defects in workmanship and materials for the period of time of not less than one (1) year after the completion of Tenant's Work. All warranties or guarantees as to materials or workmanship on or with respect to Tenant's Work shall be written so that they shall inure to the benefit of Landlord and Tenant as their respective interests may appear and can be directly enforced by either, and Tenant shall give to Landlord any assignments or other assurance necessary to effectuate the same.

C. The following provisions with respect to construction and/or installation procedures shall apply to Tenant's Work:

1. Tenant's Work shall be performed in thoroughly first-class and workmanlike manner and shall be in good and usable condition at the date of completion thereof.

2. Tenant shall pay for all necessary permits and/or fees required by public authorities and/or utility companies with respect to Tenant's Work.

3. Tenant's Work shall be coordinated with all work being performed or to be performed by Landlord and other occupants of the Shopping Center to the extent that Tenant's Work will not interfere with or delay the completion of any other work. No contractor or subcontractors participating in Tenant's Work shall at any time damage, injure, interfere with or delay the completion of the building or any other construction within the Shopping Center, and each of them shall comply with all procedures and regulations prescribed by Landlord for the integration of Tenant's Work with the work to be performed in connection with the building and all other construction within the Shopping Center.

4. Properly protect Tenant's Work with lights, guardrails and barricades and secure all parts of Tenant's Work against accident, storm and any other hazard. All Tenant Work must be performed behind a temporary construction barricade.

Landlord may provide for Tenant's account, as Landlord deems necessary and/or practical, in the Landlord's sole opinion, a temporary construction barricade for Tenant's use in the area of the Premises. Landlord shall backcharge Tenant directly for this barricade, prior to the start of Tenant's Work, or at such other time as Landlord may deem appropriate.

In the event Landlord does not provide a temporary construction barricade for the Premises, as set forth above, Tenant and/or Tenant's General Contractor shall be required to provide a temporary construction barricade in accordance with all Landlord requirements for such installations, including Landlord's barricade graphics program, at Tenant's expense. Such barricade shall be a dust-proof, solid barricade which shall cover the entire work area in the mall and installed prior to the commencement of Tenant's Work. Adequate protection to that portion of the mall floor enclosed by said barricade shall be provided, and any damage to said floor, including but not limited to staining by liquid or foodstuff, shall be repaired or replaced by Landlord at Tenant's expense.

5. All materials used in Tenant's Work shall be of new, commercial grade and first-class quality.

V. COMPLETION OF CONSTRUCTION

A. Upon completion of Tenant's Work and prior to opening the Premises for business, Tenant shall obtain from Landlord, a certificate which states that Tenant has complied with all opening requirements under this Lease ("Opening Certificate"). Tenant shall not be permitted to, and shall not, open the Premises for business in the kiosk until Landlord has delivered, and both Landlord and Tenant have signed the Opening Certificate. Tenant agrees that Landlord may withhold the Opening Certificate, based upon Landlord's good faith determination that Tenant has failed to satisfy all opening requirements under this Lease, until such time as, in the Landlord's sole opinion, Tenant has satisfied all opening requirements. Tenant further agrees that Landlord's withholding of the Opening Certificate shall not limit any of Tenant's obligations under this Lease and shall not subject Landlord to any claims or liability. No approval by Landlord shall make Landlord responsible for the condition of the kiosk or constitute a representation by Landlord of compliance with any applicable requirements or constitute a waiver of any rights and remedies that Landlord may have under this Lease or at law or in equity. If Tenant shall open the Premises in violation of the requirements of this section, such action by Tenant shall constitute a material default under this Lease. When Tenant opens the Premises for business, Tenant shall be deemed to have accepted the kiosk and agreed that it is in the condition, with respect to any of Landlord's obligations, which are required under this Lease.

B. Tenant shall commence Tenant's Work promptly after Landlord's approval of the Final Working Drawings, and upon completion of Tenant's Work, Tenant shall deliver to Landlord the following:

1. Tenant's final notarized original affidavit that Tenant's Work has been completed to Tenant's satisfaction and in strict accordance with the Final Working Drawings and Tenant's Construction Requirements, which affidavit may be relied on by Landlord and any deliberate or negligent misstatement, or any false statement made by Tenant therein, shall constitute a breach of this Lease.

2. The final notarized original affidavit of the general contractor performing Tenant's Work to the effect that Tenant's Work has been fully completed in accordance with the Final Working Drawings and that all subcontractors, laborers and material suppliers engaged in furnishing materials or rendering services for Tenant's Work have been paid in full.

3. A final notarized original, unconditional waiver of lien with respect to the Premises executed by said general contractor and, if requested by Landlord, final notarized original, unconditional waiver of liens executed by every subcontractor, laborer and material supplier engaged in or supplying materials or services for Tenant's Work, said waiver of lien documents must, in every circumstance, be totally unconditional releases.

C. Tenant shall begin the construction and/or installation of Tenant's Work immediately upon receipt of Landlord's final approval of Tenant's final plans for the kiosk, but not prior to the date upon which the kiosk location is sufficiently completed to permit the commencement of Tenant's Work, which date shall be established by written notice from Landlord to Tenant.

D. Tenant shall cause the completion of Tenant's Work and the installation of the items referred to in Part V of this Exhibit B no later than ~~fifteen (15)~~ thirty (30) calendar days after Landlord's delivery of the kiosk location to Tenant.

E. Tenant shall open the kiosk for business as provided under the provisions of this Lease.

F. Failure of Tenant to comply with the requirements of the preceding Sections C, D and E shall constitute a breach of this Lease which shall entitle Landlord, at its election and in addition to all other remedies set forth in this Lease, to take possession of the kiosk and either relet the same or terminate this Lease in accordance with the Lease .

EXHIBIT C

Additional Insured ENTITIES

WESTFIELD SHOPPINGTOWN PALM DESERT

Westfield America, Inc., Westfield Corporation, Inc., Westfield America Limited Partnership, Westfield America GP LLC, WEA Palm Desert LP, and any and all of their respective parent organizations, partners, subsidiaries and affiliates together with any mortgagee, as their interests may appear.

EXHIBIT D

INTENTIONALLY DELETED

GUARANTY

THIS GUARANTY (the "Guaranty") is made this 2nd day of October, 2003, by the undersigned ("Guarantor") to and for the benefit of WEA PALM DESERT LP, a Delaware limited partnership, ("Landlord").

WHEREAS, Landlord and MELT (CALIFORNIA) INC. , a California corporation, ("Tenant") have entered into that certain Lease dated October 14th, 2003 (the "Lease") for Premises located in WESTFIELD SHOPPINGTOWN PALM DESERT, City of Palm Desert, State of California as more fully described in the Lease; and

WHEREAS, it is a condition precedent to all the obligations of Landlord pursuant to the Lease that Guarantor shall have executed and delivered this Guaranty.

Now, therefore in consideration of and an inducement to the execution of this Lease by Landlord, the Guarantor hereby covenants and agrees as follows:

A. The Guarantor hereby guarantees the full, faithful and timely payment and performance by Tenant of all the payments, covenants and other obligations of Tenant under or pursuant to the Lease. If Tenant shall default at any time in the payment of any Minimum Annual Rental, Additional Rent or any other sums, costs or charges whatsoever, or in the performance of any of the other covenants and obligations of Tenant, under or pursuant to the Lease, then the Guarantor, at its expense, shall on demand of Landlord fully and promptly pay all Minimum Annual Rental, Additional Rent, sums, costs and charges to be paid by Tenant, under or pursuant to the Lease, and in addition shall, upon Landlord's demand therefor, pay to Landlord any and all sums due to Landlord, including (without limitation) all interest on past due obligations of Tenant, costs advanced by Landlord, and any and all damages and expenses, which may arise as a consequence of Tenant's default. The Guarantor hereby waives all requirements of notice of the acceptance of this Guaranty and all requirements of notice of breach or nonperformance by Tenant.

B. The obligations of the Guarantor hereunder are independent of, and may exceed, the obligations of Tenant. A separate action or actions may, at Landlord's option, be brought and prosecuted against the Guarantor, whether or not any action is first or subsequently brought against Tenant, or whether or not Tenant is joined in any such action, and the Guarantor may be joined in any action or proceeding commenced by Landlord against Tenant arising out of, in connection with or based upon the Lease. The Guarantor waives any right to require Landlord to proceed against Tenant or pursue any other remedy in Landlord's power whatsoever, any right to complain of delay in the enforcement of Landlord's rights under the Lease, and any demand by Landlord and/or prior action by Landlord of any nature whatsoever against Tenant, or otherwise.

C. This Guaranty shall remain and continue in full force and effect and shall not be discharged in whole or in part notwithstanding (whether prior to or subsequent to the execution hereof) any alteration, renewal, extension, modification, amendment or assignment of, or subletting, concession, franchising, licensing or permitting under, the Lease. The Guarantor hereby waives all requirements of notice of all of the foregoing, and agrees that the liability of the Guarantor hereunder shall be based upon the obligations of Tenant set forth in the Lease as the same may be altered, renewed, extended, modified, amended or assigned. For the purpose of this Guaranty and the obligations and liabilities of the Guarantor hereunder, "Tenant" shall be deemed to include any and all concessionaires, licensees, franchisees, department operators, assignees, subtenants, permittees or others directly or indirectly operating or conducting a business in or from the Premises, as fully as if any of the same were the named Tenant under the Lease.

D. The Guarantor's obligations hereunder shall remain fully binding although Landlord may have waived one or more defaults by Tenant, extended the time of performance by Tenant, released, returned or misapplied other collateral at any time given as security for Tenant's obligations (including other guaranties) and/or released Tenant from the performance of its obligations under the Lease.

E. This Guaranty shall remain in full force and effect notwithstanding the institution by or against Tenant of bankruptcy, reorganization, readjustment, receivership or insolvency proceedings of any nature, or the disaffirmance of the Lease in any such proceedings or otherwise.

F. If this Guaranty is signed by more than one party, their obligations shall be joint and several, and the release of one of such guarantors shall not release any other of such guarantors. If this Guaranty is signed on behalf of a corporation, partnership or other entity, the signer is duly authorized to execute this obligation on behalf of such corporation, partnership or other entity.

G. This Guaranty shall be applicable to and binding upon the heirs, executors, administrators, representatives, successors and assigns of Landlord, Tenant and the Guarantor. Landlord may, without notice, assign this Guaranty in whole or in part.

H. The execution of this Guaranty prior to execution of the Lease shall not invalidate this Guaranty or lessen the obligations of the Guarantor(s) hereunder.

I. Provided that Tenant is not then in default beyond any applicable cure periods set forth in the Lease, this Guaranty shall terminate and the obligations of the undersigned hereunder shall be of no further force and effect on the date that is twenty four (24) months from the Rental Commencement Date of the Lease with respect to Lease obligations first accruing or occurring after such date.

IN WITNESS WHEREOF, the Guarantor has executed this Guaranty this 2nd day of October, 2003.

MELT, INC. ,

a Nevada Limited Liability Corporation

Signature: /s/ Clive Barwin

Name: Clive Barwin

Title: President

Address: 5651 Dolly Avenue

Buena Park, California 90621

Attn: Clive Barwin

CLARK, WILSON
BC's Law Firm for Business

Our File No. 26340/0001 / D/JJK/516569.1

October 22, 2003

Melt Inc.
14 John Dykes Avenue
Vaucluse, NSW Australia 2030

Dear Sirs:

Re: Common Stock of Melt Inc. Registered on Form SB-2

We have acted as counsel to Melt Inc., a Nevada corporation (the "Company"), in connection with the filing of a registration statement on Form SB-2 (the "Registration Statement") in connection with the registration under the Securities Act of 1933 , as amended, of up to 13,230,000 shares of the Company's common stock for resale by certain selling stockholders named in the Registration Statement, filed on October 22, 2003, which shares of common stock were issued in private placements as described in the Registration Statement.

We have examined the originals or certified copies of such corporate records, certificates of officers of the Company and/or public officials and such other documents and have made such other factual and legal investigations as we have deemed relevant and necessary as the basis for the opinions set forth below. In our examination, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as copies or as facsimiles of copies or originals, which assumptions we have not independently verified.

Based upon the foregoing and the examination of such legal authorities as we have deemed relevant, and subject to the qualifications and further assumptions set forth below, we are of the opinion that the Registered Shares were duly and validly authorized and issued, fully paid and non-assessable.

We have attorneys admitted to practice in California, Florida, New York, Washington, Virginia and the District of Columbia, British Columbia and Ontario but not admitted to practice in Nevada. However, we are generally familiar with the Nevada Revised Statues ("NRS") of the State of Nevada. We have made such inquiries with respect to the NRS as we consider necessary to render this opinion with respect to a Nevada corporation.

We hereby consent to the filing of this opinion as an exhibit to the Registration Statement. In giving this consent, we do not admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933 or the General Rules and Regulations of the Securities and Exchange Commission.

Yours truly,

CLARK, WILSON

/s/ Clark, Wilson

WLM/jjk

Agreement between

Melt (California) Inc. (herein known as Melt)

And

P.G.I. of Saugatuck, Inc (herein known as PGI)

Dated

September 30, 2003

The parties agree as follows:

PGI is a manufacturer of Italian artisan ice cream; both the gelato and sorbetto are made to order fresh with true raw ingredients. PGI is willing and interested in supplying Melt with ice cream products manufactured by PGI.

Melt is a retailer and distributor of Italian artisan ice cream and is willing and interested in entering into a business relationship to purchase for it's company owned and franchised stores and distribute ice cream manufactured by PGI to restaurants and other independently owned outlets.

Terms of the agreement are as follows:

1. PGI will supply its products to Melt which include gelato and sorbetto Italian artisan ice cream.

2. If Melt provides recipe's for the production of Melt's brand of Italian ice cream then PGI will keep this information confidential and not disclose it outside third parties.

3. PGI will endeavour to manufacturer and ship from it's location in Saugatuck each order within 10 days of receipt of the order. In no event will PGI take more than 15 days to manufacturer and ship each order. Transmission of the order will be by either fax or electronic mail.

4. PGI will not be required to keep inventory, however if PGI decides to keep inventory of certain flavours, it may do so, however in no instances will PGI ship product that has been manufactured more than 30 days prior to shipment.

5. PGI will be responsible for shipping product to each retail or wholesale location as per each purchase order provide by Melt at PGI's expense. The product will be delivered to the storage area of each of Melt locations as per each purchase order. If the shipping costs are greater than 10% of the costs of the product Melt will be responsible for the payment of the excess fright charges above 10%.

6. PGI has agreed to supply product to Melt based on the following delivered prices for 2.5 gal 320 fl oz drums,

Italian Ices $20.00
Sorbetto Flavours $34.00
Gelato - Basic Flavours $35.00
Gelato - Premium Flavours $37.50

These prices are based on each order being for 120 drums. If any order is for less than 120 drums then the price for that order will be negotiated accordingly at the time of PGI receiving the order. These prices may increase if PGI's cost of supplies increase.

7. The following flavours are listed as the initial flavours, those marked in red are classified as premium flavours. If any new flavours are ordered at a later date PGI will advise if any of the new flavours are premium flavours when an order is received, if Melt is not advised then the price of new gelato flavours will be $35.00.

Item Code		Description
1100-001		Red Raspberry Sorbetto
1100-002		Lemon Sorbetto
1100-003		Mango Sorbetto
1100-004		Mixed Berry Sorbetto
1100-005		Passion Fruit Sorbetto
1100-006		Strawberry Sorbetto
1200-001		Strecchatella Gelato
1200-002		Tiramisu Kalaha Gelato
1200-003		Black Cherry Zinfandel Gelato
1200-004		Almond Ameretto
1300-001		White Chocolate Raspberry Gelato
1300-002		Swiss Chocolate Couverture Gelato
1300-003		Triple White Chocolate Gelato
1300-004		Cappuccino Hazelnut Gelato
1300-005		Rocher Gelato
1300-006		Espresso Gelato
1400-001		Tahitian Vanilla Honey
1400-002		Strawberry Gelato
1400-003		Crème de Mint Chip Gelato
1400-004		Café Carmel Gelato
1400-005		French Vanilla with Bean Specks Gelato
1400-006		Cream Caramel Gelato
1400-007		Roasted Pistachio Gelato
1400-008		Coconut Gelato
1400-009		Chocolate Chip Gelato
1400-010		Raspberry Gelato
1500-001		Double Dutch Chocolate
1500-002		Macan Island Fudge
1500-003		Toasted Coconut Almond Fudge
1500-004		Banana Caramel Praline Gelato
1500-005		Dark Chocolate Fudge Cookie Gelato
1500-006		Peanut Butter Cookie Gelato

8. Terms of payment: Melt will provide PGI with an initial payment of $4,000.00 prior to the shipment of the first order. This payment will serve as a security deposit to safe guard PGI. All invoices will be paid by Melt 15 days from date of invoice.

9. Site inspections: PGI agree to allow personnel from Melt access to the factory at any time during normal working hours.

10. PGI agree to supply Melt the main ingredients used and the nutritional contents of each flavour. It is agreed that the details will only be approximate by flavour, and will not be scientific calculation. It is envisaged by PGI that PGI should be able to supply the nutritional contents during the first quarter of 2004.

11. PGI agree not to supply product to stores owned by Brian Davimes and Debbie Davimes operating under the name of Scoop or any other name, provided annual purchases are in excess of $100,000 after the second year of operations.

By signing this agreement both parties agree to be bound by its terms

Signed and accepted for:

P.G.I. of Saugatuck, Inc Melt (California) Inc.

/s/ Pete Palazzolo /s/ Clive Barwin
_________________________ _____________________
Pete Palazzolo - President Clive Barwin - President

/s/ Signed /s/ Signed
_______________________ ______________________
Witness Witness

Name	Position Held with the Company	Age	Date First Elected or Appointed
Clive Barwin	President, CEO, Secretary and Director	49	July 18, 2003
Brandon Barwin	Vice-President and Director	38	August 1, 2003

	PAGE NUMBER
PROSPECTUS SUMMARY	6
RISK FACTORS	7
RISKS RELATED TO OUR BUSINESS	7
We have had negative cash flows from operations and if we are not able to obtain further financing our business operations may fail	7
We have only commenced our business operations in July, 2003 and we have a limited operating history. If we cannot successfully manage the risks normally faced by start-up companies, our business may fail	8
The fact that we have not earned any revenues since our incorporation and we are a development stage company raises substantial doubt about our ability to continue as a going concern or to establish and operate a successful business. If we are unable to establish and generate revenues our business will fail and you may lose some or all of your investment in our common stock.	8
We have not generated any revenues from our business operations and we will need to raise additional funds in the near future. If we are not able to obtain future financing when required, we might be forced to discontinue our business	8
All of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers	9
If we are unable to protect our trade name, our efforts to increase public recognition of our brand may be impaired	9
The establishment and maintenance of brand identity of our products is critical to our future success. If we are unable to promote and maintain our brands our business could be materially affected	9
We will be subject to risks associated with the retail frozen desert industry	9
Because we face intense competition, an investment in our company is highly speculative	10
Because we depend on a small group of qualified people, if we cannot hire and retain qualified personnel, we might be forced to discontinue our operations	10
Because our officers, directors and principal shareholders control a majority of our common stock, investors will have little or no control over our management or other matters requiring shareholder approval	10
Because we do not have sufficient insurance to cover our business losses, we might have uninsured losses, increasing the possibility that you would lose your investment	10
Because we can issue additional common shares, purchasers of our common stock may incur immediate dilution and may experience further dilution	11
RISKS ASSOCIATED WITH OUR COMMON STOCK	11
There is no active trading market for our common stock and if a market for our common stock does not develop, our investors will be unable to sell their shares	11
Because we do not intend to pay any dividends on our common shares, investors seeking dividend income or liquidity should not purchase shares in this offering	11
NASD sales practice requirements may also limit a stockholder's ability to buy and sell our stock	11
FORWARD-LOOKING STATEMENTS	12
SECURITIES AND EXCHANGE COMMISSION'S PUBLIC REFERENCE	12
THE OFFERING	12
DETERMINATION OF OFFERING PRICE	12
USE OF PROCEEDS	13
DILUTION	13
DIVIDEND POLICY	13
SELLING STOCKHOLDERS	13
PLAN OF DISTRIBUTION	16
TRANSFER AGENT AND REGISTRAR	18
LEGAL PROCEEDINGS	18
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS	18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	19
DESCRIPTION OF COMMON STOCK	20
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	20
INTEREST OF NAMED EXPERTS AND COUNSEL	21
EXPERTS	21
DISCLOSURE OF SEC POSITION OF INDEMNIFICATION FOR SECURITIES ACT LIABILITIES	21
DESCRIPTION OF PROPERTY	21
DESCRIPTION OF BUSINESS	21
MANAGEMENT'S DISCUSSION AND ANALYSIS	23
PLAN OF OPERATIONS	24
NEW ACCOUNTING PRONOUNCEMENTS	26
APPLICATION OF CRITICAL ACCOUNTING POLICIES	27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	27
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	28
EXECUTIVE COMPENSATION	28
REPORTS TO SECURITY HOLDERS	30
FINANCIAL STATEMENTS	30
WHERE YOU CAN FIND MORE INFORMATION	40

	From July 18, 2003 (Date of Inception) to September 15, 2003 ⁽¹⁾
Revenue	$Nil
Net Loss for the Period	$9,800
Loss Per Share - basic and diluted	$(0.03)
	As at September 15, 2003
Working Capital	$301,750
Total Assets	$317,550
Total Number of Issued Shares of Common Stock	18,730,000
Deficit	$9,800
Total Stockholders' Equity	$301,750

Name of Selling Stockholder and Position, Office or Material Relationship with Melt Inc.	Common Shares owned by the Selling Stockholder ⁽²⁾	Total Shares to be Registered Pursuant to this Offering	Number of Shares Owned by Selling Stockholder After Offering and Percent of Total Issued and Outstanding ⁽¹⁾
	Common Shares owned by the Selling Stockholder ⁽²⁾	Total Shares to be Registered Pursuant to this Offering	# of Shares	% of Class
Keith John Taylor	900,000	900,000	Nil	0%
Darryl Fain	900,000	900,000	Nil	0%
Ashley Goldberg	900,000	900,000	Nil	0%
First Rock Trustees Limited Re The Sunshine Trust ⁽³⁾	900,000	900,000	Nil	0%
Roy Martin Shotland	900,000	900,000	Nil	0%
Pacific Packaging Inc. ⁽⁴⁾	900,000	900,000	Nil	0%
Mark Hoffman	900,000	900,000	Nil	0%
The Rosenbaum Family Trust ⁽⁵⁾	800,000	800,000	Nil	0%
Lance Rosenberg	800,000	800,000	Nil	0%
Spinite Pty Ltd. ⁽⁶⁾	800,000	800,000	Nil	0%
Nolan Goldstein	900,000	900,000	Nil	0%
The Diamond Trust ⁽⁷⁾	900,000	900,000	Nil	0%
The Marble Trust ⁽⁸⁾	900,000	900,000	Nil	0%
The Norwood Trust ⁽⁹⁾	1,800,000	1,800,000	Nil	0%
Sussan Aalam	1,000	1,000	Nil	0%
Rosil Bosco	1,000	1,000	Nil	0%
Silvia Bosco	1,000	1,000	Nil	0%
Karen Egan	1,000	1,000	Nil	0%
Gregory Gillan	1,000	1,000	Nil	0%
Joanne Gillan	1,000	1,000	Nil	0%
Paul Gillan	1,000	1,000	Nil	0%
Nicole Gillan	1,000	1,000	Nil	0%
Austin Gillan	1,000	1,000	Nil	0%
Maria Gillan	1,000	1,000	Nil	0%
Jennifer Elizabeth Grant	1,000	1,000	Nil	0%
Zeth John Grant	1,000	1,000	Nil	0%
Noel Lynam	1,000	1,000	Nil	0%
Craig Maltz	1,000	1,000	Nil	0%
Sungjin Moon	1,000	1,000	Nil	0%
Ian Leonard Plasto	1,000	1,000	Nil	0%
Loren Pogroske	1,000	1,000	Nil	0%
Alireza Saffari	1,000	1,000	Nil	0%
Heeva Shahriari	1,000	1,000	Nil	0%
Darya Shahriari	1,000	1,000	Nil	0%
Alyson Sharpe	1,000	1,000	Nil	0%
Lance Suntup	1,000	1,000	Nil	0%
Yan Ping Zhao	1,000	1,000	Nil	0%
Kurt Dalton	1,000	1,000	Nil	0%
Andre Charles Dalton	1,000	1,000	Nil	0%
Andre Dalton	1,000	1,000	Nil	0%
Exit Out Pty Ltd. ⁽¹⁰⁾	1,000	1,000	Nil	0%
Lee-Anne Plasto	1,000	1,000	Nil	0%
World Wide Investments (Qld) Pty Ltd. ⁽¹¹⁾	1,000	1,000	Nil	0%
A.T.D. Finance Pty. Ltd. ⁽¹⁰⁾	1,000	1,000	Nil	0%
Total:	13,230,000	13,230,000

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percentage of Class ⁽¹⁾
Clive Barwin 14 John Dykes Avenue, Vaucluse, NSW 2030 Australia	2,700,000	14.4%
Brandon Barwin 34 - 11491 7th Avenue, Richmond, British Columbia, Canada V7E 4J5	1,000,000	5.3%
Glynis Sive 14 John Dykes Avenue, Vaucluse, NSW 2030 Australia	1,800,000	9.6%
Directors and Officers (as a group)	3,700,000	19.8%

Estimated Funding Required for the Fifteen Months Ending December 31, 2004
Operating expenses Cost of sales	$1,825,000
Marketing	$175,000
General and Administrative	$1,000,000
Capital Cost of opening 12 retail locations (average of $175,000 per location)	$1,700,000
Working capital	$150,000
Total	$4,850,000

SUMMARY COMPENSATION TABLE
		Annual Compensation			Long Term Compensation ⁽¹⁾
					Awards		Payouts
Name and Principal Position	Year	Salary	Bonus	Other Annual Compen- sation ⁽¹⁾	Securities Underlying Options/ SARs Granted	Restricted Shares or Restricted Share Units	LTIP Payouts	All Other Compen- sation
Clive Barwin President, CEO, Secretary and Director ⁽²⁾	2003	Nil	Nil	Nil	Nil	Nil	Nil	Nil

CURRENT ASSETS
Cash in trust account	$ 311,550
Prepaid expenses - accounting fees	6,000

TOTAL CURRENT ASSETS	$ 317,550

CURRENT LIABILITIES
Accrued professional fees	$ 10,600
Amount due to officer	4,400
Accrued taxes	800

TOTAL CURRENT LIABILITIES	15,800

STOCKHOLDERS' EQUITY
Common stock subscribed, par value $0.001 per share
Authorized - 100,000,000 shares	$ 311,550
Deficit accumulated during the development stage	(9,800 )

TOTAL STOCKHOLDERS' EQUITY		301,750

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$ 317,550

REVENUE	$ 0

PROFESSIONAL FEES	9,000

LOSS FROM OPERATIONS	(9,000)

INCOME TAXES	800

NET (LOSS)	$ (9,800 )

NET (LOSS) PER COMMON SHARE
Basic and diluted	$ ( .00 )

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic and diluted	18,730,000

	Common Stock		Paid-In Capital	Deficit Accumulated During The Development Stage
	Shares	Amounts	Paid-In Capital	Deficit Accumulated During The Development Stage

July 18, 2003 (Date of inception)	0	$ 0	$ 0	$ 0

Issuance of common stock for cash September 15, 2003	18,730,000	18,730	292,820	0

Net (loss) for the period from July 18, 2003 to September 15, 2003	0	0	0	(9,800 )

Balance, September 15, 2003	18,730,000	$ 18,730	$ 292,820	$ (9,800 )

CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$ (9,800)
Changes in operating assets and liabilities:	(6,000)
Prepaid expenses	11,400
Accrued expenses and taxes

NET CASH USED IN OPERATING ACTIVITIES		$ (4,400)

CASH FLOWS FROM INVESTING ACTIVITIES		0

CASH FLOW S FROM FINANCING ACTIVITIES:	311,550
Net proceeds from issuance of common stock	4,400
Borrowings from officer

NET CASH PROVIDED BY FINANCING ACTIVITIES		315,950

NET INCREASE IN CASH IN TRUST ACCOUNT AND BALANCE AT SEPTEMBER 15, 2003		$ 311,550

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest paid		$ 0

Taxes paid		$ 0

A reconciliation of net loss to net taxable loss is as follows:

Net loss per financial statements	$ 9,800
Net tax adjustments:
California taxes	(800)
Professional fees considered organization costs and are not deductible, but amortizable over 5 years	(9,000)
Amortization of organization costs	(750 )

Net taxable loss	$ 750

The components of deferred tax assets are as follows:
Net operating loss carryforward	$ 113
Unamortized organization costs	2,137
	2,250
Less valuation allowance	(2,250 )

Net deferred tax asset	$ 0

A reconciliation of the valuation allowance is as follows:

Balance at date of inception	$ 0
Addition for the period	2,250

Balance, at September 15, 2003	$ 2,250

SEC registration fees	$107.03
Printing and engraving expenses	$1,000 ⁽¹⁾
Accounting fees and expenses	$5,000 ⁽¹⁾
Legal fees and expenses	$15,000 ⁽¹⁾
Transfer agent and registrar fees	$1,000 ⁽¹⁾
Fees and expenses for qualification under state securities laws	$0
Miscellaneous	$1,000 ⁽¹⁾
Total	$23,107.03

Name of Stockholder		Number of Common Shares Subscribed		Proceeds Received $
Clive Barwin		2,700,000		44,550.00
Brandon Barwin		1,000,000		16,500.00
Glynis Sive		1,800,000		29,700.00
Ashley Goldberg		900,000		14,850.00
First Rock Trustees Limited Re The Sunshine Trust		900,000		14,850.00
Keith John Taylor		900,000		14,850.00
Darryl Ian Fain		900,000		14,850.00
Roy Martin Shotland		900,000		14,850.00
Pacific Packaging Inc.		900,000		14,850.00
Mark Hoffman		900,000		14,850.00
The Rosenbaum Family Trust		800,000		13,200.00
Lance Rosenberg		800,000		13,200.00
Spinite Pty Ltd.		800,000		13,200.00
Nolan Goldstein		900,000		14,850.00
Schindlers Reg Treuunternehmen as Trustees of The Marble Trust		900,000		14,850.00
Schindlers Reg Treuunternehmen as Trustees of The Diamond Trust		900,000		14,850.00
Schindlers Reg Treuunternehmen as Trustees of The Norwood Trust		1,800,000		29,700.00
Sussan Aalam		1,000		100.00
Rosil Bosco		1,000		100.00
Silvia Bosco		1,000		100.00
Karen Egan		1,000		100.00
Gregory Gillan		1,000		100.00
Joanne Gillan		1,000		100.00
Paul Gillan		1,000		100.00
Nicole Gillan		1,000		100.00
Austin Gillan		1,000		100.00
Maria Gillan		1,000		100.00
Jennifer Elizabeth Grant		1,000		100.00
Zeth John Grant		1,000		100.00
Noel Lynam		1,000		100.00
Craig Maltz		1,000		100.00
Sungjin Moon		1,000		100.00
Ian Leonard Plasto		1,000		100.00
Loren Pogroske		1,000		100.00
Alireza Saffari		1,000		100.00
Heeva Shahriari		1,000		100.00
Darya Shahriari		1,000		100.00
Alyson Sharpe		1,000		100.00
Lance Suntup		1,000		100.00
Yan Ping Zhao		1,000		100.00
Kurt Dalton		1,000		100.00
Andre Charles Dalton		1,000		100.00
Andre Dalton		1,000		100.00
Exit Out Pty Ltd		1,000		100.00
Lee-Anne Plasto		1,000		100.00
World Wide Investments (Qld) Pty Ltd.		1,000		100.00
A.T.D. Finance Pty. Ltd		1,000		100.00
Total	18,730,000		$311,550

Exhibit Number	Description
3.1**	Articles of Incorporation
3.2**	Bylaws
5.1**	Opinion of Clark, Wilson regarding the legality of the securities being registered.
10.1**	Lease Agreement between Melt (California) Inc. and Westfield Corporation Inc., dated October 14, 2003
10.2**	Supply Agreement between Melt (California) Inc. and P.G.I. of Saugatuk, Inc., dated September 30, 2003
21.	Subsidiaries of Melt Inc.
	Melt (California) Inc.
23.1**	Consent of Farber and Hass, LLP, Certified Public Accountants

Landlord:	Tenant: To the Premises and:

WEA Palm Desert LP	Melt (California) Inc.
11601 Wilshire Boulevard, 12th Floor	5651 Dolly Avenue
Los Angeles, California 90025	Buena Pork, California 90621
Attention: Legal Department	Attention: Clive Barwin - President, Melt

	Billing Address:

	Melt (California) Inc.
	5651 Dolly Avenue
	Buena Pork, California 90621
	Attention: Clive Barwin - President, Melt