Draft

CONTRACT OF LEASE
KNOW ALL MEN BY THESE PRESENTS: This Contract of Lease made and executed at the City of Makati Philippines, on this ____ day of _______________, 2005 by and between: AUTOMATIC APPLIANCES, INC, a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, with principal place of business at Greenbelt Mall, Ayala Center, Makati City represented herein by its President, MR. SAMSON C. LIM, hereinafter referred to as the "LESSOR"; - and PHILIPPINE SEVEN CORPORATION, a corporation duly organized and existing under by and virtue of the laws of the Philippines with business address at _________________________________________________ represented herein by _______________________________________, hereinafter referred to as the "LESSEE". WITNESSETH: WHEREAS, the LESSOR is the Lessee of the property known as Ground and Basement Floor, 6797 Ayala Avenue Building, hereinafter referred to as the "Subject Property", situated along Ayala Avenue corner Herrera Street, Makati City with an area of 661.51 and 549.94 square meters, more or less, respectively. WHEREAS, the LESSEE desires to lease and LESSOR is willing to lease a portion of that said property described hereinbelow; NOW, THEREFORE, premises considered, the LESSOR hereby leases unto the LESSEE and the latter agrees to lease the designated area described hereinbelow under the following terms and conditions:
1. PREMISES - The Leased Premises (hereinafter Premises) hereby consists of a portion of the ground floor of the abovementioned subject property with an area of 100 square meters, more or less; 2. LEASE PERIOD - The lease shall be for three (3) years and four (4) months to start on November 1, 2005 and end on February 28, 2009 unless earlier terminated in accordance with paragraph 25 below. Upon termination of this lease, the LESSEE shall forthwith vacate and surrender the Premises in the same condition as it was at the inception of this lease except for depreciation due to reasonable wear and tear.

A. This Lease Contract (hereinafter Contract) shall not be deemed renewed unless mutually agreed upon in writing and signed by both Parties. In the event of continued occupation by the LESSEE of the Premises after the termination of the lease, the LESSEE shall remain liable for payment of rentals and utility charges notwithstanding termination of lease and continued receipt thereof by the LESSOR shall not be construed as a renewal of the lease or a waiver of LESSOR's right to evict the LESSEE by reason of termination of the lease; B. In the event the LESSEE decides to terminate this Contract, the LESSEE shall forfeit the cash deposit and shall be liable to pay rental corresponding to the unexpired term of the lease;

Draft C. It is understood that the LESSEE shall be given thirty (30) days fit

out period, rent-free, starting from November 1, 2005 until November 30, 2005 for the set-up and renovation of the Premises.
3. DEPOSIT - Upon signing of this Contract, the LESSEE shall pay to the LESSOR the amount of PESOS: FOUR HUNDRED EIGHTY THOUSAND (P 480,000.00) equivalent to four (4) months rental as monetary deposit (hereinafter Deposit). This Deposit shall be non-interest bearing and shall answer for the unpaid obligation of the LESSEE arising from the enforcement of the terms and conditions of the Contract without prejudice to the right of the LESSOR to seek other legal remedies against the LESSEE for whatever unpaid charges, dues and fees that cannot be covered by this Deposit;

A. The Deposit shall be applied in the following order of priority: 1. Firstly, against the unpaid rentals; 2. Secondly, against unpaid bills or utility charges like electricity, water, telephone, security services, etc. 3. Thirdly, against any obligation remaining outstanding of the LESSEE to the LESSOR. B. Whenever the Deposit is diminished by reason of application against the LESSEE's obligations, the LESSEE shall upon demand by the LESSOR forthwith replenish the deposit to keep it all throughout the term of the lease. Upon expiration of this Contract, the LESSOR shall refund the deposit to the LESSEE net of all financial obligations of the LESSEE to the LESSOR. However, should LESSEE preterminate this Contract and/or violate/breach any of the terms and conditions of this Contract, the deposit shall be forfeited in favor of the LESSOR. ADVANCE RENTAL - Upon the signing of this Contract and the handover of the Premises, LESSEE shall deliver to the LESSOR as advance rental the amount of PESOS: TWO HUNDRED FORTY THOUSAND (P 240,000.00) PLUS VAT, equivalent to two (2) months rental, which shall be applied to answer for the rentals corresponding to the LAST two (2) months of occupancy by the LESSEE;
4.

5. RENTAL - The agreed monthly rental of the Premises is PESOS: ONE HUNDRED TWENTY THOUSAND (P 120,000.00) excluding payments for water, electricity and security and other utility services to be billed separately on a monthly basis. The rental rate for the subsequent year shall be increased annually by eight percent (8%) based on the last rental rate. LESSEE shall pay the monthly rental to the LESSOR at its Treasury Department located in the 3rd Floor of Collins Bldg.,167 EDSA, Mandaluyong City payable in advance within the first five (5) working days of each and every month without the need of demand or notice. A. Failure on the part of the LESSEE to pay the aforesaid rental on the date stipulated shall entitle LESSEE to charge and collect interest thereon at the rate of three percent (3%) per month. Said interest shall be computed from the day after the date payment falls due until payment is effected in full. Interest shall be computed daily and compounded monthly

6. SIGNAGE RENTAL The LESSEE shall pay a monthly rental of FIVE THOUSAND PESOS (P 5, 000.00) for their outdoor signage. 7. TAXES AND OTHER FEES - Taxes and fees relative to the LEASE direct or indirect, shall be for the exclusive account of the LESSEE, including charges for Value Added Tax (VAT). 8. UTILITY CHARGES - In addition to the rental fees, the LESSEE shall assume the billings (hereinafter "Utility Charges") for electricity consumption, which the LESSEE may incur during the entire term of the LEASE. The utility charges shall be
2

Draft

paid by the LESSEE to the LESSOR within five (5) working days from the date of the billing. It shall be the duty of the LESSEE to pick up from the LESSOR's treasury department the billings for utility charges even if the LESSOR voluntarily sends the same to the LESSEE. Accordingly, the LESSEE shall be conclusively presumed to be aware of such billings. A. The LESSEE shall likewise pay the monthly billing for common area charges pertaining to the Premises computed at the rate of ONE HUNDRED TWENTY PESOS (P 120) per square meter. 9. APPLICATION OF PAYMENT - The LESSEE shall first settle rental obligations before utility charges. Accordingly, any payment intended for Utility Charges shall nevertheless be applied first against the rental in arrears before applying it to the Utility Charges. If amount paid cannot cover full payment of the outstanding Utility Charges, the LESSOR may allocate the amount paid to any of the unpaid Utility Charges. If the Utility Charges are not fully paid, the LESSOR shall have the right at its absolute discretion to cut off supply of the unpaid utilities of the LESSEE. 10. USE OF PREMISES - The Premises shall be exclusively used by the LESSEE and shall not divert the Premises or part thereof to other uses without the written prior consent of the LESSOR, it being expressly agreed that if, at any time during the existence of this lease a portion or the whole of the Premises is used for other purposes, the LESSOR has the option to (a) cancel or preterminate this lease, or (b) increase the current Monthly Rental being collected from the LESSEE, or (c) compel the LESSEE to desist from pursuing its unauthorized activities. Notwithstanding the foregoing, the Premises must never be used for illegal or immoral purposes (including gambling activities). Use of the Premises shall be subject to any and all reasonable rules and regulations that LESSOR may promulgate from time to time. The official address that the LESSEE shall use is Name of Establishment -Blims @ Ayala Avenue. 11. RESTRICTIONS ON THE USE OF PREMISES - The LESSEE may make additions, alterations or improvements on the Premises subject to the following conditions: A Prior written consent of the LESSOR shall first be obtained, and if consent is given subject to certain conditions, such conditions shall be deemed part of this Contract;
B All additions, alterations, renovations and improvements including the

installation of partition shall be for the account of the LESSEE provided that all floor plans and layouts shall have prior written approval of the LESSOR. Likewise, they undertake to install a Garburator at the sink and to initiate waterproofing to the affected area; C LESSEE covenants and agrees not to erect, affix, display or cause to be displayed any notice or other advertising medium on the outer walls of the Premises without securing the prior written consent of the LESSOR; D All permanent additions or improvements such as the pantry area, ceilings, floorings and wall partitions shall automatically become property of the LESSOR without any liability on the part of the LESSOR to reimburse the LESSEE unless LESSOR waives in writing its ownership thereof; or except when this lease is terminated due to the fault of the LESSOR; and in case LESSOR waives ownership of the additions/ improvements, LESSEE shall at his/her expense promptly remove the same and restore the Premises to its original condition on or before the lease expires or not later than the extended period allowed by the LESSOR; E No use, practice or activity shall be permitted within any part of the building which may be the source of annoyance to other occupants or
3

Draft

LESSOR or which may interfere with the peaceful possession and proper use of the property by the occupants and LESSOR; F The LESSEE agrees not to deposit within the Premises, inflammable or explosive materials, or install therein any apparatus which may produce inflammable or explosive materials or perform or omit any act or deed which would increase the insurance rate of the building and LESSEE hold itself liable in case of such violation for the damages resulting therefrom. Moreover, should LESSEE violate/breach any of the terms of this section, the LESSOR shall also be entitled to preterminate the Contract; and G LESSEE shall secure all required government permits or approvals and pay all such fees as may be required for the abovementioned purposes. 12. COMPLIANCE WITH HEALTH AND SAFETY REGULATIONS - LESSEE shall comply with all laws, ordinances and regulations of the Republic of the Philippines, concerning police, sanitation, fire prevention and public health and safety pertaining to the Premises and the LESSEE shall for its own exclusive account and expense undertake all the ordinary and necessary/usual maintenance and repairs required of the Premises such as but not limited to the repair of roof leaks, faulty electricity, faulty faucets, clogged drainage or water closets and the like. 13. INSPECTION OF PREMISES - The LESSEE shall allow the LESSOR or its authorized representatives to inspect and enter any part of the Premises subject to prior notice to the LESSEE during reasonable hours and as exigencies may require to determine whether or not the Premises are maintained in good, tenantable conditions. 14. INDEMNIFICATION OF LESSOR The LESSEE shall indemnify and hold harmless the LESSOR against all actions, suits, damages and claims by whomsoever that may be brought or made by reason solely of the non-observance or nonperformance of the rules, regulations, ordinances or laws or of any of the covenants of this Contract by the LESSEE, its employees, representatives and/or guests without prejudice to the right of the LESSOR to cancel this lease in accordance with the penal provisions hereinafter contained. 15. SECURITY/LOSS - The LESSEE will insure its property or stocks kept inside the Premises at its own account and will not hold LESSOR responsible for any loss or damage to said properties kept therein; 16. INJURY OR DAMAGE TO PERSONS OR PROPERTY -The LESSEE hereby assumes full responsibility for any damage which maybe caused to the person or property of third persons while remaining either casually or in business in any part of the Premises due to the fault, negligence, or deliberate act of LESSEE, its employees, representatives and/or guests and further binds itself to hold the LESSOR free and harmless from such claim for injury or damage. 17. NON-LIABILITY OF LESSOR -Unless the same and wilful acts or gross negligence of the LESSOR, the LESSOR shall not be liable or responsible for the following: A. presence of bugs, vermin, anay, insects, if any, in the Premises; B. failure of water supply and/or electric current; C. any article delivered or left to any of its employees; or D. any damage done or occasioned by or arising from plumbing, gas, water, and/other pipes, or the bursting, leaking, or destruction of any cistern, tank, wash stand, water closet or waste pipes in, above, or about said Premises nor for any damage arising from acts or omission of LESSEE or its agents, employees, representatives or any and all other persons.
4

Draft

18. FIRE, EARTHQUAKE, WAR OR UNFORESEEN CAUSE In case of damage to the Premises or its appurtenances by fire, earthquake, war or any other unforeseen cause, the LESSEE shall give immediately notice thereof to the LESSOR. If the building or the Premises be so nearly destroyed as to make it untenantable, without the fault or neglect of the LESSEE, either Party may demand the rescission of this Contract. No compensation or claim shall be allowed against the LESSOR by reason of inconvenience, annoyance or injury to business arising out of the necessity of repairing any portion of the building, damages by force majeure, whenever the necessity may arise. 19. ABANDONMENT - The LESSEE shall not abandon the Premises while the lease remains in force and effect. The LESSEE shall be deemed to have abandoned the Premises in case of desertion, closure or non-use thereof for the purpose intended for a period of fifteen (15) days or more, without prior notice to LESSOR. 20. DISTURBANCES. Disturbances or discontinuance of the possession of the Premises by the LESSEE caused by circumstances beyond the control and without the fault or negligence of the LESSOR shall confer no right of any kind to the LESSEE as against the LESSOR. 21. STRIKES AND LOCK-OUTS. In case there is a strike, lock-out, picket and/or other labor dispute/disturbance in the Premises and there is a substantial interference with the operation of LESSEE's business, trade or occupation by reason thereof requiring the LESSEE to temporarily close its business to the public or if, as a result thereof, the business of other lessees or tenants in the vicinity of the Premises are likewise affected then the LESSOR shall have the sole option to terminate this lease to protect its business. The LESSOR should be informed of any notice of strike that is served on the LESSEE. 22. LEASEHOLD RIGHT NON-TRANSFERABLE - LESSEE shall not sublease nor assign the right under this lease nor any part thereof to any third Party without the prior written consent of the LESSOR and no right, title or interest thereto or therein shall be conferred or vested in anyone other than the LESSEE without the prior written consent of LESSOR. 23. SURRENDER OF PREMISES - LESSEE, at the expiration of this lease as herein provided shall, unless the same has been renewed, promptly deliver the said Premises, including the additions and/or improvements to the LESSOR in as good and tenantable condition in all respects, reasonable wear and tear excepted, devoid of all occupants, otherwise, LESSEE shall be liable to LESSOR in the amount of Ten Percent (10%) of the total lease payment of the first year of the Contract as liquidated damages in addition to actual damages incurred or that may be incurred. Notwithstanding any provision to the contrary, the LESSEE hereby binds to pay the LESSOR the aforesaid rentals even if the Premises have already been physically vacated by the LESSEE until said LESSEE shall have also surrendered the keys thereto to the LESSOR. 24. DEFAULT OF LESSEE - The LESSEE shall be deemed in default within the meaning of this Contract, in the following cases: A. The LESSEE fails to fully pay on time any rental, utility charges or any other financial obligation of the LESSEE under this Contract; B. The LESSEE violates any of the terms and conditions of this Contract; C. The LESSEE shall remain in status of being in default notwithstanding application of its/his deposit against its/his accountabilities. 25. POSSESSORY LIEN - The LESSOR is hereby granted possessory lien on all properties of the LESSEE used or situated in the Premises upon default of the LESSEE in accordance with paragraph 23 of this Contract. Upon termination of this
5

Draft

lease without the lease rentals and charges being fully paid, the LESSOR shall have the right to retain possession of said properties of the LESSEE and the latter hereby authorizes the LESSOR to offset the declared value thereof (less depreciation computed on the basis of the straight line method) against the unpaid rentals/charges. If LESSOR does not want to use said properties, it may instead sell the same to third Parties and apply the proceeds thereof against unpaid rental/charges without being liable to any prosecution therefore and without necessity of any court action for said purpose. A. It is hereby understood, further, that the exercise by the LESSOR of possessory lien shall be without prejudice to its right to take further legal action against the LESSEE to recover whatever deficiency owing to the LESSOR. 26. EFFECTS OF DEFAULT - In case of default of the LESSEE, the lease shall automatically be deemed terminated whereupon LESSEE irrevocably agrees to peacefully vacate the Premises. Notwithstanding termination of the lease, the LESSEE shall remain liable to pay rental and utility charges until such time that the Premises are actually vacated by the LESSEE, as provided in paragraph 2 hereof. If LESSEE fails to vacate the Premises within five (5) days from demand by the LESSOR, the LESSEE shall in addition to rentals, utility charges and other accountabilities, pay all expenses that may be incurred by the LESSOR for the LESSEE's eviction, plus liquidated damages equivalent to twenty five percent (25%) of all the LESSEE's obligations to the LESSOR and attorney's fees equivalent to twenty percent (20%) of the amount due from the LESSEE. In the event of payment of attorney's fees, the amount payable shall in no case be less than P5,000.00. 27. NOTICE/WRITTEN COMMUNICATIONS - Any notice or written communication given by any of the Parties herein shall be delivered personally or sent by registered mail to the address of the Parties written in this Contract. 28. WAIVERS - No limitation, restriction, covenant or condition herein contained shall be deemed to have been abrogated or waived by reason of any failure to enforce the same, irrespective of the number of violations or breaches thereof, which may occur. 29. REPRESENTATION AND WARRANTIES - The LESSOR and the LESSEE represent and warrant that at the time of the execution of this Contract, the performance and observation of the terms and conditions hereof are duly authorized and approved by their respective Boards of Directors and will not conflict with nor constitute breach of their Articles of Incorporation and By-Laws. The LESSOR and LESSEE further represent and warrant that their respective representatives and signatories to this Contract are authorized to sign on their behalf. 30. VENUE - Should any court actions be filed by either Party for breach of any of the covenants and stipulations in this Contract, both shall agree to submit to the venue and jurisdiction of any appropriate court within the City of Makati, to the exclusion of all other courts. 31. SEPARABILITY CLAUSE - The invalidity or unenforceability of any provisions hereof shall not affect or impair the other provisions which otherwise can be given full force and effect. 32. AMENDMENT OF LEASE CONTRACT - At anytime, the LESSOR may upon written notice to the LESSEE, amend this agreement for the purpose of complying with any law, decree, letter of instruction, rules or regulations of the Security Land Corporation, Makati Commercial Estate Association (MACEA), any governmental agency and/or local government unit.

Draft

IN WITNESS WHEREOF, the Parties have hereunto set their signature on the date and place first above written. AUTOMATIC APPLIANCES, INC. TIN NO. 000-107-881 (LESSOR) By: SAMSON C. LIM President PHILIPPINE SEVEN CORPORATION TIN NO.________________ (LESSEE) By:

SIGNED IN THE PRESENCE OF: _________________________ __________________________

Draft

ACKNOWLEDGMENT
REPUBLIC OF THE PHILIPPINES ) CITY OF MAKATI ) S.S. BEFORE ME, a Notary Public, in and for the above jurisdiction, this _____ day of ______________, 2005, personally appeared: NAME AUTOMATIC APPLIANCES, INC. SAMSON C. LIM PHILIPPINE SEVEN CORPORATION COM. TAX CERT. NO. 00020717 18182598 DATE/PLACE ISSUED Jan. 3, 2005/Makati City Feb. 17, 2005/Makati City

known to me and to me known to be the same persons who executed the foregoing instrument and acknowledged to me that the same is their free and voluntary act and deed and of the corporation represented for the uses and purposes therein set forth. This instrument refers to a Contract of Lease, consisting of eight (8) pages including this page wherein this acknowledgment is written, duly signed by the Parties together with their instrumental witnesses on each and every page hereof. WITNESS MY HAND AND SEAL on the date and at the place first abovewritten.

NOTARY PUBLIC Doc. No. ____; Page No. ____; Book No. ____; Series of 2005.