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                                                                   Exhibit 10.12

                                     [LOGO]
                         STANDARD INDUSTRIAL/COMMERCIAL
                          MULTI-TENANT LEASE - GROSS
                   AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

1.   BASIC PROVISIONS ("BASIC PROVISIONS").

     1.1    PARTIES: This Lease ("LEASE"), dated for reference purposes only
January 18, 2002, is made by and between Arrowood Investments, Inc., a
California Corporation ("LESSOR") and Barbeques Galore, Inc. A California
Corporation ("LESSEE"), (collectively the "PARTIES", or individually a "PARTY").

     1.2(a) PREMISES: That certain portion of the Project (as defined below),
including all improvements therein or to be provided by Lessor under the terms
of this Lease, commonly known by the street address of 3355 East Cedar Street,
located in the City of Ontario, County of San Bernardino State of California,
with zip code 91761, as outlined on Exhibit A attached hereto ("PREMISES") and
generally described as (describe briefly the nature of the Premises): a portion
of a 436,945 square foot concrete tilt-up building and all improvements therein
situated on approximately 18.23 acres, as shown on the attached Exhibit "A"
containing approximately 98,821 square feet. In addition to Lessee's rights to
use and occupy the Premises as hereinafter specified, Lessee shall have
non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as
hereinafter specified, but shall not have any rights to the roof, exterior walls
or utility raceways of the building containing the Premises ("BUILDING") or to
any other buildings in the Project. The Premises, the Building, the Common
Areas, the land upon which they are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the "PROJECT." (See
also Paragraph 2.)

     1.2(b) PARKING: 25 unreserved vehicle parking spaces ("Unreserved Parking
Spaces"); and 0 reserved vehicle parking spaces ("Reserved Parking Spaces").
(See also Paragraph 2.6.)

     1.3    TERM: 5 years and 7 months ("ORIGINAL TERM") commencing March 1,
2002 ("COMMENCEMENT DATE") and ending September 30, 2007 ("EXPIRATION
DATE"). (See also Paragraph 3.)

     1.4    EARLY POSSESSION: February 1, 2002 ("EARLY POSSESSION DATE"). (See
also Paragraphs 3.2 and 3.3.)

     1.5    BASE RENT: $34,587.35 per month ("BASE RENT"), payable on the 1st
day of each month commencing July 1, 2002. (See also Paragraph 4.)

[X]  If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.

     1.6    LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: N/A percent (N/A%)
("LESSEE'S SHARE").

     1.7    BASE RENT AND OTHER MONIES PAID UPON EXECUTION:

            (a)   BASE RENT: $34,587.35 for the period commencing July 1, 2002
("RENT COMMENCEMENT DATE").

            (b)   COMMON AREA OPERATING EXPENSES: $ N/A for the period N/A.

            (c)   SECURITY DEPOSIT: $20,000.00 ("SECURITY DEPOSIT"). (See also
Paragraph 5.)

            (d)   OTHER: $ N/A for N/A.

            (e)   TOTAL DUE UPON EXECUTION OF THIS LEASE: $54,587.35.

     1.8    AGREED USE: Warehouse, assembly and distribution of any and all
products relating to Lessee's business and Lessee's retail stores including
barbeques, fireplaces, heaters, stoves, and related accessories and general
office use and for no other purpose. (See also Paragraph 6.)

     1.9    INSURING PARTY. Lessor is the "INSURING PARTY". (See also Paragraph
8.)

     1.10   REAL ESTATE BROKERS: (See: also Paragraph 15.)

            (a)   REPRESENTATION: The following real estate brokers (the
"Brokers") and brokerage relationships exist in this transaction (check
applicable boxes):

[X]  CB Richard Ellis-Inland Valley Partners represents Lessor exclusively
     ("LESSOR'S BROKER");
[_]  Zuvich Cannon Associates, Inc. represents Lessee exclusively ("LESSEE'S
     BROKER"); or
[_]  ________________________________ represents both Lessor and Lessee ("DUAL
     AGENCY").

            (b)   PAYMENT TO BROKERS: Upon execution and delivery of this Lease
by both Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in
a separate written agreement.

     1.11   Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("GUARANTOR"). (See also Paragraph 37.)

     1.12   ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 3.1 through 57 and Exhibits A through G, all of which
constitute a part of this Lease.

2.   PREMISES. (See Addendum paragraph 2.1)

     2.1    LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in this Lease, or that may have
been used in calculating Rent, is an approximation which the Parties agree is
reasonable and any payments based thereon are not subject to revision whether or
not the actual size is more or less.

     2.2    CONDITION. Lessor shall deliver that portion of the Premises
contained within the Building ("UNIT") to Lessee broom clean and free of debris
on the Commencement Date or the Early Possession Date, whichever first occurs
("Start Date"), and, warrants that the existing electrical, plumbing, fire
sprinkler, lighting heating, ventilating and air conditioning systems ("HVAC"),
loading doors, if any, and all other such elements in the Unit, other than those
constructed by Lessee, shall be in good operating condition on said date and
that the structural elements of the roof, bearing walls and foundation of the
Unit shall be free of material defects. If a non-compliance with such warranty
exists as of the Start Date, or if one of such systems or elements should
malfunction or fail within the appropriate warranty period, Lessor shall, as
Lessor's sole obligation with respect to such matter, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance,
malfunction or failure, rectify same at Lessor's expense. The warranty periods
shall be as follows: (i) 12 months as to the HVAC systems,

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Real Estate Association
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and (ii) 360 days as to the remaining systems and other elements of the Unit. If
Lessee does not give Lessor the required notice within the appropriate warranty
period, correction of any such non-compliance, malfunction or failure shall be
the obligation of Lessor at Lessee's sole cost and expense (except for the
repairs to the fire sprinkler systems, roof, foundations, and/or bearing walls -
see Paragraph 7).

          2.3     COMPLIANCE. Lessor warrants that the improvements on the
Premises and the Common Areas comply with the building codes that were in
effect at the time that each such improvement, or portion thereof, was
constructed, and also with all applicable laws, covenants or restrictions of
record, regulations, and ordinances in effect on the Start Date ("APPLICABLE
REQUIREMENTS"). Said warranty does not apply to the use to which Lessee will put
the Premises or to any Alterations or Utility Installations (as defined in
Paragraph 7.3(a).) made or to be made by Lessee. NOTE: LESSEE IS RESPONSIBLE FOR
DETERMINING WHETHER OR NOT THE ZONING IS APPROPRIATE FOR LESSEE'S INTENDED USE,
AND ACKNOWLEDGES THAT PAST USES OF THE PREMISES MAY NO LONGER BE ALLOWED. If
the Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor's expense. If the applicable Requirements are hereafter changed so as
to require during the term of this Lease the construction of an addition to or
an alteration of the Unit, Premises and/or Building, the remediation of any
Hazardous Substance, or the reinforcement or other physical modification of the
Unit, Premises and/or Building ("CAPITAL EXPENDITURE"), Lessor and Lessee shall
allocate the cost of such work as follows:

                  (a)     Subject to Paragraph 2.3(c) below, if such Capital
Expenditures are required as a result of the specific and unique use of the
Premises by Lessee as compared with uses by tenants in general, Lessee shall be
fully responsible for the cost thereof, provided, however, that if such Capital
Expenditure is required during the last 2 years of this Lease and the cost
thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease
unless Lessor notifies Lessee, in writing, within 10 days after receipt of
Lessee's termination notice that Lessor has elected to pay the difference
between the actual cost thereof and the amount equal to 6 months' Base Rent. If
Lessee elects termination, Lessee shall immediately cease the use of the
Premises which requires such Capital Expenditure and deliver to Lessor written
notice specifying a termination date at least 90 days thereafter. Such
termination date shall, however, in no event be earlier than the last day that
Lessee could legally utilize the Premises without commencing such Capital
Expenditure.

                  (b)     If such Capital Expenditure is not the result of the
specific and unique use of the Premises by Lessee (such as, governmentally
mandated seismic modifications), then Lessor shall be solely responsible for the
cost thereof.

                  (c)     Notwithstanding the above, the provisions concerning
Capital Expenditures are intended to apply only to non-voluntary, unexpected,
and new Applicable Requirements. If the Capital Expenditures are instead
triggered by Lessee as a result of an actual or proposed change in use, change
in intensity of use, or modification to the Premises then, and in that event,
Lessee shall be fully responsible for the cost thereof, and Lessee shall not
have any right to terminate this Lease.

          2.4     ACKNOWLEDGEMENTS. Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements and the Americans with Disabilities Act), and their
suitability for Lessee's intended use, (b) Lessee has made such investigation as
it deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to its occupancy of the Premises, and (c) neither
Lessor, Lessor's agents, nor Brokers have made any oral or written
representations or warranties with respect to said matters other than as set
forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have
made no representations, promises or warranties concerning Lessee's ability to
honor the Lease or suitability to occupy the Premises, and (ii) it is Lessor's
sole responsibility to investigate the financial capability and/or suitability
of all proposed tenants.

          2.5     LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor
in Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.

          2.6     VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "PERMITTED SIZE
VEHICLES." Lessor may regulate the loading and unloading of vehicles by adopting
Rules and Regulations as provided in Paragraph 2.9. NO vehicles other than
Permitted Size Vehicles may be parked in the Common Area without the prior
written permission of Lessor. Not withstanding the foregoing, Lessee shall have
the right to park vans and small and medium sized trucks during the day and
overnight In the area designated in Exhibit "A".

          (a)     Lessee shall not permit or allow any vehicles that belong to
or are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.

          (b)     Lessee shall not service or store any vehicles in the Common
Areas,

          (c)     If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.

          2.7     COMMON AREAS - DEFINITION. The term "Common Areas" is defined
as all areas and facilities outside the Premises and within the exterior
boundary line of the Project and interior utility raceways and installations
within the Unit that are provided and designated by the Lessor from time to time
for the general non-exclusive use of Lessor, Lessee and other tenants of the
Project and their respective employees, suppliers, shippers, customers,
contractors and invitees, including parking areas, loading and unloading areas,
trash areas, roadways, walkways, driveways and landscaped areas.

          2.8     COMMON AREAS - LESSEE'S RIGHTS. Lessor grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Project. Under no circumstances shall
the right herein granted to use the Common Areas be deemed to include the right
to store any property, temporarily or permanently, in the Common Areas. Any such
storage shall be permitted only by the prior written consent of Lessor or
Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur, then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

          2.9     COMMON AREAS - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable rules and regulations ("Rules and
Regulations") for the management, safety, care, and cleanliness of the grounds,
the parking and unloading of vehicles and the preservation of good order, as
well as for the convenience of other occupants or tenants of the Building and
the Project and their invitees. Lessee agrees to abide by and conform to all
such Rules and Regulations, and to cause its employees, suppliers, shippers,
customers, contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said Rules and Regulations by
other tenants of the Project.

          2.10    COMMON AREAS - CHANGES. Lessor shall have the right, in
Lessor's sole discretion, from time to time:

          (a)     To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveway,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;

          (b)     To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;

          (c)     To designate other land outside the boundaries of the Project
to be a part of the Common Areas;

          (d)     TO add additional buildings and improvements to the Common
Areas;

          (d)     To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any Portion thereof;

          (e)     To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any portion thereof; and

          (f)     To do and perform such other acts and make such other
changes in, to or with respect to the common Areas and Project as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.

Notwithstanding the foregoing, at no time during the Term shall Lessor modify,
interfere with or impair any of the following: (i) access to and from the
Premises; (ii) the location of the loading and unloading areas for the premises;
(iii) access to and from the loading and unloading areas for the premises; and
(iv) the number of Parking spaces available to Lessee and its employees,
licensees, and invitees.


3.        TERM. (See also Addendum Paragraphs 3.1 and 3.5)

          3.1     TERM. The Commencement Date, Expiration Date and Original Term
of this Lease are as specified in Paragraph 1.3 and Paragraphs 3.1 and 3.5 of
the Addendum.

          3.2     EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this Lease
(including but not limited to the obligations to pay Lessee's Share of Common
Area Operating Expenses, Real Property Taxes and insurance premiums and to
maintain the Premises) shall, however, be in effect during such period. Any such
early possession shall not affect the Expiration Date.


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Real Estate Association

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     3.3  DELAY IN POSSESSION.  Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date, and in accordance with the provisions of Addendum Paragraph
3.1. Except as otherwise provided, if possession is not tendered to Lessee by
the Start Date, any period of rent abatement that Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee.

     3.4  LESSEE COMPLIANCE. Lessor shall not be required to tender possession
of the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
shall be required to perform all of its obligations under this Lease from and
after the Start Date, including the payment of Rent, notwithstanding Lessor's
election to withhold possession pending receipt of such evidence of insurance.
Further, if Lessee is required to perform any other conditions prior to or
concurrent with the Start Date, the Start Date shall occur but Lessor may elect
to withhold possession until such conditions are satisfied.

4.   RENT.

     4.1. RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to be rent
("RENT").

     4.2  COMMON AREA OPERATING EXPENSES. Lessor shall pay all Common  Area
Operating Expenses, as hereinafter defined, during the term of this Lease, in
accordance with the following provisions:

     (a)  COMMON AREA OPERATING EXPENSES. are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and operation
of the Project, including, but not limited to, the following:

          (i)   The operation, repair and maintenance, in neat, clean, good
order and condition, but not the replacement (see subparagraph (e)), of the
following:

                (aa)  The Common Areas and Common Area improvements, including
parking areas, loading and unloading areas, trash areas, roadways, parkways,
walkways, driveways, landscaped areas, bumpers, irrigation systems, Common Area
lighting facilities, fences and gates, elevators, roofs, and roof drainage
systems.

                (bb)  Exterior signs and any tenant directories.

                (cc)  Any fire sprinkler systems.

          (ii)        The cost of water, gas, electricity and telephone to
service the Common Areas and any utilities not separately metered.

          (iii)       Trash disposal, pest control services, property
management, security services, and the costs of any environmental inspections.

          (iv)        Reserves set aside for maintenance and repair of Common
Areas.

          (v)         Any increase above the Base Real Property Taxes (as
defined in Paragraph 10).

          (vi)        Any "Insurance Cost Increase" (as defined in Paragraph 8).

          (vii)       Any deductible portion of an insured loss concerning the
Building or the Common Areas

          (viii)      The cost of any Capital Expenditure to the Building or the
Project not covered under the provisions of Paragraph 2.3  provided.

          (ix)        Any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense.

     (b)  Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Unit, the Building or to any other building in
the Project or to the operation, repair and maintenance thereof, shall be
allocated entirely to such Unit, Building, or other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Project.

     (c)  The inclusion of the improvements, facilities and services set forth
in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Project already has the same, Lessor already provides the
services, or Lessor has agreed elsewhere in this Lease to provide the same or
some of them.

     (e)  When a capital component such as the roof, foundations, exterior
walls or a Common Area capital improvement, such as the parking lot paving,
elevators, fences, etc. requires replacement, rather than repair or maintenance,
Lessor shall, at Lessor's expense, be responsible for such replacement. Such
expenses and/or costs are not Common Area Operating Expenses.

     4.3  PAYMENT. Lessee shall cause payment of Rent to be received by Lessor
in lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one full
calendar month shall be prorated based upon the actual number of days of said
month. Payment of Rent shall be made to Lessor at its address stated herein or
to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating. In the event that any check,
draft, or other instrument of payment given by Lessee to Lessor is dishonored
for any reason, Lessee agrees to pay to Lessor the sum of $25.

5.   SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee is in Breach of this Lease, Lessor may
use, apply or retain all or any portion of said Security Deposit for the payment
of any amount due Lessor or to reimburse or compensate Lessor for any liability,
expense, loss or damage which Lessor may suffer or incur by reason thereof. If
Lessor uses or applies all or any portion of the Security Deposit, Lessee shall
within 10 days after written request therefor deposit monies with Lessor
sufficient to restore said Security Deposit to the full amount required by this
Lease.  Lessor shall not be required to keep the Security Deposit separate from
its general accounts.  Within 14 days after the expiration or termination of
this Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent,
and otherwise within 30 days after the Premises have been vacated pursuant to
Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit
not used or applied by Lessor. No part of the Security Deposit shall be
considered to be held in trust, to bear interest or to be prepayment for any
monies to be paid by Lessee under this Lease.

 6.  USE.(See also Addendum Paragraph 6.1).

     6.1  USE. Lessee shall use and occupy the Premises only for the Agreed

Use, or any other legal use which is reasonably comparable thereto, and for no
other purpose. Lessee shall not use or permit the use of the Premises in a
manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
occupants of or causes damage to neighboring premises or properties. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, and/or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after
such request give written notification of same, which notice shall include an
explanation of Lessor's objections to the change in the Agreed Use.

     6.2  HAZARDOUS SUBSTANCES.(See also Addendum Paragraph 6.2)

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Real Estate Association

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               (a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" used in this Lease shall mean any product, substance, or waste whose
presence, use, manufacture, disposal, transportation, or release, either by
itself in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "REPORTABLE USE" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration or termination) of protective
modifications (such as concrete encasements) and/or increasing the Security
Deposit.

               (d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance brought onto the Premises by
or for Lessee, (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from areas outside of the Project). Lessee's obligations
shall include, but not be limited to, the effects of any contamination or injury
to person, property or the environment created or suffered by Lessee, and the
cost of investigation, removal, remediation, restoration and/or abatement, and
shall survive the expiration or termination of this Lease for a period of no
more than 6 months. No termination, cancellation or release agreement entered
into by Lessor and Lessee shall release Lessee from its obligations under this
Lease with respect to Hazardous Substances, unless specifically so agreed by
Lessor in writing at the time of such agreement.

               (e) LESSOR INDEMNIFICATION.

               (f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee's use (including
"Alterations", as defined in paragraph 7.3(a) below) of the Premises, in which
event Lessee shall be responsible for such payment. Lessee shall cooperate fully
in any such activities at the request of Lessor, including allowing Lessor and
Lessor's agents to have reasonable access to the Premises at reasonable times in
order to carry out Lessor's investigative and remedial responsibilities.

               (g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
(see Paragraph 9.1 (e)) occurs during the term of this Lease, unless Lessee is
legally responsible therefor (in which case Lessee shall make the investigation
and remediation thereof required by the Applicable Requirements and this Lease
shall continue in full force and effect, but subject to Lessor's rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds 12 times the then monthly Base Rent or $500,000 whichever
is greater, give written notice to Lessee, within 30 days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as of the date 60 days following the
date of such notice. In the event Lessor elects to give a termination notice,
Lessee may, within 10 days thereafter, give written notice to Lessor of Lessee's
commitment to pay the amount by which the cost of the remediation of such
Hazardous Substance Condition exceeds an amount equal to 12 times the then
monthly Base Rent or $500,000, whichever is greater, give written notice to
Lessee, within 30 days after receipt by Lessor of knowledge of the occurrence of
such Hazardous Substance Condition, of Lessor's desire to terminate this Lease
as of the date 60 days following the date of such notice. In the event Lessor
elects to give a termination notice, Lessee may, within 10 days thereafter, give
written notice to Lessor of Lessee's commitment to pay the amount by which the
cost of the remediation of such Harzardous Substance Condition exceeds an amount
equal to 12 times the then monthly Base Rent or $500,000, whichever is greater.
Lessee shall provide Lessor with said funds or satisfactory assurance thereof
within 30 days following such commitment. In such event, this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.

         6.3   LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within 10 days after receipt of Lessor's written request, provide Lessor
with copies of all permits and other documents, and other information evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving the failure of Lessee or
the Premises to comply with any Applicable Requirements.

         6.4   INSPECTION; COMPLIANCE. Lessor and Lessor's "LENDER" (as defined
in Paragraph 30) and consultants shall have the right to enter into Premises at
any time, in the case of an emergency, and otherwise at reasonable times
following at least 3 days notice to Lessee, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this
Lease. The cost of any such inspections shall be paid by Lessor, unless a
violation of Applicable Requirements, or a contamination caused by Lessee is
found to exist or be imminent. In such case, Lessee shall upon request reimburse
Lessor for the cost of such inspection, so long as such inspection is reasonably
related to the violation or contamination. In conducting any inspection or
verification of compliance under this paragraph, Lessor and Lessor's Lender (and
their respective agents, consultants, employees and representatives) shall not
in any manner disturb Lessee's use or quiet enjoyment of the Premises.

7.       MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
         ALTERATIONS.

         7.1 LESSEE'S OBLIGATIONS.

                  (a) IN GENERAL. Subject to, the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole expense, keep the premises,
Utility Installations (intended for Lessee's exclusive use, no matter where
located), and Alterations in good order, condition and repair (whether or not
the portion of the Premises requiring repairs, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not the
need for such repairs occurs as a result of Lessee's use, any prior use, the
elements or the age of such portion of the Premises), including, but not limited
to, all equipment or facilities, such as plumbing, HVAC equipment, electrical,
lighting facilities, boilers, pressure vessels, fixtures, interior walls,
interior surfaces of exterior walls, ceilings, floors, windows, doors, plate
glass, and skylights but excluding any items which are the responsibility of
Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order,
condition and repair, shall exercise and perform good maintenance practices,
specifically including the procurement and maintenance of the service contracts
required by Paragraph 7.1(b) below. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
repair.

               (b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements, if any, if and when
installed on the Premises: (i) HVAC equipment, However, Lessor reserves the
right, upon notice to Lessee, to procure and maintain any or all of such service
contracts, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand,
for the cost thereof, provided such costs are reasonable.

               (c) FAILURE TO PERFORM. If Lessee fails to perform Lessee's
obligations under this Paragraph 7.1, Lessor may enter upon the Premises after
1O days' prior written notice to Lessee (except in the case of an emergency, in
which case no notice shall be required), perform such obligations on Lessee's
behalf, and put the Premises in good order, condition and repair, and Lessee
shall promptly reimburse Lessor for the cost thereof.

               (d) REPLACEMENT. Subject to Lessee's indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if an item described in Paragraph 7.1 (b) cannot be repaired other
than at a cost which is in excess of 50% of the cost of replacing such item,
then such item shall be replaced by Lessor, and the cost thereof shall be
prorated

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<PAGE>

between the Parties and Lessee shall only be obligated to pay, each month during
the remainder of the ??? of this Lease, on the date on which Base Rent is due,
an amount equal to the product of multiplying the cost of such replacement by a
fraction, the numerator of which is one, and the denominator of which is 144
(ie. 1/144th of the cost per month). Lessee may, however, prepay its
obligation at any time.

     7.2   LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, shall keep in good order, condition and repair the foundations, exterior
walls, structural condition of interior bearing walls, exterior roof, fire
sprinkler system, Common Area fire alarm and/or smoke detection systems, fire
hydrants, parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parts thereof, as
well as providing the services for which there is a Common Area Operating
Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the
interior surfaces of exterior walls nor shall Lessor be obligated to maintain,
repair or replace windows, doors or plate glass of the Premises. Lessee
expressly waives the benefit of any statute now or hereafter in effect to the
extent it is inconsistent with the terms of this Lease. Lessor shall undertake
all necessary repairs and maintenance of the Premises within ten (10) days (24
hour in the event of an emergency) of Lessee's request thereof. Notwithstanding
anything to the contrary in this Lease, in the event that Lessor is in default
in the performance of any of its obligations under this Lease, and such default
continues for a period of more that thirty (30) days (24 hours in the event of
an emergency) after written notice from Lessee to Lessor specifying such
default and provided that such default is not caused by Lessee's damage to the
Premises, Lessee shall have the right to attempt to cure such default and may
deduct such reasonable costs for the repairs, from its Rent payments due under
this Lease until so reimbursed.

     7.3   UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.

           (a) DEFINITIONS. The term "Utility Installations" refers to all floor
and window coverings, air lines, power panels, electrical distribution, security
and fire protection systems, communication systems, lighting fixtures, HVAC
equipment, plumbing, and fencing in or on the Premises. The term "TRADE
FIXTURES" shall mean Lessee's fixtures, improvements, phone equipment, racking,
machinery and equipment that can be removed without doing material damage to the
Premises. The term "ALTERATIONS" shall mean any modification of the
improvements, other than Utility Installations or Trade Fixtures, whether by
addition or deletion. "LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS"
are defined as Alterations and/or Utility Installations made by Lessee that are
not yet owned by Lessor pursuant to Paragraph 7.4(a).

           (b) CONSENT. Lessee shall not make any Alterations or Utility
Installations to the Premises without Lessor's prior written consent. Lessee
may, however, make non-structural Alterations and Utility Installations to the
interior of the Premises (excluding the roof) without such consent but upon
notice to Lessor, as long as they are not visible from the outside, do not
involve puncturing, relocating or removing the roof or any existing walls, and
the cumulative cost thereof during this Lease as extended does not exceed a sum
equal to $150,000 in any one year. Notwithstanding the foregoing, Lessee shall
not make or permit any roof penetrations and/or install anything on the roof
without the prior written approval of Lessor. Lessor may, as a precondition to
granting such approval, require Lessee to utilize a contractor chosen and/or
approved by Lessor. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with detailed plans. Consent shall be deemed conditioned
upon Lessee's: (i) acquiring all applicable governmental permits, (ii)
furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount in excess of $150,000, Lessor may condition its
consent upon Lessee providing a lien and completion bond in an amount equal to
150% of the estimated cost of such Alteration or Utility Installation and/or
upon Lessee's posting an additional Security Deposit with Lessor.

           (c) INDEMNIFICATION. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than 10 days notice prior to the commencement of any work
in, on or about the Premises, and Lessor shall have the right to post notices of
non-responsibility. If Lessee shall contest the validity of any such lien, claim
or demand, then Lessee shall, at its sole expense defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof. If
Lessor shall require, Lessee shall furnish a surety bond in an amount equal to
150% of the amount of such contested lien, claim or demand, indemnifying Lessor
against liability for the same.

     7.4   OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION. At all times, Lessee
shall own and have the right to remove its Trade Fixtures.

           (a) OWNERSHIP. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided; all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be the owner of all or
any specified part of the Lessee Owned Alterations and Utility Installations.
Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrendered by Lessee with the
Premises.

           (b) REMOVAL. By delivery to Lessee of written notice from Lessor not
earlier than 90 and not later than 30 days prior to the end of the term of this
Lease, Lessor may require that any or all Lessee Owned Alterations or Utility
Installations be removed by the expiration or termination of this Lease. Lessor
may require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.

           (c) SURRENDER; RESTORATION. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Notwithstanding the
foregoing, if this Lease is for 12 months or less, then Lessee shall surrender
the Premises in the same condition as delivered to Lessee, on the Start Date
with NO allowance for ordinary wear and tear. Lessee shall repair any damage
occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee
owned Alterations and/or Utility Installations, furnishings, and equipment as
well as the removal of any storage tank installed by or for Lessee. Lessee shall
also completely remove from the Premises any and all Hazardous Substances
brought onto the Premises by or for Lessee, (except Hazardous Substances which
were deposited via underground migration from areas outside of the Project) even
if such removal would require Lessee to perform or pay for work that exceeds
statutory requirements. Trade Fixtures shall remain the property of Lessee and
shall be removed by Lessee. The failure by Lessee to timely vacate the Premises
pursuant to this Paragraph 7.4(c) without the express written consent of Lessor
shall constitute a holdover under the provisions of Paragraph 26 below.

8.   INSURANCE; INDEMNITY.

     8.1   INTENTIONALLY DELETED

     8.2   LIABILITY INSURANCE.

           (a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor as
an additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence with an annual aggregate of not less than
$2,000,000, an "Additional Insured-Managers or Lessors of Premises Endorsement"
and contain the "Amendment of the Pollution Exclusion Endorsement" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "INSURED
CONTRACT" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance shall not, however, limit the liability of
Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by
Lessee shall be primary to and not contributory with any similar insurance
carried by Lessor, whose insurance shall be considered excess insurance only.

           (b) CARRIED BY LESSOR. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.

     8.3   PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.

           (a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and keep in force
a policy or policies of insurance in the name of Lessor, with loss payable to
Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Premises, the Building and the Project. The amount of such insurance shall be
equal to the full replacement cost of the Premises, the Building and the
Project, as the same shall exist from time to time, or the amount required by

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Real Estate Association

<PAGE>

any Lender, but in no event more than the commercially reasonable and available
insurable value thereof. See Owned Alterations and Utility Installations, Trade
Fixtures, and Lessee's personal property shares insured by Lessee under
Paragraph 8.4, If the coverage is available and commercially appropriate, such
policy or policies shall insure against all risks of direct physical loss or
damage (except the perils of flood and/or earthquake unless required by a
Lender), including coverage for debris removal and the enforcement of any
Applicable Requirements requiring the upgrading, demolition, reconstruction or
replacement of any portion of the Premises as the result of a covered loss. Said
policy or policies shall also contain an agreed valuation provision in lieu of
any coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a factor
of not less than the adjusted U.S. Department of Labor Consumer Price Index for
All Urban Consumers for the city nearest to where the Premises are located. If
such insurance coverage has a deductible clause, the deductible amount shall not
exceed $5,000.00 per occurrence.

               (b) RENTAL VALUE. Lessor shall also obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one year with an extended period
of indemnity for an additional 180 days ("Rental Value insurance"). Said
insurance shall contain an agreed valuation provision in lieu of any coinsurance
clause, and the amount of coverage shall be adjusted annually to reflect the
projected Rent otherwise payable by Lessee, for the next 12 month period.

               (c) ADJACENT PREMISES. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Project if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.

               (d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.

         8.4   LESSEE'S PROPERTY; BUSINESS INTERRUPTION INSURANCE.

               (A) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $5,000.00 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.

               (b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss
of income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.

               (c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.

         8.5   INSURANCE POLICIES. insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in the most current issue
of "Best's Insurance Guide", or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the
required insurance policies. Lessee shall, prior to the Start Date, deliver to
Lessor certificates evidencing the existence and amounts of the required
insurance. No such policy shall be cancelable or subject to modification except
after 30 days prior written notice to Lessor. Lessee shall, at least 30 days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or "insurance binders" evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand. Such policies shall be for a term of at
least one year, or the length of the remaining term of this Lease, whichever is
less. If either Party shall fail to procure and maintain the insurance required
to be carried by it, the other Party may, but shall not be required to, procure
and maintain the same.

         8.6   WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein. The effect of such releases and waivers is not limited by the
amount of insurance carried or required, or by any deductibles applicable
hereto. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogation that such companies may have against
Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby.

         8.7   INDEMNITY. (See Addendum Paragraph 8.7.)

         8.8   EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building, or from other sources or
places unless the same results from the negligence or willful misconduct of
Lessor (or its employees, agents or contracts). Lessor shall not be liable for
any damages arising from any act or neglect of any other tenant of Lessor nor
from the negligent failure of Lessor to enforce the provisions of any other
lease in the Project.

9.       DAMAGE OR DESTRUCTION. (See Addendum Paragraph 9)

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                                  Page 6 of l3

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 1O. REAL PROPERTY TAXES.

          10.1 DEFINITIONS.

              (a) "REAL PROPERTY TAXES." As used herein, the term "REAL PROPERTY
 TAXES" shall include any form of assessment; real estate, general, special,
 ordinary or extraordinary, or rental levy or tax (other than inheritance,
 personal income or estate taxes) provement bond; and/or license fee imposed
 upon or levied against any legal or equitable interest of Lessor in the
 Project, Lessor's right to other income therefrom, and/or Lessor's business of
 leasing, by any authority having the direct or indirect power to tax and where
 the funds are generated with reference to the Project address and where the
 proceeds so generated are to be applied by the city, county or other local
 taxing authority of a jurisdiction within which the Project is located. The
 term "Real Property Taxes" shall also include any tax, fee, levy, assessment or
 charge, or any increase therein, ???? by reason of events occurring during
 the term of this Lease, including but not limited to, a change in the ownership
 of the Project or any portion thereof or a change in the improvements thereon.

          10.2 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes
 applicable to the Project.

          10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall
 not include Real Property Taxes specified in the tax assessor's records and
 work sheets as being caused by additional improvements placed upon the Project
 by other lessees or by Lessor for the exclusive enjoyment of such other
 lessees. Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to
 Lessor at the time Common Area Operating Expenses are payable under Paragraph
 4.2, the entirety of any increase in Real Property Taxes if assessed solely by
 reason of Alterations, Trade Fixtures or Utility Installations placed upon the
 Premises by Lessee or at Lessee's request, (and with Lessee's consent;).

          10.4 JOINT ASSESSMENT. If the, Building is not separately assessed,
 Real Property Taxes allocated to the Building shall be an equitable proportion
 of the Real Property Taxes for all of the land and improvements included within
 the tax parcel assessed, such proportion to be determined by Lessor from the
 respective valuations assigned in the assessor's work sheets or such other
 information as may be reasonably available. Lessor's reasonable determination
 thereof, in good faith, shall be conclusive.

          10.5 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency
 all taxes assessed against and levied upon Lessee Owned Alterations and Utility
 Installations, Trade Fixtures, furnishings, equipment and all personal property
 of Lessee contained in the Premises. When possible, Lessee shall cause its
 Lessee Owned Alterations and Utility Installations, Trade Fixtures,
 furnishings, equipment and all other personal property to be assessed and
 billed separately from the real property of Lessor. If any of Lessee's said
 property shall be assessed with Lessor's real property, Lessee shall pay Lessor
 the taxes attributable to Lessee's property within 10 days after receipt of a
 written statement setting forth the taxes applicable to Lessee's property.

 11.      UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
 telephone, trash disposal and other utilities and services supplied to the
 Premises, together with any taxes thereon. Notwithstanding the provisions of
 Paragraph 4.2, if at any time in Lessor's sole judgment, Lessor determines that
 Lessee is using a disproportionate amount of water, electricity or other
 commonly metered utilities.


 12.      ASSIGNMENT AND SUBLETTING.(See Addeddum paragraph 12.1)

          12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

          (a) Regardless of Lessor's consent, any assignment or subletting shall
 not: (i) be effective without the express written assumption by such assignee
 or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee
 of any obligations hereunder, or (iii) alter the primary liability of Lessee
 for the payment of Rent or for the performance of any other obligations to be
 performed by Lessee.

          (b) Lessor may accept Rent or performance of Lessee's obligations from
 any person other than Lessee pending approval or disapproval of an assignment.
 Neither a delay in the approval or disapproval of such assignment nor the
 acceptance of Rent or performance shall constitute a waiver or estoppel of
 Lessor's right to exercise its remedies for Lessee's Default or Breach.


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          (c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.

          (d) In the event of any Default, Breach by Lessee, Lessor may proceed
directly against Lessee, any Guarantors or anyone else responsible for the
performance of Lessee's obligations under this Lease, including any assignee or
sublessee, without first exhausting Lessor's remedies against any other person
or entity responsible therefore to Lessor, or any security held by Lessor.

          (e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $1,000 as
consideration for Lessor's considering and processing said request. Lessee
agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested.

          (f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.

     12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee 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) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until an uncured Breach shall occur in the performance of Lessee's
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection of
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such an uncured Breach exists, notwithstanding any claim from Lessee to
the contrary.

          (b) In the event of an uncured Breach by Lessee, Lessor may, at its
option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time of
the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security deposit
paid by such sublessee to such sublessor or for any prior Defaults or Breaches
of such sublessor.

          (c) Any matter requiring the consent of the sublessor under a sublease
shall also require the consent of Lessor.

          (d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.

          (e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee,
only if Lessee does not cure the same within the grace period, if any, specified
in such notice. The sublessee shall have a right of reimbursement and offset
from and against Lessee for any such Defaults cured by the sublessee.

13.  DEFAULT; BREACH; REMEDIES.

     13.1 DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or Rules and
Regulations under this Lease. A "Breach", is defined as the occurrence of one or
more of the following Defaults, and the failure of Lessee to cure such Default
within any applicable grace period:

          (a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism.

          (b) The failure of Lessee to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a third
party, when due, to provide reasonable evidence of insurance or surety bond, or
to fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of 10 calendar days
following written notice to Lessee.

          (c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii)
the rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate, (v) a requested subordination, (vi) evidence concerning any
guaranty and/or Guarantor, (vii) any document requested under Paragraph 41
(easements), or (viii) any other documentation or information which Lessor may
reasonably require of Lessee under the terms of this Lease, where any such
failure continues for a period of 10 days following written notice to Lessee.

          (d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of 30 days after written notice; provided,
however, that if the nature of Lessee's Default is such that more than 30 days
are reasonably required for its cure, then it shall not be deemed to be a Breach
if Lessee commences such cure within said 30 day period and thereafter
diligently prosecutes such cure to completion.

          (e) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "DEBTOR" as defined in 11 U.S.C. (S) 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within 60 days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where possession is not restored to
Lessee within 60 days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within 60
days; provided, however, in the event that any provision of this subparagraph
(e) is contrary to any applicable law, such provision shall be of no force or
effect, and not affect the validity of the remaining provisions.

          (f) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.

          (g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory basis, and
Lessee's failure, within 60 days following written notice of any such event, to
provide written alternative assurance or security, which, when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.

     13.2 Remedies. If Lessee fails to perform any of its affirmative duties or
obligations, within 10 days after written notice (or in case of an emergency,
without notice), Lessor may, at its option, perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee upon receipt of invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:

          (a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent. Efforts by Lessor to mitigate damages
caused by Lessee's Breach of this Lease shall not waive Lessor's right to
recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit.

          (b) Continue the Lease and Lessee's right to possession and recover
the Rent as it becomes due, in which event Lessee may sublet or assign, subject
only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
the appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.

          (c) Pursue any other remedy now or hereafter available under the laws
or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.

     13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as

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"INDUCEMENT PROVISIONS", shall be deemed conditioned upon Lessee's full and
faithful performance of all of the terms, covenants and conditions of this
Lease. Upon an uncured Breach of this Lease by Lessee, any such Inducement
Provision shall automatically be deemed deleted from this Lease and of no
further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement. Provision shall be immediately due and payable by Lessee to Lessor.

     13.4  LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within 10 days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
one-time late charge equal to 10% of each such overdue amount or $100, whichever
is greater. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for 3 consecutive installments of Base Rent, then notwithstanding any provision
of this Lease to the contrary, Base Rent shall, at Lessor's option, become due
and payable quarterly in advance. (See also Addendum paragraph 13.3)

     13.5  INTEREST. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within 30 days following the date on which it was due for non-scheduled
payment, shall bear interest from the date when due, as to scheduled payments,
or the 31st day after it was due as to non-scheduled payments. The interest
("INTEREST") charged shall be equal to the prime rate reported in the Wall
Street Journal as published closest prior to the date when due plus 40%, but
shall not exceed the maximum rate allowed by law. Interest is payable in
addition to the potential late charge provided for in Paragraph 13.4.

     13.6  BREACH BY LESSOR.

           (a)  NOTICE OF BREACH. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than 30 days (24 hours in an emergency) after
receipt by Lessor, and any Lender whose name and address shall have been
furnished Lessee in writing for such purpose, of written notice specifying
wherein such obligation of Lessor has not been performed; provided, however,
that if the nature of Lessor's obligation is such that more than 30 days are
reasonably required for its performance, then Lessor shall not be in breach if
performance is commenced within such 30 day period and thereafter diligently
pursued to completion.

           (b)  Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within 30 days (24 hours in an
emergency) after receipt of said notice, or if having commenced said cure they
do not diligently pursue it to completion, then Lessee may elect to cure said
breach at Lessee's expense and offset from Rent the cost of the cure. Lessee
shall document the cost of said cure and supply said documentation to Lessor.

           (c)  All of the foregoing shall be in addition to the Lessor's
Breach provisions of Paragraph 7.2 above.

14.  CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "Condemnation"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than 10% of the floor area of the Unit (including any
loading and unloading areas), or Lessor ingress and egress route, or more than
25% of Lessee's Reserved Parking Spaces, is taken by Condemnation, Lessee may,
at Lessee's option, to be exercised in writing within 10 days after Lessor shall
have given Lessee written notice of such taking (or in the absence of such
notice, within 10 days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining except that the Base Rent shall be reduced in proportion
to the reduction in square footage of the Premises. Condemnation awards and/or
payments shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold, the value of the part
taken, or for severance damages; provided, however, that Lessee shall be
entitled to any compensation for Lessee's relocation expenses, loss of business
goodwill and/or Trade Fixtures, without regard to whether or not this Lease is
terminated pursuant to the provisions of this Paragraph. All Alterations and
Utility Installations made to the Premises by Lessee, for purposes of
Condemnation only, shall be considered the property of the Lessee and Lessee
shall be entitled to any and all compensation which is payable therefor. In the
event that this Lease is not terminated by reason of the Condemnation, Lessor
shall repair any damage to the Premises caused by such Condemnation.

15.  BROKERAGE FEES. (Per Separate Agreement)

16.  ESTOPPEL CERTIFICATES.

           (a)  Each Party (as "RESPONDING PARTY") shall within 10 days after
written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "ESTOPPEL CERTIFICATE" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

           (b)  If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such 10 day period, the Requesting Party may execute
an Estoppel Certificate stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party's performance, and (iii)
if Lessor is the Requesting Party, not more than one month's rent has been paid
in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate, so long as the facts set forth there in
are true and accurate.

           (c)  If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past 3 years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.

17.  DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event
of a transfer of Lessor's title or interest in the Premises or this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor. Except as provided in Paragraph 15, upon
such transfer or assignment and delivery of the Security Deposit, as aforesaid,
the prior Lessor shall be relieved of all liability with respect to the
obligations and/or covenants under this Lease thereafter to be performed by the
Lessor provided that any successor Lessor shall expressly assume all of Lessor's
covenants and obligations under this Lease. Subject to the foregoing, the
obligations and/or covenants in this Lease to be performed by the Lessor shall
be binding only upon the Lessor as hereinabove defined. Notwithstanding the
above, and subject to the provisions of Paragraph 20 below, the original Lessor
under this Lease, and all subsequent holders of the Lessor's interest in this
Lease shall remain liable and responsible with regard to the potential duties
and liabilities of Lessor pertaining to Hazardous Substances as outlined in
Paragraph 6.2 above.

18.  SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

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19.       DAYS. Unless otherwise specifically indicated to the contrary, the
word "days" as used in this Lease shall mean and refer to calendar days.

20.       LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Lessor's interest in the Building, land and all monies received and
receivable therefrom, and to no other assets of Lessor, for the satisfaction of
any liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.

21.       TIME OF ESSENCE. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.

22.       NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective.

23.       NOTICES.

          23.1     NOTICE REQUIREMENTS. All notices required or permitted by
this Lease or applicable law shall be in writing and may be delivered in person
(by hand or by courier) or may be sent by regular, certified or registered mail
or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
(with confirmation and a copy to be mailed via U.S. Mail), and shall be deemed
sufficiently given if served in a manner specified in this Paragraph 23. The
addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice. A copy of all
notices to Lessor shall be concurrently transmitted to such party or parties at
such addresses as Lessor may from time to time hereafter designate in writing.

          23.2     DATE OF NOTICE. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail the notice shall be deemed given 48 hours after
the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantee next day delivery shall be deemed given 24 hours after delivery of the
same to the Postal Service or courier. Notices transmitted by facsimile
transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt (confirmation report from fax machine is sufficient),
provided a copy is also delivered via delivery or mail. If notice is received on
a Saturday, Sunday or legal holiday, it shall be deemed received on the next
business day.

24.       WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. The acceptance of
Rent by Lessor shall not be a waiver of any Default or Breach by Lessee.

25.       DISCLOSURES REGARDING THE NATURE OF A REAL ESTATE AGENCY
          RELATIONSHIP.

          (a)      When entering into a discussion with a real estate agent
regarding a real estate transaction, a Lessor or Lessee should from the outset
understand what type of agency relationship or representation it has with the
agent or agents in the transaction. Lessor and Lessee acknowledge being advised
by the Brokers in this transaction, as follows:

                   (i)   Lessor's Agent. A Lessor's agent under a listing
                         --------------
agreement with the Lessor acts as the agent for the Lessor only. A Lessor's
agent or subagent has the following affirmative obligations: To the Lessor: A
                                                             -------------
fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with
the Lessor. To the Lessee and the Lessor: a. Diligent exercise of reasonable
            ----------------------------
skills and care in performance of the agent's duties. b. A duty of honest and
fair dealing and good faith. c. A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not
known to, or within the diligent attention and observation of, the Parties. An
agent is not obligated to reveal to either Party any confidential information
obtained from the other Party which does not involve the affirmative duties set
forth above.

                   (ii)  Lessee's Agent. An agent can agree to act as agent for
                         --------------
the Lessee only. In these situations, the agent is not the Lessor's agent, even
if by agreement the agent may receive compensation for services rendered, either
in full or in part from the Lessor. An agent acting only for a Lessee has the
following affirmative obligations. To the Lessee: A fiduciary duty of utmost
                                   -------------
care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee
                                                                   -------------
and the Lessor: a. Diligent exercise of reasonable skills and care in
--------------
performance of the agent's duties. b. A duty of honest and fair dealing and good
faith. c. A duty to disclose all facts known to the agent materially affecting
the value or desirability of the property that are not known to, or within the
diligent attention and observation of, the Parties. An agent is not obligated to
reveal to either Party any confidential information obtained from the other
Party which does not involve the affirmative duties set forth above.

26.       NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
125% of the Base Rent applicable immediately preceding the expiration or
termination. Nothing contained herein shall be construed as consent by Lessor to
any holding over by Lessee.

27.       CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28.       COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of
this Lease to be observed or performed by Lessee and Lessor are both covenants
and conditions. In construing this Lease, all headings and titles are for the
convenience of the Parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
Parties, but rather according to its fair meaning as a whole, as if both Parties
had prepared it.

29.       BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.

30.       SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.

          30.1     SUBORDINATION. This Lease and any Option granted hereby shall
be subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "SECURITY DEVICE"), now
or hereafter placed upon the Premises, to any and all advances made on the
security thereof, and to all renewals, modifications, and extensions thereof.
Lessee agrees that the holders of any such Security Devices (in this Lease
together referred to as "Lender") shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease, unless and until any
Lender

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takes over the position of Lessor under this Lease, in which event such Lender
shall expressly assume and perform of Lessor's covenenats and obligations under
this Lease. Any Lender may elect to have this Lease and any Option granted
hereby superior to the lien of its security Device by giving written notice
thereof to Lessee, whereupon this Lease and such Options shall be deemed prior
to such Security Device, notwithstanding the relative dates of the documentation
or recordation thereof.

     30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (a) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership except as to continuing uncured Lessor
defaults; (b) be subject to any offsets or defenses which Lessee might have
against any prior lessor, (c) be bound by prepayment of more than one month's
rent, or (d) be liable for the return of any security deposit paid to any prior
lessor, unless the new owner takes ownership of the Security Deposit.

     30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease, and
Lessee's rights under this Lease, including any options to extend the term
hereof, will not be disturbed or modified in any manner so long as Lessee is not
in uncured Breach hereof and attorns to the record owner of the Premises.
Further, within 60 days after the execution of this Lease, Lessor shall use its
commercially reasonable efforts to obtain a Non-Disturbance Agreement from the
holder of any pre-existing Security Device which is secured by the Premises.

     30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall be
effective without the execution of any further documents; provided, however,
that, upon written request from Lessee (as to the Non-Dbturbance Agreement
only), Lessor or a Lender in connection with a sale, financing or refinancing of
the Premises, Lessee and Lessor shall execute such further writings as may be
reasonably required to separately document any subordination, attornment and/or
Non-Disturbance Agreement provided for herein.

31. ATTORNEYS' FEES. If any Party brings an action or proceeding involving the
Premises whether founded in tort, contract or equity, or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term,
"Prevailing Party" shall include, without limitation, a Party who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party of its claim or
defense. The attorneys' fees award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees,
costs and expenses incurred in the preparation and service of notices of an
uncured monetary Default only and consultations in connection therewith, in an
amount not to exceed $200 oer occurance, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach.

32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times, following 3 days notice to Lessee, for the
purpose of showing the same to prospective purchasers, lenders, or tenants (as
to tenants, only during the last 6 months of the Term), and making such
alterations, repairs, improvements or additions to the Premises as Lessee and
Lessor may deem necessary. All such activities shall be without abatement of
rent or liability to Lessee as long as Lessor does not in any manner disturb
Lessee's use and quiet enjoyment of the Premises. Lessor may at any time place
on the Premises any ordinary "FOR SALE" signs and Lessor may during the last 6
months of the term hereof place on the Premises any ordinary "FOR LEASE" signs.
Lessee may at any time place on the Premises any ordinary "FOR SUBLEASE" sign.

33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor's prior written consent. Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether to
permit an auction.

34. SIGNS.  Except for ordinary "For Sublease" signs which may be placed only on
the Premises, Lessee shall not place any sign upon the Project without Lessor's
prior written consent. All signs must comply with all Applicable Requirements.

35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within 10 days following any such event
to elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.

36. CONSENTS. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including but not limited to architects', attorneys', engineers'
and other consultants' fees) (but not to exceed an aggregate of $500 per
request by Lessee) incurred in the consideration of, or response to, a request
by Lessee for any Lessor consent, including but not limited to consents to an
assignment, a subletting or the presence or use of a Hazardous Substance, shall
be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessor's consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent. The failure to specify herein any particular
condition to Lessor's consent shall not preclude the imposition by Lessor at the
time of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within 10 business days following such request.

37. GUARANTOR.

    37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty in
the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.

    37.2 DEFAULT. It shall constitute a Default of the Lessee if any Guarantor
fails or refuses, upon request to provide: (a) evidence of the execution of the
guaranty, including the authority of the party signing on Guarantor's behalf to
obligate Guarantor, and in the case of a corporate Guarantor, a certified copy
of a resolution of its board of directors authorizing the making of such
guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d)
written confirmation that the guaranty is still in effect.

38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and performance
of all of the covenants; conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.

39. OPTIONS. If Lessee is granted an option, as defined below, then the
following provisions shall apply,

    39.1 DEFINITION. "Option" shall mean: (a) the right to extend the term of
or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.

    39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Any Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee.

    39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later Option cannot be exercised unless the prior
Options have been validly exercised.

    39.4 EFFECT OF DEFAULT ON OPTIONS.

         (a) Lessee shall have no right to exercise an Option: (i) during the
time Lessee is in Breach of this Lease, or (ii) in the event that Lessee has
been given 3 or more notices of separate monetary Default, whether or not the
Defaults are cured, during the 12 month period immediately preceding the
exercise of the Option.

         (b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).

         (c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term, (i) Lessee fails to
pay Rent for a period of 30 days after such Rent becomes due, (ii) Lessor gives
to Lessee 3 or more notices of separate monetary Default during any 12 month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
material Breach of this Lease.

__________________                                            __________________

__________________                                            __________________
    Initials                                                        Initials

                                 Page 11 of 13
(C) 1998 - American Industrial      REVISED                    FORM MTG-2-11/98E
Real Estate Association

<PAGE>

40.  SECURITY MEASURES. Lessee hereby acknowledges that the Rent payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

41.  RESERVATIONS. Lessor reserves the right: (i) to grant, without the consent
or joinder of Lessee, such easements, rights and dedications that Lessor deems
necessary, (ii) to cause the recordation of parcel maps and restrictions, and
(iii) to create and/or install new utility raceways, so long as such easements,
rights, dedications, maps, restrictions, and utility raceways do not
unreasonably interfere with the use and quiet enjoyment of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate such rights.

42.  PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay.

43.  AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease on behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each party
shall, within 30 days after request, deliver to the other party satisfactory
evidence of such authority.

44.  CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.

45.  OFFER. Preparation of this Lease by either party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.

46.  AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's rights and obligations hereunder, or Lessor's
covenants and obligations hereunder, Lessee agrees to make such reasonable
non-monetary modifications to this Lease as may be reasonably required by a
Lender in connection with the obtaining of normal financing or refinancing of
the Premises.

47.  MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.

48.  WAIVER OF JURY TRIAL. The Parties hereby waive their respective rights to
trial by jury in any action or proceeding involving the Property or arising out
of this Agreement.

49.  MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease [_] is [X] is not attached to this Lease.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:

1.   SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

2.   RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION

SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS
SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION
OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH
DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.

WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES ARE LOCATED.

The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

<TABLE>
<S>                                                      <C>
Executed at:___________________________________          Executed at:   Irvine
                                                                     ------------------------------------
on:____________________________________________          on:   1.18.02
                                                            ---------------------------------------------


By LESSOR:                                               By LESSEE:

Arrowood Investments, Inc., a California                 Barbeques Galore, Inc., a California
-----------------------------------------------          ------------------------------------------------
corporation                                              corporation
-----------------------------------------------          ------------------------------------------------


By: /s/ Scott Downes                                     By: /s/ Sydney Selati
   --------------------------------------------             ---------------------------------------------
Name Printed: Scott Downes                               Name Printed: Sydney Selati
             ----------------------------------                       -----------------------------------
Title: President                                         Title: President
      -----------------------------------------                ------------------------------------------


By: ___________________________________________          By: /s/ Kevin Ralphs
                                                            ---------------------------------------------
Name Printed:__________________________________          Name Printed: Kevin Ralphs
                                                                      -----------------------------------
Title:_________________________________________          Title: C.F.O.
                                                               ------------------------------------------
Address: 8413 Jackson Road, Suite B                      Address: 15041 Bake Parkway, Suite A
        ---------------------------------------                  ----------------------------------------
Sacramento, California 95826                             Irvine, California 92618
-----------------------------------------------          ------------------------------------------------
-----------------------------------------------          ------------------------------------------------


Telephone: (916) 564-4488                                Telephone: (949) 597-2400
            ---  ------------------------------                      ---  -------------------------------
Facsimile: (916) 564-4499                                Facsimile: (949) 597-2434
            ---  ------------------------------                      ---  -------------------------------
Federal ID No._________________________________          Federal ID No. 95-3431529.
                                                                       ----------------------------------
</TABLE>

These forms are often modified to meet changing requirements of law and needs of
the industry. Always write or call to make sure you are utilizing the most
current form: American Industrial Real Estate Association, 700 South Flower
Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777.

       (c)Copyright 1998 By American Industrial Real Estate Association.
                              All rights reserved.
   No part of these works may be reproduced in any form without permission in
                                    writing.


____________                                                       _____________
____________                                                       _____________
  Initials                                                           Initials

(C) 1998 - American Industrial       REVISED                   FORM MTG-2-11/98E
Real Estate Association

                                  Page 12 of 13

<PAGE>

          Copies of all notices sent to Lessee shall also be sent to:


                          Seltzer Caplan McMahon Vitek
                         Attention: Romy A. Selati, Esq.
                            750 B Street, Suite 2100
                           San Diego, California 92101
                           Telephone: (619) 685-3161


____________                                                       _____________
____________                                                       _____________
  Initials                                                           Initials

(C) 1998 - American Industrial       REVISED                   FORM MTG-2-11/98E
Real Estate Association

                                  Page 13 of 13

<PAGE>

                                    ADDENDUM

 THIS ADDENDUM IS ATTACHED TO AND MADE A PART OF THAT CERTAIN LEASE BY AND
 BETWEEN ARROWOOD INVESTMENTS, INC., A CALIFORNIA CORPORATION AS (THE "LESSOR"),
 AND BARBECUES GALORE, INC., A CALIFORNIA CORPORATION, AS LESSEE (THE "LESSEE"),
 MADE AS OF JANUARY 18, 2002 (THE "LEASE"). THE TERMS AND CONDITIONS OF THIS
 ADDENDUM SUPPLEMENT AND, TO THE EXTENT OF ANY CONFLICT, SUPERSEDE THE
 PROVISIONS OF THE PRECEDING LEASE. EACH INITIALLY CAPITALIZED TERM USED AND
 NOT DEFINED IN THIS ADDENDUM SHALL HAVE THE MEANING GIVEN IT IN THIS LEASE.

21. PREMISES LETTING: Within thirty (30) days following the Commencement Date,
Lessee may, after written request to Lessor, cause Lessor's Architect (as
defined in Section 4 of the Work Letter) to certify the Premises floor area. The
certification shall be in accordance with the BOMA standard for gross building
area measured from the drip line of the outer bui1ding walls. In the event,
that the square footage contained in the certification is lower (re-measurement
cannot result in increased rent) than the square footage contained in Section
1.2 of the Lease by more that five hundred (500) square feet, the Base Rent
contained in Section 1.5 shall be proportionally and retroactively reduced to
reflect the actual number of square feet contained in the Architect's
certification. The Base Rent adjustment shall be an amount equal to the product
obtained by multiplying $.35 by the difference between the amount certified
by the Architect and the amount contained in Section 1.2 of the Lease.

31. COMMENCEMENT DATE:
    -----------------

    a. The Term of this Lease shall commence on March 1, 2002, subject to any
Lessee Delay or Force Majeure Delay, (the "COMMENCEMENT DATE") and continue
through the last day of the month in which the Sixty-Seventh (67th) month
anniversary of the Commencement Date occurs (such period being referred to as
the "ORIGINAL TERM"), subject to extension pursuant to any extension right
exercised as set forth in any Addendum (the "ADDENDUM") attached hereto (the
Original Term, as may be so extended, shall be referred to herein as the
"TERM"), or until this Lease is terminated as otherwise provided herein. Lessee
shall have the right to enter portions or al1 of the Premises on February 1,
2002 (the "EARLY POSSESSION DATE") to deliver and install its fixtures and
equipment ("LESSEE'S SYSTEMS") in the Premises, or portions thereof. Lessor
shall endeavor to provide for the Early Possession Date to commence on February
1, 2002, provided, however, that, in the event Lessor is unable to provide for
the Early Possession Date to commence by February 1, 2002, Lessor shall have no
liability to Lessee therefore, except as provided in 3.1 (b) below. All of the
terms and conditions of this Lease (including all insurance and indemnification
requirements) shall apply during such Early Possession Date as though the
Commencement Date had occurred (although the Commencement Date shall not
actually occur until the date set forth above in this Section); provided,
however, during such Early Possession Date, Lessee shall not be obligated to pay
Base Rent (as defined in Section 1.5 above) until the Rent Commencement Date
occurs, and Lessee acknowledges and agrees that the governmental authorities may
not allow Lessee to operate its business during the Early Possession Date until
all applicable occupancy permits have been obtained. Lessee further agrees that
all of Lessee's activities in the Premises during the Early Possession Date
shall be carried out without interference to any work to be performed by Lessor.
Any early entry by Lessee pursuant to this Section shall be subject to
scheduling and reasonable rules and regulations of Lessor's contractor. All of
Lessee's Systems or merchandise installed or placed by Lessee on or about the
Premises during the Early Possession Date shall be at the sole risk of Lessee.
Lessee shall be responsible for all utility charges that may be incurred, but no
other Operating Expenses during the early possession period, (i.e., Early
Possession Date to the Commencement Date, relating to Lessee's use of utilities,
as reasonably estimated by Lessor.

    b. Lessor shall use its best commercially reasonable efforts to effect
the Early Possession Date by no later than February 1, 2002 and the Commencement
Date by no later than March 1, 2002. Lessee shall have the right to terminate
this Lease if, subject to Force Majeure Delays and Lessee Delays, the
Commencement Date does not occur by June 1,2002; which termination right and
recovery of Lessee's actual and reasonable costs and expenses in connection with
the preparation and negotiation of this Lease and the permitting, design and
construction of the Improvements shall be Lessee's sole remedy for the failure
of the Commencement Date to occur by such outside date. In the event that the
Premises are not demised on or before the February 15, 2002, subject to Force
Majeure and Lessee Delay (as defined in Paragraph 11 of the Work Letter), then
as compensation for such delay, Lessee shall receive a rent credit of One
Thousand One Hundred Fifty-Three and no/100's Dollars ($1,153.00) per day for
each day thereafter that the Premises are not demised. In the event that the
Commencement Date does not occur on or before April 1, 2002, subject to Force
Majeure and Lessee Delay (as defined in Paragraph 11 of the Work Letter), then
as compensation for such delay, Lessee shall receive a rent credit in the sum of
One Thousand One Hundred Fifty-Three and no/lOO's Dollars ($1,153.00) for each
day thereafter that the Commencement Date has not occurred. Additionally, in
the event that the

<PAGE>

Commencement Date does not occur on or before May 1, 2002, subject to Force
Majeure and Lessee Delay (as defined in Paragraph 11 of the Work Letter), then
as compensation for such delay, Lessee shall receive a rent credit in the sum of
Two Thousand Three Hundred Six and no/lOO's Dollars ($2,306.00) for each day
thereafter that the Commencement Date has not occurred. Such rent credits or,
alternatively, the termination and recovery described above (but only if the
Commencement Date fails to occur by June 1, 2002 as may be extended for Force
Majeure Delays and Lessee Delays), shall be Lessee's sole remedy. If Lessee
receives a rent credit under the terms of this Paragraph 3.1(b), the rent
credit shall run consecutively and be cumulative. By example: if the Early
Possession Date is February 20th and the Commencement Date is April 5th, then
Lessee would receive ten (10) days of rent credit. This rent credit is in
addition to the Base Rent abatement provided in Section 1.5.

         Such rent credit or, alternatively, the termination and recovery
described above (but only if the Commencement Date fails to occur by June 1,
2002 as may be extended for Force Majeure Delays and Lessee Delays), shall be
Lessee's sole remedy. This rent credit is in addition to the Base Rent abatement
provided in Section 1.5.

3.5      EXTENSION PERIOD:
         ----------------

         a. One Period. The Original Term may be extended, at the option of
            ----------
Lessee, for one period of five (5) years, such period being herein sometimes
referred to as the "EXTENDED TERM", provided that, Lessee provides Lessor with
two hundred seventy (270) days prior written notice for each extension period.
The Extended Term shall be on the same terms, covenants and conditions of this
Lease, except for the payment of Rent which shall be as set forth below.

         b. RENT. The Rent during the Extended Term shall be the then
            ----
prevailing Market Rental Rate (as hereinafter defined) for the Premises. Within
thirty (30) days after the exercise (if exercised) of the option granted hereby,
Lessor shall advise Lessee of the Market Rental Rate at which it is prepared to
offer the Premises to Lessee for the Extension Term. "MARKET RENTAL RATE" shall
mean one-twelfth of the annual rate of base rent then prevailing in the market,
as reasonably determined by Lessor, for industrial space comparable in type,
square footage, parking, surrounding land, lease term and rent commencement date
to space in other buildings of similar use in the market which is subject to
lease terms and conditions similar to those in this Lease. If Lessee disagrees
with Lessor's determination of Market Rental Rate (which Lessee must do, if at
all, in writing setting forth Lessee's determination of Market Rental Rate
within ten (10) business days after notice of Lessor's determination of Market
Rental Rate) and if the parties cannot agree on the Market Rental Rate within
ten (10) business days after Lessor's receipt of Lessee's determination of
Market Rental Rate, then such dispute shall be determined as hereinafter
provided. Lessor and Lessee will each select an MAI-qualified appraiser within
ten (10) days after the expiration of such ten (10) business day period who
shall be disinterested and shall be a person that has been actively engaged in
the development or leasing of buildings of similar use in the area or otherwise
knowledgeable about rental rates in the area for a period of not less than five
(5) years immediately preceding his or her appointment. Lessor and Lessee shall
each simultaneously submit to the appraisers a determination of Market Rental
Rate. (If no submittal is made, the parties shall be deemed to have submitted
their original determinations.) If a qualified appraiser is not selected by a
party within the required period, then such party shall be deemed to have
accepted the other party's determination of Market Rental Rate. The appraisers
shall be directed to determine the Market Rental Rate within twenty (20) days
after their appointment and may consider Lessor's and Lessee's submittals or
other information within their own knowledge, or may make whatever inquiries
they deem necessary to make such determination. The appraisers shall be directed
as promptly as possible to select from the two determinations submitted by
Lessor and Lessee the one that is closer to the Market Rental Rate as determined
by the appraisers, and said selection shall thereafter be deemed the Market
Rental Rate. If the two appraisers so appointed fail to agree within said twenty
(20) day period as to which of the determinations submitted by the Lessor and
Lessee is closest to the actual Market Rental Rate, the two appraisers shall
appoint a third-party MAI-qualified appraiser within the next ten (10) day
period, using the criteria described above, to decide, within ten (10) days of
such appraiser's appointment, which of the two determinations submitted is
closest to the actual Market Rental Rate. The cost of the foregoing appraisal
process shall be borne by the party whose Market Rental Rate is not selected.
If no determination is made prior to the date for commencement of payment of
rent for which Market Rental Rate must be determined, then Lessor's
determination shall be used until the arbitration is completed, following which
the rent paid for the intervening period shall be reconciled with the Market
Rental Rate that was owed and Lessee shall pay on demand any shortfall in rent
owed by Lessee, if any, or Lessor shall credit against rent next falling due any
overpayment of rent by Lessee, if any. Notwithstanding the foregoing, in the
event Lessee is not satisfied with the ultimate Market Rentat Rate
determination, Lessee may cancel its option and shall pay the costs of all
appraisers.

                                      -2-

<PAGE>

          c.    Conditions. Lessee shall have no right to exercise an option to
                ----------
extend (i) during the period of a Breach, or (ii) during the period of time any
monetary obligation due Lessor from Lessee is unpaid. In addition, even if
Lessee has validly exercised an option to extend, if a Breach exists at the time
the Extension Period would otherwise commence, Lessee's prior valid exercise of
the option shall be void and of no force or effect and Lessee shall not have the
right to extend the Term. Finally, the period of time within which an extension
option may be exercised shall not be extended or enlarged by reason of Lessee's
inability to exercise an option because of the provisions of this paragraph. In
the event Lessee exercises either of Lessee's foregoing options, upon Lessor's
request in each such case, Lessee shall execute and deliver to Lessor a Lease
amendment setting forth the Base Rent for such option and providing for the
applicable Extension Period within thirty (30) days after Lessee's receipt of
such request.

          d     Options Personal. Each option granted to Lessee in this Lease is
                ----------------
personal to the original Lessee, and cannot be voluntarily or involuntarily
assigned or exercised by any person or entity other than said original Lessee
while the original Lessee is in full and actual possession of the Premises and
without the intention of thereafter assigning or subletting. The options herein
granted to Lessee are not assignable separately or apart from assignment or
sublease, and no option may be separated from this Lease in any manner, by
reservation or otherwise, except as provided in Section 39.2 of Lease.
Notwithstanding any provision of the Lease to the contrary, the option shall be
available to any approved assignee or sublessee of Lessee.

4.        BASE RENT: Notwithstanding the provisions of Section 1.5 and Section
          ---------
4 of the Lease, Lessee shall pay to Lessor, without demand, base rent ("BASE
RENT") in monthly installments in advance on or before the first day of each
calendar month throughout the Original Term as follows.

                    MONTHS OF TERMS      PSF       MONTHLY RENT (GROSS)
                    ------------------------       --------------------
                        0 - 04          $  0       Base Rent Abated
                       05 - 33          $.35       $34,587.35
                       34 - 67          $.37       $36,563.77

provided, however, Lessee shall not be obligated to pay Base Rent for months one
(1) through four (4) of the Original Term (the "RENTAL ABATEMENT"). Said Rental
Abatement shall be considered an Inducement Provision pursuant `to Section 13.3.
Lessee shall pay to Lessor upon execution of this Lease the monthly Base Rent
due for the fifth (5th) month of the Original Term.

6.1.      PERMITTED USE:
          -------------

          a.    Agreed Use. Lessee shall have the right to use the Premises only
                ----------
for the Agreed Use as defined in Section 1.8 of the Lease to the extent
permitted by applicable laws (the "PERMITTED USE"), and for no other use or
purpose. Lessee shall at all times during the Term of this Lease comply with all
rules, regulations and ordinances now in place or enacted in the future by the
City of Ontario. Lessee shall be solely responsible, at its expense, for
obtaining all conditional use permits and other governmental approvals required
for Lessee's permitted uses, and there shall be no delay of the Commencement
Date as a result of any failure or delay in obtaining any such permits or
approvals.

          b.    Semi-Annual Warehouse Sales Outside the Building. Lessee shall
                ------------------------------------------------
be allowed to conduct warehouse sales outside the Building not more than twice
during any calendar year (the "Warehouse Sale"). Any Warehouse Sale shall be
conducted exclusively in the truck court area as shown on Exhibit A as the "area
designated for day and overnight parking of vans and small and medium size
trucks". Any Warehouse Sale conducted on the Premises shall only be permitted on
the weekend and shall not interfere in any way whatsoever with other tenants in
the Project. Lessee shall notify Lessor in writing at least seven (7) business
days prior to any planned Warehouse Sale. Additionally, prior to any Warehouse
Sale Lessee must provide Lessor with written evidence that Lessee is in
compliance with Lessee's required insurance pursuant to the Lease. Said
Warehouse Sale shall comply with the City of Ontario's regulations governing
outside sales, if any. Any damage caused to the Premises by Lessee conducting a
Warehouse Sale shall be repaired by Lessee at Lessee's sole cost and expense. If
at any time during the Term of this Lease, Lessor determines that the warehouse
sales are causing excessive wear and tear to the Premises or that the warehouse
sales are interfering with the quiet use and enjoyment of other tenants in the
Project, then Lessor shall have the unilateral right at Lessor's sole and
absolute discretion to revoke Lessee's permission to conduct a Warehouse Sale.

6.2.      HAZARDOUS SUBSTANCES:
          --------------------

                                      -3-

<PAGE>

         a.   Routine Reporting Requirements. Lessee shall promptly notify
              ------------------------------
Lessor of, and shall promptly provide Lessor with true, correct, complete and
legible copies of, all of the following environmental items relating to the
Premises which may be filed or prepared by or on behalf of, or delivered to or
served upon, Lessee: reports filed pursuant to any self-reporting requirements,
reports filed pursuant to any Environmental Laws or this Lease, all permit
applications, permits, monitoring reports, workplace exposure and community
exposure warnings or notices and all other reports, disclosures, plans or
documents (even those which may be characterized as confidential) relating to
water discharges, air pollution, waste generation or disposal, underground
storage tanks or Hazardous Substances

         b.   Incident Reporting Requirements. In addition to Lessee's routine
              -------------------------------
reporting obligations described in this Section, Lessee shall promptly notify
Lessor of, and shall promptly provide Lessor with true, correct, complete and
legible copies of, all the following environmental items relating to the
Premises which may be filed or prepared by or on behalf of, or delivered to or
served upon, Lessee: all orders, reports, notices, listings and correspondence
(even those which maybe considered confidential) of or concerning the release,
investigation of, compliance, clean up, remedial and corrective actions, and
abatement of Hazardous Substances whether or not required by Environmental Laws,
including, but not limited to, reports and notices required by or given pursuant
to any Environmental Laws, and all complaints, pleadings and other legal
documents filed against Lessee related to Lessee's use, handling, storage or
disposal of Hazardous Substances. In the event of a release of any Hazardous
Substances on the Premises or to the environment, Lessee shall promptly provide
Lessor with copies of all reports and correspondence with or from all
governmental agencies, authorities or any other persons relating to such
release.

         c.   Environmental Questionnaire; Disclosure. Prior to the execution of
              ---------------------------------------
this Lease, Lessee shall complete, execute and deliver to Lessee a Hazardous
Materials Survey Form in the form of Exhibit "B" attached hereto (the "SURVEY
                                     ----------
FORM"), and Lessee shall certify to Lessor all information contained in the
Survey Form as true and correct to the best of Lessee's knowledge and belief.
The completed Survey Form shall be deemed incorporated into this Lease for all
purposes, and Lessor shall be entitled to rely fully on the information
contained therein. Within ten (10) days following receipt by Lessee of a written
request therefor from Lessor (which request shall not be made more often than
annually), Lessee shall disclose to Lessor in writing the names and amounts of
all Hazardous Substances, or any combination thereof, which were stored,
generated, used or disposed of on, under or about the Premises for the twelve
(12) month period prior to and after each such request, or which Lessee intends
to store, generate, use or dispose of on, under or about the Premises. At
Lessor's option, Lessee's disclosure obligation under this Section shall include
a requirement that Lessee update, execute and deliver to the Survey Form, as the
same may be modified by Lessor from time to time.

         d.   Inspection; Compliance. Lessor and Lessor's agents shall have the
              ----------------------
right, but not the obligation, to inspect, investigate, sample and/or monitor
the Premises, including any soil, water, groundwater or other sampling, and any
other testing, digging, drilling or analyses, at any time following forty-eight
(48) hours notice to Lessee to determine whether Lessee is complying with the
terms of this Lease involving Hazardous Substances and in connection therewith,
Lessee shall provide Lessor with full access to all relevant facilities, records
and personnel. If Lessee is not in compliance with the provisions of this Lease
involving Hazardous Substances, (i) following ten (10) days written notice to
Lessee, Lessor and Lessor's agents shall have the right, but not the obligation,
without limitation upon any of `s other rights and remedies under this Lease, to
immediately enter upon the Premises and to discharge Lessee's obligations in
that regard at Lessee's expense, notwithstanding any other provision of this
Lease, and (ii) all sums reasonably disbursed, deposited or incurred by Lessor
in connection therewith, including, but not limited to, all costs, expenses and
actual attorney fees, shall be due and payable by Lessee to Lessor, as an item
of additional Rent, on demand by Lessor. In the event of any such entry and
performance of such work, Lessor and Lessor's agents, consultants, employees and
representatives shall not in any manner disturb Lessee's use or quiet enjoyment
of the Premises.

         e.   Actions and Proceedings. Lessor, at Lessee's sole cost and
              -----------------------
expense, shall have the right, but not the obligation, to join and participate
in any legal or administrative proceedings or actions initiated in connection
with any claims or causes of action arising out of the storage, generation, use
or disposal of Hazardous Substances on, under, from or about the Premises (i)
caused or permitted by Lessee or any Lessee Parties after the Commencement Date,
(any of such storage, generation, use or disposal described items (i)
hereinabove shall be sometimes referred to herein collectively as the "LESSEE
ENVIRONMENTAL ACTIVITIES"). If the presence of any Hazardous Substances on,
under or about the Premises resulting from any Lessee Environmental Activities,
resu1ts in (A) injury to any person or entity, (B) injury to or contamination
of the Premises or (C) injury to or contamination of any real or personal
property wherever situated, Lessee, at its sole cost and expense, shall promptly
take all actions

                                      -4-

<PAGE>

necessary to return the Premises to the condition existing prior to the
production of such Hazardous Substances to the Premises and to remedy or repair
any such injury or contamination. Notwithstanding the foregoing, Lessee shall
not, without Lessor's prior written consent, take any remedial action in
response to the presence of any Hazardous Substances on, under or about the
Premises, or enter into any settlement agreement, consent decree or other
compromise with any governmental agency with respect to any Hazardous Substances
claims; provided, however, Lessor's prior written consent shall not be necessary
in the event that the presence of Hazardous Substances on, under or about the
Premises (D) poses an immediate threat to the health, safety or welfare of any
individual or (E) is of such a nature that an immediate remedial response is
necessary and it is not possible to obtain Lessor's consent before taking such
action.

          h.  Lessee's Responsibility at Conclusion of Lease. Promptly upon the
              ----------------------------------------------
expiration or earlier termination of this Lease, Lessee shall represent to
Lessor in writing that to the best of Lessee's knowledge no Hazardous
Substances exist on, under or about the Premises, as the result of Lessee's
actions, other than as specifically identified to Lessor by Lessee in writing.
To ensure performance of Lessee's diligence obligations under this Section,
Lessor may, at any time within one (1) year of the expiration of the Term,
whichever occurs first, or upon the occurrence of a Breach, by three (3) days
written notice to Lessee, conduct or cause an outside consultant selected by
Lessor to conduct an environmental evaluation and/or an audit of the Premises,
an executed copy of which audit shall be delivered to Lessee within thirty (30)
days after Lessee's written request therefore. If such environmental evaluation
and/or audit discloses the existence of Hazardous Substances on, under or about
the Premises as a result of any Lessee Environmental Activities, Lessee shall
(i) pay for the cost of such evaluation and audit, and (ii) at Lessor's request,
immediately prepare and submit to Lessor within thirty (30) days after such
request a comprehensive plan, subject to Lessor's approval, specifying within
thirty (30) days after Lessor's request therefor the actions to be taken by
Lessee to return the Premises to the condition existing prior to the
introduction of such Hazardous Substances. Upon Lessor's approval of such
clean-up plan, Lessee shall, at Lessee's sole cost and expense, without
limitation on any rights and remedies of Lessor under this Lease, immediately
implement such plan and proceed to clean up such Hazardous Substances in
accordance with all Environmental Laws and as required by such plan and this
Lease. In the event no Hazardous Substances are discovered on the Premises as a
result of any Lessee Environmental Activities, then Lessor shall pay all costs
for such evaluation/audit.

          g.  Lessor Indemnification. Lessor warrants, to its actual knowledge,
              ----------------------
that there are no Hazardous Substances, including, without limitation, asbestos,
radon gas, PCB's, lead-based paint, industrial, radioactive chemical waste,
urea-formaldehyde insulation, or underground storage tanks on the Project or any
part thereof. Lessor shall deliver the Premises to Lessee free and clear of any
Hazardous Substances. Lessor shall not utilize any Hazardous Substances within
the Premises, Building, Common Areas and Project, except in compliance with the
requirements of law pertaining thereto. Lessor shall indemnify, defend (with
counsel reasonably acceptable to Lessee), protect and hold Lessee and each of
Lessee's officers, directors, shareholders, employees, agents, representatives,
successors and assigns (collectively "Lessee Parties") harmless from and against
all claims, liabilities, damages, costs, penalties, forfeitures, losses, costs
and expenses (including reasonable attorney's fees and costs) for environmental
claims and damages, death or injury to any person, or damage to any property
whatsoever arising or resulting in whole or in part, directly or indirectly,
from the storage, generation, use disposal or discharge of Hazardous Substances
in, on, under, or from the Premises, Building, Common Areas and Project caused
by or arising solely out of the actions or inactions of Lessor, either prior to
or during the Term of this Lease. Lessor's indemnity obligations hereunder
arising solely out of the actions or inactions of Lessor shall include, without
limitation, all costs of any required investigation, removal, restoration, and
abatement of the Premises, Building, Common Areas and Project. Lessor's
obligations under this paragraph shall survive the expiration or earlier
termination of this Lease.

8.7       Indemnity:
          ---------

         (a)    Indemnification of Lessor. Lessee shall indemnify and hold
Lessor harmless from and against any and all claims or liability for bodily
injury to or death of any person or damage to any property arising out of
Lessee's use of the Premises or from the conduct of Lessee's business, or from
any activity, work, or thing done, permitted or suffered by Lessee in or about
the Premises or from Lessee's breach of this Lease, except:

                (i)  claims and liabilities occasioned in whole or in part by
the negligent acts or omissions of Lessor, its agents or employees; or

                                      -5-

<PAGE>

      (ii) claims and liabilities for property damage addressed in Section 8.6
above.

           Such indemnity shall include all reasonable costs, attorney's fees
and expenses incurred in the defense of any such claim or any action or
proceeding brought thereon. Such defense shall be by counsel reasonably
satisfactory to Lessor. This indemnity will be applicable to a claim only if the
Lessor:

                 (A) notifies Lessee of the claim or liability in writing
within sixty (60) days after the Lessor receives notice of the claim or
liability;

                 (B) permits Lessee to defend or settle against the claim or
liability; and

                 (c) cooperates with Lessee in any defense of settlement against
the claim or liability.

      (b)  Indemnification of Lessee. Lessor shall indemnify and hold Lessee
           -------------------------
and Lessee Parties harmless from and against any and all claims or liability for
bodily injury to or death of any person or damage to any property arising out of
Lessor's conduct, or from any activity, work, or thing done, permitted or
suffered by Lessor in or about the Premises or from Lessor's breach of this
Lease, except:

           (i)  claims and liabilities occasioned in whole or in part by the
negligent acts or omissions of Lessee, its agents or employees; or

           (ii) claims and liabilities for property damage addressed in Section
8.6 above.

           Such indemnity shall include all reasonable costs, attorney's fees
and expenses incurred in the defense of any such claim or any action or
proceeding brought thereon. Such defense shall be by counsel reasonably
satisfactory to Lessee. This indemnity will be applicable to a claim only if
the Lessee:

           (A)  notifies Lessor of the claim or liability in writing within
sixty (60) days after the Lessee receives notice of the claim or liability;

           (B)  permits Lessor to defend or settle against the claim or
liability; and

           (C)  cooperates with Lessor in any defense of settlement against the
claim or liability.

9.  DAMAGE OR DESTRUCTION:
    ---------------------

    9.1 (a)  Insured Loss. Lessee shall notify Lessor in writing immediately
             ------------
upon the occurrence of any damage to the Premises. If the Premises is only
partially damaged and such damage is covered by the insurance policies described
in SECTION 8.3, this Lease shall remain in effect, and Lessor shall repair the
   -----------
damage, at Lessor's sole cost and expense, as soon as reasonably possible;
provided, however, that if the time necessary to repair the damage is estimated
to exceed four (4) months, Lessee may elect to terminate this Lease as of the
date the damage occurs upon thirty (30) days written notice to Lessor. Lessor
may elect (but is not required) to repair any damage to Lessee's fixtures,
equipment, or improvements (other than the Initial Improvements, which Lessor
shall be obligated to repair in accordance with this section). For the purposes
of this Article, "partially damaged" shall mean that: (i) less than twenty five
percent (25.0%) of the Premises is unusable or untenantable as a result of such
damage; or (ii) less than twenty five percent (25.0%) of Lessee's operations are
materially impaired; and (iii) neither Lessee's ingress or egress nor loading or
                     ---
unloading areas are impaired or unusable.

        (b)  Uninsured Loss. If the cause of any partial damage is not covered
             --------------
by the insurance policies which Lessor is required to maintain under SECTION 8.3
and Lessee does not elect to terminate under Section 9.1 (a) above, Lessor
may elect either to (i) repair the damage as soon as reasonably possible, in
which case this Lease shall remain in full force and effect, or (ii) terminate
this Lease as of the date the damage occurred. Lessor shall notify Lessee within
thirty (30) days after receipt of notice of the occurrence of the damage
whether Lessor elects to repair the damage or terminate the Lease. If Lessor
elects to repair the damage and such damage was due to an act or omission of
Lessee, or Lessee's employees, agents, contractors or invitees, Lessee shall
pay Lessor the difference between the actual cost of repair and any insurance
proceeds received by Lessor. If Lessor elects to terminate the Lease, Lessee may
elect to continue this Lease in full force and effect, in which case Lessee
shall repair any damage to the Premises and any building in which the Premises
is located.

                                      -6-

<PAGE>

Lessee shall pay the cost of such repairs, except that upon satisfactory
completion of such repairs, Lessor shall deliver to Lessee any insurance
proceeds received by Lessor for the damage repaired by Lessee. Lessee shall give
Lessor written notice of such election within ten (10) days after receiving
Lessor's termination notice.

           (c)  Damage during last twelve months. If the damage to the Premises
                --------------------------------
occurs during the last twelve (12) months of the Lease Term and such damage will
require more than thirty (30) days to repair, either Lessor or Lessee may elect
to terminate this Lease as of the date the damage occurred, regardless of the
sufficiency of any insurance proceeds. The party electing to terminate this
Lease shall give written notification to the other party of such election within
thirty (30) days after Lessee's notice to Lessor of the occurrence of the
damage. Notwithstanding the foregoing, in the event Lessor chooses to terminate
this Lease as provided above, Lessee may, within fifteen (15) days following
receipt of Lessor's notice of termination, elect to exercise any available
extension option under this Lease. If Lessee makes such election, this Lease
shall continue in full force and effect, and Lessor shall proceed diligently to
repair and restore the Premises in accordance with the provisions of this Lease.

      9.2. SUBSTANTIAL OR TOTAL DESTRUCTION. If the Premises is substantially or
totally destroyed by any cause whatsoever (the damage to the Premises is greater
than partial damage as described in SECTION 9.1(A)), and regardless of whether
                                    ---------------
Lessor receives any insurance proceeds, this Lease shall terminate as of the
date the destruction occurred. Notwithstanding the preceding sentence, if the
Premises can be rebuilt within six (6) months after the date of destruction,
Lessor may elect to rebuild the Premises at Lessor's own expense, in which case
this Lease shall remain in full force and effect. Lessor shall notify Lessee of
such election within thirty (30) days after Lessee's notice of the occurrence of
total or substantial destruction. If Lessor so elects, Lessor shall rebuild the
Premises at Lessor's sole expense, except that if the destruction was caused by
an act or omission of Lessee, Lessee shall pay Lessor the difference between the
actual cost of rebuilding and any insurance proceeds received by Lessor. In the
event of substantial or total damage or destruction to the Premises, which
includes damage or destruction to the shipping, docking and loading areas,
Lessor shall make repairs to the shipping, docking and loading areas within
thirty (30) days of the date of damage or destruction so that Lessee will be
able to operate business from the area which has not been damaged or destroyed.
If Lessor does not make the repairs to the aforesaid areas within the thirty
(30) day period, Lessee may terminate the Lease upon written notice to the
Lessor.

      9.3. TEMPORARY REDUCTION OF RENT. If the Premises is destroyed or damaged
and Lessor or Lessee repairs or restores the Premises pursuant to the provisions
of this ARTICLE NINE, any Rent payable during the period of such damage, repair
        ------------
and/or restoration shall be reduced according to the degree, if any, to which
Lessee's use of the Premises is impaired. Except for such possible reduction in
Rent, insurance premiums and real Premises taxes, Lessee shall not be entitled
to any compensation, reduction, or reimbursement from Lessor as a result of any
damage, destruction, repair, or restoration of or to the Premises.

      9.4. WAIVER. Lessee waives the protection of any statute, code or judicial
decision which grants a Lessee the right to terminate a lease in the event of
the substantial or total destruction of the leased Premises. Lessee agrees that
the provisions of SECTION 9.2 and SECTION 9.3 above shall govern the rights and
                  -----------     -----------
obligations of Lessor and Lessee in the event of any substantial or total
destruction to the Premises.

      9.5  DELAYS. In the event Lessor does not commence its repair and
restoration work under this Lease within sixty (60) days following the event of
partial damage or destruction (ninety (90) days in the event of substantial or
total damage or destruction) or does not complete such repair and restoration
work within one hundred twenty (120) days following the event of partial damage
or destruction (one hundred eighty (180) days in the event of substantial or
total damage or destruction), then Lessee shall have the right to terminate this
Lease upon thirty (30) days written notice to Lessor.

10.1  REAL PROPERTY TAXES; EVENT OF SALE: In the event the Project is
      ----------------------------------
transferred (i.e. sold, leased, or conveyed) during the initial Lease Term the
Lessor shall be responsible for any Proposition 13 incremental increases in real
estate taxes.

12.1  ASSIGNMENT AND SUBLETTING:
      -------------------------

      (a)  Except as expressly permitted by this Lease, Lessee shall not
voluntarily or by operation of law assign or transfer (collectively, "assign or
assignment") or sublet all or any part of Lessee's interest in this Lease or in
the Premises without Lessor's prior written consent, which consent shall not

                                      -7-

<PAGE>

be unreasonably withheld, co    ioned or delayed and shall be given     denied
by Lessor in writing within thirty (30) days after Lessor's receipt of Lessee's
written request and any documentation regarding the assignment or sublease
reasonably requested by Lessor.

      (b)  Any change in the control of Lessee, or any merger, consolidation,
asset sale, reorganization, hypothecation, leveraged buy-out, or other transfer,
whether or not a formal assignment of this Lease or Lessee's assets, shall be
deemed an assignment of this Lease to which Lessor may withhold its consent if
such assignment is (i) not for bona fide business reasons independent of the
existence of this Lease or (ii) part of a scheme or subterfuge to avoid or evade
Lessee's obligations under this Lease. None of the foregoing shall be applicable
to transactions involving Lessee's parent company.

      (c)  Except as expressly permitted by this Lease, an assignment or
subletting without consent shall be a Default curable after notice per Paragraph
13.1(c).

      (d)  Notwithstanding anything to the contrary above, but subject to
Paragraph 12.1(b), Lessee shall have the right, without consent of Lessor, but
upon prior written notice to Lessor, to assign this Lease or to sublet the
Premises (i) to any parent, subsidiary or affiliate corporation or entity, or
(ii) to any corporation resulting from the consolidation or merger of Lessee
into or with any other entity, or (iii) to any firm, entity or corporation
acquiring the one contemporaneous transaction all or substantially all of the
stock or assets of Lessee or a division of Lessee in the State of California
((i), (ii) and (iii) are collectively referred to as "Permitted Transferees").
Any transfer pursuant to (i), (ii) or (iii) above shall be subject to the
following conditions: that any such assignment or sublease shall be subject to
all of the terms, covenants and conditions of this Lease; any assignee shall
expressly assume for the benefit of Lessor the obligations of Lessee under the
Lease by a document reasonably satisfactory to Lessor; and, Lessee shall provide
to Lessor copies of documents sufficient to verify that the transfer qualifies
under this paragraph. No such transfer shall release Lessee from liability. As
used herein, the expression "affiliate corporation or entity" means a business
entity, corporate or otherwise, that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with
Lessee or its Guarantor. The word "control" means the right and power, direct or
indirect, to direct or cause the direction of the management and polices of a
person or business entity, corporation or otherwise, through ownership or voting
securities, by contract or otherwise. Lessor shall agree to a modification of
the Agreed Use, if necessary, for the proposed assignee or sublessee,
concurrently with any properly approved assignment or sublease.

13.3  Inducement Recapture In Event of Breach: The waiver of Lessee's obligation
      ---------------------------------------
to pay the full Base Rent for the months one (1) through four (4) of the Term is
hereinafter referred to as the "Inducement Provision," and shall be deemed
conditioned upon Lessee's full and faithful performance of all of the terms,
covenants and conditions of this Lease to be performed or observed by Lessee
during the term hereof as the same may be extended. Upon the occurrence of an
uncured Breach by Lessee, the Inducement Provision shall automatically be deemed
deleted from this Lease and of no further force or effect, and any rent abated
by Lessor under such Inducement Provision shall be prorated based on the
unexpired portion of the then current Term and the prorated amount attributable
to such un-expired portion of the then current Term shall be immediately due and
payable by Lessee to Lessor, and recoverable by Lessor as additional rent due
under this Lease. The acceptance by Lessor of rent or the waiver of the Breach
which initiated the operation of this Section shall not be deemed a waiver by
Lessor of the provisions of this Section unless specifically so stated in
writing by Lessor at the time of such acceptance.

50.   Signage: Lessor shall provide Lessee with all signage rights in accordance
      -------
with Project's sign criteria. Lessee may alter glass doors (if applicable) for
signage as well with written design approval from Lessor subject to city
guidelines.

51.   ADA Compliance: Any other provision of this Lease notwithstanding, the
      --------------
parties hereby agree that the Premises may be subject to the terms and
conditions of the Americans with Disabilities Act of 1990 (hereinafter the
"ADA"). The parties further agree and acknowledge that it shall be the sole
responsibility of Lessor (at Lessor's sole cost) to comply with any and all
provisions of the ADA with respect to the shell and other structural
improvements constructed as of the Commencement Date, and the Lessee shall
comply with any and all provisions of the ADA, as such compliance may be
required in connection with Lessee's non-structural improvements and any path of
travel issues resulting from Lessee's use of the Premises. Each party further
agrees to indemnify and hold harmless against any claims, damages and
liabilities which may arise out of the indemnifying party's failure to comply
with the ADA as required by this Section Such indemnification shall include, but
not

                                      -8-

<PAGE>

necessarily be limited to reasonable attorney's fees, court costs, and gments
as a result of said claims.

52.   Building Access: Subject to local government ordinances, Lessee shall be
      ---------------
provided seven (7) days per week, twenty-four (24) hours per day of lighting,
ele:ctrical, building and parking access to the Premises.

53.   Preparation of Lease: This Agreement shall not be construed more strictly
      --------------------
against one party than against the other merely by virtue of the fact that it
may have been prepared by counsel for one of the parties, it being recognized
that both Lessor and Lessee have contributed substantially and materially to the
preparation of this Lease. The headings of various sections in this Lease are
for convenience only and are not to be utilized in construing the content or
meaning of the substantive provisions hereof. The terms "herein," "hereof,"
"hereunder" and any other similar terms used herein shall be deemed to refer to
this Lease in its entirety. All references herein to a party's best knowledge
shall be deemed to mean the best knowledge of such party based on all
appropriate and thorough inquiry. Unless specified to the contrary herein, all
references herein to an exercise of discretion or judgment by Lessor, to the
making of a deterrnination or designation by Lessor, to the application of
Lessor's discretion or opinion, to the granting or withholding of Lessor's
consent or approval, to the consideration of whether a matter or thing is
satisfactory or acceptable to Lessor, or otherwise involving the decision making
of Lessor, shall be deemed to mean that Lessor shall decide reasonably and
unilaterally using its sole and absolute discretion or judgment. Each of the
term "Lessor" and the term "Lessee" or any pronoun used in place thereof, shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their and each of their respective
successors, executors, administrators and permitted assigns, according to the
context hereof. This Lease, together with its exhibits, contains all the
agreements of the parties lhereto and supersedes any previous negotiations.
There have been no representations made by the Lessor or understandings made
between the parties other than those set forth in this Lease and its exhibits.
This Lease may not be modified except by a written instrument by the parties
hereto. If, for any reason whatsoever, any of the provisions hereof shall be
unenforceable or ineffective, all of the other provisions shall be and remain in
full force and effect.

54.   Construction of Lessee Improvements: Lessor's only obligations in
      -----------------------------------
connection with Lessee's proposed construction of improvements at the Premises
are set forth in the "Work Letter" attached as Exhibit "C" hereto.

55.   Confidentiality: Except as specifically provided herein, Lessee hereby
      ---------------
agrees that Lessee shall not disclose any of the economic terms of this Lease to
any person or entity not a party to this Lease, nor shall Lessee issue any press
releases or make any public statements relating to the terms or provisions of
this Lease; provided, however, Lessee may make necessary disclosures to
potential lenders its agents, employees, attorneys, accountants and space
pl.anning consultants, and/of as may be required in connection with Lessee
entering into and performing iits obligations under this Lease, or by applicable
Laws or court order, so long as such parties agree to keep all of the economic
terms and of this Lease strictly confidential. The obligation of Lessee set
forth in this Section 55 shall survive the expiration or any earlier termination
of this Lease for a period not to exceed six (6) months.

56.   Lien Waiver: Lessor hereby waives all lien rights, statutoryor otherwise,
      -----------
upon all trade fixiures, inventory, stock in trade and personal property of
Lessee situated in or on the Premises or upon the proceeds from the sale or
lease thereof, and agrees to execute or deliver, at Lessee's written request, an
instrument in recordable form satisfactory to Lessor confinning such waiver.
Lessee shall not submit such written requests for lien waivers more than once
annually during the Term.

57.   Memorandum of Lease: Upon the written request of Lessee, Lessor shall
      -------------------
execute and dehver to Lessee a memorandum of lease substantially in compliance
with the form attached hereto as Exhibit F. Additionally, Lessee shall at the
termination of this Lease, execute and deliver to Lessor a release of memorandum
of lease substantially in compliance with the form attached hereto as Exhibit G,
which release shall be recorded by Lessor only upon the expiration or earlier
termination of this Lease.

                        SIGNATURES ON THE FOLLOWING PAGE

                                      -9-

<PAGE>

Lessor and Lessee agree the Lease shall be modified as provided in this
Addendum. If not otherwise defined, capitalized terms in this Addendum shall
have the same meanings as set forth in the Lease.

LESSOR                                        LESSEE
------                                        ------

Arrowood Investments, Inc., a California      Barbeques Galore, Inc., a
corporation                                   California corporation



By: /s/ Scott Downes                          By: /s/ Sydney Selati
   -----------------------                       ---------------------------
   Scott Downes, President                       Sydney Selati, President


Date:_____________________                    Date:    1.18.02
                                                   ---------------

                                                             .

By:______________________                     By:   /s/ Kevin Ralphs
   Name:__________________                       ---------------------
                                                 Name:  Kevin Ralphs (CFO)
                                                      ----------------------

Address: 8413 Jackson Road, Suite B           Address: 15401 Bake Parkway,
         Sacramento, CA 95826                          Suite A Irvine, CA 92618

Telephone: (916) 381-6509                     Telephone: (949) 597-2400
Fax:       (916) 381-5350                     Fax:       (949) 597-2434

                                      -10-

<PAGE>

                                     [MAP]


                                  EXHIBIT "A"



                   [LOGO] Carlile Coatsworth Architects, Inc.



PANATTONI DEVELOPMENT

BUILDING `A' - HAVEN & MISSION
3355 E. CEDAR AVE. ONTARIO, CA

04 JANUARY 02

<PAGE>

                                   EXHIBIT "B"

                         HAZARDOUS MATERIAL SURVEY FORM

     The purpose of this form is to obtain information regarding the use of
hazardous substances on ______________'s property. Prospective tenants and
contractors should answer the questions in light of their proposed operations on
the premises. Existing tenants and contractors should answer the questions as
they relate to ongoing operations on the premises and should update any
information previously submitted.

     If additional space is needed to answer the questions, you may attach
separate sheets of paper to this form. Your cooperation in this matter is
appreciated.


1.   GENERAL INFORMATION
     -------------------

     Name of Responding Company:  Barbeques Galore Inc.
                                -----------------------

     __________________________________________________


     Check all that apply:
     Tenant (x)   Contractor ( )      Prospective (x)      Existing ( )

     Mailing Address: 15041 Bake Parkway, Suite A
                     ----------------------------------

                     Irvine CA. 92618
     --------------------------------------------------


     Contact Person & Title:  Sydney Selati, President.
                            ---------------------------

     Telephone Number: (949) 597-2400
                        ---  --- ----

     Current HAS Tenant(s):
     ---------------------


     Address of Leased Premises:_______________________

     __________________________________________________


     Prospective HAS Tenant(s):
     -------------------------




     Address of Proposed: Leased Premises:_____________

     __________________________________________________

     Address of Current Operations:____________________

     __________________________________________________

     Length of Lease or Contract Term:_________________

     Describe the proposed operations to take place on the property, including
     principal products manufactured or services to be conducted. Existing
     tenants and contractors should describe any proposed changes to ongoing
     operations.

2.   HAZARDOUS MATERIALS
     -------------------

                                      -11-

<PAGE>

     For the purpose of the Survey Form, the term "hazardous material" means any
     raw material, product or agent considered hazardous under any state of
     federal law. The term does not include wastes which are intended to be
     discarded.

     2.1  Will any hazardous materials be used or stored on-site?

          Chemical Products         Yes ( )          No (X)
          Biological Hazards        Yes ( )          No (X)
          Radioactive Materials     Yes ( )          No (X)
          Petroleum Products        Yes ( )          No (X)

     2.2  List any hazardous materials to be used or stored, the quantities
          that will be on-site at any given time, and the location and method of
          storage (e.g., bottles in storage closet on the premises).

     Hazardous Materials    Location and Method of Storage    Quantity

     ___________________                None                  ________
     ___________________                None                  ________
     ___________________                None                  ________
     ___________________                None                  ________
     ___________________                None                  ________

     2.3  Is any underground storage of hazardous substances proposed or
          currently conducted on the premises?
          Yes ()               No (X)

          If yes, describe the materials to be stored, and the size and
          construction of the tank. Attach copies of any permits obtained for
          the underground storage of such substances.


3.   SPILLS         N/A
     ------

     3.1  During the past year, have any spills occurred on the premises?

          Yes ( )          No ( )

          If so, please describe the spill and attach the results of any testing
          conducted to determine the extent of such spills.

     3.2  Were any agencies notified in connection with such spills?

          Yes ( )          No ( )

          If so, attach copies of any spill reports or other correspondence with
          regulatory agencies.

     3.3  Were any clean-up actions undertaken in connection with the spills?

          Yes ( )          No ( )

          If so, briefly describe the actions taken. Attach copies of any
          clearance letters obtained from any regulatory agencies involved and
          the results of any final soil or groundwater sampling done upon
          completion of the clean-up work.

4.   HAZARDOUS WASTE
     ---------------

     For purpose of this Survey Form the term "hazardous waste" means any waste
     (including biological, infectious or radioactive waste) considered
     hazardous under any state or federal law, and which is intended to be
     discarded.

     4.1  List the hazardous waste, if any, generated or to be generated at the
          premises, its hazard class and the quantity generated on a monthly
          basis.

                                      -12-

<PAGE>

     Hazardous Waste          Location and Method        Quarterly/Month
                              of Storage Before
                              Disposal

     ___________________              None               _______________
     ___________________              None               _______________
     ___________________              None               _______________
     ___________________              None               _______________
     ___________________              None               _______________

     4.2  Describe the method(s) of disposal (including recycling) for each
          waste. Indicate where and how often disposal will take place.


     Hazardous Materials      Location of Disposal Site  Disposal Method

     ___________________                 None            _______________
     ___________________                 None            _______________
     ___________________                 None            _______________
     ___________________                 None            _______________
     ___________________                 None            _______________


     4.3  Is any treatment or processing of hazardous wastes currently conducted
          or proposed to be conducted at the premises?

          Yes ( )          No (X)

          If yes, please describe any existing or proposed treatment methods.

     4.4  Attach copies of any hazardous waste permits or licenses issued to
          your company with respect to its operations on the premises.


5.   WASTEWATER TREATMENT/DISCHARGE    N/A
     ------------------------------

     5.1  Do you discharge industrial wastewater to:

          __  storm drain?           __ sewer?
          __  surface water?         __ no industrial discharge

     5.2  Is your industrial wastewater treated before discharge?

          Yes ( )          No ( )

          If yes, describe the type of treatment conducted.


     5.3  Attach copies of any wastewater discharge permits issued to your
          company with respect to its operations on the premises.


 6.  AIR DISCHARGES
     --------------

     6.1  Do you have any air filtration systems or stacks that discharge into
          the air?
          Yes ( )          No (X)

     6.2  Do you operate any equipment that require air emissions permits?

          Yes ( )          No (X)

     6.3  Attach copies of any air discharge permits pertaining to these
          operations.

                                      -13-





<PAGE>

7.   HAZARDOUS MATERIALS DISCLOSURES
     -------------------------------

     7.1  Does your company handle an aggregate of at least 500 pounds, 55
          gallons or 200 cubic feet of hazardous material at any given time? If
          so, state law requires that you prepare a hazardous materials
          management plan.

          Yes ( )          No (X)

     7.2  Has your company prepared a hazardous materials management plan
          (`business plan') pursuant to state and Orange County Fire Department
          requirements?

          Yes ( )          No (X)

          If so, attach a copy of the business plan.

     7.3  Are any of the chemicals used in your operations regulated under
          Proposition 65?

          Yes ( )          No (X)   No chemicals, but products which have
                                    required notice.

          If so, describe the actions taken, or proposed actions to be taken, to
          comply with Proposition 65 requirements.

     7.4  Is your company subject to OSHA Hazard Communication Standard
          Requirements?

          Yes ( )          No (X)

          If so, describe the procedures followed to comply with these
          requirements.

8.   ANIMAL TESTING
     --------------

     8.1  Does your company bring or intend to bring live animals onto the
          premises for research or development purposes?

          Yes ( )          No (X)

     8.2  Does your company bring or intend to bring animal body parts or bodily
          fluids onto the premises for research and development purposes?

          Yes ( )          No (X)

          If yes, describe the activity.

9.   ENFORCEMENT ACTIONS, COMPLAINTS
     -------------------------------

     9.1  Has your company ever been subject to any agency enforcement actions,
          administrative orders, or consent decrees?   Yes ( )          No (X)

          If so, describe the actions and any continuing compliance obligations
          imposed as a result of these actions.

     9.2  Has your company ever received any request for information, notice or
          demand letters, or any other inquiries regarding its operations?

          Yes ( )          No (X)

     9.3  Have there ever been, or are there now pending, any lawsuits against
          your company regarding any environmental or health and safety
          concerns?

          Yes (X)          No ( )   Possible Proposition 65 action.

     9.4  Has an environmental audit ever been conducted at your company's
          current facility?

                                      -14-

<PAGE>

          Yes ( )          No (X)

          If so, discuss the results of the audit.

     9.5  Have there been any problems or complaints from neighbors at your
          company's current facility?

          Yes ( )          No (X)

     9.6  If you answered "yes" to any question in this section, describe the
          environmental action or complaint and any continuing obligation
          imposed as the result of same.


  Barbeques Galore Inc.,
------------------------------
Company

By: /s/ Sydney Selati
   ---------------------------

Title:   President                      Date:     1.18.02
      ------------------------               ---------------------

                                      -15-

<PAGE>

                                   EXHIBIT "C"

                                   WORK LETTER
                                   -----------

   THIS WORK LETTER (THIS "Work Letter") IS ATTACHED TO, SUPPLEMENTS, AND IS
   MADE A PART OF THE LEASE. THESE PROVISIONS DEFINE THE TERMS AND CONDITIONS
   RELATING TO THE COMPLETION OF AND PAYMENT FOR THE IMPROVEMENTS (AS DEFINED
   BELOW). ALL INITIALLY CAPITALIZED TERMS NOT DEFINED HEREIN SHALL HAVE THE
   SAME MEANING AS SET FORTH IN THE LEASE. THE TERMS AND CONDITIONS OF THIS WORK
   LETTER SUPPLEMENT AND, TO THE EXTENT OF ANY CONFLICT, SUPERSEDE THE
   PROVISIONS OF THE PRECEDING LEASE.

1. Definitions. As used in this Work Letter and in the Lease, the term
   -----------
"Premises Improvements" shall mean those improvements set forth on the "Final
Lessor Plans" (defined in Section 5.e. of this Work Letter), which shall include
the items specified in Schedule "1" attached to this Work Letter. As used in
this Work Letter and in the Lease, the term "LESSEE IMPROVEMENTS" shall mean
those Lessee improvements to be installed in the Building set forth on the Final
Lessee Plans (as defined in Section 5.d. of this Work Letter). As used in this
Work Letter and in the Lease, "IMPROVEMENTS" shall mean the Premises
Improvements and the Lessee Improvements, which shall be constructed at Lessor's
sole cost and expense. The construction and installation of the Improvements is
sometimes referred to herein as the "WORK".

2. Completion of Improvements. Subject to the terms of the Lease and this Work
   --------------------------
Letter and any "LESSEE DELAY" or "FORCE MAJEURE DELAY" as provided herein,
Lessor shall use its commercially reasonable and diligent efforts to cause the
"Contractor" (defined in Section 7 of this Work Letter) to complete the
construction and installation of the Improvements in accordance with the terms
of this Work Letter.

3. Appointment of Construction Representatives.
   -------------------------------------------

     a.   By Lessor. Lessor hereby appoints the following person as Lessor's
          ---------
representative ("LESSOR'S REPRESENTATIVE") to act for Lessor in all matters
covered by this Work Letter: Michael Johnson.

     b.   By Lessee. Lessee hereby appoints the following person as Lessee's
          ---------
representative ("LESSEE'S REPRESENTATIVE") to act for Lessee in all matters
covered by this Work Letter: Jim Tullis.

     c.   Communications. All communications with respect to the matters covered
          --------------
by this Work Letter shall be made to Lessor's Representative or Lessee's
Representative, as the case may be. Either party may change its representative
under this Work Letter at any time by written notice to the other party.

4. Architect. Carlile Coatsworth Architects Inc. ("ARCHITECT"), shall act as the
   ---------
architect with respect to the design and construction of the Improvements.
Lessor shall enter into a contract with Architect for such services (the
"ARCHITECT CONTRACT"). The parties acknowledge and agree that the Architect
Contract entered into with the Architect will obligate the Architect to issue to
both Lessor and Lessee an architect's certificate ("ARCHITECT'S CERTIFICATE")
upon Substantial Completion (as defined in Addendum Paragraph 3.1 (a) and
hereinafter defined) of the Improvements certifying the Substantial Completion
of the Improvements in accordance with the Final Plans (as hereinafter defined).

5. Improvement Plans.
   -----------------

     a.   Approved Matters and Preliminary Specifications. Lessor and Lessee
          -----------------------------------------------
have each approved (i) the Site Plan attached to the Lease as Exhibit "A", (ii)
the Shell and Tenant Improvement Outline Specifications for the Premises
Improvements set forth in SCHEDULE "1" attached hereto and (iii) the space plan
for the Lessee Improvements set forth in SCHEDULE "2" attached hereto and (the
items in (i), (ii), and (iii) herein referred to collectively as the
"PRELIMINARY SPECIFICATIONS").

     Notwithstanding anything to the contrary contained herein, Lessor shall
have the right to substitute materials and designate alternatives for any of the
Preliminary Lessor Specifications and Preliminary Lessor Plans, but only if such
substitute materials and alternatives are equivalent to those specified in the
Preliminary Plans and are approved by Lessee which approval shall not be
unreasonably withheld.

                                      -16-

<PAGE>

     b.   Final Plans.  Based on the Preliminary Lessee Plans approved by Lessor
          -----------
and Lessee, Lessor shall cause the Architect, the Engineers and/or other
consultants selected and retained by Lessor to prepare and deliver to Lessee
final architectural plans, drawings and specifications and complete engineering,
mechanical, fire/life safety, structural and electrical *working drawings for
all of the Lessee. Improvements (collectively, the "Lessee Working Drawings")
showing: (i) the layout, lighting, finish and decoration work (including
carpeting and other floor coverings); and (ii) all other specifications for the
Lessee Improvements. Within seven (7) days after Lessor's delivery of the Lessee
Working Drawings to Lessee, Lessee shall approve or disapprove (in which case
specific modifications must be proposed) the same in writing, which approval
shall not be unreasonably withheld; provided, however, that Lessee may only
disapprove the Lessee Working Drawings to the extent such Lessee Working
Drawings are materially inconsistent with the Preliminary Lessee Plans or to
propose modifications which are consistent with the Preliminary Lessee Plans,
and only if Lessee delivers to Lessor, within such 7-day period, specific
changes proposed by Lessee which (A) are consistent with the Preliminary Lessee
Plans and (B) do not constitute changes which would result in a Design Problem.
If any such revisions are timely and properly proposed by Lessee, Lessor shall
cause the Lessee Working Drawings to be revised to incorporate such revisions
and submit the same for Lessee's approval in accordance with the foregoing
provisions, and the parties shall follow the foregoing procedures for approving
the Lessee Working Drawings until the same are finally approved by Lessor and
Lessee. The Lessee Working Drawings which have been finally approved by Lessor
and Lessee shall be referred to herein as the "Final Plans."

     c.   Design Problem; Lessee Changes. Once the Preliminary Plans or the
          ------------------------------
Final Plans, as the case may be, have been approved by Lessor and Lessee, Lessee
shall make no changes or modifications thereto without the prior written consent
of Lessor, which consent may be withheld in Lessor's sole and absolute
discretion if such change or modification would result in any of the following
(each a "Design Problem"): (i) directly or indirectly delay "Substantial
Completion," as that term is defined in Section 10 below, of the Premises,
unless Lessee agrees that any such delay shall constitute a Lessee Delay (as
defined below); (ii) increase the overall cost of designing or constructing the
Improvements above the cost of the Improvements depicted in the Preliminary
Specifications, unless Lessee agrees to pay for such increased cost as if such
increased cost were a Change Order Cost (as defined below); (iii) be of a
quality lower than the quality of the Lessee Improvements set forth in the
Preliminary Lessee Plans (with respect to the Lessee Improvements) or be a
quality lower than the quality of the Premises Improvements set forth in the
Preliminary Lessor Plans (with respect to the Premises Improvements); (iv)
materially affect the exterior appearance or size or cost of the Building or the
parking areas, or the structure or systems and equipment of the Building; and/or
(v) violate any applicable laws, rules, regulations, ordinances, directives,
covenants, easements and restrictions of record, and permits (collectively,
"Applicable Law"). Notwithstanding anything to the contrary set forth in this
Work Letter, in the event that Lessee shall request any changes or substitutions
to any of the Construction Drawings and such changes, differences and/or
substitutions result in net increased costs of construction in excess of the
costs of those improvements depicted on the Preliminary Specifications, then
Lessee shall pay such excess costs to Lessor in cash within ten (10) business
days after Lessor's request therefor, which request for payment shall not be
made until Lessor has incurred such costs as evidenced by an invoice or progress
billing from the Contractor.

     d.   Governmental Approvals. When the Final Lessor Plans and Final Lessee
          ----------------------
Plans have been approved by Lessee and Lessor, Architect shall submit the Final
Lessor Plans and Final Lessee Plans to the appropriate governmental agencies for
plan checking and the issuance of a building permit for the Improvements.
Architect shall make any and all changes to the Final Lessor Plans and Final
Lessee Plans required by any applicable governmental entity, including, without
limitation, any changes required by the City of Ontario, to obtain a building
permit for the Improvements. Lessor shall be responsible for obtaining approval
of the Final Lessor Plans and the Final Lessee Plans by all governmental
agencies having jurisdiction, including all necessary permits and the temporary
and permanent certificate of occupancy (or other required, equivalent approval
Tom the local governmental authority permitting occupancy of the Premises).
Lessee and Lessor shall cooperate with each other in obtaining such approvals.
Notwithstanding the foregoing, Lessee shall be responsible for obtaining, at
Lessee's sole cost and expense, all approvals required in connection with
Lessee's proposed racking/conveying plan, product mix, use of the Premises or
commodity class in order that Lessee may conduct its business in the Premises in
accordance with the terms of the Lease, and the cost of any changes required to
any of the Construction Drawings or the Improvements as a result of such product
mix, use, and/or commodity class shall be paid for by Lessee within ten (10)
business days after Lessor's notice thereof to Lessee.

     e.   No Representations. Notwithstanding anything to the contrary contained
          ------------------
in the Lease or herein, Lessor's participation in the preparation of the
Construction Drawings, the selection of the

                                      -17-

<PAGE>

Architect, Engineers, consultants and Contractor, the cost estimates, the
Improvements and the construction thereof shall not constitute any
representation or warranty, express or implied, that the Improvements, if built
in accordance with the Final Plans, will be suitable for Lessee's intended
purpose, and Lessor specifically disclaims any such effect. Lessee acknowledges
and agrees that the Improvements are intended for use by Lessee and the
specifications and design requirements for such Improvements are not within the
special knowledge or experience of Lessor. Lessor's sole obligation shall be to
arrange the construction of the Improvements in accordance with the requirements
of the Final Plans; and any additional costs or expenses required for the
modification thereof to more adequately meet Lessee's use, whether during or
after Lessor's construction thereof, shall be borne entirely by Lessee except as
otherwise provided in this Work Letter. Provided, however, the foregoing shall
not be applicable to any construction, engineering or design defects in the
Premises or Building. Notwithstanding the foregoing, Lessor agrees to provide a
copy of and to assign to Lessee, on a non-exclusive basis, the benefit of all
construction warranties pertaining to the Improvements for the Term.

     f.   Plans As Of Lease Execution and Delivery. Development of plans for the
          ----------------------------------------
Improvements has occurred prior to the execution and delivery of this Lease.
Accordingly, notwithstanding anything contained in this Work Letter to the
contrary, the plans which have most recently been approved of by Lessor and
Lessee, consisting of the Site Plan dated as of January 4, 2002, attached hereto
as Exhibit A and the Preliminary Tenant Improvement Plan (PL -3) dated as of
January 7, 2002, will constitute the Lessor and Lessee Working Drawings referred
to in this Work Letter.

6. Change Orders. After the parties approve the Final Plans and a building
   -------------
permit for the Premises Improvements and/or the Lessee Improvements is issued,
any further changes to the Final Plans shall require the prior written approval
of Lessee and Lessor (not to be unreasonably withheld or delayed); provided,
however, that (a) Lessee may not make any changes to portions of the Final Plans
which are required by any governmental agencies or authorities. Lessee may not,
however, make any changes to the Final Plans. If Lessee desires any change in
the Final Plans relative to the Lessee Improvements which is reasonable and
practical and which meets the standard set forth in the first sentence of this
Section 6 (which shall be conclusively determined by the Architect), such
changes may only be requested by the delivery to Lessor by Lessee of a proposed
written "CHANGE ORDER" specifically setting forth in detail the requested change
and the reasons for such requested change. Lessor shall have five (5) business
days from the receipt of the proposed Change Order to provide the following
items: (a) a summary of any estimated increase or decrease in the cost
reasonably caused by such change including a seven (7%) fee to process said
Change Order (the "CHANGE ORDER COST"), (b) a statement of the estimated number
of days of any delay in Substantial Completion beyond March 1, 2002, caused by
such proposed change (the "CHANGE ORDER DELAY"), and (c) a statement of the
estimated cost of the Change Order Delay (the "CHANGE ORDER DELAY EXPENSE"),
which Change Order Delay Expense shall be the product of the number of days of
such delay multiplied by the daily Base Rent rate. Lessee shall then have three
(3) business days to approve the Change Order Cost, the Change Order Delay and
the Change Order Delay Expense. If Lessee approves these items, Lessee shall pay
to Lessor the Change Order Cost and Change Order Delay Expense within ten (10)
business days after Lessee's approval thereof. Lessor shall, promptly following
receipt of such payment, execute the Change Order and cause the appropriate
changes to the Final Lessee Plans to be made. If Lessee fails to respond to
Lessor within said three (3) business day period, the Change Order Cost, the
Change Order Delay and the Change Order Delay Expense shall be deemed
disapproved by Lessee and Lessor shall have no further obligation to perform any
work set forth in the proposed Change Order. The Change Order Cost shall include
all costs reasonably associated with the Change Order, including, without
limitation, architectural fees, engineering fees and construction costs, as
reasonably determined by the Architect and the Contractor, respectively. The
Change Order Delay shall include all delays in Substantial Completion beyond
March 1,2002, caused by the Change Order, including, without limitation, all
design and construction delays, as reasonably determined by the Architect and
the Contractor, respectively. The Change Order Delay shall include all delays
caused by the Change Order, including, without limitation, all design and
construction delays, as conclusively determined by the Architect and the
Contractor, respectively.


7. Selection of Contractor. A contractor, under the supervision of and selected
   -----------------------
by Lessor, shall construct the Improvements (the "CONTRACTOR"). Lessor shall
also approve and select all subcontractors performing such work. The Contractor
shall be Panattoni Construction.


8. Construction of the Improvements. Lessor shall enter into a construction
   --------------------------------
contract with the Contractor on a form reasonably acceptable to Lessor
("CONSTRUCTION CONTRACT") for the construction and installation of the
Improvements in accordance with the Final Plans. Lessor shall enter into a

                                      -18-

<PAGE>

construction contract for the construction and installation of the Lessee
improvements in accordance with the Final Lessee Plans on a form reasonably
acceptable to Lessor.

9.  Payment for Cost of the Improvements. Except as specified in Section 5.g,
    ------------------------------------
Section 6 above, or as Lessee may agree to assume in connection with obtaining
Lessor's approval of a proposed change in the Preliminary Plans or Working
Drawings that constitutes a Design Problem, Lessor shall pay the cost of all
permits required for the development of the Improvements and water, sewer or
other utility connection charges and for designing and constructing the
Premises Improvements as provided in the Final Plans Plans.

10. Substantial Completion. Lessee's failure to complete any Lessee fixtures,
    ----------------------
work-stations, built-in-furniture, equipment, Lessee's Systems (as defined in
Section 3.1.6 of the Lease) or personal property to be installed by Lessee shall
not delay Substantial Completion. If there is any delay in the Commencement Date
beyond March 1, 2002 that results from a Lessee Delay (as defined in Section 11
below), then the Commencement Date shall be accelerated by the number of days of
delay caused by the Lessee Delay(s).

11. Lessee Delays and Force Majeure Delays. As used herein, "LESSEE DELAYS"
    --------------------------------------
means any delay in the design or construction of the Improvements resulting from
any or all of the following: (a) Lessee's failure to timely perform any of its
obligations pursuant to this Work Letter, including any failure to complete, on
or before the due date therefor, any action item which is Lessee's
responsibility pursuant to this Work Letter, including Lessee's failure to
grant approvals and/or make payments within the time frames described herein;
(b), Lessee's request for materials, finishes, or installations which are not
readily available and which therefore actually delay the completion of the
Lessee Improvements, (c) any delay in any way whatsoever arising from Lessee's
conducting "INSPECTIONS" under Section 12 below more frequently than twice
weekly, (d) Change Order Delays, or (e) any other act or failure to act by
Lessee, Lessee's Representative, Lessee's employees, agents, independent
contractors, consultants and/or any other person performing or required to
perform services on behalf of Lessee, including interference with Lessor, or
Contractors or subcontractors, during Lessee's early entry under Section 3.1.b
of the Lease. Except with respect to a Change Order Delay or Lessee's failure to
comply with specific deadline dates for Lessee's performance set forth herein,
no delay shall be deemed to have occurred until and unless Lessor has given
written notice to Lessee identifying the event of delay and, if curable, Lessee
fails to cure the delay within one (1) business day after Lessee's receipt of
such notice, in which case the actual delay attributable to such event from and
after Lessor's notice shall be considered a Lessee Delay.

As used herein, "FORCE MAJEURE DELAYS" means delays (other than a delay which a
party should have reasonably foreseen and provided against resulting from causes
beyond the reasonable control of Lessor or the Contractor (not relating to
financial inability), including, without limitation, any delay caused by any
action, inaction, order, ruling, moratorium, regulation, statute, condition or
other decision of any governmental agency having jurisdiction over any portion
of the Real Property or Premises, over the construction of the Improvements or
over any uses thereof, or by delays in inspections or in issuing approvals or
permits by governmental agencies, or by fire, flood, inclement weather, strikes,
lockouts or other labor or industrial disturbance (whether or not on the part
of agents or employees of either party hereto engaged in the construction of
the Improvements), civil disturbance, order of any government, court or
regulatory body claiming jurisdiction or otherwise, act of public enemy, war,
riot, sabotage, blockage, embargo, or inability to secure materials, supplies or
labor through ordinary sources by reason of shortages or priority, discovery of
hazardous or toxic materials, earthquake, or other natural disaster, or any
cause whatsoever beyond the reasonable control (excluding financial inability)
of the party whose performance is required, or any of its contractors or other
representatives, whether or not similar to any of the causes herein above stated
(other than a delay which a party should have reasonably foreseen and provided
against). In the event any Force Majeure Delay occurs, neither party shall be
entitled to delay or excuse in its performance of an obligation under this Lease
unless it notifies the other party of such Force Majeure Delay within ten (10)
days of its occurrence.

12. Lessee's Inspection Rights. Lessor shall schedule and attend weekly progress
    --------------------------
meetings, walk-throughs and any other meetings with the Architect, the
Contractor and Lessee to discuss the progress of the construction of the
Improvements ("MEETINGS"). Lessor shall give Lessee at least twenty-four (24)
hours prior notice (written or telephonic) of all such Meetings. Lessee shall
designate in writing the person or persons appointed by Lessee to attend the
Meetings and such designated party shall be entitled to be present at and to
participate in the discussions during all Meetings; but Lessor may conduct the
Meetings even if Lessee's appointees are not present. In addition to the
foregoing and to Lessee's early entry rights as provided in Section 3.1.b of
the Lease, Lessee or its agents shall have the right at any and all reasonable
times to conduct inspections, tests, surveys and reports of work in progress
("INSPECTIONS") for the purpose of reviewing whether the Improvements are being
constructed

                                      -19-

<PAGE>

in accordance with the Final Plan, as amended by any approved Change Orders or
other agreed upon changes. Lessee agrees to protect, hold harmless and indemnify
Lessor from all claims, demands, costs and liabilities (including reasonable
attorneys' fees) arising from Lessee's or Lessee's agents entry onto the Land
for the purpose of conducting Inspections.

13.  Walk-Through and Punch List. Upon Substantial Completion of the
     ---------------------------
Improvements, Lessee, Lessor, the Lessee's Representative and the Architect
shall jointly conduct a walk-through of the Improvements and shall jointly
prepare a punch list ("PUNCH LIST") of items needing additional work ("PUNCH
LIST ITEMS"); provided, however, the Punch List shall be limited to items which
are required by the Construction Contract, the Final Plans, Change Orders and
any other changes agreed to by the parties. Lessor shall use its commercially
reasonable best efforts to diligently pursue completion of any Punch-List items
within thirty (30) days following the walk-through.

14.  Miscellaneous Construction Covenants.
     ------------------------------------


     a.   Coordination with Lease. Nothing herein contained shall be construed
          -----------------------
as (i) constituting Lessee as Lessor's agent for any purpose whatsoever, or (ii)
a waiver by Lessor or Lessee of any of the terms or provisions of the Lease.
Any default by either party with respect to any portion of this Work Letter,
shall be deemed a breach of the Lease for which Lessor and Lessee shall have
all the rights and remedies as in the case of a breach of the Lease by the other
party.

     b    Cooperation. Lessor and Lessee agree to cooperate with one another and
          ------------
to cause their respective employees, agents and contractors to cooperate with
one another to coordinate any work being performed by Lessor and/or Lessee under
this Work Letter, and their respective employees, agents and contractors so as
to avoid unnecessary interference and delays with the completion of the Work.

15   No Representations. Lessor does not warrant that the Premises, the Building
     ------------------
or any component thereof will be free of latent defects or that it will not
require maintenance and/or repair within any particular period of time, except
as expressly provided herein or the Lease.

16.  Option to Remove; Ownership of Lessee Improvements. By written notice to
     --------------------------------------------------
Lessee, Lessor may require that any or all of the Lessee Improvements be removed
by Lessee, at Lessee's sole cost and expense, prior to the expiration or earlier
termination of the Lease. If Lessor requires any or all of the Lessee
Improvements to be so removed by Lessee, Lessee shall, at Lessee's sole cost and
expense, repair all damage resulting from such removal and restore the Premises
to good condition and repair and, if Lessee fails to do so, Lessor may do so at
Lessee's cost. Any Lessee Improvements that Lessor does not require Lessee to
remove shall become the property of Lessor upon expiration or earlier
termination of the Lease and shall remain on the Premises at all times during
the Term.

                                      -20-

<PAGE>

                          SCHEDULE "1" to EXHIBIT "C"

                               [LOGO OF PANATTONI]


                      SHELL AND TENANT IMPROVEMENT OUTLINE
                                 SPECIFICATIONS

                                       FOR

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

                             BARBEQUES GALORE, INC.

                                   BUILDING A
                             SEC STERLING AND CEDAR
                                3355 E. CEDAR ST.
                           ONTARIO, CALIFORNIA 91761

                                     Revised

                                January 14, 2002

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


                                               PREPARED FOR
                                               Panattoni Development Company
                                               19600 Fairchild Road, #285
PREPARED FOR                                   Irvine, CA 92612
Barbeques Galore, Inc.                         (949) 474-7830
                                               (949) 474-7833 Fax

                                  Page 1 of 14

<PAGE>

                      TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            Page
<S>                                                                         <C>
DIVISION 1: GENERAL REQUIREMENTS                                              5

  1.00  DEFINED TERMS                                                         5

  1.01  LAWS, ORDINANCES, RULES & REGULATIONS                                 5

  1.02  FIELD ADMINISTRATION PERSONNEL                                        5

  1.03  TECHNICAL AND ADMINISTRATIVE                                          5

  1.04  MOBILIZATION/DEMOBILIZATION                                           5

  1.05  TEMPORARY CONSTRUCTION FACILITIES                                     5

  1.06  QUALITY/TRAINING/SAFETY/PROGRAMS                                      5

  1.07  DAILY CLEANUP                                                         5

  1.08  TESTING                                                               5

  1.09  FINAL CLEANUP AND PUNCHLIST                                           5

  1.10  IMPACT, PERMIT, & CONNECTION FEES                                     6

  1.11  SIGNAGE                                                               6

DIVISION 2: SITEWORK                                                          6

  2.01  CLEAR AND GRUB                                                        6

  2.02  LAYOUT ENGINEERING                                                    6

  2.03  MASS EARTHWORK                                                        6

  2.04  FINE GRADE                                                            6

  2.05  UNDERGROUND UTILITIES                                                 6

  2.06  ASPHALT PAVING                                                        7

  2.07  CONCRETE SLABS                                                        7

  2.08  SITE CONCRETE                                                         7

  2.09  CONCRETE LOADING DOCKS & APRONS                                       7

  2.10  LANDSCAPE AND IRRIGATION                                              7

  2.11  EXTERIOR SIGNAGE                                                      7

  2.12  EROSION PROTECTION                                                    7

  2.13  OFFSITE CONSTRUCTION                                                  7

DIVISION 3: CONCRETE                                                          7

  3.01  BUILDING FOUNDATIONS                                                  7

  3.02  FLOOR SLAB                                                            7

  3.03  TILT-UP WALLS                                                         8

  3.04  RETAINING/SCREEN WALLS                                                8
</TABLE>

                                  Page 2 of 14

<PAGE>

DIVISION 4: MASONRY                                            8

  4.01  CMU BLOCK WALLS                                        8

DIVISION 5: STRUCTURAL STEEL & METALS                          8

  5.01  STRUCTURAL STEEL                                       8

  5.02  MISCELLANEOUS METALS                                   8

DIVISION 6: CARPENTRY                                          8

  6.01  ROOF STRUCTURE                                         8

  6.02  MISCELLANEOUS CARPENTRY                                8

  6.03  MECHANICAL SCREEN WALLS                                8

  6.04  SMOKE CURTAIN WALLS                                    8

DIVISION 7: THERMAL & MOISTURE PROTECTION                      8

  7.01  BUILT UP ROOFING                                       8

  7.02  ROOF ACCESS                                            8

  7.03  MISCELLANEOUS CAULKING                                 9

  7.04  INSULATION                                             9

  7.06  SMOKE HATCHES                                          9

DIVISION 8: DOORS AND WINDOWS                                  9

  8.01  EXTERIOR DOORS                                         9

  8.02  INTERIOR DOORS                                         9

  8.03  ALUMINUM STOREFRONT                                    9

  8.04  ROLL-UP DOORS                                          9

DIVISION 9: FINISHES & OFFICE IMPROVEMENTS                     9

  9.01  EXTERIOR WALL PAINTING                                 9

  9.02  METAL FRAMING AND SHEETROCK                            9

  9.03  CEILINGS                                               9

  9.04  FLOOR COVERINGS                                        9

  9.05  INTERIOR PAINTING                                      9

  9.06  VINYL WALL COVERING                                   10

  9.07  CERAMIC TILE                                          10

  9.08  MISC. PAINTING                                        10

DIVISION 10: SPECIALTY                                        10

 10.01  BATHROOM ACCESSORIES                                  10

 10.02  FENCING                                               10

 10.03  FLAGPOLES                                             10


                                  Page 3 of 14


<PAGE>

  10.04 SIGNAGE                                               10

DIVISION 11: DOCK EQUIPMENT                                   10

  11.01 DOCK EQUIPMENT                                        10

DIVISION 12: FURNISHINGS                                      10

DIVISION 13: SPECIAL CONSTRUCTION                             10

  13.01 SECURITY SYSTEM                                       10

  13.85 DETECTION AND ALARM - FIRE LIFE SAFETY                10

  13.90 FIRE PROTECTION                                       11

DIVISION 14: CONVEYING SYSTEM                                 11

DIVISION 15: MECHANICAL                                       11

  15.01 PLUMBING                                              11

  15.03 HVAC                                                  11

DIVISION 16: ELECTRICAL                                       11

  16.01 LIGHTING                                              11

  16.02 ELECTRICAL SERVICE                                    11


                                  Page 4 of 14

<PAGE>

INTRODUCTION

The intent of this specification is to outline the requirements of an
attractive, high quality, cost efficient building constructed to reflect local
design standards.

Lessee to be provided the Lessee Improvements on a turnkey basis for
approximately 1,500 square feet of single-story office space; including
restrooms to code, plan check and permit fees (see also Schedule "A" attached
hereto and made a part hereof).

DIVISION 1: GENERAL REQUIREMENTS

1.0   DEFINED TERMS:

      Owner/Developer: Panattoni Development, LLC; Architect: CC Architects;
      Contractor: Panattoni Construction; Tenant: Barbeques Galore, Inc

1.01  LAWS, ORDINANCES, RULES & REGULATIONS

      All applicable laws, ordinances, rules and regulations pertaining to the
      City of Ontario, the State of California and Federal Government, shall be
      complied with. Building designed in strict compliance with all local
      building codes, including but not limited to the Uniform Building Code and
      Uniform Fire Code.

1.02  FIELD ADMINISTRATION PERSONNEL

      The field administration personnel shall consist of a full time, exclusive
      project superintendent, and a skilled labor force appropriate to the
      current phase of construction.

1.03  TECHNICAL AND ADMINISTRATIVE

      A design team of experienced architects and engineers familiar with this
      type of building will be assembled to create construction drawings, and to
      consult throughout the construction phase. All structures will be designed
      to meet the applicable seismic zone criteria. The Contractor will provide
      plumbing, mechanical, fire protection and electrical construction
      documents. Contractor may, at its option, utilize design/build
      subcontractors to prepare some of the design documents.

      The Architect, Structural Engineer and Civil Engineer will be providing
      errors and omission insurance coverage for their work in the amount of
      $1,OOO,OOO per occurrence and $2,000,000 in aggregate. General Contractor
      shall carry general liability insurance of $l,OOO,OOO.

      Architect will control the distribution of all prints and maintain a
      record of such distribution.

      Architect to employ line-of-site analysis to assure wall parapets are tall
      enough to screen anticipated roof mounted equipment.

1.04  MOBILIZATION/DEMOBILIZATION

      As work is commenced, temporary utilities and facilities will be provided
      as required. The contractor will be responsible for providing and/or
      coordinating for equipment and materials. Temporary yards and facilities
      will be removed and/or relocated as the job progresses.

1.05  TEMPORARY CONSTRUCTION FACILITIES

      The contractor at various locations on the site will provide temporary
      restrooms. A job site trailer will be furnished with telephone, computer,
      printer, fax machine, and conference room.

1.06  QUALITY AND SAFETY PROGRAMS

      Quality assurance shall be accomplished through direct supervision by the
      on-site superintendent, the project manager, and periodic inspection by
      the architect, as needed. Additionally, an independent laboratory will
      conduct specialized testing and certification on all required phases of
      construction. The contractor will maintain project safety standards in
      accord with state and local safety standards.

1.07  DAILY CLEANUP

      Maintain premises and public properties free from accumulation of waste,
      debris, and rubbish caused by operations or wind during and after
      construction. Provide on-site containers for collection of waste
      materials, debris, and rubbish.

1.08  TESTING

      Initial geotechnical report will be provided by Developer which will:
      address soil shrinkage and subsidence; recommend R-valves, traffic indices
      and paving sections; and indicate soil corrosivity.

      Contractor responsible to provide independent inspection, observation and
      testing as required by all governmental agencies, including but not
      limited to soils, concrete, welding and roofing. Test results shall be
      promptly distributed to the Developer and the local jurisdiction.

1.09  FINAL CLEANUP AND PUNCH LIST

      Contractor shall employ experienced workmen, or professional cleaners for
      final cleanup. In preparation of substantial completion or occupancy,
      conduct final inspection of sight-exposed


                                  Page 5 of 14


<PAGE>

               interior and exterior surfaces, and concealed spaces. Remove
               grease, dust, dirt, stains, labels, fingerprints and other
               foreign materials from exposed interior and exterior finishes. At
               time of substantial completion perform "walk-through" with the
               Tenant and/or Owner. Compile a "punch list" as work to be
               finished, repaired, patched, or touched-up. At the completion of
               punch list work, perform a final walk through with the Tenant
               and/or Owner. Punch list work must be completed within 2 weeks
               and for every day not complete, Contractor will pay Developer a
               penalty in the amount of $1,000 per diem.

               Contractor is responsible for obtaining foal Certificate of
               Occupancy.

     1.10      IMPACT, PERMIT, & CONNECTION FEES

               Contractor will obtain the building permits that shall be paid
               for by Developer.

               Processing of PUD applications, lot line Adjustments, and other
               required entitlements will be provided by Developer.

               The Tenant is to obtain all the required permits relating to
               environmental issues and operations specific to its business.

     1.11      SIGNAGE

               No signage shall be allowed on site or buildings by Contractor or
               sub contractors, unless approved in writing by Developer.

     DIVISION  2: SITEWORK

     2.01      CLEAR AND GRUB

               Clear site of trees, stumps, debris, surface vegetation and soil
               of organic materials.

     2.02      LAYOUT ENGINEERING

               Contractor to provide licensed surveyor to locate pertinent
               boundaries, grades, and building corners. Contractor's
               superintendent to locate footings. Owner shall locate and mark
               the parcel lines and provide an elevation benchmark.

     2.03      MASS EARTHWORK

               On-site soils are assumed acceptable for use in engineered fill.
               The site will be graded to balance with no import or export of
               material. In the case where import or export of soil is required,
               the cost shall be borne by Contractor. All earthwork shall comply
               with the recommendations of the soils engineer. Contractor to be
               responsible for all costs to comply with all local, state and
               federal handicap requirements per drawings.

     2.04      FINE GRADE

               Fine grade pad to required +4/100th of a foot.
                                          -

     2.05      UNDERGROUND UTILITIES

               Contractor is responsible to have all utilities including power,
               phone, domestic water, sewer, storm drains and gas available at
               the lot lines.

               All items shall be designed to meet state and local requirements.

               Domestic Water:  Domestic water service to be installed by
                                Contractor per civil drawings to each building
                                and at each office area. Service to include a
                                meter and back flow device. In the case of
                                multiple locations: one location to be fully
                                operational and the other locations to have a
                                suitably sized pipe stubbed into the building
                                from the property line without the final
                                connection of a hot top or meter. Contractor
                                responsible for correct location (including
                                depth) of tie-ins to the public system.

               Irrigation:      Irrigation water service will be provided by
                                Contractor to each building. Services will
                                include a meter, back flow device and pressure
                                reducer as required to accommodate both Phasing
                                and Number of building. Contractor responsible
                                for correct location (including depth) of
                                tie-ins to the public system.

               Fire Water:      The contractor is requested to review the
                                option of installing a single (shared) Fire
                                Pump House that will accommodate both Buildings
                                A and C. Contractor responsible for correct
                                location (including depth) of tie-ins to the
                                public system.

                                The on-site fire line main will be connected to
                                two (2) off-site City water mains to form a
                                loop. Contractor to locate fire hydrants around
                                the building perimeter as required by the Fire
                                Department.

               Sewer:           Sewer service will be connected to the sewer
                                main. Contractor to stub sewer 20' into each
                                building at each office location. Each location
                                to have a clean-out in pour strip. Contractor
                                responsible for correct location (including
                                depth) of tie-ins to the public system.

                                  Page 6 of 14

<PAGE>

               Storm Drain:     The storm drain system will drain the entire
                                site and tie into the Public Storm System.
                                Contractor responsible for correct location
                                (including depth) of tie-ins to the public
                                systems. Any on-site retention/detention
                                systems, as required, will be the responsibility
                                of the Contractor.

     2.06      ASPHALT PAVING

               Paving section for truck traffic areas will be per
               recommendations of soils engineer.

               Paving section for auto and truck traffic areas will be per
               recommendations of soils engineer.

               Civil drawings to indicate paving sections.

               Parking per code and as shown on Site Plan.

     2.07      CONCRETE SLABS

               Dumpster pad will be 6", 3,000 psi, reinforced concrete slab

     2.08      SITE CONCRETE

               Curbs shall be 6" extruded concrete curbs except for poured in
               place curb and gutter where applicable.

               Provide 4" concrete slabs for the sidewalks.

     2.09      CONCRETE LOADING DOCKS & APRONS

               Loading Docks: Only docks and aprons to be concrete, balance to
                              be asphalt paving. Concrete 6" nominal thickness
                              slab with a compressive strength of 3,000 psi on
                              native as designed by engineer. Dock height to be
                              48".

     2.10      LANDSCAPE AND IRRIGATION

               Contractor will use Hunter Landscape as the design-build
               landscaping sub-contractor. Contractor will be responsible for
               all costs associated with obtaining final City or jurisdiction
               approval.

               Landscape:       Provide a mix of trees and ground cover. All
                                landscaping shall be installed per City
                                guidelines.

               Irrigation:      Provide 100% coverage to landscaped area with a
                                fully automated commercial grade irrigation
                                system which shall be designed to prevent water
                                overspray from hitting all building surfaces.

               Erosion Control: To be provided as needed.

               Final design to be approved by City.

     2.11      EXTERIOR SIGNAGE

               None

     2.12      EROSION PROTECTION

               To be provided per local requirements. Civil engineer to provide
               SWPP program with full implementation by General Contractor.

     2.13      OFFSITE CONSTRUCTION

               Contractor to provide curb, gutter, sidewalk, streetlights, fne
               hlydrants, median work, paving, street work and utility
               modifications (including any removal, relocation, and/or
               under-grounding as required by the governing jurisdiction) as
               required to complete subject project.

     DIVISION 3: CONCRETE

     3.01      BUILDING FOUNDATIONS

               The foundations will be reinforced 2,500 psi concrete isolated,
               spread footings designed to a specified structural yield as
               directed by structural drawings.

     3.02      FLOOR SLAB

               The following specification is subject to approval by the
               structural engineer. It will provide a strong, high quality
               industrial floor of superior strength and flatness suitable for
               warehousing and distribution.

               Floor slab will be 6" nominal thickness, 4,000 psi compressive
               strength concrete placed over compacted native subgrade. Slab
               slope to be 0.5% or less. In the office area, a visqueen vapor
               barrier will be used under a 6" slab on native soil or as
               recommended by soils engineer. The concrete will be placed with a
               laser screed and ftished with riding power trowels to a burnished
               finish to meet or exceed Ff50 and F130. All construction joints
               to receive dowels greased at one end. All control joints to
               receive dowel baskets and with all joints cut perpendicular at a
               distance

                                  Page 7 of 14

<PAGE>

               not to exceed 18'0". Floor slab will be reinforced (1) column bay
               deep at the entire perimeter of warehouse area and throughout
               office pod areas. Reinforcing will consist of #3 bars at 18" on
               center each way.

               Wet cure will be provided.

               Floor will be sealed with one (1) coat of Sonnebom Lapidolith
               floor sealer or equal.

     3.03      TILT-UP WALLS

               The exterior of building shall be constructed of reinforced
               concrete. Construction and erection of the wall panels to be
               standard tilt-up method. Panel thickness shall be specified by
               the structural engineer.

               Exterior face of panels shall receive a floor slab finish, and
               shall be prepared to receive finish paint. Panel height shall be
               per architectural drawings to provide a clear height at the
               outside walls (excluding smoke curtains) per the table below.
               However, the first bay from the docks may have a 28' clear
               height.

               Interior pick points will be covered by concrete patch. The
               interior panel surfaces will be smooth troweled. Exterior panel
               joints to be caulked. All panels shall be tied together per
               structural drawings and shall meet all applicable seismic codes.

               Building                 Clear Height
               --------                 ------------
                  A                           30

     3.04      RETAINING/SCREEN WALLS

               Contractor to provide retaining walls and screen walls as shown
               on drawings.

     DIVISION  4: MASONRY

     4.01      CMU BLOCK WALLS

               Contractor shall be responsible for all costs associated with any
               block walls on site.

     DIVISION  5: METALS

     5.01      STRUCTURAL STEEL

               Roof to be supported by steel columns. Structural steel shall
               conform to structural engineers design.

               Column spacing will be approximately 52' x 50'.

     5.02      MISCELLANEOUS METALS

               Install 6" pipe bollards at the sprinkler risers and down spouts
               in the warehouse and truck court.

               Install one set of concrete stairs at each exit man door in the
               dock area and warehouse, if needed.


     DIVISION  6: WOODS & PLASTICS

     6.01      ROOF STRUCTURE

               Roof will be a standard panelized wood roof system using open web
               steel trussel girders, 2 x 4 subpurlins with hangers, stiffeners,
               and structural I plywood or OSB sheeting.

     6.02      MISCELLANEOUS CARPENTRY

               All miscellaneous carpentry will be performed to provide a
               professional finish.

     6.03      MECHANICAL SCREEN WALLS

               Per architectural and structural drawings.

     6.04      SMOKE CURTAIN WALLS (See 13.90 - Fire Protection).

     DIVISION 7: THERMAL & MOISTURE PROTECTION

     7.01      BUILT UP ROOFING

               Four-ply built-up roof with a 10 year no dollar limit (NDL)
               manufacturer's warranty by Intec Permaglas, John-Manville, or
               equal, Four-ply to include a base, two plies (Type IV) and a
               mineral cap-sheet.

     7.02      ROOF ACCESS

               Provide roof access via interior mounted ladder. Ladder to meet
               all applicable codes

                                  Page 8 of 14

<PAGE>

     7.03      MISCELLANEOUS CAULKING

               Panel joints will be caulked on the exterior to the full panel
               height.

     7.04      FLOOR JOINT CAULKING

               Caulk all joints in the fast bay along dock doors (excluding
               office pods) and at all joints in the warehouse area. Caulking
               material to be a urethane based product.

     7.05      INSULATION

               Foil faced single layer foil R-7 cut back 2" and folded back to
               sheating.

     7.06      SMOKE HATCHES

               2% curb mounted smoke hatches. The cost of additional smoke
               hatches that may be required as a result of Tenant's use/racking
               or storage plan shall be the sole responsibility of Tenant. No
               burglar bars are included.

     DIVISION 8: DOORS & WINDOWS

     8.01      EXTERIOR DOORS

               Exterior walk doors to be 3'0" x 7'0" hollow metal doors and
               frames as required by the UBC code exiting requirements. All
               hardware to be Schlage `D' series Sparta, brushed aluminum, or
               equivalent. Exterior doors will include key cylinder and pull
               hardware for Fire Department access. Final keying per the
               Tenant's specifications. Knox boxes to be provided per Fire
               Department's requirements.

     8.02      INTERIOR DOORS

               N/A

     8.03      ALUMINUM STOREFRONT

               Provide storefront system (2" x 4-l/2" front-loaded
               configuration) at main entrances with double leaf storefront
               doors. Glass to be sized per opening, single glazed (1/4"),
               medium performance, Versalux Blue 2000 R (2) reflective glass,
               tempered as required by code. Glazing to be installed with
               reflective coating on the interior surface.

     8.04      ROLL-UP DOORS

               Provide 9x10 doors at dock area, and one (1) 12x14 grade level
               door, see table below.

               Doors will be heavy duty, 24 gauge, vertical push up sectional
               (not coiling) track doors with vision lights.

               All doors to be equipped with track guards. All doors to have (1)
               standard view windows installed on the same side as the door
               latch.

               Suite      Dock High Doors     Grade Level Doors
               ------------------------------------------------
                 B             11                    1

     DIVISION 9: FINISHES

     9.01      EXTERIOR WALL PAINTING

               The building exterior will be prepared per paint manufactures
               specifications to receive one coat of primer and one coat of
               exterior vinyl paint; include one additional paint color per
               architectural drawings. Exterior man doors, roll-up doors and
               handrails will be enamel.

     9.02      METAL FRAMING AND SHEETROCK

               Perimeter office walls to be 12'0" high AFF. Interior office
               walls will be 9'0" high AFF.

     9.03      CEILINGS

               1" White suspended metal grid. Armstrong 769, (or equal) 2'x4'
               acoustical ceiling tiles.

     9.04      FLOOR COVERINGS

               Roll carpet, level loop (approx $12 per sq.yd.) 32 oz. Design
               Weave Tempest Classic, (or equal).

     9.05      INTERIOR PAINTING

               Interior walls of warehouse walls to be painted one coat to
               cover.

                                  Page 9 of 14

<PAGE>

     9.06      VINYL WALL COVERING

               N/A

     9.07      CERAMIC TILE

               N/A

     9.08      MISC. PAINTING

               All above ground piping such as back-flow preventors shall be
               painted mallard green. All fire hydrants and PIV's painted per
               Fire Department Specs.

               Contractor to provide all handicap and traffic signage as well as
               parking lot curb painting and striping.

     DIVISION 10: SPECIALTIES

     10.01     BATHROOM ACCESSORIES

               N/A

     10.02     FENCING

               As shown: 1) all vehicle gates to be sliding (not swinging), with
               gate tracks cast in place during placing of concrete and equipped
               with conduit for future electric gate openers, 2) concrete screen
               walls, as shown.

               Install a 10'0" high slatted fence and a 20'0" wide gate double
               drive gate. Fence to be engineered per local building department
               jurisdiction wind load calculations.

     10.03     FLAGPOLES

               N/A

     10.04     SIGNAGE

               Signage will be available to the Tenant at Tenant's expense,
               subject to the provisions of the applicable governing agencies
               and Landlords approval.

     DIVISION 11: EQUIPMENT

     11.01     LOADING DOCK EQUIPMENT

               Eleven (11) edge of dock plate levelers (Kelley or equal). All
               eleven (11) dock doors shall be equipped with dock bumpers. All
               dock doors to be equipped with track guards.

     DIVISION 12: FURNISHINGS

               N/A

     DIVISION 13: SPECIAL CONSTRUCTION

     13.01     SECURITY SYSTEM

               Installation of the security system is the Tenant's
               responsibility,

     13.85     DETECTION AND ALARM - FIRE LIFE SAFETY

               Contractor shall provide a turnkey, design/build cost to install
               a fire alarm monitoring system for the entire project that will
               meet all current state and local building codes. Design shall be
               by a qualified electrical engineer and or qualified electrical
               designer.

               Contractor will also be responsible to establish service with the
               local telephone company to provide (2) voice grade, dedicated
               lines to the fire alarm panel and to coordinate with the fire
               alarm contractor so that system is operational and does not delay
               final sign-off by the City and Fire Department.

           1)  Provide design build alarm system to meet minimum code
               requirements of the City, Fire Marshall, NFPA.

           2)  To include but not be limited to the following:
               a) UL central station listed
               b) Double Detector Check Valves
               c) Post Indicator Valves
               d) Riser Valves
               e) Riser flow switches
               f) Pump Room valves
               g) Pump Running
               h) Loss of power

                                 Page 10 of 14


<PAGE>

               Installation of Shell Central Station Monitoring by Landlord. Any
               additional monitoring as needed due to Tenant's storage
               requirements will be the responsibility of the Tenant.

               Tenant will be responsible for monthly Central Station Monitoring
               of the fire protection system.

     13.90     FIRE PROTECTION

               The warehouse areas will be fully sprinklered. Building to be
               equipped with an ESFR system. The pump house will have a floor
               drain to storm drain system.

               Smoke curtains to be l-5/16" deep 24 gage metal deck Verco or
               approved equal if required by the Fire Department and will be the
               Landlord's responsibility.

     DIVISION 14: CONVEYING SYSTEM

               N/A

     DIVISION 15: MECHANICAL

     15.01     PLUMBING

               See Underground Utilities section 2.05.

     15.03     HVAC

               An allowance is included to provide exhaust fans and louvers that
               will allow for a code minimum of air changes per hour. Use UBC
               code mechanical ventilation.

     DIVISION 16: ELECTRICAL

     16.01     LIGHTING

               Provide emergency exit lighting due to the effects of the
               Tenant's racking lay out.

               Parking lot lighting not less than one (1) foot candle average.

     16.02     ELECTRICAL SERVICE

               General contractor shall provide a design build cost for the
               project. Design shall be by a qualified electrical engineer and
               or qualified electrical designer. Liability and Errors &
               Omissions insurance shall conform to Section 1.03 of this
               specification. Plans shall be processed with SCE by the General
               contractor, the Electrical designer or the Electrical contractor.
               Any fees shall be paid by the General Contractor.

            1) Primary Service

               a) Primary conduit to SCE designated location per SCE approved
                  drawings. Transformer pad and substructure approved by SCE

               b) Secondary conduit and conductor shall be sized and bussed
                  according to the table below, and as required by SCE to the
                  underground pull section.

               c) The underground pull section (UPS), shall be sized and bussed
                  according to the table below.

               d) The location of the primary service shall be in an electrical
                  room. Each electrical room will be located on the outside wall
                  of each of the buildings, constructed of a drywall enclosure
                  with a single man door as access to the room. Switchgear will
                  be installed on the exterior perimeter concrete tilt wall.
                  Alternate locations approved by SCE and the owner will be
                  considered. Final size and dimensions of the electrical room
                  shall be recommended by the Electrical designer and approved
                  by the Owner and the project Architect.

            2) House Service

               a) An independently metered House Service shall be sized at 100
                  Amps, 480/277 volts, three phase.

                  i)  The House Meter may be either a Meter Section or a Meter
                      Main Service Panel

                  ii) The house Service shall serve the following design/build
                      components:

                      (1) Exterior lighting to meet Ontario Building Department
                          standards. Inclusive but not limited to 1 Foot Candle
                          Minimum maintained on all parking, drive, and truck
                          surfaces. Lighting control to clock on, photo-cell
                          off.

                      (2) Lighthg in the Electrical room.

                      (3) 110 volt circuits in the Electrical room to serve:

                          a) Telephone backboard, irrigation time clock

                          b) Alarm panel

                          c) Code required circuit at all fue risers for riser
                             flow alarm

                          d) Exit lights over all doors to the exterior
                             (either 110 or 277), Note, Nuclear signs may be
                             used if approved by Ontario Building Department.

            3) Fire Pump Service

               a) A fire pump service shall be designed to serve the following:

                  i)  Pump controller serving a 100 hp (480/277volt) fire pump
                      meeting all Uniform Codes, Fire Marshall requirements,
                      NFPA. Option price to serve a 150 hp pump.

                  ii) Service to include meter main approved by Ontario Building
                      Department, SCE and Fire Marshall.

                                 Page 11 of 14


<PAGE>

             iii) Interior pump house lighting.
              iv) Conduit and any required conductor from pump house to SCE
                  designated transformer or buss location.
               v) Interior pump house 110 volt convenience plug.
              vi) Conduit from pump house to building main electrical room for
                  alarm circuits.
     4)  Electrical Service, Design build:
         a) Meter Main bussed to Underground Pull Section.
         b) Conduit and conductor to serve Tenant panel.
         c) Provide warehouse lighting using High Bay Metal Halide fixtures to
            provide an average of 15 Foot Candles at 36" average AFF, with 8'0"
            wide racking in place, (two (2) 4'0" deep racks set back-to-back),
            and 9'0" wide aisles.
         d) Provide for twenty-two (22) battery charging station outlets.
     5)  General Notes:
         a) Provide photometric layout with all engineered drawings.

<TABLE>
     Building 2/nd/ Conduits Pull Section  House Service  Dial Corp.    Barbeques Service
     ------------------------------------------------------------------------------------
<S>           <C>            <C>           <C>            <C>           <C>
        A        4000 amps     3000 amps     200 amps      1200 amps/1/      800 amps
</TABLE>

Distribution to warehouse equipment is not assumed
______________________________

/1/277/48Ov 3 phase, expandable to 3000 amps

                                  Page 12 of 14

<PAGE>

                  SCHEDULE "A" TO SCHEDULE "1" TO EXHIBIT "C"
                        DESCRIPTION OF IMPROVEMENT WORK
                           DATED AS OF JANUARY 14,2002

CONFLICT IN TERMS; To the extent that there is any conflict between any standard
construction specifications and materials set forth in this Schedule A and the
terms of Schedule 1, the terms and conditions of Schedule 1 shall control.

1.  Lessor, at Lessor's sole cost and expense, shall provide the Lessee
    Improvements on a turnkey basis per a mutually acceptable space plan,
    specifications, and work letter. As part of Lessor's cost and expense,
    Lessor shall provide space planning, architectural and engineering
    services, and construction management in order to incorporate the following
    general Lessee Improvements:

       A.  Office:     Lessor shall construct approximately 1,500 square feet of
           ------
       office space improvements. The office space shall include, but shall not
       be limited to the following requirements.

                       a) Two private offices (12' x 12')

                       b) Open bullpen for four (4) 8' x 8' workstations.

                       c) Break room for 10 people with sink (including
                          disposal), upper and lower cabinets.

                       d) Men's and Women's restrooms/fixtures for office space
                          and a separate warehouse restroom to code for 30
                          warehouse employees.

                       e) The office area shall include electric outlets and
                          phone & data conduits for each office and workstation,
                          dedicated outlet in break room, and open area for
                          copier and refrigerator, all lighting (including
                          ceiling tile and grid), HVAC (including ductwork) and
                          standard finishes throughout.

       B.  Warehouse:  Lessor shall provide the following warehouse
           ---------
       improvements.

                       a) Install high bay center aisle lighting to be 15-foot
                          candle average 3' AFL for approximately 77,000 square
                          feet of warehouse space.

                       b) Install general warehouse lighting at 25-foot candle
                          average 3' AFL with no racking for approximately
                          20,000 square feet of warehouse space.

                       c) Install edge of dock plates on all doors.

                       d) Install eighteen (18) lift battery-charging stations
                          per code adjacent to office area.

                       e) Install emergency egress lighting to code.

          Lessee shall not be responsible for any cost overruns unless costs are
          associated with Lessee Change Orders.

                                  Page 13 of 14

<PAGE>

      2. Condition of Premises:  Lessor shall deliver the Premises to Lessee
                                 under the following conditions:

                              a) Fire Sprinkler System: Lessor to provide Lessee
                                 ---------------------
                                 with a Title 19 Inspection Report on the fire
                                 sprinkler system.

                                      i. Fire hoses and extinguishers shall be
                                         provided pursuant to applicable code.


                              b) Equipment Services and Utilities: Lessor shall
                                 --------------------------------
                                 deliver the Premises with all equipment
                                 services and utilities in properly working
                                 condition, including loading doors. The
                                 equipment services and utilities include HVAC
                                 units, elevators, restrooms, sewer, water,
                                 electrical service, and natural gas systems,
                                 etc.


                                  Page 14 of 14

<PAGE>

                                BARBEQUES GALORE
                             3355-B E CEDAR STREET

                            PRELIMINARY LAYOUT PL-3
                                  1,855 SQ.FT.

                                 7 JANUARY 2002

                          Schedule "2" to Exhibit "C"

                                  [HOUSE PLAN]

<PAGE>

                                   Exhibit "D"
                               LEGAL DESCRIPTION

That certain real property located in the City of Ontario, County of San
Bernardino, State of California, consisting of Parcel 1 of Parcel map 15478
recorded in Book 191, pages 85 through 89 of Parcel maps, in the office of the
County Recorder of San Bernardino, California.


                                      -2-

<PAGE>

                                   EXHIBIT "E"
                                   -----------

                            FORM OF NON-DISTURBANCE
                            -----------------------

RECORDING REQUESTED BY

UNION BANK OF CALIFORNIA, N.A.


AND WHEN RECORDED MAIL TO:

UNION BANK OF CALIFORNIA, N.A.
Attn.:____________________________
__________________________________
__________________________________
__________________________________






                                       Space above this line for Recorder's use.

             SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT


THIS SUBORDINATION, NONDISTURBANCE AND ATTORNMENT AGREEMENT (the "Agreement")
is made as of _____________ by and between Union Bank of California, N.A.
("Bank") and ("Tenant").

                                    RECITALS:

     A.   Bank has made, or has agreed to make, a loan (the "Loan") to
("Borrower") evidenced by, among other things, a promissory note executed, or to
be executed, by Borrower in favor of Bank in the principal amount of the Loan
(as amended from time to time, the "Note").

     B.   The Note and certain other obligations of Borrower under the Loan are,
or will be, secured by, among other things, a Deed of Trust, Assignment of
Rents, Security Agreement and Fixture Filing (as amended from time to time, the
"Deed of Trust"). The Deed of Trust, executed or to be executed by Borrower in
favor of Bank, and previously recorded or recorded concurrently herewith,
encumbers the estate of Borrower in certain real property and improvements
commonly known as, and more particularly described on Exhibit A attached hereto
(the "Property").

     C.   Borrower has leased a portion of the Property to Tenant subject to
the terms and conditions of a lease dated _______________ (together with any
amendments executed prior to the date hereof, the "Lease").

     D.   As a condition to making the Loan, Bank requires that Tenant
subordinate the Lease to the Deed of Trust and the lien thereof and attorn to
Bank as provided below. Tenant is willing to provide such subordination and
attornment provided Bank agrees not to disturb Tenant's right to possession
under the Lease as provided below.

                                   AGREEMENT:

For good and valuable consideration, Tenant and Bank agree as follows:

     1.   SUBORDINATION. Tenant hereby subordinates the Lease and all rights,
          -------------
remedies and options of Tenant thereunder, including without limitation any
option to purchase or right of first refusal to purchase the Property or any
part thereof or interest therein, to the Deed of Trust and to the lien thereof
and to all sums secured thereby and advances made thereunder with the same force
and effect as if the Deed of Trust had been executed, delivered and recorded
prior to the execution and delivery of the Lease.

     2.   NON DISTURBANCE. Bank will not join Tenant as a party in any
          ---------------
Foreclosure (defined below) unless the joinder is necessary or desirable to
pursue its remedies under the Deed of Trust, and provided that such joinder
shall not result in the termination of the Lease or disturb Tenant's possession
of the Premises. In the event of a Foreclosure, Bank agrees that the leasehold
interest of Tenant under the Lease shall not be terminated by reason of the
Foreclosure, but rather the Lease shall continue in full force and effect and
Bank shall recognize and accept Tenant as tenant under the Lease subject to the

                                      -3-

<PAGE>

provisions of the Lease except as otherwise provided below; provided that, if
Tenant shall then be in default under the Lease beyond any notice, grace or cure
period, at Bank's option the Lease shall be terminated by reason of the
Foreclosure and Bank shall have no obligation to Tenant under the Lease. As used
in this Agreement, "Foreclosure" means any non-judicial or judicial foreclosure
or other enforcement of the remedies of the Deed of Trust, or any deed or other
transfer in lieu thereof.

     3.   ATTORNMENT. In the event of a transfer of Borrower's interest in the
          ----------
Property to a Purchaser (defined below); Tenant agrees that the Lease shall
continue in full force and effect and Tenant agrees to attorn to the Purchaser
as its landlord under the Lease and to be bound by all of the provisions of the
Lease for the balance of the term thereof; provided that, the Purchaser shall
not be:

          (a)  Liable for any act or omission of any Prior Landlord (defined
below) or subject to any offsets or defenses which Tenant might have against
any Prior Landlord;

          (b)  Liable for the return of any rental security deposit, or bound by
any payment of rents, additional rents or other sums which Tenant may have paid
more than one month in advance to any Prior Landlord, except to the extent such
sums are actually received by Purchaser;

          (c)  Bound by any amendment to the Lease, made without Bank's prior
written consent;

          (d)  Liable for obligations under the Lease the cost of which exceed
the value of its interest in the Property or for obligations which accrue after
Purchaser has sold or otherwise transferred its interest in the Property;

          (e)  Bound to install, construct or pay for any improvements on the
Property, or bound to restore the Property after a casualty for a cost in
excess of proceeds recovered under any insurance required to be carried under
the Lease, or bound to restore the Property after a taking for a cost in excess
of any condemnation award;

          (f)  Bound by any restriction on competition beyond the Property;

          (g)  Bound by any notice of termination, cancellation or surrender of
the Lease made without Bank's prior written consent;

          (h)  Bound by any environmental representation, warranty, covenant or
indemnity contained in the Lease,

          (i)  Bound by any option to purchase or right of first refusal with
respect to the Property or any portion thereof; and

          (j)  Bound by any representation or warranty contained in the Lease.

This attornment shall be immediately effective and self operative, without the
execution of any further instrument, upon Purchaser's acquisition of Borrower's
interest in the Property. As used in this Agreement, "Purchaser" means any
transferee, including Bank, of Borrower's interest in the Property pursuant to a
Foreclosure, and "Prior Landlord" means any landlord, including Borrower, under
the Lease prior in time to Purchaser.

     4.   NOTICE TO TENANT. After written notice is given to Tenant by Bank that
          ----------------
Borrower is in default under the Loan and that the rentals under the Lease
should be paid to Bank pursuant to the terms of the Deed of Trust, Tenant shall
thereafter pay to Bank all rent and all other sums due Borrower under the
Lease.

     5.   NOTICE TO LENDER AND RIGHT TO CURE. Tenant shall provide written
          ----------------------------------
notice to Bank of any default by Borrower under the Lease and Tenant agrees that
no notice of termination of the Lease or of an abatement of rent shall be
effective unless Bank shall have received written notice of default giving rise
to such termination or abatement and shall have failed within 60 days after
receipt of such notice to cure such default, or if such default cannot be cured
within 60 days, shall have failed within 60 days after receipt of such notice to
commence and thereafter diligently pursue any action necessary to cure such
default, including without limitation any action to obtain possession of the
Property. Notwithstanding the foregoing, Bank shall have no obligation to cure
any such default.

     6.   MISCELLANEOUS. This Agreement shall be binding upon and inure to the
          -------------
benefit of Bank and Tenant and their respective successors and assigns. This
Agreement shall be governed and interpreted under the laws of the state where
the Property is located. This Agreement is the entire agreement of the parties
and supersedes any prior agreement with respect to its subject matter, and no
provision of this Agreement may be waived or modified except in a writing signed
by all parties. If any lawsuit, arbitration or other proceeding is brought under
this Agreement, the prevailing party shall be entitled to recover the
reasonable fees and costs of its attorneys in such proceeding. If any provision
of this Agreement is held to be invalid or unenforceable in any respect, this
Agreement shall be construed without such provision. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which taken together shall constitute one and the same document.
Tenant represents and warrants to Bank that this Agreement is a valid and
binding agreement of Tenant and the person(s) executing this Agreement on behalf
of Tenant have the authority to do so.

                                      -4-

<PAGE>

IN WITNESS WHEREOF, Bank and Tenant have duly executed this Agreement as of the
date first above written.

BANK:
Union Bank of California, N.A.


By:_______________________________________
Name:_____________________________________
Title:____________________________________

TENANT:

___________________________________________,
a__________________________________________


By:_______________________________________
Name:_____________________________________
Title:____________________________________


By:_______________________________________
Name:_____________________________________
Title:____________________________________

                                      -5-

<PAGE>

                                   EXHIBIT "A"
                          LEGAL DESCRIPTION OF PROPERTY
                          -----------------------------

                      [INSERT OR ATTACH LEGAL DESCRIPTION]

<PAGE>

                              NOTARY ACKNOWLEDGMENT


                    [INSERT OR ATTACH NOTARY ACKNOWLEDGMENTS
                              FOR APPLICABLE STATE]

                                       2

<PAGE>

                                   EXHIBIT "F"
                              MEMORANDUM OF LEASE

RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:


ROMY A. SELATI, ESQ.
Seltzer Caplan McMahon Vitek
750 B Street, Suite 2100
San Diego, California 92101



--------------------------------------------------------------------------------
                           (Space Above This Line for Recorder's Use)

                               MEMORANDUM OF LEASE


         THIS MEMORANDUM OF LEASE ("Memorandum") is made as of January ___,
2002, by and between ARROWOOD INVESTMENTS, INC., a California corporation
("Lessor"), and BARBEQUES GALORE, INC., a California corporation ("Lessee"), who
agree as follows:


1.       Lessor is the owner of that certain improved real property located in
the City of Ontario, County of San Bernardino, State of California, more
particularly described on Exhibit A attached hereto and incorporated herein
                          ---------
("Project").

2.       Lessor and Lessee have entered into that certain Lease dated as of
January l8, 2002 ("Lease"), with respect to the leasing of a portion of the
Project consisting of approximately 98,821 square feet of warehouse and office
space in that certain building located at 3355 East Cedar Street, Ontario,
California ("Premises"), subject to the provisions and conditions set forth
therein. The Lease is incorporated herein by this reference. Any capitalized
terms not defined herein shall have the meaning ascribed thereto in the Lease.

3.       Lessor hereby agrees to lease to Lessee, and Lessee agrees to lease
from Lessor, the Premises upon and subject to the provisions and conditions set
forth in the Lease, as the same may be amended from time to time.

4.       The Lease has a term of five (5) years and seven (7) months, commencing
on March 1, 2002 and ending on September 30, 2007. Lessee has the option to
extend the original term of the Lease for one (1) additional period of five (5)
years.

5.       This Memorandum is being recorded to provide notice to any and all
subsequent interests in the Project and the Premises of the rights and
obligations of the parties under the Lease and is not intended to modify or
change the provisions of the Lease.

                                   Page 1 of 2

<PAGE>

6.  To the extent of any inconsistency between the Lease and this Memorandum,
the Lease shall control.


7.  This Memorandum shall inure to the benefit of and shall be binding upon
Lessor and Lessee and their respective successors and assigns.

LESSOR:

ARROWOOD INVESTMENTS, INC., a
California corporation


By:  ___________________________________
     Scott Downes, President


LESSEE:

BARBEQUES GALORE, INC., a
California corporation


By:  ___________________________________
     Sydney Selati, President

                                   Page 2 of 2

<PAGE>

                                    EXHIBIT A
                                    ---------

                                LEGAL DESCRIPTION

                                   [attached]

<PAGE>

                                   EXHIBIT "G"
                                   -----------
                         RELEASE OF MEMORANDUM OF LEASE
                         ------------------------------

RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:


ROMY A. SELATI, ESQ.
Seltzer Caplan McMahon Vitek
750 B Street, Suite 2100
San Diego, California 92101




--------------------------------------------------------------------------------
                                 (Space Above This Line for Recorder's Use)


                         RELEASE OF MEMORANDUM OF LEASE


         THIS RELEASE OF MEMORANDUM OF LEASE ("Release") is made as of
_____________________________, 200_, by BARBEQUES GALORE, INC., a California
corporation ("Lessee"):

         Lessee, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, hereby releases that certain
Memorandum of Lease dated ______________________________ , 2002, recorded in the
Official Records of the San Diego County Recorder" Office on
_________________________________, 2002, as Document No. ________________,
relating to that certain Lease dated January 18, 2002, between Lessee and
ARROWOOD INVESTMENTS, INC., a California corporation ("Lessor"), for premises
located on the following improved real property in the City of Ontario, County
of San Bernadino, State of California:

             SEE EXHIBIT A ATTACHED HERETO AND INCORPORATED HEREIN.
                 ---------



BARBEQUES GALORE, INC., a
California corporation


By:  ________________________________
     Sydney Selati, President

<PAGE>

                                    EXHIBIT A
                                    ---------

                               LEGAL DESCRIPTION

                                   [attached]