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        STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--MODIFIED NET
                  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

      [LOGO OF AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION APPEARS HERE]



1.   Basic Provisions ("Basic Provisions").

     1.1     Parties: This Lease ("Lease"), dated for reference purposes only, 
November 26             , 1996 is made by and between          Bedford Property 
------------------------    --                        --------------------------
Investors, Inc., a Maryland corporation      ("Lessor") and   Leslie's Poolmart 
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(Inc.), a California corporation ("Lessee"), (collectively the "Parties," or 
--------------------------------
individually a "Party").

     1.2(a)  Premises: That certain portion of the Building, including all 
improvements therein or to be provided by Lessor under the terms of this Lease, 
commonly known by the street address of 1595 Dupont Avenue            , located
                                        ------------------------------
in the City of Ontario County of San Bernadino    , State of California    , 
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with zip code 91761 , as outlined on Exhibit  A attached hereto, plus the area 
indicated on Exhibit A as the "Truck Parking Area"; provided that Lessor shall
have access to this Truck Parking Area during normal business hours, and at
other times upon reasonable advance notice to Lessee, for the purpose of
repairing, replacing and maintaining the Truck Parking Area and the landscaping
appurtenant thereto ("Premises"). The "Building" is that certain building
containing the Premises and generally described as (describe briefly the nature
of the Building): approximately 183,244 sq. ft. concrete tilt-up building at
                  ----------------------------------------------------------
1595 Dupont Ave., Ontario, CA; part of a larger complex located at
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1505/1555/1595 Dupont Ave.. 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 or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements therein, are herein collectively referred to as
the "Industrial Center." (Also see Paragraph 2.)

     1.2(b)  Parking: No more than 202   unreserved vehicle parking spaces 
                      ------------------
("Unreserved Parking Spaces"); (Also see Paragraph 2.6.)

     1.3     Term: See Addendum                       (Also see Paragraph 3.)
                   -----------------------------------

     1.4     Early Possession: See Addendum    (Also see Paragraphs 3.2 and 3.3)
                               ----------------

     1.5     Base Rent: $See Addendum   per month ("Base Rent"), payable on the 
                         --------------
First (1st)   day of each month commencing on the Commencement Date (Also see 
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Paragraph 4.)

[_]  If this box is checked, this Lease provides for the Base Rent to be 
adjusted per Addendum _________, attached hereto.

     1.6(a)  Base Rent Paid Upon Execution: $43,798 as Base Rent for the period 
                                             ------            
of the third (3rd) month of the term.
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     1.6(b)  Lessee's Share of Common Area Operating Expenses: See Addendum
                                                               -----------------

     1.7     Security Deposit: $_______________

     1.8     Permitted Use: See Addendum
                            ----------------------------------------------------

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               ("Permitted Use") (Also see Paragraph 6.)
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     1.9     Insuring Party. Lessor is the "Insuring Party." (Also see Paragraph
8.) 

     1.10(a) Real Estate Brokers. The following real estate broker(s) 
(collectively, the "Brokers") and brokerage relationships exist in this 
transaction and are consented to by the Parties (check applicable boxes):

[X]  CB Commercial                      represents Lessor exclusively ("Lessor's
     -----------------------------------
Broker");
[X]  Grubb & Ellis Company              represents Lessee exclusively ("Lessee's
     -----------------------------------
Broker"); or

     1.12    Addends and Exhibits. Attached hereto is an Addendum or Addenda 
consisting of Paragraphs    1     through  18      , and Exhibits   A     
                        ----------       ----------              ----------
through    E      , all of which constitute a part of this Lease.
       -----------

2.   Premises, Parking and Common Areas.

     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 square footage set forth in this Lease, or 
that may have been used in calculating rental and/or Common Area Operating 
Expenses, is an approximation which Lessor and Lessee agree is reasonable and 
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is 
not subject to revision whether or not the actual square footage is more or 
less.

     2.2     Condition. Lessor shall deliver the Premises to Lessee clean and 
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning 
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement 
Date. If a non-compliance with said warranty exists as of the Commencement Date,
Lessor shall, 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, rectify same at Lessor's expense. If Lessee does 
not give Lessor written notice of a non-compliance with this warranty within 
sixty (60) days after the Commencement Date, correction of that non-compliance 
shall be the obligation of Lessee at Lessee's sole cost and expense. 
Notwithstanding the foregoing, Lessor hereby warrants that (i) the heating, 
ventilating and air conditioning system ("HVAC") currently existing in the 
Premises (and not any HVAC system installed by or for Lessee as part of the 
Improvements to be constructed by Lessee pursuant to Exhibit C hereto, which 
Lessee shall repair or replace at its sole cost and expense) shall be in good 
working order, condition and repair for a period of nine (9) months following 
the Commencement Date, and (ii) Lessor shall be responsible for repairing or 
replacing latent defects in the construction of the Building (other than latent 
defects in the Improvements to be constructed by Lessee pursuant to Exhibit C 
hereto, which Lessee shall repair or replace at its sole cost and expense).

     2.3     Compliance with Covenants, Restrictions and Building Code. Lessor 
warrants that any improvements (other than those constructed by Lessee or at 
Lessee's direction) on or in the Premises which have been constructed or 
installed by Lessor or with Lessor's consent or at Lessor's direction shall 
comply with all applicable covenants or restrictions of record and applicable 
building codes, regulations and ordinances in effect on the Commencement Date. 
Lessor further warrants to Lessee that Lessor has no knowledge of any claim 
having been made by any governmental agency that a violation or violations of 
applicable building codes, regulations, or ordinances exist with regard to the 
Premises as of the Commencement Date. Said warranties shall not apply to any 
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor 
shall, except as otherwise provided in this Lease, promptly after receipt of 
written notice from Lessee given within nine (9) months following the 
Commencement Date and setting forth with specificity the nature and extent of 
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the 
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable 
Laws (as defined in Paragraph 2.4).
     
     2.4     Acceptance of the Premises. Lessee acknowledges that it has 
             --------------------------
inspected and knows the condition of the Premises, and has satisfied itself with
respect thereto and the suitability of the Premises for Lessee's intended use. 
Except as expressly provided in this Lease, Lessee accepts the Premises in their
condition existing as of the Early Possession Date, subject to all applicable 
zoning, municipal, county, state and federal laws, ordinances and regulations 
governing and regulating the use or occupancy of the Premises, including without
limitation the Americans With Disabilities Act, all laws, ordinances and 
regulations governing Hazardous Substances and any covenants or restrictions of 
record (hereinafter "Applicable Laws"), and accepts this Lease subject thereto 
and to all matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that neither Lessor nor any employee or agent of Lessor has made 
any representation or warranty to Lessee as to the condition of the Premises, 
except as expressly set forth in Sections 2.2 and 2.3, above, or the present or 
future suitability of the Premises for the conduct of Lessee's business. Lessee,
at its sole cost and expense, shall comply with all Applicable Laws related to 
the particular manner in which Lessee uses or occupies the Premises. Lessor 
acknowledges receipt of a letter from Lessee to Dave Ariss, Managing Director of
California Commerce Center of which the Industrial Center is a part, wherein 
Lessee's and its subtenant, Leslie's Pool Brite's, use of the Premises for their
intended purposes was approved by Dave Ariss on behalf of California Commerce 
Center, and agrees that Lessor shall not object to the use of the Premises made 
by Lessee and Leslie's Pool Brite as being in violation of the California 
Commerce Center covenants, conditions and restrictions.

     2.5     Lessee as Prior Owner/Occupant. The warranties made by Lessor in 
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In 
such event, Lessee shall, at Lessee's sole cost and expense, correct any 
non-compliance of the Premises with said warranties.

(C) American Industrial Real Estate Association 1993
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        2.6   Vehicle Parking. Lessee shall be entitled to use the number of 
Unreserved 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." Vehicles other than 
Permitted Size Vehicles shall be parked and loaded or unloaded in the area 
identified on Exhibit A hereto as the "Truck Parking Area." (Also see Paragraph 
2.9.)

              (a)   Lessee shall not permit or allow any vehicles that belong to
or 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)   If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.8, then Lessor shall have the right, upon notice
to Lessee at the Premises, 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.

              (c)   Lessor shall at the Commencement Date of this Lease, provide
the parking facilities required by Application Law.

        2.7   Common Area - Definition. The term "Common Areas" is defined as 
all areas and faciliates outside the Premises and within the exterior boundary 
line of the Industrial Center and interior utility raceways within the Premises
that are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways, and landscaped areas.

        2.8   Common Areas - Lessee's Rights. Lessor hereby 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 priviledges reserved
by Lessor under the terms hereof or under the terms of any reasonable and non-
discriminatory rules and regulations or restrictions governing the use of the
Industrial Center, and which Lessee has notice of. Lessee hereby agrees that
Lessee has notice of the terms and conditions of this Lease, including without
limitation, the rules and regulations attached hereto as Exhibit D, all
covenants, conditions and restrictions currently of record affecting the
Premises, and all zoning and other building and land use regulations governing
the Premises. 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 and non-discriminatory Rules and 
Regulations with respect thereto in accordance with Paragraph 40. 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 lessees of the Industrial Center. 

        2.10  Common Area - 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 driveways, 
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 
Industrial Center to be a part of the Common areas;

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

              (e)   To use the Common Areas while engaged in making additional 
improvements, repairs or alterations to the Industrial Center, 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 Industrial Center as 
Lessor may, in the exercise of sound business judgment, deem to be appropriate.
Notwithstanding the foregoing, in no event shall any changes to the Industrial 
Center or the Common Areas thereof voluntarily undertaken by Lessor (and not 
under threat of condemnation) materially and adversely affect Lessee's access 
to, or the parking or loading for, the Premises. With respect to the area noted 
on Exhibit A hereto as the "Truck Parking Area", such area shall be deemed to be
part of the Premises and not part of the Common Areas; provided, however, that 
such Truck Parking Area shall be maintained by Lessor along with the Common 
Areas. The cost of such maintenance shall be a Reimbursable Cost (as defined in 
Paragraph 4 of the Addendum attached hereto) attributable to the Building.

3.   Term

        3.1   Term. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3

        3.2   Early Possession. If an Early Possession Date is specified in 
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Rent shall be abated for the period of such early occupancy. All other terms of
this Lease, however, (including but not limited to the obligations to carry the
insurance required by paragraph 8) shall be in effect during such period. Any
such early possession shall not affect nor advance the Expiration Date of the
Original Term.

        3.3   Delay in Possession. If for any reason Lessor cannot deliver 
possession of the Premises to Lessee by the Early Possession Date. Lessor shall
not be subject to any liability therefor, nor shall such failure affect the 
validity of this Lease, or the obligations of Lessee hereunder, or extend 
the term hereof, but in such case, Lessee shall not, except as otherwise 
provided herein, be obligated to pay rent or perform any other obligation of 
Lessee under the terms of this Lease until Lessor delivers possession of the 
Premises to Lessee. If possession of the Premises is not delivered to Lessee 
within sixty (60) days after the Date, Lessee may, at its option, by notice in 
writing to Lessor within ten (10) days after the end of the said sixty (60) day 
period, cancel this Lease, in which event the parties shall be discharged from 
all obligations hereunder; provided furthur, however, that if such written 
notice of Lessee is not received by Lessor within said ten (10) day period, 
Lessee's right to cancel this Lease hereunder shall terminate and be of no 
further force or effect.

4.   Rent.

        4.1   Base Rent. Lessee shall pay Base Rent and other rent charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without offset or deduction, except as specifically provided in
Paragraph 10 of Exhibit C hereto on or before the day on which it is due under
the terms of this Lease. Base Rent and all other rent and charges for any period
during the term hereof which is for less than one full month shall be prorated
based upon the actual number of days of the month involved. Payment of Base Rent
and other charges shall be made to Lessor at its address stated herein or to 
such other persons or at such other addresses as Lessor may from time to time
designate in writing to Lessee.

        4.2   Common Area Operating Expenses. Lessee shall pay to Lessor during 
the term hereof, in addition to the Base Rent, Lessee's Share (as specified in 
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the 
following provisions:
               
              (a)   "Common Area Operating Expenses" are defined, for purpose of
this Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:

                    (i)   The operation, repair and maintenance, in neat, clean,
good order and condition, of the following:

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

                          (bb)   Exterior signs and any tenant directories.

                          (cc)   Fire detection and sprinkler systems.

                    (ii)  The cost of water, gas, electricity and telephone to 
service the Common Areas.

                    (iii) Property management and security services and the 
costs of any environmental inspections of Common Areas.

                    (iv)  Real Property Taxes (as defined in Paragraph 10.2) to 
be paid by Lessor for the Building and the Common Areas under Paragraph 10 
hereof.

                    (v)   The cost of the premiums for the insurance policies 
maintained by Lessor under Paragraph 8 hereof.

                    (vi)  Any commercially reasonable deductable portion of an
insured loss (not including any deductible any Lessor's earthquake coverage)
concerning the Building of the Common Areas, it being agreed between Lessor and 
Lessee that Lessor's insurance deductible as specified in Section 8.3 hereof is 
deemed to be commercially reasonable.

                    (vii) 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 Building or to any other building in 
the Industrial Center or to the operation, repair and maintenance thereof, shall
be allocated entirely to the Building or to such 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 equitable allocated by 
Lessor to all buildings in the Industrial Center.

              (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 these 
services unless the Industrial Center 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.

              (d)   Lessee's Share of Common Area Operating Expenses shall be
payable by Lessee within thirty (30) days after a reasonably detailed statement
of actual expenses is presented to Lessee by Lessor. At Lessor's option,
however, an amount may be estimated by Lessor prior to the Commencement Date and
thereafter the end of each calendar year during the term hereof, based upon the
prior year's Reimbursable Costs of Lessee's Share of annual Common Area
Operating Expenses and the same shall be payable monthly during each 12-month
period of the Lease term, on the same day as the Base Rent is due hereunder,
Lessor shall deliver to Lessee within one hundred twenty (120) days after the 
expiration of each calendar year a reasonably detailed statement showing 
Lessee's Share of the actual Common Area Operating Expenses incurred during the 
preceding year. If Lessee's payments under this paragraph 4.2(d) during said 
preceding year exceed Lessee's Share as indicated on said statement, Lessee 
shall be credited the amount of such over-

 


 


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payment against Lessee's Share of Common Area Operating Expenses next becoming 
due. If Lessee's payments under this Paragraph 4.2(d) during said preceding year
were less than Lessee's Share as indicated on said statement, Lessee shall pay 
to Lessor the amount of the deficiency within thirty (30) days after delivery by
Lessor to Lessee of said statement. See Addendum

6.   Use.

     6.1  Permitted Use.

          (a)  Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8 and for no other purpose. Lessee shall not use or
permit the use of the Premises in a manner that is unlawful, creates waste or a
nuisance, or that unreasonably disturbs owners and/or occupants of, or causes
damage to the Premises or neighboring premises or properties.

     6.2  Hazardous Substances.

          (a)  Reportable Uses Require Consent. The term "Hazardous Substance" 
as used in this Lease shall mean any product, substance, chemical, material or 
waste whose presence, nature, quantity and/or intensity of existence, use, 
manufacture, disposal, transportation, spill, release or effect, either by 
itself or 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 Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereto and
asbestos or asbestos containing materials. Lessee shall not engage in any
activity in or about the Premises which constitutes a Reportable Use (as
hereinafter defined) of Hazardous Substances without the express prior written
consent of Lessor and compliance in a timely manner (at Lessee's sole cost and
expense) with all Applicable Requirements (as defined in Paragraph 6.3).
"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 (iii) the presence
in, on or about the Premises of a Hazardous Substance with respect to which any
Applicable Laws require that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but upon notice to Lessor and in compliance
with all Applicable Requirements, use any ordinary and customary materials
reasonably required to be used by Lessee in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises or neighboring properties to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may (but
without any obligation to do so) condition its consent to any Reportable Use of
any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Lessor's option, removal on or before Lease expiration
or earlier termination) of reasonably necessary protective modifications to the
Premises (such as concrete encasements) and/or the deposit of an additional
Security Deposit under Paragraph 5 hereof. Notwithstanding the foregoing, and
subject to the terms and conditions of this Lease, Lessor agrees that Lessee may
use, process and store within the Premises only the following Hazardous
                                           ----
Substances without the need for additional security deposits or additional
installations in the Premises (other than Lesses's Special Improvements, as
defined in Exhibit C hereto), provided that Lessee complies with all applicable
federal, state and local laws, regulations and ordinances and all other
Applicable Requirements governing the generation, use, manufacture,
transportation, storage, disposal, spill or release of such Hazardous
Substances:

          a.  Sodium Dichloroisocyanurate, dihydrate
          b.  Sodium Dichloro-s-triazainetrione, dihydrate
          c.  Sodium Persulfate
          d.  Trichloroisocyanuric Acid
          e.  Trichloro-s-triazainetrione
          f.  1-Bromo-3-Chloro-5,5-Dimethylhydantoin
          g.  Calcium Hypochlorite
          h.  Sodium Dichloroisocyanuric Acid, Anhydrous
          i.  Sodium Dichloro-s-triazainetrione, Anhydrous

          From and after the Early Possession Date, Lessee shall be solely 
responsible for any release of, or contamination caused by, the aforementioned 
Hazardous Substances and any other Hazardous Substances brought onto the 
Industrial Center by or for Lessee. In the event that Lessee shall desire to 
generate, use, manufacture, transport, store, or dispose of Hazardous Substances
other than those specifically listed above, Lessee shall obtain Lessor's prior 
written consent thereto, which consent shall not be unreasonably withheld or 
delayed, but which consent may be conditioned upon Lessee's providing Lessor 
with adequate assurances that such Hazardous Substances will not expose the 
Building, the Industrial Center, and/or the tenants, users and customers thereof
to any risk of physical harm or property damage.

          (b)  Duty to Inform Lessor. If Lessee knows, or has reasonable cause 
to believe, that a Hazardous Substance brought onto the Industrial Center by or 
for Lessee, has come to be located in, on, under or about the Premises or the 
Building, other than as previously consented to by Lessor, Lessee shall 
immediately give Lessor written notice thereof, together with a copy of any 
statement, report, notice, registration, application, permit, business plan, 
license, claim, action, or proceeding given to, or received from, any 
governmental authority or private party concerning the presence, spill, release,
discharge of, or exposure to, such Hazardous Substance including but not limited
to all such documents as may be involved in any Reportable Use involving the 
Premises. Lessee shall not cause or permit any Hazardous Substance to be spilled
or released in, on, under or about the Premises (including, without limitation, 
through the plumbing or sanitary sewer system). Lessor acknowledges that 
Leslie's Pool Brite, a California corporation, a Lessor approved subtenant of 
Lessee, may vent certain fumes as part of its operations in the Premises. Lessor
hereby agrees that the venting of such fumes shall not constitute a spill or 
release of a Hazardous Substance by Lessee or it subtenant, provided that such 
venting of fumes is properly performed and permitted in accordance with all 
Applicable Laws relating thereto, including without limitation all requirements 
of the South Coast Air Quality Management District.

          (c)  Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the 
Premises, harmless from and against any and all damages (whether direct or 
consequential, including, without limitation, any diminution in the value of the
Premises or the Industrial Center) liabilities, judgements, costs, claims, 
liens, expenses, penalties, loss of permits and attorneys' and consultants' 
fees arising out of or involving any Hazardous Substance brought onto the 
Premises by or for Lessee or by anyone under Lessee's control. Lessee's 
obligations under this Paragraph 6.2(c) 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
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. 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. Lessor shall indemnify, protect, defend and hold Lessee
harmless from and against any and all claims, judgements, damages, penalties,
fines, liabilities, losses, suits, administrative proceedings and costs
(including, but not limited to, reasonable attorneys' and consultants' fees)
arising out of or involving any Hazardous Substance brought onto the Premises by
Lessor, its employees, agents or contractors; provided, however, that the
foregoing indemnity shall not apply to any Hazardous Substances that were not
brought onto the Premises by Lessor, its employees, agents or contractors,
notwithstanding that Lessor may be held legally responsible for such Hazardous
Substances because Lessor is the owner of the Premises, or otherwise.

     6.3  Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole 
cost and expense, fully, diligently and in a timely manner, comply with all 
"Applicable Requirements," which term is used in this Lease to mean all laws, 
rules, regulations, ordinances, directives, covenants, easements and 
restrictions of record, permits, the requirements of any applicable fire 
insurance underwriter or rating bureau, and the recommendations of Lessor's 
engineers and/or consultants (in the event, and only in the event, that there 
has been a spill or release of Hazardous Substances for which Lessee is 
responsible hereunder, it being understood and agreed between Lessor and Lessee 
that absent such a spill or release, Lessor's engineers or consultants shall not
direct the manner in which Lessee utilizes or stores those Hazardous Substances 
which Lessee is allowed to use hereunder) relating in any manner to Lessee's 
particular use and/or occupancy of the Premises (including but not limited to 
matters pertaining to (i) industrial hygiene, (ii) environmental conditions on, 
in, under or about the Premises, including soil and groundwater conditions, and 
(iii) the use, generation, manufacture, production, installation, maintenance, 
removal, transportation, storage, spill, or release of any Hazardous Substance),
now in effect or which may hereafter come into effect. Lessee shall, within
fifteen (15) days after receipt of Lessor's written request (except in the case
of an emergency, in which event Lessee shall provide such information
immediately) provide Lessor with copies of all documents and information,
including but not limited to permits, registrations, manifests, applications,
reports and certificates, 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, compliant or report pertaining to or
involving failure by Lessee or the Premises to comply with any Applicable
Requirements.

     6.4  Inspection; Compliance with Law. Lessor, Lessor's agents, employees, 
contractors and designated representatives, and the holders of any mortgages, 
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at 
reasonable times, for the purpose of inspecting the condition of the Premises 
and for verifying compliance by Lessee with this Lease and all Applicable 
Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to 
employ experts and/or consultants in connection therewith to advise Lessor with 
respect to Lessee's activities, including but not limited to Lessee's 
installation, operation, use, monitoring, maintenance, or removal of any 
Hazardous Substance on or from the Premises. Notwithstanding the foregoing, in 
no event shall Lessor's inspection rights hereunder materially interfere with 
Lessee's business operations in the Premises, unless there has been a spill or 
release of Hazardous Substances. The costs and expenses of any such inspections 
shall be paid by the party requesting same, unless a Default or Breach of this 
Lease by Lessee or a violation of Applicable Requirements or a contamination, 
caused or materially contributed to by Lessee, if found to exist or to be 
imminent, or unless the inspection in requested or ordered by a governmental 
authority as the result of any such existing or imminent violation or 
contamination. In such case, Lessee shall upon request reimburse Lessor or 
Lessor's  Lender, as the case may be, for the costs and expenses of such 
inspections.

          If at any time during the term Lessee knows or believes that any spill
or release of any Hazardous Substance for which Lessee is responsible hereunder 
has come or will come to be located upon, about, or beneath the Premises, then 
Lessee shall, as soon as reasonably possible, either prior to the release or 
spill or following the discovery thereof by Lessee, giver verbal and follow-up 
written notice of that condition to Lessor. Lessee covenants to investigate, 
clean up and otherwise remediate any spill or release of any Hazardous Substance
for which Lessee is responsible hereunder at Lessee's cost and expense. Any such
investigation, cleanup and remediation shall be performed only after Lessee has 
obtained Lessor's written consent, which shall not be unreasonably withheld; 
provided, however, that Lessee shall be entitled to respond immediately to an 
emergency without first obtaining Lessor's written consent. All cleanup and 
remediation shall be done in accordance with all Applicable Laws relating 
thereto and to the standard required by the governmental authorities having 
jurisdiction thereover; provided, however, that Lessee shall be solely 
responsible for reimbursing the Lessor for any diminution in the value of the 
Industrial Center or the Premises caused a result of such spill or release of 
Hazardous Substances.

7.   Maintenance, Repairs, Utility Installations, Trade Fixtures and 
     Alterations.

     7.1  Lessee's Obligations.

     (a)  Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's 
Obligations), 9 (Damage or Destruction), and 14 (Condemnation) and reasonable 
wear and tear Lessee shall, at Lessee's sole cost and expense and at all times, 
keep the Premises and every part thereof in good order, condition and repair 
(whether or not such portion of the Premises requiring repair, 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, 
without limiting the generality of the foregoing, all equipment or facilities 
specifically serving the Premises, such as plumbing, heating, air conditioning, 
ventilating, electrical, lighting facilities, boilers, fired or unfired pressure
vessels, fire hose connections if within the Premises, 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 below. Lessee, in keeping the Premises in good
order, condition and repair, shall exercise and perform good maintenance
practices. 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)  Lessee shall, at Lessee's sole cost and expense, procure and maintain 
a contract, with copies to Lessor, in customary form and substance for and with
a contractor specializing and experienced in the inspection, maintenance and 
service of the heating, air conditioning and ventilation system for the 
Premises. However, Lessor reserves the right, upon notice to Lessee, to procure 
and maintain the contract for the heating, air conditioning and ventilating 
systems, and if Lessor so elects, Lessee shall reimburse Lessor, upon demand, 
for the cost thereof.

     (c)  If Lessee fails to perform Lessee's obligations under this Paragraph 
7.1, Lessor may enter upon the Premises after thirty (30) 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; in accordance with Paragraph 13.2 
below.

     7.2  Lessor's Obligations. Subject to the provisions of Paragraph 2.2 
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement 
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the 
foundations, exterior walls, structural condition of interior bearing walls, 
exterior roof, fire sprinkler and/or standpipe and hose (if located in the 
Common Areas) or other automatic fire extinguishing system including fire alarm 
and/or smoke 

<PAGE>
 
detection systems and equipment, 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 exterior 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 which would otherwise afford Lessee the right to make 
repairs at Lessor's expense or to terminate this Lease because of Lessor's 
failure to keep the Building, Industrial Center or Common Areas in good order, 
condition and repair.

     7.3  Utility Installations, Trade Fixtures, Alterations.

          (a)  Definitions; Consent Required. The term "Utility Installations" 
is used in this Lease to refer to all air lines, power panels, electrical 
distribution, security, fire protection systems, communications systems, 
lighting fixtures, heating, ventilating and air conditioning equipment, 
plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures"
shall mean Leasee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "Alterations" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms of this Lease, other than Utility Installations or Trade
Fixtures. "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). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make
Alterations and Utility Installations to the interior of the Premises (excluding
the roof) without Lessor's consent but upon notice to Lessor, provided that
Lessee complies with all the following terms and conditions: (i) all such
Alterations and Utility Installations shall be made at Lessee's sole cost and
expense, including any additional requirements or conditions imposed upon Lessee
or Lessor as a result of Lessee's desire to make such Alterations and Utility
Installations, (ii) all such Alterations and Utility Installations shall not be
visible from the exterior of the Premises, (iii) all such Alterations and
Utility Installations shall not affect the roof or structural portions of the
Premises, (iv) all such Alterations and Utility Installations shall not affect
the existing utility and mechanical systems serving the Premises, including
without limitation the HVAC, plumbing, electrical, fire safety and sprinkler
systems, (v) all such Alterations and Utility Installations shall be properly
approved and permitted by all governmental authorities having jurisdiction
thereover, shall be expeditiously commenced and completed, shall be performed
in a good and workmanlike manner using new materials and otherwise in
conformance with all Applicable Laws, and shall be constructed by a California
licensed contractor which carries a policy of commercial general liability
insurance in an amount not less than $500,000.00 per occurrence, with Lessor
named as additional insured thereunder, (vi) all such Alterations and Utility
Installations shall not cost, in the aggregate, more than Thirty Thousand
Dollars ($30,000.00) in any one calendar year, or more than One Hundred Fifty
Thousand Dollars ($150,000.00) in the aggregate during the Lease term, (vii)
Lessee shall give Lessor not less than ten (10) days prior written notice of the
date that Lessee intends to commence such Alterations and Utility Installations
so that Lessor may post notices of non-responsibility with respect thereto,
(viii) unless otherwise agreed to in writing by Lessor, all such Alterations and
Utility Installations shall be removed by Lessee prior to the expiration or
earlier termination of this Lease, and the Premises restored to the condition
existing prior to the making of such Alterations and Utility Installations. In
the event that Lessee desires not to remove all such Alterations and Utility
Installations, Lessee shall provide Lessor, along with the notice specified in
subsection (vii) above, with (a) a written request that such Alterations and
Utility Installations need not be removed, (b) plans and specifications for such
Alterations and Utility Installations, and (c) such other information as is
reasonably necessary for Lessor to understand the nature and extent of the
proposed Alterations and Utility Installations. Lessor shall respond in writing
to Lessee within five (5) business days following receipt of all the information
specified above, notifying Lessee whether or not such Alterations and Utility
Installations need be removed and the Premises restored upon the expiration or
earlier termination of this Lease.

          (b)  Consent. Any Alterations or Utility Installations that Lessee
shall desire to make which require the consent of the Lessor shall be presented
to Lessor in written form with detailed plans. All consents given by Lessor,
whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall
be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner,
with good and sufficient materials, and be in compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor.

          (c)  Lien Protection. 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 ten (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 in or on the Premises as provided by law. If
Lessee shall, in good faith, 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
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one
and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim. In addition,
Lessor may require Lessee to pay Lessor's attorneys' fees and costs in
participating in such action if Lessor shall decide if it is to its best
interest to do so.

     7.4  Ownership, Removal, Surrender, and Restoration.

          (a)  Ownership. Subject to Lessor's right to require their removal and
to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Unless otherwise instructed per Subparagraph 7.4(b) hereof, all
Lessee-Owned Alterations and Utility Installations shall, at the expiration or
earlier termination of this Lease, become the property of Lessor and remain upon
the Premises and be surrendered with the Premises by Lessee; provided, however,
that in the event that this Lease is terminated as a result of damage or
destruction to the Premises, any insurance proceeds related to Lessee's Special
Improvements and Lessee-Owned Alterations and Utility Installations shall belong
solely to Lessee.

          (b)  Removal. Unless otherwise agreed in writing, Lessor may require 
that any or all Lessee-Owned Alterations or Utility Installations be removed by 
the expiration or earlier termination of this Lease, notwithstanding that their 
installation may have been consented to by Lessor. Lessor may require the 
removal at any time of all or any part of any Alterations or Utility 
Installations made without the required consent of the Lessor.

          (c)  Surrender/Restoration. Lessee shall surrender the Premises by the
end of the last day of the Lease term or any earlier termination date, clean and
free of debris and in good operating order, condition and state of repair, 
ordinary wear and tear and damage, destruction or condemnation covered by 
Paragraphs 9 and 13 herein excepted. Ordinary wear and tear shall not include 
any damage or deterioration that would have been prevented by Lessee performing 
all of its obligations under this Lease. Except as otherwise agreed or specified
herein, the Premises, as surrendered, shall include the Alterations and Utility 
Installations. The obligation of Lessee shall include the repair of any damage 
occasioned by the Installation, maintenance or removal of Lessee's Trade 
Fixtures, furnishings, equipment, and Lessee-Owned Alterations and Utility 
Installations, as well as the removal of any storage tank installed by or for 
Lessee, and the removal, replacement, or remediation of any soil, material or 
ground water contaminated by Lessee, all as may then be required by Applicable 
Requirements and/or good practice. Lessee's Trade Fixtures shall remain the 
property of Lessee and shall be removed by Lessee subject to its obligation to 
repair and restore the Premises per this Lease.

8.        Insurance; Indemnity.
  
     8.1  Payment of Premiums. The cost of the premiums for the insurance 
policies maintained by Lessor under this Paragraph 8 shall be a Common Area 
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods 
commencing prior to, or extending beyond, the term of this Lease shall be 
pro-rated to coincide with the corresponding Commencement Date or Expiration 
Date.

     8.2  Liability Insurance.

          (a)  Carried by Lessee. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, involving 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 See Addendum with 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 required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be 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 also maintain liability insurance
in addition to and not in lieu of, the insurance required to be maintained by 
Lessee. Lessee shall be named as an additional insured therein; provided,
however, that Lessee's liability insurance policy shall be primary, non-
contributing with and not in excess of Lessor's policy.

     8.3  Property Insurance-Building, Improvements and Rental Value.

          (a)  Building and Improvements. Lessor shall obtain and keep in force 
during the term of this Lease a policy or policies in the name of Lessor, with 
loss payable to Lessor and to any Lender(s), insuring against loss or damage to 
the Premises. Such insurance shall be a standard "All Risk" policy of property 
insurance, in an amount equal to the full replacement value of the Building 
(exclusive of foundations and footings), with a deductible not in excess of Ten 
Thousand Dollars ($10,000.00.) Lessee-Owned Alterations and Utility 
Installations, Trade Fixtures and Lessee's personal property shall be insured by
Lessee pursuant to Paragraph 8.4. If the coverage is available and commercially 
appropriate, Lessor's policy or policies shall insure against the perils of 
earthquake.

          (b)  Rental Value. Lessor shall also obtain and keep in force during 
the term of this Lease a policy or policies in the name of Lessor, with loss 
payable to Lessor and any Lender(s), insuring the loss of the full rental and 
other charges payable by all lessees of the Building to Lessor for a period of 
twelve (12) months.

          (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 Industrial Center 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 Insurance. Subject to the requirements of Paragraph 
8.5, Lessee at its cost shall either by separate policy or, at Lessor's option, 
by endorsement to a policy already carried, maintain insurance coverage on all 
of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and 
Utility Installations in, on, or about the Premises similar in coverage to that 
carried by Lessor as the insuring Party under Paragraph 8.3(a). Such insurance 
shall be a full replacement cost coverage with a deductible not to exceed Ten 
Thousand Dollars ($10,000.00) per occurrence; provided that in no event shall 
Lessor be responsible to Lessee for any amount paid by Lessee as part of a 
deductible payment made by Lessee in connection with the aforesaid property 
insurance. The proceeds from any such insurance shall be used by Lessee for the 
replacement of personal property and the restoration of Trade Fixtures and 
Lessee-Owned Alterations and Utility Installations. Upon request from Lessor, 
Lessee shall provide Lessor with written evidence that such insurance is in 
force. Lessee shall also carry business interruption/loss of income insurance in
an amount equal to Lessee's lost revenues for a period of twelve (12) months 
(including without limitation, lost revenues in Lessee's retail facilities) as a
result of Lessee's inability to utilize the Premises to any extent.
Notwithstanding the foregoing, Lessee may elect to self insure for its personal
property insurance and business interruption/loss of income insurance.

     8.5  Insurance Policies. Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located, 
and maintaining during the policy term a "General Rating" of at least B+, V, or 
such other rating as may be required by a Lender, as set forth in the most 
current issue of "Best's Insurance Guide." Lessee shall not do or permit to be 
done anything which shall invalidate the insurance policies referred to in 


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<PAGE>
 
this Paragraph 8, Lessee shall cause to be delivered to Lessor, within seven (7)
days after the earlier of the Early Possession Date or the Commencement Date,
certified copies of, or certificates evidencing the existence and amounts of,
the insurance required under Paragraph 8.2(a) and 8.4. No such policy shall be
cancellable or subject to modification except after thirty (30) days' prior
written notice to Lessor. Lessee shall at least thirty (30) days prior to the
expiration of such policies furnish Lessor with evidence of renewals or
"Insurance binders" evidencing renewal thereof or certificates of insurance
evidencing that Lessee continues to carry the insurance required to be carried
by Lessee herein, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee upon demand.

     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 (whether in contract or in tort) against the 
other, for loss or damage to their property or for loss of revenue or income 
arising out of or incident to the perils required to be insured against under 
Paragraph 8. The effect of such releases and waivers of the right to recover 
damages shall not be limited by the amount of insurance carried of required, or 
by any deductibles applicable thereto. Lessor and Lessee agree to have their 
respective insurance companies issuing property damage and business 
interruption/loss of income insurance or rental loss insurance, as applicable 
insurance 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, Lessee's Indemnity. Subject to the provisions of Section 
          -----------------------------
8.6 of this Lease and Paragraph 15 of the Addendum hereto, Lessee, as a material
part of the consideration to be rendered to Lessor, shall indemnify, defend, 
protect and hold harmless Lessor and all partners, shareholders, directors, 
officers, employees and agents of Lessor (collectively, "Lessor Parties") 
against all actions, claims, demands, damages, liabilities, losses, penalties, 
fees (including without limitation reasonable attorneys' fees and costs) and 
expenses (collectively, "Claims and Damages") of any kind which may be brought 
or imposed upon the Lessor Parties or which the Lessor Parties may pay or incur 
by reason of injury to person or property, from whatever cause, all or in any 
way connected with the condition or use of the Premises, or the improvements or 
personal property therein or thereon, including without limitation any 
liability or injury to the person or property of Lessee, its partners, 
shareholders, directors, officers, employees and agents (the "Lessee Parties"), 
to the extent the same would be covered under a customary commercial general 
liability insurance policy with the Lessor named as an additional insured 
thereunder. Subject to the provisions of Section 8.6 of this Lease and Paragraph
15 of the Addendum hereto, Lessee also agrees to indemnify, defend and protect 
the Lessor Parties and hold them harmless from any and all Claim and Damages 
incurred in connection with or arising out of the negligence or willful 
misconduct of the Lessee Parties.

    
     Lessor's Indemnity. Subject to the provisions of Section 8.6 of this Lease 
     ------------------
and Paragraph 15 of the Addendum hereto, Lessor, as a material part of the 
consideration to be rendered to Lessee, shall indemnify, defend, protect and 
hold harmless the Lessee Parties against all Claims and Damages of any kind 
which may be brought or imposed upon the Lessee Parties or which the Lessee 
Parties may pay or incur by reason of injury to person or property, from 
whatever cause, all or in any way connected with the condition or use of the 
Common Areas, or the improvements or personal property therein or thereon, 
including without limitation any liability or injury to the person or property 
of the Lessor Parties, to the extent the same would be covered under a customary
commercial general liability insurance policy with the Lessee named as an 
additional insured thereunder. Subject to the provisions of Section 8.6 of this 
Lease and Paragraph 15 of the Addendum hereto, Lessor also agrees to indemnify, 
defend and protect the Lessee Parties and hold them harmless from any and all 
Claims and Damages incurred in connection with or arising out of the negligence 
or willful misconduct of the Lessor Parties.     
<PAGE>
 
        9.8   Termination - Advance Payments.  Upon termination of this Lease 
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.

        9.9   Waiver of Statutes.  Lessor and Lessee agree that the terms of 
this Lease shall govern the effect of any damage to or destruction of the 
Premises and the Building with respect to the termination of this Lease and 
hereby waive the provisions of any present or future statute to the extent it 
is inconsistent herewith.

10.     Real Property Taxes.

        10.1  Payments of Taxes.  Lessor shall pay the Real Property Taxes, as 
defined in Paragraph 10.2, applicable to the Industrial Center prior to 
delinquency and except as otherwise provided in Paragraph 10.3, any such amounts
shall be included in the calculation of Common Area Operating Expenses in
accordance with the provisions of Paragraph 4.2.

        10.2  Real Property Tax Definition.  As used herein, the term "Real 
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Industrial Center by any
authority having the direct or indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street
drainage, or other Improvement district thereof, levied against any legal or
equitable interest of Lessor in the Industrial Center or any portion thereof,
Lessor's right to rent or other income therefrom, and/or Lessor's business of
leasing the Premises. The term "Real Property Taxes" shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes in Applicable Law taking effect, during the term of
this Lease, including but not limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this Lease,
or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. In calculating Real Property Taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.

        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 as follows:  Lessee 
shall pay, as additional rent to Lessor, its "pro rata share" of all Real 
Property Taxes stated in the tax bill in which the Premises are included, 
including the parking and Common Areas, as well as the improvements on all of 
said land, or otherwise arising under the provisions of this Article 10. Pro 
rata share is defined as that fraction the numerator of which is the square 
footage in the Premises and the denominator of which is the gross leasable 
square footage included within the tax bill.

        10.5  Lessee's 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 or stored within the Industrial Center. 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 ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.

11.     Utilities.  Lessee shall pay directly for all utilities and services 
supplied to the Premises, including but not limited to electricity, telephone, 
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or 
separately billed to the Premises, Lessee shall pay to Lessor a reasonable 
proportion to be determined by Lessor of all such charges jointly metered or 
billed to the premises in the Building, in the manner and within the time 
periods set forth in Paragraph 4.2(d).

12.     Assignment and Subletting.

        12.1  Lessor's Consent Required.  Lessor and Lessee acknowledge that, 
although Lessee's stock is currently publicly traded, Lessee has informed Lessor
of a proposed transaction whereby the current management of the Lessee intends 
to purchase all of the outstanding stock of Lessee such that the stock of the 
Lessee would no longer be publicly traded (the "Management Buyout.")  The 
provisions of Sections 12.1 (b) and (c) below shall not apply to the Management 
Buyout.

              (a)  Lessee shall not voluntarily or by operation of law assign, 
transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or
sublet all or any part of Lessee's interest in this Lease or in the Premises 
without Lessor's prior written consent given under the subject to the terms of 
Paragraph 36.

              (b)  Provided that Lessee is or becomes a company whose stock 
shares are no longer publicly traded, a change in the control of Lessee shall 
constitute an assignment requiring Lessor's consent.  During the initial three 
(3) years of the term hereof, the transfer, on a cumulative basis, of more than 
twenty-five percent (25%), but less than fifty percent (50%), of the outstanding
shares of Lessee, shall not constitute an assignment requiring Lessor's consent,
provided that the current President and CEO of Lessee, Brian McDermott
("McDermott") remains employed by Lessee in his current capacity. In addition,
during the initial three (3) years of the term hereof, the transfer, on a
cumulative basis, of more than twenty-five percent (25%) of the outstanding
shares of Lessee which causes or is accompanied by McDermott no longer being
employed by Lessee in his current capacity shall constitute an assignment
requiring Lessor's consent; provided, however, that Lessor may not withhold its
consent to any such transaction if Lessee agrees to post with Lessor such
security for Lessee's performance of this Lease (including, without limitation,
cash, or a letter of credit, or a Lease guaranty) as is reasonable given the
nature of the transaction proposed by Lessee, the reduction in the Net Worth of
Lessee (as defined below), if any, which will occur thereby, and the increased
risk to Lessor of Lessee's performance hereunder which is caused thereby. From
and after the expiration of the initial three (3) years of the term hereof, a
transfer of up to forty nine percent (49%) of the outstanding shares of Lessee
shall not constitute an assignment requiring Lessor's consent, notwithstanding
any changes in the employment status of McDermott. In any event, the transfer,
on a cumulative basis, at any time during the term hereof, of fifty percent
(50%) or more of the outstanding shares of Lessee shall constitute an assignment
requiring Lessor's consent. The foregoing provisions shall not apply to the
Management Buyout.

              (c)  The involvement of the Lessee or its assets in any 
transaction, or series of transactions (by way of merger, sale, acquisition, 
financing, re-financing, transfer, leveraged buy-out or otherwise), whether or 
not a formal assignment or hypothecation of this Lease or Lessee's assets 
occurs, which results or will result in a reduction in the Net Worth of Lessee, 
as hereinafter defined, by an amount equal to or greater than twenty-five 
percent (25%) of such Net Worth of Lessee as it was represented to Lessor at the
time of full execution and delivery of this Lease, shall be considered an 
assignment of this Lease by Lessee to which Lessor may reasonably withhold its 
consent; provided, however, that Lessor may not withhold its consent to any 
transaction contemplated by this Section 12.1 (b) if Lessee agrees to post with 
Lessor such security for Lessee's performance of this Lease (including, without 
limitation, cash, or a letter of credit, or a Lease guaranty) as is reasonable 
given the nature of the transaction proposed by Lessee, the reduction in the Net
Worth of Lessee which will occur thereby, and the increased risk to Lessor of 
Lessee's performance hereunder which is caused thereby.  "Net Worth of Lessee" 
for purposed of this Lease shall be the net worth of Lessee (excluding any 
guarantors) established under generally accepted accounting principles 
consistently applied.  The foregoing provisions shall not initiate the 
Management Buyout.

              (d)  An assignment or subletting of Lessee's interest in this 
Lease without Lessor's specific prior written consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1, or a non-curable Breach 
without the necessity of any notice and grace period. If Lessor elects to treat 
such unconsented to assignment or subletting as a non-curable Breach, Lessor 
shall have the right to terminate this Lease.

              (e)  Lessee's remedy for any breach of this Paragraph 12.1 by 
Lessor shall be limited to compensatory damages and/or injunctive relief.

        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, nor (iii) alter the primary 
liability of Lessee for the payment of Base Rent and other sums due Lessor 
hereunder or for the performance of any other obligations to be performed by 
Lessee under this Lease.

              (b)  Lessor may accept any 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 any rent for performance shall constitute a 
waiver or estoppel of Lessor's right to exercise its remedies for the Default 
or Breach by Lessee of any of the terms, covenants or conditions of this Lease.

              (c)  The consent of Lessor to any assignment or subletting shall 
not constitute a consent to any subsequent assignment or subletting by Lessee or
to any subsequent or successive assignment or subletting by the assignee or 
sublessee. However, Lessor may consent to subsequent sublettings and 
assignments of the sublease or any amendments or modifications thereto upon
notification to Lessee unless Lessee has been released from its obligations
hereunder pursuant to Paragraph 9.F of the Addendum herein, or otherwise, and
without obtaining their consent, and such action shall not relieve such persons
from liability under this Lease or the sublease.

              (d)  In the event of any Default or Breach of Lessee's obligation 
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or 
anyone else responsible for the performance of the Lessee's obligations under 
this Lease, including any sublessee, without first exhausting Lessor's remedies 
against any other person or entity responsible therefor 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. Lessee agrees to provide Lessor 
with such other or additional information and/or documentation as may be 
reasonably requested by Lessor.

              (f)  Any assignee of, or sublessee under, this Lease shall, by 
reason of accepting such assignment or entering into such sublease, be deemed, 
for the benefit of Lessor, 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 in writing.



<PAGE>
 
     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 rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease; provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur under Paragraphs 13.1(b), 13.1(d)(to the extent that Lessor expends
sums in curing such Breach) and 13.1(e) in the performance of Lessee's
obligations under this Lease, Lessee may, except as otherwise provided in this
Lease, receive, collect and enjoy the rents accruing under such sublease, Lessor
shall not, by reason of the foregoing provision or any other assignment of such
sublease to Lessor, nor by reason of the collection of the rents from a
sublessee, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee under such
Sublease. 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 the
rents and other charges due and to become due under the sublease. Sublessee
shall rely upon any such statement and request from Lessor and shall pay such
rents and other charges to Lessor without any obligation or right to inquire as
to whether such Breach exists and notwithstanding any notice from or claim from
Lessee to the contrary. Lessee shall have no right or claim against such
sublessee, or, until the Breach has been cured, against Lessor, from any such
rents and other charges so paid by said sublessee to Lessor.

            (b)   In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any 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 other prior defaults
or breaches of such sublessor under such sublease.

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

13.  Default;Breach;Remedies.

     13.1   Default; Breach. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350,000 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:

            (a)   The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.

            (b)   Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent, Lessee's Share of Common
Area Operating Expenses, or any other monetary payment required to be made by
Lessee hereunder (hereinafter, "Additional Rent") as and when due, the failure
by Lessee to provide Lessor with reasonable evidence of insurance or surety bond
required under this Lease, or the failure of Lessee to fulfill any obligation
under this Lease which endangers or threatens life or property, where such
failure continues for a period of three (3) days following written notice
thereof by or on behalf of Lessor to Lessee. Notwithstanding the foregoing, no
more often than once each twelve (12) months during the term hereof, Lessor
shall provide Lessee with written notice of Lessee's failure to timely pay Base
Rent or Additional Rent, and provided that Lessee pays such Base Rent or
Additional Rent to Lessor within ten (10) days following Lessee's receipt of
Lessor's written notice, Lessee shall not be deemed to be in default hereunder.
In all events Lessor shall give Lessee such notice of non-payment of Base Rent
and/or Additional Rent, and/or of Lessee's non-performance of any provision of
this Lease as is required by California law, prior to instituting any action in
unlawful detainer to dispossess Lessee from the Premises.

            (c)   Except as expressly otherwise provided in this Lease, the 
failure by Lessee to provide Lessor with reasonable written evidence (in duly 
executed original form, If applicable) of (I) compliance with Applicable 
Requirements per Paragraph 6.3 (II) the inspection, maintenance and service 
contracts required under Paragraph 7.1(b) (III) the rescission of an 
unauthorized assignment or subletting per Paragraph 12.1, (IV) a Tenancy 
Statement per Paragraphs 16 or 37, (V) the subordination or non-subordination of
this Lease per Paragraph 30, (VI) the guaranty of the Performance of Lessee's 
obligations under this Lease if required under Paragraphs 1.11 and 37, (VII) the
execution of any document requested under Paragraph 42 (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 ten (10) days following written notice by or on behalf of Lessor 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 40 hereof that
are to be observed, compiled with or performed by Lessee, other than those 
described in Subparagraphs 13.1(a), (b) or (c), above, where such Default 
continues for a period of thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's 
Default is such that more than thirty (30) days are reasonably required for its 
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if 
Lessee commences such cure within said thirty (30) day period and thereafter 
diligently prosecutes such cure to completion.

            (e)   The occurrence of any of the following events:(i) the making
by Lessee of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (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 sixty (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 sixty (60) days; provided, however,in the event
that any provision of this Subparagraph 13.1(e) is contrary to any applicable
law, such provision shall be of no force or effect, and shall not affect the
validity of the remaining provisions.

            (f)   The discovery by Lessor that any financial statement of Lessee
or of any Guarantor, given to Lessor by Lessee or any Guarantor, 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 breach basis, 
and Lessee's failure, within sixty (60) days following written notice by or on 
behalf of Lessor to Lessee of any such event, to provide Lessor with written 
alternative assurances of 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 affirmative duty or
obligation of Lessee under this Lease, within thirty (30) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may at its
option (but without obligation to do so), 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 to Lessor within thirty (30) days following Lessee's
receipt of Lessor's 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 own
option, may require all future payments to be made under this Lease by Lessee to
be made only by cashier's check in the event of a Breach of this Lease by Lessee
(as defined in Paragraph 13.1), 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, Lessor may;

            (a)   Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Lessee shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee; (i) the worth at the time
of the award of 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 attorney's 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 San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the 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 for such
rent and/or damages.

            (b)   Continue the Lease and Lessee's right to possession in effect 
(in California under California Civil Code Section 1951.4) after Lessee's Breach
and recover the rent as it becomes due, provided Lessee has the right to sublet 
or assign, subject only to reasonable limitations. Lessor and Lessee agree that 
the limitations on assignment and subletting in this Lease are reasonable. Acts 
of maintenance or preservation, efforts to relet the Premises, or the 
appointment of a receiver to protect the Lessor's interest under this Lease, 
shall not constitute a termination of the Lessee's right to possession.

            (c)   Pursue any other remedy now or hereafter available to Lessor 
under the laws or judicial decisions of the state wherein the Premises are 
located.


                                    Page 7 
<PAGE>
 
               (d)   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.

        13.4   Late Charges. Lessee hereby acknowledges that late payment by 
Lessee to Lessor of rent and other sums due hereunder 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 the terms of any ground lease, mortgage or deed of trust covering the 
Premises. Accordingly, if any installment of rent or other sum due from Lessee 
shall not be received by Lessor of Lessor's designee within ten (10) days after 
such amount shall be due, then, without any requirement for notice to Lessee, 
Lessee shall pay to Lessor a late charge equal to (i) One Thousand Dollars 
($1000.00), if Lessee has failed to timely make a payment of Base Rent, or (ii) 
two percent (2%) of the past due sum, for all other payments due from Lessee to 
Lessor hereunder. The parties hereby agree that such late charge represents a 
fair and reasonable estimate of the costs Lessor will Incur by reason of late 
payment by Lessee. 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 Lessor from exercising any of the other rights and remedies 
granted hereunder.

        13.5   Breach by Lessor. 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 13.5, a 
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
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 thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in 
breach of this Lease if performance is commenced within such thirty (30) day 
period and thereafter diligently pursued to completion. Notwithstanding the 
foregoing, in the event of an "emergency situation" (as defined below) that 
Lessee believes is Lessor's obligation to cure or remedy pursuant to the terms 
hereof, Lessee shall make reasonable attempts to notify Lessor of such emergency
situation, but Lessee shall not be required to wait for Lessor to respond to 
such emergency situation. In the event of an emergency situation, Lessee may 
undertake to cure such emergency situation and thereafter bill Lessor for the 
reasonable cost thereof. In the event that Lessor shall dispute that it was 
Lessor's obligation under this Lease to cure or remedy the emergency situation, 
the dispute, if not resolved by Lessor and Lessee through negotiation, shall, 
upon written notice from either party to the other, be submitted to arbitration 
under the commercial arbitration rules of the American Arbitration Association. 
If such dispute is arbitrated, the losing party in such dispute shall pay all 
the fees and costs of the American Arbitration Association in such arbitration, 
including without limitation, the fee for the arbitrator. As used herein, an 
"emergency situation" is any situation that poses a present danger of personal 
injury or property damage.

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
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within ten (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 the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur if the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether (such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority, Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.

15.     Brokers'.

        15.4  Representations and Warranties. Lessee and Lessor each represent
and warrant to the other that it has had no dealings with any person, firm,
broker or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction, Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.

16.     Tenancy and Financial Statements.

        16.1  Tenancy Statement. Each Party (as "Responding Party") shall within
thirty (30) days after written notice from the other Party (the "Requesting
Party") execute, acknowledge and deliver to the Requesting Party a statement in
writing, acknowledging the commencement and termination dates of this Lease,
that it is in full force and effect, has not been modified (or if it has,
stating such modifications), stating the Base Rent and Additional Rent payable
thereunder, plus such additional information, confirmation and/or statements as
may be reasonably requested by the Requesting Party.
    
        16.2  Financial Statement. If Lessor desires to finance, refinance, or 
sell the Premises or the Building, or any part thereof, Lessee and all 
Guarantors shall deliver to any potential lender or purchaser designated by 
Lessor either (i) if Lessee is then a publicly owned company, a copy of Lessee's
most recent 10Q or 10K filing with the SEC, or (ii) if Lessee is then a company 
whose stock is not publicly traded, a copy of Lessee's audited financial 
statement for the preceding calendar year, or if available, more current audited
financial statements. 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.     Lessor's Liability. The term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises. In the
event of a transfer of Lessor's title or interest in the Premises or in this
Lease, Lessor shall deliver to the transferee or assignee (in cash or credit)
any unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, and the
assumption by such transferee or assignee from the date of such assignment or
transfer of the landlord's obligations under this Lease, the prior Lessor shall
be relieved of all liablity with respect to the obligations and/or covenants
under this Lease thereafter to be performed by the Lessor. 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.

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.

19.     Interest on Past-Due Obligations. Any monetary payment due Lessor or 
Lessee hereunder, other than late charges, not received by Lessor or Lessee 
within ten (10) days following the date on which it was due, shall bear interest
from the date due at the prime rate charged by the largest state chartered bank 
in the state in which the Premises are located plus four percent (4%) per annum,
but not exceeding the maximum rate allowed by law, in addition to the potential 
late charge provide for in Paragraph 13.4.

20.     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.

21.     Rent Defined. All monetary obligations of Lessee to Lessor under the 
terms of this Lease are deemed to be rent.

22.     No Prior or other Agreements. 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 shall be in writing and may be delivered in person (by hand or by 
messenger or courier service) or may be sent by regular, certified or 
registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by
facsimile transmission during normal business hours, 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 notice purposes. Either Party may by
written notice to the other specify a different address for notice purposes, 
except that upon Lessee's taking possession of the Premises, the Premises shall 
constitute Lessee's address for the purpose of mailing or delivering notices to 
Lessee. A copy of all notices required or permitted to be given to Lessor 
hereunder shall be concurrently transmitted to such party or parties at such 
addresses as Lessor may from time to time hereafter designate by written notice 
to Lessee.

        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 forty-eight (48) hours after 
the same is addressed as required herein and mailed with postage prepaid. Notice
delivered by United States Express Mail or overnight courier that guarantees 
next day


         
    
MULT-TENANT-MODIFIED NET       
(R) American Industrial Real Estate Association 1993      
                               
<PAGE>
 
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by 
facsimile transmission or similar means, the same shall be deemed served or 
delivered upon telephone or facsimile confirmation of receipt of the 
transmission thereof, provided a copy is also delivered via delivery or mail. If
notice is received on a Saturday or a Sunday or a legal holiday, it shall be 
deemed received on the next business day.

24.   Waivers. No waiver by either party hereto of the Default or Breach of any 
term, covenant or condition hereof by the other party hereto shall be deemed a 
waiver of any other term covenant or condition hereof, or of any subsequent 
Default or Breach by such party of the same or any other term, covenant or 
condition hereof Either party's consent to, or approval of, any such act shall 
not be deemed to render unnecessary the obtaining of such party'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. Regardless of Lessor's knowledge of a Default or Breach 
at the time of accepting rent, the acceptance of rent by Lessor shall not be a 
waiver of any Default or Breach by Lessee of any provision hereof. Any payment 
given Lessor by Lessee may be accepted by Lessor on account of moneys or damages
due Lessor, notwithstanding any qualifying statements or conditions made by
Lessee in connection therewith, which such statements and/or conditions shall be
of no force or effect whatsoever unless specifically agreed to in writing by
Lessor at or before the time of deposit of such payment.

25.   Recording. Either Lessor or Lessee shall, upon request of the other, 
execute, acknowledge and deliver to the other a short form memorandum of this 
Lease for recording purposes. The Party requesting recordation shall be 
responsible for payment of any fees or taxes applicable thereto.

26.   No Right To Holdover. Lessee has no right to retain possession of the 
Premises or any part thereof beyond the expiration or earlier termination of 
this Lease. In the event that Lessee holds over in violation of this Paragraph 
26 then the Base Rent payable from and after the time of the expiration or 
earlier termination of this Lease shall be increased to one hundred twenty five 
percent (125%) of the Base Rent applicable during the month immediately 
preceding such expiration or earlier termination. Nothing contained herein 
shall be construed as a 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 
law or in equity.

28.   Covenants and Conditions. All provisions of this Lease to be observed or 
performed by Lessee are both covenants and conditions.

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 by Lessor upon the real property of which the Premises are a 
part, to any and all advances made on the security thereof, and to all 
renewals, modifications, consolidations, replacements and extensions thereof. 
Lessee agrees that the Lenders holding any such Security Device shall have no 
duty, liability or obligation to perform any of the obligations of Lessor under
this Lease, but that in the event of Lessor's default with respect to any such 
obligation, Lessee will give any Lender whose name and address have been 
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any 
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, 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 provision 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: (I) be liable 
for any act or omission of any prior lessor or with respect to events occurring 
prior to acquisition of ownership, (II) be subject to any offsets or defenses 
which Lessee might have against any prior lessor, or (III) be bound by 
prepayment of more than one month's rent.

      30.3  Non-Disturbance.  With respect to Security Devices currently 
encumbering the Premises, it is acknowledged and agreed between the parties
hereto that The Prudential Insurance Company of America ("Prudential") is
currently the beneficiary under a deed of trust encumbering the Premise, and
that Lessor has requested that Prudential enter into a non-disturbance agreement
with Lessee with respect to this Lease. With respect to any Security Devices
entered into by Lessor after the execution of this lease, Lessee's subordination
of this Lease shall be subject to receiving assurance (a "non-disturbance
agreement") from the Lender in a commercially reasonable form, that Lessee's
possession and this Lease, including any options to extend the term hereof, will
not be disturbed so long as Lessee is not in Breach hereof and attorns to the
record owner of the Premises. With respect to the Security Device currently
encumbering the Premises in favor Prudential, Lessor shall deliver to Lessee,
prior to the parties' full execution and delivery of this Lease, a non-
disturbance agreement in favor of Lessee, in the form attached hereto as 
Exhibit E, executed and acknowledged by Purdential. In the event Lessor does not
deliver to Lessee such executed and acknowledged non-disturbance agreement
within thirty (30) days following the Early Possession Date, Lessee shall have
the right to terminate this Lease, exercisable within ten (10) days thereafter
upon ten (10) days written notice to Lessor, which termination shall be
effective if Lessor does not provide Lessee with the executed and acknowledged
non-distrubance agreement within such ten (10) day period. In the event that
Lessee shall elect to so terminate this Lease, (i) Lessee shall remove, at its
sole cost and expense, all Improvements (as defined in Exhibit C hereto)
constructed by Lessee to the date of such termination and restore the Premises
to the condition existing prior to such construction, and (ii) Lessor,
notwithstanding anything to the contrary contained in this Lease, shall have no
obligation to partially or totally reimburse Lessee for the cost of constructing
any Improvements.

      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 Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.

31.   Attorneys' Fees.  If any Party brings an action or proceeding to enforce 
the terms hereof or 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' fee 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.

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 upon reasonable advance notice to 
Lessee at the Premises, for the purpose of showing the same to prospective, 
purchasers, lenders, or lessees (provided, however, with respect to showing the 
Premises to proposed lessees, such inspection shall only take place during the 
last one hundred eighty (180) days of the term hereof) and making such 
alterations, repairs, improvements or additions to the Premises or to the 
Building, as Lessor may reasonably deem necessary.  Lessor may at any time place
on or about the Premises or Building any ordinary "For Sale" signs and Lessor 
may at any time during the last one hundred eighty (180) days of the term hereof
place on or about the Premises any ordinary "For Lease" signs.  All such 
activities of Lessor shall be without abatement of rent or liability to Lessee; 
provided that Lessor shall use commercially reasonable efforts not to materially
and adversely affect Lessee's use and occupation of the Premises as a result of 
such entry by Lessor, but Lessor shall not be obligated to expend any additional
sums beyond what Lessor would otherwise pay in performing any alterations, 
repairs, replacements or improvements to the Premises in order not to affect 
Lessee's use and occupation of the Premises.

33.   Auctions.  Lessee shall not conduct, nor permit to be conducted, either 
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent.  Notwithstanding anything to the 
contrary in this Lease, Lessor shall not be obligated to exercise any standard 
of reasonableness in determining whether to grant such consent.

34.   Signs.  Lessee shall not place any sign upon the exterior of the Premises 
or the Building, except that Lessee may, with Lessor's prior written consent, 
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long as such signs are in a location designated by 
Lessor and comply with Applicable Requirements and the signage criteria 
established for the Industrial Center by Lessor.  The installation of any sign 
on the Premises by or for Lessee shall be subject to the provisions of Paragraph
7 (Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations).
Unless otherwise expressly agreed herein, Lessor reserves all rights to the use
of the roof of the Building; provided, however, that Lessee shall be entitled to
install or place all items on or through the roof as are shown on Final Plans
for the Improvements, as specified in Exhibit C hereto.

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, Lessor shall, in the event of any such surrender, 
termination or cancellation, have the option to continue any one or all of any 
existing subtenancies.  Lessor's failure within ten (10) days following any such
event to make a written election 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.

35.   Consents. 

           (a)  Except for Paragraph 33 hereof (Auctions) or 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)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment & subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. Lessor's consent to any act,
assignment of this Lease or subletting of the Premises by Lessee 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.
            
           (b)  All conditions to Lessor's consent authorized by this Lease are 
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions 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.

See Addendum

38.   Quiet Possession.  Upon payment by Lessee of the rent for the Premises and
the 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 of the Premises for the entire term hereof subject to all of the 
provisions of this Lease.




<PAGE>
 
40.  Rules and Regulations. Lessee agrees that it will abide by, and keep and 
observe all reasonable rules and regulations ("Rules and Regulations") which 
Lessor may make from time to time 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 Industrial Center and their invitees. Lessor's 
current Rules and Regulations are attached hereto as Exhibit D.

41.  Security Measures. Lessee hereby acknowledges that the rental 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.

42.  Reservations, Lessor reserves the right, from time to time, to grant, 
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the 
recordation of parcel maps and restrictions, so long as such easements, rights 
of way, utility raceways, dedications, maps and restrictions do not reasonably 
interfere with the use of the Premises by Lessee. Lessee agrees to sign any 
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions. Lessor shall reimburse Lessee for Lessee's 
actual and reasonable attorneys' fees and cost incurred in connection with 
Lessee's review of any such documents, not to exceed the sum of Fifteen Hundred 
Dollars ($1,500.00), upon receipt of bills or invoices evidencing such 
expenditure by Lessee.

43.  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 under the provisions of this 
Lease.

44.  Authority. If either Party hereto is a corporation, trust, or general or 
limited partnership, 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. If Lessee is a corporation, trust or 
partnership, Lessee shall, within thirty (30) days after request by Lessor, 
deliver to Lessor evidence satisfactory to Lessor of such authority.

45.  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.

46.  Offer. Preparation of this Lease by either Lessor or Lessee or Lessor's 
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.

47.  Amendments. This Lease may be modified only in writing, signed by the 
parties in interest at the time of the modification. The Parties shall amend 
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change. Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an institutional insurance company or pension plan Lender in
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.

48.  Multiple Parties. Except as otherwise expressly provided herein, if more 
than one person or entity is named herein as either Lessor or Lessee, the 
obligations of such multiple parties shall be the joint and several 
responsibility of all persons or entities named herein as such Lessor or Lessee.


                See Addendum

                                     -10-
<PAGE>
 
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.

                IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR 
                ATTORNEY'S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE 
                CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE  
                POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR
                HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
                MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY
                THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR 
                EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
                CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT 
                RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR
                OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
                IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN 
                ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE 
                CONSULTED.


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


Executed at:  Lafayette CA                 Executed at:  Chatsworth, California
            -------------------------                  -------------------------
on:  11/27/96                              on:  11/26/96
   ----------------------------------         ----------------------------------


By LESSOR:                                 By LESSEE:
 
     BEDFORD PROPERTY INVESTORS, INC.,     LESLIE'S POOLMART (INC.),
--------------------------------------     -------------------------------------
     a Maryland corporation                a California corporation
--------------------------------------     -------------------------------------
By: /s/ Jim Moore                          By: /s/ Brian McDermott
   -----------------------------------        ----------------------------------
Name Printed: Jim Moore                    Name Printed: Brian McDermott
             -------------------------                  ------------------------
Title:  VP Mgr                             Title:  CEO & President
      --------------------------------           -------------------------------
By:                                        By: /s/ Cynthia G. Watts
   -----------------------------------        ----------------------------------
Name Printed:                              Name Printed:  Cynthia G. Watts
             -------------------------                  ------------------------
Title:                                     Title:  VP & Secretary
      --------------------------------           -------------------------------
Address:                                   Address:
        ------------------------------             -----------------------------

--------------------------------------     -------------------------------------
Telephone:(   )                           Telephone:(818) 993-4212
               -----------------------                   -----------------------
Facsimile:(   )                           Facsimile:(818) 885-0292
               -----------------------                   -----------------------


NOTE: These forms are often modified to meet changing requirements of law and 
needs of 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)1993 by American Industrial Real Estate Association. All rights reserved. No 
part of these words may be reproduced in any form without permission in writing.

                                     -11-
<PAGE>
 

                               ADDENDUM TO LEASE
                            DATED NOVEMBER  , 1996
                                  ----------------
                   BETWEEN BEDFORD PROPERTY INVESTORS, INC.,
                     a Maryland corporation ("LESSOR") AND
         LESLIE'S POOLMART (INC), a California corporation ("LESSEE")
         -------------------------------------------------
                       FOR PREMISES GENERALLY LOCATED AT
                    1595 DUPONT AVENUE, ONTARIO, CALIFORNIA
                    ----------------------------



This Addendum is intended to supplement, but not supersede (unless 
specifically so stated), the provisions of the Lease described above (the 
"Lease"), and the provisions hereof are hereby incorporated into the Lease. Any 
capitalized term is hereby given the same meaning as set forth in the Lease. In 
the event of any conflict between any provision of this Addendum and any 
provision of the Lease, the provision of this Addendum shall control.

1.   The following is hereby added to Section 1.3, Term:

     Term. The "Original Term" shall commence on the earlier to occur of (i) the
     ----
     date that Lessee substantially completes the Improvements (as defined in
     Exhibit C hereto) such that Lessee can utilize the Premises for Lessee's
     intended use, notwithstanding minor incomplete or defective items that do
     not materially prevent Lessee from utilizing the Premises, or (ii) subject
     to "Force Majeure" (as defined below), eight (8) weeks following the Early
     Possession Date (the "Commencement Date"), and shall continue for One
                                                                       ---  
     Hundred Twenty (120) months, plus any partial month at the beginning of the
     --------------------    
     term if the Commencement Date is other than the first day of a calendar
     month (the "Expiration Date.") Notwithstanding the foregoing, Lessor and
     Lessee acknowledge and agree that both Lessor and Lessee shall have a right
     to terminate this Lease pursuant to and in accordance with the terms and
     conditions set forth in Section 5 of Exhibit C hereto. Within thirty (30)
     days following the Commencement Date, Lessee shall execute and deliver to
     Lessor a written acknowledgment of the Commencement Date in the form
     attached hereto as Exhibit "B" and incorporated herein by this reference.
     In the event that the Commencement Date is delayed because (i) Lessor has
     agreed to perform the Compliance Obligations (as defined in Section 5.B. of
     Exhibit C), or (ii) of Force Majeure, the Commencement Date shall be
     delayed one day for each day that Lessor's performance of the Compliance
     Obligations within the Premises, or Force Majeure, delays the Commencement
     Date. Lessee shall notify Lessor in writing in the event that a Force
     Majeure occurrence arises that will likely delay the Commencement Date
     beyond eight (8) weeks following the Early Possession Date. In the event
     that Force Majeure delays the Commencement Date beyond eight (8) weeks
     following the Early Possession Date, but Lessee is utilizing all or a
     portion of the Premises for its business operations from and after eight
     (8) weeks following the Early Possession Date, Lessee shall pay to Lessor 
     a proportionate share of the Base Rent and Additional Rent payable by 
     Lessee hereunder, based upon the portion of the Premises being utilized by 
     Lessee. As used herein, the term "Forces Majeure" shall mean any delay 
     resulting from or caused by an Act of God, fire, earthquake, flood, 
     explosion, action of the elements, war, invasion, insurrection, riot, mob 
     violence, sabotage, malicious mischief, inability to procure or general
     shortage of labor, equipment, facilities, materials, or supplies in the
     open market, failure of transportation, strike, lockout, action of labor
     unions, litigation not within the reasonable control of Lessee,
     condemnation, requisition, law, order or regulation of government or civil,
     military or naval authority, or any other cause (excluding financial
     inability) whether similar or dissimilar to the foregoing not within the
     reasonable control of Lessee.

2.   The following is hereby added to Section 1.4, Early Possession:

     Early Possession. Lessor shall deliver possession of the Premises to Lessee
     ----------------
     on or before three (3) business days following the full execution of this
     Lease (the "Early Possession Date.")

3.   The following is hereby added to Section 1.5, Base Rent:

     Months 1 through 2:                $-0-
     Months 3 through 60:               $43,978.00
     Months 61 through 90:              $47,643.00    
     Month 91:                          $-0-
     Months 92 through 120:             $51,308.00

     Notwithstanding the foregoing, Lessor and Lessee agree that, in the event
     that Lessee completes the contemplated Management Buyout (as defined in
     Paragraph 3 on Page 6A of the Lease), Base Rent in the amount of $43,978.00
     per month shall be payable during months 1 and 2 of the term hereof, and no
     Base Rent shall be due from Lessee to Lessor for months 36 and 48 of the
     Lease term. In the event that the Management Buyout has not occurred prior
     to the Commencement Date, and thereafter the Management Buyout occurs,
     Lessee shall (i) provide written notice to Lessor that the Management
     Buyout has occurred within five (5) business days following the completion
     thereof, and (ii) pay to Lessor, with the next installment of Base Rent
     becoming due under the Lease, all Base Rent for months 1 and/or 2 of the
     term hereof not previously paid to Lessor by Lessee.

4.   The following is hereby added to Section 1.6(b), Lessee's Share of Common 
     Area Operating Expenses:

     A. Notwithstanding anything to the contrary contained herein, "Lessee's
     Share" of (i) Common Area Operating Expenses and (ii) expenses reimbursable
     to Lessor by Lessee pursuant to Section 7.2 of the Lease (collectively,
<PAGE>
 
the "Reimbursable Costs") shall be (a) Forty and 6/10 Percent (40.6%), based 
upon the square footage of the Premises (not including the square footage of the
Truck Parking Area) as compared to the square footage of the Industrial Center 
available for lease, with respect to those Reimbursable Costs identified below
as applicable to the Industrial Center, and (b) one hundred percent (100%) with 
respect to those Reimbursable Costs identified below as applicable to the 
Building.

B. Those categories of Reimbursable Costs applicable to the Industrial Center 
include Real Property Taxes, insurance premiums payable by Lessor, property 
association dues and fees payable by Lessor in connection with the recorded 
covenants, conditions and restrictions for California Commerce Center, 
miscellaneous cleaning of Common Area facilities, including without limitation, 
windows, walls, sidewalks, landscaping and parking lots that are part of Common 
Areas, miscellaneous repair and maintenance of electrical facilities and service
serving the Common Areas, including without limitation, replacement of exterior 
lights, miscellaneous repair and maintenance of plumbing facilities and service 
serving the Common Areas, miscellaneous repair and maintenance of doors
(excluding roll-up doors), painting of the Industrial Center, the cost of
providing water, gas, and electricity for Common Area facilities, the cost of
maintaining, repairing and replacing landscaping in the Industrial Center, the
cost of maintaining, repairing and replacing the parking lots, paved or
concreted areas and walkways within the Industrial Center, the cost of any
capital improvements or replacements made to the Common Areas, and any other
costs or expenses incurred by Lessor in the operation and maintenance of the
Common Areas which are not part of the Reimbursable Costs applicable to the
Building.

C. Those categories of Reimbursable Costs applicable to the Building include 
sprinkler monitoring costs for the Building, including without limitation, all 
testing costs, inspection costs, telephone and monitoring charges and repair or 
replacement costs, the cost of repairing or replacing the roof on the Building, 
the cost of repairing or replacing the heating, ventilating and air conditioning
system serving the Building, the cost of repairing or replacing the electrical 
service and meters serving the Building, the cost of repairing the water and 
sewer service and meters to the Building, the cost of maintaining, repairing and
replacing the Truck Parking Area, the cost of any capital improvements or 
replacements made to the Building and Truck Parking Area, and any other costs or
expenses incurred by Lessor in the operation and maintenance of the Building or 
Truck Parking Area which are not part of the Reimbursable Costs applicable to 
the Common Areas.

D. Notwithstanding anything to the contrary set forth above, with respect to 
Reimbursable Costs that constitute replacements of equipment and improvements 
which Lessor is required to perform pursuant to the terms of this Lease, and any
other replacements or improvements which Lessor determines to be reasonably 
necessary to the operation of the Industrial Center, or which are mandated or 
required by applicable law, ordinance or code, shall hereinafter be known as 
"Capital Costs."  Certain Capital Costs shall be reimbursed by Lessee to Lessor 
hereunder as part of Reimbursable Costs each year, only to the extent of that 
fraction allocable to the year in question.  Lessee shall reimburse Lessor 
each year for that portion of the Capital Cost determined by taking (i) the
total Capital Cost amount incurred by Lessor, with interest on such Capital Cost
amount at a rate equal to ten percent (10%) per annum over the commercially
reasonable useful life of the improvement for which such Capital Cost was
incurred, and (ii) multiplying such amount by a fraction, the numerator of which
is the then remaining term of this Lease (or if Lessee elects to extend the term
hereof, by such extended term or the remainder thereof), and the denominator of
which is the commercially reasonable useful life of the improvement for which
such Capital Cost was incurred. The Capital Costs subject to such amortization
procedure are restricted to the following two categories: (a) those costs for
capital improvements to the Industrial Center or the Building of a type which do
not normally recur more frequently than every five (5) years in the normal
course of operation and maintenance of facilities such as the Industrial Center
or the Building (specifically excluding painting of all or a portion of the
Industrial Center or Building); and (b) costs incurred for the purpose of
reducing other operating expenses or utility costs, from which Lessee can expect
a reasonable benefit, or that are required by governmental law, ordinance,
regulation or mandate, not applicable to the Industrial Center or Building at
the time of the original construction.

E. With respect to Capital Costs incurred solely for the purpose of reducing 
other operating expenses or utility costs, from which Lessee can expect a 
reasonable benefit, Lessor shall obtain Lessee's prior written consent to the 
incurring of such Capital Costs by Lessor, which consent shall not be 
unreasonably withheld or delayed.  Lessee shall approve or disapprove Lessor's 
request to incur such Capital Costs within five (5) business days of Lessee's 
receipt of written notice from Lessor that it desires to incur such Capital 
Costs, which notice from Lessor shall describe with reasonable specificity the 
nature and extent of the Capital Costs proposed to be incurred.  In the event 
that Lessee shall disapprove of Lessor's incurring of such Capital Costs, 
Lessee's written disapproval shall include the specific reasons for Lessee's 
disapproval.

F. With respect to Capital Costs incurrred for the purpose of seismically 
upgrading or retro-fitting the Building and which is required by governmental 
mandate or ordinance, Lessor and Lessee agree that the commercially reasonable 
useful life of such improvements shall be a period of thirty (30) years.  With 
respect to Capital Costs incurred for the purpose of re-roofing the Building, 
Lessor and Lessee agree that the commercially reasonable useful life of such 
roof shall be a period of (i) ten (10) years, if Lessor determines to put a 
three-ply roof on the Building, or (ii) twenty (20) years, if Lessor determines 
to put a four-ply roof on the Building.

G. Lessor and Lessee acknowledge that the water pressure currently provided by 
the local water utility company is sufficient for Lessee's use and for the fire 
protection system servicing the Premises.  In the event that, in the future, 
the water pressure provided by the local water utility company reasonably 
becomes insufficient for Lessee's use and the fire protection system serving 
the Premises, Lessor agrees, as Reimbursable Cost applicable to the Building, to
install an ancillary water pump to provide water pressure reasonably sufficient
for Lessee's use and for the fire protection system serving the Premises.  The 
cost of such pump shall be deemed to be a Capital Cost, amortized in accordance 
with the provisions set forth above in subsection D.

<PAGE>
 
5.    The following is hereby added to Section 1.8, Permitted Use:

      Use. The Premises shall be used solely for general warehouse use and
      ---
      distribution, storage, packaging, service and repair of products, for the
      forming of granular chlorine into tablets, the packaging of chlorine into
      Department of Transportation ("DOT") approved consumer sized containers,
      the repackaging of granular chemicals (including chlorine compounds) into
      DOT approved consumer sized containers, the mixing, dilution and packaging
      of liquid pool products and for any other uses which are incidental or
      reasonably related thereto, and for no other purpose."

6.    The following is hereby added as new Section 4.2(e):

      Also included within the definition of Common Area Operating Expenses
      shall be a yearly management fee paid Lessor for the operation and
      management of the Industrial Center, which in no event shall exceed ten
      percent (10%) of the sum of (i) Common Area Operating Expenses of the
      Building and/or the Industrial Center, as applicable (not including Real
      Property Taxes), which are payable by Lessee hereunder, plus (ii) those
      costs incurred by Lessor pursuant to Section 7.2 of the Lease which are
      applicable to the Building and/or the Industrial Center and which are
      payable by Lessee hereunder. The aforementioned management fee is the only
      management or administrative fee charged to Lessee by Lessor in connection
      with its management and operation of the Premises and the Industrial
      Center.

7.    The following is hereby added to Section 8.2(a) where indicated:

      "ONE MILLION DOLLARS ($1,000,000.00) per occurrence with a ONE MILLION
      DOLLAR ($1,000,000.00) annual aggregate and an umbrella policy of FIVE 
      MILLION DOLLARS ($5,000,000.00) any occurrence,"

8.    The following is hereby added as new Section 9 where indicated:

      A.     Rights of Termination.  In the event the Premises suffers (a) an
             ---------------------
      "uninsured property loss" (as hereinafter defined) or (b) a property loss
      which cannot be repaired within two hundred seventy (270) days from the
      date of destruction under the laws and regulations of state, federal,
      county or municipal authorities, or other authorities with jurisdiction,
      Lessor may terminate this Lease as at the date of the damage upon written
      notice to Lessee following the casualty. In the event of property loss to
      the Premises which cannot be repaired within two hundred seventy (270)
      days of the occurrence thereof, Lessee shall have the right to terminate
      the Lease by written notice to Lessor within thirty (30) days following
      notice from Lessor that the time for restoration shall exceed two hundred
      seventy (270) days. Lessor shall deliver such notice to Lessee within
      forty-five (45) days following the date of such damage or destruction. For
      purposes of this Lease, the term "uninsured property loss" shall mean any
      loss arising from a peril not covered by the standard form of "All Risk"
      property insurance policy, or not covered by Lessor's policy of earthquake
      insurance, including any deductible related thereto (subject to the
      provisions of Subsection B, below.)

      B.     Earthquake Damage.  Subject to Subparagraph A, above, in the event
             -----------------
      of any earthquake damage to the Premises (not including Lessee's Special
      Improvements or Lessee-Owned Alterations or Utility Installations, for
      which Lessee shall be solely responsible) which is not covered by Lessor's
      policy of earthquake insurance, including any deductible related thereto,
      and which costs less than Fifty Thousand Dollars (50,000.00) to repair,
      Lessor shall be obligated to make such repairs at its sole cost and
      expense. Subject to Subparagraph A, above, in the event of any earthquake
      damage to the Premises which is not covered by Lessor's policy of
      earthquake insurance, including any deductible related thereto, and which
      costs in excess of Fifty Thousand Dollars (50,000.00) to repair, Lessor
      shall have no obligation to make such repairs, and may elect to terminate
      this Lease pursuant to Subsection A, above, unless agrees in writing,
      within thirty (30) days following receipt of notice from Lessor that the
      cost to repair is reasonably estimated by Lessor to exceed the sum of
      Fifty Thousand Dollars (50,000.00), to the "Capitalization Procedure" (as
      described below.) In the event that Lessee timely and properly notifies
      Lessor that it agrees to the Capitalization Procedure, Lessor shall have
      no right to terminate this Lease as a result of such earthquake damage,
      and shall commence to repair all such damage as soon as reasonably
      possible and thereafter to diligently prosecute such repairs to
      completion. In the event that Lessee timely and properly notifies Lessor
      that it agrees to the Capitalization Procedure, all costs of repairing
      such earthquake damage in excess of Fifty Thousand Dollars (50,000.00)
      shall be treated as a Capital Cost, as specified in Paragraph 4 of this
      Addendum, recoverable from Lessee in accordance therewith, with the
      reasonable useful life of such repairs being agreed between Lessor and
      Lessee to be thirty (30) years (the "Capitalization Procedure.")

      C.     Repairs.  In the event of a property loss which may be repaired 
             -------
      within two hundred seventy (270) days from date of the damage, or, in the
      alternative, in the event the parties do not elect to terminate this Lease
      under the terms set forth above, then this Lease shall continue in full
      force and effect and Lessor shall forthwith undertake to make such repairs
      to reconstitute the Premises to as near the condition as existed prior to 
      the property loss as practicable.  Such partial destruction shall in no
      way annul or void this Lease except that Lessee shall be entitled to a
      proportionate reduction of Base Rent and Additional Rent following the
      property loss and until the time the Premises are restored.  Such 
      reduction shall be an amount which reflects the degree of interference 
      with Lessee's business.  So long as Lessee conducts its business in the 
      Premises, there shall be no abatement until the parties agree on the
      amount thereof.  If the parties cannot agree with forty five (45) days of
      property loss, the matter shall be submitted to arbitration under the
      commercial arbitration rules of the American Arbitration Association.  
      Upon the resolution of the dispute, the settlement shall be retroactive 
      and Lessor shall within ten (10) days thereafter refund to Lessee any sums
      due in respect of the reduced rental from the date of the property loss.
      If such dispute is arbitrated, the losing party in such dispute shall pay
      all the fees and cost of the American Arbitration Association in such
      arbitration, including without limitation the fee for the arbitrator.  
      Lessor's obligations to restore shall in no way include any construction
      originally performed by Lessee or subsequently undertaken by Lessee,
      including without limitation Lessee's Special Improvements (as defined in
      Exhibit C hereto) and any

<PAGE>
 

     Lessee-Owned Alterations and/or Utility Installations, but shall include
     solely that property constructed by Lessor prior to commencement of the
     Term hereof.

     D. Repair Costs. The cost of any repairs to be made by Lessor, pursuant to
        ------------
     this Section 9 of this Lease (specifically excluding Subparagraph B,
     above), shall be paid by Lessor utilizing available insurance proceeds. In
     no event shall Lessor be required to expend in restoration of the Premises
     more than it receives from Lessor's property insurance policies.

     E.  Total Destruction. Total destruction of the Premises shall teminiate 
         -----------------
     this Lease.

     F.  Waiver. Lessee hereby waives all statutory or common law rights of
         ------
     termination in respect to any partial destruction or property loss which
     Lessor is obligated to repair or may elect to repair under the terms of
     this Article. Further, in event of a property loss to the Premises which
     costs in excess of Two Hundred Thousand Dollars ($200,000.00) to repair and
     occurring during the last two (2) years of the original term hereof or of
     any extension, Lessor need not undertake any repairs and may cancel this
     Lease unless Lessee has the right under the terms of this Lease to extend
     the term for an additional period of at least five (5) years and does so
     within thirty (30) days following the date of the property loss. In event
     of a property loss to the Premises during the last twelve (12) months of
     the original term hereof or of any extension thereof, which will take in
     excess of one hundred eighty (180) days to repair or restore, either Lessor
     or Lessee may elect to terminate this Lease upon written notice to the
     other.
 
9.   The following is hereby added as new Section 12.4:

     A.  "In addition to any other conditions to Lessor's consent to a proposed
         or sublet of all or a portion of the Premises contained herein, Lessor
         and Lessee agree that should Lessor withhold its consent for any of the
         following reasons, which list is not exclusive, such withholding shall
         be deemed to be reasonable:

         (1)   The tangible net worth of the proposed assignee or sublessee of
               all of the Premises is not at least equal to Thirty Million
               Dollars (provided, however, that the foregoing requirement shall
               not apply to a sublease of less than all of the Premises);

         (2)   A proposed transferee whose occupation of the Premises would
               cause a diminution in the reputation of the Industrial Center or
               the other businesses located therein;

         (3)   A proposed transferee whose impact on the Premises, the common
               facilities or the other occupants of the Industrial Center would
               be in excess of the impact caused by Lessee; or
              
         (4)   A proposed transferee whose occupancy will require a variation in
               the terms of the Lease.

     B.  Procedure for Obtaining Consent. Lessor need not commence its review of
         -------------------------------
         any proposed assignment or sublet, or respond to any request by Lessee
         with respect to such, unless and until it has received from Lessee
         reasonably adequate descriptive information concerning the business to
         be conducted by the proposed transferee, the transferee's financial
         capacity, and such other information as may reasonably be required in
         order to form a prudent judgment as to the acceptability of the
         proposed assignment or sublet, including, without limitation, the
         following:

         (1)   The past two years' Federal Income Tax returns of the proposed
               transferee (or in the alternative the past two years' audited
               annual Balance Sheets and Profit and Loss statements, certified
               correct by a Certified Public Accountant);
  
         (2)   Banking references of the proposed transferee; and

         (3)   A resume of the business background and experience of the 
               proposed transferee.

         Lessee shall reimburse Lessor as additional rent for Lessor's
         reasonable costs and attorneys' fees incurred in conjunction with the
         processing and documentation of any proposed Transfer of the Premises,
         whether or not consent is granted, provided that the same shall not
         exceed Fifteen Hundred Dollars ($1500.00) per transaction. Lessor shall
         approve or disapprove of Lessee's request for consent to a Transfer
         within five (5) business days of Lessor's receipt of all of the above
         referenced information from Lessee.

     C.  Recapture. By written notice to Lessee (the "Termination Notice") 
         ---------
         within five (5) business days following submission to Lessor by Lessee
         of the information specified above, Lessor may terminate this Lease in
         the event of a proposed assignment of this Lease or sublet of the
         entire Premises.

     D.  Effect of Transfer. If Lessor consents to a proposed assignment or 
         ------------------
         sublet, the following conditions shall apply:

         (1)   Each and every covenant, condition or obligation imposed upon
               Lessee by this Lease and each and every right, remedy or benefit
               afforded Lessor by this Lease shall not be impaired or diminished
               as a result of such assignment or sublet.

         (2)   On a monthly basis, any sums of money, or other economic 
               consideration received by Lessee
<PAGE>
 
                    from the transferee in such month (whether or not for a
                    period longer than one month), including higher rent,
                    bonuses, key money, or the like which exceed, in the
                    aggregate, the total sums which Lessee pays Lessor under
                    this Lease in such month, or the prorated portion thereof if
                    the premises transferred is less than the entire Premises,
                    shall be payable fifty percent (50%) to Lessor and fifty
                    percent (50%) to Lessee, and Lessor's share shall be paid
                    with Lessee's payment of Base Rent after deduction of the
                    reasonable out-of-pocket costs incurred by Lessee for (i)
                    any space planning, architectural or design fees or expenses
                    incurred in connection with such assignment or sublease,
                    (ii) any improvement allowance or other monetary
                    consideration provided to the transferee by Lessee, (iii)
                    reasonable legal fees incurred in connection with such
                    assignment or sublease, (iv) costs of advertising the
                    Premises or portion thereof which is the subject of the
                    assignment or sublease (hereinafter, the "Transfer Costs"),
                    pursuant to the following procedure:the Transfer Costs shall
                    be amortized on a monthly straight line basis over the term
                    of the assignment or sublease, and only that amortized
                    portion of the Transfer Costs applicable to each month of
                    the term of the assignment or sublease shall be deducted
                    from the payment hereinabove specified to be made by Lessee
                    to Lessor.

            (3)     Subject to the provisions of Paragraph F, below, no
                    Transfer, whether or not consent of Lessor is required
                    hereunder, shall relieve Lessee of its primary obligation to
                    pay the rent and to perform all other obligations to be
                    performed by Lessee hereunder. The acceptance of rent by
                    Lessor from any person shall not be deemed to be a waiver by
                    Lessor of any provision of this Lease or to be a consent to
                    any assignment or sublet of the Premises.

            (4)     If Lessor consents to a sublease, such sublease shall not 
                    extend beyond the expiration of the term of this Lease.

            (5)     No proposed assignment or sublet shall be valid and no
                    transferee shall take possession of the Premises or any part
                    thereof unless, within ten (10) days after the execution of
                    the documentary evidence thereof, Lessee shall deliver to
                    Lessor a duly executed duplicate original of the instrument
                    by which the proposed assignment or sublet is to be
                    documented, in form reasonably satisfactory to Lessor which
                    provides that (i) any assignee (but not necessarily any
                    subtenant) assumes Lessee's obligations for the payment of
                    rent and for the full and faithful observance and
                    performance of the covenants, terms and conditions
                    contained herein, (ii) such transferee will, at Lessor's
                    election, attorn directly to Lessor in the event Lessee's
                    Lease is terminated for any reason on the terms set forth in
                    the instrument of transfer and (iii) such instrument of
                    transfer contains such other assurances as Lessor reasonably
                    deems necessary.

    E.      Excluded Transfers. Notwithstanding any provision of this Lease to
            ------------------
            the contrary, Lessor's consent shall not be required for, Lessor's
            recapture right specified in subparagraph C., above, shall not apply
            to, and Lessor shall not share in any profits of the type described
            in subparagraph D.2, above, with respect to, any (i) sublease of all
            or a portion of the Premises to Leslie's Pool Brite, a California
            corporation, (ii) sublease to a company that provides to Lessee (and
            possibly third parties) pool equipment or other parts incidental to
            Lessee's business operations within the Premises, (iii) lease of
            storage space within the Premises where the party leasing such space
            does not enter into possession of the Premises or any portion
            thereof, but merely consigns items for storage to Lessee (provided
            that such items consigned for storage do not include any Hazardous
            Substances), or (iv) any assignment of this Lease or sublease of any
            portion of the Premises to any entity or person which controls, is
            controlled by, or under common control with, Lessee. Lessee shall
            notify Lessor in writing of any assignment of this Lease or any
            sublease of all or a portion of the Premises (except for leases of
            storage space as contemplated by subsection (ii) above, which shall
            require no notice to Lessor) within ten (10) days following such
            assignment or sublease. Included in such notice shall be an executed
            copy of the document by which such assignment or sublease has been
            effectuated. As used above, "control" means ownership and the right
            to vote stock possessing at lease fifty percent (50%) of the total
            combined voting power of all classes of Lessee's capital stock
            issued, outstanding and entitled to vote for election of directors.

    F.      Release of Lessee. In the event that Lessee proposes an assignment
            -----------------
            of this Lease to an assignee that Lessor agrees meets the
            requirements set forth in Subparagraph A, above, upon receiving
            Lessor's written consent to such assignment Lessee shall be released
            from all of its obligations thereafter accruing under this Lease.

10. The following is hereby added as new Section 36(c):
    
    "Notwithstanding anything to the contrary contained in this Lease, if any
    provision of this Lease expressly or impliedly obligates Lessor not to
    unreasonably withhold its consent or approval, an action for declaratory
    judgment or specific performance will be Lessee's sole right and remedy in
    any dispute as to whether Lessor has breached such obligation."

11. The following is hereby added as new Section 49:

    "Limited Liability. In the event of default, breach, or violation by Lessor
     ----------------- 
    (which term includes Lessor's partners, co-venturers, co-tenants, officers,
    directors, employees, agents or representatives) of any Lessor's
    obligations under this Lease, Lessor's liability to Lessee shall be limited
    to its ownership interest in the Industrial Center or the proceeds of a
    public sale of such interest pursuant to foreclosure of a judgment against
    Lessor. Lessor(as defined above) shall not be personally liable for any
    deficiency beyond its interest in the Industrial Center."
   
<PAGE>
 
13.   The following is hereby added as new Section 50:

      "Interruptions. It is understood that Lessor does not warrant that any of
      --------------
      the services or utilities in this Lease will be free from interruption.
      Lessee acknowledges that any one or more such services or utilities may be
      suspended or reduced by reason of repairs, alterations or improvements
      necessary to be made, by strikes or accidents, by action of the local
      utility supplier, by orders or regulations of any federal, state, county
      or municipal authority, and other cause beyond the reasonable control of
      Lessor. Any such interruption or suspension of services or utilities shall
      not be deemed an eviction or disturbance of Lessee's use and possession of
      the Premises or any part hereof, not render Lessor liable to Lessee for
      damages by abatement of Rent or otherwise, nor relieve Lessee of
      performance of Lessee's obligations under this Lease."

14.   The following is hereby added as new Section 51:

      "Condition of Premises. Except as to the specific warranties of Lessor
      ----------------------
      contained herein, and the construction obligations of Lessor, if any,
      stated in Exhibit "C" to this Lease, Lessee shall accept the Premises in
      "as is" condition as of the date of execution of this Lease by Lessee, and
      Lessee acknowledges that the Premises in such condition are in good and
      sanitary order, condition and repair."

15.   The following is hereby added as new Section 52:

      "Waiver of Claims. Provided that Lessee elects to self insure for damage
      -----------------
      to its personal property, trade fixtures, Lessee's Special Improvements,
      Lessee-Owned Alterations or Utility Installations, and for business
      interruption/loss of income due to damage or destruction to the Premises,
      interruptions with necessary utility services, or other events which cause
      Lessee economic loss because it is unable to utilize the Premises to any
      extent, Lessee, as a material part of the consideration to be rendered to
      Lessor, hereby waives all claims against Lessor for damages to goods,
      wares, merchandise and loss of business (including loss of income in other
      retail outlets of Lessee as a result of its inability to utilize the
      Premises to any extent) in, upon or about the Premises and injury to
      Lessee, its agents, employees, invitees or third persons, in, upon or
      about the Premises, from any cause arising at any time, including the
      negligence of the parties hereto."

16.   The following is hereby added as new Section 53:

      "Notice and Right to Cure Default. Lessee agrees to give any mortgagee(s)
      ---------------------------------
      and/or trust deed holders, by registered mail, a copy of any notice of
      default served upon Lessor, provided that prior to such notice Lessee has
      been notified, in writing (by way of Notice of Assignment of Rents and
      Leases, or otherwise), of the address of such mortgagees and/or trust deed
      holders. Lessee further agrees that if Lessor shall have failed to cure
      such default within the time provided for in this Lease, then the
      mortgagees and/or trust deed holders shall have an additional thirty (30)
      days within which to cure such default or, if such default cannot be cured
      within that time, then such additional time as may be necessary if within
      such thirty (30) days, any mortgagee and/or trust deed holder has
      commenced and is diligently pursuing the remedies necessary to cure such
      default (including but not limited to commencement of foreclosure
      proceedings, if necessary to effect such cure), in which event this Lease
      shall not be terminated while such remedies are being so diligently
      pursued."

17.   The following is hereby added as new Section 54:

      "Waiver of California Code Sections. In this Lease, numerous provisions 
      -----------------------------------
      have been negotiated by the parties, some of which provisions are covered
      by statute. Whenever a provision of this Lease and a provision of any
      statute or other law cover the same matter, the provisions of this Lease
      shall control. Therefore, Lessee waives (for itself and all persons
      claiming under Lessee) the provisions of Civil Code Sections 1932(2) and
      1933(4) with respect to the destruction of the Premises; Civil Code
      Sections 1941 and 1942 with respect to Lessor's repair duties and Lessee's
      right to repair, Code of Civil Procedure Section 1265.130, allowing either
      party to petition the Superior Court to terminate this Lease in the event
      of a partial taking of the Premises by condemnation as herein defined; and
      any right of redemption or reinstatement of Lessee under any present or
      future case law or statutory provision (including Code of Civil Procedure
      Sections 1179) in the event Lessee is dispossessed from the Premises for
      any reason. This waiver applies to future statutes enacted in addition to
      or in substitution for the statutes specified herein."

18.   The following is hereby added as new Section 55:

      "OPTION TO EXTEND THE TERM.
      --------------------------
      
      1.   Notice to Exercise. Lessee shall have the right to extend the initial
           ------------------
           term hereof for two (2) additional and consecutive periods of five
           (5) years each upon the same terms and conditions as stated herein,
           except for the Base Rent, which shall be determined for the first
           Extended Term in accordance with paragraph 3, below, and which shall
           be determined for the second Extended Term in accordance with
           paragraphs 4 through 9, below; and further, except that the number of
           additional periods shall be reduced by one for each extension option
           that is exercised. Each such extension is herein referred to as an
           "Extended Term". Failure to timely exercise any extension option
           hereunder shall cause all subsequent options to immediately become
           null and void. Lessee must exercise its right, if at all, by written
           notification (the "Notice to Exercise") to Lessor not less than One
           Hundred Eighty (180) nor more than Two Hundred Seventy (270) days
           prior to the expiration of the initial term hereof, or the then
           current Extended Term, if any, provided that Lessee is not in Breach
           of this Lease as of the date (i) that Lessee exercises its right to
           extend the term hereof, or (ii) of the commencement of the
           applicable Extended Term.
<PAGE>
 
2.   Options are Personal.  The options to extend granted herein are personal to
     --------------------
     the original Lessee executing this lease, and notwithstanding anything to
     the contrary contained in the Lease, the rights contained in this Addendum
     are not assignable or transferable by such original Lessee. Lessor grants
     the rights contained herein to Lessee in consideration of Lessee's strict
     compliance with the provisions hereof, including without limitation, the
     manner of exercise of this option.

3.   CPI Adjustment.  The Base Rent provided herein shall be subject to increase
     --------------
     at the commencement of the first Extended term hereof, and upon the
     expiration of the thirtieth (30th) month of the first Extended Term
     (hereinafter, the "adjustment dates"), as follows:

     The basis for computing the increase in Base Rent is the Consumer Price
     Index, All Urban Consumers, All Items, Los Angeles-San Diego-Riverside
     Area, published by the United States Department of Labor, Bureau of Labor
     Statistics (1984=100) (the "Index"). The Index which is published nearest
     to the commencement of the ninety-second (92nd) full calendar month of the
     initial term of this Lease (for the rental adjustment as of the
     commencement of the first Extended Term), or the immediately prior
     adjustment date (for the rental adjustment as of the end of the thirtieth
     (30th) month of the first Extended Term) shall be deemed to be the
     "Beginning Index". The Index published nearest to the applicable adjustment
     date shall be deemed to be the "Extension Index". If the Extension Index
     has increased over the applicable Beginning Index, the Base Rent until the
     next rent adjustment date, if any, shall be established by multiplying the
     Base Rent in effect immediately prior to the applicable adjustment date by
     a fraction, the numerator of which is the Extension Index and the
     denominator is the Beginning Index. In no event, however, shall the Base
     Rent as established at the (i) first adjustment date be less than seven
     percent (7%) more than, or more than fourteen percent (14%) more than, the
     Base Rent due immediately prior to the first adjustment date, and (ii)
     second adjustment date be less than seven and one-half percent (7.5%) more
     than, or more than fifteen percent (15%) more than, the Base Rent due
     immediately prior to the second adjustment date. Lessor shall notify Lessee
     of the amount of such adjustment, and Lessee shall acknowledge such
     adjustment within five (5) days of such notice from Lessor. Following
     adjustment of the Base Rent as specified herein, the parties shall
     immediately execute an amendment to the Lease on request of either party
     stating the new Base Rent. In the event the Extension Index has not been
     published as of the applicable adjustment date, the previous Base Rent
     shall remain in effect until publication thereof. On the first calendar
     month following publication of the Extension Index (the "Retroactive
     Date"), Lessee shall pay to Lessor (i) the Base Rent for the current month
     as increased as provided herein, and (ii) the monthly increase in the Base
     Rent resulting from the calculation upon publication of the Extension Index
     multiplied by the number of months that have elapsed between the last
     adjustment date and the Retroactive Date, such that the newly revised Base
     Rent shall have been paid in full commencing with the immediately preceding
     adjustment date.

     If the Index is changed so that the Beginning Index differs from that used
     for the Extension Index, the Index shall be converted in accordance with
     the conversion factor published by the United States Department of Labor,
     Bureau of Labor Statistics. If the Index is discontinued or revised during
     the term of the Lease, such other government index or computation with
     which it is replaced shall be used in order to obtain substantially the
     same result as would have been obtained if the Index had not been
     discontinued or revised.

4.   Fair Market Rental.  If Lessee exercises the right to extend the term of
     ------------------
     the Lease for the second Extended Term contemplated hereby, then the Base
     Rent shall be adjusted to equal the Fair Market Rental for the Premises as
     of the date of the commencement of the second Extended Term, pursuant to
     the procedures hereinafter set forth. The term "Fair Market Rental" means
     the Base Rent chargeable for the Premises based upon the following factors
     applicable to the Premises or any comparable premises:

     (a) Rental rates being charged for comparable premises in the same 
         geographical location;

     (b) The relative locations of the comparable premises;

     (c) Improvements, or allowances provided for improvements, or to be 
         provided;

     (d) Rental adjustments, if any, or rental concessions;

     (e) Services and utilities provided or to be provided;

     (f) Use limitations or restrictions;

     (g) Any other relevant Lease terms or conditions.

     In no event, however, shall the Fair Market Rental be less than the Base
     Rent in effect immediately prior to the commencement date of the second
     Extended Term. The Fair Market Rental may include provision for further
     Base Rent adjustments during the Extended Term if such adjustments are
     commonly required in the market place for similar types of leases, if such
     adjustments are commonly required in the market place for similar types of
     leases.

5.   Determination of Fair Market Rental.  Upon exercise of the right to extend
     -----------------------------------
     for the second Extended Term, and included within the Notice of Exercise,
     Lessee shall notify Lessor of its opinion of Fair Market Rental as above
     defined for the second Extended Term. If the parties are unable to agree
     upon a Base Rent for
<PAGE>
 
        the second Extended Term within thirty (30) days following Lessor's
        receipt of the Notice to Exercise, within (10) days thereafter, either
        party at its own cost and expense and by giving notice to the other
        party in writing, may appoint a real estate appraiser who is a member of
        the Appraisal Institute, or the Society of Real Estate Appraisers, or an
        equivalent professional organization, with a lease five (5) years'
        experience appraising properties devoted to the same general type of use
        (e.g. office, industrial) as the Premises in the county in which the
        Premises are located ("Qualified Appraiser"), to set the Fair Market
        Rental for the second Extended Term. The terms "Base Rent" and "Fair
        Market Rental" as used in this article shall be interchangeable. If a
        party does not appoint a Qualified Appraiser within ten (10) days after
        the first party has given notice of the name of its Qualified Appraiser,
        the single Qualified Appraiser appointed shall be the sole appraiser and
        shall set the Fair Market Rental for the second Extended Term. If two
        Qualified Appraisers are appointed by the parties, they shall meet
        promptly, on five (5) days' notice to the parties, to take such evidence
        and other information as the parties may deem reasonable to submit to
        the Qualified Appraiser. Within thirty (30) days after the selection of
        the last of the two Qualified Appraisers to be appointed by the parties,
        the Qualified Appraisers shall render their opinions of the Fair Market
        Rental of the Premises as above qualified. If the two valuations are
        within ten percent (10%) of each other, they shall be averaged and the
        average of the two shall be the Base Rent for the second Extended Term.
        If only one appraisal is timely submitted that opinion shall constitute
        the Base Rent for the second Extended Term. If the two valuations are
        separated by more than ten percent (10%), then the two Qualified
        Appraisers shall, within ten (10) days following the last date for
        submissions of the two appraisals of Fair Market Rental, appoint a third
        Qualified Appraiser. If they are unable to agree upon a third Qualified
        Appraiser within such ten (10) day period, either of the parties to this
        Lease, by giving five (5) days' notice to the other party, may demand
        Arbitration as specified in Section 7 of this Addendum. If neither party
        applies for Arbitration within the ten (10) day period herein specified,
        the two appraisals of Fair Market Rental shall be averaged as stated
        above, and such average shall be the Base Rent for the second Extended
        Term.

6.      Arbitration. In the event the parties are unable to mutually agree upon
        -----------
        a Base Rent for the second Extended Term, and in such event proceed to
        the Appraisal or Arbitration procedure herein specified, both parties
        shall be bound to submit the matter for such determination. The
        procedure specified in this article for appointment of Qualified
        Appraisals, delivery of appraisals, appointment of an Arbitrator, and
        determination of Fair Market Base Rental Value thereby, is herein
        collectively referred to as "Arbitration." The Arbitration shall be
        conducted and determined in the County where the Premises are situated.
        If the Arbitration is not concluded before the commencement of the
        second Extended Term, Lessee shall pay Base Rent to Lessor in an amount
        equal to the Fair Market Rental set forth in the appraisal be Lessor's
        Qualified Appraiser until the Fair Market Rental is determined in
        accordance with the arbitration provisions hereof. If the Fair Market
        Rental as determined by Arbitration differs from that stated by Lessor's
        Qualified Appraiser, then any adjustment required to correct the amount
        previously paid by Lessee shall be made by payment by the appropriate
        party within thirty (30) days after the determination of Fair Market
        Rental by Arbitration has been concluded, as provided herein. Lessee
        shall be obligated to make payment during the entire second Extended
        Term of the Base Rent determined in accordance with the Arbitration
        procedures hereunder.

7.      Demand for Arbitration. A party demanding Arbitration hereunder shall
        ----------------------
        make its demand in writing ("Demand Notice") within ten (10) days after
        receipt of notice from the Qualified Appraisers that they have failed to
        appoint a third Qualified Appraiser as specified in Section 5 above. A
        copy of the Demand Notice shall be sent to the President of the Real
        Estate Board for the County in which the Premises are located. If there
        is no Real Estate Board, or Board President, in said County then a copy
        of the Demand Notice shall be sent to the Presiding Judge of the highest
        trial court in such County for the State in which the Premises are
        located. The Board President or Presiding Judge, whichever is
        applicable, is hereinafter referred to as the "Appointer." The
        Appointer, acting in his personal, private capacity, shall appoint
        within ten (10) days thereafter a Qualified Appraiser. The Arbitrator
        shall be qualified to serve as an expert witness, over objection, to
        give opinion testimony addressed to the issue in a court of competent
        jurisdiction.

8.      Decision of the Arbitrator. As used herein, the term Arbitrator refers
        --------------------------
        to a third Qualified Appraiser, selected by any of the methods
        heretofore set forth. The Arbitrator shall, within sixth (60) days after
        his appointment, state in writing his determination as to whether the
        Fair Market Rental stated by Lessor's Qualified Appraiser or the Fair
        Market Rental stated by Lessee's Qualified Appraiser, most closely
        approximates his own. The Arbitrator shall have the right to consult
        experts and competent authorities consultation shall be made in the
        presence of both parties with full right to cross examine. The
        Arbitrator may not state his own opinion of Fair Market Rental, but is
        strictly limited to the selection of one of the two appraisals submitted
        by the other two Qualified Appraisers. The Arbitrator shall have no
        right to propose a middle ground or any modification of either of the
        proposed valuation, and shall have no power to modify this Lease. The
        valuation so chosen as most closely approximating that of the Arbitrator
        shall constitute his decision, shall be deemed the Base Rent for the
        second Extended Term and shall be final and binding upon the parties
        absent fraud or gross error. The Arbitrator shall render a decision and
        ward in writing, with counterpart copies to each party. Judgement may be
        entered thereon in any court of competent jurisdiction.

9.      Successor Arbitrator: Fees and Expenses. In the event of failure,
        ---------------------------------------
        refusal, or inability of the Arbitrator to act in a timely manner, a
        successor shall be appointed in the same manner as such Arbitrator was
        first chosen hereunder. The fees and expenses of the Arbitrator and for
        the administrative hearing fee, if any,
<PAGE>
 
        shall be divided equally between the parties. Each party shall bear its
        own attorneys' fees and other expenses including fees of witnesses in
        presenting evidence, and the fees and cost of its own Qualified
        Appraiser."

IN WITNESS WHEREOF, the parties have initialed this Addendum to Lease on the
date set forth above.

LESSOR:  J
       --------

LESSEE:  BPM
       --------
<PAGE>
 
                         EXHIBIT A - INDUSTRIAL CENTER




                  [DIAGRAM OF INDUSTRIAL CENTER APPEARS HERE]
<PAGE>
 
                                  EXHIBIT "B"

                        ACKNOWLEDGMENT OF COMMENCEMENT


This Acknowledgment of Commencement is made as of __________, 199_, with 
reference to that certain Lease Agreement (hereinafter referred to as the
"Lease") dated _____________, by and between Bedford Property Investors, Inc., a
Maryland corporation as "Lessor" therein, and Leslie's Poolmart (Inc). a
                                              --------------------------
California corporation as "Lessee" for the demised premises situated at 1595
----------------------                                                  ----
Dupont Avenue, Ontario, California.
----------------------------------                                 

The undersigned hereby confirms the following:

1.   That the Lessee accepted possession of the Premises (as described in said 
     Lease) on __________, 199_, and subject to the express warranties of Lessor
     contained in Sections 2.2 and 2.3 of the Lease, acknowledges that the
     Premises are as represented by the Lessor and in good order, condition and
     repair, and that the improvements, if any, required to be constructed for
     Lessee by Lessor under this Lease have been so constructed and are
     satisfactorily completed in all respects.

2.   That all conditions of said Lease to be performed by Lessor prerequisite to
     the full effectiveness of said Lease have been satisfied and that Lessor
     has fulfilled all of its duties of an inducement nature.

3.   That the Commencement Date of the Original Term is ___________, 199_, and
     that, unless sooner terminated, the Original Term thereof expires on
     ________________ ("Expiration Date.")

4.   That said Lease is in full force and effect and that the same represents
     the entire agreement between Lessor and Lessee concerning said Lease.

5.   That there are no existing defenses which Lessee has against the
     enforcement of said Lease by Lessor, and no offsets or credits against
     rentals.

6.   That the Base Rent under said Lease is presently in effect and that all
     rentals, charges and other obligations on the part of Lessee under said
     Lease commenced to accrue on ____________, 199_.

7.   That the undersigned Lessee has not made any prior assignment,
     hypothecation or pledge of said Lease or of the rents thereunder.

     LESSEE:
     -------


     By:
        ---------------------------------

     Name: (Print):
                    ---------------------

     Its: 
         --------------------------------
           (Title)

<PAGE>
 
                                  EXHIBIT "C"
                           CONSTRUCTION OBLIGATIONS

      The purpose of this Exhibit C is to set forth the responsibilities of the 
Lessor and Lessee with respect to the design and construction of the Premises.

      1.    Plans and Specifications
            ------------------------

            (a) Lessor and Lessee have reviewed and approved the preliminary 
space plan (the "Preliminary Plan") for the construction of certain improvements
consisting of office space and other improvements attached hereto as Exhibit C-1
(the "Tenant Improvements.") Lessee shall submit any final plans and
specifications for the Tenant Improvements to Lessor as and when completed (the
"Tenant Improvement Plans.") Provided that the Tenant Improvement Plans do not
materially deviate from the Preliminary Plan, Lessor shall approve the Tenant
Improvement Plans within three (3) business following Lessor's receipt thereof.
In the event that the Tenant Improvement Plans do materially deviate from the
Preliminary Plan, Lessor shall notify Lessee of its approval or reasonable
disapproval of the Tenant Improvement Plans within three (3) business following
Lessor's receipt thereof, with such notice specifying the revisions that Lessor
reasonably requires to the Tenant Improvement Plans in order to approve the
same.

            (b) Within thirty (30) days following full execution of the Lease to
which this Exhibit C is attached, Lessee shall submit to Lessor for Lessor's 
approval, which approval shall not be unreasonably withheld or delayed, two (2) 
sets of complete plans and specifications for the layout, construction and 
finish of "Lessee's Special Improvements" (as defined below), consistent with 
the design and construction of the Base Building Work (as hereinbelow 
described), including mechanical and electrical drawings and floor and ceiling 
plans, showing the location of partitions, light fixtures, electrical outlets, 
telephone outlets, sprinklers, doors, wall finishes, floor coverings and other 
materials and finishes as Lessee may desire ("Lessee's Plans.")

            (c) The Tenant Improvement Plans and Lessee's Plans shall be 
prepared by a licensed architect and/or engineer, and shall be in a form 
sufficient to secure approval from all governmental authorities having 
jurisdiction over the approval thereof, and shall be otherwise reasonably 
satisfactory to Lessor.

            (d) If Lessor reasonably disapproves Lessee's Plans, or any portion 
thereof, Lessor shall notify Lessee of such disapproval within five (5) business
following Lessor's receipt thereof, specifying the revisions that Lessor 
requires in order to obtain Lessor's approval (hereinafter the "Revision 
Notice"). Within ten (10) days after receipt of the Revision Notice, Lessee 
shall submit to Lessor plans and specifications, revised to incorporate the 
changes required by Lessor. Such revised plans and specifications shall be 
subject to Lessor's approval within three (3) business following Lessor's 
receipt thereof, not to be unreasonably withheld. The revised Tenant Improvement
Plans and Lessee's Plans approved by Lessor are herein after referred to as the 
"Final Plans".

            (e) All interior decorating services such as the selection of wall 
paint colors and/or wall coverings, fixtures, carpeting and other decorator 
selection efforts required by Lessee shall be provided by Lessee at Lessee's 
sole cost and expense and, if not already included within the Final Plans 
approved by Lessor, shall be subject to the approval of Lessor within three (3) 
business following Lessor's receipt thereof, not to be unreasonably withheld.

      2.    Lessee's Non-Standard Improvements. Lessor and Lessee acknowledge 
            ----------------------------------
and agree that Lessee shall be constructing within the Premises, in the 
approximate location and configuration as shown on Exhibit C-1 hereto, certain 
special improvements necessary for the operation of Lessee's business within the
Premises, as follows: a containment facility for Lessee's storage of chlorine 
and/or other chemicals used in operation of Lessee's business (hereinafter, 
"Lessee's Special Improvements"). Notwithstanding anything herein to the 
contrary, Lessee's Special Improvements shall be included in Lessee's Plans and 
in the Final Plans; provided, however, that Lessor shall have no obligation to 
pay for, or to contribute to the payment for, Lessee's Special Improvements, all
of which shall be designed, permitted and constructed by Lessee at its sole cost
and expense. Upon the expiration or earlier termination of this Lease, Lessee, 
at its sole cost and expense, shall remove all of Lessee's Special Improvements 
and shall restore the Premises to the condition existing prior to the 
installation of Lessee's Special Improvements.

      3.    Base Building Work.  Subject to the provisions of the Lease to which
            ------------------
this Exhibit is attached, Lessor shall deliver the Building in which the 
Premises are located, in "as-is where-is" condition, with such improvements and 
amenities as are then constructed within the Building (collectively hereinafter 
referred to as the "Base Building Work.")

      4.    Building Permit. Following approval by Lessor of the Final Plans, or
            ---------------
concurrently therewith, Lessee shall submit such plans for approval of the 
governmental agencies having jurisdiction thereover, and shall, as soon as 
reasonably possible, obtain two (2) building permits (one each for the Tenant 
Improvements and Lessee's Special Improvements) and any and all other 
governmental approvals necessary for the construction of the Tenant Improvements
and Lessee's Special Improvements, in conformance with the Final Plans, and for 
the operation of Lessee's business within the Premises (hereinafter the 
"Permits.") Lessor and Lessee acknowledge and agree that the Permits for 
construction of the Tenant Improvements may be obtained prior to obtaining the 
Permits-for the construction of Lessee's Special Improvements and/or the Permits
for Lessee's business operations within the Premises, and that Lessee may begin 
construction of the Tenant Improvements prior to obtaining all Permits for the 
construction of Lessee's Special Improvements or the operation of Lessee's 
business within the Premises, subject to the provisions set forth below in 
Section 5. The Tenant Improvements and Lessee's Special Improvements are 
sometimes collectively referred to herein as the "Improvements."

      5.    Termination Rights. Lessor and Lessee shall both have the right to 
            ------------------
terminate this lease, upon not less than ten (10) days prior written notice to 
the other, in accordance with the following terms and provisions:
<PAGE>
 
          A. Lessee's Termination Right. In the event that, after using 
             --------------------------
reasonable efforts, Lessee is unable, on or before twelve (12) weeks following 
the Early Possession Date, to obtain all necessary Permits for the construction 
of Lessee's Special Improvements and/or for Lessee's business operations within 
the Premises, Lessee, in conformance with the terms hereof, may elect to 
terminate this Lease ("Lessee's Termination Right.") In the event that Lessee 
fails to terminate this Lease in conformance herewith on or before twelve (12) 
weeks following the Early Possession Date, Lessee's Termination Right shall 
expire and be deemed null and void and of no further force and effect, and 
Lessee shall have no further right to terminate this Lease pursuant to this 
Section. In the event that Lessee shall have undertaken the construction of any 
of the Improvements prior to the exercise of Lessee's Termination Right as 
specified herein, Lessee shall be obligated, at its sole cost and expense, to 
(i) pay for all Improvements so constructed by Lessee (notwithstanding the 
provisions of Section 11, below, requiring Lessor to partially or totally 
reimburse Lessee for the cost of constructing the Tenant Improvements), and (ii)
remove all such Improvements constructed by Lessee and restore the Premises to 
the condition existing prior to such construction.

          B. Lessor's Termination Right. In the event that, as a result of 
             --------------------------
Lessee's attempt to obtain all necessary Permits or otherwise, any governmental 
or other authority shall require that any alterations, improvements, 
replacements, repairs or other construction or compliance obligations be 
performed within or about the Premises, the Building and/or the Industrial 
Center (the "Compliance Obligations"), which Compliance Obligations in the 
aggregate cost in excess of Fifty Thousand Dollars ($50,000.00), Lessor may 
elect, subject to Lessee's right to continue the Lease as set forth below, to 
terminate this Lease ("Lessor's Termination Right"). Lessee shall provide Lessor
with written notice of any such Compliance Obligations immediately upon Lessee's
learning of such Compliance Obligations, and Lessor's reasonable estimate of the
cost thereof. In the event that the estimated cost is in excess of Fifty 
Thousand Dollars ($50,000.00), and Lessor notifies Lessee that it intends to 
exercise Lessor's Termination Right as a result thereof, Lessee may notify 
Lessor that it desires to continue the Lease in full force and effect, 
notwithstanding Lessor's Termination Right, and in such event it shall be deemed
that Lessee has agreed to pay all costs of the Compliance Obligations in excess 
of Fifty Thousand Dollars ($50,000.00) pursuant to the following procedure: 
Lessee shall reimburse Lessor each year for that amortized portion of the costs 
of the Compliance Obligations in excess of Fifty Thousand Dollars ($50,000.00), 
determined by taking the total costs of the Compliance Obligations in excess of
Fifty Thousand Dollars ($50,000.00), with interest on such costs at a rate equal
to ten percent (10%) per annum, and amortizing such costs over the term of this
Lease. In the event that Lessor does not elect to exercise Lessor's Termination
Right and is willing to perform such Compliance Obligations, Lessor shall notify
Lessee of such fact in writing, and Lessor shall thereafter commence such
Compliance Obligations and diligently prosecute such Compliance Obligations to
completion. Notwithstanding anything to the contrary contained herein, the
initial Fifty Thousand Dollar ($50,000.00) cost of Compliance Obligations
undertaken by Lessor shall be deemed to be Common Area Operating Expenses and,
to the extent required by the terms of this Lease, may be deemed to be Capital
Costs and, if so characterized, shall be amortized in conformance with the terms
hereof.

     Lessee and Lessor agree that Lessor shall have no obligation to pay any 
brokerage commission or fee in connection with this Lease transaction to any 
person or entity whatsoever, including without limitation any person or entity 
representing Lessee in connection herewith, unless and until Lessee' Termination
Right and/or Lessor's Termination Right shall expire. In the event that Lessee' 
Termination Right and/or Lessor's Termination Right shall be timely and properly
exercised, (i) Lessee hereby agrees to indemnify and hold Lessor harmless from
and against any loss, cost, claim, suit, proceeding, liability, fee (including
without limitation, reasonable attorney's fees and cost) or expense incurred by
Lessor as a result of any person or entity claiming a brokerage fee or
commission from Lessor for the representation of Lessee in connection herewith,
and (ii) Lessor hereby agrees to indemnify and hold Lessee harmless from and
against any loss, cost, claim, suit, proceeding, liability, fee (including
without limitation, reasonable attorney's fees and costs) or expense incurred by
Lessee as a result of any person or entity claiming a brokerage fee or
commission from Lessee for the representation of Lessor in connection herewith.

     6.   Contractor; Construction. Lessor and Lessee agree that Altman 
          ------------------------
Construction ("Altman") shall be the general contractor for the construction of
the Improvements. Following Lessor's and Lessee's written approval of the Final
Plans, and Lessee's obtaining of the Permits for the construction of the Tenant
Improvements and/or the Lessee's Special Improvements (it being agreed by Lessor
and Lessee that Permits for the Tenant Improvements and the Lessee's Special
Improvements shall be obtained separately and that Lessee, subject to the
provisions hereof, including without limitation Section 5, may commence
construction of the Tenant Improvements prior to obtaining all Permits necessary
for the construction of Lessee's Special Improvements or for the operation of
Lessee's business within the Premises), Lessee shall cause Altman to commence
construction of the Improvements and diligently prosecute the same to
completion.

     7.   Changes, Additions and Alterations. If Lessee shall request any 
          ----------------------------------
change, addition or alteration in the Final Plans (each, a "Change Request"),
such change, addition or alteration in the Final Plans shall be subject to
Lessor's prior written approval within three (3) business following Lessor's
receipt of the Change Request, not to be unreasonably withheld. No such Change
Request, nor any other delay in the completion of the Improvements except as
specifically provided in Paragraph 1 of the Addendum, shall delay the
commencement date of this Lease beyond eight (8) weeks following the Early
Possession Date.

     8.   Costs. Subject to reimbursement by Lessor of the "Improvement 
          -----
Allowance" (as defined below), Lessee shall be solely responsible for any and 
all costs and expenses incurred in connection with the construction of the 
Improvements, including without limitation, all fees and costs of the Designer.

     9.   Ownership. All Tenant Improvements, not including Lessee's Special 
          ---------
Improvements, shall become the property of Lessor immediately upon the
completion thereof, and Lessee hereby agrees to assign to Lessor any warranties
or other guaranties obtained by Lessee in connection with the construction of
Tenant Improvements. All Lessee's Special Improvements shall be paid for and
owned by Lessee.

     10.  Improvement Allowance. Lessor shall contribute up to a maximum amount 
          ---------------------
of One Hundred Fifty
<PAGE>

Thousand Dollars ($150,000.00) towards the cost of the Tenant Improvements (the 
"Improvement Allowance"). Notwithstanding anything to the contrary contained 
herein, in no event shall Lessor be obligated to pay any portion of the 
Improvement Allowance towards the cost of designing, permitting or constructing 
Lessee's Special Improvements, which shall be paid for solely by Lessee. Lessor 
shall pay such portion of the Improvement Allowance as Lessee has expended in 
the design, permitting and construction of the Tenant Improvements within thirty
(30) days following completion of the Tenant Improvements and presentation to 
Lessor by Lessee of (i) bills and invoices reasonably acceptable to Lessor, 
detailing the amounts spent by lessee on the design, permitting and construction
of the Tenant Improvements, and (ii) unconditional lien releases and waivers 
from the Contractor and all subcontractors and material suppliers, in the form 
required by applicable state law, or such other evidence reasonably satisfactory
to Lessor either (a) showing that all such parties have been paid in full and 
have released any rights to lien the Building or the Premises for non-payment, 
or that (b) Lessee has fully bonded any such lien rights in accordance with 
applicable State law and otherwise in a manner reasonably acceptable to Lessor. 
Any costs of constructing the Tenant Improvements in excess of the Improvement 
Allowance, and all costs of constructing Lessee's Special Improvements, shall be
paid for solely by Lessee. In the event that Lessor shall fail to so reimburse 
to Lessee the Improvement Allowance, Lessee may deduct the amount of the 
Improvement Allowance (or so much thereof as Lessor has failed to pay to Lessee 
in conformance with the terms hereof) from the Base rent first becoming due 
hereunder by Lessee to Lessor. In the event that, following completion thereof, 
the Tenant Improvements shall cost less than the total Improvement Allowance, as
evidenced by bills and invoices therefore reasonably acceptable to Lessor, any 
portion of the Improvement Allowance not so spent on the Tenant Improvements, up
to a maximum of Fifty Thousand Dollars ($50,000.00), shall be credited by Lessor
toward the Base Rent first becoming due hereunder by Lessee to Lessor.

 
<PAGE>
 
                                   EXHIBIT D
                             RULES AND REGULATIONS

1.      No sign, placard, picture, advertisement, name of notice shall be 
inscribed, displayed or printed or affixed on the Building or to any part 
thereof, or which is visible from the outside of the Building, without the 
written consent of Lessor, first had and obtained and Lessor shall have the 
right to remove any such sign, placard, picture, advertisement, name or notice 
without notice to and at the expense of Lessee.  All approved signs or lettering
on doors shall be printed, affixed or inscribed at the expense of Lessee by a 
person approved by Lessor.

2.      If a directory is located at the Building, it is provided exclusively 
for the display of the name and location of Lessee only and Lessor reserves the 
right to exclude any other names therefrom.

3.      The sidewalks, passages, exits, entrances, and stairways in and around
the Building shall not be obstructed by Lessee or used by it for any purpose
other than for ingress to and egress from the Premises. The passages, exits,
entrances, stairways and roof are not for the use of the general public and
Lessor shall in all cases retain the right to control and prevent access thereto
by all persons whose presence in the judgement of Lessor shall be prejudicial to
the safety, character, reputation and interests of the building and its tenants,
provided that nothing therein contained shall be construed to prevent such
access to persons with whom Lessee normally deals in the ordinary course of
Lessee's business unless such persons are engaged in illegal activities. Neither
Lessee nor any employees or invitees of Lessee shall go upon the roof of the
Building without Lessor's prior consent not to be unreasonably withheld;
provided, however, that Lessee may go upon the roof in the case of an emergency
situation requiring immediate action. Lessee shall be responsible for any damage
to the roof caused by Lessee's activities thereon.

4.      Lessee shall provide Lessor with the keys to any additional lock or 
locks installed by Lessee on any door in the Building for the purpose of 
emergency access by Lessor.

5.      The toilets and urinals shall not be used for any purpose other than 
those for which they were constructed, and no rubbish, newspapers or other 
substances of any kind shall be thrown into them.  Waste and excessive use of 
water shall not be allowed.  Lessee shall be responsible for any breakage, 
stoppage or damage resulting from the violation of this rule by Lessee or its 
employees or invitees. 

6.      Less shall not overload the floor of the Premises or mark, drive nails, 
screw or drill into the partitions, woodwork or plaster or in any way deface the
Premises or any part thereof.

7.      The Premises shall not be used for washing clothes, for lodging, or for 
any improper, objectionable or immoral purposes.

8.      Lessee shall not use or keep in the Premises any kerosene, gasoline, or 
other inflammable or combustible fluid or material (other than those substances 
necessary to Lessee's business operation), or use any method of heating or air 
conditioning other than that supplied by Lessor or installed by Lessee with 
Lessor's consent. 

9.      Lessor will direct electricians as to the manner and location in which
telephone and telegraph wires are to be introduced. No boring or cutting for
wires will be allowed without the consent of Lessor. The location of telephones,
call boxes, and other office equipment affixed to the Premises shall be subject
to the approval of Lessor.

10.     Lessee shall not lay linoleum, tile, carpet or other similar floor 
covering so that the same shall be affixed to the floor of the Premises in any 
manner except as approved by Lessor.  The expense of repairing any damage 
resulting from a violation of this rule or removal of any floor covering shall 
be borne by Lessee.

11.     Any window covering desired by Lessee which is visible from the exterior
of the Premises shall be approved by Lessor.

12.     Lessor reserves the right to exclude or expel from the Building any 
person who, in the judgement of Lessor, is intoxicated or under the influence or
liquor or drugs, or who shall in any manner do any act in violation of the rules
and regulations of the Building.

13.     Lessee shall not disturb, solicit, or canvass any occupant of the 
Building.

14.     Without the written consent of Lessor, Lessee shall not use the name of 
the Building in connection with or in promoting or advertising the business of 
Lessee except as Lessee's address.

15.     Lessee shall not permit any contractor or other person making any
alterations, additions or installations within the Premises to use the Common 
Areas for storage of materials, for construction activities or otherwise, 
without the prior written consent of the Lessor.  Lessee shall be liable for and
shall pay the expense of any additional cleaning or other maintenance required 
to be performed by Lessor in the Common Areas as a result of the transportation 
or storage of material or work performed within the Building by or for Lessee.

16.     Lessee shall be entitled to use parking spaces as mutually agreed upon 
between Lessee and Lessor subject to such reasonable conditions and regulations 
as may be imposed from time to time by Lessor.  Lessee agrees that vehicles of 
Lessee or its employees or agents shall not park in driveways nor occupy parking
spaces or other areas reserved for any use such as Visitors, Delivery, Loading, 
or other tenants.  Lessor or its agents shall have the right to cause or be 
removed any car of Lessee, its employees or agents, that may be parked in 
unauthorized areas, and Lessee agrees to save and hold harmless
<PAGE>
 
Lessor, its agents and employees from any and all claims, losses, damages and 
demands asserted or arising in respect to or in connection with the removal of 
any vehicle.  Lessee, its employees, or agents shall not park campers, trucks or
cars on the Building parking areas overnight or over weekends, unless performing
work within the Premises during such periods.  Lessee will from time to time, 
upon request of Lessor, supply Lessor with a list of license plate numbers of 
vehicles owned or operated by its employees and agents.

17.     Canvassing, soliciting and peddling is prohibited in the Building and 
Lessee shall cooperate to prevent the same.

18.     Lessor is not responsible for the violation of any rule contained herein
by any tenants.

19.     Lessor may waive any one or more of these rules for the benefit of any 
particular tenant, but no such waiver shall be construed as a waiver of Lessor's
right to enforce these rules against any or all tenants occupying the Building.

20.     If required by Applicable Law or ordinance, Lessee is responsible for 
purchasing and installing a security system for the Premises.  The cost of 
purchasing, installing, maintaining and operating any such system shall be at 
the sole cost and expense of Lessee.

21.     The display, carrying, and use of pistols, rifles, shotguns and other 
firearms is prohibited in and about the Building, the parking lots and other 
common areas, except for authorized municipal, state and federal law enforcement
personnel.  Lessee and its employees, agents and invitees shall not display, 
carry or use any firearms within the Building, parking lots or other common 
areas.

22.     Lessor reserves the right to make reasonable modifications hereto and 
such other and further reasonable rules and regulations as in its judgement may 
be required for the safety, care and cleanliness of the Building and the 
Industrial center and for the preservation of good order therein.  Lessee agrees
to abide by all such rules and regulations; provided, however, that in any 
conflict between such rules and regulations and the terms and conditions of the 
Lease, the terms and conditions of the Lease shall control.
<PAGE>
 
                                   EXHIBIT E



RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

The Prudential Insurance Company
of America
Four Embarcadero Center, Suite 2700
San Francisco, California 94111

            SUBORDINATION, NO-DISTURBANCE AND ATTORNMENT AGREEMENT

            NOTE: THE SUBORDINATION PROVIDED FOR IN THIS AGREEMENT
            RESULTS IN YOUR LEASEHOLD ESTATE BECOMING SUBJECT TO AN
           INTEREST IN THE PROPERTY CREATED BY SOME OTHER INSTRUMENT


     This Subordination, Non-disturbance and Attornment Agreement (this 
"Agreement") is made as of _______________, 199_, by and among THE PRUDENTIAL 
INSURANCE COMPANY OF AMERICA, a New Jersey corporation ("Lender"), Bedford 
Property Investors, Inc., a California Corporation ("Landlord"), and Leslie's 
Poolmart, Inc., a California Corporation ("Tenant").

                               R E C I T A L S:

     A. Lender will make or has made a loan (the "Loan") to Landlord secured or 
to be secured by that certain Deed of Trust, Security Agreement and Fixture 
Filing with Assignment of Rents and Proceeds executed by Landlord, as trustor, 
in favor of a trustee for the benefit of Lender, as beneficiary (as amended from
time to time, the "Deed of Trust") encumbering the property commonly known as 
Dupont Industrial Center (the "Property"), which Property is more particularly 
described on Exhibit A attached hereto and incorporated herein by this 
             ---------
reference.

     B. Tenant has leased a portion of the Property (the "Premises") pursuant to
a Lease dated as of __________________, 199_ (The "Lease").

     C. Lender requires the agreements, statements and assurances contained in
this Agreement. Tenant understands that, in making the Loan, Lender will rely on
the agreements, assurances and statements made in this Agreement.



                                       1
<PAGE>
 
        NOW, THEREFORE, Lender, Tenant, and Landlord agree as follows:

1.      Subordination. Tenant agrees that the Lease, and the rights of Tenant 
        -------------
in, to and under the Lease and the Property, are hereby subjected and 
subordinated, and shall remain in all respects and for all purposes subject and 
subordinate, to the lien of the Deed of Trust, and to any and all renewals, 
modifications and extensions of the Deed of Trust, and any and all other 
instruments held by Lender as security for the Loan.

2.      Tenant Not To Be Disturbed. Lender agrees that it will not join Tenant 
        --------------------------
as a party defendant in any action or proceeding foreclosing the Deed of Trust 
unless such joinder is necessary to foreclose the Deed of Trust, and then only 
for such purpose and not for the purpose of terminating the Lease. If Lender or 
any other party shall become the owner of the Premises by reason of foreclosure,
whether judicial or non-judicial or other proceedings brought to enforce the 
Deed of Trust or by deed in lieu of foreclosure (collectively a "Succeeding 
Owner"), such Succeeding Owner agrees that so long as Tenant is not in default 
under the Lease or this Agreement (beyond the cure period (if any) granted to 
Tenant under the terms of the Lease), Tenant's possession or occupancy of the 
Premises shall not be disturbed, diminished or interfered with by Lender during 
the remaining term of the Lease.

3.      Tenant To Attorn To Lender. If a Succeeding Owner shall become the owner
        --------------------------
of the Premises by reason of foreclosure, whether judicial or non-judicial or 
other proceedings brought to enforce the Deed of Trust or by deed in lieu of 
foreclosure, the Lease shall, subject to the provisions set forth in clauses (a)
through (e) below, continue in full force and effect, such Succeeding Owner 
shall perform (but shall not personally assume) the obligations of the original 
Landlord thereunder, and Tenant hereby agrees to attorn to the Succeeding Owner 
as Tenant's lessor, provided, however, that in any and all events, the 
Succeeding Owner shall not be:

        (a)  Liable for any act or omission of any prior lessor (including 
        Landlord) or subject to any offsets or defenses which Tenant might have
        against any such prior lessor;

        (b)  Liable or obligated to expand the Property, pay tenant improvement 
        allowances, construct additional improvements or otherwise expend funds
        which are capital in nature, other than expenses for ordinary
        maintenance and repair;

                                       2
<PAGE>
 
        (c)  Liable to reconstruct the Premises or the Property to the extent 
        insurance proceeds are not available therefor;

        (d)  Liable for any obligation to indemnify or reimburse Tenant, any
        leasehold mortgagee, or any other third party or any of their respective
        successors and assigns from and against any loss, liability, damage or
        cost relating to or arising from the presence of any toxic or hazardous
        materials on, under or about the Property; or

        (e)  Liable or bound by any right of first refusal or option to purchase
        all or any portion of the Property set forth in the Lease;

        (f)  Bound by any material amendment or material modification of the 
        Lease made without its consent;

        (g)  Liable to Tenant for any security deposit paid to any prior
        landlord (including Borrower) which security deposit was not transferred
        to Lender or Purchaser

        (h)  Bound by any rent or additional rent which the Tenant might have
        paid for more than the current month to any prior landlord (including
        the Borrower);

        (i)  Bound by any provision of Section 6.2(c) of the Lease, or any other
        indemnification provision of the Lease relating to Landlord's obligation
        to indemnify Tenant for matters arising out of the presence, use or
        disposal of hazardous or toxic substances on the Property.

The agreements to attorn contained in this Paragraph are intended to be 
self-effectuating in favor of any Succeeding Owner.  Nevertheless, upon written 
request Tenant shall provide such written evidence as may be reasonably required
by any Succeeding Owner of the continuing effectiveness of Tenant's obligations
under this Agreement and the Lease as modified by this Agreement.

4.      Rental Payments.  Tenant agrees that upon written demand from Lender at 
        ---------------
any time prior to release of the Deed of Trust, it will pay rent under the Lease
to Lender.  Landlord hereby releases Tenant from all claims arising out of 
Tenant's payment of rent as instructed by Lender in writing.

5.      Lender's Notice of Default and Options to Cure.  Tenant agrees that, 
        ----------------------------------------------
until release of the Deed of Trust, it shall not invoke any

                                       3
<PAGE>
 
remedies under the Lease for breaches or defaults by the Landlord without having
first given to Lender (i) written notice of such default and (ii) the greater of
(a) 30 days after the period provided under the Lease for cure by the Landlord
of such default or (b), if cure of such default requires possession of the
property, 30 days after Lender has obtained possession within which to cure such
default. Notwithstanding any provision contained in this Agreement to contrary,
(x) Lender shall be under no obligation to cure any default under the Lease, and
(y) Tenant's obligation contained herein to forbear exercise of its rights and
remedies under or with respect to the Lease shall not be defeased by Lender's
failure to cure, (A) any default of Landlord described in clauses 3(a) through
(e), inclusive, or (B) any other default under the Lease that cannot reasonably
be cured through the expenditure of money (i.e., the bankruptcy of Landlord).

6.  Assignment of Lease.  Tenant understands that Landlord's interest in the 
    -------------------
Lease has been assigned to Lender in connection with the Loan and that no
amendment modification or termination of the Lease shall be effective unless
approved in writing by Lender. Except as provided herein, however, Lender shall
assume no duty, liability or obligation to Tenant under the Lease.

7.  Notices.  Any notices under this Agreement shall be sent by certified mail 
    -------
to the addresses indicated below.

8.  Successors and Assigns.  This Agreement shall be binding upon and shall 
    ----------------------
inure to the benefit of the parties and their heirs, administrators,
representatives, successors, and assigns.


                                       4
<PAGE>
 
IN WITNESS WHEREOF, this Agreement has been duly executed by the parities hereto
as of the day and year first above written.

                                            LENDER:

                                            THE PRUDENTIAL INSURANCE COMPANY OF
                                            AMERICA, a New jersey corporation

                                            By:
                                               --------------------------------
                                               Its:
                                                   ----------------------------

                                            Address:

                                            Four Embarcadero Center
                                            Suite 2700
                                            San Francisco, CA 94111

                                            LANDLORD:

                                                                            , a
                                            --------------------------------
                                            --------------------------------
                                            
                                            By:
                                               --------------------------------
                                               Its:
                                                   ----------------------------

                                            Address:

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

                                       5

<PAGE>
 
                                           TENANT:


                                           ____________________, a
                                           ____________________

                                           By: ________________________
                                              Its: ____________________

                                           Address:

                                           _________________________
                                           _________________________
                                           _________________________

                                       6
                                           
<PAGE>
 


                                   EXHIBIT A

                          [REAL PROPERTY DESCRIPTION]






                                       7