EXHIBIT 10.24
                                      LEASE

1.   BASIC LEASE TERMS.

     (a)  Effective Date of this Lease: November 1, 1999.

     (b)  Parties and Notice Addresses:

          Landlord:   MACTARNAHAN   LIMITED   PARTNERSHIP,   an  Oregon  limited
          partnership whose address is 11416 S.W.  Lynnridge  Avenue,  Portland,
          Oregon 97225, phone number (503) 644-5342.

          Tenant:  HARCO PRODUCTS,  INC., an Oregon  corporation,  whose address
          shall be at the Premises.

     (c)  Description  of Premises:  Approximately  5,600  existing  square foot
          space as shown on attached  Exhibit  "A" located at 4670 S.W.  Pacific
          Avenue, Beaverton, Oregon.

     (d)  Term:  The term of this Lease shall  commence on November 1, 1999 (the
          "Commencement  Date")  and  shall  expire  on  October  31,  2004 (the
          "Expiration Date"); provided, however, that the term of this Lease may
          be  terminated  by Tenant upon 60 days'  written  notice to  Landlord;
          provided,  however,  that if Tenant  assigns its interest in the Lease
          pursuant to Section 19(a) or 19(b), then the 60-day notice period will
          be extended to a 180-day notice period.

     (e)  Base Monthly Rent: Base Monthly Rent shall be $2,500 per month.

     (f)  Security Deposit: None.

     (g)  Use:  The  Premises  shall be used for any  lawful  purpose as allowed
          pursuant to Section 6 below, and for no other purpose whatsoever.



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2.   PREMISES.

     (a)  Demise and  Description.  Landlord  leases to Tenant and Tenant leases
          from  Landlord  the  premises  described  in Section 1 and depicted on
          Exhibit  "A"  attached  (the  "Premises"),  which are  located  in the
          project depicted on Exhibit "A" attached (the "Project").  The Project
          is agreed to  contain a total of 15,600  square  feet of space at this
          time. All square  footages set forth herein are  approximate,  but are
          agreed  figures,  and no claim shall be based upon any  inaccuracy  or
          remeasurement.

     (b)  Inspection.  Tenant  executes  this  Lease for the  Premises  in their
          present  condition  "AS IS."  Tenant  acknowledges  that Tenant is not
          relying on any representation of Landlord or of any agent of Landlord,
          express  or  implied,  as  to  the  condition  of  the  Premises,  the
          suitability of the Premises for particular purposes,  or compliance of
          the Premises with any city, county, state and/or federal statute, code
          or ordinance. Landlord has not made, and no agent of Landlord has made
          or is authorized  to make,  any  representation  or warranty to Tenant
          regarding the Premises or the Project.  Tenant is leasing the Premises
          pursuant to its own independent  examination,  study and inspection of
          the Premises and Tenant is relying upon its own  determination  of the
          value of the Premises and the uses to which the Premises may be put.

     (c)  Common  Areas.  Tenant and its  employees  and  visitors  shall have a
          license to use the common areas of the Project, in common with others,
          during the time that Tenant has a right to occupy the  Premises.  This
          license is subject to the  provisions of this Lease,  to events beyond
          the reasonable control of Landlord (including  government  regulation,
          casualty,  or condemnation),  and to the reserved right of Landlord to
          delete from, add to, reconfigure, or otherwise modify the common areas
          from   time   to   time;   provided,    any   deletions,    additions,
          reconfigurations or modifications which are not required by government
          regulation  shall not  materially  interfere with the visibility of or
          access to the  Premises.  Tenant shall not make  excessive  use of the
          common  areas  and  shall  comply  with  such  rules  and  regulations
          regarding the common areas as Landlord may reasonably  adopt from time
          to time. Landlord shall at all times throughout the term of this Lease
          operate,  or cause the operation  of, the common areas,  including the
          parking areas,  in the Project in a good manner  consistent  with past
          practice.  No  charge  shall be made or  imposed  upon  Tenant  or its
          employees or visitors for parking within the Project without the prior
          approval of Tenant. Parking is intended for the employees and visitors
          of Tenant and the other  lessees of the  Project.  Landlord  shall not
          allow the parking  ratio to be less than  required  by any  applicable
          law,  subject  to  changes  in  law,  takings  or  sales  in  lieu  of
          condemnation, and other acts of government.

3.   TERM.  The term of this  Lease is for the  period  set forth in  Section 1,
     commencing on the  Commencement  Date and expiring on the Expiration  Date,
     unless earlier  terminated in accordance with the provisions of this Lease.
     Upon request,  the parties shall execute an Amendment hereto specifying the
     exact Commencement Date and Expiration Date.

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4.   RENT.

     (a)  Base Monthly Rent.

          (1)  Generally.  Tenant  shall pay  Landlord  base monthly rent in the
               applicable  amount(s)  set  forth in this  Lease  ("Base  Monthly
               Rent"). Base Monthly Rent shall be paid monthly in advance on the
               first day of each and every  calendar  month.  Base  Monthly Rent
               shall  commence  to  accrue  as of the  Commencement  Date;  Base
               Monthly  Rent  shall  be  prorated  and paid in  advance  for any
               partial first month.  The  obligation of Tenant to pay any amount
               hereunder to Landlord shall be deemed an obligation to pay rent.

          (2)  Initial Occupancy Provisions. Tenant shall be given possession of
               the Premises upon mutual execution and delivery of this Lease.

     (b)  Expenses. Beginning on and as of delivery of possession,  Tenant shall
          pay to Landlord the Tenant's Share (defined below) of Expenses related
          to the Project.

          (1)  Expenses  Defined.  The term  "Expenses"  shall  mean  all  costs
               incurred by Landlord in connection with the ownership, operation,
               management, improvement,  replacement (excluding roof replacement
               and  excluding  replacements  and repairs to the structure of the
               building not  necessitated  by the act or  negligence of Tenant),
               repair and maintenance of the Project, including roof repairs and
               maintenance,  but excluding (i) landscape  upkeep and parking lot
               cleaning and sweeping,  and (ii) costs incurred by Landlord under
               Section  13(c)  below.  Expenses  include  but are not limited to
               taxes  (including  the then  current  installments  of all  local
               improvement   district   assessments   and  other   assessments),
               insurance  premiums,  utility  charges  (electric,  gas,  and all
               others),  repair and  maintenance  costs,  and a  management  and
               administrative  fee equal to ten  percent  (10%) of all  Expenses
               excluding taxes and insurance premiums.

          (2)  Tenant's  Share.  Tenant's  Share of  Expenses  is defined as the
               total annual  amount of Expenses  multiplied  by a fraction,  the
               numerator of which is the square  footage of the Premises and the
               denominator  of  which  is the  square  footage  of the  Project.
               Tenant's Share of Expenses shall be calculated on an annual basis
               for each calendar  year,  including the remainder of the calendar
               year in which the Commencement Date occurs, shall be prorated for
               partial  calendar years, and shall be adjusted in the case of any
               change in the square footage of the Premises and/or Project.

          (3)  Taxes and Insurance.  Tenant shall pay to Landlord Tenant's Share
               of taxes and  insurance  once each year  within  ten (10) days of
               Landlord's invoice for the same.

          (4)  Estimate and Monthly Payment of Expenses;  Annual Reconciliation.
               Tenant shall pay to Landlord,  monthly in advance,  as additional
               rent,  one-twelfth  (1/12th)  of the annual  estimate of Tenant's
               Share of Expenses  other than taxes and insurance then in effect,
               beginning as of the date of delivery of  possession.  Immediately
               prior to the  Commencement  Date, and prior to each calendar year
               thereafter,  Landlord shall  estimate  Tenant's Share of Expenses
               other than taxes and insurance for the coming  calendar year, and
               such  estimate  shall be the  basis  for the  foregoing  payment;
               Landlord may revise such estimate and readjust  Tenant's payments
               accordingly once during each year.  Following each calendar year,
               Landlord  shall prepare an accounting  of actual  Expenses  other
               than taxes and

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               insurance  incurred  during  the  prior  calendar  year and shall
               deliver the same to Tenant. If the additional rent paid by Tenant
               under this Section 4(b)4 during the  preceding  calendar year was
               less than the actual amount of Tenant's  Share of Expenses  other
               than taxes and  insurance,  Landlord  shall so notify  Tenant and
               Tenant  shall pay the  shortfall to Landlord  within  thirty (30)
               days of receipt of such  notice;  such amount  shall be deemed to
               have accrued  during the prior calendar year and shall be due and
               payable  from Tenant even if this Lease shall have  expired or if
               this  Lease or  Tenant's  right of  possession  shall  have  been
               terminated prior to Tenant's receipt of this notice.  If Tenant's
               payments were greater than the actual amount of Tenant's Share of
               Expenses  other than taxes and  insurance,  then the  overpayment
               shall be credited by Landlord to Expense  payments next due under
               this  Section  4(b)4.  Tenant  shall have  thirty  (30) days from
               receipt  of the annual  accounting  notice  within  which to give
               written  notice of a  disagreement  with any item with respect to
               the calculation of Tenant's Share of Expenses with respect to the
               preceding  calendar  year;  failure to so notify  Landlord  shall
               represent a final  determination  of  Tenant's  Share of Expenses
               with  respect  to such  calendar  year as to any  matter  not the
               subject of such a notice.  Tenant shall have the right to review,
               at Landlord's place of business,  the records which relate to any
               item of  disagreement  covered by such a written  notice;  in the
               event such  review  proves an  improper  overcharge  of  Expenses
               (e.g.,   charges  for  repair  work   performed  at  a  different
               location),  Tenant's  sole  remedy  shall be (a) a credit for the
               overcharge,  and  (b)  if  the  overcharge  exceeds  $500  in any
               calendar year,  reimbursement  for the  reasonable  out-of-pocket
               costs incurred by Tenant in connection with the review, excluding
               attorneys fees except as allowed under Section 28(e) below.

     (c)  General Rent Provisions.  All amounts payable hereunder from Tenant to
          Landlord  shall  be  deemed  rent.  All  rent  shall  be  paid  by its
          respective  due date at the address  shown in Section 1, or such other
          place as Landlord may designate in writing from time to time. All rent
          shall be paid without prior demand or notice and without any deduction
          or offset  whatsoever  except only that Tenant shall have the right to
          offset  against  rent the  amount of any final  judgment  obtained  by
          Tenant against  Landlord which is not then subject to appeal or review
          or to any  unexpired  right to appeal or to request  review.  All rent
          shall  be paid in  lawful  money  of the  United  States  of  America.
          Proration  of rent due for any partial  month shall be  calculated  by
          dividing  the number of days in the month for which rent is due by the
          actual number of days in that month and  multiplying by the applicable
          monthly rate.

          Tenant  acknowledges  that late  payment by Tenant to  Landlord of any
          rent or other sums due under this Lease will cause  Landlord  to incur
          costs not  contemplated  by this Lease,  the exact amount of such cost
          being extremely difficult and impractical to ascertain.  Therefore, if
          any rent or other sum due from Tenant is not received  within five (5)
          days of the date when  first  due,  Tenant  shall pay to  Landlord  an
          additional  sum  equal to 5% of such  overdue  payment.  Landlord  and
          Tenant  hereby  agree  that such  late  charge  represents  a fair and
          reasonable estimate of the costs that Landlord will incur by reason of
          any such late  payment  and that the late charge is in addition to any
          and all remedies  available  to the  Landlord and that the  assessment
          and/or  collection  of the late charge shall not be deemed a waiver of
          default.  Additionally,  all such  delinquent rent or other sums, plus
          this late  charge,  shall bear  interest at the rate of 12% per annum,
          or, if lower,  the  maximum  interest  rate  permitted  by law. If any
          payment is  returned  for  insufficient  funds,  Landlord  may require
          Tenant to pay all future payments by cashier's check.


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5.   DEPOSIT. There will be no security deposit.

6.   USE OF PREMISES.

     (a)  Generally.  Tenant  shall use the  Premises  solely for the  continued
          operation of the business of Tenant as previously operated. Tenant may
          change such use only with the prior written consent of Landlord;  such
          consent shall be granted for any lawful and reputable  legal use which
          (i) is not prohibited hereunder,  and (ii) is not in conflict with any
          exclusive  use right  granted by  Landlord  to  another  lessee at the
          Project.

     (b)  Compliance. Tenant shall promptly comply, and take all steps necessary
          to cause the  Premises to comply,  with all laws,  ordinances,  codes,
          orders and  regulations  affecting  the Premises,  including,  without
          limitation,   those  relating  to  Hazardous  Substances,   earthquake
          preparedness,  disabled  persons,  and/or any elevator or HVAC system;
          but only to the extent that work is required by any act,  use or other
          work of Tenant.  Tenant shall not do or permit  anything to be done in
          or about the Premises or bring or keep  anything in the Premises  that
          will materially increase the risk to the Premises or Landlord.  Tenant
          shall not  conduct  nor permit  (i) any  nuisance,  waste,  or illegal
          activity at the  Premises,  or (ii) any  activity  which  unreasonably
          interferes with the quiet enjoyment of other occupants of the Project.

7.   EMISSIONS; STORAGE, USE AND DISPOSAL OF WASTE.

     (a)  Emissions. Tenant shall not:

          (1)  Release  any air or  water  pollution  from the  Premises  or the
               Project.

          (2)  Release  from the  Premises or the  Project any liquid,  solid or
               gaseous matter, or any combination thereof,  into the atmosphere,
               the  ground  or any  body  of  water  in  violation  of any  law,
               ordinance or regulation.

          (3)  Produce any unreasonable odor, noise, vibration,  glare, light or
               heat discernible from outside the Premises.

     (b)  Hazardous Substances.

          (1)  Generally. Without Landlord's prior written consent, Tenant shall
               not  bring  into  the  Premises  or the  Project  any  "Hazardous
               Substance"  (except  small  quantities  of cleaning  materials or
               office  supplies which are used and stored in compliance with all
               legal  requirements,   and  except  substances  that  Tenant  has
               previously  brought  into  the  Premises  or the  Project  in the
               ordinary course of its business). "Hazardous Substance" means (a)
               any  substance  commonly  known  as  such,   including,   without
               limitation,  oil, gasoline, or any similar substance,  and/or (b)
               any substance  referred to as such or by any similar  designation
               in any law or regulation  now or hereafter in existence  relating
               to health or  environmental  protection  or  relating to the use,
               storage,  or disposal of wastes.  If Tenant desires to bring into
               the  Premises or any other  portion of the Project any  Hazardous
               Substance,  Tenant shall first obtain  Landlord's  prior  written
               consent in each instance, which may be withheld or conditioned by
               Landlord in its discretion; any such request shall be accompanied
               by a list of the Hazardous  Substances and such other information
               as Landlord may request.

          (2)  Release. Tenant shall in all events use and contain any Hazardous
               Substances in strict compliance with all laws and shall not allow
               any release of the same.

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          (3)  Storage.  Tenant  shall not store or keep any  gasoline  or other
               fuel or explosive substances within the Premises.

     (c)  Disposal of Waste.

          (1)  Refuse Disposal.  Tenant shall not keep any trash, garbage, waste
               or other refuse on the Premises except in sanitary containers and
               shall regularly and frequently remove the same from the Premises.

          (2)  Sewage  Disposal.  Tenant shall properly  dispose of all sanitary
               sewage  and  shall not use the  sewage  disposal  system  for the
               disposal of anything  except sanitary sewage nor in excess of the
               amount which can be  accommodated  by such  system.  Tenant shall
               keep the sewage disposal system free of all  obstructions  and in
               good operating condition.

     (d)  Information.   Tenant  shall   provide   Landlord  with  any  and  all
          information  regarding Hazardous  Substances affecting the Premises in
          its  possession,  including  copies  of all  filings  and  reports  to
          governmental  entities at the time they are originated,  and any other
          information  reasonably  requested  by  Landlord.  In the event of any
          accident,  spill or other  incident  involving  Hazardous  Substances,
          Tenant shall immediately  report the same to Landlord and shall supply
          Landlord  with all  information  and reports with respect to the same.
          All  information  described  herein  shall  be  provided  to  Landlord
          regardless  of  any  claim  by  Tenant  that  it  is  confidential  or
          privileged.

     (e)  Compliance with Law. Notwithstanding any other provision in this Lease
          to  the  contrary,  Tenant  shall  comply  with  all  laws,  statutes,
          ordinances,  regulations,  rules and other  governmental  requirements
          relating to the storage,  use and  disposal of  Hazardous  Substances.
          Landlord  represents  that (i) Landlord has received no written notice
          from a  governmental  authority  that  the  handling,  transportation,
          storage,  treatment or use of Hazardous  Substances  at the Project to
          date has not been in compliance with all applicable laws,  regulations
          and   ordinances,   and   (ii)  to  its   actual   knowledge   without
          investigation, the Project has not been used as a landfill or dump and
          no Hazardous Substances have been illegally discharged,  deposited, or
          dumped at the Project.

     (f)  Indemnification.  Tenant shall defend, indemnify and hold Landlord (as
          defined in Section 15)  harmless  from any loss,  claim,  liability or
          expense   (including   attorneys'   fees,   fines,   penalties,    and
          investigation, response, remediation, and response costs), arising out
          of or in connection  with  Tenant's  failure to observe or comply with
          the provisions of this Section 7.

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8.   COMPLIANCE WITH LAWS.

     (a)  Americans with Disabilities Act ("A.D.A.").

          (1)  Common  Areas.  Landlord  agrees  to adopt  and to  pursue a plan
               intended to comply with Landlord's  reasonable  interpretation of
               the  A.D.A.  as the  same  relates  to the  common  areas  of the
               Project.  Notwithstanding  the foregoing,  if Landlord reasonably
               determines that a modification of the common areas may be legally
               required under the A.D.A.  or similar law or regulation by reason
               of the particular activities conducted by Tenant at the Premises,
               Landlord  shall have the right (but not the  obligation)  to make
               such  modification  and to perform all work required by reason of
               such modification, and all costs incurred by Landlord in so doing
               shall be  reimbursed  by Tenant  within  ten (10) days  following
               written notice from Landlord to Tenant.  However,  Landlord shall
               consult  with  Tenant  prior to  performing  such  work and shall
               cooperate  with Tenant in any efforts which Tenant  undertakes to
               confirm  that such work is not  legally  required  so long as any
               such  cooperation  and any  delay  to work by  Landlord  does not
               subject Landlord to the possibility of legal liability.

          (2)  Premises. Tenant acknowledges that (a) compliance of the Premises
               with  the  A.D.A.  depends  upon the  uses of the  Premises,  the
               location  of each use  within  the  Premises,  alterations  which
               Tenant makes to the  Premises,  and changes to these factors over
               time, and (b) Tenant may have obligations  under the A.D.A. as an
               employer which may differ from its obligations as the operator of
               the Premises. Tenant shall make only such uses of the Premises as
               comply with the A.D.A.  Tenant agrees,  at its expense,  to cause
               the  Premises to comply  with the A.D.A.,  but only to the extent
               that work is  required  by any act,  use or other work of Tenant.
               Tenant further  specifically  agrees that, in connection with its
               installation of alterations and tenant improvements, Tenant shall
               comply  with  all  requirements  of  the  A.D.A.  related  to the
               alterations and tenant improvements,  including,  but not limited
               to,  any  requirements  to improve or modify  other  portions  or
               aspects of the Premises or the Project in connection with or as a
               result of the alterations or tenant improvements  contemplated by
               Tenant, all at the expense of Tenant.

          (3)  Relation To Other Provisions.  Nothing in this Section 8(a) shall
               expand the rights,  nor limit the duties,  of Tenant  pursuant to
               any other Section of this Lease.

     (b)  Other Laws and Codes. The Premises,  the alteration and improvement of
          the Premises by Tenant,  and the use and  occupancy of the Premises by
          Tenant,  are subject to all applicable laws, codes,  regulations,  and
          approvals. Tenant shall comply with the same and cause the Premises to
          comply with the same,  at the expense of Tenant.  Landlord  represents
          that Landlord has not received any outstanding  uncured written notice
          from any governmental  authority of any violation of the Premises with
          present laws, codes, regulations or approvals;  however, Landlord does
          not represent  that the Premises in fact complies with all  applicable
          laws, codes, regulations and approvals.

     (c)  Indemnity.  Tenant  shall  defend,  indemnify  and hold  Landlord  (as
          defined in Section 15) harmless  from any claim or cause of action and
          all related costs and expenses (including attorney fees incurred by or
          demanded  from  Landlord)  arising out of or related to the failure of
          Tenant to perform any obligation under this Section 8.

9.   SIGNAGE. Not applicable.

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10.  PERSONAL  PROPERTY  TAXES.  Tenant shall pay before  delinquency all taxes,
     assessments,  license fees and public charges  levied,  assessed or imposed
     upon operations at the Premises or upon trade fixtures,  merchandise and/or
     personal property in or about the Premises.

11.  PARKING.  Tenant  shall not allow its  employees or visitors (a) to use the
     parking areas of the Project  other than for transient  parking of standard
     and compact  size cars,  nor (b) to park  overnight  or to park at any time
     other than while in the  Premises.  Landlord  reserves the right to assign,
     redesign and/or reconfigure parking areas.

12.  UTILITIES.  Tenant  shall  pay,  as  and  when  due,  the  cost  of  phone,
     electricity,  gas water,  sewer and any other utility services  provided to
     the  Premises.  Such costs  shall be  determined  by  separate  metering or
     monitoring  provided by Landlord  when  feasible  and  economical,  or by a
     reasonable  allocation  made by Landlord.  Tenant shall arrange for and pay
     for all garbage service and janitorial service to the Premises.

13.  MAINTENANCE.

     (a)  By Landlord.  Landlord shall maintain the existing structural parts of
          the  Premises,  which shall  include  only the  existing  foundations,
          footings, bearing and exterior walls (excluding glass), concrete slab,
          roof  (excluding  skylight),  plumbing and  electrical  outside of the
          Premises,  and  gutters  and  downspouts  (although  Tenant  shall  be
          responsible  for keeping the gutters and  downspouts  of the  Premises
          clean and unobstructed);  provided, however, (a) any costs incurred by
          Landlord in such maintenance  shall be deemed "Expenses" under Section
          4 above unless specifically  excluded pursuant to Section 4 above, and
          (b) any  maintenance or repair to the Premises or any other portion of
          the  Project  necessitated  by  the  activities  of  Tenant  or by the
          negligence or excessive  use of Tenant shall be  reimbursed  solely by
          Tenant within thirty (30) days of request.

     (b)  By  Tenant.  Except as  expressly  set forth in Section  13(a)  above,
          Tenant shall,  commencing on delivery of possession,  maintain in good
          condition  and repair,  at its expense,  the entirety of the Premises,
          including,  but not  limited  to,  all  interior  walls,  floors,  and
          ceilings,  all doors,  windows and other glass, all fixtures,  and the
          plumbing, electrical and HVAC systems. Tenant shall be responsible for
          snow and ice removal and shall be responsible for freeze protection of
          the water system within the Premises.  Landlord shall maintain an HVAC
          maintenance  and full  service  contract  and Tenant  shall  reimburse
          Landlord  for the  charges  under  the same  within  ten (10)  days of
          invoicing,  and a  management  and  administrative  fee  equal  to ten
          percent  (10%) of all  such  charges  excluding  taxes  and  insurance
          premiums.  Upon expiration or termination of this Lease or of Tenant's
          right of possession,  Tenant shall surrender the Premises to Landlord,
          in at  least  as  good a  condition  as  when  first  delivered  to or
          constructed by Tenant, excepting ordinary wear and tear and damage due
          to casualty.

     (c)  Special Repairs. Landlord shall, at its cost and without reimbursement
          under  Section 4(b) above,  accomplish  the  following at such time or
          times as Landlord determines  necessary:  (a) replacement of the roof;
          (b) repair of any latent or patent  defects in the roof or  structural
          elements  of  the  Premises  existing  on the  date  hereof;  and  (c)
          remediation  of any Hazard  Substances  contamination  at the Premises
          which is not caused,  contributed to, exposed,  disturbed nor worsened
          by Tenant.

14.  ALTERATIONS.  The following provisions of this Section 14 govern subsequent
     alterations of the Premises.

     (a)  Project.  Tenant shall make no  alterations  to the Project other than
          alterations to the Premises.

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     (b)  Alterations  to  Premises.  Tenant  shall make no  alterations  to the
          Premises  without first obtaining  Landlord's  prior written  consent,
          which  prior  consent may be withheld  or  conditioned  in  Landlord's
          discretion;   provided  (a)  no  consent   shall  be   necessary   for
          nonstructural  interior  alterations costing less than $2,000, and (b)
          consent shall not be  unreasonably  withheld or conditioned  for other
          nonstructural  changes.  Any request  for consent  shall not be deemed
          complete  until the request is made in writing and is  accompanied  by
          complete plans and  specifications  for the contemplated  work. Tenant
          shall obtain all necessary  permits prior to  commencement of any work
          and shall  contract  with a  licensed  general  contractor  reasonably
          acceptable to Landlord for construction of the work. Work shall not be
          commenced until Tenant has obtained  course of construction  insurance
          satisfactory  to Landlord  and  delivered  proof of such  insurance to
          Landlord.  All  work  shall  be  prosecuted  diligently  and  shall be
          conducted  in  strict   compliance   with  the   approved   plans  and
          specifications and with the applicable permits. Upon completion of the
          work,  Tenant shall supply to Landlord  fully complete and correct "as
          built"  plans  and   specifications  for  the  work  and  satisfactory
          government final inspection reports (and certificates of occupancy, if
          applicable).  Tenant shall also comply with any conditions  imposed by
          Landlord  in  connection  with  Landlord's  consent as allowed by this
          Section.

     (c)  Payment.  Tenant  shall  pay for  all  work  at the  Premises  and all
          materials  delivered  to the  Premises.  Payments  shall  be made on a
          monthly basis, in full, or on such more rapid terms as are part of the
          agreement between Tenant and its general contractor.  Tenant shall not
          allow any lien to be filed or perfected  with regard to the  Premises,
          any portion of the Project,  or any interest of Tenant related to this
          Lease  or the  Premises.  In the  event  any  such  lien is  filed  or
          perfected,  Landlord  shall  have the  right,  without  waiver  of the
          default nor of any other remedy,  to cause such lien to be removed (by
          any  means,  including  payment  of the  underlying  claim);  however,
          Landlord shall give to Tenant at least thirty (30) days written notice
          prior to Landlord  taking steps to remove any such lien.  Tenant shall
          defend and indemnify Landlord,  the Premises,  and the Project against
          any lien or other  claim  with  regard  to  alteration  and/or  tenant
          improvement  work,  and shall  reimburse  Landlord for all expenses in
          connection  with any such  lien or  claim,  including  attorney  fees.
          Landlord shall have the right to post notices of  nonresponsibility at
          the Premises.

     (d)  Removal.  All  alterations  and  tenant  improvements  (including  all
          carpeting,  window  treatments,  and wall coverings),  excluding trade
          fixtures,  shall be deemed a part of the  Premises and shall remain on
          and be surrendered with the Premises. However, Landlord shall have the
          right to elect that certain  alterations or tenant improvements remain
          the  property  of Tenant and must be removed by Tenant  (and  affected
          surfaces  restored) at the  expiration or termination of this Lease or
          of  Tenant's  right  of  possession.  This  election  must  be made by
          Landlord at the time Landlord  issues its prior written consent to the
          applicable alteration or tenant improvement.  However, if Tenant fails
          to  obtain   Landlord's   prior  written  consent  to  the  particular
          alteration or tenant  improvement,  or if such consent is not required
          hereunder,  Landlord shall have the right to make this election at any
          time within 90 days  following the  expiration or  termination of this
          Lease or of Tenant's right of possession.

     (e)  Exterior Work. Any exterior work, including painting, shall be subject
          to the prior written consent of Landlord  required by this Section 14.
          All exterior  painting,  exterior sheet metal work, roof work, or work
          in the common areas, if approved,  shall be performed by Landlord, but
          at the expense of Tenant  (Landlord  may require  that Tenant  deposit
          such expense with Landlord prior to commencement of the work),  or, at
          the election of Landlord,  by Tenant at its expense using  contractors
          reasonably approved by Landlord.  If Tenant requests a change in paint
          color on the exterior of the Premises,  Landlord  shall have

<PAGE>


          the right to  condition  approval  of the new  color  upon a change in
          color to the balance of the Project, at Tenant's expense.

15.  RELEASE AND INDEMNITY.

     (a)  Generally.  Except as  provided  in  Sections  15(b) and 16(e)  below,
          Tenant  agrees  that  Landlord  shall not be liable to Tenant  for any
          damage to Tenant or Tenant's  property or business from any cause, and
          Tenant  waives  all claims  against  Landlord  for damage to  persons,
          property,  or  business  arising  for any  reason  in, on or about the
          Premises.  Tenant shall defend,  indemnify and hold Landlord  harmless
          from all damages arising out of any damage to any person, property, or
          business  occurring  in, on or about the  Premises,  including  damage
          caused by any act or omission of Tenant, Tenant's use of the Premises,
          or  Tenant's  breach of any term of this Lease.  For  purposes of this
          Section  15(a),  and all other release,  indemnity,  and limitation of
          liability  provisions of this Lease other than Section 15(b), the term
          "Landlord"  shall include the Landlord (the originally  named Landlord
          and  all  successor  lessors),  all of  Landlord's  owners  (partners,
          members,  shareholders,  etc.), all of Landlord's  agents,  all master
          lessors  and/or ground  lessors and the owners and agents of the same,
          and all employees and managers of the foregoing.

     (b)  Landlord  Indemnity.  Subject to Sections  16(e),  27 and 28(c) below,
          Landlord shall indemnify Tenant from any claim asserted against Tenant
          to the extent  arising out of the  negligence  of Landlord or out of a
          default by Landlord as defined in, but subject to the  provisions  of,
          Section 28(l) below.

16.  INSURANCE.

     (a)  Liability. Tenant, at its cost, shall maintain comprehensive liability
          and property damage  insurance with a single combined  liability limit
          of  $2,000,000,  insuring  against  all  liability  of Tenant  and its
          representatives,  employees, invitees, and agents arising out of or in
          connection  with  Tenant's  use or  occupancy  of the  Premises.  Such
          insurance  shall  insure   performance  by  Tenant  of  the  indemnity
          provisions  of  Section  15, but only to the  extent  that  commercial
          liability  insurance  policies  that  are  customary  in the  industry
          provide  such  coverage.  Landlord  shall be  named  as an  additional
          insured.

     (b)  Personal Property and Business Interruption. At its cost, Tenant shall
          maintain a policy of standard  fire and  extended  coverage  insurance
          with  vandalism  and  malicious  mischief  endorsements  and all  risk
          coverage on all Tenant's  personal property and trade fixtures located
          at the  Premises  in an  amount  equal to at least  90% of their  full
          replacement  value or such  higher  amount  as is  necessary  to avoid
          co-insurance.

     (c)  Policies.  All insurance  required to be provided by Tenant under this
          Lease (a) shall  release  Landlord  from any  claims for damage to any
          person, to the Premises, and to Tenant's business,  fixtures, personal
          property,  improvements  and  alterations  in or on the Premises,  (b)
          shall be issued by an insurance  company  authorized to do business in
          Oregon with a financial  rating and a management  rating,  as rated in
          the most  recent  edition  of  Best's  Insurance  Reports,  reasonably
          acceptable to Landlord,  (c) shall be issued as a primary policy,  (d)
          shall contain an endorsement requiring at least 30 days' prior written
          notice  to  Landlord  and  Landlord's   lender  before   cancellation,
          expiration,  or change in  coverage,  scope or amount of any policy (a
          "best efforts" type of notice  provision is not  acceptable),  and (e)
          shall have no deductible  greater than $5,000.  Tenant shall deliver a
          certificate  or copy of each such policy,  together  with  evidence of
          payment of all current  premiums,  to Landlord upon  execution of this
          Lease and at least thirty (30) days prior to the scheduled  expiration
          date of any such policy.  Tenant's  failure to maintain any  insurance
          coverage

<PAGE>


          required hereunder or to provide evidence of such coverage to Landlord
          shall constitute a default under this Lease.

     (d)  Landlord's   Insurance.   Landlord   shall   maintain  such  casualty,
          liability,  rent loss,  and other  insurance  regarding the Project as
          Landlord  deems  appropriate  from  time to  time.  The  costs of such
          insurance   (including  premiums  and  deductibles)  shall  be  deemed
          "Expenses" under Section 4(b) above. Such insurance shall include,  at
          a minimum,  comprehensive  liability  insurance with a combined single
          limit of at least  $2,000,000  covering  claims  arising in the common
          areas of the Project and extended coverage fire and casualty insurance
          (including  earthquake)  on a  replacement  cost  basis with rent loss
          coverage in an amount  selected by Landlord but which is sufficient to
          avoid co-insurance.  Tenant shall be named as an additional insured on
          Landlord's  liability policy.  Landlord shall deliver a certificate of
          insurance to Tenant upon annual request.

     (e)  Waiver  of  Subrogation.  Anything  in  this  Lease  to  the  contrary
          notwithstanding,  Landlord  and Tenant each hereby  waives any and all
          rights of recovery, claims, and causes of action against the other and
          its agents (including partners,  both general and limited),  officers,
          directors,  shareholders and employees for any loss or damage that may
          occur to the Premises or any improvements thereto, the Project, or any
          improvements thereto, or any property of such party therein, by reason
          of fire,  the  elements,  or any other  cause  which  could be insured
          against  under the  terms of a fire and  extended  coverage  insurance
          policy,  regardless  of cause or origin,  including  negligence of the
          other party hereto, its agents, officers, or employees, and each party
          covenants that no insurer shall hold any right of subrogation  against
          such other party.

17.  DESTRUCTION.

     (a)  Project.  Damage to or  destruction  of portions of the Project  other
          than the Premises  shall not affect the rights and  obligations of the
          parties under this Lease.

     (b)  Premises.  If a casualty  occurs at the Premises,  Landlord shall have
          the right to  terminate  this Lease by written  notice given within 60
          days of such  casualty in the event (a)  Landlord  estimates  that the
          cost of restoration  necessitated by such casualty (including the cost
          of  all  work  which  must  be  undertaken  in  connection   with  the
          restoration)  shall  exceed  50% of the then  replacement  cost of the
          building in which the  Premises are  located,  (b) Landlord  estimates
          that the uninsured  portion of such restoration cost exceeds $250,000,
          or (c) the term of this Lease is then  scheduled to expire  within one
          (1) year  following  the date of the casualty.  In the event  Landlord
          terminates this Lease pursuant to this Section 17(b),  the termination
          shall be without  liability to  Landlord,  and Tenant shall vacate the
          Premises within thirty (30) days of receipt of the termination notice.
          In all other instances,  following a casualty,  Landlord shall proceed
          with  reasonable  diligence  to restore  the  damaged  portions of the
          Premises  to  approximately  their  condition  prior to the  casualty.
          Tenant  acknowledges  that the  restoration  may not  produce an exact
          recreation of the former condition of the Premises, since laws, codes,
          and site  conditions  may require  some  variation  from the  previous
          Premises to the restored Premises.

     (c)  No Claim.  Tenant shall have no claim against  Landlord for any damage
          suffered by reason of any damage or destruction.  Rent shall be abated
          by reason of damage or  destruction  to the Premises to the extent and
          so long as Tenant is  unable  to use the same for the  conduct  of its
          business.

18.  CONDEMNATION. In the event the entirety of the Premises is taken by eminent
     domain,  this Lease shall  terminate  as of the  earlier  that title or the
     right of possession  passes to the condemning  authority.  If a part of the
     Premises is so taken, this Lease shall terminate as to the part so taken as
     of

<PAGE>


     the  earlier  of the  passing  of  possession  or title  to the  condemning
     authority,  and this Lease shall  remain in full force and effect as to the
     portion of the Premises  not so taken,  except that Base Monthly Rent shall
     be reduced to the same proportion  that the area of the remaining  Premises
     bears to the area of the entire Premises  immediately prior to such taking,
     and  Landlord  shall  perform any  necessary  restoration  work;  provided,
     however,  (a) Landlord  shall have the right to terminate this Lease due to
     such partial  taking by ten (10) days'  written  notice given within ninety
     (90) days of the passage of title or  possession,  and (b) in the event the
     remaining Premises are unsuitable for use by Tenant, then Tenant shall have
     the right to terminate  this Lease by ten (10) days'  written  notice given
     during such ninety (90) day period.  Any award for the taking of all or any
     part of the Premises  shall be the sole and exclusive  property of Landlord
     and  Tenant  shall not have the right to  participate  in the  condemnation
     proceedings.  However, Tenant shall be entitled to any award for relocation
     benefits or for the loss of tangible  personal property owned by Tenant, so
     long as the same does not reduce the award otherwise payable to Landlord.

19.  ASSIGNMENT OR SUBLEASE.

     (a)  Assignment or Subletting. Tenant shall not assign its interest in this
          Lease or the  Premises or sublease  all or any part of the Premises or
          allow any  other  person or entity to occupy or use all or any part of
          the Premises nor to operate a concession at the Premises without first
          obtaining Landlord's written consent. Landlord's prior written consent
          to an  assignment,  sublease,  or  occupancy/concession  shall  not be
          unreasonably  withheld,  but may be issued subject to conditions.  One
          such condition may be payment of a reasonable  security  deposit.  Any
          request for consent  shall be complete  only upon delivery to Landlord
          of all  information  requested  by  Landlord to evaluate a request for
          such  consent.  Any  assignment,   sublease,  or  occupancy/concession
          without   Landlord's   written  consent  shall  be  voidable  and,  at
          Landlord's election, shall constitute a default.

     (b)  Ownership Changes. If Tenant is a partnership, a withdrawal or change,
          voluntary, involuntary, or by operation of law, of any partner, or the
          dissolution   of  the   partnership,   shall  be  deemed  a  voluntary
          assignment.  If Tenant  consists of more than one person,  a purported
          assignment,  voluntary or  involuntary or by operation of law from one
          person to the other shall be deemed a voluntary assignment.  If Tenant
          is a corporation or limited liability company, any dissolution, merger
          (upstream or downstream),  consolidation,  or other  reorganization of
          Tenant,  or sale or other transfer of a controlling  percentage of the
          capital  stock (or  membership  interest)  of Tenant  other  than with
          Portland  Brewing  Company or any  subsidiary  or other  affiliate  of
          Portland Brewing Company,  or the sale of at least 50% of the value of
          the  operating  assets of Tenant to any person  other than to Portland
          Brewing  Company or any  subsidiary  or other  affiliate  of  Portland
          Brewing  Company  shall be deemed a voluntary  assignment.  The phrase
          "controlling percentage" means ownership of and right to vote stock or
          membership  interests  possessing  at least 25% of the total  combined
          voting  power  of any  class  of  equity  securities  (e.g.,  stock or
          membership  interests)  issued  and  outstanding.  The  preceding  two
          sentences  shall not apply to the sale of stock by or of  corporations
          the stock of which is publicly  traded  through an exchange;  a public
          offering  of the stock of a  corporate  Tenant  shall not be deemed an
          assignment.

     (c)  Portland  Brewing  Company  Transfer.  Notwithstanding  the foregoing,
          Tenant  shall  have the  right to  assign  this  Lease or to  sublet a
          portion of the Premises to Portland  Brewing Company or any subsidiary
          or other affiliate of Portland Brewing  Company.  Tenant shall give to
          Landlord at least  thirty (30) days prior  written  notice of any such
          sublease,  and shall comply with such  conditions  as are requested by
          Landlord in connection with such sublease.

<PAGE>


     (d)  Involuntary  Assignment.  No interest of Tenant in this Lease shall be
          assignable  by  involuntary   assignment   through  operation  of  law
          (including without limitation the transfer of this Lease by testacy or
          intestacy).  Each  of  the  following  acts  shall  be  considered  an
          involuntary assignment: (i) if Tenant is or becomes insolvent, (ii) if
          Tenant makes an assignment for the benefit of creditors,  or if Tenant
          becomes a debtor in a case under the Bankruptcy Act (or if Tenant is a
          partnership  or  consists  of more than one person or  entity,  if any
          partner  of the  partnership  or other  such  person  or entity is the
          debtor),  (iii) if a writ of attachment or execution is levied on this
          Lease;  or (iv) if, in any  proceeding  or action to which Tenant is a
          party, a receiver is appointed  with  authority to take  possession of
          the Premises. An involuntary  assignment shall constitute a default by
          Tenant,  and Landlord  shall have the right to elect to terminate this
          Lease,  in which case this  Lease  shall not be treated as an asset of
          Tenant.

     (e)  Termination.  In the event this Lease  expires  or is  terminated,  or
          Landlord   terminates   the  right  of  possession   of  Tenant,   all
          subtenancies  of the Premises shall  terminate at that time, or at the
          election of Landlord,  one or more of such subtenancies shall continue
          but with the lessor's  interest in the same being  deemed  assigned to
          Landlord;  provided,  however, that Landlord shall have no obligation,
          and Tenant  shall  continue to be liable,  with respect to any prepaid
          amounts,  security  deposits,  and acts or  omissions  by Tenant which
          occurred  or relate to the period  prior to the deemed  assignment  of
          such a subtenancy to Landlord.

     (f)  Payment. Whether or not consent is granted, and in cases where consent
          is not required but prior notice and  compliance  with  conditions  is
          required,  Tenant shall  reimburse  Landlord for all costs incurred by
          Landlord in connection with the assignment,  sublease or concession up
          to a maximum reimbursement of $1,000.

     (g)  Encumbrances.  Tenant shall not, voluntarily or involuntarily,  create
          nor allow any lien,  encumbrance  or security  interest  to arise,  be
          filed or be  perfected  against  the  Premises,  any  improvements  or
          alterations, or the lessee's interest in this Lease.

20.  DEFAULT.  The occurrence of any of the following shall constitute a default
     by Tenant:  (a) a failure to pay rent or other charge  within five (5) days
     of written notice that the same is due but unpaid (provided,  only one such
     written  notice need be given in any  calendar  year and failure to pay any
     rent or other charge  thereafter in such calendar year within five (5) days
     of when  due  shall be a  default  without  the  need for any such  written
     notice);  (b) failure to perform any other  provision  of this Lease within
     ten (10) days of written  notice of such failure  (although no such written
     notice  shall be required for a failure if a failure of the same nature has
     already  occurred  under this Lease);  (c) Tenant  becomes  insolvent;  (d)
     Tenant becomes a debtor in a bankruptcy proceeding; or (e) any guarantor of
     this Lease fails to perform any  obligation  under its  guaranty,  any such
     guarantor  attempts  to revoke its  guaranty,  any such  guarantor  becomes
     insolvent,  any such guarantor  dissolves or otherwise ceases to exist, any
     such  guarantor  becomes a debtor in a bankruptcy  proceeding,  or any such
     guarantor fails to perform any obligation under its guaranty.

21.  LANDLORD'S REMEDIES.

     (a)  Generally.  Landlord shall have the following remedies if Tenant is in
          default of the  Lease.  These  remedies  are not  exclusive;  they are
          cumulative  and in addition to any  remedies  now or later  allowed by
          law.  Landlord  may  terminate  this Lease  and/or  Tenant's  right to
          possession of the Premises at any time. No act by Landlord  other than
          giving  notice  to  Tenant  shall   terminate  this  Lease.   Acts  of
          maintenance,  efforts to relet the Premises,  or the  appointment of a
          receiver on Landlord's initiative to protect Landlord's interest under
          this Lease shall not  constitute a  termination  of Tenant's  right to
          possession.

<PAGE>


     (b)  Damages.  Upon  termination  of this  Lease  or of  Tenant's  right to
          possession,  Landlord has the right to recover  from  Tenant:  (i) the
          worth  of the  unpaid  rent  that  had  been  earned  at the  time  of
          termination;  (ii) the  worth of the  amount of the  unpaid  rent that
          would have been earned after the date of termination less the worth of
          replacement rent that could be earned by Landlord; and (iii) any other
          amount,  including  but not limited to expenses  incurred to relet the
          Premises,   court,   attorney,  and  collection  costs,  necessary  to
          compensate Landlord for all detriment caused by Tenant's default. "The
          Worth," as used in item (i) in this  Section  21, is to be computed by
          allowing  interest  at the rate of 12 percent  per annum or, if lower,
          the maximum  interest  rate  permitted by law.  "The Worth" as used in
          item (ii) in this  Section 21, is to be computed  by  discounting  the
          amount  at the  discount  rate  of the  Federal  Reserve  Bank  of San
          Francisco at the time of  termination of Tenant's right of possession.
          "Unpaid rent" shall include Base Monthly Rent and Expenses. Nothing in
          this  Section  shall limit any  obligation  imposed by Oregon law upon
          Landlord to mitigate its damages.

     (c)  Performance by Landlord.  All covenants and agreements to be performed
          by Tenant  under this Lease shall be  performed  by Tenant at its sole
          cost and expense and without any offset  against rent. If Tenant shall
          fail to pay any sum of money owed to any party other than Landlord for
          which it is liable  hereunder,  or if Tenant shall fail to perform any
          other act on its part to be performed hereunder, Landlord may, without
          waiving  such  default or any other right or remedy,  but shall not be
          obligated  to, make any such  payment or to perform any such other act
          to be made or performed by Tenant.  All sums so paid by Landlord,  and
          necessary incidental costs, together with interest thereon at the rate
          specified hereinabove from the date of expenditure by Landlord,  shall
          be payable to Landlord on demand.

22.  ENTRY ON PREMISES.  Landlord and its authorized  representatives shall have
     the  right to enter the  Premises  at all  reasonable  times for any of the
     following  purposes:  (a) to  determine  whether the  Premises  are in good
     condition and whether Tenant is complying with its  obligations  under this
     Lease; (b) to show the Premises to lenders,  brokers, or persons interested
     in leasing or purchasing the Premises, or (c) to perform work,  maintenance
     or repairs or to take steps to protect  Landlord's  interests.  All entries
     outside of normal  business  hours  shall be  preceded  by notice to Tenant
     except in cases of  emergency.  Landlord  shall not be liable in any manner
     for any  inconvenience,  disturbance,  loss of business,  nuisance or other
     damage  arising out of  Landlord's  entry onto the  Premises  nor shall any
     entry be deemed an  eviction.  In an  emergency,  Landlord may enter by any
     means  deemed  necessary.  Tenant  shall not be entitled to an abatement or
     reduction of rent if Landlord exercises any rights reserved in this Section
     22. Landlord shall use reasonable  efforts to limit the duration and degree
     of any disturbance caused to Tenant by entry onto the Premises by Landlord.

23.  SUBORDINATION.  Without the  necessity  of any  additional  document  being
     executed by Tenant for the purpose of effecting a subordination, and at the
     election of Landlord or any mortgagee or any beneficiary of a Deed of Trust
     with a lien on the  Premises  or any  ground  lessor  with  respect  to the
     Premises,  this Lease shall be subject and  subordinate at all times to (a)
     all ground leases or underlying  leases which may now exist or hereafter be
     executed  affecting the Premises,  and (b) the lien of any mortgage or deed
     of trust  which may now exist or  hereafter  be  executed in any amount for
     which the  Premises,  ground  leases or  underlying  leases,  or Landlord's
     interest or estate in any of said items is specified as security; provided,
     however,  no default by Landlord  under any such mortgage or other security
     instrument shall affect Tenant's rights under this Lease, so long as Tenant
     pays and performs all of its obligations  hereunder.  In the event that any
     ground lease or underlying  lease terminates for any reason or any mortgage
     or Deed of Trust is foreclosed or a conveyance  in lieu of  foreclosure  is
     made for any  reason,  Tenant  shall,  notwithstanding  any  subordination,
     attorn to and become the Tenant of the  successor  in interest to Landlord.
     Tenant  covenants  and  agrees to  execute  and  deliver,  upon  request by
     Landlord and in the form  reasonably  requested by Landlord


<PAGE>


     any additional  documents  evidencing the priority or subordination of this
     Lease with  respect to any such ground  lease or  underlying  leases or the
     lien of any such  mortgage  or Deed of  Trust so long as any  subordination
     agreement  required by such a ground lessor or lender  includes a provision
     to the  effect  that,  so long as  Tenant  performs  all of its  obligation
     hereunder, the rights of Tenant hereunder shall not be disturbed.

     Tenant,  within  twenty days of request  from  Landlord  from time to time,
     shall execute and deliver to Landlord a certificate stating that this Lease
     is not in default (or specifying  the  defaults),  and is in full force and
     effect  without   modification   (or  stating  the   modifications).   This
     certificate  shall also state the amount of current monthly rent, the dates
     to which  rent has been paid in  advance,  and the  amount of any  security
     deposit and prepaid rent, and such other factual  matters as are reasonably
     requested.  Failure to deliver this  certificate to Landlord  within twenty
     days shall  entitle  Landlord,  without  waiver of the  default or of other
     remedies,   to  issue  an  estoppel  certificate  supplying  the  requested
     information to Landlord's knowledge;  a copy of the same shall be delivered
     to Tenant,  and Tenant  shall be  estopped to deny the matters set forth in
     such estoppel certificate.

24.  NOTICE. Any notice under this Lease shall be in writing and shall be either
     hand delivered, sent by overnight courier, sent by facsimile with hard copy
     by regular mail, or sent by mailed notice meaning  prepaid  certified first
     class mail, return receipt requested,  addressed as set forth in Section 1.
     Notice shall be deemed to be  communicated  upon hand  delivery,  facsimile
     transmission,  delivery by overnight  courier,  or three (3) days following
     such deposit of mailed notice.  Either party may change its address by such
     a written  notice to the other  party.  As a  courtesy,  each  party  shall
     simultaneously  send a copy of any notice given  hereunder also to the last
     known  attorney of the other  party,  but failure to do so shall not affect
     the rights of the party giving the notice nor invalidate any notice given.

25.  WAIVER.  No delay or  omission  in the  exercise  of any right or remedy by
     Landlord shall impair such right or remedy or be construed as a waiver.  No
     act or conduct of Landlord,  including without limitation acceptance of the
     keys to the  Premises,  shall  constitute an acceptance of the surrender of
     the  Premises by Tenant  before the  expiration  of the term.  Only written
     notice from Landlord to Tenant shall constitute acceptance of the surrender
     of the Premises and accomplish termination of the Lease. Landlord's consent
     to or  approval  of any  act by  Tenant  requiring  Landlord's  consent  or
     approval  shall not be deemed  to waive or  render  unnecessary  Landlord's
     consent to or  approval  of any  subsequent  act by  Tenant.  Any waiver by
     Landlord  of any default  may be proved and  established  only by a writing
     signed  by  Landlord  expressly  setting  forth  the  waiver.  No waiver by
     Landlord of a default shall be a waiver of any other default concerning the
     same or any other provision of the Lease.

26.  SURRENDER OF PREMISES;  HOLDING OVER.  Upon the expiration of this Lease or
     the sooner  termination  of this Lease or of Tenant's  right of possession,
     Tenant  shall (a)  surrender  the Premises to Landlord in  accordance  with
     Section 14 above, and (b) remove all of its personal  property which is not
     then  encumbered by a lien  asserted by Landlord.  Tenant waives all claims
     against  Landlord  for any damage to personal  property  not so removed and
     Tenant  shall be  liable  to  Landlord  for  Landlord's  cost for  storage,
     removal, or disposal of such personal property.

     If Tenant  remains in possession of the Premises  after such  expiration or
     termination,  or after the date in any notice  given by  Landlord to Tenant
     terminating  this Lease or  Tenant's  right of  possession,  in either case
     without a written  extension  agreement  being  executed  by  Landlord  and
     Tenant,  then,  without  waiver  of the  right of  summary  eviction,  such
     possession by Tenant shall be a tenancy at sufferance terminable on written
     notice at any time, by either party.  All provisions of this Lease,  except
     those pertaining to term and rent, shall apply to the tenancy. Tenant shall
     pay Base Monthly Rent,  prorated daily, at the rate of 125% of Base Monthly
     Rent for the last full rent paying  calendar month during the regular term,
     plus 100% of Expenses pursuant to Section 4(b).

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27.  LIMITATION OF  LIABILITY.  The liability of Landlord upon any claim made by
     Tenant  related to this  Lease,  or  otherwise  related to the  Premises or
     Project (for breach of this Lease,  in tort,  for statutory  liability,  or
     otherwise) is expressly limited to the interest of Landlord in the Project,
     and Tenant  shall have no  recourse  to any other  assets of  Landlord.  In
     addition,  and without  limiting the effect of the foregoing,  in the event
     Landlord is a limited  liability  company,  joint  venture,  partnership or
     co-tenancy,  then (a) the sole and  exclusive  remedy  of  Tenant  shall be
     against  the limited  liability  company,  joint  venture,  partnership  or
     co-tenancy  and  its  assets,  and  (b) no  member,  venturer,  partner  or
     co-tenant  (nor any owner or agent of the same)  shall be sued by Tenant or
     named as a party in litigation  by Tenant,  and no judgment may be taken or
     enforced by Tenant against any such member, venturer,  partner or co-tenant
     (nor any  owner or agent of the  same).  In no event  whatsoever  shall any
     claim be made against any ground lessor or master lessor of the Premises.

28.  MISCELLANEOUS PROVISIONS.

     (a)  Time of  Essence.  Time is of the  essence of each  provision  of this
          Lease.

     (b)  Successor.  This Lease shall be binding on and inure to the benefit of
          the parties and their successors.

     (c)  Landlord's Consent.  Any consent required by Landlord under this Lease
          shall be valid  only if  granted  in  writing  and,  unless  otherwise
          specifically  provided  herein,  may be  withheld  or  conditioned  by
          Landlord in its sole and absolute discretion. In no event shall Tenant
          have the right to terminate this Lease, and in no event shall Landlord
          be liable for monetary  damages,  based upon a claim  arising from the
          withholding or conditioning of consent;  the sole remedy of Tenant for
          any alleged improper withholding or conditioning of consent shall be a
          court order requiring Landlord to grant the requested consent on terms
          ordered by the court.

     (d)  Commissions.  Each party  represents that no commission is owed to any
          real estate  broker,  finder,  or other  person  with  respect to this
          Lease.

     (e)  Attorney Fees and Costs. In the event of litigation  arising out of or
          in connection with the Lease,  the prevailing  party shall be entitled
          to recover from the other party  reasonable  attorney's fees and costs
          incurred at and in preparation for trial and any appeal or review,  as
          well as in bankruptcy proceedings and/or arbitration  proceedings.  If
          Landlord employs a collection  agency to recover  delinquent  charges,
          Tenant agrees to pay all collection agency and attorneys' fees charged
          to Landlord in addition to rent,  late  charges,  interest,  and other
          sums payable under this Lease.

     (f)  Landlord's  Successors.  In the event of a sale or other conveyance by
          Landlord  of the  Premises,  the same shall  operate  to  release  the
          conveying  Landlord from any later arising liability under this Lease,
          and, in such event,  Landlord's  successor in interest shall be solely
          responsible for all such obligations under this Lease.  Similarly,  no
          succeeding  Landlord shall be in any way liable for claims which arise
          prior to conveyance of the Premises to such successor.

     (g)  Interpretation.  This Lease  shall be  construed  and  interpreted  in
          accordance  with the laws of the state of  Oregon.  Each party has had
          the full opportunity to have this Lease reviewed by such attorneys and
          others as each such party deems fit; this Lease shall not be construed
          strictly nor adversely  against  Landlord by reason of the same having
          been  initially  drafted by the  attorneys  for  Landlord.  This Lease
          constitutes the entire  agreement  between the parties with respect to
          the Premises and may be amended only by a written  document  signed by
          both Landlord and Tenant.  When required by the context of this Lease,
          the

<PAGE>


          singular shall include the plural, and the masculine shall include the
          feminine and/or neuter. "Party" shall mean Landlord or Tenant. If more
          than one person or entity constitutes  Tenant, the obligations imposed
          upon that party shall be joint and several;  if Tenant  consists of or
          includes a  partnership,  all partners  shall be jointly and severally
          liable.  In the  event  any  provision  hereof  is  held to be void or
          unenforceable as written,  the parties intend and desire that (i) such
          provision be enforced to the fullest  extent  allowed by law,  (ii) if
          necessary, a court reform the provision to allow for such enforcement,
          and (iii) the balance of this Lease remain fully enforceable.

     (h)  Survival.  The  indemnity,   release,  limitation  of  liability,  and
          attorneys  fees  provisions  hereof shall  survive the  expiration  or
          termination of this Lease or other  Tenant's  right of possession.  No
          such expiration or termination shall relieve Tenant from any liability
          hereunder.

     (i)  Relationship;  No Joint Venture or  Partnership.  The  relationship of
          Landlord  and Tenant is only that of a lessor  and a lessee;  no other
          relationship   (such  as  a  partnership,   joint  venture  or  agency
          relationship) is intended nor created hereby.

     (j)  Lease Memorandum.  At the request of Tenant,  Landlord shall execute a
          recordable  memorandum  of this  Lease.  Upon  request at or after the
          expiration  or  termination  of this  Lease  or of  Tenant's  right of
          possession,  Tenant shall  execute and deliver to Landlord a Quitclaim
          Deed which Landlord may record to remove such memorandum of lease.

     (k)  Landlord  Obligations.  Landlord shall pay the property taxes assessed
          against the Project prior to foreclosure of the same for  delinquency.
          Landlord  represents  to  Tenant  that it has full  right and power to
          execute this Lease, to perform its obligations hereunder, and to grant
          the estate demised herein. Subject to the provisions hereof,  Landlord
          covenants that, so long as Tenant fully and timely performs all of its
          obligations  hereunder,  Tenant shall have  possession of the Premises
          free from  eviction  by Landlord or those  claiming  through  Landlord
          (including Landlord's lenders),  subject to acts of government and the
          provisions of this Lease.

     (l)  Landlord  Default.  Landlord  shall not be deemed in  default  of this
          Lease  unless and until  Landlord  shall have failed to perform any of
          its  obligations  set forth in this Lease and such failure  shall have
          continued  for  thirty  (30) days  following  the  giving by Tenant of
          written notice to Landlord specifying the failure; provided,  however,
          in the event more than thirty (30) days is reasonably required to cure
          such  failure,  Landlord  shall not be deemed in default  hereunder if
          Landlord  commences  cure  within  such  thirty  (30) day  period  and
          thereafter  pursues  cure to  completion.  In the event of a  Landlord
          default,  Tenant  shall be  entitled  to collect  its  actual  damages
          arising from such default,  but consequential  and incidental  damages
          are hereby  waived.  Upon the  failure of Landlord to pay any taxes or
          assessments  which are liens against the Premises prior to foreclosure
          of the  same,  and the  continuance  of  such  failure  following  the
          expiration of the applicable notice and cure period, Tenant shall have
          the right to pay such taxes and related  charges to cure such  default
          on behalf of and at the  expense of  Landlord,  and the amount so paid
          shall be  reimbursed  to Tenant by  Landlord  within  thirty (30) days
          after written demand,  with interest thereon at the rate of 12 percent
          per annum.  Further,  in the event of a failure by Landlord to perform
          any of its  maintenance  obligations  under Section 13 above,  and the
          continuance of such failure following the expiration of the applicable
          notice and cure  period,  Tenant  shall have the right to perform  all
          necessary  work on behalf of and at the expense of  Landlord,  and the
          necessary cost of such work shall be paid to Tenant by Landlord within
          thirty (30) days after written  demand,  with  interest  thereon at 12
          percent per annum, so long as Tenant provides to Landlord  evidence of
          the  performance  of such work,  evidence  of payment in full for such
          work, and evidence of lien waivers from all

<PAGE>


          contractors  who performed any such work or who would  otherwise  have
          the  right to  claim a lien by  reason  of such  work;  any such  work
          undertaken  by  Tenant  shall be  undertaken  in  compliance  with the
          provisions  of  Section  14  above.  Tenant  shall  have no  right  to
          terminate  this Lease  based upon a default by  Landlord  unless  such
          default  materially  interferes with the ability of Tenant to continue
          to conduct  its  business  at the  Premises  for at lease  thirty (30)
          consecutive  days.  Nothing  in this  Section  28(l)  shall  limit the
          operation of Sections 27 and 28(c).

     (m)  Quiet  Enjoyment.  So long as Tenant pays and performs in full, as and
          when due, all obligations of Tenant hereunder, Landlord covenants that
          Tenant shall have possession of the Premises, subject to the terms and
          provisions of this Lease, the rights of Landlord under this Lease, and
          all acts and requirements of governmental authority.


                LANDLORD:        MACTARNAHAN LIMITED PARTNERSHIP

                                 By: HARMER MILL & LOGGING SUPPLY CO., a
                                 corporation, general partner



                                 By:  /s/ R. SCOTT MACTARNAHAN
                                 Its: VICE PRESIDENT


                TENANT:          HARCO PRODUCTS, INC., an Oregon corporation


                                 By: /s/ CHARLES A. ADAMS
                                 Its:  President and Chief Executive Officer


Exhibits
--------
                            A - Premises and Project