01-287182.07
01-287182.07






                                 LEASE AGREEMENT

                                     Between


                        GENERAL ELECTRIC CAPITAL BUSINESS
                           ASSET FUNDING CORPORATION,
                             a Delaware corporation,
                                   as Lessor,


                                       and


                          MANCHESTER TECHNOLOGIES INC.,
                             a New York corporation,
                                   as Lessee.


Property Address: 160 Oser Avenue
                           Hamlet of Hauppauge
                           Town of Smithtown
                           Suffolk County, New York

                           District:                  0800
                           Section:    182.00
                           Block:                01.00
                           Lot:                022.005


                           Dated as of March 14, 2003





<PAGE>


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01-287182.07
01-287182.07


                                Table of contents

                                                                           Page
                                    ARTICLE I

Section 1.01.     Lease of Premises; Title and Condition......................1
Section 1.02.     Use.........................................................2
Section 1.03.     Term........................................................2
Section 1.04.     Rent........................................................2
Section 1.05.     Payment of Rent.............................................3
Section 1.06.     Late Payment Charge.........................................3

                               ARTICLE II

Section 2.01.     Disclaimer of Representation by Lessor......................3
Section 2.02.     Premises Leased "As Is".....................................3
Section 2.03.     Maintenance and Repair......................................4
Section 2.04.     Alterations, Replacements and Additions.....................4
Section 2.05.     Encumbrances................................................5
Section 2.06.     Replacement of Lessor's Fixtures and Lessor's Equipment.....5
Section 2.07.     Lessee To Comply With Covenants.............................6
Section 2.08.     Lessor's Cooperation Clause.................................6
Section 2.09.     Third-party Claims Against Lessor...........................6
                               ARTICLE III

Section 3.01.     Removal.....................................................7

                               ARTICLE IV

Section 4.01.     Restriction on Assignment or Other Transfer.................7
Section 4.02.     Information About Proposed Transferee.......................7
Section 4.03.     Terms Relating to Consent...................................7
Section 4.04.     Subleases...................................................8
Section 4.05.     Original Documents to Lessor................................8
Section 4.06.     Effect of Transfer..........................................8
Section 4.07.     Collection of Rent..........................................8

                                ARTICLE V

Section 5.01.     Net Lease...................................................9
Section 5.02.     Taxes and Assessments; Compliance With Law..................9
Section 5.03.     Utility Services...........................................11
Section 5.04.     No Adverse Possession......................................11
Section 5.05.     Entry by Lessor............................................11
Section 5.06.     Liens......................................................11
Section 5.07.     Indemnification............................................12
Section 5.08.     Environmental Compliance...................................12

                               ARTICLE VI

Section 6.01.     Compensation...............................................14
Section 6.02.     Casualty...................................................14
Section 6.03.     Condemnation...............................................16
Section 6.04.     Required Insurance Coverage................................17
Section 6.05.     Separate Insurance Coverages...............................18
Section 6.06.     Compliance With Insurance Requirements.....................18
Section 6.07.     Additional Coverages.......................................18
Section 6.08.     Policy Provisions..........................................19
Section 6.09.     Companies and Form of Policies.............................19
Section 6.10.     Handling of Proceeds by Lessor.............................19
Section 6.11.     Handling of Proceeds by Depository.........................19
Section 6.12.     Certificates of Coverage...................................19
Section 6.13.     Procurement by Lessor......................................19

                               ARTICLE VII

Section 7.01.     Events of Default..........................................20
Section 7.02.     Remedies Upon Lessee's Default.............................20

                              ARTICLE VIII

Section 8.01.     Lessee's Notices and Remedies..............................24
Section 8.02.     Fee Mortgagee's Right To Cure..............................24

                               ARTICLE IX

Section 9.01.     Subordination and Nondisturbance...........................24
Section 9.02.     Election Not To Subordinate................................24
Section 9.03.     Attornment.................................................24
Section 9.04.     Limitations on Lessee......................................25
Section 9.05.     No Merger of Fee and Leasehold Estates.....................25
Section 9.06.     Changes to Lease Required by Fee Mortgagee.................25

                                ARTICLE X

Section 10.01.    Estoppel Certificate.......................................25
Section 10.02.    Financial Information......................................25

                               ARTICLE XI

Section 11.01.    Quiet Enjoyment............................................26

                               ARTICLE XII

Section 12.01.    Lessor's Reversionary Interest; Surrender of Premises......26
Section 12.02.    Delivery of Rents and Records..............................26
Section 12.03.    Acceptance of Surrender....................................27
Section 12.04.    Holding Over...............................................27

                              ARTICLE XIII

Section 13.01.    Definition of "Lessor".....................................27
Section 13.02.    Exculpation of Lessor......................................27

                               ARTICLE XIV

Section 14.01.    No Waiver, etc., by Parties................................27
Section 14.02.    Notices, Etc...............................................27
Section 14.03.    Separability...............................................28
Section 14.04.    Headings...................................................28
Section 14.05.    Relationship of Parties; Disclaimer........................28
Section 14.06.    Operating Lease............................................28
Section 14.07.    Joint Obligation...........................................29
Section 14.08.    Prior Agreements...........................................29
Section 14.09.    Recording..................................................29
Section 14.10.    Proration of Rent..........................................29
Section 14.11.    Authorization of Lease.....................................29
Section 14.12.    Applicable Law.............................................29
Section 14.13.    United States Funds........................................29
Section 14.14.    Time of Performance........................................29
Section 14.15.    "Force Majeure" Delays.....................................29
Section 14.16.    Waiver of Jury Trial.......................................29
Section 14.17.    Attorneys' Fees............................................30
Section 14.18.    Amendments.................................................30
Section 14.19.    Successors.................................................30
Section 14.20.    Brokers....................................................30
Section 14.21.    Construction...............................................30
Section 14.22.    Execution in Counterparts..................................30
Section 14.23.    Exhibits and Riders........................................30



<PAGE>



SCHEDULE A........LEGAL DESCRIPTION
SCHEDULE B........CONTRACTUAL REQUIREMENTS
SCHEDULE C........PERMITTED EXCEPTIONS
SCHEDULE D........LESSEE INSURANCE REQUIRMENTES
SCHEDULE E........PERMANENT LOAN INSURANCE REQUIREMENTS




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01-287182.07

                                 LEASE AGREEMENT


     THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the 14th
day of March 2003,  by and  between  GENERAL  ELECTRIC  CAPITAL  BUSINESS  ASSET
FUNDING CORPORATION,  a Delaware  corporation  (herein,  with its successors and
assigns,  "Lessor"),  and MANCHESTER  TECHNOLOGIES INC. , a New York corporation
(herein, together with permitted successors and assigns, called "Lessee").

                                    ARTICLE I

     Section 1.01. Lease of Premises;  Title and Condition.  In consideration of
the rents and covenants herein stipulated to be paid and performed by Lessee and
upon the terms and conditions herein specified,  Lessor hereby leases to Lessee,
and Lessee hereby leases from Lessor,  the premises (the "Premises")  consisting
of:

          (a) that parcel of land in the Hamlet of Hauppauge, Town of Smithtown,
     Suffolk  County,  New York,  commonly  known as 160 Oser  Avenue,  and more
     particularly described in Schedule A attached hereto and made a part hereof
     (the "Land");

          (b) all of the buildings,  structures,  facilities,  installations and
     other  improvements  of every kind and description now or hereafter in, on,
     over and under the Land (collectively, the "Improvements");

          (c)  any  movable  or not  permanently  affixed  fixtures,  machinery,
     equipment,  furnishings,  moveable walls or  partitions,  or other personal
     property  used  or  procured  for use in  connection  with  the  operation,
     maintenance and protection of the Premises,  which are located on or in the
     Improvements  on the  Commencement  Date  (as  defined  in  Section  1.03),
     including  (without  limitation)   plumbing,   gas,  electrical,   heating,
     ventilating,  lighting and air  conditioning  systems,  facilities  used to
     provide  any  utility   services,   parking  and  common  area  facilities,
     refrigeration,  garbage disposal,  and all landscaping,  paving and parking
     areas,  but except items, if any,  included within the category of Lessee's
     Equipment  (collectively  referred  to  herein  as  "Lessor's  Equipment").
     "Lessee's  Equipment"  shall  mean  all  machinery,  equipment,  furniture,
     furnishings  and other  personal  property  (i)  installed by Lessee or its
     permitted  sublessees  or permitted  occupants in, on or about the Premises
     and (ii) not used or procured  for use in  connection  with the  operation,
     maintenance  and protection of the Premises,  as such, but used or procured
     for use directly in connection with the business conducted thereon;

          (d) all fixtures,  machinery,  equipment, and other items of property,
     now  or  hereafter   permanently   affixed  to  or  incorporated  into  the
     Improvements,  including (without limitation) boilers,  furnaces,  heaters,
     electrical equipment,  incineration, air and water pollution control, waste
     disposal, sprinkler systems, fire and theft protection equipment, plumbing,
     heating,  ventilating,  lighting and air conditioning  systems,  facilities
     used to provide any utility  services,  parking and common area facilities,
     and  refrigeration  systems and equipment,  together with all replacements,
     modifications,  and  alterations  thereto,  all of which,  to the  greatest
     extent  permitted  by law,  are  hereby  deemed  by the  parties  hereto to
     constitute  real  estate  (collectively  referred  to herein  as  "Lessor's
     Fixtures")   (all   the   foregoing   being   included   within   the  term
     "Improvements"); and

          (e) all of Lessor's right,  title and interest,  if any, in and to all
     easements,  rights-of-way,  appurtenances  and other  rights  and  benefits
     associated  with the Land and to all  public  or  private  streets,  roads,
     avenues,  alleys or passways,  open or  proposed,  on or abutting the Land,
     including (without limitation) the Contractual  Requirements (as defined in
     Section 2.07  hereof)  attached  hereto as Exhibit B (all of the  foregoing
     being included within the term "Land").

     The  Premises  are  leased  to Lessee in their  present  condition  without
representation  or  warranty  by Lessor and  subject to the rights of parties in
possession,  to the existing  state of title,  the existing state and quality of
Improvements,  any state of facts that an accurate survey or physical inspection
thereof might show, all zoning regulations,  restrictions, rules and ordinances,
building  restrictions and other laws and regulations now in effect or hereafter
adopted by any  governmental  authority having  jurisdiction,  to all applicable
Legal Requirements (as defined in Subsection 5.02(b)) now or hereafter in effect
and to Permitted  Exceptions  listed in Schedule C attached  hereto.  Lessee has
examined  the  Premises  and title to the Premises and has found all of the same
satisfactory for all purposes.

     Section 1.02.  Use. Lessee may use the Premises or cause it to be used only
for Permitted Uses.  "Permitted  Uses" are defined as all uses permitted by law,
the certificate of occupancy and  regulations of the applicable  local planning,
building  and other  agencies.  Lessee  shall not use the Premises for any other
purpose  without  the prior  written  consent of Lessor,  which  consent  may be
withheld in its absolute  discretion.  Without  limiting the  generality  of the
foregoing,  Lessor may  condition  or withhold  such consent if the proposed use
will  significantly  alter the  character  or purpose or detract or diminish the
value  or  operating  efficiency  of  the  Premises,  significantly  impair  the
revenue-producing  capability of the Premises,  adversely  affect the ability of
Lessee to comply  with  this  Lease,  increase  the use,  handling,  generation,
storage,  transportation or disposal of any Hazardous  Materials or constitute a
nuisance.

     Section 1.03. Term.

     This Lease shall be for an initial term (the "Lease  Term")  commencing  on
March 14,  2003 (the  "Commencement  Date") and ending at  midnight on March 31,
2018 (the "Expiration  Date"),  or such earlier date as this Lease is terminated
pursuant to its terms.  Provided  that Lessee shall not be in default under this
Lease beyond  applicable  periods of notice and cure as  hereinafter  set forth,
Lessee shall have four (4) options to renew this Lease for successive periods of
five (5) years each (such  periods  being  referred  to herein as the  "Extended
Term"),  on the same terms and  conditions  otherwise set forth herein.  Each of
said options shall be exercised by Lessee's  giving  written notice to Lessor of
its  exercise  of such option at lease 180 days prior to the  expiration  of the
then-current term of this Lease.

     Section 1.04. Rent.

          (a) During the Lease Term,  Lessee shall pay to Lessor the Basic Rent,
     initially  $360,000.00  per annum,  which  Basic  Rent  shall be  increased
     annually  by two  percent  (2%).  The Basic  Rent shall be payable in equal
     monthly installments, in advance, on the first day of each and every month.
     Lessee shall perform all its obligations  under this Lease at its sole cost
     and expense, and shall pay all Basic Rent, additional charges and any other
     sum due hereunder when due and payable, without notice or demand.

          (b) Lessee shall pay, as additional  rent, all other  amounts,  costs,
     expenses,  liabilities and obligations that Lessee herein assumes or agrees
     to pay, and will reimburse  Lessor for any payments  thereof made by Lessor
     in accordance with the terms and requirements of this Lease  (collectively,
     "Additional  Rent").  Such expenses shall include (without  limitation) (i)
     the   cost  of  air   conditioning,   electricity,   heating,   mechanical,
     ventilation,  water  and  sewer,  and any  elevator  systems  and all other
     utilities,  and the cost of supplies and  equipment,  and  maintenance  and
     service  contracts  in  connection  therewith,  (ii) the  cost of  repairs,
     maintenance  and  cleaning  of any  common  areas,  (iii) the cost of fire,
     extended coverage,  sprinkler, public liability,  property damage and other
     insurance,  (iv) [OMITTED],  (v) fees,  charges and other costs,  including
     management  fees,  consulting  fees, legal fees and accounting fees, of all
     independent  contractors  engaged by Lessor or reasonably charged by Lessor
     if Lessor  performs  management  services in connection  with the Premises,
     (vi) the cost of any license, permit or inspection fees, (vii) if requested
     by  Lessor  following  the  occurrence  of an Event of  Default  hereunder,
     reasonable  reserves to cover costs of  long-term  programmed  maintenance,
     including  (without  limitation) HVAC and any elevator system  maintenance,
     (viii) all taxes and assessments  pursuant to Section 5.02(a), and (ix) any
     other costs and expenses of any other kind whatsoever  reasonably  incurred
     in  managing,  operating,  maintaining  and  repairing  the  Premises,  but
     excluding  costs of any special  services  rendered to  individual  tenants
     (including  Lessee) for which a special charge is made,  other costs billed
     to and paid by  individual  tenants  (including  Lessee)  and costs paid by
     proceeds of insurance.  In the event of any failure by Lessee to pay any of
     the  Additional  Rent,  Lessor  shall have all rights,  powers and remedies
     provided  for  herein or by law as in the case of  nonpayment  of the Basic
     Rent.

     Section 1.05. Payment of Rent. Lessee will pay to Lessor all Basic Rent and
Additional Rent by good check or checks subject to collection,  at the principal
office of Lessor, or at such other place or to such agent as Lessor from time to
time may  designate  by  written  notice  to Lessee  given  not  later  than the
twentieth day of the month for the following and subsequent months.

         Section 1.06. Late Payment Charge. If Lessee shall fail to make payment
of any installment of Basic Rent, any payment of Additional Rent or any payment
of any other sums required by this Lease as provided in this Lease within ten
days after such payment is due (regardless of any notice requirements for
purposes of Article VII), Lessee shall pay to Lessor, in addition to such Basic
Rent, Additional Rent or other sum, a late charge equal to 5% of the amount so
delinquent, said charge being intended as stipulated compensation for the
additional costs and expenses incurred by Lessor because of such late payment
and not as a penalty.

                                   ARTICLE II

     Section  2.01.  Disclaimer  of  Representation  by Lessor.  Lessee is fully
familiar  with the physical  condition  of the  Premises  and all  Improvements.
Lessor  has  made no  representation  as to the  condition  of the  Premises  or
Improvements or the fitness or  availability  thereof for any particular use and
none shall be implied  from this Lease,  and Lessor  shall not be liable for any
latent or patent defect therein.

     Section   2.02.   Premises   Leased  "As  Is".  THE   PREMISES,   INCLUDING
IMPROVEMENTS,  ARE  DEMISED  AND LEASED TO LESSEE  "AS IS" AND IN THEIR  PRESENT
CONDITION  WITHOUT  ANY  REPRESENTATION  OR  WARRANTY  BY  LESSOR  AS  TO  THEIR
COMPLIANCE WITH APPLICABLE  LEGAL  REQUIREMENTS  AND INSURANCE  REQUIREMENTS (AS
DEFINED IN SECTION  6.04) NOW OR HEREAFTER  IN EFFECT OR AS TO THEIR  COMPLIANCE
WITH APPLICABLE TERMS AND CONDITIONS OF ANY CONTRACTUAL REQUIREMENTS (AS DEFINED
IN SECTION 2.07).

     LESSEE  HAS  INSPECTED,  IS FULLY  FAMILIAR  WITH AND  HEREBY  ACCEPTS  THE
PREMISES  AND HAS  FOUND  THE  SAME TO BE  SATISFACTORY  TO IT FOR ALL  PURPOSES
RELATING TO THIS LEASE.  LESSOR SHALL HAVE NO LIABILITY  WHATSOEVER TO LESSEE IN
RESPECT OF OR ARISING OUT OF THE  EXISTING  STATE OF TITLE TO THE PREMISES OR OF
THE EXISTING  CONDITION,  STAGE OF COMPLETION OR QUALITY OF  CONSTRUCTION OF THE
IMPROVEMENTS.

     LESSOR  MAKES NO  REPRESENTATION  OR  WARRANTY,  EXPRESS OR  IMPLIED,  WITH
RESPECT TO THE  PREMISES  OR OF ANY  FIXTURES OR OTHER  ITEMS  CONSTITUTING  ANY
PORTION THEREOF, OR THE LOCATION,  USE,  DESCRIPTION,  DESIGN,  MERCHANTABILITY,
FITNESS FOR USE FOR A PARTICULAR PURPOSE, CONDITION OR DURABILITY THEREOF, OR AS
TO THE  QUALITY OF THE  MATERIAL  OR  WORKMANSHIP  THEREIN,  OR WITH  RESPECT TO
LESSOR'S  TITLE THERETO OR OWNERSHIP  THEREOF,  AND ALL RISKS  INCIDENT  THERETO
SHALL BE BORNE BY LESSEE.

     Section 2.03. Maintenance and Repair.

          (a) Lessee  acknowledges  that it has  received  the  Premises in good
     order and repair.  Lessee,  at its own expense,  will maintain all parts of
     the Premises in good repair and condition and will take all action and will
     make all structural and nonstructural, foreseen and unforeseen and ordinary
     and  extraordinary  changes  and  repairs  that may be required to keep all
     parts of the  Premises in good  repair and  condition  (including,  without
     limitation,  all  painting,  glass,  utilities,   conduits,   fixtures  and
     equipment,  foundation,  roof, exterior walls, heating and air conditioning
     systems, wiring,  plumbing,  sprinkler systems and other utilities, and all
     paving,  sidewalks,  roads,  parking areas,  curbs and gutters and fences).
     Lessor shall not be required to maintain, repair or rebuild all or any part
     of the  Premises.  Lessee  waives the right to require  Lessor to maintain,
     repair or rebuild all or any part of the  Premises  or make  repairs at the
     expense of Lessor pursuant to any Legal Requirement,  agreement,  contract,
     covenant, condition or restrictions at any time.

          (b)  Replacement  of or major repairs to all  structural or mechanical
     systems shall be  undertaken  by Lessee at its sole cost and expense.  Such
     replacements  shall be made  pursuant to and in  accordance  with plans and
     specifications  approved  in  advance  by  Lessor  as  required  for  Major
     Alterations, such approval not to be unreasonably withheld.

          (c) Lessee  shall have the benefit  of, and the right to enforce,  all
     builders'  and  manufacturers'  warranties  issued  for the  benefit of the
     Premises so long as Lessee is not in default  under the terms of this Lease
     and all costs of Lessor's cooperation are borne by Lessee. Lessor agrees to
     promptly  cooperate  with Lessee to the extent  necessary  or  desirable to
     enforce the provisions of all warranties.

     Section 2.04. Alterations,  Replacements and Additions. With respect to any
alteration,  change, addition or improvement (herein collectively referred to as
an "Alteration") to any portion of the Premises:

          (a) If such Alteration is not structural in nature and does not affect
     the condition of the  Improvements or any utilities and does not lessen the
     value of the Premises as it is at the commencement of such work, and if the
     cost thereof is less than  $150,000,  Lessor's  consent to such  Alteration
     shall  not be  required.  Such  Alterations  (referred  to herein as "Minor
     Alterations")  shall be  expeditiously  completed in a good and workmanlike
     manner  and in  compliance  with  all  applicable  Legal  Requirements  and
     Insurance  Requirements.  Lessee shall pay the increased  premium,  if any,
     charged by the  insurance  companies  carrying  insurance  policies  on the
     Premises,  to cover the  additional  risk  during  the course of such work.
     Lessee shall  provide  Lessor upon request with evidence of payment for all
     work done within 90 days after  completion  thereof.  All such  Alterations
     made by Lessee to the existing (as of the date of this Lease) Improvements,
     Lessor's  Fixtures and Lessor's  Equipment  shall be and become part of the
     Premises.

          (b) If such  Alteration is  structural in nature or adversely  affects
     the  value or  utility  of the  Improvements  or  lessens  the value of the
     Premises as it is at the commencement of such work in any material respect,
     or if the cost thereof is $150,000 or more,  Lessor's prior written consent
     to such  alteration  thereto shall be required,  which consent shall not be
     unreasonably withheld,  delayed or conditioned.  Such Alterations (referred
     to herein as "Major Alterations") shall be performed in accordance with the
     following requirements:

               (i) Before  commencing any Major  Alteration,  Lessee shall, upon
          request,  at  Lessee's  own cost and  expense,  deliver  to  Lessor an
          endorsement to the commercial  general  liability  policy  required by
          this Lease,  which  endorsement shall provide that such insurance will
          cover work in progress;

               (ii) Lessee shall pay the increased  premium,  if any, charged by
          the insurance  companies  carrying insurance policies on the Premises,
          to cover the additional risk during the course of such work;

               (iii) All such  Alterations made by Lessee to the existing (as of
          the date of this Lease)  Improvements,  Lessor's Fixtures and Lessor's
          Equipment shall be and become a part of the Premises;

               (iv) Lessee shall, prior to the commencement of such work, submit
          plans and  specifications to Lessor for Lessor's  approval.  If Lessor
          approves  such  plans and  specifications,  Lessee  shall  obtain  all
          necessary  approvals from municipal  departments  and bureaus and from
          any other municipal,  state and federal authorities having supervision
          or  jurisdiction  of the  Premises,  and a copy of all such  necessary
          approvals shall be delivered to Lessor;

               (v)  All  of  such  work  shall  be  completed  substantially  in
          accordance with the plans and specifications approved by Lessor and in
          accordance with all Legal Requirements;

               (vi) No building now or hereafter erected upon the Premises shall
          be demolished, nor shall Major Alteration be made thereto, without the
          prior written consent of Lessor;

               (vii) Lessee shall  provide  Lessor upon request with evidence of
          payment for all work done within 90 days after completion thereof; and

               (viii) Prior to the  commencement of any such work,  Lessee shall
          furnish Lessor such security or assurances as are reasonably  required
          by Lessor to assure  completion of the Major Alteration and payment of
          the costs  thereof,  including  Lessor's  reasonable  approval  of the
          proposed  construction  budget or estimated costs of construction  and
          Lessee's  assurance  that  Lessee  can  and  will  pay  all  costs  of
          construction  and will discharge all  construction  liens which may be
          asserted on account of the work.

          (c) The  provisions  of this Section  shall also apply with respect to
     any Alterations undertaken by any subtenant of any portion of the Premises.

     Section 2.05.  Encumbrances.  If all or any part of the Improvements  shall
encroach upon any property,  street or right-of-way adjoining or adjacent to the
Premises,  or shall violate the agreements or conditions  affecting the Premises
or any part  thereof,  or shall  hinder,  obstruct  or impair  any  easement  or
right-of-way  to which the Premises are subject,  then,  promptly  after written
request of Lessor (unless such encroachment,  violation, hindrance,  obstruction
or impairment is not  material) or of any person so affected,  Lessee shall,  at
its expense, either (a) obtain valid and effective waivers or settlements of all
claims,  liabilities and damages  resulting  therefrom or (b) if Lessor consents
thereto, make such changes, including alteration or removal, to the Improvements
and take such other action as shall be  necessary  to remove or  eliminate  such
encroachments, violations, hindrances, obstructions or impairments.

     Section 2.06. Replacement of Lessor's Fixtures and Lessor's Equipment.

          (a)  Lessee  may,  from time to time,  and upon not less than 30 days'
     prior  written  notice to  Lessor,  remove and  dispose of any of  Lessor's
     Fixtures  and  Lessor's  Equipment  constituting  a major  component of the
     Premises (i.e. plumbing, gas, electrical,  heating,  ventilating,  lighting
     and air  conditioning  systems) with Lessor's prior written  consent.  Such
     consent shall not be  unreasonably  withheld so long as Lessee  immediately
     replaces  such Lessor's  Fixtures and Lessor's  Equipment,  constituting  a
     major  component  of the  Premises,  with items which are at least equal in
     value and general utility to those removed,  which are free of any liens or
     security  interests  and the fee  title to which is  conveyed  directly  to
     Lessor and made subject to this Lease.

          (b)  Lessee  may,  from time to time,  and upon not less than 30 days'
     prior  written  notice to  Lessor,  remove and  dispose of any of  Lessor's
     Fixtures and Lessor's Equipment which does not constitute a major component
     of the  Premises  so long as  Lessee  immediately  replaces  such  Lessor's
     Fixtures  and  Lessor's  Equipment  which are not major  components  of the
     Premises  with items which are at least equal in value and general  utility
     to those  removed.  Such  components  must be free of any liens or security
     interests  and the fee  title  to such  must  be,  upon  placement  of such
     components upon the Premises,  conveyed directly to Lessor and made subject
     of this Lease.

     Section 2.07.  Lessee To Comply With Covenants.  Lessee agrees that it will
not use the Premises,  or any part  thereof,  or suffer or permit the same to be
used in any  manner or  suffer  or do  anything  upon the  Premises  or any part
thereof  which  may  violate  any  material  covenant,  condition,  reservation,
agreement,  easement or  restriction to which the Premises may be subject on the
Commencement Date or which may be imposed after said date which are consented to
in writing by Lessee,  and Lessee  agrees  that it will  observe and perform and
will comply with and carry out the  provisions of all  Contractual  Requirements
during the Lease Term. "Contractual Requirements" are defined as all obligations
required under any covenants, conditions and restrictions,  easement agreements,
operating  agreements,   equipment  leases  or  other  contractual   obligations
applicable to and binding upon the Premises.

     Section 2.08.  Lessor's  Cooperation  Clause.  Upon reasonable request from
time to time,  Lessor shall join with Lessee in executing:  (a) any  conveyance,
dedication,  grant  of  easement  or  license  or other  instrument  as shall be
reasonably  necessary to provide  public  utility  service to the Premises or in
order to allow the  Permitted  Uses of the  Premises  by  Lessee  and (b) to the
extent that the signature or approval of Lessor is required by any  governmental
body,  applications  for such  permits or other  governmental  authorization  or
approvals.  Lessor will join in such applications or other documentation without
any cost or  liability  to Lessor in  connection  therewith,  and  Lessee  shall
indemnify and hold Lessor  harmless from any cost,  liability or expense arising
therefrom.

     Section 2.09. No Third-party  Claims Against Lessor.  Nothing  contained in
this Lease  shall  constitute  the  consent  or  request  of Lessor,  express or
implied,  by  inference  or  otherwise,  to any  person,  firm or entity for the
performance of any labor or the furnishing of any materials or other property in
respect of the Premises or any part  thereof,  or as giving Lessee any authority
to contract for or permit the rendering of any services or the furnishing of any
materials  or other  property  so as to permit the  making of any claim  against
Lessor.  Nothing in this Lease shall be deemed as giving Lessee any right, power
or  authority  to  contract  for or permit the  rendering  of any service or the
furnishing of any material that would give rise to any  mechanic's or other lien
against  Lessor's  interest in the Premises.  NOTICE IS HEREBY GIVEN THAT LESSOR
WILL NOT BE LIABLE FOR ANY  LABOR,  SERVICES  OR  MATERIALS  FURNISHED  OR TO BE
FURNISHED  TO LESSEE,  OR TO ANYONE  HOLDING AN INTEREST IN THE PREMISES (OR ANY
PART THEREOF) THROUGH OR UNDER LESSEE,  AND THAT NO CONSTRUCTION,  MECHANIC'S OR
OTHER LIENS FOR ANY SUCH LABOR,  SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT
THE INTEREST OF LESSOR IN THE PREMISES.

                                   ARTICLE III

     Section 3.01.  Removal.  Lessee may remove  Lessee's  Equipment at any time
during the Lease Term. Any of Lessee's  Equipment not removed by Lessee prior to
the expiration of the Lease or earlier termination shall be considered abandoned
by Lessee and may be appropriated,  sold,  destroyed or otherwise disposed of by
Lessor without notice to Lessee; provided,  however, that if Lessee shall not be
in material default at the time of the expiration of this Lease, if Lessee shall
request in writing and tender a check to Lessor for the  prorated  amount of the
Basic  Rent  for such  period,  Lessee  shall be  granted  up to  fourteen  (14)
additional days for the removal of the Lessee's Equipment, provided further that
Lessor  shall  not be  required  to  accede  to such  request  if so doing  will
interfere  with the  rights  of a  subsequent  tenant  of the  Premises  or with
Lessor's preparations required by the lease for such subsequent tenant,,  Lessee
shall pay Lessor  upon  demand all  reasonable  costs and  expenses  incurred by
Lessor in removing,  storing and  disposing  of same.  Lessee will repair at its
expense all damage to the Premises necessarily caused by the removal of Lessee's
Equipment, whether effected by Lessee or by Lessor.

                                   ARTICLE IV

     Section 4.01. Restriction on Assignment or Other Transfer. Lessee covenants
and agrees for Lessee and its successors, assigns and legal representatives that
neither this Lease nor the Lease Term and estate  hereby  granted,  nor any part
hereof or thereof,  will be  assigned or  mortgaged,  pledged or  encumbered  by
Lessee  or  otherwise  transferred  (whether  voluntarily,   involuntarily,   by
operation  of law,  or  otherwise)  or for any  purpose  other than as set forth
herein,   without  the  prior  written  consent  of  Lessor  in  every  case  (a
"Transfer"), except in accordance with this Article IV. For the purposes of this
Article IV, a Transfer  shall be deemed to include any  transfer,  assignment or
encumbrance of the controlling interests in Lessee,  whether occurring by reason
of one transaction or cumulatively  in any two or more  transactions;  provided,
however, a Transfer shall not be deemed to occur solely as a result of the death
of  any  natural  person  or  the  transfer  of  any  interest  to a  trust  for
estate-planning purposes without the release of the transferor,  and a merger or
consolidation  in which  Lessee is the  surviving  entity  shall not require the
consent of Lessor. A Transfer of the Lease to an entity owned by Lessee or under
common control with Lessee shall not require the consent of Lessor provided that
the Lessee named herein shall remain liable for all  obligations  hereunder.  If
the Transfer  involves an assignment of this Lease,  the assignee  shall execute
and  deliver  to Lessor  an  agreement  in form and  substance  in all  respects
reasonably satisfactory to Lessor whereby such assignee assumes and agrees to be
bound by and perform all of the obligations of Lessee under this Lease.

     Section  4.02.  Information  About  Proposed  Transferee.   Notwithstanding
anything  contained in Section  4.01,  in the event  Lessee  wishes to assign or
otherwise make a Transfer of this Lease, Lessee shall first notify Lessor of the
name of the  proposed  transferee  and of the  material  terms,  provisions  and
conditions  contained in the proposed  Transfer,  and shall provide  Lessor with
such information as to the proposed transferee's  financial condition,  business
experience and standing as Lessor may reasonably require.

     Section 4.03. Terms Relating to Consent. Every Transfer shall be subject to
the following conditions:

          (a) except as is otherwise  set forth herein with respect to Transfers
     which do not require the consent of Lessor,  the proposed  transferee shall
     be of a  financial  standing  which  in  Lessor's  judgment  (based  on its
     then-current underwriting criteria for similar properties and transactions)
     will allow such  proposed  transferee  to meet its  obligations  under this
     Lease as they become due;

          (b) the Premises shall be used by such transferee for a Permitted Use;

          (c) there  shall be no material  default by Lessee  which has not been
     cured  within any (if any)  applicable  cure period under any of the terms,
     covenants and conditions of this Lease at the time that Lessor's consent to
     any such  Transfer is  requested  (if such  consent is  required) or on the
     effective date of the Transfer; and

          (d) Lessee shall reimburse Lessor for any reasonable expenses that may
     be incurred by Lessor in connection with the proposed  Transfer,  including
     (without  limitation)  the  costs  of  making   investigations  as  to  the
     acceptability  of a proposed  transferee as to whom consent is required and
     all legal  expenses  incurred in  connection  with the granting of any such
     requested consent to the Transfer;

          (e) any request for or notice of an  assignment of this Lease shall be
     accompanied  by the proposed  instrument of assignment  and the  assignment
     document  will  provide  that the  assignee  cannot  further  transfer  its
     interest without complying with the transfer requirements of this Lease.

     Section 4.04.  Assignment  and  Subletting . (a) Lessee may sublease all or
any part of the  Premises  to one or more  subtenants  without  the  consent  of
Lessor,  provided  the  sublease  is  subordinate  to this  Lease and to the Fee
Mortgage,  and the sublessee  does not require a  nondisturbance  agreement with
Lessor.  "Fee Mortgage" means any mortgage,  deed of trust or similar instrument
encumbering real property to secure an obligation made by Lessor which is at any
time a lien on Lessor's  interest in the Premises,  the  beneficiary of which is
referred  to  herein as "Fee  Mortgagee."  To the  extent  Lessor's  consent  is
required, the sublease shall be submitted to Lessor for review and approval. All
subleases shall  expressly be made subject to the provisions of this Lease.  Any
sublease of all or a portion of the Premises shall specifically state that it is
subject and subordinate to the terms and conditions of this Lease and to the Fee
Mortgage,  that it shall be limited by the provisions hereof and that the lessee
thereunder shall not have any other or further rights than Lessee has under this
Lease.  No  sublease  shall  extend for any period  longer than the term of this
Lease.

     (b)......Lessee  may assign this Lease,  without the consent of Lessor, but
otherwise  on the terms set forth in Section  4.01 above,  provided  that (i) no
such assignment shall release Lessee from its obligations hereunder or any lease
guarantor  from  its  obligations  under  its  lease  guaranty,  and (ii) if the
assignee  shall reject this Lease in bankruptcy or if the Lease shall  otherwise
be terminated  without the consent of Lessor (other than in accordance  with the
express terms of this Lease relating to casualty and  condemnation),  the Lessee
named  herein  and/or the lease  guarantor on the date hereof shall enter into a
new lease with Lessor for the Premises, on the same terms as this Lease, for the
then-remaining term of this Lease.


     Section  4.05.  Original  Documents  to Lessor.  In the event this Lease is
assigned  or if more  than 10% in the  aggregate  of the  Premises  is  sublet a
duplicate original of the instrument[s] of assignment or subletting, as the case
may be, shall be sent to Lessor within 10 days after the effective date thereof.
Any assignee of this Lease shall assume the obligations of Lessee  hereunder and
a duplicate  original of such  assumption  shall be delivered to Lessor together
with the aforesaid duplicate original of the assignment instrument.

     Section 4.06. Effect of Transfer. No such assignment,  Transfer or sublease
shall  release  Lessee  from  liability   hereunder  or  affect  or  reduce  any
obligations of Lessee named herein or of any other Lessee assuming this Lease or
affect or reduce the rights of Lessor hereunder. All obligations of Lessee named
herein and of any other Lessee assuming this Lease shall continue in full effect
as the joint and several  obligations  of a principal  and not of a guarantor or
surety,  as though  no  assignment,  Transfer  or  sublease  had been  made.  In
connection  therewith,  Lessee named herein and each succeeding  Lessee assuming
this Lease agrees that the joint and several  liability of each hereunder  shall
continue in full force and effect and shall not be terminated or affected by any
action which Lessor may take or fail to take against any Lessee  hereunder or by
reason of any waiver of, or failure to enforce,  any rights or remedies reserved
to Lessor, or otherwise.

     Section 4.07.  Collection  of Rent.  If Lessee's  interest in this Lease is
assigned,  whether or not in  violation  of the  provisions  hereof,  Lessor may
collect Basic Rent and  Additional  Rent from the  assignee.  If the Premises is
sublet to, or occupied by, or used by, any person other than Lessee,  whether or
not in violation  hereof,  Lessor after default by Lessee under this Lease,  may
collect Basic Rent and Additional Rent from the subtenant,  user or occupant. In
either case, no such  assignment,  sublease or collection  shall affect Lessee's
obligations  hereunder,  and Lessor shall apply the net amount  collected to the
Basic Rent,  Additional  Rent and other  obligations of Lessee  reserved in this
Lease in such order as Lessor elects.

                                    ARTICLE V

     Section 5.01. Net Lease.

          (a) It is expressly  understood  and agreed by and between the parties
     that this Lease is an absolute net lease,  and the Basic Rent and all other
     sums  payable  hereunder  to or on behalf of Lessor  shall be paid  without
     notice or demand and without setoff, counterclaim,  abatement,  suspension,
     deduction or defense.

          (b) Except as otherwise  expressly  provided in the Lease,  this Lease
     shall not  terminate,  nor shall  Lessee have any right to  terminate  this
     Lease or be entitled to the abatement of any rent or any reduction thereof,
     nor shall the  obligations  hereunder of Lessee be otherwise  affected,  by
     reason of any damage to or  destruction  of all or any part of the Premises
     from whatever  cause,  the taking of the Premises or any portion thereof by
     condemnation or otherwise,  the  prohibition,  limitation or restriction of
     Lessee's use of the Premises,  or interference with such use by any private
     person or  corporation,  or by reason of any eviction by paramount title or
     otherwise,  or for any other cause  whether  similar or  dissimilar  to the
     foregoing,  any present or future law to the contrary  notwithstanding,  it
     being  the  intention  of the  parties  hereto  that the rent and all other
     charges  payable  hereunder to or on behalf of Lessor shall  continue to be
     payable  in all  events  and the  obligations  of  Lessee  hereunder  shall
     continue  unaffected,  unless the  requirement  to pay or perform  the same
     shall be terminated pursuant to an express provision of this Lease. Nothing
     contained in this Section  shall be deemed a waiver by Lessee of any rights
     that it may have to bring a separate  action with respect to any default by
     Lessor hereunder or under any other agreement.

          (c) Lessee  covenants and agrees that it will remain  obligated  under
     this Lease in  accordance  with its terms and that Lessee will not take any
     action to  terminate,  rescind or avoid  this  Lease,  notwithstanding  the
     bankruptcy,   insolvency,   reorganization,    composition,   readjustment,
     liquidation,  dissolution,  winding-up or other proceeding affecting Lessor
     in any such proceeding and  notwithstanding any action with respect to this
     Lease  which may be taken by any  trustee or receiver of Lessor in any such
     proceeding or by any court in any such proceeding.

          (d) Lessee waives all rights now or hereafter  conferred by law (i) to
     quit, terminate or surrender this Lease or the Premises or any part thereof
     or (ii) to any abatement,  suspension,  deferment or reduction of the rent,
     or any other sums payable  hereunder to or on behalf of Lessor,  regardless
     of whether such rights shall arise from any present or future constitution,
     statute or rule of law.  Nothing in the  foregoing  shall be  construed  to
     negate any  termination  right that Lessee may have under the express terms
     of this Lease.

     Section 5.02. Taxes and Assessments; Compliance With Law.

          (a) Subject to the  provisions of subsection  (d) below,  Lessee shall
     pay,  prior to any  interest,  penalty,  fine or cost that may be added for
     nonpayment: (i) all taxes, assessments, levies, fees, water and sewer rents
     and  charges  and all other  governmental  charges,  general  and  special,
     ordinary and extraordinary, foreseen and unforeseen, which are, at any time
     prior to or during  the  Lease  Term  hereof,  imposed  or  levied  upon or
     assessed  against or which arise with respect to (A) the Premises,  (B) any
     Basic Rent, Additional Rent or other sums payable hereunder, (C) this Lease
     or the leasehold estate hereby created or (D) the operation,  possession or
     use of the Premises;  (ii) all gross receipts or similar taxes (i.e., taxes
     based upon gross  income which fail to take into  account  deductions  with
     respect to depreciation, interest, taxes or ordinary and necessary business
     expenses,  in each case relating to the  Premises)  imposed or levied upon,
     assessed  against or measured by any Basic Rent,  Additional  Rent or other
     sums payable hereunder;  (iii) all sales, value added, ad valorem,  use and
     similar  taxes at any time  levied,  assessed  or payable on account of the
     acquisition,  ownership,  leasing,  operation,  possession  or  use  of the
     Premises;  and (iv) all charges of  utilities,  communications  and similar
     services  serving  the  Premises.  Lessee  shall not be required to pay any
     franchise, estate, inheritance,  transfer, income, capital gains or similar
     tax  of  Lessor  unless  such  tax  is  imposed,   levied  or  assessed  in
     substitution for any other tax, assessment,  charge or levy which Lessee is
     required to pay pursuant to this Section;  provided,  however,  that if, at
     any time during the Lease Term,  the method of taxation  shall be such that
     there  shall be  assessed,  levied,  charged or imposed on Lessor a capital
     levy or other tax  directly on the rents  received  therefrom,  or upon the
     value of the Premises or any present or future  improvement or improvements
     on the  Premises,  then all such  levies  and taxes or the part  thereof so
     measured  or based  shall be payable by  Lessee,  and Lessee  shall pay and
     discharge  the same as herein  provided.  Lessee  will  furnish  to Lessor,
     promptly after demand  therefor,  proof of payment of all items referred to
     above which are payable by Lessee.  If any such  assessment  may legally be
     paid in installments,  Lessee may pay such assessment in  installments;  in
     such event,  Lessee shall be liable only for installments  which become due
     and payable  with  respect to any tax period  occurring in whole or in part
     during the Lease Term hereof; provided,  however, that all amounts referred
     to in this Section for the fiscal or tax year in which the Lease Term shall
     expire shall be apportioned so that Lessee shall pay those portions thereof
     which correspond with the portion of such year as are within the Lease Term
     hereby demised.

          (b) Lessee shall comply with and cause the Premises to comply with and
     shall assume all obligations and liabilities  with respect to (i) all laws,
     ordinances  and  regulations  and  other  governmental  rules,  orders  and
     determinations  presently in effect or hereafter  enacted,  made or issued,
     whether or not presently contemplated (collectively, "Legal Requirements"),
     applicable to the Premises or the ownership,  operation,  use or possession
     thereof and (ii) all agreements,  contracts, insurance policies (including,
     without limitation, to the extent necessary to prevent cancellation thereof
     and to insure  full  payment  of any  claims  made  under  such  policies),
     agreements,   covenants,  conditions  and  restrictions  now  or  hereafter
     applicable to the Premises or the ownership,  operation,  use or possession
     thereof,  including  (without  limitation)  all  such  Legal  Requirements,
     contracts, agreements,  covenants, conditions and restrictions that require
     structural,  unforeseen or extraordinary changes; provided,  however, that,
     with respect to any of the obligations of Lessee in clause (ii) above which
     are not now in existence,  Lessee shall not be required to so comply unless
     Lessee is either a party thereto or has given its written consent  thereto,
     or unless the same is occasioned by Legal  Requirements or Lessee's default
     (including any failure or omission by Lessee) under this Lease.  Nothing in
     clause (ii) of the immediately preceding sentence or the following sentence
     shall modify the obligations of Lessee under Section 5.07.

          (c) If an Event of Default  shall  occur and be  continuing,  upon the
     request of Lessor,  Lessee shall, in addition to and concurrently  with the
     payment of Basic Rent as required  in  Subsection  1.04(a),  each month pay
     one-twelfth  of the amount (as estimated by Lessor) of the annual taxes and
     assessments  described in  Subsection  5.02(a) and the annual  premiums for
     insurance  required in Section  6.04 next  becoming  due and  payable  with
     respect  to the  Premises,  and  Lessee  shall also pay to Lessor on demand
     therefor the amount by which the actual taxes and assessments and insurance
     premiums exceed the payment by Lessee required in this subsection.

          (d) Lessee  shall  have the right  before  any  delinquency  occurs to
     contest or object to the amount or validity of any such tax by  appropriate
     legal  proceedings  but this shall not be deemed or construed in any way as
     relieving,  modifying or extending Lessee's covenant to pay any such tax at
     the time and in the manner in this Article  provided,  unless (i) the legal
     proceedings shall operate to prevent the sale of the Leased Premises or any
     part  thereof  to  satisfy  such tax prior to final  determination  of such
     proceedings;  or (ii)  Lessee  shall have  provided  a good and  sufficient
     undertaking  as may be required or permitted by law to accomplish a stay of
     such  proceedings.  Lessee  agrees to promptly pay and satisfy any such tax
     finally adjudicated adversely to Lessee and, if necessary to prevent a sale
     or other loss or damage to Lessor prior to final adjudication,  to pay such
     tax under  protest or take such other steps as may be  necessary to prevent
     any such sale, loss, or other image to Lessor. Lessor shall co-operate with
     Lessee  in such  contest,  without  expense  to  Lessor,  but  shall not be
     required to join in any such  proceedings  unless it shall be necessary for
     it to do so in order  properly to  prosecute  such  proceedings  and Lessor
     shall have been fully indemnified to its satisfaction against all costs and
     expenses in  connection  therewith.  Lessor  shall not be  subjected to any
     liability for the payment of any costs or expenses in  connection  with any
     such proceedings  brought by Lessee,  and Lessee covenants to indemnity and
     save Lessor harmless from any loss, cost,  damage,  and expense incurred by
     Lessor in connection with or as a result of such proceedings.  Lessee shall
     notify Lessor of Lessee's  intended action prior to contesting or objecting
     to a tax.

     Section 5.03. Utility Services. Lessee agrees to arrange for, and to pay or
cause to be paid all charges for, gas, water, sewer,  electricity,  light, heat,
power,  telephone  or other  communication  service or other  utility or service
used,  rendered or supplied to, upon or in  connection  with the Premises or any
portion thereof,  throughout the Lease Term, and to indemnify Lessor and save it
harmless  against  any  liability  or  damages  arising  from any  interruption,
curtailment  or stoppage of any such utility or service.  Lessee shall also,  at
its sole cost and expense, procure or cause to be procured any and all necessary
permits, licenses or other authorizations required for the lawful and proper use
and for the  installation  and  maintenance  upon the Premises of wires,  pipes,
conduits, tubes and other equipment and appliances for use in supplying any such
utility service to or upon the Premises.  Lessee expressly agrees that Lessor is
not, nor shall it be, required to furnish to Lessee or any other occupant of the
Premises,  during  the  demised  term,  any water,  sewer  service,  gas,  heat,
electricity,  light, power or any other facilities,  equipment, labor, materials
or services of any kind whatsoever.

     Section 5.04. No Adverse Possession.  Lessee shall not suffer or permit the
Premises  or any  part or  parts  thereof  to be used in such  manner  as  might
reasonably tend to impair Lessor's title to the Premises or any portion thereof,
or in such manner as might reasonably make possible a claim or claims of adverse
usage or adverse  possession,  or of implied  dedication  of the Premises or any
portion thereof.

     Section  5.05.  Entry  by  Lessor.  Lessor,  the Fee  Mortgagee  and  their
authorized  representatives  shall have the right to enter the  Premises  or any
portion thereof at all reasonable  times upon reasonable prior notice (except in
cases of  emergency,  where no notice  will be  required)  to Lessee (a) for the
purpose of inspecting the same (including  without  limitation any environmental
inspection)  or,  after  the  occurrence  of an Event of  Default  by  Lessee in
completing any  alterations or repairs  required  hereunder,  for the purpose of
doing any work,  and may take all such  action  thereon as may be  necessary  or
appropriate  for any  such  purpose  (but  nothing  contained  in this  Lease or
otherwise  shall  create  or imply  any duty upon the part of Lessor to make any
such  inspection  or do any such  work),  and (b) for the purpose of showing the
Premises to prospective purchasers and mortgagees and, within 12 months prior to
the  expiration  of the Lease  Term,  for the  purpose  of  showing  the same to
prospective lessees. No such entry shall constitute an eviction of Lessee.

     Section 5.06.  Liens.  Lessee will remove and  discharge any charge,  lien,
security  interest  or  encumbrance  upon the  Premises  or upon any Basic Rent,
Additional  Rent or other sums  payable  hereunder  which arises for any reason,
including (without limitation) all liens which arise out of the possession, use,
occupancy,  construction,  repair or  rebuilding of the Premises or by reason of
labor or materials  furnished or claimed to have been furnished to Lessee or for
the  Premises,  but not including  (a) the liens and  encumbrances  set forth in
Schedule C, (b) this Lease and any assignment  hereof or any sublease  permitted
hereunder and (c) any mortgage,  charge,  lien, security interest or encumbrance
created or caused by Lessor or its agents,  employees or representatives without
the consent of Lessee. Lessee may provide a bond or other security acceptable to
Lessor to remove or pay all costs  associated with the removal of any such lien.
Nothing  contained in this Lease shall be construed as constituting  the consent
or request of Lessor,  express or implied,  to or for the performance (on behalf
of or for the  benefit of Lessor) by any  contractor,  laborer,  materialman  or
vendor,  of any labor or services or for the furnishing of any materials for any
construction,  alteration,  addition, repair or demolition of or to the Premises
or any part  thereof.  Notice is hereby given that Lessor will not be liable for
any labor,  services or materials  furnished or to be furnished to Lessee, or to
anyone holding an interest in the Premises or any part thereof  through or under
Lessee,  and that no mechanic's  or other liens for any such labor,  services or
materials  shall  attach  to or  affect  the  interest  of  Lessor in and to the
Premises.

     Section 5.07.  Indemnification.  Lessee will defend, protect, indemnify and
save harmless Lessor,  its agents and employees and the Fee Mortgagee,  from and
against  any and  all  liabilities,  obligations,  damages,  losses,  penalties,
claims, causes of action,  costs, charges and/or expenses,  including reasonable
attorneys'  fees and  expenses,  which may be  imposed  upon or  incurred  by or
asserted against Lessor,  its agents or employees or the Fee Mortgagee by reason
of (a) any  accident,  injury  to any  person  (including  death)  or  damage to
property  occurring on or about the Premises from all causes whatsoever  (except
to the extent  caused by any act of sole  negligence  or willful  misconduct  of
Lessor or Fee  Mortgagee),  (b) any loss  arising out of any work  performed  on
Premises  by Lessee or any agent,  employee  or  contractor  of Lessee or by any
assignee or sublessee of Lessee or any agent, employee or contractor of any such
assignee  or  sublessee,  (c) any  default  on the part of Lessee to  perform or
comply with any term of this Lease,  (d) any claim for the  performance of labor
or the furnishing of materials or other  property at Lessee's  request or at the
request of anyone claiming under Lessee or performed by Lessor in respect of the
Premises or any part  thereof,  (e) any action or  proceeding  pertaining to the
Premises to which Lessor, its agents or employees or the Fee Mortgagee is made a
party and  arising  out of or in  connection  with this  Lease and (f) any acts,
omissions,  or  negligence  of Lessee or the  sublessees,  contractors,  agents,
employees,  invitees, customers,  concessionaires or licensees of Lessee (except
to the extent  caused by any act of sole  negligence  or willful  misconduct  of
Lessor or Fee Mortgagee).

     Section 5.08. Environmental Compliance.

          (a) Lessee's  Representations.  As a material inducement for Lessor to
     enter into this Lease,  Lessee  represents  and warrants that (i) except as
     may be permitted by applicable law, throughout the Lease Term (A) all parts
     of the  Premises  will be kept free (by  Lessee and  others)  of  Hazardous
     Materials  (as defined  below) and (B) no part of the Premises will be used
     by Lessee or others to generate,  manufacture,  refine,  transport,  treat,
     store, handle, dispose of, transfer, produce or process Hazardous Materials
     and (ii) Lessee will not suffer or permit any  activity  in, at or from all
     or any part of the Premises  that will cause or contribute to pollution (by
     petroleum or petroleum products,  or otherwise) of the Premises in whole or
     in part  or any  other  property.  "Hazardous  Materials"  shall  mean  all
     materials  which  because of their  quantity,  concentration  or  physical,
     chemical  or  infectious  characteristics  may cause or pose a  present  or
     potential  hazard  to  human  health  or the  environment  when  improperly
     handled,  treated, stored,  transported,  disposed of or otherwise managed.
     The term  shall  include  (without  limitation)  all  petroleum,  petroleum
     products, explosives, radioactive materials, hazardous wastes, hazardous or
     toxic substances,  any material containing 1% or more asbestos by weight or
     any other  substance or material now or hereafter  defined as a "hazardous"
     or  "toxic"  substance,  material  or  product  by the  U.S.  Environmental
     Protection  Agency or the state in which the Premises is located  under the
     Comprehensive  Environmental  Response,   Compensation  and  Liability  Act
     (CERCLA),  the Resource  Conservation  and  Recovery Act (RCRA),  the Toxic
     Substances  Control Act (TSCA),  the Federal  Water  Pollution  Control Act
     (FWPCA) or comparable state statutes and other  Environmental  Requirements
     (as  defined  below).  Lessee  shall  comply  fully with all  Environmental
     Requirements.  "Environmental  Requirements" shall mean all applicable laws
     pertaining to the protection of human health and the environment, including
     (without limitation) employee and community right-to-know laws and all laws
     regarding the use, generation, storage, transportation, treatment, disposal
     or other  handling of Hazardous  Materials.  The only  Hazardous  Materials
     permitted  on the Premises  are  cleaning  products and other  materials in
     ordinary  quantities  which are used in the ordinary course of business and
     necessary  for the conduct of the  Permitted  Uses and which Lessee uses in
     strict compliance with all applicable Environmental Requirements.

          (b)  Lessee's  Remediation.  If during  the Lease  Term any  Hazardous
     Materials are dumped, released,  discharged, spilled or leaked onto or into
     the Premises or found to be  contaminating  the Premises (or if a party has
     reasonable  cause to  believe  that  such  dumping,  releasing,  discharge,
     spilling or leak may have occurred or that such Hazardous  Materials may be
     contaminating  the  Premises),  the party will  notify  the other  party in
     writing  (except in cases of an  emergency  as described in Section 5.05 in
     which  event the party  shall have the right to take  action  without  such
     notice as provided therein) as to the matter in question.  In such event or
     at any other time as may be requested by Lessor, the parties will cooperate
     in having reasonable  examinations,  tests or  investigations  performed at
     Lessee's  expense  to  determine  the extent of the  problem  and nature of
     appropriate   corrective   action  (or  if  Lessee   fails  to  cause  such
     examinations or investigations to be performed after notice of the required
     action Lessor will have the right to perform them on Lessee's behalf and at
     Lessee's  expense).  If such examinations  demonstrate that the Premises is
     contaminated  by Hazardous  Materials at levels  requiring  remedial action
     under applicable laws, Lessee will have 30 days (or such longer time as may
     be reasonably  necessary under the circumstances or such lesser time as may
     be required by emergency conditions,  by law, regulation or judicial order,
     or by any  governmental  entity,  whichever is sooner) after written notice
     from Lessor to eliminate same and (to the extent  necessary) to restore the
     Premises to prior condition but with new non-Hazardous  Materials,  failing
     which Lessor may either terminate this Lease on written notice to Lessee or
     take all action deemed  desirable by Lessor to effect such  elimination and
     (to the extent necessary)  restoration.  If Lessor elects the latter,  upon
     request and as  Additional  Rent,  Lessor will be entitled to receive  from
     Lessee all reasonable  costs and expenses in any way associated  therewith,
     plus interest at the rate provided in Section 7.02(k) hereof.

          (c)  Lessee's  Indemnity.  Lessee,  for  itself,  its  successors  and
     assigns,  hereby agrees to defend,  indemnify,  hold harmless and reimburse
     Lessor, its successors and assigns, and any Fee Mortgagee from, against and
     for any and all damages,  claims, demands,  liabilities,  losses, penalties
     and expenses  (including,  without  limitation,  court costs and reasonable
     attorneys'  fees),  including,  without  limitation,  any diminution in the
     value of the  Premises,  which are in any manner caused in whole or in part
     by the presence of any Hazardous  Materials on or about the Premises or the
     failure of Lessee or any subtenant, agent, employee or contractor of Lessee
     or the Premises to comply with any Environmental  Requirements,  whether or
     not the same are known to or caused by Lessee  and  whether  the same occur
     during the term of this Lease, any time prior to the term of this Lease or,
     with respect to any  occurrence or condition on or about the Premises which
     is caused by any condition, act or omission prior to the expiration of this
     Lease,  which is  discovered  after the term of the Lease.  This  indemnity
     shall survive the termination, expiration or forfeiture of this Lease.

          (d)  Lessor's  Cooperation.  Unless an Event of  Default  shall  exist
     hereunder  or Lessee shall not be  diligently  performing  its  obligations
     under subsections (b) and (c) above, Lessor agrees to cooperate with Lessee
     in connection  with (i) any claim Lessor and/or Lessee may have against any
     third party for the cost of any  remediation  conducted  or to be conducted
     on, in and under the Premises or with  respect to any damage  caused to the
     Premises, and (ii) any insurance covering such remediation and/or damage to
     the Premises. Lessor hereby assigns to Lessee any and all rights, claims or
     causes of  action  Lessor  may have with  against  such  third  party or in
     connection  with such insurance to the extent of any sums paid by Lessee in
     fulfillment of its obligations  under  subsections (b) and (c) above except
     to the  extent  that such  rights,  claims,  causes of action or  insurance
     proceeds are necessary to fully compensate  Lessor with respect to any such
     remediation  or damage to the  Premises.  Lessee agrees to pay all Lessor's
     out-of-pocket costs incurred by Lessor in connection with such cooperation.

                                   ARTICLE VI

     Section 6.01.  Compensation.  Except as provided in Subsection  6.02(a)(i),
Lessee hereby irrevocably assigns to Lessor any award, compensation or insurance
payment to which  Lessee may become  entitled by reason of Lessee's  interest in
the  Premises  (a) if the use,  occupancy  or title of the  Premises or any part
thereof  is taken,  requisitioned  or sold in, by or on account of any actual or
threatened  eminent  domain  proceeding or other action by any person having the
power of eminent  domain  ("Condemnation")  or (b) if the  Premises  or any part
thereof is damaged or  destroyed  by fire,  flood or other  casualty,  including
(without limitation) vandalism ("Casualty"). All awards, compensations,  damages
and  insurance  payments on account of any  Condemnation  or Casualty are herein
collectively called  "Compensation." Lessor may appear in any such proceeding or
action to negotiate,  prosecute and adjust any claim for any  Compensation,  and
Lessor  shall  collect any such  Compensation.  Lessee shall pay all of Lessor's
reasonable costs and expenses in connection with each such  proceeding,  action,
negotiation, prosecution and adjustment. Lessee shall be entitled to participate
in any such proceeding, action, negotiation,  prosecution,  appeal or adjustment
as contemplated  herein.  Notwithstanding  anything to the contrary contained in
this Article VI, if permissible under applicable law, any separate  Compensation
made to Lessee for its  moving  and  relocation  expenses,  anticipated  loss of
business profits,  loss of goodwill or fixtures and equipment paid for by Lessee
and which are not part of the Premises (including, without limitation,  Lessee's
Equipment)  shall be paid directly to and shall be retained by Lessee (and shall
not be deemed to be Compensation). All Compensation shall be applied pursuant to
this Article VI, and all such Compensation  (less the expense of collecting such
Compensation) may be called the "Net Proceeds."

     Section 6.02. Casualty.

     (a) Payment of Proceeds.

               (i) In case of any  Casualty to the  Premises or any part thereof
          where the  insurance  proceeds to be collected  are less than $75,000,
          the  proceeds  of any such  insurance  shall  be paid  to,  and may be
          adjusted by, Lessee alone.

               (ii) In case of any  Casualty to the Premises or any part thereof
          where the insurance  proceeds to be collected are $75,000 or more, the
          proceeds  of any such  insurance  shall be paid to a  depository  (the
          "Depository") chosen by Lessor or, if there is a Fee Mortgagee, by the
          Fee  Mortgagee,  to be disbursed in  accordance  with Section  6.02(e)
          below, and will be adjusted by Lessee with the reasonable  approval of
          Lessor or, if there is a Fee Mortgagee,  the Fee Mortgagee.  Lessor or
          the Fee Mortgagee may be the Depository.

          (b)  Restoration of Premises.  In case of any Casualty to the Premises
     or any part thereof, Lessee will, at Lessee's expense, whether or not there
     are insurance  proceeds  available or sufficient for the purpose,  promptly
     commence and complete with due diligence the restoration of the Premises to
     as nearly as possible its value,  condition and character immediately prior
     to such Casualty.

          (c) Prompt Performance. Restoration of the Premises under this Section
     6.02 shall be performed in accordance with Section  2.04(b) hereof.  If the
     work of  repairing,  replacing  or  rebuilding  said  damaged or  destroyed
     Premises  or  portion  thereof  shall  not  have  been  commenced  promptly
     following  the receipt of all  required  approvals  of  Lessee's  plans and
     specifications,  or  having  been  commenced,  shall  not be  expeditiously
     proceeding,  Lessor  shall have all rights under this Lease in respect of a
     default by Lessee.

          (d) No  Abatement.  Regardless  of any Casualty to the Premises or any
     part thereof,  Lessee shall not be entitled to any abatement of Basic Rent,
     Additional  Rent, or any other payment  Lessee is required to make pursuant
     to this Lease.

          (e)  Substantial  Casualty;   Proceeds  Held  by  Depository.  If  the
     insurance proceeds to be collected following a Casualty are $75,000 or more
     (a  "Substantial  Casualty"),  then Lessee shall promptly notify Lessor and
     the Fee Mortgagee in writing of such Casualty.  In case of any  Substantial
     Casualty, the proceeds of insurance (excluding,  however,  proceeds payable
     or on  account  of  Lessee's  Equipment)  will  be  paid  directly  to  the
     Depository  and  remitted  by the  Depository  to Lessee or to the  persons
     designated  by Lessee for the costs of labor and  materials  as the work of
     repair, replacement and/or restoration progresses upon Lessee's request and
     against:

               (i) a certificate  by Lessee dated not more than 15 days prior to
          the  request,  setting  forth  the  following:  (A)  that the sum then
          requested  either  has  been  paid  by  Lessee  or is  justly  due  to
          contractors,  subcontractors,  materialmen,  engineers,  architects or
          other  persons who have rendered  services or furnished  materials for
          the work therein  specified,  and giving a brief  description  of such
          services and materials and the several  amounts so paid or due to each
          of said persons in respect thereto and (B) that the cost, as estimated
          by the person  signing such  certificate,  of the work  required to be
          done  subsequent to the date of such  certificate in order to complete
          it does not exceed the funds  remaining in the hands of the Depository
          after payment of the sum requested in such certificate; and

               (ii) lien waivers or other evidence  reasonably  satisfactory  to
          the  Depository  and Lessor,  to the effect that there has not been or
          may not be filed with  respect to the Premises or any part thereof any
          construction,  mechanics', laborers', materialmen's or other like lien
          which  has  not  been  discharged  of  record  except  such as will be
          discharged  by  payment  of  the  amount  requested  or  contested  by
          appropriate legal action by Lessee in accordance with Section 5.06.

               In  the  event  the  insurance   proceeds   exceed  the  cost  of
          restoration  work, such excess shall be paid equally to the Lessee and
          the Lessor or the Fee Mortgagee, as applicable.

               Any structural  work required to be performed by Lessee under the
          provisions of Section 6.02(b) which involves a cost of $50,000 or more
          (as  estimated  by  a  licensed   architect  selected  by  Lessee  and
          reasonably  acceptable  to  Lessor  and the Fee  Mortgagee)  shall  be
          performed under the supervision of an architect selected by Lessee and
          reasonably  satisfactory  to  Lessor  and the  holder of the first Fee
          Mortgage,  and the aforesaid  certificate shall also be signed by such
          architect  as  to  the  matters  in  paragraph   (e)(i)   above.   Any
          nonstructural  work  required  to be  performed  by  Lessee  under the
          provisions  of Section  6.02(b)  which  involves a cost of $100,000 or
          more (as  estimated  by a licensed  architect  selected  by Lessee and
          reasonably  acceptable  to  Lessor  and the Fee  Mortgagee)  shall  be
          performed under the supervision of an architect selected by Lessee and
          reasonably  satisfactory  to  Lessor  and the  holder of the first Fee
          Mortgage,  and the aforesaid  certificate shall also be signed by such
          architect as to the matters in paragraph (e)(i) above.

          (f) Requirements of Fee Mortgagee.  Subject to Section 9.06 hereof, in
     the event the Fee Mortgagee  requires changes to this Lease with respect to
     the  amounts  or types of  insurance  coverages,  the  duties for repair or
     restoration,  the  handling of  proceeds,  the  application  of casualty or
     condemnation  proceeds  to  the  restoration  of  the  Premises  or to  the
     indebtedness  secured by the Fee  Mortgage  or other  matters,  Lessee will
     cooperate  in  executing  any  clarification  or  amendment  of this  Lease
     reasonably  required  by the Fee  Mortgagee  as a  condition  to  providing
     financing to Lessor.

     Section 6.03. Condemnation.

          (a) Notice of  Condemnation.  In the event of a Condemnation of any or
     all of the Premises,  Lessee shall provide notice of such  Condemnation  to
     Lessor.

          (b) Substantial Condemnation.  In the event of any Condemnation of all
     of the Premises or so much thereof that the  remainder is  insufficient  to
     permit the  continued  operation  of  Lessee's  business  thereon,  even if
     restored to an  architectural  unit under the provisions of this Lease (any
     such event being a "Substantial Condemnation"),  then Lessee may, within 90
     days  after the  Substantial  Condemnation,  deliver  to Lessor a notice (a
     "Termination  Notice") of its intention to terminate this Lease on the next
     date for  payment  of Basic  Rent  occurring  not less than 120 days  after
     delivery  of  the  Termination  Notice  (the  "Termination  Date").  If the
     Termination  Date occurs during any Extended Term,  then this Lease and the
     term hereby  granted shall cease and expire on the date when  possession of
     the Premises or such portion thereof shall be taken,  and all rents,  taxes
     and other  charges  shall be prorated and paid to such date. If Lessee does
     not deliver a Termination Notice pursuant to the foregoing provisions, then
     this Lease shall  remain in full force and effect and Lessor shall make the
     Net Proceeds of the  Compensation  available to Lessee to repair or restore
     the Premises.

          (c) Award on Substantial  Condemnation.  In the event of a termination
     of this  Lease by reason of a  Substantial  Condemnation,  the whole of any
     Compensation  shall be paid solely to Lessor, who shall be entitled to keep
     said award,  including  consequential and other damages and compensation of
     any sort for such Substantial Condemnation, without deduction therefrom for
     any leasehold or other interest in the Premises owned by Lessee,  and in no
     event (except in the event Lessee shall  purchase the Premises  pursuant to
     subsection  (b)  above)  shall  Lessee  be  entitled  to  any  part  of the
     Compensation.  Lessee agrees to execute any documents  that may be required
     to facilitate collection by Lessor of any Compensation.

          (d) Continuance of Lease on Less Than Substantial Condemnation. In the
     event of a  Condemnation  of any part of the  Premises  and if the part not
     taken is sufficient to permit the reasonable operation of Lessee's business
     if restored as an architectural unit, this Lease shall remain in full force
     and effect, except:

               (i) The annual  Basic Rent under this  Lease,  commencing  on the
          date that title  shall  vest by reason of such  taking  (the  "Vesting
          Date"),  shall be reduced by an amount which bears the same proportion
          to the Basic Rent payable immediately prior to such taking as the then
          fair market  rental  value of the part of the  Premises so taken shall
          bear to the then fair market rental value of the whole of the Premises
          immediately prior to such taking.

               (ii) Lessor shall be entitled to and shall receive and retain the
          Compensation  payable  in respect of the  portion of the  Premises  so
          taken, subject to the provisions of subdivision (iii) below.

               (iii)  Promptly  after  such  taking  Lessee  shall  at  Lessee's
          expense,  whether or not there are condemnation  proceeds available or
          sufficient  for the purpose,  restore that part of the Premises  which
          remains  to as nearly  its  former  condition  as  circumstances  will
          permit. The award with respect to any Improvements shall be payable to
          the Depository for  disbursement  subject to the provisions of Section
          6.02(e).  Subject to the same provisions and limitations set forth for
          payments in Section  6.02(e),  Lessee shall receive advances from said
          award  for the  payment  of the costs of labor  and  materials  as the
          restoration and construction  progresses.  Any balance remaining after
          payment  of all such  costs of labor  and  materials  shall be paid to
          Lessor.

          (e)  Cooperation  of  Parties.   Nothing  herein  contained  shall  be
     construed  or deemed to vest in Lessee any  ownership or title of or to the
     Premises.  Lessor and Lessee shall  cooperate  with each other,  and Lessor
     shall have the right to designate counsel to represent Lessor and Lessee to
     represent the parties in any  proceeding  relating to a  Condemnation.  The
     foregoing shall not negate Lessee's right to obtain separate counsel at its
     own expense in any such proceeding.

          (f) Temporary  Condemnation.  In the event of a Condemnation of all or
     any portion of the Premises for temporary use, the foregoing  provisions of
     this Section shall be  inapplicable  thereto,  this Lease shall continue in
     full force and  effect  without  reduction  or  abatement  of Basic Rent or
     Additional  Rent.  In such  event,  Lessee  alone shall be entitled to make
     claim for,  recover and retain any  Compensation  recoverable in respect of
     such  temporary use whether in the form of rental or  otherwise;  provided,
     that any  Compensation  paid for any  period  beyond the term of this Lease
     shall be paid to Lessor.

     Section 6.04.  Required Insurance  Coverage.  During the Lease Term, Lessee
shall,  at  Lessee's  sole  cost and  expense,  secure  and  keep the  following
insurance (the "Insurance Requirements") in full force and effect:

          (a)  "All-risk"  of  physical  damage  coverage  insurance,  including
     earthquake damage coverage,  covering the  Improvements,  Lessor's Fixtures
     and Lessor's Equipment on a replacement cost basis, in an amount sufficient
     to avoid application of any co-insurance clause and with an "agreed amount"
     endorsement  voiding  co-insurance,  including  a full  "replacement  cost"
     endorsement  together with  appropriate  "demolition and increased costs of
     construction" endorsements. Lessee shall be responsible for determining the
     applicability   of  "demolition  and  increased   costs  of   construction"
     endorsements.  Lessor  reserves  the  right to  reasonably  disapprove  any
     exclusions  from the "all-risk"  coverage  furnished  hereunder.  If Lessee
     elects to provide blanket "all-risk" coverage over locations in addition to
     the Premises,  Lessor reserves the right to require a specific  endorsement
     or  endorsements  from the  insurance  companies  affording  such  coverage
     evidencing  coverage  over the Premises in a  sufficient  amount to provide
     recovery on a  replacement  cost basis.  Lessee's  coverage may provide for
     reasonable self-insured retentions.

          (b) Commercial general liability  insurance for the benefit of Lessor,
     Lessee and the Fee Mortgagee,  fully protecting Lessor,  Lessee and the Fee
     Mortgagee in respect of personal injuries and death to persons and property
     damage,  with a  combined  single  limit of not less  than  $5,000,000  for
     personal  injuries and death to persons and property  damage.  In the event
     Lessee maintains blanket liability coverage,  the total limits of liability
     required hereunder must be available to the Premises.

          (c) Business  interruption/loss  of rents insurance covering all risks
     referenced  in Section  6.04(a) for the  benefit of Lessor,  Lessee and, if
     Lessor so directs, for the benefit of the Fee Mortgagee, as their interests
     may appear,  covering risk of loss during the lesser of the first 12 months
     of reconstruction or the actual  reconstruction  period necessitated by the
     occurrence  of  any of the  covered  hazards,  in  such  amounts  as may be
     customary for comparable properties in the area and in an amount sufficient
     to prevent Lessor or Lessee from becoming a co-insurer. Lessee's obligation
     for  payment of rent  shall be  reduced  dollar for dollar by the amount of
     rent insurance received by Lessor or Fee Mortgagee.

          (d) Boiler  and  machinery  coverage  covering  loss or  damage,  on a
     replacement cost basis,  from explosion of any steam and pressure  boilers,
     hot  water  heaters,  and  similar  apparatus  located  in, on or about the
     Premises  with  limits  of  not  less  than  the  replacement  cost  of the
     Improvements.  In the event coverage hereunder is afforded by more than one
     insurance   company,   all  such  companies  shall  furnish  a  joint  loss
     endorsement to the policies covering the risk set forth in this Section.

          (e) Flood (if the  Premises  is located in whole or in part within any
     flood plain area as  designated  by any  department or agency of the United
     States Government  having  jurisdiction) and such other hazards and in such
     amounts as may be customary for comparable properties in the area, provided
     the same is available at rates which are economically practical in relation
     to the risks covered,  as determined by Lessee and  reasonably  approved by
     Lessor.

          (f) Workers' compensation  insurance coverage for all persons employed
     by Lessee on the Premises with  statutory  limits and otherwise with limits
     of and provisions in accordance with the requirements of applicable  local,
     state and federal law.

          (g)  During  the  course  of any  construction  or  reconstruction  in
     connection with any addition,  renovation or any Casualty or  Condemnation,
     "builder's  risk" coverage for the Premises  written on an "all risk" basis
     with privilege granted to occupy in an amount not less than the full amount
     of the construction or reconstruction  cost, during the period of any Major
     Alteration,  which shall  include the value of  building  materials  on the
     Premises,  covering  loss or damage by fire,  lightning,  windstorm,  hail,
     explosion,  riot,  riot  attending  a  strike,  civil  commotion,  aircraft
     vehicles, smoke,  earthquakes,  vandalism and malicious mischief, and flood
     insurance  (if the  Premises  is in a flood  hazard  area),  and such other
     hazards as may be included in broad form of extended  coverage from time to
     time available.

          (h) Without limiting the generality of the foregoing, during the Lease
     Term, Lessee shall, at Lessee's sole cost and expense,  secure and keep the
     insurance  coverages  as  required  in  Schedule D hereto in full force and
     effect.

     Section  6.05.  Separate  Insurance  Coverages.  Without the prior  written
consent  of  Lessor,  Lessee  shall  not  obtain  or  carry  separate  insurance
concurrent  in form or  contributing  in the event of loss with that required by
Section  6.04 to be furnished  by Lessee  unless  Lessor and Lessee are included
therein as additional named insureds, with loss payable as in this Lease. Lessee
shall immediately notify Lessor whenever any such separate insurance is obtained
and shall deliver to Lessor certificates evidencing the same.

     Section 6.06.  Compliance  With  Insurance  Requirements.  Lessee shall not
violate or permit to be violated any of the  conditions  or provisions of any of
the insurance policies, and Lessee shall so perform and satisfy the requirements
of the companies  writing such  policies.  Lessee  further  agrees to reasonably
cooperate  with  Lessor as and when  requested  to comply  with loss  prevention
programs.

     Section 6.07. Additional  Coverages.  On reasonable demand of Lessor or the
Fee  Mortgagee,  Lessee  shall  provide  such other forms of  insurance  in such
amounts,  and/or  the  foregoing  insurance  in such  additional  amounts as the
parties may from time to time approve,  as are customarily  furnished by Lessees
under  comparable  leases in the case of property similar in use to the Premises
and located in the area in which the Premises is situated,  provided the same is
available  at rates  which are  economically  practical  in relation to the risk
covered.  Without  limiting the  generality  of the  foregoing,  if Lessor is or
becomes the Fee  Mortgagee  with respect to the  Premises,  then Lessee shall be
required to maintain insurance meeting the requirements  specified in Schedule E
hereto and such other  requirements  as Lessor may  specify  under its  standard
requirements for similar properties and transactions.

     Section  6.08.  Policy  Provisions.  All insurance  policies  maintained by
Lessee pursuant to Section 6.04 shall name Lessee as insured, and Lessor and the
Fee Mortgagee as additional  insureds and shall provide (a) that losses shall be
payable  notwithstanding  any  act or  negligence  of  Lessee  and  (b)  that no
cancellation,  nonrenewal, or material alteration in the terms and conditions of
coverage  thereof shall be effective until at least 30 days after written notice
thereof  delivered  by certified  mail,  return-receipt  requested,  is given to
Lessor and to the Fee Mortgagee.

     Section  6.09.  Companies  and Form of Policies.  All policies of insurance
procured  by Lessee  shall be  issued  by  insurance  companies  licensed  to do
business in the State in which the Premises are located and  authorized to issue
such policy or  policies.  All  policies  shall be in a form and with  companies
reasonably  acceptable to Lessor and may be part of blanket coverage relating to
various properties operated by Lessee.

     Section 6.10. Handling of Proceeds by Lessee.  Insurance proceeds which are
payable to Lessee alone in accordance with the provisions of Section  6.02(a)(i)
shall be held by Lessee and used  solely by Lessee to pay for the cost of making
repairs, alterations and improvements to the Premises and doing such work as may
be  necessary to protect the Premises  against  further  damage and for no other
purpose.  If the  proceeds of insurance  payable to Lessee  alone under  Section
6.02(a)(i)  shall  exceed such costs,  one-half of such excess shall be promptly
paid by Lessee to Lessor or to Fee Mortgagee, if applicable.

     Section 6.11. Handling of Proceeds by Depository.  The Compensation payable
to the Depository in accordance  with the provisions of this Lease shall be held
in trust for the  purpose  of  paying  for the cost of the work  required  to be
performed by Lessee under Sections 6.02 and 6.03 and the cost of making repairs,
alterations  and  improvements  to the  Premises  and doing  such work as may be
necessary to protect the Premises  against further injury and shall be disbursed
as provided in Section  6.02(e).  The Depository shall be entitled to reasonable
compensation  payable out of such funds.  If the insurance  proceeds held by the
Depository  shall exceed such cost, such excess shall belong to and be paid over
to the Lessor upon the completion of and payment for such work.

     Section 6.12.  Certificates of Coverage.  Upon the execution of this Lease,
Lessee  shall  deliver  to Lessor  and to the Fee  Mortgagee  a  certificate  of
insurance  coverage  as to  the  policies  required  by  this  Lease  evidencing
compliance  with the terms of this Lease and bearing  evidence of payment of all
premiums therefor. Thereafter, as to policy renewals, Lessee will provide Lessor
and the Fee Mortgagee  with  certificates  or  assurances of continued  coverage
within thirty (30) days prior to expiration of such policies.

     Section 6.13.  Procurement by Lessor.  If premiums on any insurance  policy
shall not be paid or if the memoranda of policies or certificates or evidence of
payment of the premiums  thereon shall not be so delivered to Lessor as required
herein,  or if  Lessor  learns  of  any  cancellation  of  any  policy  required
hereunder,  Lessor may procure  and/or pay for any such  insurance  for Lessor's
benefit  only and not for the  benefit  of  Lessee,  with or  without  notice to
Lessee.  Lessee may restore such coverage effective one year after the effective
date of the insurance  procured by Lessor provided Lessee furnishes  evidence of
such coverage and payment  therefor at least 60 days prior to the  expiration of
said one-year policy in the form required by Section 6.04. The amount so paid by
Lessor with interest  thereon at the interest rate specified in Section  7.02(k)
hereof  from the date of  payment  shall  become  due and  payable  by Lessee as
Additional Rent with the next or any subsequent  installment of Basic Rent which
shall become due after such  payment by Lessor;  it being  expressly  covenanted
that  payment  by  Lessor  of any such  premium  shall not be deemed to waive or
release the default in the payment thereof by Lessee,  or the right of Lessor to
take such action as may be  permissible  hereunder  as in the case of default in
the payment of Basic Rent.

                                   ARTICLE VII

     Section  7.01.  Events of Default.  Lessee  shall be in default  under this
Lease if any one or more of the following  events (referred to herein as "Events
of Default" or "Event of Default") shall occur:

          (a) if default shall be made in the  procurement or maintenance of any
     insurance required under this Lease and such default shall continue for ten
     (10)  days  after  written  notice  is given by  Lessor  to  Lessee of such
     default; or

          (b) if default shall be made in the payment when due of any Basic Rent
     or Additional  Rent and such default shall continue for ten (10) days after
     Lessor gives Lessee written notice of such nonpayment; or

          (c) if default  shall be made in the  payment of any other sum payable
     under this Lease and such  default  shall  continue for ten (10) days after
     Lessor gives Lessee written notice of nonpayment; or

          (d) if  default  shall  be made by  Lessee  in the  performance  of or
     compliance with any of the terms of this Lease other than those referred to
     in any of the other  subparagraphs in this Section,  and such default shall
     continue for a period of sixty (60) days after Lessor gives Lessee  written
     notice thereof; or

          (e) if Lessee or any  guarantor  of  Lessee's  obligations  under this
     Lease  (each,  if any, a  "Guarantor")  shall file a voluntary  petition in
     bankruptcy or shall be  adjudicated a bankrupt or insolvent,  or shall file
     any petition or answer seeking any reorganization, arrangement, composition
     or  readjustment,  or similar relief for itself under any present or future
     federal,  state or  other  statute,  law or  regulation,  or shall  seek or
     consent to or acquiesce  in the  appointment  of any  trustee,  receiver or
     liquidator  of  itself or of all or any  substantial  part of its or of the
     property, or shall take any general assignment for the benefit of creditors
     or shall  admit in writing its  inability  to pay debts  generally  as they
     become due; or

          (f) if a  petition  shall be filed  against  Lessee  or any  Guarantor
     seeking  any  reorganization,   arrangement,   composition,   readjustment,
     liquidation,  dissolution  or similar  relief  under any  present or future
     federal,  state or other  statute,  law or  regulation,  and  shall  remain
     undismissed  or unstayed for a period of 60 days, or if in connection  with
     any such  event  any  trustee,  receiver  or  liquidator  of Lessee or such
     Guarantor, or of all or any substantial part of any of its property,  shall
     be appointed without its consent or acquiescence and such appointment shall
     remain unvacated or unstayed for a period of 30 days; or

          (g) if Lessee shall vacate or abandon the Property; or

          (h)  if  this  Lease  or the  estate  of  Lessee  hereunder  shall  be
     transferred  to or shall pass to or devolve upon any other person except in
     a manner expressly permitted herein.

     Section 7.02. Remedies Upon Lessee's Default.

          (a) Repossession,  Reletting,  etc., by Lessor. If an Event of Default
     shall have  occurred and be  continuing,  Lessor,  without  further  notice
     except as required by  applicable  law and with no  liability to Lessee for
     any action in accordance with applicable law, may repossess the Property by
     any means  provided  by law,  including  (without  limitation)  summary  or
     eviction proceedings, ejectment or otherwise, and may remove Lessee and all
     other  persons and any and all property  from the same. At any time or from
     time to time  thereafter,  Lessor may (but shall be under no obligation to)
     relet the  Property or any part  thereof for the account of Lessee,  in the
     name of Lessee or Lessor or otherwise,  without notice to Lessee,  for such
     term or terms  (which may be greater  or less than the period  which  would
     otherwise  have  constituted  the balance of the term of this Lease) and on
     such conditions  (which may include  concessions or free rent) and for such
     purposes as Lessor in its  discretion  may  determine,  and may collect and
     receive the rents  therefor.  Lessor shall not be liable for any failure to
     collect any rent due upon any such reletting.

          (b) Payment of Damages.  No such  expiration or sooner  termination of
     this Lease or of Lessee's  right of possession  shall relieve Lessee of its
     liability and obligations  under this Lease, all of which shall survive any
     such expiration or sooner termination.  In the event of any such expiration
     or sooner  termination,  Lessee  will pay to Lessor  the Basic Rent and all
     Additional Rent and other sums required to be paid by Lessee up to the time
     of such expiration or sooner termination,  and thereafter Lessee, until the
     end of what would  have been the term of this Lease in the  absence of such
     expiration  or sooner  termination,  and whether or not the Property or any
     part  thereof  shall have been relet,  shall be liable to Lessor  for,  and
     shall pay to Lessor,  as and for liquidated and agreed current  damages for
     Lessee's  default,  the Basic Rent and all  Additional  Rent and other sums
     which would be payable thereafter under this Lease by Lessee,  less the net
     proceeds,  if any,  of any  reletting  effected  for the  account of Lessee
     pursuant to Section  7.02(a)  during the period which would  otherwise have
     constituted  the balance of the term of this Lease,  after deducting all of
     Lessor's reasonable  expenses in connection with such reletting,  including
     (without  limitation)  all  repossession  costs,   brokerage   commissions,
     attorneys'  fees,  expenses of employees,  costs incurred in alterations to
     the Improvements  required in connection with the reletting of the Property
     for use by another lessee and expenses of preparation  for such  reletting.
     Lessee  will pay such  amounts to Lessor  monthly on the days on which such
     Basic  Rent,  Additional  Rent and all other sums  would have been  payable
     under this  Lease,  and Lessor  shall be  entitled to recover the same from
     Lessee on each such day.

          (c) Lump-sum  Damage  Payment.  At any time after such  expiration  or
     sooner  termination  of this Lease as  provided  herein or pursuant to law,
     whether or not Lessor  shall  have  recovered  any  amounts  under  Section
     7.02(b),  Lessor  shall be entitled to recover from Lessee and Lessee shall
     pay to Lessor,  on demand,  as and for  liquidated and agreed final damages
     for Lessee's  default,  an amount equal to the sum of the following,  as of
     the date of such payment by Lessee:

               (i) the worth of the unpaid  Basic Rent and  Additional  Rent and
          other sums due and  payable  which had been earned at the time of such
          expiration or sooner termination; plus

               (ii) the worth of the unpaid Basic Rent and  Additional  Rent and
          other sums due and payable after such expiration or sooner termination
          and on or  before  the  time of  Lessee's  lump-sum  payment  pursuant
          hereto,  after deducting from such unpaid amounts any (if any) portion
          thereof that Lessee proves could have been reasonably avoided; plus

               (iii) the worth of the unpaid Basic Rent and Additional  Rent and
          other sums due and  payable  for the  balance of the Lease Term or, if
          termination occurs during an Extension Period,  such Extension Period,
          after  deducting from such unpaid amounts any (if any) portion thereof
          that Lessee proves can be reasonably avoided; plus

               (iv) any other amount which is necessary to compensate Lessor for
          all the detriment  proximately  caused by Lessee's  failure to perform
          Lessee's  obligations  under  this  Lease or which  would be likely to
          result therefrom,  including (without limitation) any costs or expense
          incurred by Lessor: (A) in retaking possession of the Premises; (B) in
          maintaining,  repairing,  preserving,  restoring, replacing, cleaning,
          altering  or  rehabilitating  the  Premises  or any  portion  thereof,
          including such acts for reletting to a new tenant or tenants;  (C) for
          leasing  commissions;   or  (D)  for  any  other  costs  necessary  or
          appropriate to relet the Premises.

                  The "worth" of the amounts referred to in subparagraphs (i)
         and (ii) of this Section is computed by accruing interest at the
         Default Rate on the unpaid rent and other sums due and payable from the
         respective due dates for such amounts until Lessee's lump-sum payment
         pursuant hereto. The "worth" of the amount referred to in subparagraph
         (iii) of this Section is computed by discounting such amount at a rate
         equal to the weekly average yield 10-year U.S. Treasury Constant
         Maturities (as published in Federal Reserve Statistical Release H-15
         [519]) on or nearest to the Friday immediately preceding the date of
         Lessee's lump-sum payment pursuant hereto.

          (d) Receiver.  Lessor may have a receiver appointed for Lessee to take
     possession  of the  Premises  and to  apply  any  rent  collected  from the
     Premises and to exercise all other rights and remedies granted to Lessor as
     an attorney-in-fact for Lessee.

          (e) Lessee's  Equipment.  At any time after the occurrence of an Event
     of  Default,  Lessor  may send  written  notice to Lessee to remove  all of
     Lessee's Equipment and property from the Premises.  If Lessee shall fail to
     remove such  Equipment  and property  within five (5)  business  days after
     receipt of such notice from Lessor,  then Lessor may remove such  Equipment
     and property  from the  Premises and arrange for storage of such  Equipment
     and  property  at  another  location,  all at the sole cost and  expense of
     Lessee.  In the event of any such removal of Lessee's  Equipment  and other
     property  from the  Premises  by Lessor,  Lessee  waives any and all claims
     against  Lessor  regarding  the removal and  storage of its  Equipment  and
     property  including,  without  limitation,  the manner of removal,  cost of
     removal,  location  of  storage,  cost of storage  and damage to or missing
     Equipment and property.

          (f) Bankruptcy or Insolvency.

               (i) If Lessee shall become a debtor in a case filed under Chapter
          7 or Chapter 11 of the Bankruptcy Code and Lessee or Lessee's  trustee
          shall  fail to elect to assume  this  Lease  within 60 days  after the
          filing of such  petition  or such  additional  time as provided by the
          court,  this Lease shall be deemed to have been rejected.  Immediately
          thereupon,  Lessor  shall be entitled to  possession  of the  Premises
          without  further  obligation to Lessee or Lessee's  trustee,  and this
          Lease,  upon the  election of Lessor,  shall  terminate,  but Lessor's
          right to be compensated for damages  (including,  without  limitation,
          liquidated  damages pursuant to any provision  hereof) or the exercise
          of any other remedies in any such proceeding shall survive, whether or
          not this Lease shall be terminated.

               (ii) An  assumption  of this  Lease in  accordance  with  Section
          7.02(f)(i)  shall  not limit  Lessor's  right to  declare  an Event of
          Default  hereunder  and exercise any and all remedies  available to it
          if, at any time after such  assumption,  Lessee is liquidated or files
          or has filed  against  it a  subsequent  petition  under  Chapter 7 or
          Chapter 11 of the Bankruptcy Code.

               (iii) When,  pursuant to the Bankruptcy Code, Lessee's trustee or
          the debtor-in-possession  shall be obligated to pay reasonable use and
          occupancy charges for the use of the Premises,  such charges shall not
          be less than the Basic Rent, Additional Rent and other sums payable by
          Lessee under this Lease.

               (iv)  Neither the whole nor any  portion of Lessee's  interest in
          this Lease or its estate in the  Premises  shall pass to any  trustee,
          receiver, assignee for the benefit of creditors or any other person or
          entity,  by operation of law or otherwise  under the laws of any state
          having jurisdiction of the person or property of Lessee, unless Lessor
          shall have consented to such transfer. No acceptance by Lessor of rent
          or any  other  payments  from any such  trustee,  receiver,  assignee,
          person or other entity shall be deemed to  constitute  such consent by
          Lessor nor shall it be deemed a waiver of Lessor's  right to terminate
          this Lease for any  transfer  of  Lessee's  interest  under this Lease
          without such consent.

               (v) In the event of an assignment of Lessee's  interests pursuant
          to this  Section,  the right of any  assignee to extend the Lease Term
          shall be extinguished.

          (g)  Limitation  by Law.  If any  statute or rule of law  governing  a
     proceeding in which  liquidated  final damages provided for in Section 7.02
     are to be proved shall validly  limit the amount  thereof to an amount less
     than the amount above agreed upon,  Lessor shall be entitled to the maximum
     amount allowable under such statute or rule of law.

          (h) Remedies  Cumulative,  Etc. Each right,  power and remedy provided
     for in this Lease or now or  hereafter  existing  at law or in equity or by
     statute or otherwise  shall be cumulative  and  concurrent  and shall be in
     addition to every other right,  power or remedy  provided for in this Lease
     or  now  or  hereafter  existing  at  law or in  equity  or by  statute  or
     otherwise, and the exercise or beginning of the exercise of any one or more
     of the  rights,  powers or  remedies  provided  for in this Lease or now or
     hereafter existing in law or in equity or by statute or otherwise shall not
     preclude  the  simultaneous  or later  exercise  of any or all  other  such
     rights,  powers or remedies.  The  collection of any late payment charge or
     any  interest  at the  Default  Rate  shall not be deemed  an  election  of
     remedies or in lieu of any other remedies or damages. Lessor shall have the
     right to  specifically  enforce  this  Lease and to enjoin  any  default or
     prospective or anticipated default hereunder.

          (i) Statutory Rights. Lessee retains any rights of notice or rights of
     redemption,  if any, as may be required by  applicable  State law.  "State"
     shall mean the State where the  Premises  are  located.  However,  any such
     notice  required by law may be given by Lessor in (or, at Lessor's  option,
     separate from) any notice  required to be given by Lessor under this Lease,
     and the time periods  provided in this Lease and required under  applicable
     law will not be "tacked" onto each other but will commence running from the
     original date of delivery of such notices.

          (j) Application of Funds. Any payments received by Lessor under any of
     the  provisions  of this Lease during the existence or  continuance  of any
     Event of Default (and any payment made to Lessor  rather than Lessee due to
     the  existence  of an  Event  of  Default)  shall be  applied  to  Lessee's
     obligations  in such order as Lessor may determine or, if prescribed by the
     laws of the State, in accordance with such laws.

          (k) Late  Interest.  If Lessee  shall fail to make any  payment of any
     sums  required by this Lease  within ten days after  Lessor gives notice of
     nonpayment,  Lessee shall pay to Lessor, in addition to such sums, interest
     thereon at the rate of 5% per annum higher than and varying  daily with the
     highest  prime  rate as  published  from  time to time in the  Wall  Street
     Journal (the "Default  Rate"),  computed from the date such payment was due
     to and including  the date of payment in full.  If the Wall Street  Journal
     ceases to quote such rate,  Lessor  shall  have the right to  substitute  a
     reasonably comparable index for such prime rate.

          (l) No Usury.  The intention of the parties being to conform  strictly
     to the usury  laws now in  force,  whenever  any  provision  in this  Lease
     provides for payment by Lessee to Lessor of interest at a rate in excess of
     the legal rate  permitted  to be charged,  such rate herein  provided to be
     paid shall be deemed reduced to such legal rate.

                                  ARTICLE VIII

     Section 8.01.  Lessee's Notices and Remedies.  In the event Lessor fails to
perform  its  responsibilities  pursuant to this  Lease,  Lessee's  notice as to
Lessor's  nonperformance  will  be sent  simultaneously  to  Lessor  and the Fee
Mortgagee.  Lessor will be in default  under this Lease if Lessor fails to cause
such  responsibilities to be fully performed within 30 days after written notice
by  Lessee to Lessor  specifying  the  nature  of the  default  with  reasonable
particularity.  If the  default is of such a nature  that it cannot be  remedied
fully within the 30-day period,  this  requirement  shall be satisfied if Lessor
begins  correction  of the  default  within  the 30-day  period  and  thereafter
proceeds  with  reasonable  diligence  and in good faith to effect the remedy as
soon as  reasonably  practicable.  Lessee  shall not have the right to terminate
this Lease as a result of Lessor's default. In the event of such default, Lessee
shall have all remedies  available  under law for breach of contract,  including
(without limitation) the right of specific performance.  In addition, Lessee may
elect in its discretion to perform the required action or take corrective action
reasonably required to cure the default if it pertains to the Premises, in which
event Lessor shall reimburse  Lessee for the reasonable  out-of-pocket  costs of
such action,  together with reasonable and necessary costs and disbursements and
interest,  and such amounts may be deducted  from the rent  thereafter to become
due under this Lease,  after at least 20 days' written notice to Lessor (and the
Fee Mortgagee) as to the costs so incurred.

     Section 8.02.  Fee  Mortgagee's  Right To Cure.  The Fee Mortgagee that has
notified  Lessee of its address in the manner provided for notices in this Lease
will have the right to cure any default by Lessor. The cure period will commence
on  delivery  of notice to such Fee  Mortgagee  of the  default and extend for a
period  ending 30 days  after the end of the time  period  for  Lessor to cure a
default. In this connection,  any representative of the Fee Mortgagee shall have
the right to enter upon the Premises for the purpose of curing Lessor's default.

                                   ARTICLE IX

     Section 9.01.  Subordination and Nondisturbance.  This Lease and all rights
of Lessee  under  this  Lease  are,  and shall at the  option of Lessor  remain,
subject and  subordinate in all respects to the Fee Mortgage and to all advances
made or  hereafter  to be made  under any such  mortgage,  and to all  renewals,
modifications, consolidations, correlations, replacements and extensions of, and
substitutions  for, the Fee  Mortgage,  provided  that the Fee  Mortgagee  shall
execute and deliver to Lessee a nondisturbance and attornment  agreement in form
and substance approved by the Fee Mortgagee and reasonably  acceptable to Lessee
which provides in substance (a) that if Lessor defaults under its mortgage,  the
Fee  Mortgagee  will not  disturb the  occupancy  of Lessee and this Lease shall
remain in full force and effect in accordance  with its terms,  provided that no
Event of Default has occurred and is continuing  (in the event of any such Event
of Default,  the Fee Mortgagee  shall have such rights and remedies with respect
to such  default as are  provided  herein),  (b) that Lessee  shall,  at the Fee
Mortgagee's option, attorn to such Fee Mortgagee and the Lease shall continue as
a direct lease between such Fee Mortgagee and Lessee,  and (c)  containing  such
other provisions as Fee Mortgagee may reasonably require. The provisions of this
Section shall be self-operative.  Lessee shall also provide to the Fee Mortgagee
any and all other  assurances or  instruments  the Fee Mortgagee may  reasonably
request to evidence and confirm such provisions. All such agreements shall be in
form suitable for recording.

     Section 9.02.  Election Not To Subordinate.  Notwithstanding the provisions
of Section  9.01,  the holder of any mortgage to which this Lease is subject and
subordinate, as provided in said Section 9.01, shall have the right, at its sole
option,  at any time, to  subordinate  and subject its mortgage,  in whole or in
part, to this Lease by recording a unilateral declaration to such effect.

     Section 9.03. Attornment.  At any time prior to the expiration of the Lease
Term,  Lessee  agrees,  at the  election  and upon  demand  of any  owner of the
Premises,  or of the Fee  Mortgagee,  to attorn,  from time to time, to any such
owner or holder,  upon the then  executors'  terms and conditions of this Lease,
for the  remainder  of the term  originally  demised  in this  Lease and for any
renewal term, provided that such owner or holder, as the case may be, shall then
be entitled to  possession  of the Premises  subject to the  provisions  of this
Lease.  The  provisions  of this Section  shall inure to the benefit of any such
owner or holder,  shall apply  notwithstanding  that,  as a matter of law,  this
Lease  may  terminate  upon  the  foreclosure  of any  such  mortgage,  shall be
self-operative upon any such demand, and no further instrument shall be required
to give  effect to said  provisions.  Lessee,  however,  upon demand of any such
owner  or  holder  agrees  to  execute,  from  time  to  time,   instruments  in
confirmation  of the foregoing  provisions of this Section,  satisfactory to any
such owner or holder  acknowledging  such attornment and setting forth the terms
and  conditions  of its tenancy.  Nothing  contained  in this  Section  shall be
construed to impair any right otherwise exercisable by any such owner or holder.

     Section 9.04.  Limitations  on Lessee.  Lessee agrees that, if requested by
Lessor or the Fee  Mortgagee,  Lessee shall enter into an agreement with the Fee
Mortgagee  whereby Lessee shall agree for the benefit of such Fee Mortgagee that
Lessee  will not,  without  in each case the prior  written  consent of such Fee
Mortgagee,  (a) amend, modify, cancel or surrender the term of this Lease except
as  expressly  permitted  by the  provisions  of this  Lease,  or enter into any
agreement  with  Lessor so to do or (b) pay any  installment  of Basic Rent more
than one month in  advance  of the due date  thereof  or  otherwise  than in the
manner provided for in this Lease.

     Section  9.05. No Merger of Fee and  Leasehold  Estates.  There shall be no
merger of this Lease nor of the leasehold  estate created by this Lease with the
fee estate in the  Premises  or any part  thereof by reason of the fact that the
same person, firm or corporation or other entity may acquire or own such estates
directly or indirectly; and no such merger shall occur until all persons, firms,
corporations  and  other  entitled,  including  the Fee  Mortgagee,  having  any
interest  in this  Lease and the  leasehold  estate  created  hereby and the fee
estate in the Premises or any party thereof  shall join in a written  instrument
effecting such merger and shall duly record it.

     Section 9.06. Changes to Lease Required by Fee Mortgagee.  In the event the
Fee Mortgagee shall require reasonable  modifications of this Lease that do not,
in the  aggregate,  materially  increase the  obligation of Lessee  hereunder or
interfere  with or  diminish  Lessee's  rights,  Lessee  agrees to execute  such
modification(s) upon request of Lessor.

                                    ARTICLE X

     Section  10.01.  Estoppel  Certificate.  Upon  request,  either party will,
without charge,  execute,  acknowledge and deliver to the other party, within 15
days after request  therefor,  a certificate  certifying  (a) that this Lease is
unmodified  and in full force and effect (or, if there have been  modifications,
that  this  Lease is in full  force and  effect  as  modified  and  stating  the
modifications), (b) the date, if any, to which the Basic Rent has been paid, (c)
whether or not there are,  to the  knowledge  of the party,  then  existing  any
defaults  under  this  Lease (if so,  specifying  the  same) and (d) such  other
matters as may be reasonably  required.  Any such certificate may be relied upon
as to the facts  stated  therein  by any  actual  or  prospective  mortgagee  or
purchaser of the Premises from Lessor or any actual or prospective  sublessee or
assignee  of  Lessee's  interest  in this  Lease in  connection  with one of the
transactions permitted or approved under Article IV.

     Section 10.02. Financial Information.  Lessee will deliver to Lessor within
10 days  (except as set forth  below) of filing,  sending  or  otherwise  making
public, copies of all periodic reports filed by with the Securities and Exchange
Commission  ("SEC")  (including,  without  limitation,  all  8-K,  10-K and 10-Q
reports pursuant to Section 13(a) of the Securities Act of 1934, as amended (the
"1934 Act")), and all proxy statements of Lessee to its stockholders;  provided,
however, that, if such statements and reports are not required to be filed or do
not  include  the  following  information,  Lessee  will  deliver to Lessor with
respect to Lessee the following:

          (a) Within 10 days after filing with the SEC but in no event more than
     105 days after the end of each fiscal year of Lessee,  (i) a balance  sheet
     of Lessee  and its  consolidated  subsidiaries  as of the end of such year,
     (ii) a  statement  of profits  and  losses of Lessee  and its  consolidated
     subsidiaries  for such year and (iii) a  statement  of cash flows of Lessee
     and its consolidated  subsidiaries for such year,  setting forth in each of
     (i), (ii) and (iii) above, in comparative form, the  corresponding  figures
     for the preceding  fiscal year in reasonable  detail and scope and prepared
     by independent certified public accountants of recognized national standing
     or New York City Metro  Area  regional  standing  selected  by Lessee,  and
     within 90 days  after the end of each  fiscal  quarter  of Lessee a balance
     sheet of Lessee  and its  consolidated  subsidiaries  as of the end of such
     quarter and statements of profits and losses of Lessee and its consolidated
     subsidiaries  for such quarter,  setting forth in each case, in comparative
     form, the  corresponding  figures for the similar  quarter of the preceding
     year,  in  reasonable  detail and  scope,  and  certified  by an officer of
     Lessee,  all  of the  foregoing  financial  statements  being  prepared  in
     accordance  with generally  accepted  accounting  principles,  consistently
     applied, except as otherwise indicated in such statements; and

          (b)  Upon  request  of  Lessor,  with  reasonable   promptness,   such
     additional, public financial statements and information (including, without
     limitation,   copies  of  public  reports  filed  by  Lessee  or  financial
     statements  and  information  delivered  by Lessee to its  shareholders  or
     lenders  and,  if Lessee is part of a  consolidated  group,  its  financial
     statement   consolidating  entries  in  reasonable  detail)  regarding  the
     business affairs and financial condition of Lessee as Lessor may reasonably
     request,  for so long as same do not  violate  any  federal  or state  laws
     limiting the dissemination of information by publicly-held companies.

                                   ARTICLE XI

     Section 11.01. Quiet Enjoyment.  Lessor covenants that Lessee,  upon paying
the Basic Rent and all  Additional  Rent and other sums  payable  hereunder  and
performing and complying with all the terms hereof,  shall, subject to the terms
of this Lease,  lawfully,  peaceably and quietly hold, occupy, possess and enjoy
the Premises during the term of this Lease,  without hindrance or molestation by
Lessor or others claiming through Lessor, subject, however, to the terms of this
Lease.

                                   ARTICLE XII

     Section 12.01. Lessor's Reversionary Interest;  Surrender of Premises. Upon
expiration or termination of this Lease,  Lessor shall,  at no charge to Lessor,
become  the  owner  of,  and  have  the  reversionary  interest  in,  all of the
Improvements.  Lessee  shall  surrender  the  Premises to Lessor in good repair,
operating  condition,  working order and appearance,  subject to reasonable wear
and tear and (to the extent  provided  herein for  termination  after  casualty)
damage by fire and other  casualty.  All repairs for which Lessee is responsible
will be completed to the latest practical date prior to such surrender.  If this
Lease is terminated in connection with a Casualty,  Lessee will assign to Lessor
the entire insurance proceeds  pertaining to the Premises that revert to Lessor.
Lessee shall promptly remove all of its own signs, inventory, Lessee's Equipment
and other personal  property that remain the property of Lessee and will restore
any physical damage caused by such removal.

     Section  12.02.  Delivery  of Rents  and  Records.  Upon  surrendering  the
Premises to Lessor, Lessee will pay to Lessor all deposits or other security and
all prepaid rents received from  subtenants and other  occupants whose tenancies
may  continue  beyond the last day of the Lease  Term or the sooner  termination
thereof and will  deliver to Lessor all  original  subleases  and  modifications
thereof,  lease  files,  plans,  records,  registers  and all other  papers  and
documents  which may be required for the proper  operation and management of the
Premises and are then in Lessee's possession or under its control.  Lessee shall
have access to any records, papers and documents so delivered to such extent and
at such times as the same may be reasonably  required  after the last day of the
term of this Lease Term or such sooner termination thereof. Nothing herein shall
require  Lessor to recognize any such existing  sublease as continuing in effect
after such last day or sooner termination.  The provisions of this Section shall
survive the expiration or sooner termination of this Lease.

     Section  12.03.  Acceptance  of  Surrender.  No surrender to Lessor of this
Lease or of the Premises or any part thereof, or of any interest therein,  prior
to the expiration of the Lease Term,  shall be valid or effective  unless agreed
to and accepted in writing by Lessor, and no act by Lessor or any representative
or agent of  Lessor,  other  than such a written  acceptance  by  Lessor,  shall
constitute an acceptance of any such surrender.

     Section  12.04.  Holding  Over.  If Lessee  remains  in  possession  of the
Premises or any part thereof after the  expiration or sooner  termination of the
term of this Lease (or any renewal term hereof)  without the  execution of a new
lease, such holding over, in the absence of a written agreement to the contrary,
shall  be  deemed,  if  Lessor  so  elects,  to  have  created  a  tenancy  from
month-to-month  terminable on 30 days' notice by either party to the other. Such
month-to-month  tenancy will be at a monthly  rental equal to 125% of the sum of
the monthly  installment of Basic Rent payable during the last year of the Lease
Term, and Lessee will otherwise  continue to pay Additional  Rent as provided in
this Lease and perform its other obligations hereunder.

                                  ARTICLE XIII

     Section 13.01.  Definition of "Lessor".  The term "Lessor," as used in this
Lease so far as covenants or  obligations  on the part of Lessor are  concerned,
shall be limited to mean and include only the owner or owners of the Premises or
holder  of the  Fee  Mortgage  in  possession  at the  time in  question  of the
Premises.  In the  event  of any  transfer  or  transfers  of the  title  of the
Premises,  Lessor  herein  named  (and in case of any  subsequent  transfers  or
conveyances,  the then grantor) shall be automatically freed and relieved of its
liabilities  accruing from and after the date of such transfer and conveyance of
all liability as respects the performance of any covenants or obligations on the
part of Lessor contained in this Lease thereafter to be performed.

     Section 13.02. Exculpation of Lessor. Notwithstanding anything contained in
the  preceding  paragraph or in any other  provision  hereof,  Lessee shall look
solely to the estate and interest of Lessor,  its  successors and assigns in the
Premises (and any  condemnation,  insurance or other  proceeds  thereof) for the
collection  of any judgment  recovered  against  Lessor based upon the breach by
Lessor of any of the terms, conditions or covenants of this Lease on the part of
Lessor to be  performed,  and no other  property  or  assets of Lessor  shall be
subject to levy, execution or other enforcement  procedures for the satisfaction
of  Lessee's   remedies  under  or  with  respect  to  either  this  Lease,  the
relationship of Lessor and Lessee hereunder or Lessee's use and occupancy of the
Premises.

                                   ARTICLE XIV

     Section 14.01. No Waiver, etc., by Parties. No failure by a party to insist
upon the strict  performance of any term of this Lease or to exercise any right,
power or remedy  consequent upon a breach thereof,  and no acceptance of full or
partial  rent by  Lessor  during  the  continuance  of any  such  breach,  shall
constitute a waiver of any such breach or of any such term.

     Section 14.02.  Notices, Etc. All notices and demands which are required or
permitted  to be  given  by  either  party on the  other  hereunder  shall be in
writing.  All notices and demands shall be sent by United States Mail, certified
or registered mail, return-receipt requested, or by recognized overnight courier
service (such as Federal  Express),  or by facsimile or other  telecommunication
device capable of transmitting  and creating a written record.  Notices shall be
effective  five (5) business  days  following the date they are deposited in the
United States Mail, one (1) business day after delivery to an overnight  courier
and on the day they are telefaxed (if a confirmation  report results).  Unless a
party  designates  another address for notices (by notice given pursuant to this
Section, notices shall be sent to the following address:

   If to Lessor:     General Electric Capital Business Asset Funding Corporation
                     10900 NE 4th Street, Suite 500
                     Bellevue, Washington  98004
                     Attention: Vice President/Manager, Real Estate
                     Facsimile:  (425) 709-9120


   If to Lessee:     Manchester Technologies Inc.

                     160 Oser Avenue
                     -
                     Hauppauge, New York 11788
                     Attention: Barry R. Steinberg
                     Facsimile:  (631) 435-2340


                              With a copy to:

   .........                  Kressel Rothlein Walsh & Roth LLC
   .........                  684 Broadway
   .........                  Massapequa, New York  11758
                              Attention:  Joel Rothlein, Esq.
                              Facsimile:  (516) 798-5498

Any  notices to be  provided to the Fee  Mortgagee  shall be to such  address as
shall be provided to the parties in writing by the Fee Mortgagee.

     Section  14.03.  Separability.   Each  and  every  covenant  and  agreement
contained  in this  Lease  is,  and shall be  construed  to be, a  separate  and
independent  covenant  and  agreement,  and the breach of any such  covenant  or
agreement by Lessor shall not discharge or relieve Lessee from its obligation to
perform  the same.  If any term or  provision  of this Lease or the  application
thereof  to any  person  or  circumstance  shall to any  extent be  invalid  and
unenforceable,  the remainder of this Lease,  or the  application of the term or
provision to persons or circumstances other than those as to which it is invalid
or unenforceable,  shall not be affected thereby, and each term and provision of
this Lease shall be valid and shall be enforced to the extent permitted by law.

     Section 14.04. Headings. The headings to the various Sections of this Lease
have been  inserted for  convenience  of  reference  only and shall not limit or
otherwise affect the meaning thereof.

     Section 14.05. Relationship of Parties; Disclaimer. The relationship of the
parties to this Lease is  landlord  and tenant.  Lessor is not a partner,  joint
venturer, joint employer, principal or agent of or with or a lender to Lessee in
any respect or for any purpose in the conduct of Lessee's business or otherwise.
No provision of this Lease or previous (or subsequent)  conduct or activities of
Lessee or Lessor will be construed:

          (a) as making either party a partner, joint venturer,  joint employer,
     principal or agent of or with each other or

          (b)  as  making   Lessee  or  Lessor   responsible   for   payment  or
     reimbursement  of any  costs  incurred  by  each  other  (except  as may be
     expressly  set forth  herein  or as  expressly  set forth in other  written
     agreements executed by the parties).

     Section 14.06.  Operating Lease. This Lease is specifically intended by the
parties  to be a true  lease.  Lessor  holds fee  simple  absolute  title to the
Premises,  and such title was not acquired or intended to be held as any type of
mortgage or security interest. This Lease is intended by Lessor and Lessee to be
an operating lease under generally accepted accounting principles.

     Section  14.07.  Joint  Obligation.  If there be more  than one  Lessee  or
assignee of Lessee, the obligations imposed upon Lessee hereunder shall be joint
and several.

     Section 14.08. Prior Agreements.  This Lease (including  attached Exhibits)
is the entire,  final and complete agreement of the parties only with respect to
the  specific  matters set forth in this Lease and  supersedes  and replaces all
written and oral agreements previously or contemporaneously  made or existing by
and between the parties or their  representatives  with respect to such specific
matters.

     Section 14.09.  Recording.  This Lease shall not be recorded, but, upon the
request of either party,  the parties shall execute and acknowledge a memorandum
of this Lease in recordable form that may be recorded by Lessor or Lessee.

     Section  14.10.  Proration  of Rent.  If this Lease starts or ends during a
rental period,  Rent and Additional Rent shall be prorated as of such date using
a 30-day  month and a 360-day  year.  Upon  termination  other than for default,
prepaid rent shall be refunded, if applicable.

     Section  14.11.  Authorization  of Lease.  Each of Lessee and Lessor hereby
covenants and warrants to the other that (a) it is duly qualified to do business
in the  state in which  the  Premises  is  located,  (b) it has full  right  and
authority  to enter  into  this  Lease  and to  perform  all of its  obligations
hereunder  and (c) each  person  (and all of the persons if more than one signs)
signing this on its behalf is duly and validly authorized to do so.

     Section  14.12.  Applicable  Law.  This  Lease  shall  be  governed  by and
construed and enforced in  accordance  with the laws of the State (as defined in
Section 7.02(i)).

     Section  14.13.  United States Funds.  All sums herein  mentioned  shall be
conclusively  deemed to refer to and shall be  measured  by and  payable  in the
lawful currency of the United States.

     Section 14.14.  Time of  Performance.  Time is of the essence of this Lease
and each and all of its provisions in which performance is a factor.

     Section  14.15.  "Force  Majeure"  Delays.  In the event that either  party
hereto shall be delayed or hindered in or prevented from the  performance of any
act required hereunder by reason of strikes, lockouts, labor troubles, inability
to  procure  materials,  failure  of  power,  restrictive  governmental  laws or
regulations,  riots,  insurrection,  war or other  reason of like nature not the
fault of the party delayed in performing  work of doing acts required  under the
terms of this Lease (a delay  resulting  from  financial  inability  to perform,
excepted) (collectively,  "force majeure" events), then performance of such work
or act shall be  excused  for the  period of the  delay,  and the period for the
performance of any such work or act shall be extended for a period equivalent to
the period of such delay. This provision shall not operate to excuse Lessee from
prompt payment of Basic Rent,  Additional Rent or any other payments required by
the terms of this  Lease,  unless the  commencement  date or periods  permitting
Lessee to abatement of rent are postponed or extended by such delays.

     Section 14.16.  Waiver of Jury Trial.  LESSOR AND LESSEE HEREBY WAIVE THEIR
RESPECTIVE  RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING  OUT  OF,  DIRECTLY  OR  INDIRECTLY,  THIS  LEASE,  ANY OF  THE  RELATED
DOCUMENTS, ANY DEALINGS AMONG LESSEE OR LESSOR RELATING TO THE SUBJECT MATTER OF
THE TRANSACTIONS CONTEMPLATED BY THIS LEASE OR ANY RELATED TRANSACTIONS,  AND/OR
THE RELATIONSHIP THAT IS BEING ESTABLISHED AMONG LESSOR AND LESSEE. THE SCOPE OF
THIS WAIVER IS INTENDED TO BE ALL  ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY
BE FILED IN ANY COURT  (INCLUDING,  WITHOUT  LIMITATION,  CONTRACT CLAIMS,  TORT
CLAIMS,  BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND  STATUTORY  CLAIMS).
THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR
IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,  RENEWALS,
SUPPLEMENTS OR  MODIFICATIONS TO THIS LEASE,  ANY RELATED  DOCUMENTS,  OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE TRANSACTIONS  CONTEMPLATED BY THIS
LEASE OR ANY RELATED TRANSACTIONS. IN THE EVENT OF LITIGATION, THIS LEASE MAY BE
FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

     Section 14.17. Attorneys' Fees. In the event of any action or proceeding by
either party against the other under this Lease,  the prevailing  party shall be
entitled to recover for the fees of its attorneys in such action or  proceeding,
including  costs of  appeal,  if any,  in such  amount as the court may  adjudge
reasonable as attorneys' fees.

     Section  14.18.  Amendments.  Neither this Lease nor any term hereof may be
changed,  waived,  discharged or terminated orally, but only by an instrument in
writing signed by the party against whom the enforcement of the change,  waiver,
discharge or termination is sought.

     Section 14.19.  Successors and Assigns.  This Lease shall bind and inure to
the  benefit  of Lessor  and its  successors  and  assigns  and  Lessee  and its
successors and, without limiting Article IV hereof, its assigns.  Any assignment
of this Lease by Lessor  shall not  terminate  such  Lessor's  rights  under the
environmental  and  other  indemnities  provided  by Lessee  in this  Lease.  In
furtherance  of any  proposed  assignment  by Lessor,  Lessor may share with the
proposed  assignee  Lessee's  financial  information  and Property  information,
provided  such  proposed   assignee  is  directed  to  treat  such   information
confidentially  (Lessor hereby agreeing to be responsible for any failure of any
such proposed assignee to so treat any such information).

     Section 14.20.  Brokers.  Lessee  warrants that it has had no dealings with
any real estate broker or agent in connection with the negotiation of this Lease
and it knows of no real estate  broker or agent other than  Anthony  Gallano and
AGJR Real Estate who is entitled to a commission in connection  with this Lease.
Lessee shall defend and indemnify  Lessor against all claims for any broker's or
agent's fees,  commissions and expenses,  except to the extent Lessor has agreed
to pay the same in writing.

     Section  14.21.  Construction.  Each  party  to  this  Lease  has  had  the
opportunity  to consult  with its legal  counsel,  and this  Lease  shall not be
construed  against either party.  All pronouns or any variation  thereof in this
Lease  shall be deemed to refer to  masculine,  feminine,  neuter,  singular  or
plural  as the  identity  of the  person  or  persons  may  require.  All of the
provisions  of this Lease shall be deemed and  construed to be  "conditions"  as
well as  "covenants"  as though the words  specifically  expressing or importing
covenants and conditions be used in each separate provision hereof.

     Section 14.22. Execution in Counterparts. This Lease may be executed in any
number of  counterparts,  each of which shall be an  original,  but all of which
shall constitute one and the same instrument.

     Section 14.23. Exhibits and Riders. All Exhibits,  schedules, plats, riders
and addenda, if any, and other attachments to this Lease are a part hereof.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;
                            EXECUTION PAGE FOLLOWS.]


<PAGE>


01-287182.07

01-287182.07

     IN  WITNESS  WHEREOF,  the  parties  hereto  have  caused  this Lease to be
executed as of the date first above written.

                                 Lessor:

               GENERAL ELECTRIC CAPITAL BUSINESS
               ASSET FUNDING CORPORATION,
               a Delaware corporation

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


               Lessee:

               MANCHESTER TECHNOLOGIES INC.,
               a New York corporation

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

































                       [EXECUTION PAGE OF LEASE AGREEMENT]


                                   SCHEDULE A

                                LEGAL DESCRIPTION



<PAGE>


01-287182.07

01-287182.07
                                   SCHEDULE B

                            CONTRACTUAL REQUIREMENTS


                                 160 Oser Avenue




1.       Island Wide Mechanical Systems Inc. HVAC maintenance agreement dated
         10/21/02 for period 09/01/02 -08/31/03.


2.       Electronix Systems Central Station Alarms, Inc. security system
         contract dated 08/15/02.

<PAGE>


01-287182.07

01-287182.07

                                   SCHEDULE C

                              PERMITTED EXCEPTIONS

                                 160 Oser Avenue


1.   Covenants, restrictions,  easements, agreements, of record, etc. more fully
     set forth herein:  Covenants and  Restrictions  Liber 7404 CP 558 Covenants
     and Restrictions  Liber 7764 CP 407 Sewer Agreement Liber 7461 CP 153 Right
     of Way Liber 6082 CP 516  Telephone  Agreement  Liber 7410 CP 451  (Affects
     Streets)  Electric  Easement  Liber  7440  CP 60  (Affects  Streets)  Water
     Agreement Liber 7584 CP 336 (Affects  Streets) Road Dedication  Liber 10018
     CP 578 (Dedicates all Streets on Map to Town) Telephone Easement Liber 1114

2.   Fifty (50) foot setback line as shown on filed map.


<PAGE>


2
01-287182.07
01-287182.07

                                   SCHEDULE D

                          LESSEE INSURANCE REQUIREMENTS


NAME OF INSURED:                     MANCHESTER TECHNOLOGIES INC.
---------------

INSURED MAILING ADDRESS:             160 Oser Avenue, Hauppauge, New York 11788
-----------------------


PROPERTY ADDRESS(s):                 160 Oser Avenue, Hauppauge, New York 11788
-------------------


ADDITIONAL INSURED:
------------------


General Electric Capital Business Asset Funding Corporation ("GE Capital"), a
Delaware corporation, its successors and assigns 10900 NE 4th Street, Suite 500
Bellevue, WA 98004

LEASE NO.:                                    001-        -001
---------                                          ------




INSURANCE REQUIREMENTS:
----------------------

HAZARD INSURANCE:
----------------

     Evidenced on Form Acord 27 - Evidence of Insurance, naming General Electric
Capital Business Asset Funding  Corporation,  its successors and/or assigns,  as
Additional Insured as respects the subject property.

         Perils: Fire and Extended coverage, vandalism and malicious mischief,
Boiler and Machinery, and if applicable, Flood and Earthquake Insurance.

     Values:  100% Replacement cost value of property/Limit of $5,000 deductible
     ------

         Endorsements Required:
o        Inflation Guard, and Agreed Amount and Replacement Cost endorsements
o        List of Locations and Schedule of Values, if Blanket Policy
o        30 Days Notice of Cancellation
o        Agreed Amount endorsement

               Co-insurance should not be a condition of any insurance provided.

Loss of Rents/Business Interruption for 12 months (or in an amount equivalent to
at least 12 months rent) is required.

         Boiler and Machinery Coverage will be required.

LIABILITY:

         Coverage to be On Occurrence basis only.

         Evidence of Insurance, showing comprehensive general liability on an
Occurrence Basis, in an amount not less than $5,000,000 (per occurrence) to
include:

         Bodily injury and property damage liability (primary and excess
umbrella acceptable to satisfy limits).

         General Electric Capital Business Asset Funding Corporation is to be
         named Additional Insured as respects this property and the Additional
         Insured endorsement should be attached to the certificate.

SPECIAL INSTRUCTIONS

     General  Electric  Capital  Business  Asset  Funding  Corporation  is to be
provided with an Evidence of Insurance and a  Certificate  of Insurance  from an
insurance  company  having a Best's  Rating of A/X or better for,  respectively,
hazard and liability  coverage and must be executed by the insurance  company or
its  authorized  agent.  The  evidence  and  certificate  must itemize the above
coverage  and  endorsements.  WITHIN  90 DAYS OF  ISSUANCE  OF THE  EVIDENCE  OF
INSURANCE, THE INSURANCE COMPANY IS TO PROVIDE A CERTIFIED COPY OF THE INSURANCE
POLICY INCLUDING ALL ENDORSEMENTS AND AMENDMENTS.





<PAGE>



2
01-287182.07

01-287182.07

                                   SCHEDULE E

                      PERMANENT LOAN INSURANCE REQUIREMENTS


NAME OF INSURED:                    MANCHESTER TECHNOLOGIES INC.
---------------



INSURED MAILING ADDRESS:            160 Oser Avenue, Hauppauge, New York 11788
-----------------------


PROPERTY ADDRESS(s):                160 Oser Avenue, Hauppauge, New York
-------------------

MORTGAGEE/LOSS PAYEE:
--------------------




LOAN NO.:

INSURANCE REQUIREMENTS:
----------------------

HAZARD INSURANCE:
----------------

     Evidenced on Form Acord 27 - Evidence of Property Insurance, naming General
     Electric Capital Business Asset Funding Corporation,  its successors and/or
     assigns,  as Loss Payee and Mortgagee as respects the subject property.  If
     the credit tenant is to provide the insurance  coverage,  the Borrower must
     be named as Additional Insured.

     Perils:  Fire and Extended  coverage,  vandalism  and  malicious  mischief,
     Boiler and Machinery, and if applicable, Flood and Earthquake Insurance.

     Values:  l00% Replacement cost value of property/Limit of $5,000 deductible
     ------

         Endorsements Required:
o        Inflation Guard, and Agreed Amount and Replacement Cost endorsements
o        List of Locations and Schedule of Values, if Blanket Policy
o             438BFU (Loss Payee Endorsement - see copy attached, with
              enlargement of same for easier reading), in favor of General
              Electric Capital Business Asset Funding Corporation amended to 30
              days notice of change, cancellation or non-renewal.
o        30 Days Notice of Cancellation
         ? Waiver of Subrogation endorsement is required, unless property is
owner occupied.

          Co-insurance should not be a condition of any insurance provided.

          Loss of  Rents/Business  Interruption  for 12 months  (or in an amount
          equivalent to at least 12 months rent) is required.

          Boiler and Machinery  coverage is required.  If the insurance  carrier
          for the Boiler &  Machinery  coverage  is  different  from that of the
          Property  Coverage,  a  Joint  Loss  Agreement   endorsement  must  be
          reflected on the evidences of insurance for both Property coverage and
          Boiler & Machinery coverage.

          If the 438BFU  Lender's  Loss Payable  Endorsement  is not  available,
          please submit another Loss Payable  endorsement  for review by General
          Electric Capital Business Asset Funding Corporation.

LIABILITY:

          Evidenced on Form Acord 25 - Certificate of Liability Insurance

          Coverage to be On Occurrence basis only.

          Evidence of Insurance,  showing  comprehensive general liability on an
          Occurrence   Basis,  in  an  amount  not  less  than  $2,000,000  (per
          occurrence) to include;

          Bodily  injury  and  property  damage  liability  (primary  and excess
          umbrella acceptable to satisfy limits).

          General Electric  Capital Business Asset Funding  Corporation is to be
          named  Additional  Insured  as  respects  this  property  only and the
          Additional Insured  endorsement should be attached to the certificate.
          If the  credit  tenant  is to  provide  the  insurance  coverage,  the
          Borrower must be named as Additional Insured as well.

SPECIAL INSTRUCTIONS

General Electric  Capital  Business Asset Funding  Corporation is to be provided
with an Evidence of Property Insurance and a Certificate of Liability  Insurance
from an  insurance  company  having a Best's  Rating of A/X or  better  for both
hazard and liability  coverage and must be executed by the insurance  company or
its authorized  agent.  The evidence and certificate  must itemize all the above
endorsements  and the evidence  must include a copy of the  completed and signed
438BFU endorsement (a copy of which is attached).  WITHIN 90 DAYS OF ISSUANCE OF
THE EVIDENCE OF INSURANCE,  THE INSURANCE COMPANY IS TO PROVIDE A CERTIFIED COPY
OF THE INSURANCE POLICY INCLUDING ALL ENDORSEMENTS AND AMENDMENTS.





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                   LENDER'S LOSS PAYABLE ENDORSEMENT - 438 BFU


1.   Loss or damage, if any, under this policy shall be paid to General Electric
     Capital  Business  Asset Funding  Corporation,  its successors and assigns,
     hereinafter  referred to as the  "Lender," in whatever form or capacity its
     interests  may appear and whether said interest be vested in said Lender in
     its   individual   or  in  its  disclosed  or   undisclosed   fiduciary  or
     representative capacity, or otherwise, or vested in a nominee or trustee of
     said Lender.

2.   The  insurance  under this  policy,  or any rider or  endorsement  attached
     thereto, as to the interest only of the Lender, its successors and assigns,
     shall not be  invalidated  nor  suspended:  (a) by any error,  omission  or
     change respecting the ownership, description, possession or location of the
     subject of the insurance or the interest therein, or the title thereto; (b)
     by the  commencement of foreclosure  proceedings or the giving of notice of
     sale  of any of the  property  covered  by this  policy  by  virtue  of any
     mortgage  or trust  deed;  (c) by any breach of  warranty,  act,  omission,
     neglect  or  noncompliance  with  any of the  provisions  of  this  policy,
     including  any and all riders now or  hereafter  attached  thereto,  by the
     named insured, the borrower,  mortgagor,  trustor,  vendee,  owner, tenant,
     warehouseman,  custodian,  occupant,  or by the  agents of either of any of
     them or by the happening of any event  permitted by them or either of them,
     or their agents, or which they failed to prevent,  whether occurring before
     or after the attachment of this  endorsement,  or whether before or after a
     loss,  which under the  provisions  of this policy of  insurance  or of any
     rider or  endorsement  attached  thereto  would  invalidate  or suspend the
     insurance as to the named insured, excluding herefrom, however, any acts or
     omissions of the Lender while  exercising  active control and management of
     the property.

3.   In the event of failure of the  insured  to pay any  premium or  additional
     premium  which  shall be or become due under the terms of this policy or on
     account of any change in occupancy  or increase in hazard not  permitted by
     this policy,  this Company  agrees to give written  notice to the Lender of
     such  nonpayment  of  premium  after  sixty  (60) days from and  within one
     hundred  and twenty  (120) days after due date of such  premium and it is a
     condition of the continuance of the rights of the Lender hereunder that the
     Lender  when so  notified  in  writing  by this  Company  of failure of the
     insured to pay such  premium  shall pay or cause to be paid the premium due
     within ten (10) days following  receipt of the Company's  demand in writing
     therefor.  If the Lender shall  decline to pay said  premium or  additional
     premium,  the  rights  of the  Lender  under  this  Lender's  Loss  Payable
     Endorsement  shall not be terminated  before ten (10) days after receipt of
     said written notice by the Lender.

4.   Whenever  this  Company  shall pay to the Lender any sum for loss or damage
     under this  policy  and shall  claim  that as to the  insured no  liability
     therefor  exists,  this Company,  at its option,  may pay to the Lender the
     whole  principal sum and interest and other  indebtedness  due or to become
     due from the  insured,  whether  secured or  unsecured  (with refund of all
     interest not  accrued),  and this  Company,  to the extent of such payment,
     shall thereupon  receive a full assignment and transfer,  without recourse,
     of the debt and all rights and securities held as collateral thereto.

5.   If there be any other insurance upon the within  described  property,  this
     Company  shall  be  liable  under  this  policy  as to the  Lender  for the
     proportion of such loss or damage that the sum hereby  insured bears to the
     entire insurance of similar  character on said property under policies held
     by, payable to and expressly  consented to by the Lender.  Any Contribution
     Clause  included  in any  Fallen  Building  Clause  Waiver or any  Extended
     Coverage  Endorsement  attached  to this  contract of  insurance  is hereby
     nullified,  and also any  Contribution  Clause in any other  endorsement or
     rider  attached to this  contract of insurance is hereby  nullified  except
     Contribution Clauses for the compliance with which the insured has received
     reduction in the rate charged or has received  extension of the coverage to
     include  hazards  other  than fire and  compliance  with such  Contribution
     Clause is made a part of the consideration for insuring such other hazards.
     The  Lender  upon the  payment  to if of the full  amount of its claim will
     subrogate  this Company (pro rata with all other insurers  contributing  to
     said  payment) to all of the  Lender's  rights of  contribution  under said
     other insurance.

6.   This  Company  reserves  the right to cancel  this  policy at any time,  as
     provided by its terms, but in such case this policy shall continue in force
     for the benefit of the Lender for thirty (30) days after written  notice of
     such cancellation is received by the Lender and shall then cease.

7.   This policy shall remain in full force and effect as to the interest of the
     Lender  for a period  of ten (10)  days  after  its  expiration  unless  an
     acceptable  policy in renewal therefor with loss thereunder  payable to the
     Lender  in  accordance  with  the  terms  of  this  Lender's  Loss  Payable
     Endorsement  shall have been issued by some insurance  company  accepted by
     the Lender.

8.   Should  legal  title to and  beneficial  ownership  of any of the  property
     covered  under  this  policy  become  vested in the  Lender or its  agents,
     insurance  under this policy  shall  continue  for the term thereof for the
     benefit of the Lender,  but, in such event, any privileges  granted by this
     Lender's  Loss Payable  Endorsement  which are not also granted the insured
     under the terms and  conditions of this policy and/or under other riders or
     endorsements attached thereto shall not apply to the insurance hereunder as
     respects such property.

9.   All  notices  herein  provided  to be given by the Company to the Lender in
     connection  with this policy and this  Lender's  Loss  Payable  Endorsement
     shall be mailed to or be  delivered  to the  Lender at its office or branch
     at: Suite 500, 10900 NE 4th Street, Bellevue, WA 98004.

Attached to Policy No.
                       ---------------------------------
Of:
    ----------------------------------------------------
Issued to:
           ---------------------------------------------
Agency at:
           ---------------------------------------------
Date:
           --------------------------------------
<PAGE>


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