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                                                                    EXHIBIT 10.1

                                       LEASE
1. Basic Provisions.

1.1 Parties: This Lease ("Lease"), dated for reference purposes only, as of
October 1, 2002, is made by and between La Canada Properties, Inc., a California
corporation ("Landlord"), and Sport Chalet, Inc., a Delaware corporation
("Tenant") (collectively the "Parties" or individually a "Party").

1.2 Premises: The "Premises" shall consist of All space within the existing
building (the "Building") located at 839 Houseman Street, in the City of La
Canada, County of Los Angeles, State of California, containing approximately
27,500 square feet of "Rentable Area" (as hereinafter defined), on the north
side of Foothill Boulevard, approximately as depicted on the site plan therefor
attached hereto as Exhibit A and incorporated herein by this reference. The
Premises are to be located within a larger project site as depicted on Exhibit A
(the "Project") to be constructed by Landlord, which shall include certain
"Common Areas" (as hereinafter defined). (See Paragraph 2 for further
provisions.)

1.3 Term: Ten (10) years (the "Term") commencing on October 1, 2002 (the
"Commencement Date"). (See Paragraph 3 for further provisions).

1.4 Options: Tenant shall have the option to extend the Term of this Lease for
two (2) additional periods of five (5) years each, as more particularly provided
in Paragraph 3.2 below.

1.5 Base Rent: "Base Rent" under this Lease shall initially equal the sum of
$37,125.00, but shall be subject to increase on each yearly anniversary of the
Commencement Date during the Term of this Lease, as the Term may be extended by
any "Option Term(s)" in accordance with Paragraph 3.2 below, to equal the
product obtained by multiplying the Base Rent in effect immediately prior to the
applicable anniversary date, by a fraction, the numerator of which is the
"Index" (as hereinafter defined) for the calendar month which is three (3) full
calendar months prior to the applicable anniversary date, and the denominator of
which is the Index for the calendar month which is fifteen (15) full calendar
months prior to the applicable anniversary date; provided that in no event shall
Base Rent be reduced as a result of such adjustment of an anniversary date. As
used herein, the "Index" shall mean the Consumer Price Index published by the
United States Department of Labor, Bureau of Labor Statistics (the "Bureau")
"All Items" for All Urban Consumers in the Los Angeles-Riverside-Orange County
metropolitan area (1982-84=100). Landlord shall use reasonable efforts to
calculate and give Tenant written notice of any such increase in the Base Rent
prior to, and Tenant shall in all events pay the increased Base Rent effective
on, each anniversary date. Should the Bureau discontinue the publication of the
Index, publish the same less frequently or alter the same in some other manner,
the most nearly comparable index or procedure as reasonably determined by
Landlord shall be substituted therefor. The Base Rent as adjusted pursuant
hereto on an anniversary date shall be the Base Rent until the next anniversary
date. Base Rent shall be payable monthly in advance on the first day of each
month during the Term. (See Paragraph 4 for further provisions.)

1.6 Security Deposit: None.

1.7 Permitted Use. General office and administrative use and lawful uses
incidental thereto and for no other use or purpose, unless expressly otherwise
approved by Landlord, which approval shall not be unreasonably withheld,
conditioned or delayed.



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1.8 Tenant's Share: Tenant's Share shall be one hundred percent (100%) (being a
fraction, expressed as a percentage, the numerator of which is the Rentable Area
of the Premises and the denominator of which is the total of all Rentable Area
within the Building). (See Paragraph 4 for further provisions.)

1.9 Real Estate Brokers: None. (See Paragraph 15 for further provisions.)

2. Premises.

2.1 Letting. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the Premises, for the Term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease.

2.2 Construction of the Premises and Common Areas. Landlord has heretofore
constructed the Building and performed the other "Landlord's Work" (as defined
in Exhibit B attached hereto and incorporated herein by this reference), at
Landlord's sole cost and expense. Tenant has heretofore, at Tenant's sole cost
and expense, installed all "Tenant's Work" (as defined in Exhibit B) in
accordance with Exhibit B attached hereto.

2.3 Measurement of the Premises. All calculations of "Usable Area" and "Rentable
Area" under this Lease shall be determined in accordance with BOMA standards
(Building Owners and Managers Association Method for Measuring Floor Area in
Office Buildings, ANSI Z65.1-1996). However, the parties agree that any
statement of square footage set forth in this Lease, or that may have been used
in calculating rental, is an approximation which Landlord and Tenant agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual square footage is more or less.

2.4 Vehicle Parking. During the Term (and, notwithstanding anything to the
contrary contained in this Lease, regardless of any expansion or change to the
Project), Tenant shall be entitled to use, without charge therefor, at least of
the number of parking spaces existing at the Project as of the date hereof and
Tenant shall have the right to reasonably approve any change in the location of
such parking spaces within the Project so as to ensure a location reasonably
proximate to the Premises. Such parking spaces shall be used only for parking by
vehicles no larger than full sized passenger automobiles or pick-up trucks.
Tenant shall not permit or allow any vehicles that belong to or are controlled
by Tenant or Tenant's employees, agents or contractors to be loaded, unloaded or
parked in areas other than those designated by Landlord for such activities.

2.5 Common Areas. The term "Common Areas" is defined as all areas and facilities
outside the Premises and within the exterior boundary line of the Project that
are provided and designated by Landlord from time to time for the general
non-exclusive use of Landlord, Tenant and of other occupants of the Project and
their respective employees, suppliers, shippers, customers and invitees, which
may include, without limitation, parking areas, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped
areas. Landlord hereby grants to Tenant, for the benefit of Tenant and its
employees, suppliers, shippers, customers and invitees, during the Term of this
Lease, the non-exclusive right to use, in common with others entitled to such
use, the Common Areas as they exist from time to time, subject to any rights,
powers and privileges reserved by Landlord under the terms of this Lease or
under the terms of any reasonable and non-discriminatorily enforced rules or
regulations or restrictions governing the use of the Project. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Landlord or such other person(s) as



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Landlord may appoint, shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable and non-discriminatorily enforced rules and
regulations with respect to the Common Areas, in accordance with the provisions
of Paragraph 40 below. Tenant agrees to abide by and conform to all such rules
and regulations, and to cause its employees, agents and contractors to so abide
and conform. Landlord shall not be responsible to Tenant for the non-compliance
with such rules or regulations by other tenants and users of the Project.
Landlord shall have the right, in its sole and absolute discretion, from time to
time (a) to make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances, parking
spaces, parking areas, loading and unloading areas, ingress, egress, direction
of traffic, landscaped areas and walkways, so long as reasonable access to the
Premises remains available; (b) to close temporarily any of the Common Areas for
maintenance and/or repair purposes or to prevent the acquisition of rights in
the Common Areas by other persons or entities, so long as reasonable access to
the Premises remains available; (c) to designate other land outside the
boundaries of the Project to be a part of the Common Areas; (d) to add
additional buildings and improvements to the Common Areas; (e) to use the Common
Areas while engaged in making additional improvements, repairs or alterations to
the Project, or any portion thereof; and (f) to do and perform such other acts
and make such other changes in, to or with respect to the Common Areas and/or
Project as Landlord may, in the exercise of commercially reasonable business
judgment, deem to be appropriate. Without limiting the generality of the
foregoing, the parties hereby acknowledge that portions of the Project site
remain to be developed subsequent to the development of the Building. However,
notwithstanding anything to the contrary contained in this Lease, in the course
of performance of any subsequent development, redevelopment, construction or
other work upon the Project or exercise of any of the rights reserved by
Landlord in this Paragraph 2.5, Landlord shall not materially adversely affect
(i) the use or occupancy of the Premises, (ii) means of access to and from the
Premises, (iii) parking serving the Premises, or (iv) visibility of Premises
signage from adjacent rights of way.

3. Term.

3.1 Term and Commencement. This Lease shall be effective and binding upon the
parties from and after the date hereof. The Term of this Lease shall be as
specified in Paragraph 1.3 above, commencing upon the Commencement Date;
provided, however, that if for any reason Landlord does not deliver possession
of the Premises to Tenant by any date estimated therefor, Landlord shall not be
subject to any damages or liability therefor, nor shall such failure affect the
validity of this Lease, or the obligations of Tenant hereunder, or extend the
Term hereof. However, if the Commencement Date of this Lease does not occur by
the date which is two (2) years following the date hereof, unless otherwise
approved by Landlord and Tenant, this Lease shall automatically terminate
without any further action by either of the parties hereto and neither party
shall have any obligation or liability hereunder.

3.2 Options to Extend. Landlord hereby grants Tenant two (2) separate options
(the "Options") to extend the Term of this Lease for two (2) separate
consecutive terms (the "Option Terms") of five (5) years each, following
expiration of the then existing Term, upon all the terms and conditions
contained in this Lease (including, without limitation, adjustment of Base Rent
in accordance with the provisions of Paragraph 1.5 above). Tenant shall give
written notice of the exercise of each Option to Landlord at least nine (9)
months prior to the expiration of the then applicable Term; provided that Tenant
may not exercise any such Option to extend if Tenant is then in default under
this Lease beyond any applicable period for cure thereof. References in this
Lease to the "Term" shall mean the initial Term of this Lease, as the same may
be extended by any Option Terms, as applicable. Tenant's option to extend the
Term by the Option Terms pursuant hereto shall be personal to Tenant and any
"Permitted Transferee"



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(as defined in Paragraph 12 below) of Tenant, and shall not be assignable to or
exercisable by any assignee of Tenant other than a Permitted Transferee.

4. Rent.

4.1 Base Rent. Tenant shall cause payment of Base Rent and other rent or
charges, as the same may be adjusted from time to time, to be received by
Landlord in lawful money of the United States, without offset or deduction
(except as expressly otherwise provided in this Lease), on or before the day on
which it is due under the terms of this Lease. Base Rent shall be payable
monthly in advance during the Term commencing upon the Commencement Date. Base
Rent and all other rent and charges for any period during the Term hereof which
is for less than one (1) full calendar month shall be prorated based upon the
actual number of days of the calendar month involved. Payment of Base Rent and
other rent and charges shall be made to Landlord at its address stated herein or
to such other persons or at such other addresses as Landlord may from time to
time designate in writing to Tenant.

4.2 Operating Expenses.

(a) For purposes of this Lease, "Operating Expenses" shall mean the sum of costs
incurred by Landlord in performance of obligations with respect to the Building
and improvements therein pursuant to Paragraph 7.2 below, costs incurred by
Landlord in maintaining the insurance described in Paragraph 8.3 below, costs
incurred by Landlord in payment of Real Property Taxes with respect to the
Building pursuant to Paragraph 10.1 below, and the "Building's Share" (as
hereinafter defined) of "Common Area Expenses" (as hereinafter defined),.
Operating Expenses shall also include the amount of any insurance deductible
pursuant to Paragraph 8.3 in the event of casualty, subject to the following:
Operating Expenses shall not include any portion of any deductible in excess of
$50,000.00 and further, if Tenant's Share of any deductible exceeds $5,000.00,
then such insurance deductible shall not be wholly included in Operating
Expenses in the year incurred, but instead shall be amortized over the
reasonably anticipated useful life of the applicable repair item and only annual
amortization of such amount shall be included in Operating Expenses during each
year of such useful life. In addition, Operating Expenses shall include an
"Administrative Fee" to Landlord equal to ten percent (10%) of all other items
of Operating Expenses other than items of Operating Expenses relating to Real
Property Taxes, insurance costs or utility costs. As used herein, the
"Building's Share" shall mean a fraction, the numerator of which is the Rentable
Area of the Building and the denominator of which is the total of all Rentable
Area within the Project. For purposes of this Lease, "Common Area Expenses"
shall mean all costs incurred by Landlord for the operation, management, repair,
maintenance and replacement, in neat, clean, good order and condition, of the
Common Areas, including, without limitation, any parking areas, loading and
unloading areas, trash areas, roadways, sidewalks, walkways, parkways,
driveways, landscaped areas, striping, bumpers, irrigation systems, lighting
facilities, fences and gates, costs of causing the Common Areas to comply with
applicable Laws, costs incurred by Landlord in maintaining a policy of liability
insurance pursuant to Paragraph 8.2 below, costs incurred by Landlord in payment
of Real Property Taxes with respect to the Common Areas pursuant to Paragraph
10.1 below, and the cost of water, gas and electricity to service the Common
Areas. Notwithstanding anything to the contrary contained in this Lease, the
parties hereby agree and acknowledge that portions of the Project are
anticipated to remain undeveloped until following the Commencement Date under
this Lease. Accordingly, following the completion of development of the Project,
Tenant's Share of Operating Expenses shall not increase disproportionately based
upon any development of the Project for uses and/or at densities different that
the use and density of development of the Building and parking areas serving the
Building.



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(b) However, notwithstanding anything to the contrary contained in this Lease,
in no event shall Operating Expenses include any of the following: (1) the cost
of any structural repairs or any other expenditures which, in accordance with
generally accepted accounting principles, are not fully chargeable to current
account in the year the expenditure is incurred (provided that in the event of
parking lot resurfacing during the Term, costs of such resurfacing shall not be
wholly included in Operating Expenses in the year incurred, but shall be
amortized over the reasonably anticipated useful life of such resurfacing and
may be included in Operating Expenses on an amortized basis, during each year of
such reasonably anticipated useful life); (2) other than the Administrative Fee
(which may be included in Operating Expenses), fees, costs or expenses relating
to management, administration or supervision of all or any part of the Project
or Common Areas (including, without limitation, individual compensation or other
expenses with respect to officers, executives or on or off site management or
administrative personnel of Landlord, or third parties engaged by Landlord to
provide such services, or any other costs or expenses relating to
administrative, bookkeeping, accounting, management or similar services or
functions with respect to the Project or Common Areas); (3) rent or other
amounts payable under any ground lease or master lease, or interest,
amortization or other repayment of indebtedness or costs, fees, points or other
expenses in connection with any financing or refinancing of all or any part of
the Project Center; (4) cost of correcting defects in the initial design or
construction of the Project or any expansion or redevelopment thereof, or any
repairs resulting from inferior or deficient workmanship; (5) costs of
correcting any non-compliance of the Project or any part thereof with applicable
Laws as of the Substantial Completion Date; (6) any costs relating to Hazardous
Materials; (7) cost for which Landlord is reimbursed, receives a credit or is
otherwise compensated (other than tenant reimbursements for Operating Expenses);
(8) costs of repair or restoration required due to casualty damage or
condemnation (other than inclusion of insurance deductibles on an amortized
basis as expressly provided in subparagraph (a) above); (9) reserves for
anticipated future expenses; (10) advertising or promotional expenses
(including, but not limited to, those relating to Christmas or other seasonal
decorations or promotional events); (11) interest or penalties incurred as a
result of Landlord's failure to pay any bill as it shall become due or costs
resulting from the negligence or wilful misconduct of Landlord, its employees,
agents and/or contractors; (12) costs of leasing any item which if purchased,
rather than leased, would be excluded from Operating Expenses pursuant hereto;
(13) any amount paid to any corporation or other entity related to Landlord or
to the managing agent of Landlord which is in excess of the amount which would
have been paid in the absence of such relationship; (14) costs related to the
operation of Landlord as an entity rather than the operating of the Project
(including, without limitation, costs of formation of the entity, internal
accounting, legal matters and/or preparation of tax returns) or costs associated
with marketing or selling Project or any interest therein, or converting the
Project to a different form of ownership; (15) leasing commissions, attorneys'
fees, costs and disbursements, and other expenses (including, without
limitation, advertising) incurred in connection with leasing, renovating, or
improving space for tenants or other occupants or prospective tenants or
occupants of the Project or development of other properties, or costs
(including, without limitation, permit, license, and inspection fees) incurred
in renovating or otherwise improving or decorating, painting or redecorating
space for tenants or other occupants or vacant space; (16) costs of any services
sold to tenants or other occupants for which Landlord is entitled to be
reimbursed by such tenants or other occupants as an additional charge or rental
over and above the basic rent and escalations payable under the lease with such
tenant or other occupant, and costs associating with valet parking (including,
without limitation, wages and other expenses); (17) any depreciation or
amortization of the Building or other buildings and improvements within the
Project; (18) expenses in connection with services or other benefits of a type
provided to some but not all tenants or not available to Tenant, such as (by way
of illustration and not in limitation) special services provided to food service
tenants, and garbage removal (if Tenant is maintaining its own trash dumpster at
Tenant's expense and not using the Project's dumpster); (19) repairs and/or
maintenance of any pylon or other



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sign which does not include any Tenant signage but does include signage of other
tenants or occupants of the Project; and (20) costs of maintenance or repair to
the premises of Project tenants to the extent that, as to the Premises, Tenant
performs such maintenance or repair itself, at Tenant's sole cost, or (21) costs
of utilities or services to the premises of Project tenants to the extent that,
as to the Premises, Tenant pays for such utilities or services directly.

(c) Tenant shall pay to Landlord, as additional rent, Tenant's Share of
Operating Expenses, within thirty (30) days after Tenant's receipt of a
statement therefor from Landlord; provided, however, that at Landlord's option,
an amount may be estimated by Landlord from time to time of Tenant's Share of
annual Operating Expenses and the same shall be payable monthly, in advance,
during each year of the Lease Term, on the same day as the Base Rent is due
hereunder. In the event of payment of Tenant's Share of Operating Expenses on an
estimated basis, Landlord shall have the right to adjust its estimate of such
expenses from time to time during the Lease Term upon not less than thirty (30)
days prior written notice to Tenant, based upon reasonably anticipated changes
in the amount of such expenses. For any year during which Tenant's Share of
Operating Expenses is so paid on an estimated basis, within ninety (90) days
following the end of such year or as soon thereafter as information becomes
available to Landlord, Landlord shall deliver to Tenant a statement of actual
Operating Expenses for such year, and if Tenant has overpaid Tenant's Share of
Operating Expenses, Tenant shall be entitled to a credit against Tenant's Share
of Operating Expenses next coming due under this Lease in the amount of such
excess (except that any such overpayment allocable to the final year of the
Lease Term shall be refunded to Tenant following the satisfaction of all Tenant
obligations under this Lease), and if Tenant has underpaid Tenant's Share of
Operating Expenses, Tenant shall pay any such deficiency to Landlord within
thirty (30) days following receipt of such statement. Landlord's obligation to
make such refund and Tenant's obligation to pay such deficiency, as applicable,
shall survive the expiration of the Term or earlier termination of this Lease.

(d) Landlord shall keep at the Project or at another location in California,
complete and accurate books of account and records with respect to the Operating
Expenses, and shall retain such books and records and reasonable supporting
documentation as to each year during the Term for at least two (2) years from
the date Landlord submits its annual statement of Operating Expenses for such
year. Tenant's payment of Tenant's Share of Operating Expenses shall be without
prejudice to Tenant's examination and audit rights. Tenant may at any reasonable
time during normal business hours, upon ten (10) days' prior notice to Landlord,
cause a complete audit to be made of such books, records and other materials
which Landlord is required to retain for all or any part of the two (2) years
immediately preceding the giving of such notice. Tenant may require Landlord to
produce such information about such books and records as is reasonably necessary
and customary for a proper examination and audit thereof and to make such books
and records available to Tenant for examination and audit. Any such audit shall
be conducted in a manner so as to avoid unreasonable interference with
Landlord's business operations. If such audit discloses any overpayment by
Tenant of Tenant's Share of Operating Expenses, Landlord shall refund to Tenant
the amount of such overpayment within thirty (30) days following Landlord's
receipt of such audit. If such audit discloses any underpayment by Tenant of
Tenant's Share of Operating Expenses, Tenant shall pay the amount of such
deficiency to Landlord together with delivery to Landlord of such audit. If such
audit discloses an overpayment by Tenant of Tenant's Share of Operating Expenses
by three percent (3%) or more, Landlord shall pay to Tenant within thirty (30)
days after demand, Tenant's reasonable cost in conducting such audit (as
evidenced by invoices or other reasonable supporting documents delivered to
Landlord). Tenant shall not conduct such an audit of Landlord's records more
than once in any given year. Failure of Tenant to conduct such an audit within
two (2) years following submission to Tenant of the applicable annual statement
shall constitute the waiver by Tenant of any right to audit Common Area Expenses
specified within


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such annual statement.

4.3 Late Charges. Tenant hereby acknowledges that late payment by Tenant to
Landlord of rent and other sums due hereunder will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Landlord by
the terms of any ground lease, mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within five (5) days after
such amount shall be due, then, without any requirement for notice to Tenant,
Tenant shall pay to Landlord a late charge equal to six percent (6%) of such
overdue amount; provided that as to the initial such late payment in any twelve
(12) consecutive month period during the Term, such late charge shall not be due
or payable unless such failure by Tenant to pay when due is not cured within
five (5) days following Tenant's receipt of written notice thereof from
Landlord. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Landlord will incur by reason of late payment
by Tenant. Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder.

4.4 Interest on Past Due Obligations. In addition to the late charge provided
for in Paragraph 4.3, any monetary payment due either party hereunder not
received by the applicable party on the date on which it was due, shall
thereafter bear interest at the "Interest Rate" (as hereinafter defined), from
the date due until paid. For purposes of this Lease, the "Interest Rate" shall
mean the four percent (4%) per annum plus the then prevailing per annum "prime
rate" as most recently published in the Wall Street Journal (or the then "prime"
rate as established by a comparable alternate source reasonably designated by
Landlord in the event the Wall Street Journal ceases to publish a prevailing
"prime" rate), provided that in no event shall the Interest Rate exceed the
maximum rate permitted by applicable law governing interest rate restrictions.

5. Abatement of Rent for Interference. Notwithstanding anything to the contrary
contained in this Lease, during the Term of the Lease, if Tenant is actually
prevented from using all or a material portion of the Premises as a result of
(i) an interruption in essential utility services to the Premises which is the
fault of Landlord or Landlord's employees, agents or contractors, or (ii)
Landlord's actions in developing, remodeling or renovating the Project pursuant
to this Lease above and/or in entering upon the Premises (other than in
exercising any remedy or curing any Tenant failure to perform in accordance with
this Lease), and which prevention from use is not cured by Landlord within three
(3) consecutive business days following Landlord's receipt of written notice
thereof from Tenant stating Tenant's intent to receive an abatement, then Base
Rent and Tenant's obligation for payment of Tenant's Share of Operating Expenses
shall thereafter be equitably abated, based upon the portion of the Premises
which Tenant is so prevented from using, until and to the extent that Tenant is
no longer so prevented from using such portion of the Premises as a result of
the applicable item described in clause (i) or (ii) above. Notwithstanding the
foregoing, the provisions of Paragraph 9 below and not the provisions of this
Paragraph 5 shall govern in the event of casualty damage to the Premises or
Project and the provisions of Paragraph 14 below and not the provisions of this
Paragraph 5 shall govern in the event of condemnation of all or a part of the
Premises or Project.

6. Use.

6.1 Use. Tenant shall use the Premises for the use or uses set forth in
Paragraph 1.7 above, and shall not use or permit the Premises to be used for any
other purpose whatsoever. Tenant shall use and



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occupy the Premises in compliance with all applicable federal, state and local
laws, codes, rules, ordinances, statutes and other requirements (collectively,
"Laws") (which Laws shall include, without limitation, the Americans with
Disabilities Act of 1990, applicable fire-life safety codes of the City where
the Premises is located, and governmental requirements imposed in connection
with the development or occupancy of the Building, including, without
limitation, participation in any transportation management programs and
compliance with any applicable air quality/trip reduction requirements), and
shall, upon written notice from Landlord, discontinue any use of the Premises
which is declared by any governmental authority having jurisdiction to be a
violation of applicable Laws; provided that the provisions of this sentence
shall not obligate Tenant to make any structural alterations or improvements to
the Premises required to comply with applicable Laws unless such compliance is
necessitated by Tenant's particular use of, or Alterations to, the Premises.
Tenant shall make any and all alterations or improvements to the Premises
required to comply with applicable Laws; except that Tenant shall not be
required to make structural alterations or improvements to the Premises required
to comply with applicable Laws unless such compliance is necessitated by
Tenant's particular use of, or Alterations to, the Premises. Tenant shall comply
with all reasonable rules, orders, regulations and requirements of any insurance
authority having jurisdiction over the Project or any present or future insurer
relating to the Premises or the Project. Tenant shall promptly, upon demand,
reimburse Landlord for any additional premium charged for any existing insurance
policy or endorsement required by reason of Tenant's failure to comply with the
provisions of this Paragraph 6 or by reason of Tenant's particular manner of use
or occupancy of the Premises. Tenant shall not do or permit anything to be done
in or about the Premises which will in any manner obstruct or interfere with the
rights of other tenants or occupants of the Project, or injure them, or use or
allow the Premises to be used for any unlawful purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises and shall
keep the Premises in first class repair and appearance. Tenant shall not place a
load upon the Premises exceeding the Building's maximum floor load capacity.
Landlord reserves the right to reasonably prescribe the weight and positions of
all safes, files and heavy equipment which Tenant desires to place in the
Premises so as to distribute properly the weight thereof.

6.2 Hazardous Materials.

        (a) To Landlord's actual knowledge, as of the delivery of possession of
the Premises to Tenant, no portion of the Project shall be in violation of any
applicable Laws respecting "Hazardous Materials" (as hereinafter defined) at
levels which would materially and adversely affect Tenant's use or occupancy of
the Premises. Landlord shall indemnify, defend and hold harmless Tenant from and
against any and all claims, judgments, damages, penalties, fines, costs,
liabilities and losses (including, without limitation, sums paid in settlement
of claims and for reasonable attorneys' fees, consultant fees and expert fees,
but specifically excluding special, indirect or consequential damages including
but not limited to claims for loss of use, anticipated profit or business
opportunity, market-based stigma damages or business interruption, or mental or
emotional distress or fear of injury or disease), to the extent arising as a
result of any Hazardous Materials under current interpretations of applicable
Laws as of the date of this Lease now or hereafter located in, on, under or
about the Building and/or Project unless caused to be so located in, on, under
or about the Building and/or Project by Tenant, any subtenant of Tenant and/or
any of their respective employees, agents, representatives, contractors or
invitees. This indemnification of Tenant by Landlord includes, without
limitation, costs incurred in connection with any investigation of site
conditions or any clean-up, remedial, removal or restoration work. The covenants
of Landlord under this Paragraph 6.2(a) shall survive the expiration of the Term
or earlier termination of this Lease.



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<PAGE>

        (b) Except general office supplies typically used in an office area in
the ordinary course of business, such as copier toner, liquid paper, glue, ink,
and cleaning solvents (collectively, "Customary General Office Hazardous
Materials"), for use in the manner for which they were designed, in such amounts
as may be normal for the office business operations conducted by Tenant in the
Premises, neither Tenant nor any subtenant nor any of their respective
employees, agents, representatives, contractors, licensees or invitees, shall
use, handle, store or dispose of any Hazardous Materials in, on, under or about
the Premises, the Building or the Project. In the event any Hazardous Materials
(other than Customary General Office Hazardous Materials) are caused to be
located in, on, under or about the Premises, Building or Project by Tenant, any
of its subtenants, or any of their respective employees, agents,
representatives, contractors, licensees or invitees, Tenant shall notify
Landlord of the same immediately following Tenant's first learning of the same.
In the event of a breach of the covenant contained in the foregoing sentences of
this Paragraph 6.2(b), or in the event Hazardous Materials are otherwise caused
to be located in, on, under or about the Premises, Building or Project by
Tenant, any of its subtenants, or any of their respective employees, agents,
representatives, contractors, licensees or invitees, Tenant shall be solely
responsible for and shall indemnify, defend and hold Landlord harmless from and
against any and all claims, judgments, damages, penalties, fines, costs,
liabilities and losses (including, without limitation, diminution in valuation
of the Premises, Building or Project, and sums paid in settlement of claims and
for reasonable attorneys' fees, consultant fees and expert fees) which arise
during or after the Term as a result of any contamination directly or indirectly
arising from the activities which are the basis for such breach. This
indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any
clean-up, remedial, removal or restoration work. Tenant shall promptly take all
actions, at its sole cost and expense, as are necessary to return the Premises,
Building and/or Project to the condition existing prior to the introduction of
any such Hazardous Materials, provided Landlord's approval of such actions shall
first be obtained and Tenant shall fully cooperate in connection with any such
clean up, restoration or other work, at Tenant's sole cost and expense.
Furthermore, Tenant shall promptly notify Landlord of any inquiry, test,
investigation or enforcement proceeding by or against Tenant or the Premises
concerning the presence of any Hazardous Materials. Tenant acknowledges that
Landlord, at Landlord's election, shall have the sole right, at Tenant's
expense, to negotiate, defend, approve and appeal any action taken or order
issued by any governmental authority with regard to any Hazardous Materials
contamination which Tenant is obligated hereunder to remediate. The covenants of
Tenant under this Paragraph 6.2(b) shall survive the expiration of the Term or
earlier termination of this Lease.

        (c) "Hazardous Materials" shall mean asbestos, petroleum fuel, natural
gas or any fraction thereof, and any hazardous or toxic substance, material or
waste which is or become regulated by any local governmental authority, the
State of California or the United States Government, including, but not limited
to, any material or substance defined as a "hazardous waste," "extremely
hazardous waste," "restricted hazardous waste," "hazardous substance,"
"hazardous material" or "toxic pollutant" under state or federal laws, statutes
or regulations, including, without limitation, the California Health and Safety
Code and/or under the Comprehensive Environmental Response, Compensation and
Liability Act, 42. U.S.C. Section 9601, et seq.

7. Maintenance; Repairs; Alterations.

7.1 Tenant's Obligations.

        (a) Tenant will at its expense maintain all portions of the Building,
interior and exterior (other than the roof structure, foundation, structural
walls and other structural elements of the Building)



                                       9
<PAGE>

in good and tenantable condition and make all needed repairs thereto, including
exposed interior utility lines, meters, pipes, conduits, fixtures and other
equipment and systems serving exclusively the Building and equipment and
personal property of Tenant within the Building. Tenant shall permit no waste,
damage or injury to the Premises. Tenant shall perform all necessary repairs,
alterations and improvements to cause the Premises to comply with all applicable
Laws to the extent that such compliance is required as a result of Tenant's
particular use of the Premises. Tenant will not overload the electrical wiring
serving the Premises, and will install at its expense any additional electrical
wiring which is required in connection the operation of Tenant's business, in
excess of such electrical wiring and capacity as is existing as of the date
hereof. In the event that any elements of the Project to be maintained and
repaired by Tenant pursuant to this Lease are covered by warranties obtained by
Landlord with respect to Landlord's Work, Landlord shall assign such warranties
to Tenant or otherwise reasonably cooperate with Tenant so as to allow Tenant to
take advantage of the benefit of such warranties.

        (b) In the event of an emergency, Landlord shall have the right, but not
the obligation, to undertake immediate repairs of such nature as would normally
be Tenant's responsibility, and notify Tenant promptly after such repairs have
been undertaken (including, without limitation, notice by telephone, to the
extent reasonably practicable). If Tenant fails to repair any portion of the
Premises which is Tenant's responsibility, within thirty (30) days after notice
from Landlord of the necessity for such repair (or such greater period of time
as is reasonably necessary to complete such repairs in the event such repairs
are not susceptible of completion within thirty (30) days, provided that
following receipt of such notice from Landlord, Tenant promptly commences such
repairs and diligently prosecutes the same to completion), or in the case of any
emergency as above stated, Landlord may perform the repairs or maintenance and
Tenant shall reimburse Landlord for the reasonable cost of such repairs within
thirty (30) days following Tenant's receipt from Landlord of invoices or other
reasonable evidence of the amount of such costs; provided, however, that in the
event Tenant in good faith disputes whether Landlord in fact performed an
obligation of Tenant hereunder, Tenant shall have the right to dispute the same
by institution of a reference proceeding in accordance with the provisions of
Paragraph 39 below. If it is determined pursuant to such proceeding that
Landlord did not in fact perform an obligation of Tenant in accordance herewith,
then Landlord shall not have any right to reimbursement for the cost of
performance as herein provided. If it is determined pursuant to such proceeding
that Landlord in fact performed an obligation of Tenant hereunder, then Tenant
shall within ten (10) days following such determination, reimburse Landlord for
the reasonable cost of such performance as determined pursuant to such action,
plus interest thereon at the Interest Rate from the date of Landlord's
expenditure until Tenant's reimbursement.

7.2 Landlord's Obligations.

        (a) Landlord will, at its sole cost and expense, keep, maintain, repair
and replace in first-class and professional manner and repair consistent with
the standards of first-class office/commercial project comparable to the Project
located in the vicinity of the Project, and (subject to Tenant's obligation to
perform necessary repairs, alterations or improvements to the Premises to comply
with applicable Laws where such compliance is required as a result of Tenant's
particular use of the Premises) perform any repairs, improvements or alterations
required by applicable Laws to, the roof structure, foundation, structural walls
and other structural elements of the Building and utility lines, meters, pipes,
conduits, fixtures and other equipment and systems (except if exposed within the
Building), plus all Common Areas of the Project. Notwithstanding anything to the
contrary contained in this Lease, Tenant shall have the right (but not the
obligation) upon written notice to Landlord, to assume responsibility for any
work of maintenance, repair or replacement otherwise to be performed by



                                       10
<PAGE>

Landlord pursuant to this Lease, and (i) if the cost of such work would, if
performed by Landlord, be included in Operating Expenses pursuant to Paragraph
4.2 above, then Tenant shall perform such work at Tenant's sole cost (in which
case Operating Expenses shall not include costs of performance of such work),
and (ii) if the cost of such work would, if performed by Landlord, not be
included in Operating Expenses pursuant to Paragraph 4.2 above, then Landlord
shall reimburse Tenant for the reasonable costs of such work within thirty (30)
days following Tenant's submission to Landlord of reasonable evidence of such
costs; provided further, that Tenant may not elect to assume responsibility for
performance of such work with respect to the Common Areas pursuant to this
Paragraph 7.2(a) from and after such time as there are occupants of the Project
other than Tenant.

        (b) Tenant may give Landlord notice of such repairs as may be required
under the terms of this Lease, and Landlord shall proceed forthwith to effect
the same with reasonable diligence, but in no event later than thirty (30) days
after having received notice (or such greater period of time as is reasonably
necessary to complete such repairs in the event such repairs are not susceptible
of completion within thirty (30) days, provided Landlord shall, following
receipt of such notice from Tenant, promptly commence such repairs and
diligently prosecute the same to completion). In event of an emergency, Tenant
shall have the right, but not the obligation, to undertake immediate repairs of
such nature as would normally be Landlord's responsibility, and notify Landlord
promptly after such repairs have been undertaken (including, without limitation,
notice by telephone, to the extent reasonably practicable). If Landlord fails to
repair any portion of the Premises which is Landlord's responsibility, within
the thirty (30) day period set forth above (or such greater period of time as is
reasonably necessary to complete such repairs in the event such repairs are not
susceptible of completion within thirty (30) days, provided that following
receipt of such notice from Tenant, Landlord promptly commences such repairs and
diligently prosecutes the same to completion), or in the case of any emergency
as above stated, Tenant may perform the repairs or maintenance and Landlord
shall reimburse Tenant for the reasonable cost of such repairs within thirty
(30) days following Landlord's receipt from Tenant of invoices or other
reasonable evidence of the amount of such costs; provided, however, that in the
event Landlord in good faith disputes whether Tenant in fact performed an
obligation of Landlord hereunder, Landlord shall have the right to dispute the
same by institution of a reference proceeding in accordance with the provisions
of Paragraph 39 below. If it is determined pursuant to such proceeding that
Tenant did not in fact perform an obligation of Landlord in accordance herewith,
then Tenant shall not have any right to reimbursement for the cost of
performance as herein provided. If it is determined pursuant to such proceeding
that Tenant in fact performed an obligation of Landlord hereunder, then Landlord
shall within ten (10) days following such determination, reimburse Tenant for
the reasonable cost of such performance as determined pursuant to such action,
plus interest thereon at the Interest Rate from the date of Tenant's expenditure
until Landlord's reimbursement. Should Landlord fail to pay such amount as is
owing in accordance herewith (i) within thirty (30) days of receipt of invoice
(if Landlord does not institute an action within such thirty (30) day period to
in good faith dispute as herein provided), or (ii) within ten (10) days after
such determination by such action, as applicable, Tenant may deduct and offset
such amount (including interest at the Interest Rate from the time such
expenditure was made by Tenant until paid by Landlord) from Base Rent, Tenant's
Share of Operating Expenses and other monetary obligations of Tenant owing to
Landlord hereunder.

7.3 Alterations; Liens; Surrender.

(a) Tenant shall not make or allow to be made any alterations, additions or
improvements (collectively, any "Alterations") in or to the Premises during the
Term without obtaining Landlord's prior written consent (which consent shall not
be unreasonably withheld or delayed); except, however,



                                       11
<PAGE>

that Tenant may make interior, non structural Alterations to the Premises
costing less than Fifty Thousand Dollars ($50,000.00) per work of Alterations
and not (i) requiring the demolition of any existing improvements or (ii)
adversely affecting the roof, mechanical or utility systems serving the Premises
or the exterior appearance of the Building, without Landlord's prior consent but
upon at least ten (10) days prior written notice to Landlord. To the extent that
preparation of plans and specifications is customary as to a particular type of
work of proposed Alterations, Tenant's request for consent to such Alterations
requiring consent shall be accompanied by two (2) complete sets of plans and
specifications for the proposed Alterations suitable for submission to
Landlord's architect for evaluation and a statement of the identity of the
contractor who will perform such Alterations. If Landlord's consent is required
for any Alterations, Tenant shall pay all reasonable out of pocket costs
incurred by Landlord in the evaluation of the plans and specifications,
including, but not limited to, Landlord's general contractor's, architects' and
engineers' fees. In addition, as a condition to Landlord's granting of its
consent to any Alterations, Landlord shall have the right to approve the
contractor and subcontractors performing such Alterations, such approval not to
be unreasonably withheld or delayed, and Landlord shall have the right to
require that Tenant furnish assurances satisfactory to Landlord that all
contractors and subcontractors who will perform such work have in force workers'
compensation and such other employee and comprehensive general liability
insurance in accordance with the standards set forth in Paragraph 8.1(a) below
(but with a liability limit of not less than One Million Dollars
($1,000,000.00)), and such other insurance as Landlord reasonably deems
necessary to supplement the insurance coverage provided for in Paragraph 8. All
Alterations work to be performed by Tenant in the Premises requiring the consent
of Landlord pursuant hereto, including the delivery, storage and removal of
materials, shall be scheduled through and be subject to the reasonable
supervision of Landlord, and shall be performed in accordance with any
reasonable conditions or regulations imposed by Landlord. All Alterations work
(whether or not Landlord's consent is required therefor) shall be completed in a
good and workmanlike manner and in accordance with all applicable Laws. All
Alterations requiring Landlord's consent shall be completed in accordance with
the approved plans and specifications therefor. Promptly following the
completion of any Alterations where the preparation of "as built" plans would be
customary for the particular Alterations work performed, Tenant shall deliver to
Landlord both a "hard" copy and a copy on CAD diskette of the "as built" plans
and specifications (including all working drawings) for such Alterations.
Promptly following the completion of any Alterations for which any governmental
permit, approval or sign off is required under applicable Laws, Tenant shall
deliver to Landlord a copy of signed off permits, inspection cards or other
documentation, if any is available given the nature of the Alterations work
performed, evidencing governmental approval of completion of the work. Promptly
following the completion of any Alterations requiring Landlord's consent, Tenant
shall cause to be recorded in the Office of the County Recorder of Los Angeles
County a Notice of Completion in accordance with Section 3093 of the California
Civil Code or any successor statute with respect to the work, and deliver a copy
thereof to Landlord. Any supervision by Landlord of such Alterations shall in no
event constitute Landlord's approval of the work so performed, nor shall
Landlord be responsible for or have any liability with respect to such
supervision or work. Copies of required building permits or authorizations shall
be obtained by Tenant at its expense and Tenant shall furnish copies of same to
Landlord.

(b) Tenant shall provide Landlord with not less than ten (10) days prior written
notice prior to the commencement of any work in the Premises that could result
in the imposition of a mechanics' or materialman's lien against the Premises or
the Building. Any mechanics' or materialman's liens filed against the Premises
or against the Building or the Project for work claimed to have been done for,
or materials claimed to have been furnished to, Tenant will be discharged by
Tenant, by bond or otherwise, within thirty (30) days after Tenant's receipt of
notice of the filing thereof, at Tenant's sole



                                       12
<PAGE>

cost and expense. All Alterations upon the Premises shall, unless Landlord
elects otherwise by written notice to Tenant at the time of Tenant's
installation of such Alterations, become the property of Landlord upon the
expiration of the Term or earlier termination of this Lease, and shall remain
upon and be surrendered with the Premises, as part thereof, at the expiration of
the Term or earlier termination of this Lease. If Landlord requires Tenant to
remove any Alterations in writing at the time of Landlord's approval of the
applicable Alterations (or, as to Alterations not requiring Landlord's approval,
within fifteen (15) days following Landlord's receipt of written notice from
Tenant of such Alterations), Tenant, at its sole cost and expense, agrees to
remove the identified Alterations on or before the expiration of the Term or
earlier termination of this Lease and repair any damage to the Premises caused
by such removal.

(c) The initial Landlord's Work made pursuant to this Lease shall be the sole
property of Landlord and shall not be removed by Tenant from the Premises.
Notwithstanding the foregoing, all articles of personal property and all
business and trade fixtures (which are susceptible of removal without material
damage to the Premises and which are not permanently affixed to the Premises),
machinery, equipment, furniture and removable partitions owned by Tenant or
installed by Tenant at its expense in the Premises shall be and remain the sole
property of Tenant and may be removed by Tenant at any time during the Term of
this Lease and shall be removed by Tenant prior to the expiration of the Term or
earlier termination of this Lease, provided that Tenant shall at its sole
expense repair any damage caused by such removal. If Tenant shall fail to remove
all of its property from the Premises upon the expiration of the Term or earlier
termination of this Lease for any cause whatsoever, Landlord may, at its option,
either treat such property as being conveyed to Landlord in which case the same
shall automatically and without further action be deemed to be the sole property
of Landlord, or remove the same in any manner that Landlord shall choose, and
store or dispose of said property without liability to Tenant for loss thereof,
and Tenant agrees to pay to Landlord upon demand any and all expenses incurred
in such removal, including court costs, reasonable attorneys' fees and storage
charges on such property for any length of time that the same shall be in
Landlord's possession. In the alternative, Landlord may, at its option, sell
said property, or any of the same, in such manner as Landlord determines to be
appropriate in Landlord's reasonable business judgment, for such prices as
Landlord may obtain and apply the proceeds of such sale to any amounts due under
this Lease from Tenant to Landlord and to the expense incident to the removal
and sale of such property. Tenant waives the benefit of any statutory provisions
governing the treatment by a landlord of a tenant's personal property left in
leased premises following the expiration of the lease, in the event Tenant fails
to remove all of its property from the Premises upon the expiration of the Term
or earlier termination of this Lease, the parties hereby agreeing that the
provisions of this Lease constitute the express agreement of the parties with
respect thereto and are intended to govern such situation.

8. Insurance; Indemnity.

8.1 Liability Insurance - Tenant. From the date of delivery of the Premises to
Tenant and thereafter until the expiration of the Term or earlier termination of
this Lease, Tenant will maintain in effect at its sole cost commercial general
liability insurance covering the Premises and Tenant's use thereof against
claims from personal injury (including, without limitation, false arrest, libel,
slander, assault, battery, invasion of privacy), bodily injury, death and
property damage occurring in or about the Premises, such insurance in each case
to afford protection to a combined single limit of at least Two Million Dollars
($2,000,000.00) (which insurance shall include, without limitation, customary
contractual liability coverage with respect to the obligations of Tenant under
Paragraph 8.7 below), and naming Landlord as an additional insured thereunder.



                                       13
<PAGE>

8.2 Liability Insurance - Landlord. From the date of delivery of the Premises to
Tenant and thereafter until the expiration of the Term or earlier termination of
this Lease, Landlord will maintain in effect, as an item of Common Area
Expenses, commercial general liability insurance covering the Common Areas
within the Project against claims from personal injury (including, without
limitation, false arrest, libel, slander, assault, battery, invasion of
privacy), bodily injury, death and property damage occurring in or about the
Common Areas within the Project, such insurance in each case to afford
protection to a combined single limit of at least Two Million Dollars
($2,000,000.00) (which insurance shall include, without limitation, customary
contractual liability coverage with respect to the obligations of Landlord under
Paragraph 8.7 below), and naming Tenant as an additional insured thereunder.
Notwithstanding anything to the contrary contained in this Lease, Tenant shall
have the right (but not the obligation) upon written notice to Landlord, to
assume responsibility for maintenance of the insurance required under this
Paragraph 8.2, at Tenant's sole cost (in which case Common Area Expenses shall
not include costs of liability insurance with respect to the Common Areas and in
which case Landlord shall be named as an additional insured thereunder);
provided that Tenant may not elect to assume responsibility for maintenance of
such insurance with respect to the Common Areas pursuant to this Paragraph 8.2
from and after such time as there are occupants of the Project other than
Tenant.

8.3 Property Insurance Building, Improvements and Rental Value.

(a) Building and Improvements. From the date of delivery of the Premises to
Tenant and thereafter until the expiration of the Term or earlier termination of
this Lease, as an item of Operating Expenses, Landlord shall maintain in effect
an "All Risk Policy" (as hereinafter defined) insuring against damage to any
portion of the Premises, Building and all appurtenances thereto. Such insurance
shall be in the full amount of replacement cost (subject only to reasonable
deductible amounts and exclusive of footings, foundation and excavation),
without deduction for physical depreciation, including coverage for debris
removal and the enforcement of any applicable Laws requiring the upgrade,
demolition, reconstruction or replacement of any portion of the Premises as a
result of a covered loss, and shall provide that the proceeds of any loss shall
be payable in the manner provided for in this Lease. Landlord shall, upon the
delivery of possession of the Premises and at least ten (10) days prior to each
anniversary of the Commencement Date thereafter occurring during the Term,
provide Tenant with a certification of such insurance coverage, which
certificate shall indicate, among other things, that the Premises, Building and
all the improvements and Landlord's fixtures appurtenant thereto, have been
insured to their full replacement value, without deduction for physical
depreciation. As used herein, the term "All Risk Policy" shall mean a policy of
fire and other property insurance in the form commonly referred to in the
industry as "all risk" with extended endorsement (theft, vandalism and malicious
mischief coverage) and including broad form water damage, or if such policy is
no longer issued, such other policy as would cover the same risks and perils;
provided that although Landlord may elect to obtain coverage for flood and
earthquake in addition to such policy, Tenant shall not be required to pay any
part of the premium allocable to such coverages unless such coverage is
available at commercially reasonable rates.

(b) Rental Value. Landlord shall, in addition, obtain and keep in force during
the Term of this Lease, as an item of Operating Expenses, a policy or policies
in the name of Landlord, insuring the loss of the full rental and other charges
payable to Landlord by Tenant under this Lease for one (1) year (including
Tenant's Share of Operating Expenses, and any scheduled rental increases). Said
insurance shall provide that in the event any applicable lease is terminated by
reason of an insured loss, the period of indemnity for such coverage shall be
extended beyond the date of the completion of repairs or replacement of the
Building, to provide for one full year's loss of rental revenues from the date
of any



                                       14
<PAGE>

such loss. Said insurance shall contain an agreed valuation provision in lieu of
any coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, property taxes, insurance premium costs and
other expenses, if any, otherwise payable to Landlord, for the next twelve (12)
month period.

(c) Adjacent Premises. Notwithstanding anything to the contrary contained
herein, to the extent the cost of maintaining insurance with respect to the
Building and/or any other buildings within the Project is increased as a result
of Tenant's acts, omissions, use or occupancy of the Premises, Tenant shall pay
for such increase.

(d) Tenant's Option. Notwithstanding anything to the contrary contained in this
Lease, Tenant shall have the right (but not the obligation) upon written notice
to Landlord, to assume responsibility for maintenance of the insurance required
under this Paragraph 8.3, at Tenant's sole cost (in which case Operating
Expenses shall not include costs of the insurance specified in this Paragraph
8.3).

8.4 Tenant's Property Insurance. Subject to the requirements of Paragraph 8.5,
Tenant at its cost shall either by separate policy or, at Landlord's option, by
endorsement to a policy already carried, maintain insurance coverage on all
personal property located in, on, or about the Premises similar in coverage to
that required under Paragraph 8.3(a). Such insurance shall be full replacement
cost coverage with a deductible of not to exceed commercially reasonable
amounts. Tenant shall be solely entitled to all proceeds from any such
insurance. In addition, so long as Tenant maintains a net worth in excess of Ten
Million Dollars ($10,000,000.00), Tenant may elect to self-insure for such
coverage, provided that in the event of such self-insurance, it shall be deemed
that Tenant had fully insured such personal property items for all purposes of
this Lease (including, without limitation, Paragraph 8.6 below) as required by
this Paragraph 8.4.

8.5 Insurance Policies. The policies of insurance maintained by Landlord and
Tenant pursuant to Paragraph 8.1 above shall each (a) include a cross liability
endorsement providing that Landlord and Tenant, although insureds, may recover
on account of the negligence of the other, and (b) provide that such insurance
is not contributory with the coverage which the other party may carry and is
primary insurance coverage and not excess insurance coverage or overage
insurance coverage. The policies of insurance maintained by Landlord and Tenant
pursuant to this Lease shall (1) provide that the insurer will give at least
thirty (30) days' written notice of any cancellation, reduction in coverage,
lapse or failure to renew, to the insured party or parties thereunder, and (2)
be obtained from an insurer with a policy holder's rating of at least A- and a
financial rating of not less than VIII in the most recently published Best's
Insurance Guide. The insurance required to be maintained by the parties
hereunder is subject to increase upon reasonable request by the other party in
accordance with customary industry practice for insurance maintained by
comparable landlords or tenants of comparable projects or premises, as
applicable, in the vicinity of the Project and Premises. Landlord and Tenant
agree to deliver to the other certificates of insurance evidencing the existence
in force of the policies of insurance described in this Lease promptly following
request therefor by the other party. Each of such certificates shall provide
that such insurance shall not be canceled, reduced in coverage, lapse or
materially amended unless thirty (30) days' prior written notice of such
cancellation, reduction in coverage, lapse or amendment is given to the party
designated on such certificate as the holder thereof. Any insurance required by
this Paragraph 8 may be by satisfied by blanket, umbrella and/or excess
liability insurance, covering additional items or locations or insureds, so long
as the coverage afforded (including, without limitation, coverage as to
additional insureds) will not be reduced or diminished by reason of the use of
such blanket, umbrella and/or excess liability policy of insurance.



                                       15
<PAGE>

8.6 Waiver of Subrogation. Landlord and Tenant hereby mutually release each
other from liability and waive all right of recovery against each other for any
loss in or about the Premises, from perils insured against under the respective
property damage insurance policies required to be carried hereunder, whether due
to negligence or any other cause; provided that this Paragraph 8.6 shall be
inapplicable if it would have the effect, but only to the extent it would have
the effect, of invalidating any insurance coverage of Landlord or Tenant. If the
waiver of subrogation pursuant hereto results in an additional premium charge to
Landlord, Tenant agrees to promptly pay Landlord such additional charge upon
receiving a written billing therefor. However, if such insurance policies cannot
be obtained with a waiver of subrogation, the parties are relieved of the
obligation to obtain such a waiver hereunder.

8.7 Indemnity.

        (a) Except to the extent resulting from the negligence or wilful
misconduct of Landlord or Landlord's employees, agents or contractors or
Landlord's breach of this Lease, and subject to the provisions of Paragraph 8.6
above, Tenant shall indemnify, hold harmless and defend Landlord and its agents,
employees and contractors from and against any and all expense, liability and/or
claims for damage to or loss of property (including, without limitation,
Tenant's property) or injury to or death of persons (including, without
limitation, Tenant, its agents, employees, contractors, visitors, licensees or
invitees), or amounts owing (including, without limitation, claims for labor or
materials furnished or alleged to have been furnished to or for the Tenant at or
for use of the Premises, whether or not secured by a mechanic's or materialman's
lien against the Premises, Building or Project or any part thereof) (i) directly
or indirectly resulting from any cause on or about the Premises, or in
connection with the maintenance or operation of Tenant's business, or Tenant's
occupation or use of the Premises, and/or (ii) during such times as Tenant
elects to maintain the insurance specified under Paragraph 8.2 above, directly
or indirectly resulting from any cause on or about the Common Area. Tenant shall
discharge any judgment or compromise rendered against or suffered by Landlord as
a result of anything indemnified against hereunder and shall reimburse Landlord
for any and all costs, fees, or expenses incurred or paid by Landlord
(including, without limitation, reasonable attorneys' fees) in connection with
the defense of any action or claim resulting therefrom. The obligations of
Tenant pursuant to this Paragraph 8.7(a) relating to the period prior to the
expiration of the Term or earlier termination of this Lease shall survive the
expiration of the Term or earlier termination of this Lease.

        (b) During such times as Landlord is required to maintain the insurance
specified under Paragraph 8.2 above, the provisions of this Paragraph 8.7(b)
shall apply: Except to the extent resulting from the negligence or wilful
misconduct of Tenant or Tenant's employees, agents or contractors or Tenant's
breach of this Lease, and subject to the provisions of Paragraph 8.6 above,
Landlord shall indemnify, hold harmless and defend Tenant and its agents,
employees and contractors from and against any and all expense, liability and/or
claims for damage to or loss of property (including, without limitation,
Landlord's property) or injury to or death of persons (including, without
limitation, Landlord, its agents, employees, contractors, visitors, licensees or
invitees) or amounts owing (including, without limitation, claims for labor or
materials furnished or alleged to have been furnished to or for the Landlord at
the Project, whether or not secured by a mechanic's or materialman's lien
against the Premises, Building or Project or any part thereof), directly or
indirectly resulting from any cause on or about the Common Area. Landlord shall
discharge any judgment or compromise rendered against or suffered by Tenant as a
result of anything indemnified against hereunder and shall reimburse Tenant for
any and all costs, fees, or expenses incurred or paid by Tenant (including,
without limitation, reasonable attorneys' fees) in connection with the defense
of any action or claim resulting therefrom. The obligations of Landlord pursuant
to this Paragraph 8.7(b) relating to the period prior to



                                       16
<PAGE>

the expiration of the Term or earlier termination of this Lease shall survive
the expiration of the Term or earlier termination of this Lease.

9. Damage or Destruction.

9.1 Casualty. If the Premises shall be destroyed by fire or other casualty so as
to render all or a portion of the Premises untenantable, then, for so long as
Tenant is actually not occupying all or a portion of the Premises for the
operation of Tenant's business (as opposed to having items of Tenant's personal
property remaining in the Premises) as a result of such prevention from use,
Tenant shall be entitled to an abatement of Tenant's obligation for payment of
Base Rent and Tenant's Share of Operating Expenses, on a proportionate basis to
the extent that Tenant's use of the Premises is so effectively prevented; which
abatement shall commence as of the date of the casualty and continue during the
period of such repair or reconstruction, until such time as Tenant is no longer
so effectively prevented from using the Premises.

9.2 Repair by Landlord. Except where Landlord or Tenant elects to terminate this
Lease as hereinafter provided, Landlord shall use reasonable diligence to repair
any casualty to the Premises, Building or Common Areas to the extent of
available insurance proceeds (or such proceeds as would have been so available
had Landlord maintained the insurance required to be maintained by Landlord
under this Lease), subject to delays and adjustment of insurance proceeds
(provided that Tenant shall be responsible for the repair of Tenant's furniture,
fixtures, equipment and personal property). In the event of the total
destruction of the Premises or Project, or in the event of the partial
destruction of the Premises or Project which is the result of an event not
required to be covered by the insurance to be maintained by Landlord pursuant to
this Lease and the costs of repair of which exceed five percent (5%) of the
replacement cost of the Building, or requiring repair for which Landlord is
unable (despite the exercise of commercially reasonable efforts) to obtain
necessary governmental permits or approvals without being subject to
unreasonable expense or condition, then Landlord shall have the right to elect
to terminate this Lease by written notice to Tenant delivered within ninety (90)
days following the occurrence of the casualty, unless (in the case of uninsured
casualty damage) Tenant elects by written notice delivered to Landlord within
twenty (20) days following Landlord's election to so terminate, to pay the
amount by which Landlord's costs of repair of the Building not covered by
Landlord's insurance exceed five percent (5%) of the replacement cost of the
Building, in which case Landlord's election to terminate shall be nullified and
Tenant shall be responsible for such costs in accordance with customary
construction funding disbursement procedures. The proceeds from any insurance
paid by reason of damage to or destruction of the Project or any part thereof
insured by Landlord, shall belong to and be paid to Landlord. Tenant shall not
be entitled to any compensation or damages from Landlord or Landlord's insurance
provider for loss in the use of the whole or any part of the Premises and/or any
inconvenience or annoyance by such damage, repair, reconstruction or
restoration.

9.3 Damage Near End of Term. Notwithstanding anything to the contrary contained
herein, if the Premises is wholly or partially damaged or destroyed within the
final twelve (12) months of the then remaining Term of this Lease (as the same
may theretofore have been extended pursuant to this Lease), and if as a result
of such damage or destruction Tenant is, or reasonably will be, denied access or
use of a material portion of the Premises for the conduct of its business
operations for a period of ninety (90) consecutive days (or such shorter period
as is then remaining in the Term), Landlord or Tenant may, at its option, by
giving the other notice no later than sixty (60) days after the occurrence of
such damage or destruction, elect to terminate the Lease as to the affected
portion of the Premises.

9.4 Tenant Termination Right. Notwithstanding anything to the contrary contained
in this Lease, in



                                       17
<PAGE>

the event of material casualty damage to the Premises or Common Areas serving
the Premises not resulting in termination of this Lease, Landlord shall deliver
written notice to Tenant within ninety (90) days following such casualty damage
or occurrence setting forth Landlord's good faith estimate of the time required
for completion of repair and/or restoration of such damage, and if such
estimated time exceeds nine (9) months from the occurrence of the casualty,
Tenant may elect to terminate this Lease by written notice to Landlord within
twenty (20) days following Tenant's receipt of such notice. In addition, in the
event such repair and/or restoration of the Project is not actually completed
within nine (9) month period from the occurrence of the casualty (or such longer
time period as may have been estimated in such notice to Tenant), Tenant may
elect to terminate this Lease upon thirty (30) days prior written notice to
Landlord, provided that if such repair and/or restoration is completed within
such thirty (30) day period, such election to terminate shall be nullified and
this Lease shall continue in full force and effect.

9.5 Termination Advance Payments. Upon termination of this Lease pursuant to
this Paragraph 9, an equitable adjustment shall be made concerning advance Base
Rent and any other advance payments made by Tenant to Landlord.

9.6 Waiver of Statutes. Landlord and Tenant hereby waive the provisions of any
statutes (including, without limitation, Sections 1932(2) and 1933(4) of the
California Civil Code) or court decisions which provide a party to a lease with
a right to abatement of rent or termination of the lease when leased property is
damaged or destroyed and agree that such event shall be exclusively governed by
the terms of this Lease.

10. Real Property Taxes.

10.1 Payment of Taxes. During the Term of this Lease, Landlord shall pay the
"Real Property Taxes", as defined in Paragraph 10.2 below, applicable to the
Building (as an item of Operating Expenses), and applicable to the Common Areas
(as an item of Common Area Expenses).

10.2 Definition of "Real Property Taxes." As used herein, the term "Real
Property Taxes" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Premises by any authority
having the direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage or
other improvement district thereof, levied against any legal or equitable
interest of Landlord in the Premises, Building and/or Project, Landlord's right
to rent or other income therefrom, and/or Landlord's business of leasing the
Premises, Building and/or Project. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in applicable law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Premises, Building and/or Project or in the improvements
thereon, the execution of this Lease, or any modification, amendment or transfer
thereof, and whether or not contemplated by the Parties.

10.3 Personal Property Taxes. Tenant shall pay prior to delinquency all taxes
assessed against and levied upon any Alterations, trade fixtures, furnishings,
equipment and all personal property contained in the Premises or elsewhere. When
possible, Tenant shall cause its trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Landlord. If any of Tenant's trade fixtures, furnishings, equipment
and all other personal property shall be assessed with Landlord's real property,
Tenant shall pay Landlord the taxes attributable to Tenant



                                       18
<PAGE>

within ten (10) days after receipt of a written statement setting forth the
taxes applicable to Tenant's trade fixtures, furnishings, equipment and all
other personal property.

11. Utilities. Tenant shall contract for, in Tenant's name, and shall pay for
all water, gas, heat, light, power, telephone, trash disposal and other
utilities and services supplied to the Premises, together with any taxes
thereon. All such utility service for the Building shall be separately metered
for the Building. Landlord shall be responsible for any governmental hook-up
charges or fees in connection with such utility service to the Building..
Landlord shall not be liable in damages or otherwise for any failure or
interruption of any utility service being furnished to the Premises, and no such
failure or interruption shall be deemed to constitute an actual or constructive
eviction or entitle Tenant to terminate this Lease or withhold any rent or any
other sum due under this Lease.

12. Assignment and Subletting.

12.1 Landlord's Consent Required. Tenant shall not voluntarily assign its
interest in this Lease (an "assignment") or sublease or permit occupancy by
third parties of all or any part of the Premises (a "sublease"), without first
obtaining Landlord's prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. Tenant shall not under any
circumstances mortgage, pledge or otherwise transfer or encumber this Lease or
the Premises (except for an assignment or sublease pursuant to this Paragraph
12). Any assignment or sublease without Landlord's prior written consent shall
be voidable at Landlord's election and shall constitute a default hereunder.
Notwithstanding anything to the contrary contained herein, Tenant shall have the
right without Landlord's prior consent and without being subject to Paragraph
12.5 below, to assign this Lease or sublet all or any part of the Premises to
any entity (i) controlling, controlled by or under common control with Tenant,
or (ii) resulting from a merger or consolidation with Tenant or acquiring all or
substantially all of the assets and/or stock of Tenant; provided that any such
entity shall assume the obligations and liabilities of Tenant under this Lease
(any such permitted assignee or subtenant is referred to in this Lease as a
"Permitted Transferee") and no such assignment or sublease shall in any manner
release Tenant from its primary liability under this Lease. In addition, the
transfer of any number of shares of Tenant's stock shall not be deemed to
constitute an assignment, sublease or other transfer requiring the consent of
Landlord so long as Tenant's stock is traded on a public exchange.

12.2 Requests for Consent. No consent to an assignment or sublease shall
constitute a further waiver of the provisions of this Paragraph 12. Except in
the case of assignment or subletting to a Permitted Transferee, Tenant shall
notify Landlord in writing of Tenant's intent to assign or sublease this Lease,
the name of the proposed assignee or subtenant, information concerning the
financial responsibility of the proposed assignee or subtenant and the economic
and other material terms of the proposed assignment or subletting, and Landlord
shall, within thirty (30) days of receipt of such written notice, and the
financial responsibility information and such other information as may be
requested by Landlord concerning the proposed assignee or subtenant (such
request to be made, if at all, within ten (10) days of Tenant's initial request
for Landlord's consent and submission of the information set forth above), elect
one of the following: (i) consent to such proposed assignment or sublease; or
(ii) refuse such consent, which refusal shall be on reasonable grounds.

12.3 Reasonable Consent. Landlord and Tenant agree, by way of example and not in
limitation as to other reasonable grounds for withholding consent and without in
any manner limiting Landlord's rights in the event of a proposed assignment or
sublease, that it shall be reasonable under this Lease and under any applicable
law for Landlord to withhold its consent to a proposed assignment or subletting
should Landlord determine that any of the following apply: (i) the proposed
transferee's use of the



                                       19
<PAGE>

Premises is inconsistent with the permitted use under this Lease and Landlord
reasonably withholds consent to a proposed change in use; (ii) the proposed
transferee is of a character or reputation which is not consistent with the
quality of the Building or Project; (iii) the proposed assignee does not in
Landlord's reasonable judgment have sufficient financial strength to assure
performance of the obligations to be performed pursuant to such assignment or
subletting; (iv) the space to be subleased is not regular in shape with
appropriate means of ingress and egress suitable for normal leasing purposes;
(v) the proposed transferee is a governmental agency or instrumentality thereof;
or (vi) the proposed assignment or sublease is likely to result in more than a
reasonable and safe number of occupants per floor within the space proposed to
be assigned or sublet or is likely to result in insufficient visitor parking for
the Building.

12.4 Terms of Assignment or Subletting. Any assignee of Tenant's interest in
this Lease (whether or not under an assignment requiring Landlord's consent)
hereby agrees that (and at Landlord's option, if Landlord's consent is required
for such assignment pursuant to this Lease, it shall be a condition to such
assignment that Landlord receive an instrument executed by such assignee and
expressly enforceable by Landlord agreeing that) such assignee assumes and
agrees to be bound by all of the terms and provisions of this Lease and to
perform all of the obligations of Tenant hereunder. Any subtenant of all or any
portion of the Premises (whether or not under a subletting requiring Landlord's
consent) and Landlord hereby agrees that (and, at Landlord's option, if
Landlord's consent is required for such sublease pursuant to this Lease, it
shall be a condition to such sublease that Landlord receive an instrument
executed by such subtenant agreeing that) such sublease is subject and
subordinate to this Lease and to all mortgages or deeds of trust to which this
Lease is subordinate; that Landlord may enforce the provisions of the sublease,
including (following the occurrence of any default by Tenant under this Lease
which is not cured within any applicable period for cure pursuant to hereto)
collection of rent; that in the event of termination of this Lease for any
reason, including, without limitation, a voluntary surrender by Tenant, or in
the event of any re entry or repossession of the Premises by Landlord, Landlord
may, at its option, either (i) terminate the sublease, or (ii) take over all of
the right, title and interest of Tenant, as sublandlord, under such sublease, in
which case such subtenant will attorn to Landlord, but that nevertheless
Landlord will not (1) be liable for any previous act or omission of Tenant under
such sublease, (2) be subject to any defense or offset previously accrued in
favor of the subtenant against Tenant, or (3) be bound by any previous
modification of any sublease made without Landlord's written consent, or by any
previous prepayment by subtenant of more than one month's rent.

12.5 Excess Consideration. In connection with Landlord's grant of consent to an
assignment or sublease as required under the provisions of this Paragraph 12,
Tenant shall pay Landlord's reasonable attorneys' fees and processing costs
incurred in giving such consent (not to exceed $1,000.00 per assignment or
subletting transaction). In the event of any assignment or sublease requiring
Landlord's consent, Landlord shall receive as additional rent hereunder fifty
percent (50%) of Tenant's "Excess Consideration" derived from such assignment or
sublease (but Excess Consideration shall not include fair market consideration
received by Tenant for the transfer by Tenant of any furniture, trade fixtures
or equipment of Tenant). In the event of a sublease, "Excess Consideration"
shall mean all rent, additional rent or other consideration actually received by
Tenant from such subtenant and/or actually paid by such subtenant on behalf of
Tenant in connection with the subletting in excess of the rent, additional rent
and other sums payable by Tenant under this Lease during the term of the
sublease on a per square foot basis if less than all of the Premises is
subleased, less the sum of Tenant's reasonable out-of-pocket costs incurred in
connection with such sublease for brokerage commissions, reasonable attorneys'
fees, the cost of any alterations or improvements made for the benefit of such
subtenant, and/or any free rent period granted to such subtenant. In the event
of an assignment, "Excess



                                       20
<PAGE>

Consideration" shall mean key money, bonus money or other consideration paid by
the assignee to Tenant in connection with such assignment, and any payment in
excess of fair market value for services rendered by Tenant to assignee or for
assets, fixtures, inventory, equipment, or furniture transferred by Tenant to
assignee in connection with such assignment, less the sum of Tenant's reasonable
out-of-pocket costs incurred in connection with such assignment for brokerage
commissions, reasonable attorneys' fees, the cost of any alterations or
improvements made for the benefit of such assignee and/or any free rent period
granted to such assignee. If part of the Excess Consideration shall be payable
by the assignee or subtenant other than in cash, then Landlord's share of such
non-cash consideration shall be in such form as is reasonably satisfactory to
Landlord.

12.6 Continuing Liability of Tenant. Notwithstanding any permitted assignment or
subletting (whether or not the same requires Landlord's consent pursuant to this
Paragraph 12), Tenant shall at all times remain directly, primarily and fully
responsible and liable for all payments owed by Tenant under this Lease and for
compliance with all obligations under the terms and conditions of this Lease.
Landlord's waiver or consent to any assignment or subletting shall not relieve
Tenant or any assignee or sublessee from any obligation under this Lease whether
or not accrued and Tenant shall at all times remain directly, primarily and
fully responsible and liable for all payments owed by Tenant under this Lease
and for compliance with all obligations of Tenant under the terms and conditions
of this Lease.

13. Default; Remedies.

13.1 Default. The occurrence of either of the following shall be deemed to
constitute an event of default by Tenant under this Lease:

(a) The failure by Tenant to make any payment of Rent as and when due where such
failure shall continue for a period of five (5) business days after written
notice thereof from Landlord to Tenant; provided however, that any such notice
shall be in lieu of, and not in addition to, any notice required under
California Code of Civil Procedure Section 1161 or any similar successor
statute.

(b) The failure by Tenant to observe or perform any of the express or implied
covenants or provisions of this Lease to be observed or performed by Tenant,
other than as specified in Paragraph 13.1(a), where such failure shall continue
for a period of thirty (30) days after written notice thereof from Landlord to
Tenant; provided, however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161 or any similar successor statute; provided, further, that if the
nature of Tenant's default is such that more than thirty (30) days are
reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant shall promptly commence such cure within such thirty (30) day
period and thereafter continuously and diligently prosecute such cure to
completion.

13.2 Remedies.

(a) In the event of any default by Tenant pursuant to Paragraph 13.1 above, in
addition to any other remedies available to Landlord at law or in equity,
Landlord shall have the immediate option to terminate this Lease and all rights
of Tenant hereunder by giving written notice of such intention to terminate. In
the event that Landlord shall elect so to terminate this Lease, then Landlord
may recover from Tenant: (i) the worth at the time of award of any unpaid rent
which had been earned at the time of such termination; plus (ii) the worth at
the time of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss Tenant proves could have been reasonably avoided; plus (iii) the
worth at the time of award of the



                                       21
<PAGE>

amount by which the unpaid rent for the balance of the Term after the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus (iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including, without limitation, the cost of
recovering possession of the Premises, expenses of re-letting, including
necessary renovation and alteration of the Premises, reasonable attorneys' fees
and that portion of any leasing commission paid by Landlord in connection with
this Lease applicable to the unexpired term of this Lease. The term "rent" as
used in this Paragraph 13.2(a) above shall be deemed to mean Base Rent and
Tenant's Share of Operating Expenses. As used in clauses (i) and (ii) above, the
"worth at the time of award" is computed by allowing interest at the Interest
Rate. As used in clause (iii) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).

(b) In the event of any default by Tenant pursuant to Paragraph 13.1 above and
Tenant's abandonment of the Premises, Landlord shall also have the right to
continue the Lease and Tenant's right to possession in effect (under California
Civil Code Section 1951.4) and recover the rent as it becomes due, provided
Tenant has the right to sublet or assign, subject only to reasonable
limitations. See Paragraphs 12 and 36 for the limitations on assignment and
subletting which limitations Tenant and Landlord agree are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Landlord's interest under the Lease, shall not
constitute a termination of the Tenant's right to possession.

(c) All rights, options and remedies of Landlord contained in this Lease shall
be construed and held to be cumulative, and no one of them shall be exclusive of
the other, and Landlord shall have the right to pursue any one or all of such
remedies or any other remedy or relief which may be provided by law, whether or
not stated in this Lease.

(d) Landlord waives such liens, if any, to which it may have a right with
respect to the merchandise, furniture, trade fixtures and other personal
property of Tenant located on or about the Premises and shall from time to time
execute such documents as Tenant may reasonably request to acknowledge such
waiver.

13.3 Default by Landlord. Except as otherwise expressly provided in this Lease,
Landlord shall be in default under this Lease if Landlord fails to perform any
of its obligations hereunder and said failure continues for a period of thirty
(30) days after Tenant gives Landlord notice thereof (unless such failure cannot
reasonably be cured within thirty (30) days) and Landlord shall have commenced
to cure within said thirty (30) days and continues diligently to pursue the
curing of the same). Tenant shall use reasonable efforts to give to any holder
of indebtedness secured by a first lien upon the Premises whose address has
previously been provided to Tenant, a copy of any notice of default served upon
the Landlord. Tenant further agrees that any such holder of indebtedness shall
have the right to cure any Landlord default within the time period provided for
such cure by Landlord pursuant to this Lease. If such default is not cured
within the specified time period, Tenant may exercise any right or remedy
available to it at law or in equity or under this Lease. Tenant shall have the
right to cure any such default and Landlord shall reimburse Tenant for the
reasonable cost thereof within thirty (30) days following receipt from Tenant of
invoices or other reasonable evidence of the amount of such costs; provided,
however, in the event Landlord in good faith disputes whether Tenant properly
performed an obligation of Landlord, Landlord may dispute the same by
institution of a reference proceeding pursuant to Paragraph 39 below within
thirty (30) days following Tenant's request for reimbursement.



                                       22
<PAGE>

If it is determined pursuant to such proceeding that Tenant's cure was proper,
Landlord shall, within ten (10) days following such determination, reimburse
Tenant for the cost of such cure (plus interest at the Interest Rate from the
date of Tenant's expenditure until reimbursement). Should Landlord fail to pay
Tenant any amount due Tenant (a) within thirty (30) days following receipt of
Tenant's invoices or other evidence (if Landlord does not institute a reference
proceeding disputing such cure), or (b) within ten (10) days after determination
by reference, Tenant may, notwithstanding anything to the contrary contained in
this Lease, deduct and offset such amount (including, without limitation,
interest at the Interest Rate from the time of Tenant's expenditure until
repaid) from any monetary obligation of Tenant owing Landlord hereunder.
Notwithstanding anything to the contrary contained in this Lease, Tenant shall
have the right to offset any unpaid reference or court award from any monetary
obligation due under this Lease. Any amount due from Landlord to Tenant shall
bear interest at the Interest Rate from the date due until paid. All rights,
options and remedies of Tenant contained in this Lease shall be construed and
held to be cumulative, and no one of them shall be exclusive of the other, and
Tenant shall have the right to pursue any one or all of such remedies or any
other remedy or relief which may be provided by law, whether or not stated in
this Lease. Tenant's failure to insist upon strict performance of any term,
covenant or condition of this Lease or to exercise any right or remedy it has
shall not be deemed a waiver or relinquishment for the future of such
performance, right or remedy unless in writing signed by Tenant. No waiver by
Tenant shall constitute a waiver of any subsequent breach.

14. Condemnation.

14.1 Non-Temporary Taking. If any material portion of the Project shall be taken
for any public or quasi-public purpose by any lawful power or authority by
exercise of the right of appropriation, condemnation or eminent domain, or sold
to prevent such taking to such an extent as to render untenantable the entirety
of the Premises or such a material portion of the Premises that Tenant's
operation from the remainder of the Premises is not reasonably practicable as
reasonably determined by the parties, either party shall have the right to
terminate this Lease effective as of the date possession is required to be
surrendered to said authority by written notice to the other party by the
effective date of such taking. Tenant shall not assert any claim against
Landlord or the taking authority for any compensation because of such taking,
other than a claim for any separate award attributable to the value of any
personal property or trade fixtures of Tenant which are taken, costs of Tenant's
relocation, and Tenant hereby assigns to Landlord all of Tenant's interest in,
and Landlord shall be entitled to receive, the entire amount of any other award
without deduction for any estate or interest of Tenant (including, without
limitation, any award attributable to the value of the remaining Term of this
Lease). If neither Tenant nor Landlord so elects to terminate, Landlord shall,
to the extent of proceeds received, commence to restore the Premises to
substantially their same condition prior to such partial taking, and a
proportionate allowance shall be made to Tenant for the Monthly Base Rent and
Tenant's obligation for payment of Tenant's Expenses Excess corresponding to the
time during which, and to the part of the Premises of which, Tenant shall be so
deprived on account of such taking and restoration. Nothing contained in this
Paragraph 14.1 shall be deemed to give Landlord any interest in any award made
to Tenant for the taking of Tenant's personal property and trade fixtures or for
Tenant's costs of relocation.

14.2 Temporary Taking. In the event of a taking of the Premises or any part
thereof for temporary use, (i) this Lease shall be and remain unaffected thereby
and Rent shall not abate, and (ii) Tenant shall be entitled to receive for
itself such portion or portions of any award made for such use with respect to
the period of the taking which is within the Term, provided that if such taking
shall remain in force at the expiration of the Term or earlier termination of
this Lease. For purposes of this Paragraph 14.2, a



                                       23
<PAGE>

temporary taking shall be defined as a taking for a period of nine (9) months or
less.

14.3 Waiver of Code Sections. Landlord and Tenant hereby waive the provisions of
any statutes (including, without limitation, Section 1265.130 of the California
Code of Civil Procedure) or court decisions which provide a party to a lease
with a right to abatement of rent or termination of the lease when leased
property is condemned or taken and agree that such event shall be exclusively
governed by the terms of this Lease.

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

16. Estoppel Certificate.

16.1 Each Party (as "Responding Party") shall within ten (10) days after written
notice from the other Party (the "Requesting Party") execute, acknowledge and
deliver to the Requesting Party a statement in writing (a) certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease as so modified is in
full force and effect), and the date to which rental and other charges are paid
in advance, if any, (b) acknowledging that there are not, to the Responding
Party's knowledge, any uncured defaults on the part of Landlord or Tenant, or
specifying such defaults if any are claimed, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

16.2 If Landlord desires to finance, refinance, or sell the Premises, Building
and/or Project or any part thereof, Tenant and all Guarantors of Tenant's
performance hereunder shall deliver to any potential lender or purchaser
designated by Landlord such financial statements of Tenant and such Guarantors
as may be reasonably required by such lender or purchaser, including but not
limited to Tenant's financial statements for the past three (3) years. All such
financial statements shall be received by Landlord and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth. However,
so long as Tenant remains an entity whose stock is traded on a national
exchange, Tenant's annual 10K and quarterly 10Q filings shall be deemed
sufficient to satisfy the obligations of Tenant under this Paragraph 16.2.

17. Landlord's Liability. The term "Landlord" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the tenant's interest in the prior lease. In the event of
a transfer of Landlord's title or interest in the Premises or in this Lease,
Landlord shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Landlord at the time of such transfer or
assignment. Upon such transfer or assignment, the prior Landlord shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the "Landlord". The obligations and/or
covenants in this Lease to be performed by the Landlord shall be binding only
upon the Landlord as hereinabove defined.

18. Severability. The invalidity of any provision of this Lease, as determined
by a court of



                                       24
<PAGE>

competent jurisdiction, shall in no way affect the validity of any other
provision hereof.

19. Rooftop Equipment. Provided Tenant obtains Landlord's prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed, Tenant
shall have a right to use the roof of the Building for any antennae or other
communications equipment or other roof-top mounted equipment as Tenant may deem
desirable for the operation of its business; provided, however, that no roof
penetrations shall be made without obtaining Landlord's consent, which consent
shall not be unreasonably withheld, conditioned or delayed, and Tenant shall, at
its own expense, promptly repair any damage or wear to the roof resulting from
such use of Tenant's equipment. Tenant shall coordinate any such roof work with
Landlord so as not to impair any roof warranty then in effect and shall comply
with all applicable Laws with respect thereto (including, without limitation,
any applicable Laws respecting screening of such rooftop equipment).

20. Time of Essence; Force Majeure. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease. However, if either party is delayed or hindered in or prevented from
the performance of any act required hereunder because of strikes, lockouts,
inability to procure labor or materials, failure of power, restrictive Laws,
riots, insurrection, war, fire or other casualty or other reason of a similar or
dissimilar nature beyond the reasonable control of the party delayed, financial
inability excepted (any "Force Majeure Event"), performance of such act shall be
excused for the period of the Force Majeure Event, and the period for the
performance of such act shall be extended for an equivalent period. Delays or
failures to perform resulting from lack of funds shall not be Force Majeure
Events.

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

22. No Prior or Other Agreements. This Lease contains all agreements between the
Parties with respect to the leasing of the Premises from Landlord to Tenant, and
no other prior or contemporaneous agreement or understanding shall be effective.

23. Notices.

23.1 All notices required or permitted by this Lease shall be in writing and may
be delivered in person (by hand or by messenger or courier service) or may be
sent by certified mail, return receipt requested, or U.S. Postal Service Express
Mail or other reputable overnight courier service, with postage prepaid, or by
facsimile transmission with receipt confirmed by telephone (provided that a copy
of such notice sent by facsimile transmission is also sent by one of the other
means of delivery of notices pursuant to this Paragraph 23) and shall be deemed
sufficiently given if served in a manner specified in this Paragraph 23. The
addresses noted adjacent to Landlord's signature on this Lease shall be
Landlord's address for delivery or mailing of notice purposes, unless Landlord
by written notice to Tenant, specifies a different address for notice purposes.
From and after the Commencement Date, the Premises shall constitute Tenant's
address for the purpose of mailing or delivering notices to Tenant, unless and
until a different address for receipt of notices is specified by Tenant in
written notice to Landlord. A copy of all notices required or permitted to be
given to either party hereunder shall be concurrently transmitted to such party
or parties at such addresses as the recipient party may from time to time
hereafter designate by written notice to the other party.

23.2 Any notice sent by registered or certified mail, return receipt requested,
shall be deemed given on the date of delivery shown on the receipt card, or if
no delivery date is shown, the postmark thereon.



                                       25
<PAGE>

Notices delivered by United States Express Mail or overnight courier that
guarantees next business day delivery shall be deemed given on the next business
days after delivery of the same to the United States Postal Service or courier
for next business day delivery. Notices sent by facsimile transmission, shall be
deemed given on telephone confirmation of receipt subject to the following
provisions of this Paragraph 23.2. If a notice is received on a Saturday, Sunday
or legal holiday, it shall be deemed received on the next day which is not a
Saturday, Sunday. If a notice sent by facsimile transmission is received after
5:00 p.m. California time, it shall be deemed received on the next day which is
not a Saturday, Sunday or a legal holiday.

24. Waivers. No waiver by Landlord of the default of any term, covenant or
condition hereof by Tenant, shall be deemed a waiver of any other term, covenant
or condition hereof, or of any subsequent default by Tenant of the same or of
any other term, covenant or condition hereof. Landlord's consent to, or approval
of, any act shall not be deemed to render unnecessary the obtaining of
Landlord's consent to, or approval of, any subsequent or similar act by Tenant,
or be construed as the basis of an estoppel to enforce the provision or
provisions of this Lease requiring such consent. Regardless of Landlord's
knowledge of a default at the time of accepting rent, the acceptance of rent by
Landlord shall not be a waiver of any preceding default by Tenant of any
provision hereof, other than the failure of Tenant to pay the particular rent so
accepted. Any payment given Landlord by Tenant may be accepted by Landlord on
account of moneys or damages due Landlord, notwithstanding any qualifying
statements or conditions made by Tenant in connection therewith, which such
statements and/or conditions shall be of no force or effect whatsoever.

25. Recording. Neither this Lease nor any memorandum hereof shall be recorded by
either Landlord or Tenant.

26. No Right To Holdover. Tenant has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. Any holding over by Tenant after the expiration or earlier
termination of this Lease shall be construed to be a tenancy at sufferance on
all of the terms and conditions set forth herein to the extent not inconsistent
with a tenancy at sufferance, provided that the Base Rent for such holdover
period shall be an amount equal to one hundred twenty-five percent (125%) of the
monthly Base Rent due for the last full month of the Term. Acceptance by
Landlord of rent or any other sum payable hereunder after such expiration or
earlier termination shall not result in an extension or renewal of this Lease.
If Tenant fails to surrender the Premises upon the expiration or earlier
termination of this Lease, Tenant shall indemnify, defend and hold harmless
Landlord from and against all loss, damage, cost, liability or expense
(including, without limitation, attorneys' fees and expenses) resulting from or
relating to such failure to surrender the Premises including, without
limitation, any claim made by any succeeding tenant.

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

28. Matters of Record. The parties hereby acknowledge that this Lease shall be
subordinate to existing matters of record (the "Agreements"), provided, however,
that this Lease shall not be subordinate to any new Agreement or any amendment
or supplement to the existing Agreements, which is not first approved by Tenant
in writing, which approval shall not be unreasonably withheld, conditioned or
delayed. Notwithstanding any such subordination to the Agreements or any
amendment or supplement thereto, as between Landlord and Tenant, Landlord shall
be liable to Tenant for any breach of the terms set forth in this Lease,
notwithstanding whether such breach is permitted pursuant to the terms of the
Agreements, and Landlord shall be solely responsible for and shall indemnify,



                                       26
<PAGE>

defend and hold harmless Tenant from and against any and all losses, demands,
damages, claims, liabilities, obligations, costs and/or expenses (including,
without limitation, reasonable attorneys' fees and expenses) incurred as a
result of any conflict between the provisions of this Lease and the Agreements.

29. Binding Effect; Choice of Law. Except as otherwise provided herein, this
Lease shall be binding upon the parties, their personal representatives,
successors and assigns and be governed by the laws of the State in which the
Premises are located. Any litigation between the Parties hereto concerning this
Lease shall be initiated in the county in which the Premises are located.

30. Subordination; Attornment.

30.1 Subordination. Upon notice by Landlord, Tenant shall subordinate its rights
under this Lease to any lease(s) wherein Landlord is the lessee and to the lien
of any mortgage(s) or deed(s) of trust (collectively, "Instrument"), regardless
of whether such Instrument now exists or is hereafter created, to all advances
thereunder, to any interest thereon, and to all modifications, consolidations,
renewals, replacements and extensions thereof, provided the lessors, mortgagees
or beneficiaries agree to provide Tenant with an agreement of non-disturbance in
a form reasonably acceptable to Tenant, agreeing to recognize this Lease and
Tenant's rights hereunder in the event of termination or foreclosure under the
Instrument. Tenant agrees to execute any agreement evidencing such subordination
and non-disturbance in a form reasonably acceptable to Tenant, at Landlord's
request. Any such lessor, mortgagee or beneficiary may elect to have this Lease
prior to its instrument, and in the event of such election and upon notification
by such lessee, mortgagee or beneficiary to Tenant, this Lease shall be deemed
prior to said Instrument, whether this Lease is dated prior or subsequent to
said Instrument. Notwithstanding anything to the contrary contained in this
Lease, it shall be a condition precedent to the performance of each of Tenant's
obligations under this Lease (including, without limitation, Tenant's obligation
for the payment of Base Rent and Tenant's Share of Operating Expenses), that
Tenant obtain from each lessor, mortgagee or beneficiary under any Instrument
presently encumbering the Premises, an agreement of non-disturbance in a form
reasonably acceptable to Tenant. It is the understanding of the parties that no
such Instrument currently encumbers the Premises.

30.2 Attornment. If Landlord's interest in the Premises is transferred (except
in a sale-leaseback financing transaction), or if any proceedings are brought
for the foreclosure of, or in the event of the exercise of the power of sale
under, any Instrument, or if any lease in a sale leaseback transaction wherein
Landlord is the lessee is terminated, Tenant shall attorn to and recognize such
purchaser, assignee, mortgagee or beneficiary as Landlord under this Lease,
provided such purchaser, assignee, mortgagee or beneficiary has executed or
agrees to execute an agreement of subordination, non-disturbance and attornment
in form reasonably acceptable to Tenant and such purchaser, assignee, mortgagee
or beneficiary recognizing this Lease and Tenant's rights hereunder.

31. Attorneys' Fees. If any Party brings an action or proceeding to enforce the
terms hereof or declare rights hereunder, the Prevailing Party (as hereafter
defined) in any such proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys' fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party of its claim or defense. The attorneys' fee award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. In addition
to the foregoing award of attorneys' fees to the


                                       27
<PAGE>

Prevailing Party, the Prevailing Party shall be entitled to its attorneys' fees
incurred in any post-judgment proceedings to collect or enforce the judgment.
This provision is separate and several and shall survive the merger of this
Lease into any judgment on this Lease. Landlord shall be entitled to attorneys'
fees, costs and expenses incurred in the preparation and service of notices of
default and consultations in connection therewith, whether or not a legal action
is subsequently commenced in connection with such default.

32. Landlord's Entry. Landlord and its employees, agents, representatives,
consultants and/or contractors shall have the right from time to time upon
reasonable prior notice to Tenant (which, notwithstanding anything to the
contrary contained in this Lease respecting the manner of delivery of notices,
may be oral or written notice), except that no such prior notice shall be
required in the event of an emergency or for scheduled provision of services to
the Premises, to enter the Premises to inspect the same, to supply any service
to be provided by Landlord to Tenant hereunder, to show the Premises to
prospective purchasers, encumbrancers or (during the final twelve (12) months of
the Term) tenants, to post notices of non-responsibility, to alter, improve or
repair the Premises or any other portion of the Building, all without being
deemed guilty of any eviction of Tenant and without abatement of Rent (subject
to the provisions of Paragraph 5 above), and may, if necessary to carry out such
purposes, erect scaffolding and other necessary structures where required by the
character of the work to be performed. Landlord shall use reasonable efforts to
minimize any interference with the operation of Tenant's business from the
Premises resulting from any such entry (except in the event of an emergency).
Subject to the provisions of Paragraph 5 above, Tenant hereby waives any claim
for damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss in, upon and about the Premises or the Project. Landlord shall at all
times have and retain a key with which to unlock all doors to and in the
Premises. In the event of an emergency, Landlord shall have the right to use any
and all means which Landlord may reasonably deem proper to open said doors in
order to obtain entry to the Premises. Any entry to the Premises obtained by
Landlord by any of said means, or otherwise, shall not be construed or deemed to
be a forcible or unlawful entry into the Premises, or an eviction of Tenant from
the Premises or any portion thereof. It is understood and agreed that no
provision of this Lease shall be construed as obligating Landlord to perform any
repairs, alterations or decorations, except as otherwise expressly agreed herein
by Landlord.

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

34. Signs. Tenant may install the maximum lawful building signage as Tenant may
desire to advertise Tenant's own business, subject to Landlord's prior written
approval, which approval shall not be unreasonably withheld, conditioned or
delayed. The installation of any sign on the Premises by or for Tenant shall be
subject to the provisions of Paragraph 7. In addition, Tenant shall be entitled
to such monument, pylon or other signage to be located in the Common Areas of
the Project as are specified to be included within Landlord's Work pursuant to
Exhibit B (the identification panels of Tenant upon which signage shall be
subject to replacement by Tenant from time to time to reflect Tenant's then
desired identification thereon). All Tenant signage pursuant to this Lease shall
be subject to compliance with the requirements of applicable Laws.

35. Termination; Merger. The voluntary or other surrender of this Lease by
Tenant, the mutual termination or cancellation hereof, or a termination hereof
by Landlord for default by Tenant, shall



                                       28
<PAGE>

automatically terminate any sublease or lesser estate in the Premises; provided,
however, Landlord shall, in the event of any such surrender, termination or
cancellation, have the option to continue any one or all of any existing
subtenancies. Landlord's failure within ten (10) days following any such event
to make a written election to the contrary by written notice to the holder of
any such lesser interest, shall constitute Landlord's election to have such
event constitute the termination of such interest.

36. Consents. Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld,
conditioned or delayed. Landlord's actual reasonable costs and expenses
(including but not limited to architects', attorneys', engineers' or other
consultants' fees) incurred in the consideration of, or response to, a request
by Tenant for any Landlord consent pertaining to this Lease or the Premises,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance or storage tank, shall be paid by
Tenant to Landlord upon receipt of an invoice and supporting documentation
therefor.

37. Interpretation. The language in all parts of this Lease shall be in all
cases construed as a whole according to its fair meaning and not strictly for
nor against either Landlord or Tenant.

38. Quiet Possession. Upon payment by Tenant of the rent for the Premises and
the observance and performance of all of the covenants, conditions and
provisions on Tenant's part to be observed and performed under this Lease,
Tenant shall have quiet possession of the Premises for the entire term hereof
subject to all of the provisions of this Lease and all matters of record against
the Premises.

39. Expedited Dispute Resolution. Any dispute between Landlord and Tenant
pursuant to this Lease (other than Landlord's exercise of unlawful detainer
remedies) shall, at the option of either party, be heard by a reference pursuant
to the provisions of California Code of Civil Procedure Section 638 et seq., for
a determination to be made which shall be binding upon the parties as if tried
before a court or jury. The parties agree specifically as to the following: (i)
within five (5) business days after service of a demand by a party hereto, the
parties shall agree upon a single referee who shall then try all issues, whether
of fact or law, and then report a finding or judgment thereon, provided that if
the parties are unable to agree upon a referee either party may seek to have one
appointed, pursuant to California Code of Civil Procedure Section 640, by the
presiding judge of the Los Angeles County Superior Court; (ii) the compensation
of the referee shall be such charge as is customarily charged by the referee for
like services, and the cost of such proceedings shall initially be borne equally
by the parties; provided, however, the prevailing party in such proceedings
shall be entitled, in addition to all other costs, to recover its contribution
for the cost of the reference as an item of damages and/or recoverable costs;
(iii) if a reporter is requested by either party, then a reporter shall be
present at all proceedings, and the fees of such reporter shall be borne by the
party requesting such reporter and such fees shall be an item of recoverable
costs, provided that only a party shall be authorized to request a reporter;
(iv) the referee shall apply all California Rules of Procedure and Evidence and
shall apply the substantive law of California in deciding the issues to be
heard, and notice of any motions before the referee shall be given, and all
matters shall be set at the convenience of the referee; (v) the referee's
decision under California Code of Civil Procedure Section 644, shall stand as
the judgment of the court, subject to appellate review as provided by the laws
of the State of California; (vi) the parties agree that they shall in good faith
endeavor to cause any such dispute to be decided within four (4) months; and the
date of hearing for any proceeding shall be determined by agreement of the
parties and the referee, or if the parties cannot agree, then by the referee;
and (vii) the referee shall have the power to award damages and all other
relief.



                                       29
<PAGE>

40. Rules and Regulations. Tenant agrees that it will abide by, keep and observe
all reasonable and non-discriminatorily enforced rules and regulations which
Landlord may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order within the Project, as well as for the convenience of
occupants or tenants of the Project and their invitees. However, in no event
shall such rules and regulations increase the monetary obligations owing from
Tenant to Landlord under this Lease or otherwise materially increase the
obligations or diminish the rights of Tenant under this Lease.

41. Security Measures. Tenant hereby acknowledges that the rental payable to
Landlord hereunder does not include the cost of guard service or other security
measures, and that Landlord shall have no obligation whatsoever to provide same
(provided that Landlord has the right, in its sole and absolute discretion, to
provide security services and include the cost thereof as an item of Common Area
Expenses). Tenant assumes all responsibility for the protection of the Premises,
Tenant, its agents and invitees and their property from the acts of third
parties.

42. Reservations. Landlord reserves to itself the right, from time to time, to
grant, without the consent or joinder of Tenant, such easements, rights and
dedications that Landlord deems necessary, and to cause the recordation of
parcel maps and restrictions, so long as such easements, rights, dedications,
maps and restrictions do not materially adversely affect (i) the use or
occupancy of the Premises, (ii) means of access to and from the Premises, (iii)
parking serving the Premises, or (iv) visibility of Premises signage from
adjacent rights of way. Tenant agrees to sign any documents reasonably requested
by Landlord to effectuate any such easement rights, dedication, map or
restrictions.

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

44. Authority. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Tenant is a corporation, trust or
partnership, Tenant shall, within thirty (30) days after request by Landlord,
deliver to Landlord evidence satisfactory to Landlord of such authority.

45. Offer. Preparation of this Lease by Landlord, Tenant or Landlord's agent or
Tenant's agent and submission of same to the other party shall not be deemed an
offer to lease to such other party. This Lease is not intended to be binding
until executed by both Landlord and Tenant.

46. Limitation of Landlord's Liability. In consideration of the benefits
accruing hereunder, and notwithstanding anything contained in this Lease to the
contrary, Tenant and all successors and assigns covenant and agree that, in the
event of any actual or alleged failure, breach or default hereunder by Landlord
or in the event of any other action against Landlord with respect to this Lease,
their sole and exclusive remedy shall be against Landlord's interest in the
Project and the proceeds thereof and



                                       30
<PAGE>

therefrom. Tenant and all such successors and assigns agree that the obligations
of Landlord under this Lease do not constitute personal obligations of the
individual partners, whether general or limited, members, directors, officers or
shareholders of Landlord, and Tenant shall not seek recourse against the
individual partners, members, directors, officers or shareholders of Landlord or
any of their personal assets for satisfaction of any liability with respect to
this Lease. Notwithstanding any contrary provision contained in this Lease,
neither Landlord, any of the individual partners, members, directors, officers
or shareholders of Landlord or any of their respective employees, agents or
contractors shall be liable under any circumstances for any indirect or
consequential damages or any injury or damage to, or interference with, Tenant's
business, including but not limited to, loss of profits, loss of rents or other
revenues, loss of business opportunity, loss of goodwill or loss of use, in each
case, however occurring.

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

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

The parties hereto have executed this Lease as of the date first written above.

<TABLE>
<CAPTION>
LANDLORD:                                                     TENANT:
---------                                                     --------
<S>                                                           <C>
La Canada Properties, Inc., a California corporation          Sport Chalet, Inc., a Delaware corporation

By: La Canada Enterprises, Inc., a California                 By:  /s/ Howard Kaminsky
    corporation, its agent
                                                              Print Name: Howard Kaminsky
    By:  /s/ Norbert Olberz
                                                              Its: Chief Financial Officer
    Print Name: Norbert Olberz

    Its: President

Address of Landlord:                                          Address of Tenant:
La Canada Properties, Inc.                                    Prior to Commencement Date:
920 Foothill Boulevard                                        Sport Chalet, Inc.
La Canada, California 91011                                   920 Foothill Boulevard
Attn:  President                                              La Canada, California 91011
                                                              Attn:  President

                                                              Following Commencement Date:
                                                              Sport Chalet, Inc.
                                                              839 Houseman Street
                                                              La Canada, California 91011
                                                              Attn:  President
</TABLE>



                                       31
<PAGE>

EXHIBIT A

Site Plan Depicting Project

EXHIBIT B

CONSTRUCTION OF PREMISES

1. Landlord's Work. Landlord has caused the construction of the Building and the
improvements contained therein and the Common Areas, as existing as of the date
hereof (collectively, "Landlord's Work"). All "punch-list" items with respect to
Landlord's Work not completed upon the date hereof shall be completed by
Landlord as soon as possible following the date hereof but in no event later
than sixty (60) days thereafter. In addition, at any time within one (1) year
following the date hereof, Tenant shall have the right to notify Landlord of
incomplete or defective items of Landlord's Work and Landlord shall promptly
complete or repair, as the case may be, such items of work.

2. Tenant's Work. All work in the Premises (other than Landlord's Work) and the
installation of such furniture, trade fixtures and equipment as Tenant deems
necessary for the operation of Tenant's business from the Premises is
collectively referred to herein as "Tenant's Work". To the extent Tenant's Work
constitutes Alterations which would require the consent of Landlord pursuant to
the Lease, such Tenant's Work shall be performed in accordance with the
provisions of the Lease governing the making of Alterations by Tenant.



                                       32