EXHIBIT 10.1


                            BASIC LEASE INFORMATION


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         Lease Date:                   June 8, 1998

         Landlord:                     SOUTH VALLEY ASSOCIATES
         Address of Landlord:          11411 NE 124th St., Suite 150
                                       Kirkland, WA 98034

         Tenant:                       Gargoyles Inc., a Washington corporation

         Premises:                     22223 68th Avenue South, Building B
                                       Kent, Washington 98032


Paragraph 1    Premises   consisting   of   approximately   25,348  square  feet
               (consisting  of 5,075 sf of office and 20,273 sf of warehouse) in
               the Building "B" of  approximately  83,755 square feet  (computed
               from  measurements  to  the  exterior  of  outside  walls  of the
               building  and to the center of  interior  walls),  such  premises
               being shown and  outlined in red on the plan  attached  hereto as
               Exhibit  A, and  being  part of the real  property  described  in
               Exhibit B attached hereto.


Paragraph 1    Lease Term:  Commencing on the "Commencement Date" as hereinafter
               defined and ending thirty six (36) months  thereafter except that
               in the event the Commencement Date is a date other than the first
               day of a calendar  month,  said term shall extend for said number
               of months in  addition to the  remainder  of the  calendar  month
               following the Commencement Date.

Paragraph 1    Scheduled Term Commencement Date: August 1, 1998

Paragraph 2    Monthly Base Rent:    Months                       Rent
                                     ------                       ----
                                      1-36                      $10,750.00

Paragraph 2B   Security Deposit:     First Payment:             $13,411.54
               Security Deposit:     Second Payment due on or
               before August 1, 1998:                           $13,411.54

Paragraph 4A   Tenant'  Initial  Monthly  Escrow  Payment  for  Taxes  and Other
               Charges: $1,365.00

Paragraph 7    Tenant's   Initial  Monthly  Common  Area   Maintenance   Charge:
               $1,167.00

Paragraph 14B  Tenant's Initial Monthly Insurance Escrow Payment: $131.00

               Tenant's Initial Monthly Payment: $13,411.54

               The foregoing Basic Lease Information is hereby incorporated into
               and made a part of this Lease.  Each  reference  in this lease to
               any of the Basic  Lease  information  shall  mean the  respective
               information  herein  above set forth  and shall be  construed  to
               incorporate all of the terms provided under the particular  Lease
               paragraph  pertaining  to such  information.  In the event of any
               conflict  between any Basic Lease  Information  and the Lease the
               former shall control.



<PAGE>



                                 LEASE AGREEMENT


THIS  LEASE  AGREEMENT,  made  and  entered  into by and  between  South  Valley
Associates,  herein after  referred to as  "Landlord",  and,  Gargoyles  Inc., a
Washington corporation hereinafter referred to as "Tenant";


                                   WITNESSETH


1.   PREMISES AND TERM.

     A. In  consideration  of the  obligation  of  Tenant  to pay rent as herein
     provided, and in consideration of the other terms, provisions and covenants
     hereof,  Landlord  hereby  demises and leases to Tenant,  and Tenant hereby
     takes and leases from Landlord those certain Premises as outlined in red on
     Exhibit "A" attached hereto (hereinafter  referred to as the "Premises" and
     incorporated  herein by reference,  together  with all rights,  privileges,
     easements,  appurtenances,  and  amenities  belonging  to  or  in  any  way
     appertaining  to  the  Premises  and  together  with  buildings  and  other
     improvements  situated or to be situated upon land described in Exhibit "B"
     attached hereto.

     B. To have and to hold the same for a term commencing on the  "Commencement
     Date:,  as  hereinafter  defined and ending  thereafter as specified in the
     Basic Lease  Information,  attached hereto,  (the "Lease Term"),  provided,
     however that, in the event the "Commencement Date" is a date other than the
     first day of a calendar  month,  said term shall  extend for said number of
     months in addition to the  remainder of the calendar  month  following  the
     "Commencement Date".

     C. The  "Commencement  Date" shall be the Scheduled Term  Commencement Date
     shown in the Basic  Lease  Information  attached  hereto  and  incorporated
     herein by reference.

     D. Early termination option - See Exhibit "C".

     E. Tenant Improvements - See Exhibit "D".

2.   BASE RENT AND SECURITY DEPOSIT.

     A. Tenant agrees to pay to Landlord Base Rent for the Premises,  in advance
     without  demand,  deduction or set off, for the entire Lease Term hereof at
     the rate  specified  in the Basic  Lease  Information,  payable  in monthly
     installments.  One such monthly  installment shall be due and payable on or
     before the first day of each calendar  month  succeeding  the  Commencement
     Date recited above during the Lease Term except that the rental payment for
     any  fractional  calendar  month at the  commencement  or end of the  Lease
     period shall be prorated on the basis of 30-day month.

     B. In addition, Tenant agrees to deposit with Landlord on the date hereof a
     security  deposit in the amount  specified in the Basic Lease  Information,
     which sum shall be held by Landlord,  without  obligation for interest,  as
     security for the  performance of tenant's  covenants and  obligation  under
     this Lease, it being  expressly  understood and agreed that such deposit is
     not an advance rental  deposit,  not the last month's rent nor a measure of
     Landlord's damages in the event of Tenant's default. Upon the occurrence of
     any event of default by Tenant,  Landlord may,  from time to time,  without
     prejudices to any other remedy provided herein or provided by law, use such
     deposit to the extent  necessary  to make good any arrears of rent of other
     payments due Landlord hereunder,  and any other damage,  injury, expense or
     liability  caused by such event of default;  or to perform  any  obligation
     required of Tenant under the Lease; and Tenant shall pay Landlord on demand
     the  amount so  applied in order to  restore  the  security  deposit to its
     original amount. Although the security deposit shall be deemed the property
     of Landlord,  any  remaining  balance of such deposit  shall be returned by
     Landlord to Tenant at such time after termination of this Lease that all of
     tenant's obligations under this Lease have been fulfilled.
<PAGE>

3.   USE.

     A. The  Premises  shall be used only for the  purpose  of  general  office,
     receiving,  storing, shipping,  assembly, light manufacturing,  and selling
     (other  than  retail)  products,  materials  and  merchandise  made  and/or
     distributed  by  Tenant  and  for  such  other  lawful  purposes  as may be
     incidental  thereto.  Outside  storage,  including  without  limitation  is
     prohibited  without  Landlord's prior written consent.  Tenant shall at its
     own cost and expense obtain any and all licenses and permits  necessary for
     its use of the Premises.  Tenant shall comply with all  governmental  laws,
     ordinances and regulations applicable to the use of the Premises, and shall
     promptly comply with all governmental  orders and directives  including but
     not limited to those regarding the correction,  prevention and abatement of
     nuisances in or upon, or connected with, the Premises, all at Tenant's sole
     expense.  Tenant shall not permit any  objectionable  or unpleasant  odors,
     smoke,  dust,  gas,  noise or vibrations to emanate from the Premises,  nor
     take any other action which would constitute a nuisance or would disturb or
     endanger  any other  tenants  of the  building  in which the  Premises  are
     situated  or  unreasonably  interfere  with  their use of their  respective
     Premises.  In addition to any other remedies Landlord may have for a breach
     by Tenant of the terms of this Section 3, Landlord  shall have the right to
     have  Tenant  evicted  from the  Premises  should  Tenant fail to abate the
     nuisance  or  unreasonable   interference   with  other  Tenants.   Without
     Landlord's  prior  written  consent,  Tenant  shall not  receive,  store or
     otherwise handle any product, material or merchandise which is explosive or
     highly inflammable.  Tenant will not permit the Premises to be used for any
     purpose  or in any  manner  (including  without  limitation  any  method of
     storage)  which would render the  insurance  thereon void or the  insurance
     risk  more  hazardous  or  cause  the  State  Board of  Insurance  or other
     authority to disallow any sprinkler  credits.  In the event Tenant's use of
     Premises shall result in an increase in insurance premiums, Tenant shall be
     solely responsible for said increase.

     B. With respect to any release of toxic or hazardous substance or wastes or
     other condition of the Premises occurring on or after the date of the Lease
     and caused by or resulting  from the negligent acts or omissions or willful
     misconduct of Tenant, its employees, authorized agents, or contractors, and
     which release or other condition violates the provisions of or necessitates
     any removal,  treatment or other remedial action under, any past,  present,
     or future  federal state or local  statute or ordinance or any  regulation,
     directive,  or requirement or any governmental  authority with jurisdiction
     relating  to  protection  of the  environment,  Tenant  agrees  to  defend,
     indemnify, and hold harmless Landlord, its partners, employees, agents, and
     contractors,  from and  against  any and all  losses,  claims  liabilities,
     damages,   demands,   fines,  costs,  and  expenses  (including  reasonable
     attorney's fees and legal expenses) arising out of or resulting  therefrom.
     The  provisions  of  this  paragraph   shall  survive  the  termination  or
     expiration of this Lease and the surrender of the Premises by Tenant,  with
     respect  to  releases,  events,  or  conditions  occurring  prior  to  such
     termination, expiration, or surrender. With respect to any release of toxic
     or  hazardous  substances  or wastes  or other  condition  of the  Premises
     occurring  prior to the date of this Lease and caused by or resulting  from
     the  negligent  acts or omissions or willful  misconduct  of Landlord,  its
     employees,   authorized  agents,  or  contractors,  and  which  release  or
     condition   violates  the  provisions  of,  or  necessitates  any  removal,
     treatment,  or other remedial action under,  any past,  present,  or future
     federal,   state,   or  local  statute  or  ordinance  or  any  regulation,
     requirement,  or directive of any governmental  authority with jurisdiction
     relating  to  protection  of the  environment,  Landlord  agrees to defend,
     indemnify,  and hold  harmless  Tenant from and against any and all losses,
     claims,   liabilities,   damages,   demands,  fines,  costs,  and  expenses
     (including  reasonable attorney' fees and legal expenses) arising out of or
     resulting therefrom.
<PAGE>

4.   TAXES AND OTHER CHARGES

     A.  Tenant  agrees  to pay it  proportionate  share of any and all real and
     personal  property taxes,  regular and special  assessments,  license fees,
     public  service  impact  fees and  other  charges  of any  kind and  nature
     whatsoever,  payable by Landlord as a result of any public or  quasi-public
     authority,  private  party,  or owner's  association  levy,  assessment  or
     imposition against,  or arising out of Landlord's  ownership of or interest
     in, the real estate described in Exhibit "B" attached hereto, together with
     the building and the grounds,  parking areas, driveways,  roads, and alleys
     around the building in which the Premises are located,  or any part thereof
     (hereinafter collectively referred to as the "Charges").  During each month
     of the Lease Term, Tenant shall make a monthly escrow deposit with Landlord
     (the  "Escrow  Payment")  equal to 1/12 of its  proportionate  share of the
     Charges which will be due and payable for that  particular  calendar  year.
     Any lump sum public service impact fees paid by Landlord shall be amortized
     over ten (10) years at interest not to exceed the actual  interest  paid by
     Landlord and equal installments of such fee, together with interest accrued
     there on,  shall be payable  monthly as a portion  of the  Charges.  Tenant
     authorizes  Landlord to use the funds  deposited  by Tenant  with  Landlord
     under this Paragraph 4 to pay the Charges. Each Escrow Payment shall be due
     and payable,  as additional rent at the same time and in the same manner as
     the payment of monthly rental as provided herein. The amount of the initial
     Monthly  Escrow  Payment will be specified in the Basic Lease  Information.
     The initial  Escrow Payment is based upon Tenant's  proportionate  share of
     the  estimated  Charges  for the year in question  and the  monthly  Escrow
     Payment is subject to increase or decrease as determined by the Landlord to
     reflect an accurate escrow of Tenant's estimated proportionate share of the
     Charges. The Escrow Payment account of Tenant shall be reconciled annually.
     If the Tenant's  total Escrow  Payments are less than  Tenant's  actual pro
     rata share of the  Charges,  tenant  shall pay to Landlord  upon demand the
     difference;  if the Tenant's  total Escrow  Payments are more than Tenant's
     actual pro rata share of the Charges, Landlord shall retain such excess and
     credit it to Tenant's Escrow Payment  accounting for the successive  year's
     Charges.  Tenant's proportionate share of the Charges shall be based on the
     gross leasable  square footage of the Building  computed by multiplying the
     Charges by a fraction,  the numerator of which shall be the number of gross
     leasable  square feet of floor space in the Premises and the denominator of
     which shall be the total applicable gross leasable square footage;  or such
     other equitable apportionment as may be adopted.

     B. If Tenant should fail to pay any Escrow Payments  required to be paid by
     Tenant  hereunder,  in  addition  to any other  remedies  provided  herein,
     Landlord  may,  if it  so  elects,  pay  such  Escrow  Payments  or  taxes,
     assessments,  license fees and other charges.  Any sums so paid by Landlord
     shall be deemed to be so much additional rental owing by Tenant to Landlord
     and due and payable upon demand as  additional  rental plus interest at the
     rate of  eighteen  percent  (18%) per  annum  from the date of  payment  by
     Landlord until repaid by Tenant.

     C. (1) If at any time during the Lease Term, the present method of taxation
     shall be  changed  so that in lieu of the  whole or any part of any  taxes,
     assessments, fees or charges levied, assessed or imposed on real estate and
     the  improvements  thereon,  there shall be levied,  assessed or imposed on
     Landlord  a  capital  levy or other  tax  directly  on the  rents  received
     therefrom and/or a franchise tax, assessment, levy or charge measured by or
     based,  in whole or in part,  upon such rents or the  present or any future
     building or buildings, then all such taxes,  assessments,  fees or charges,
     or the part  thereof so measured  or based,  shall be deemed to be included
     within he term "Charges" for the purposes hereof.
<PAGE>

          (2) Tenant  may,  alone or along with  other  tenants of the  building
     containing the Premises,  at its sole cost and expense, in its or their own
     name(s)  dispute  and  contest  any  Charges  by  appropriate   proceedings
     diligently  conducted  in good faith,  but only after  Tenant and all other
     Tenants,  if any,  joining with Tenant in such contest have  deposited with
     Landlord the amount so contested and unpaid or their  proportionate  shares
     thereof  as the  case  may be,  which  shall  be held by  Landlord  without
     obligation for interest until the termination of the proceedings,  at which
     time the  amount(s)  deposited  shall be  applied  by  Landlord  toward the
     payment of the items held valid (plus any court costs, interest,  penalties
     and other liabilities associated with the proceeding(s), and Tenant's share
     of any excess shall be returned to Tenant.  Tenant further agrees to pay to
     Landlord upon demand Tenant's share (as among all Tenants who  participated
     in  the  contest)  of  all  court  costs,  interest,  penalties  and  other
     liabilities  relating to such  proceedings.  Tenant hereby  indemnifies and
     agrees to hold harmless the Landlord  from and against any cost,  damage or
     expense   (including   attorney's   fees)  in  connection   with  any  such
     proceedings.

          (3) Any payment to be made  pursuant to this  Paragraph 4 with respect
     to the calendar year in which this Lease commences or terminates shall bear
     the same ratio to the  payment  which  would be required to be made for the
     full  calendar  year as that part of such  calendar  year by the Lease Term
     bears to a full calendar year.

     D. Tenant shall be liable for all taxes levied  against  personal  property
     and trade fixtures placed by Tenant in the Premises.  If any such taxes are
     levied against  Landlord or Landlord's  property and if Landlord  elects to
     pay the same or if the assessed  value of Landlord's  property is increased
     by inclusion of personal  property and trade  fixtures  placed by Tenant in
     the Premises and Landlord  elects to pay the taxes based on such  increase,
     Tenant shall pay to Landlord  upon demand that part of such taxes for which
     Tenant is primarily liable hereunder.

5.   TENANT'S MAINTENANCE

     A. Tenant  shall at its own cost and expense keep and maintain all parts of
     the Premises  (except  those for which  Landlord is  expressly  responsible
     under  the terms of this  Lease) in good  condition,  promptly  making  all
     necessary repairs and replacements,  including but not limited to, windows,
     glass and plate glass, doors, any special office entry,  interior walls and
     finish work,  floor and floor covering,  downspouts,  gutters,  heating and
     air-conditioning  systems, dock boards, truck doors, dock bumpers,  paving,
     plumbing work and fixtures, termite and pest extermination, regular removal
     of trash and debris, keeping the parking areas,  driveways,  alleys and the
     whole of the Premises in a clean and sanitary  condition.  Tenant shall not
     be  obligated  to  repair  any  damage  caused by fire,  tornado,  or other
     casualty covered by the insurance to be maintained by Landlord  pursuant to
     subparagraph  14(A) below,  except that tenant shall be obligated to repair
     all wind  damage to glass  except  with  respect to  tornado  or  hurricane
     damage.

     B. Tenant shall not damage any demising  wall or disturb the  integrity and
     support  provided  by any  demising  wall and  shall  at its sole  cost and
     expense,  promptly  repair any damage or injury to any demising wall caused
     by Tenant or its employees, agents, licensees or invites.

     C. Tenant and its employees,  customers and licensees  shall have the right
     to use the  parking  areas,  if any,  as may be  designated  by Landlord in
     writing,  subject to such reasonable  rules and regulations as Landlord may
     from time to time  prescribe  and subject to right of ingress and egress of
     other tenants.  Landlord shall not be  responsible  for enforcing  Tenant's
     exclusive parking rights against any third parties.  If Tenant or any other
     particular  tenant  of the  building  can be  clearly  identified  as being
     responsible for  obstructions or stoppage of a common sanitary sewage line,
     then Tenant, if Tenant is responsible,  or such other  responsible  Tenant,
     shall pay the entire cost thereof, upon demand, as additional rent.
<PAGE>

     D.   Landlord   shall,   enter  into  a  regularly   scheduled   preventive
     maintenance/service  contract with a maintenance  contractor  for servicing
     all heating and air-conditioning systems and equipment with the Premises.

6.   LANDLORD'S  REPAIRS.  After reasonable  notice from Tenant,  Landlord shall
repair the roof,  exterior walls and foundations,  and the cost thereof shall be
shared as provided in Paragraph 7. Tenant shall repair and pay for any damage to
such  items  to be  maintained  by  Landlord  caused  by any  act,  omission  or
negligence of Tenant, or Tenant's employees,  agents,  licensees or invitees, or
caused by Tenant's default hereunder.  The term "walls" as used herein shall not
include  windows,  glass or plate glass,  doors,  special store fronts or office
entries. Tenant shall immediately give Landlord written notice of defect or need
for repairs,  after which Landlord shall have a reasonable  opportunity and time
to repair same or cure such  defect.  Landlord's  liability  with respect to any
defects,  repairs or maintenance for which Landlord is responsible  under any of
the  provisions  of this Lease  shall be limited to the cost of such  repairs or
maintenance for the curing of such defect.

7.   MONTHLY  COMMON-AREA  MAINTENANCE  CHARGE.  Tenant  agrees  to  pay,  as an
additional charge each month, its  proportionate  share of the cost of operation
and  maintenance  of the Common Area which shall be defined from time to time by
Landlord.  Common  Area costs as normally  charged in the  market,  which may be
incurred by Landlord,  at its discretion,  shall include,  but not be limited to
costs incurred for lighting,  water, sewage,  trash removal,  exterior painting,
exterior window cleaning, accounting,  policing, sweeping, services negotiation,
customary  property  management  fee not to exceed 5% of rentals,  sewer  lines,
plumbing,  paving,  landscape maintenance,  plant material replacement and other
like charges,  and for  administration of the items set forth in this paragraph.
Landlord  shall  maintain  the Common Areas in  reasonably  good  condition  and
repair.  The  proportionate  share to be paid by tenant of the cost of operation
and maintenance of the Common Area shall be computed on the ratio that the gross
leasable  square  feet of the  Premises  bears  to the  total  applicable  gross
leasable square footage or such other equitable apportionment as may be adopted.
Landlord shall make monthly or other  periodic  charges based upon the estimated
annual cost of operation and maintenance of the Common Area,  payable in advance
but subject to  adjustment  after the end of the year on the basis of the actual
cost for such year.  Any such  periodic  charges  shall be due and payable  upon
delivery of notice thereof. The initial Common-Area Maintenance Charges, subject
to adjustment as provided herein,  shall be due and payable, as additional rent,
at the same time and in the same manner as the time and manner of the payment of
monthly rental as provided herein. The amount of the initial monthly Common-Area
Maintenance Charge shall be as specified in the basic Lease Information.

8.   RENTAL ADJUSTMENT

     Intentionally deleted

9.   ALTERATIONS.

     A. Tenant shall not make any alterations,  additions or improvements to the
     Premises (including but not limited to roof and wall penetrations)  without
     the  prior  written  consent  of  Landlord,  which  consent  shall  not  be
     unreasonably  withheld  or  delayed.  Tenant  may,  without  the consent of
     Landlord,  but at its own cost and expense and in a good workmanlike manner
     erect  such  shelves,  bins,  machinery  and trade  fixture  as it may deem
     advisable,  without  altering  the  basic  character  of  the  building  or
     improvements   and  without   overloading  or  damaging  such  building  or
     improvements,  and in each case complying with all applicable  governmental
     laws,  ordinances,  regulations and other  requirements.  All  alterations,
     additions,  improvements  and  partitions  erected  by Tenant  shall be and
     remain  the  property  of Tenant  during  the Term of the Lease and  Tenant
     shall, unless Landlord otherwise elects as hereinafter provided, remove all
     alterations,  additions,  improvements and partitions erected by Tenant and
     restore the Premises to their original condition by the date of termination
     of this Lease or upon earlier vacating of the Premises  provided,  however,
     that if  Landlord  so elects  prior to  termination  of this  Lease or upon
     earlier  vacating  of  the  Premises  that  such  alterations,   additions,
     improvements and partitions shall become the property of Landlord as of the
     date of termination of this Lease or upon earlier  vacating of the Premises
     and shall be delivered up to the Landlord with the  Premises.  All shelves,
     bins,  machinery and trade  fixtures  installed by Tenant may be removed by
     Tenant  prior to the  termination  of this Lease if Tenant so  elects,  and
     shall be removed by the date of  termination  of this Lease or upon earlier
     vacating of the  Premises if required by  Landlord;  upon any such  removal
     tenant shall restore the Premises to their  original  conditions.  All such
     removals and restoration  shall be accomplished in good workmanlike  manner
     so as not to damage the primary  structure or  structural  qualities of the
     buildings and other improvements situated on the Premises
<PAGE>

     B. Tenant shall remove any sumps and clarifiers  and any related  Hazardous
     Materials  ("Hazardous   Materials"  shall  mean  petroleum  and  petroleum
     products,  asbestos,  and PCBs and any "hazardous  substances",  "hazardous
     materials",  or  "toxic  substances"  in  the  Comprehensive  Environmental
     Response, Compensation and Liability Act of 1980, as amended, the Hazardous
     Materials  Transportation Act, as amended, or the Resource Conservation and
     Recovery Act, as amended, those substances,  materials and wastes which are
     defined  as  "hazardous  wastes"  or  as  "hazardous   substances"  in  the
     Washington Health and Safety Code or Labor Code, and "hazardous" or "toxic"
     in the regulations  adopted or publication  promulgated  pursuant to any of
     said laws) in or about the Premises and  associated  with  Tenant's use and
     occupancy thereof upon the expiration or earlier termination of this Lease.

     C.  Notwithstanding  anything to the contrary  contained  herein,  Landlord
     agrees that the Tenant shall not be  responsible  for,  and Landlord  shall
     hold Tenant harmless against,  any costs of cleanup or removal arising from
     or associated with any hazardous material existing in, on or throughout the
     Premises, as of the date Tenant occupies the Premises pursuant to the terms
     of this Lease,

10.  SIGNS.  Tenant shall not install signs upon the Premises without Landlord's
     prior written approval,  which approval shall not be unreasonably  withheld
     or  delayed,  and any such  signage  shall  be  subject  to any  applicable
     governmental laws, ordinances,  regulations and other requirements.  Tenant
     shall  remove  all  such  signs  by the  termination  of this  Lease.  Such
     installations  and  removals  shall  be made in such a  manner  as to avoid
     injury or  defacement  of the building and other  improvements,  and tenant
     shall  repair  any  injury  or  defacement,  including  without  limitation
     discoloration caused by such installations and/or removal.

11.  INSPECTION.

     A. Landlord and Landlord's agents and representatives  shall have the right
     to enter and inspect the Premises at any  reasonable  time during  business
     hours,  for the purpose of ascertaining the condition of the Premises or in
     order to make such  repairs as may be required or  permitted  to be made by
     Landlord  under the terms of this Lease.  During the period that is six (6)
     months prior to the end of the Term hereof,  Landlord and Landlord's agents
     and  representatives  shall  have the  right to enter the  Premises  at any
     reasonable  time  during  business  hours for the  purpose of  showing  the
     Premises and shall have the right to erect on the Premises a suitable  sign
     indicating the Premises are available.

     B. Tenant shall give  written  notice to Landlord at least thirty (30) days
     prior to vacating the Premises and shall  arrange to meet with Landlord for
     a joint  inspection  of the  Premises  prior to  vacating.  In the event of
     Tenant's  failure  to give such  notice or arrange  such joint  inspection,
     Landlord's  inspection at or after Tenant's  vacating the Premises shall be
     conclusively  deemed  correct  for the  purposes  of  determining  Tenant's
     responsibility for repairs and restoration.  It shall be the responsibility
     of Tenant, prior to vacating the Premises, to clean and repair the Premises
     and restore them to the  condition  in which they were in upon  delivery of
     the Premises to Tenant at the Commencement  Date,  reasonable wear and tear
     excepted.  Cleaning,  repair  and  restoration  shall  include,  but not be
     limited to, removal of all trash,  cleaning and repainting of walls,  where
     necessary, cleaning of carpet and flooring,  replacement of light bulbs and
     tubes, cleaning and wiping down of all fixtures,  maintenance and repair of
     all heating and air-conditioning systems, and all similar work, which shall
     be done at the latest practical date prior to vacation of the Premises.

12.  UTILITIES.  Landlord  agrees to provide at its cost water,  electricity and
     gas service  connections  into the  Premises;  but Tenant shall pay for all
     water, gas, heat, light,  power,  telephone,  sewer,  sprinkler charges and
     other  utilities and services  used on or from the premises,  together with
     any taxes,  penalties,  surcharges or the like  pertaining  thereto and any
     maintenance  charges for  utilities  and shall  furnish all electric  light
     bulbs and tubes. If any such services are not separately metered to Tenant,

<PAGE>

     Tenant shall pay a reasonable  proportion  as determined by Landlord of all
     charges jointly metered with other Premises.  Landlord shall in no event be
     liable for any interruption or failure of utility services on the Premises.

13.  ASSIGNMENT AND SUBLETTING.

     A.  Tenant  shall not have the  right,  voluntarily  or  involuntarily,  to
     assign, convey,  transfer,  mortgage or sublet the whole or any part of the
     Premises under this Lease without the prior written consent of Landlord. In
     the event  Tenant  applies to  Landlord  for  consent  to  assign,  convey,
     transfer or sublet the Premises,  Landlord may condition  such consent upon
     the right to receive  one-half  of the  profit,  if any,  which  Tenant may
     realize on account of such assignment,  conveyance, transfer or sublease of
     the Premises.  For purposes of this paragraph,  "profit" shall mean any sum
     which the assignee, sublessee or transferee is required to pay, or which is
     credited  to Tenant as rent in excess of the rents  required  to be paid by
     Tenant to Landlord  under this Lease.  Landlord  also reserves the right to
     recapture the Premises or applicable  portion thereof in lieu of giving its
     consent by notice given to Tenant  within twenty (20) days after receipt of
     Tenant's written request for assignment or subletting. Such recapture shall
     terminate  this  Lease  as  to  the  applicable   space  effective  on  the
     prospective  date of assignment or subletting,  which shall be the last day
     of a calendar  month and not earlier than sixty (60) days after  receipt of
     Tenant's request  hereunder.  In the event that Landlord shall not elect to
     recapture and shall thereafter give its consent,  Tenant shall pay Landlord
     $500.00, to reimburse Landlord for processing and leasing costs incurred in
     connection with such consent.

     B. Notwithstanding any permitted assignment or subletting,  Tenant shall at
     all times remain directly,  primarily and fully  responsible and liable for
     the payment of the rent herein specified and for compliance with all of its
     other obligations under the terms,  provisions and covenants of this Lease.
     Upon the occurrence of an "event of default" as hereinafter defined, if the
     Premises or any part  thereof are then  assigned  or sublet,  Landlord,  in
     addition to any other remedies  herein  provided or provided by law, may at
     its option  collect  directly  from such  assignee or  subtenant  all rents
     becoming  due to Tenant  under such  assignment,  transfer or sublease  and
     apply such rent against any sums due to Landlord from Tenant  hereunder and
     no such collection shall be construed to constitute a novation or a release
     of Tenant from the further performance of Tenant's obligations hereunder.

14.  INSURANCE, FIRE AND CASUALTY DAMAGE.

     A. Landlord agrees to maintain insurance covering the building of which the
     Premise  are a part in the amount not less than  eighty  percent  (80%) (or
     such greater  percentage as may be necessary to comply with the  provisions
     of any  co-insurance  clauses  of the  policy) of the  "replacement  costs"
     thereof as such term is defined in the Replacement  Cost  Endorsement to be
     attached thereto, insuring against the perils of Fire, Lightning,  Extended
     Coverage,  Vandalism and Malicious  Mischief,  extended by Special Extended
     Coverage  Endorsement to insure against all other Risks of Direct  Physical
     Loss,  such  coverages  and  endorsements  to be as defined,  provided  and
     limited in the standard bureau forms prescribed by the insurance regulatory
     authority  for the  State in which the  Premises  are  situated  for use by
     insurance  companies  admitted  in  such  state  for  the  writing  of such
     insurance on risks located within such state.  Subject to the provisions of
     subparagraph  14,  C, D, E  below,  such  insurance  shall  be for the sole
     benefit of Landlord and under its sole control.  In the event the insurance
     policy shall contain a  deductible,  Tenant shall be liable for and pay any
     deductible  withheld from insurance  proceeds or payable under the terms of
     the insurance policy in the event of acclaim or insured loss thereunder.
<PAGE>

     B.  Tenant  agrees to pay its  proportionate  share of  Landlord's  cost of
     carrying  fire  and  extended  coverage  insurance   ("Insurance")  on  the
     building.  During each month of the term of this Lease, Tenant shall make a
     monthly   escrow   deposit  with  Landlord  equal  to  one-twelfth  of  its
     proportionate  share of the  insurance on the  buildings  and grounds which
     will be due  and  payable  for  that  particular  year.  Tenant  authorizes
     Landlord  to use the  funds  deposited  by him  with  Landlord  under  this
     paragraph to pay the cost of such Insurance.  Each Insurance escrow Payment
     shall be due and payable,  as additional  rent, at the same time and manner
     of the payment of the monthly rental as provided herein.  The initial share
     of the  estimated  insurance  for the  year in  question,  and the  monthly
     Insurance  Escrow  Payment is subject to increase or decrease as determined
     by  Landlord to reflect an accurate  monthly  escrow of Tenant's  estimated
     proportionate share of this Insurance. The Insurance Escrow Payment account
     of Tenant shall be reconciled  annually.  If the Tenant's  total  Insurance
     Escrow  Payments  are less  than  Tenant's  actual  pro  rata  share of the
     Insurance,  Tenant shall pay to Landlord upon demand the difference; if the
     total Insurance Escrow Payments of Tenant are more than Tenant's actual pro
     rata share of the Insurance  Landlord shall promptly  refund the balance of
     such excess to Tenant after first  crediting the excess to the next monthly
     payment  by Tenant  for its  proportionate  share of taxes  and  Insurance.
     Tenant's  cost of Insurance  shall be computed by  multiplying  the cost of
     insurance  by a  fraction,  the  numerator  of which shall be the number of
     gross  leasable  square  feet  of  floor  space  in the  Premises  and  the
     denominator of which shall be the total  applicable  gross leasable  square
     footage. The amount of the initial monthly Insurance Escrow Payment will be
     as specified in the Basic Lease information.

     C. If the building,  of which the Premises are a part, should be damaged or
     destroyed by fire,  tornado or other casualty,  Tenant shall give immediate
     written notice thereof to Landlord.

     D. If the  building,  of which the Premises  are a part,  should be totally
     destroyed by fire, tornado or other casualty, or if it should be so damaged
     thereby that  rebuilding  or repairs  cannot in  Landlord's  estimation  be
     completed  within two hundred (200) days after the date upon which Landlord
     is notified by Tenant of such damage,  this Lease shall  terminate  and the
     rent shall be abated during the unexpired portion of this Lease,  effective
     upon the date of the occurrence of such damages. Landlord shall give notice
     to Tenant in writing of its  determination  to terminate  this Lease within
     ninety (90) days following the date of the occurrence of such damage.

     E. If the building,  of which the Premises are a part, should be damaged by
     any peril  covered  by the  insurance  to be  provided  by  Landlord  under
     subparagraph  14(a) above, but only to such extent that rebuilding  repairs
     can in  Landlord's  estimation  be completed  within two hundred (200) days
     after the date upon which  Landlord is  notified by Tenant of such  damage,
     this Lease shall not  terminate,  and  Landlord  shall at its sole cost and
     expense thereupon  proceed with reasonable  diligence to rebuild and repair
     such  building to  substantially  restore the condition in which it existed
     prior to such damage except that Landlord shall not be required to rebuild,
     repair or replace any part of the partition,  fixtures, additions and other
     improvements  which may have been  placed  in,  or about  the  Premises  by
     Tenant. If the Premises are untenantable in whole or in part following such
     damage,  the rent  payable  hereunder  during  the period in which they are
     untenantable  shall be reduced to such extent as may be fair and reasonable
     under all of the  circumstances.  In the event that Landlord  shall fail to
     complete  such repairs and  rebuilding  within two hundred (200) days after
     the date upon which  Landlord is notified by Tenant of such damage,  Tenant
     may at its option  terminate  this Lease by  delivering  written  notice of
     termination  at  Tenant's  exclusive  remedy,  whereupon,  all  rights  and
     obligations hereunder shall cease and terminate.
<PAGE>

     F. Notwithstanding anything herein to the contrary, in the event the holder
     of any  indebtedness  secured by a mortgage or deed of trust  covering  the
     Premises   required  that  the  insurance   proceeds  be  applied  to  such
     indebtedness, then Landlord shall have the right to terminate this Lease by
     delivering written notice of termination to Tenant within fifteen (15) days
     after such requirement is made by any such holder, whereupon all rights and
     obligations hereunder shall cease and terminate.

     G. Waiver of  Subrogation.  Landlord and Tenant  hereby waive any right and
     release each other for any loss or damage to property caused by fire or any
     other perils insured in policies of insurance covering such property,  even
     if such loss or damage shall have been caused by the fault or negligence of
     the other party, or anyone for whom such party may be  responsible,  by way
     of  subrogation  or  otherwise.  Provided  however,  this release  shall be
     applicable,  and in force and effect,  only with  respect to loss or damage
     occurring during such times as the parties each having had their respective
     insurance  companies  issue an insurance  policy that  contains a clause or
     endorsement to the effect that any such release shall not adversely  affect
     or impair said  policies or prejudice  the right of the releaser to recover
     thereunder;  and then, only to the extent of the insurance proceeds payable
     under such  policies.  Each of the Landlord and Tenant  agrees that it will
     request its insurance  carriers to include in its policies such a clause or
     endorsement.  If extra  cost shall be charged  therefor,  each party  shall
     advise the other thereof and of the amount of the extra cost, and the other
     party, at its election,  may pay the same, but shall not be obligated to do
     so.

15.  LIABILITY.  Landlord  shall not be liable to Tenant or Tenant's  employees,
     agents,  servants,  guests,  invitees or  visitors,  or to any other person
     whomsoever,  for any injury to person or damage to property on or about the
     Premises,  resulting  from and/or caused in part or whole by the negligence
     or misconduct of Tenant, its employees,  agents, servants, guests, invitees
     or visitors,  or of any other person entering upon the Premises,  or caused
     by the building and  improvements  located on the Premises  becoming out of
     repair,  or caused by leakage of gas, oil, water or steam or by electricity
     emanating  from the Premises,  or due to any cause  whatsoever,  and Tenant
     hereby  covenants  and agrees that it will at all times  indemnify and hold
     safe and harmless the property,  the Landlord (including without limitation
     the  trustee  and  beneficiaries  if  Landlord  is  a  trust),   Landlord's
     employees,  agents, servants,  guests, invitees and visitors from any loss,
     liability,  claims,  suits, costs,  expenses,  including without limitation
     attorney's fees and damages, both real and alleged, arising out of any such
     damage or injury;  except  injury to persons or damage to property the sole
     cause of which is the  gross  negligence  of  Landlord  or the  failure  of
     Landlord to repair any part of the Premises  which Landlord is obligated to
     repair and maintain hereunder within a reasonable time after the receipt of
     written  notice  from  Tenant of needed  repairs.  Tenant's  obligation  to
     indemnify  Landlord  under this  Paragraph  15  includes an  obligation  to
     indemnify for losses  resulting from death or injury to Tenant's  employees
     and Tenant  accordingly  hereby waives any and all immunities it now has or
     hereafter may have under any  Industrial  Insurance  Act, or other worker's
     compensation, disability benefit or other similar act which would otherwise
     be  applicable  in the  case of such a  claim.  Tenant  shall  procure  and
     maintain  throughout  the  term  of this  Lease a  policy  or  policies  of
     Insurance, at its sole cost and expense,  insuring both Landlord and Tenant
     against all  claims,  demands or actions  arising  out of or in  connection
     with: (i) the Premises; (ii) the condition of the Premises;  (iii) Tenant's
     operations  and  maintenance  and use of the  Premises;  and  (iv)  Tenants
     liability  assumed under this Lease,  the limits of such policy or policies
     to be in the amount of not less than  $1,000,000  per occurrence in respect
     of injury to persons (including death) and in respect to property damage or
     destruction,  including  loss of use thereof.  All such  policies  shall be
     procured by Tenant from  responsible  insurance  companies  satisfactory to
     Landlord.   Certified  copies  of  such  policies,  together  with  receipt
     evidencing  payment of premiums  therefor,  shall be  delivered to Landlord
     prior to the  Commencement  Date of this Lease.  Not less than fifteen (15)

<PAGE>

     days prior to the expiration date of any such policies, certified copies of
     the renewals thereof (bearing  notations  evidencing the payment of renewal
     premiums)  shall be delivered  to Landlord.  Such  policies  shall  further
     provide that not less than thirty (30) days  written  notice shall be given
     to  Landlord  before  such  policy  may be  canceled  or  changed to reduce
     insurance provided thereby.

16.  CONDEMNATION.

     A. If the whole or any substantial part of the Premises should be taken for
     any  public  or  quasi-public  use under  governmental  law,  ordinance  or
     regulation,  or by right of eminent domain,  or by private purchase in lieu
     thereof and the taking would prevent or materially  interfere  with the use
     of the  Premises  for the purpose for which they are being used,  the Lease
     shall  terminate and the rent shall be abated during the unexpired  portion
     of this Lease,  effective  when the physical  taking of said Premises shall
     occur.

     B. If part of the  Premises  shall be taken for any public or  quasi-public
     use under  any  governmental  law,  ordinance,  regulation,  or by right of
     eminent domain,  or by private purchase in lieu thereof,  and this Lease is
     not terminated as provided in the subparagraph  above, this Lease shall not
     terminate but the rent payable  hereunder  during the unexpired  portion of
     this Lease  shall be reduced to such  extent as may be fair and  reasonable
     under all of the circumstances

     C. In the event of any such  taking or private  purchase  in lieu  thereof,
     Landlord  shall be entitled to receive the entire  award.  Tenant  shall be
     entitled  to make a claim in any  condemnation  proceedings  which does not
     reduce  the amount of  Landlord's  award,  for the value of any  furniture,
     furnishings and fixtures installed by and at the sole expense of Tenant.

17.  HOLDING  OVER.  Tenant will, at the  termination  of this Lease by lapse of
     time or otherwise,  yield up immediate possession to Landlord.  If Landlord
     agrees in  writing  that  tenant  may hold over  after  the  expiration  or
     termination  of this Lease,  unless the parties hereto  otherwise  agree in
     writing on the terms of such holding  over,  the hold over tenancy shall be
     subject to  termination by Landlord at any time upon not less than five (5)
     days  advance  written  notice  or by Tenant at any time upon not less than
     thirty (30) days  advance  written  notice,  and all of the other terms and
     provisions  of this Lease shall be  applicable  during that period,  except
     that Tenant shall pay Landlord from time to time upon demand, as rental for
     the period of any hold over, an amount equal to one and one-half (1 1/2 the
     Base Rent in effect on the termination  date, plus all additional rental as
     defined  herein,  computed  on a daily  basis for each day of the hold over
     period.  No holding  over by  Tenant,  whether  with or without  consent of
     Landlord,  shall operate to extend this Lease except as otherwise expressly
     provided.  The  preceding  provisions  of this  paragraph  17 shall  not be
     construed as Landlord's consent for Tenant to hold over.

18.  QUIET ENJOYMENT. Landlord covenants that it now has, or will acquire before
     Tenant takes possession of the Premises, good fee or leasehold title to the
     Premises, free and clear of all liens and encumbrances,  excepting only the
     lien for  current  taxes not yet due,  such  mortgage or  mortgages  as are
     permitted by the terms of this Lease,  zoning ordinances and other building
     and fire  ordinances and  governmental  regulations  relating to the use of
     such property, and easements,  restrictions and other conditions of record.
     In the event  this  Lease is a  sublease,  then  Tenant  agrees to take the
     Premises subject to the provisions of the prior leases. Landlord represents
     and warrants  that it has full right and authority to enter into this Lease
     and that Tenant, upon paying the rental herein set forth and performing its
     other  covenants  and  agreements  herein set forth,  shall  peaceably  and
     quietly  have,  hold and enjoy the  Premises  for the term  hereof  without
     hindrance or molestation from Landlord, subject to the terms and provisions
     of this Lease.

19.  EVENTS OF DEFAULT.  The  following  events  shall be deemed to be events of
     default by Tenant under this Lease:

     A. Tenant shall fail to pay for any installment of the rent herein reserved
     when due, or any payment with respect to taxes  hereunder  when due, or any

<PAGE>

     other payment or  reimbursement  to Landlord  required herein when due, and
     such  failure  shall  continue  for a period of five (5) days from the date
     such payment was due.

     B.  Tenant  shall  become  insolvent,  or shall make a transfer in fraud of
     creditors, or shall make an assignment for the benefit of creditors.

     C.  Tenant  shall  file a  petition  under any  section  or  chapter of the
     National Bankruptcy Act, as amended, or under any similar law or statute of
     the  United  States  or any State  thereof;  or  Tenant  shall be  adjudged
     bankrupt or insolvent in proceedings filed against Tenant thereunder.

     D. A receiver or trustee shall be appointed for all or substantially all of
     the assets of Tenant.

     E. Tenant shall desert or vacate any substantial portion of the Premises.

     F. Tenant shall fail to comply with any term, provision or covenant of this
     Lease (other than the foregoing in this  Paragraph  19), and shall not cure
     such failure within twenty (20) days after written notice thereof to Tenant
     or take  immediate  steps to cure such  failure  and to cure  such  failure
     within a reasonable period of time.

20.  REMEDIES.  Upon the  occurrence of any such events of default  described in
     Paragraph  19 hereof,  Landlord  shall have the option to pursue any one or
     more of the following remedies without any notice or demand whatsoever.

     A. Intentionally Deleted

     B. Terminate this Lease, in which event Tenant shall immediately  surrender
     the  Premises to  Landlord,  and if Tenant  fails so to do,  Landlord  may,
     without  prejudice to any other remedy which it may have for  possession or
     arrearage  in rent,  take  possession  of the  Premises as  provided  under
     Washington State law. Tenant agrees to pay to Landlord on demand the amount
     of all  loss and  damage  which  Landlord  may  suffer  by  reason  of such
     termination,   whether   through   inability   to  relet  the  Premises  on
     satisfactory terms or otherwise.

     C.  Enter  upon and take  possession  of the  Premises  and expel or remove
     Tenant and any other person who may be occupying  such Premises or any part
     thereof,  by the use of such force as is lawful,  without  being liable for
     prosecution or any claim for damages  therefor,  and relet the Premises for
     such terms ending before, on or after the expiration date of the Lease Term
     at such rentals and upon such other conditions  (including  concessions and
     prior occupancy  periods) as would be reasonable  under the  circumstances,
     and  receive the rent  therefor.  Tenant  agrees to pay to the  Landlord on
     demand any deficiency that may arise by reason of such reletting.  Landlord
     shall take  reasonable  steps to relet the Premises or any part thereof but
     Landlord  shall not be liable  for  refusal  or  failure to relet or in the
     event of reletting for refusal or failure to collect any rent due upon such
     reletting. In the event Landlord is successful in reletting the Premises at
     a rental  in excess of that  agreed  to be paid by Tenant  pursuant  to the
     terms of this Lease,  Landlord and Tenant each  mutually  agree that Tenant
     shall not be entitled, under any circumstances,  to such excess rental, and
     Tenant does hereby specifically waive any claim to such excess rental.

     D. Enter upon the Premises, by reasonable force if necessary, without being
     liable for prosecution or any claim for damages  therefor,  and do whatever
     Tenant is obligated to do under the terms of this Lease;  Tenant  agrees to
     reimburse Landlord on demand for any reasonable expenses which Landlord may
     incur in thus effecting  compliance  with Tenant's  obligations  under this
     Lease,  and Tenant further agrees that Landlord shall not be liable for any
     damages  resulting  to the Tenant from such action,  whether  caused by the
     negligence of Landlord or otherwise.
<PAGE>

     E.  Whether or not  Landlord  retakes  possession  or relets the  Premises,
     Landlord shall have the right to recover unpaid rent and all damages caused
     by Tenant's default,  including attorney's fees. Damages shall include, but
     which shall not  necessarily  be limited to, all rents lost, all reasonable
     legal  expenses  and other  related  costs  incurred by Landlord  following
     Tenant's default,  all costs incurred by Landlord in restoring the Premises
     to good order and  condition,  or in  remodeling,  renovation  or otherwise
     preparing the Premises or reletting,  all reasonable  costs  (including any
     brokerage  commissions  and the  value  of  Landlord's  time)  incurred  by
     Landlord,  plus interest  thereon from the date of expenditure  until fully
     repaid at the rate of eighteen percent (18%) per annum.

     F. In the event Tenant fails to pay an installment of rent, additional rent
     or other  charges  hereunder as and when such  installment  is due, to help
     defray the additional  cost to Landlord for  processing  such late payments
     Tenant  shall pay to Landlord on demand a late charge in an amount equal to
     five percent (5%) of such  installment;  and the failure to pay such amount
     within ten (10) days  after  demand  therefor  shall be an event of default
     hereunder.  The  provision for such late charge shall be in addition to all
     of Landlord's  other rights and remedies  hereunder or at law and shall not
     be construed as liquidated  damages or as limiting  Landlord's  remedies in
     any  manner.  Any and all late rent shall bear an  eighteen  percent  (18%)
     interest rate.

     G. Pursuit of any of the foregoing  remedies shall not preclude  pursuit of
     any of the other remedies herein provided or any other remedies provided by
     law, such remedies being cumulative and non-exclusive, nor shall pursuit of
     any remedy  herein  provided  constitute a forfeiture or waiver of any rent
     due to Landlord  hereunder or of any damages accruing to Landlord by reason
     of the  violation  of any of the terms,  provisions  and  covenants  herein
     contained.  No act or thing done by the  Landlord or its agents  during the
     Lease Term hereby granted shall be deemed a termination of this Lease or an
     acceptance of the surrender of the premises,  and no agreement to terminate
     its Lease or accept a surrender of said  Premises  shall be valid unless in
     writing  signed by  Landlord.  No waiver by  Landlord of any  violation  or
     breach of any of the terms  provisions and covenants herein contained shall
     be deemed or  construed to  constitute  a waiver of any other  violation or
     breach of any item of the terms, provisions and covenants herein contained.
     Landlord's  acceptance of the payment of rental or other payments hereunder
     after the  occurrence  of an event of default  shall not be  construed as a
     waiver of such  default  unless  Landlord  so  notifies  Tenant in writing.
     Forbearance  by  Landlord  to enforce  one or more of the  remedies  herein
     provided  upon an event of  default  shall not be deemed  or  construed  to
     constitute a waiver of such default or of  Landlord's  right to enforce any
     such remedies with respect to such default or any subsequent  default.  If,
     on account of any breach or default by Tenant in Tenant's obligations under
     the terms and  conditions  of this  Lease,  it shall  become  necessary  or
     appropriate  for Landlord to employ or consult with an attorney  concerning
     or to enforce or defend any of  Landlord's  rights or  remedies  hereunder,
     Tenant agrees to pay any reasonable attorney's fees so incurred.

21.  LANDLORD'S LIEN. Intentionally Deleted

22.  MORTGAGES.  Tenant  accepts  this  Lease  subject  and  subordinate  to any
     mortgage  (s)  and/or  deed  (s) of  trust  now or at  any  time  hereafter
     constituting  a lien  or  charge  upon  the  Premises  or the  improvements
     situated  thereon.  At the  request  of  Landlord,  Tenant  shall  promptly
     execute,  acknowledge and deliver, all instruments which may be required to
     subordinate this Lease to any existing or future mortgages,  deeds of trust
     and/or other security  documents on or  encumbering  the Premises or on the
     leasehold  interest  held by  Landlord,  provided  that  the  mortgagee  or
     beneficiary, as the case may be, shall agree to recognize this Lease in the
     event of a default by Landlord.
<PAGE>

23.  LANDLORD'S  DEFAULT.  In the event Landlord should become in default in any
     payment due on any such mortgage described in Paragraph 21 hereof or in the
     payment  of taxes or any  other  item  which  might  become a lien upon the
     Premises  and  which  Tenant  is not  obligated  to pay under the terms and
     provisions of this Lease,  Tenant is authorized and empowered  after giving
     Landlord five (5) days prior written  notice of such default and Landlord's
     failure  to cure such  default,  to pay any such items for and on behalf of
     Landlord,  and the amount of any item so paid by Tenant for or on behalf of
     Landlord,  together  with any  interest  or penalty  required to be paid in
     connection  therewith,  shall be payable on demand by  Landlord  to Tenant;
     provided,  however,  that Tenant shall not be  authorized  and empowered to
     make any payment under the terms of Paragraph 23 unless the item paid shall
     be superior to Tenant's  interest  hereunder.  In the event Tenant pays any
     mortgage debt in full, in accordance with this paragraph,  it shall, at its
     election,   be  entitled  to  the  mortgage   security  by   assignment  or
     subrogation.

24.  MECHANICS  LIENS.  Tenant shall have no authority,  express or Implied,  to
     create or place any lien or  encumbrance  of any kind or nature  whatsoever
     upon, or in any manner to bind, the interest of Landlord in the Premises or
     to  charge  the  rentals  payable  hereunder  for any claim in favor of any
     person dealing with Tenant,  including  those who may furnish  materials or
     perform labor for any  construction  or repairs,  and each such claim shall
     affect and each such lien shall  attach to, if at all,  only the  leasehold
     interest granted to Tenant by this instrument.  Tenant covenants and agrees
     that it will pay or cause to be paid all sums legally due and payable by it
     on account of any labor performed or materials furnished in connection with
     any work  performed  on the Promises on which any lien is or can be validly
     and legally asserted against its leasehold  interest in the Premises or the
     improvements  thereon and that it will save and hold Landlord harmless from
     any and all loss,  cost or  expense  based on or  arising  out of  asserted
     claims or liens  against the leasehold  estate or against the right,  title
     and  interest of the  Landlord  in the  Premises or under the terms of this
     Lease.

25.  NOTICES.   Each   provision  of  this   instrument  or  of  any  applicable
     governmental  laws,  ordinances,  regulations and other  requirements  with
     reference to the  sending,  mailing or delivery of any notice or the making
     of any  payment by  Landlord to Tenant or with  reference  to the  sending,
     mailing or delivery  of any notice or the making of any  payment  Tenant or
     Landlord  shall be deemed  to be  complied  with when and if the  following
     steps are taken:

     A. All rent and other  payments  required  to be made by Tenant to Landlord
     hereunder shall be payable to Landlord at the address hereinbelow set forth
     or at such  other  address as  Landlord  may  specify  from time to time by
     written notice delivered in accordance herewith. Tenant's obligation to pay
     rent and any other amounts to Landlord  under the terms of this Lease shall
     not be  deemed  satisfied  until  such  rent and  other  amounts  have been
     actually received by Landlord.

     B. All payments  required to be made by Landlord to Tenant  hereunder shall
     be payable to Tenant at the address  hereinbelow set forth or at such other
     address  within the  continental  United  States as tenant may specify from
     time to time by written notice delivered in accordance herewith.
<PAGE>

     C. Any notice or document  required or permitted to be delivered  hereunder
     shall be deemed  to be  delivered  whether  actually  received  or not when
     deposited  in  the  United  States  Mail,  postage  prepaid,  Certified  or
     Registered  Mail,  addressed  to  the  parties  hereto  at  the  respective
     addresses set out below, or at such other address as they have  theretofore
     specified by written notice delivered in accordance herewith:

     LANDLORD:                                        TENANT:
     South Valley Associates                          Gargoyles, Inc.
     11411 N.E. 124th Street, Suite 150               5866 South 194th Street
     Kirkland, Washington 98034                       Kent, Washington 98032

     Phone: (206) 823-1191                            Phone: (425) 921-3600

     If and when included within the term "Landlord" as used in this instrument,
     there are more than one  person,  firm or  corporation,  all shall  jointly
     arrange  among  themselves  for  their  joint  execution  of such a  notice
     specifying  some  individual  at some  specific  address for the receipt of
     notices and  payments to  Landlord:  if and when  included  within the term
     "Tenant",  as used in this instrument there are more than one person,  firm
     or corporation,  all shall jointly arrange among themselves for their joint
     execution of such a notice  specifying  some  individual  at some  specific
     address within the continental United States for the receipt of notices and
     payments to Tenant.  All parties  included within the terms  "Landlord" and
     "Tenant",  respectively, shall be bound by notices given in accordance with
     the provisions of this paragraph to the same effect as if each had received
     such notice.

26.  SUBSTITUTION SPACE.

     A. Landlord  shall have the right at any time from the date hereof  through
     the end of the term of this Lease or any renewal or  extension  hereof,  to
     substitute,  instead of the leased Premises,  other space (of approximately
     the  same  area  as  the  leased  Premises)   hereinafter  referred  to  as
     "Substitution Space," in the Building.

     B. If  Landlord  desires to exercise  such  right,  it shall give Tenant at
     least one hundred and twenty  (120) days prior  written  notification  that
     Tenant is to relocate to another  space.  Tenant  shall then give  Landlord
     written  notice within ten (10) days of receipt of Landlord's  notification
     whether  Tenant agrees to relocate,  or whether  Tenant elects to terminate
     the Lease and vacate  the  Premises  as of the one  hundred  and  twentieth
     (120th) day following the date of  Landlord's  notification.  Should Tenant
     fail to give  Landlord  written  notice  within ten (10) days of receipt of
     Landlord's  notification,  then Tenant  shall be deemed to have  elected to
     terminate,  and this Lease shall  automatically  terminate  one hundred and
     twenty (120) days following the date of Landlord's notification.  If Tenant
     shall retain  possession of the Premises or any part thereof  following the
     termination date, Tenant shall be liable to Landlord,  for each day of such
     retention,  for double the amount of the daily  rental for the last  period
     prior  to the  date of such  expiration  or  termination,  subject  to rent
     adjustments  as provided in Paragraph 27, plus actual  damages  incurred by
     Landlord  resulting  from  delay by tenant in  surrendering  the  Premises,
     including  without  limitation  any claims  made  against  Landlord  by any
     succeeding Tenant to the Premises and Landlord's costs in taking any action
     at law, in equity or self help to evict Tenant from the Premises.
<PAGE>

     C. If Tenant elects to move to the Substitution  Space,  such move shall be
     at the sole cost of Landlord  including  all costs and expenses  related to
     improving  the space  with  leasehold  improvements  equal to those then in
     Tenant's  Premises,  moving  the  furniture,  office  equipment  and  other
     contents of the Premises to the new space,  reinstating  telecommunications
     equipment,  printing of new  stationery,  business  cards and other printed
     matter  bearing the address of Tenant of the same  quality and  quantity as
     Tenant's  existing  inventory and such other reasonable  expenses as tenant
     may incur, it being the intention of the parties that tenant incur no costs
     or expenses as a result of the move. After such move, all terms, covenants,
     conditions, provisions, and agreements of this Lease shall continue in full
     force and effect and shall apply to the Substitution  Space except that (a)
     if the then  unexpired  balance of the term of the Lease shall be less than
     one year,  the term of this Lease shall be  extended so that the  unexpired
     balance  of the term of this  Lease  shall be one year from the date of the
     move and (b) if the  Substitution  Space  contains more square footage than
     the  presently  leased  Premises,  the monthly  rental  shall be  increased
     proportionately  (provided that such rental increase shall not be in excess
     of  five  percent  (50/6)  of the  rental  immediately  preceding  such  an
     increase).

27.  MISCELLANEOUS.

     A. Words of any gender  used in this Lease shall be held and  construed  to
     include any other gender, and words in the singular number shall be held to
     include the plural, unless the context otherwise requires.

     B. The terms,  provisions  and covenants and  conditions  contained in this
     Lease shall apply to,  inure to the  benefit of, and be binding  upon,  the
     parties  hereto and upon their  respective  heirs,  legal  representatives,
     successors  and permitted  assigns,  except as otherwise  herein  expressly
     provided.  Landlord  shall  have the right to assign  any of its rights and
     obligations  under this Lease.  Each party  agrees to furnish to the other,
     promptly upon demand, a corporate resolution, proof of due authorization by
     partners   or   other   appropriate   documentation   evidencing   the  due
     authorization of such part to enter into this Lease.

     C. The captions  inserted in this Lease are for convenience  only and in no
     way define,  limit or otherwise describe the scope or intent of this Lease,
     or any provision  hereof,  or in any way affect the  interpretation of this
     Lease.

     D. Tenant  agrees  from time to time within ten (10) days after  request of
     Landlord,  to deliver to  Landlord,  or  Landlord's  designee,  an estoppel
     certificate  stating that this Lease is in full force and effect,  the date
     to which  rent has been  paid,  the  unexpired  term of this Lease and such
     other matters pertaining to this Lease as may be requested by Landlord.  It
     is understood and agreed that Tenant's  obligation to furnish such estoppel
     certificates  in a timely  fashion is a material  inducement for Landlord's
     execution of this Lease.

     E.  This  Lease  may  not be  altered,  changed  or  amended  except  by an
     instrument in writing signed by both parties hereto.

     F. All  obligations  of  Tenant  hereunder  not fully  performed  as of the
     expiration or earlier  termination  of the term of this Lease shall survive
     the expiration or earlier termination of the term hereof, including without
     limitation all payment  obligations with respect to taxes and insurance and
     all  obligations  concerning  the  condition  of  the  Premises.  Upon  the
     expiration  or earlier  termination  of the Term hereof and prior to Tenant
     vacating the  premises,  Tenant shall pay to Landlord an amount  reasonably
     estimated by Landlord as necessary to put the Premises,  including  without
     limitation all heating and air-conditioning  systems and equipment therein,
     in good  condition and repair  pursuant to Paragraph  11(B) hereof.  Tenant
     shall also, prior to vacating the Premises,  pay to Landlord the amount, as
     estimated  by  Landlord,  of Tenant's  obligation  hereunder or real estate
     taxes and  insurance  premiums  for the year in which the Lease  expires or

<PAGE>

     terminates. All such amounts shall be used and held by Landlord for payment
     of such obligations of Tenant  hereunder,  with Tenant being liable for any
     additional costs therefor upon demand by Landlord, or with any excess to be
     returned to Tenant  after all such  obligations  have been  determined  and
     satisfied,  as the case may be. Any security deposit held by Landlord shall
     be credited  against the amount  payable by Tenant under this  Paragraph 26
     (F).

     G. If any  clause  or  provision  of this  Lease  is  illegal,  invalid  or
     unenforceable  under  present or future laws  effective  during the Term of
     this Lease,  then and in that  event,  it is the  intention  of the parties
     hereto that the remainder of its Lease shall not be affected  thereby,  and
     it is also the  intention of the parties to this Lease that in lieu of each
     clause  or   provision   of  this  Lease  that  is   illegal,   invalid  or
     unenforceable,  there be added as part of this  Lease  contract a clause or
     provision  as similar in terms to such  illegal,  invalid or  unenforceable
     clause of provision as may be possible and be legal, valid and enforceable.

     H.  Because the  Premises  are on the open market and are  presently  being
     shown,  this Lease  shall be treated  as an offer with the  Promises  being
     subject  to  prior  lease  and  such  offer   subject  to   withdrawal   or
     non-acceptance  by Landlord or to other use of the Premises without notice,
     and this Lease shall not be valid or binding  unless and until  accepted by
     Landlord in writing and a fully  executed  copy  delivered  to both parties
     hereto.

     l. All references in this Lease to "the date hereof" or similar  references
     shall be deemed to refer to the last date,  in point of time,  on which all
     parties hereto have executed this Lease.

     J.  During  the  term of this  Lease  and any  subsequent  option  periods,
     Landlord  shall  have the right to  request  and  obtain  Tenant's  current
     financial  statements with reasonable  advance notice.  Tenant shall comply
     with Landlord's request for financial statements in a reasonable time frame
     not to exceed thirty (30) days from the date of request. Landlord agrees to
     protect  any  such   financial   statements   released  to  Landlord  on  a
     "confidential" basis.

28.  LIABILITY OF LANDLORD.  Tenant agrees that no trustee,  officer,  employee,
     agent or individual partner of Landlord, or its constituent entitles, shall
     be personally  liable for any  obligation of Landlord  hereunder,  and that
     Tenant must look solely to the  interests of Landlord,  or its  constituent
     entitles in the subject  real  estate,  for the  enforcement  of any claims
     against Landlord arising hereunder.

29.      ADDITIONAL PROVISIONS.

LANDLORD:                               TENANT



s/ Peter Richard Henning                S/ Leo Rosenberger
------------------------------          ---------------------------------
Peter Richard Henning                   Leo Rosenberger
General Partner                         Chief Executive Officer
                                        Chief Financial Officer



<PAGE>

CORPORATE ACKNOWLEDGMENT:

State of _____________________  )
                                ) ss.
County of ____________________  )

         On  this  ______  day of  ______________,  19__  before  me  personally
appeared  _____________  to me known to be the ______ of the  corporation,  that
executed  the  within  and  foregoing   instrument  and  acknowledged  the  same
instrument to be the free and voluntary  act and deed of said  corporation,  for
the uses and  purposes  therein  mentioned,  and on oath  stated  that they were
authorized to execute said instrument.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first written above.

                             Signature: __________________________________
                             Print Name: _________________________________
                                         Notary Public in and for the
                                         State of ________________________
                                         Residing in _____________________
                                         My appointment expires __________


CORPORATE ACKNOWLEDGMENT:

State of Washington  )
                     ) ss.
County of King       )

         On  this  11th  day  of  June,  1998  before  me  personally   appeared
_____________ to me known to be the individual or individuals,  described in and
who executed  the within and  foregoing  instrument,  and  acknowledged  that he
signed same as his free and  voluntary  act and deed,  for the uses and purposes
therein mentioned.

         IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first written above.

                             Signature: s/ Cynthia L. Pope
                             Print Name: Cynthia L. Pope
                                         Notary Public in and for the
                                         State of Washington
                                         Residing in Bellevue
                                         My appointment expires 6-10-2001
<PAGE>

State of Washington  )
                     ) ss.
County of King       )

         I, the undersigned, a notary public in and for the State of Washington,
hereby certify that on this 16th day of June, 1998,  personally  appeared before
me  Peter  Richard  Henning  known  to be the  individual  described  in and who
executed the foregoing  instrument,  and acknowledged that he/she signed same as
his/her  free and  voluntary  act and deed,  for the uses and  purposes  therein
mentioned.

         WITNESS my hand and official seal hereto affixed the day and year first
written above.


(SEAL)                               S/ Yvonne M. Nelson
                                     Notary Public in and for the
                                     State of Washington, residing at Bothell


State of _____________________  )
                                ) ss.
County of ____________________  )

         I,  the  undersigned,   a  notary  public  in  and  for  the  State  of
___________,  hereby certify that on this ____ day of _________, 1998 personally
appeared before me _______________  known to be the individual  described in and
who executed the foregoing instrument,  and acknowledged that he/she signed same
as his/her free and  voluntary act and deed,  for the uses and purposes  therein
mentioned.

         WITNESS my hand and official seal hereto affixed the day and year first
written above.


                                     _______________________________________
                                     Notary Public in and for the State of 
                                     ___________________, residing at 
                                     ________________________

State of _____________________  )
                                ) ss.
County of ____________________  )

         I,  the  undersigned,   a  notary  public  in  and  for  the  State  of
___________, hereby certify that on this ____ day of _________, 1998, personally
appeared before me _______________  known to be the individual  described in and
who executed the foregoing instrument,  and acknowledged that he/she signed same
as his/her free and  voluntary act and deed,  for the uses and purposes  therein
mentioned.

         WITNESS my hand and official seal hereto affixed the day and year first
written above.


                                     _______________________________________
                                     Notary Public in and for the State of 
                                     ___________________, residing at 
                                     ________________________