Document:

<PAGE>
                                                                    EXHIBIT 10.2

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                      LEASE

         DATE:            April 14, 2004

         LANDLORD:        PANATTONI DEVELOPMENT COMPANY, LLC,
                          a California limited liability company

         TENANT:          BIG 5 CORP., a Delaware corporation

         LOCATION:        Sycamore Canyon Boulevard
         CITY OF:         Riverside
         COUNTY OF:       Riverside
         STATE OF:        California

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                      Page
                                                                                                      ----
<S>                                                                                                   <C>
ARTICLE 1:   TERM................................................................................       2

ARTICLE 2:   RENTAL..............................................................................       9

ARTICLE 3:   POSSESSION AND TITLE................................................................      11

ARTICLE 4:   SIGNS AND COMMUNICATION EQUIPMENT...................................................      16

ARTICLE 5:   USE OF PREMISES; UTILITIES; COMPLIANCE WITH LAWS....................................      16

ARTICLE 6:   TAXES AND LIENS.....................................................................      19

ARTICLE 7:   REPAIRS.............................................................................      22

ARTICLE 8:   ALTERATIONS; SURRENDER OF PREMISES..................................................      25

ARTICLE 9:   DAMAGE OR DESTRUCTION...............................................................      27

ARTICLE 10:  INSURANCE AND INDEMNITY.............................................................      30

ARTICLE 11:  ASSIGNMENT AND SUBLETTING...........................................................      34

ARTICLE 12:  EMINENT DOMAIN......................................................................      35

ARTICLE 13:  ATTORNEYS' FEES.....................................................................      38

ARTICLE 14:  PERMITS AND LICENSES................................................................      38

ARTICLE 15:  EXTENSION OF TERM...................................................................      38

ARTICLE 16:  SUBORDINATION.......................................................................      39

ARTICLE 17:  TENANT'S DEFAULTS...................................................................      40

ARTICLE 18:  LANDLORD'S DEFAULTS.................................................................      42

ARTICLE 19:  NOTICES.............................................................................      43

ARTICLE 20:  MISCELLANEOUS PROVISIONS............................................................      44
</TABLE>

                                      (i)
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
EXHIBITS

EXHIBIT A:      DESCRIPTION OF LAND
EXHIBIT B-1:    SITE PLAN OF LAND
EXHIBIT B-2:    PROPOSED FINAL MAP
EXHIBIT C:      CONSTRUCTION
EXHIBIT D:      PERMITTED ENCUMBRANCES
EXHIBIT E:      NON-DISTURBANCE, ATTORNMENT AND SUBORDINATION
                AGREEMENT
EXHIBIT F:      LANDLORD'S WAIVER-INVENTORY
EXHIBIT G:      MEMORANDUM OF LEASE
EXHIBIT H:      COMMENCEMENT CERTIFICATE
EXHIBIT I:      DELIVERY CONDITION
</TABLE>

                                      (ii)
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                      INDEX

<TABLE>
<CAPTION>
                                                                              Page(s)
                                                                              -------
<S>                                                                           <C>
AAA........................................................................     36
Acquisition Date...........................................................      1
additional rent............................................................     11
Adjustment Date............................................................      9
Approved Title Exceptions..................................................     12
Base Index.................................................................     10
Brokers....................................................................     45
Building...................................................................      1
Building/Site Work.........................................................      2
Change of Ownership........................................................     20
Claims.....................................................................     33
Commencement Date..........................................................      2
Communication Equipment....................................................     16
Comparison Index...........................................................     10
Construction Escrow........................................................     28
Delivery Condition.........................................................      4
Delivery Date..............................................................      2
Delivery Deadline Date.....................................................      6
Earthquake Insurance Coverage..............................................     31
Encumbrances...............................................................     12
Excess Costs...............................................................     28
Experienced Contractor.....................................................     27
Expiration Date............................................................      2
First Period...............................................................      9
Fixed Rent.................................................................      9
Fixturization Period.......................................................      3
Fixturization Work.........................................................     10
Force Majeure Delays.......................................................      7
Grading Commencement.......................................................      5
Grading Commencement Outside Date..........................................      5
Hazardous Materials........................................................     15
Improvements...............................................................      1
Index......................................................................     10
Interest Rate..............................................................     22
JAMS.......................................................................     36
Land.......................................................................      1
Land Acquisition...........................................................      1
Landlord...................................................................      1
Landlord Delays............................................................      3
Landlord's Contractor......................................................      6
Landlord's Maintenance Obligations.........................................     22
Landlord's Representatives.................................................     33
</TABLE>

                                     (iii)
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

<TABLE>
<CAPTION>
                                                                              Page(s)
                                                                              -------
<S>                                                                           <C>
Landlord's Termination Notice..............................................     28
Landlord's Work............................................................      1
Landlord's Work Costs......................................................      8
Larger Parcel..............................................................      1
Lease......................................................................      1
Leasehold Title Commitment.................................................     14
Leasehold Title Policy.....................................................     14
Maximum Earthquake Premium.................................................     31
Memorandum of Lease........................................................     44
Memorandum of Lease Amendment..............................................      2
No Dollar Limit............................................................     23
Official Records...........................................................      1
Option Period..............................................................     38
Option Periods.............................................................     38
Outside Operations Date....................................................      3
Partial Taking.............................................................     35
Permit Issuance............................................................      5
Permit Issuance Outside Date...............................................      5
Permitted Deed of Trust....................................................     12
Permitted Easements........................................................     12
Permitted Encumbrances.....................................................     12
Permitted Use..............................................................     16
Premises...................................................................      1
Pricing Request............................................................      5
Pricing Statement..........................................................      5
Proposed Final Map.........................................................      1
Punchlist Items............................................................      5
Ready for Occupancy........................................................      4
Ready for Occupancy Outside Date...........................................      7
Real Property Taxes........................................................     20
rent.......................................................................     11
Rentable Area..............................................................      8
rental.....................................................................     11
rentals....................................................................     11
rents......................................................................     11
Second Period..............................................................      9
Signs......................................................................     16
Site Plan..................................................................      1
SNDA.......................................................................     39
Subdivision................................................................      1
Subdivision Outside Date...................................................      1
Systems....................................................................     22
Tax Statements.............................................................     21
Tenant.....................................................................      1
</TABLE>

                                      (iv)
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

<TABLE>
<CAPTION>
                                                                              Page(s)
                                                                              -------
<S>                                                                           <C>
Tenant Change Order........................................................      4
Tenant Delays..............................................................     12
Tenant Design Problem......................................................      4
Tenant Improvement Allowance...............................................      8
Tenant Improvements........................................................      1
Tenant Termination Amount..................................................      8
Tenant's Election Notice...................................................     32
Tenant's Eminent Domain TI Proceeds........................................     36
Tenant's Representatives...................................................     33
Tenant's Termination Insurance Proceeds....................................     32
Term.......................................................................      2
Terminable Event...........................................................      6
Threshold Amount...........................................................     28
TI Costs...................................................................      8
to Landlord's actual knowledge.............................................     15
Total Taking...............................................................     35
Uninsured Casualty.........................................................     28
</TABLE>

                                      (v)
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         THIS LEASE ("LEASE") is made and entered into as of the 14th day of
April, 2004, by and between PANATTONI DEVELOPMENT COMPANY, LLC, a California
limited liability company ("LANDLORD"), owner of the Premises (defined in the
following paragraph below), and BIG 5 CORP., a Delaware corporation ("TENANT").

                                    RECITALS

         A.       Land, Building and Premises. That for and in consideration of
the rental hereinafter reserved, and of the mutual covenants, agreements, and
conditions hereinafter contained, and upon all of the terms and provisions of
this Lease, Landlord does hereby lease to Tenant, and Tenant does hereby rent
from Landlord, for the Term as set forth in Article 1 below, the following
(collectively, the "PREMISES"): (i) that certain parcel of real property (the
"LAND") containing approximately 46.64 gross acres (approximately 44.81 net
acres after dedication of Crest Ridge Drive and the expansion parcel for
Sycamore Canyon Boulevard to the City of Riverside, as contemplated by the
Proposed Final Map, as defined below), situated on Sycamore Canyon Boulevard, in
the City of Riverside, County of Riverside, State of California, as more
particularly described in Exhibit A attached hereto and made a part hereof and
more particularly shown on the site plan attached hereto as Exhibit B-1 and made
a part hereof (the "SITE PLAN"); (ii) the warehouse/distribution building (the
"BUILDING") having dimensions of approximately 1,560 feet by 600 feet and
containing a total of approximately 953,132 square feet of Rentable Area (as
defined in Paragraph 1.6 below) to be constructed by Landlord on the Land
pursuant to the terms and provisions of this Lease, which Rentable Area shall be
subject to adjustment in accordance with Paragraph 1.6 below; (iii) the
"IMPROVEMENTS", which means, collectively, the Building and all other
structures, driveways, entrances and exits, parking areas, landscaping,
utilities, drainage facilities, lighting and curb cuts, and all other
improvements and fixtures (excluding Tenant's trade fixtures and personal
property) now or hereafter located on the Land; and (iv) all easements, rights
and appurtenances now or hereafter appurtenant thereto.

         B.       Acquisition and Subdivision of Land. Notwithstanding anything
to the contrary contained in this Lease, the parties acknowledge and agree that
Landlord does not currently own the Land, and the Land is part of a larger
approximately 96 acre parcel (the "LARGER PARCEL") as depicted on the Proposed
Final Map which is in the process of being purchased and subdivided by Landlord.
It is anticipated by the parties that on or before June 1, 2004 (the
"ACQUISITION OUTSIDE DATE"), Landlord will cause all of the following events
(herein referred to collectively as the "LAND ACQUISITION") to occur: (i)
acquisition by Landlord of fee simple title to the Larger Parcel (including the
Land) from the current owner thereof, as evidenced by the recordation of a grant
deed in favor of Landlord for the Larger Parcel (including the Land) in the
official records of the county in which the Premises are located (the "OFFICIAL
RECORDS"); and (ii) recordation of the Memorandum of Lease (as defined in
Paragraph 20.2 below) in the Official Records immediately following the
recordation of such grant deed. It is also anticipated by the parties that on or
before October 1, 2004 (the "SUBDIVISION OUTSIDE DATE"), Landlord will cause all
of the following events (hereinafter referred to collectively as the
"SUBDIVISION") to occur: (A) the subdivision of the Land from the Larger Parcel
into a legally subdivided parcel pursuant to a final parcel map recorded in the
Official Records, which final parcel map shall be based upon and substantially
in accordance with that certain proposed final parcel map no. 31139-1 (the
"PROPOSED FINAL MAP") on which the Land is depicted as Parcel 1 thereof (a copy
of which

                                      -1-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Proposed Final Map is attached hereto as Exhibit B-2), and subject only to the
conditions for such subdivision as set forth on the Proposed Final Map (which
conditions Landlord shall satisfy and cause to be deleted, at its expense, prior
to recordation of such final parcel map); (B) subject to the following
provisions of this Recital B, recordation in the Official Records of a
memorandum of lease amendment (the "MEMORANDUM OF LEASE AMENDMENT") to be
executed by the parties as provided in Paragraph 20.2 below, which modifies the
Memorandum of Lease to (1) reflect that the subdivision of the Land from the
Larger Parcel has occurred, and (2) attach thereto the legal description of the
Land, as so subdivided, as the land component of the Premises; and (C) receipt
by Tenant of the Leasehold Title Policy or Leasehold Title Commitment for the
Premises, as the case may be, as defined in and pursuant to the provisions of
Paragraph 3.3 below. It is currently contemplated by the parties that the Land
Acquisition will occur prior to the Subdivision, but in the event Landlord
causes the Land Acquisition and Subdivision to occur concurrently, then
notwithstanding the foregoing provisions of Recital B to the contrary, (1) the
parties shall not record the Memorandum of Lease Amendment, and (2) prior to
recordation of the Memorandum of Lease, a modified version of the Memorandum of
Lease shall be executed by the parties and delivered to the escrow holder
described in Paragraph 20.2 below in substitution for the originally executed
Memorandum of Lease in order to eliminate references to the Larger Parcel and
such Subdivision and to reference and attach thereto as an exhibit the legal
description of the Land, as so subdivided, as the land component of the
Premises. If Landlord fails to either (x) effect the Land Acquisition by the
Acquisition Outside Date, as evidenced by written notice thereof (together with
conformed copies of the recorded grant deed of the Larger Parcel, including the
Land, in favor of Landlord and the recorded Memorandum of Lease) delivered by
Landlord to Tenant on or before such Acquisition Outside Date, or (y) effect the
Subdivision by the Subdivision Outside Date, as evidenced by written notice
thereof together with conformed copies of the recorded final parcel map
subdividing the Land from the Larger Parcel, and the recorded Memorandum of
Lease Amendment (if applicable), then, in either such case, and in addition to
Tenant's other rights and remedies set forth in this Lease, Tenant shall have
the rights set forth in Paragraph 1.5 below.

ARTICLE 1: TERM.

         1.1      Commencement Date. The term of this Lease (the "TERM") shall
be for a period of approximately ten (10) years commencing upon the Commencement
Date (as defined hereinbelow), and expiring upon the date (the "EXPIRATION
DATE") that is the last day of the calendar month which is ten (10) years after
the Commencement Date, unless extended or sooner terminated as provided in this
Lease. The "COMMENCEMENT DATE" shall be the date that is the earlier of: (i) the
later of (A) January 1, 2005, and (B) that date which is ninety (90) days after
the date (the "DELIVERY DATE") Landlord delivers to Tenant possession of the
Premises in the Delivery Condition (as defined in Paragraph 1.4.1 below),
subject, however to acceleration (but not before January 1, 2005) due to Tenant
Delays (as defined and provided in Paragraph 6 of Exhibit C) and/or extension
and postponement as provided in Paragraph 1.2 below; or (ii) the date Tenant
actually commences its ordinary business operations in the Building (which shall
be subject to Tenant obtaining all applicable licenses therefor required by
Applicable Laws, as defined in Paragraph 1.2 below). For purposes of this
Paragraph 1.1, Tenant shall be considered to have commenced its ordinary
business operations in the Building when it has personnel and inventory on-site
within the Building and is able to commence distribution of that inventory from
the Building. Accordingly, the mere fact that Tenant has commenced the storage
of inventory at

                                      -2-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

the Premises shall not be considered the commencement of its ordinary business
operations in the Building. Landlord shall give Tenant thirty (30) days' advance
notice of the date possession of the Premises shall be delivered to Tenant in
the Delivery Condition. Said delivery of possession of the Premises to Tenant in
the Delivery Condition shall be made in full compliance with the terms and
conditions of Article 3 of this Lease and Exhibit C attached hereto.

         1.2      Fixturization Period. During such ninety (90) day period set
forth in Paragraph 1.1 above (the "FIXTURIZATION PERIOD"), Tenant intends to
install certain "Fixturization Work" within the Building, as defined and
described in Exhibit C attached hereto, and in connection with the installation
of the Fixturization Work: (i) Tenant shall have uninterrupted access to the
Building and Premises to install the Fixturization Work during the Fixturization
Period, subject, however, to Landlord's rights of access as are reasonably
necessary for Landlord to complete Landlord's Work and make the Premises Ready
for Occupancy (as defined in Paragraph 1.4.2 below) during the ninety (90) day
period immediately following the Delivery Date; and (ii) Landlord shall use
commercially reasonable efforts, at no cost to Landlord, to assist Tenant in
obtaining (at Tenant's expense) all governmental permits and approvals for such
Fixturization Work (including, without limitation, racking permits, applicable
fire department approvals and permits for Tenant's proposed guns and ammunition
areas in the Building). If Tenant's installation of the Fixturization Work
and/or commencement of Tenant's ordinary business operations in the Building
following delivery of possession thereof to Tenant in the Delivery Condition
shall be delayed by reason of any Landlord Delays (as defined in Paragraph 1.3
below), then the Fixturization Period shall be extended and accordingly the
Commencement Date of the Term of this Lease shall be postponed for a period
equal to the duration of such Landlord Delays. In the event any of such Landlord
Delays delay Tenant's commencement of business operations in the Building for a
period beyond the date which is eighteen (18) months after the date of execution
of this Lease (the "OUTSIDE OPERATIONS DATE"), Tenant may elect to terminate
this Lease by written notice delivered to Landlord within sixty (60) days after
the Outside Operations Date, and Tenant shall be entitled to receive from
Landlord the Tenant Termination Payment as defined in and pursuant to Paragraph
1.5.5 below.

         1.3      Landlord Delays. As used herein, "LANDLORD DELAYS" shall mean
any delays in the installation of the Fixturization Work, and/or the
commencement of Tenant's ordinary business operations in the Building following
delivery of possession of the Premises to Tenant in the Delivery Condition,
actually caused by any of the following (but only to the extent such delays are
not caused by Tenant Delays or Force Majeure Delays, as defined in Paragraph
1.5.4 below):

                  (i)      Landlord's failure or refusal to (A) give
authorizations, approvals or disapprovals within the time periods required under
this Lease or Exhibit C, (B) disburse and/or pay when due the cost of Landlord's
Work required to be paid for by Landlord (including disbursement of the Tenant
Improvement Allowance) in accordance with Exhibit C, or (C) otherwise comply
with the time deadlines and/or schedules set forth in this Lease and/or Exhibit
C;

                  (ii)     Landlord's breach of any provisions of this Lease or
Exhibit C;

                                      -3-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                  (iii)    any unreasonable interference with Tenant's
installation of the Fixturization Work caused by Landlord's Work, including,
without limitation, any failure by Landlord to provide Tenant with uninterrupted
access to the Building and Premises to install the Fixturization Work after the
Delivery Date as required in Paragraph 1.2 above and thereafter commence its
ordinary business operations in the Building;

                  (iv)     (A) any defects in the design and/or construction of
Landlord's Work or failure of Landlord to comply with all Applicable Laws and/or
the requirements of Exhibit C in connection with the design and construction of
Landlord's Work, including, without limitation, any failure of Landlord's Work
to meet the Delivery Condition requirements as of the date the Premises are
delivered to Tenant, and/or (B) incorrect or incomplete Final Plans (as defined
in Exhibit C) for Landlord's Work and/or the failure of the Final Plans to
comply with Applicable Laws or otherwise meet the requirements set forth in
Exhibit C;

                  (v)      revisions made to the Final Plans after approval
thereof by Landlord and Tenant unless required by Tenant Change Orders (as
defined in Exhibit C) requested by Tenant pursuant to Exhibit C;

                  (vi)     Landlord's failure to complete Landlord's Work and
make the Premises Ready for Occupancy within the ninety (90) day period
following the Delivery Date; and/or

                  (vii)    any other acts, negligence or omissions of or by
Landlord or Landlord's employees, agents, contractors, licensees or invitees.

         1.4      Delivery Condition; Ready for Occupancy.

                  1.4.1    Delivery Condition. For purposes hereof, the Premises
shall be deemed to be in the "DELIVERY CONDITION" after Landlord has caused both
the Land Acquisition and the Subdivision to occur, and when all of Landlord's
Work for the Premises to be constructed by Landlord pursuant to Exhibit C has
been completed to the extent set forth on Exhibit I attached hereto, and
otherwise to such extent so as to not unreasonably delay or interfere with
Tenant's installation of the Fixturization Work described in Paragraph 1.2
above. Immediately prior to Landlord's delivery of possession of the Premises to
Tenant in the Delivery Condition, Landlord and Tenant shall conduct a joint
walk-through of the Premises to confirm whether or not the Premises are in fact
in the Delivery Condition as described in and required by Exhibit I and this
Paragraph 1.4.1. The parties acknowledge and agree that the Delivery Date will
occur prior to completion of all of Landlord's Work, and that Landlord will be
completing the remainder of Landlord's Work and causing the Premises to be Ready
for Occupancy during Tenant's Fixturization Period while Tenant is installing
the Fixturization Work.

                  1.4.2    Ready for Occupancy. Landlord covenants to complete
Landlord's Work (subject to the Punchlist Items, as defined below in this
Paragraph 1.4.2) and cause the Premises to be Ready for Occupancy within ninety
(90) days after the Delivery Date. For purposes hereof, the Premises shall be
deemed "READY FOR OCCUPANCY" when:

                           (i)      Landlord has caused both the Land
Acquisition and the Subdivision to occur;

                                      -4-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                           (ii)     all of Landlord's Work has been completed in
accordance with the Final Plans, all Applicable Laws, and the provisions of
Exhibit C, excepting only those incomplete items of finishing and/or correction
work (collectively, the "PUNCHLIST ITEMS") which (A) are of such a nature that
they will not and do not unreasonably delay or interfere with Tenant's
completion of the Fixturization Work or Tenant's commencement of its ordinary
business operations from the Premises following Tenant's completion of the
Fixturization Work, and (B) are identified on a list to be jointly prepared and
mutually agreed upon by Landlord and Tenant as provided hereinbelow (provided,
however, that such Punchlist Items shall be completed by Landlord within thirty
(30) days after such substantial completion);

                           (iii)    a certificate of occupancy (or a temporary
certificate of occupancy or its equivalent, subject to conditions reasonably
acceptable to Tenant) with respect to Landlord's Work has been issued by the
City of Riverside, and a copy of the same has been delivered to Tenant;

                           (iv)     all Premises systems and utilities
(including, without limitation, water, electricity, and HVAC) are in good
working order and operation;

                           (v)      Landlord's Contractor (as defined in Exhibit
C) has executed a Certificate in the form attached as Schedule 2 to Exhibit C,
and a copy of same has been delivered to Tenant; and

                           (vi)     Landlord's Architect has executed a
Certificate in the form of the AIA Certificate of Substantial Completion
(G704-1978), and a copy of same has been delivered to Tenant.

Within ten (10) days after Landlord has made the Premises Ready for Occupancy
and delivered to Tenant the certificates described in clauses (iii), (v) and
(vi) hereinabove, Landlord and Tenant will jointly conduct a walk-through
inspection of the Premises and will jointly prepare an agreed upon list of
Punchlist Items to be performed by Landlord pursuant to Exhibit C.

         1.5      Failure to Effect Land Acquisition or Subdivision, Commence
Grading, Obtain Permits, Achieve Delivery Condition or Complete Landlord's Work.

                  1.5.1    If Landlord fails to (i) effect the Land Acquisition
by the Acquisition Outside Date, or (ii) effect the Subdivision by the
Subdivision Outside Date, or (iii) commence grading of the Land ("GRADING
COMMENCEMENT") by August 15, 2004 (the "GRADING COMMENCEMENT OUTSIDE DATE"), as
such date in this clause (iii) may be extended as provided in Paragraph 1.5.4
below, or (iv) obtain from the appropriate governmental authorities all
necessary building permits and approvals to construct Landlord's Work (the
"PERMIT ISSUANCE") by August 15, 2004 (the "PERMIT ISSUANCE OUTSIDE DATE"), as
such date in this clause (iv) may be extended as provided in Paragraph 1.5.4
below, then in addition to Tenant's other rights and remedies set forth in this
Lease, Tenant may, at any time thereafter but prior to the date the Land
Acquisition, Subdivision, Grading Commencement or Permit Issuance (as the case
may be) has occurred, either (A) terminate this Lease upon ten (10) days' prior
written notice to Landlord and receive from Landlord the Tenant Termination
Amount (as defined in and pursuant to Paragraph 1.5.5 below), or (B) extend the
Acquisition Outside Date, the Subdivision Outside

                                      -5-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Date, the Grading Commencement Outside Date or the Permit Issuance Outside Date
(as the case may be) to a later date as designated by Tenant in its sole and
absolute discretion in a written notice delivered by Tenant to Landlord, in
which event:

                           (1) Tenant shall retain its termination right and
right to receive the Tenant Termination Amount pursuant to clause (A) of this
Paragraph 1.5.1 if Landlord fails to cause the Land Acquisition, Subdivision,
Grading Commencement or Permit Issuance (as the case may be) to occur by such
extended Acquisition Outside Date, extended Subdivision Outside Date, extended
Grading Commencement Outside Date or extended Permit Issuance Outside Date (as
the case may be);

                           (2) Tenant shall receive one (1) day of abated Fixed
Rent and Real Property Taxes for each day that is within the period commencing
as of the originally scheduled Acquisition Outside Date and expiring upon the
date the Land Acquisition actually occurs;

                           (3) Tenant shall receive one (1) day of abated Fixed
Rent and Real Property Taxes for each day that is within the period commencing
as of the originally scheduled Subdivision Outside Date, and expiring upon the
date the Subdivision actually occurs;

                           (4) Tenant shall receive one (1) day of abated Fixed
Rent and Real Property Taxes for each date that is within the period commencing
as of the originally scheduled Grading Commencement Outside Date (as the same
may be extended pursuant to Paragraph 1.5.4 below) and expiring upon the date
Grading Commencement actually occurs; and

                           (5) Tenant shall receive one (1) day of abated Fixed
Rent and Real Property Taxes for each day that is within the period commencing
as of the originally scheduled Permit Issuance Outside Date (as the same may be
extended pursuant to Paragraph 1.5.4 below) and expiring upon the date the
Permit Issuance actually occurs.

                  1.5.2    If Landlord fails to deliver possession of the
Premises to Tenant in the Delivery Condition by May 1, 2005 (the "DELIVERY
DEADLINE DATE"), as such date may be extended as provided in Paragraph 1.5.4
below, then in addition to Tenant's other rights and remedies set forth in this
Lease, Tenant may, at any time thereafter but prior to delivery of possession of
the Premises to Tenant in the Delivery Condition, either (i) terminate this
Lease upon not less than ten (10) days' prior written notice to Landlord and
receive from Landlord the Tenant Termination Amount, or (ii) extend the Delivery
Deadline Date to a later date as designated by Tenant in its sole and absolute
discretion in a written notice delivered by Tenant to Landlord, in which event:
(A) Tenant shall retain its termination right and right to receive the Tenant
Termination Amount pursuant to clause (i) of this Paragraph 1.5.2 if Landlord
fails to deliver possession of the Premises to Tenant in the Delivery Condition
by such extended Delivery Deadline Date; and (B) Tenant shall receive one (1)
day of abated Fixed Rent and Real Property Taxes for each day that is within the
period commencing as of the originally scheduled Delivery Deadline Date (as the
same may be extended pursuant to Paragraph 1.5.4 below) and expiring upon the
date Landlord actually delivers possession of the Premises to Tenant in the
Delivery Condition.

                                      -6-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                  1.5.3    If Landlord fails to cause the Premises to be Ready
for Occupancy by August 1, 2005 (the "READY FOR OCCUPANCY OUTSIDE DATE"), as
such date may be extended as provided in Paragraph 1.5.4 below, then in addition
to Tenant's other rights and remedies set forth in this Lease, Tenant may, at
any time thereafter prior to Landlord causing the Premises to be Ready for
Occupancy, either (i) terminate this Lease upon not less than ten (10) days'
prior written notice to Landlord and receive from Landlord the Tenant
Termination Amount, or (ii) extend the Ready for Occupancy Outside Date to a
later date as designated by Tenant in its sole and absolute discretion in a
written notice delivered by Tenant to Landlord, in which event: (A) Tenant shall
retain its termination right and right to receive the Tenant Termination Amount
pursuant to clause (i) of this Paragraph 1.5.3 if Landlord fails to cause the
Premises to be Ready for Occupancy by such extended Ready for Occupancy Outside
Date; and (B) Tenant shall receive one (1) day of abated Fixed Rent and Real
Property Taxes for each day that is within the period commencing as of the
originally scheduled Ready for Occupancy Outside Date (as the same may be
extended pursuant to Paragraph 1.5.4 below) and expiring upon the date Landlord
actually causes the Premises to be Ready for Occupancy.

                  1.5.4    Notwithstanding anything in this Paragraph 1.5 to the
contrary, if Grading Commencement, Permit Issuance, delivery of possession of
the Premises to Tenant in the Delivery Condition and/or causing the Premises to
be Ready for Occupancy shall be delayed by reason of (i) any Tenant Delays,
and/or (ii) "FORCE MAJEURE DELAYS", which are defined herein, collectively, as
delays due to governmental regulations, unavailability of material or labor,
rain or other inclement weather, acts of God, strikes, lockouts or any other
matters beyond Landlord's reasonable control (other than Landlord's financial
condition), including delays in obtaining applicable permits from the
governmental authorities beyond the normal period of time for issuance of such
permits for similar projects and not due to Landlord's failure to comply with
the provisions of this Lease or the requirements of such governmental
authorities for issuance of such permits, then the Grading Commencement Outside
Date, the Permit Issuance Outside Date, the Delivery Deadline Date or the Ready
for Occupancy Outside Date (as the case may be) shall be extended for a period
equal to the duration of such Tenant Delays and Force Majeure Delays.
Notwithstanding the foregoing to the contrary, (A) such extension of any of such
four (4) dates for any Force Majeure Delays described in clause (ii) hereinabove
shall not exceed a period of two (2) months nor result in the Ready for
Occupancy Outside Date being extended, in any event, beyond the date which is
eighteen (18) months after the date of execution of this Lease, and (B) no such
extension shall occur to the extent such Force Majeure Delays and/or Tenant
Delays could have been avoided had Landlord used reasonable efforts to avoid
such delay and to adapt and compensate for such delay. In addition, no Tenant
Delay or Force Majeure Delay shall be deemed to have occurred unless Landlord
has delivered to Tenant written notice specifying in reasonable detail the
actions, inactions or circumstances Landlord claims constitute such Tenant Delay
or Force Majeure Delay within five (5) business days after Landlord becomes
aware of the occurrence of the action, inactions or circumstances; provided,
however, in the event Landlord provides such notice after the expiration of that
fifth (5th) business day, the Tenant Delay or Force Majeure Delay (as the case
may be) shall be deemed to have occurred commencing on the day that Landlord
actually provides such notice to Tenant; and provided, further, that no such
Tenant Delay shall be deemed to have occurred if Tenant cures the action,
inaction or circumstance which Landlord claims constitutes such Tenant Delay
within two (2) business days after such notice is received by Tenant (however,
Tenant shall only be entitled to an aggregate of fifteen (15) business days in
which to cure any such actions, inactions or circumstances, and any

                                      -7-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

such Tenant Delays occurring after such fifteen (15) business days of aggregate
cure days utilized by Tenant shall be deemed to have occurred without taking
into account any subsequent cure periods hereinabove).

                  1.5.5    Following any such termination of this Lease pursuant
to this Paragraph 1.5, Paragraph 1.2 above or Paragraph 16.1 below, both parties
hereto shall be freed and discharged of all further obligations under this
Lease, except: (i) as provided for in provisions of this Lease which by their
terms survive the expiration or earlier termination of this Lease; (ii) Landlord
shall remain obligated to disburse any undisbursed Tenant Improvement Allowance
to pay for any costs for which the Tenant Improvement Allowance may be utilized
and which have been incurred prior to the effective date of such termination,
subject to and in accordance with the provisions of Exhibit C; and (iii)
Landlord shall reimburse Tenant an amount (the "TENANT TERMINATION AMOUNT")
equal to Tenant's actual, documented and reasonable out-of pocket costs paid or
incurred by Tenant in connection with (A) this Lease (including, without
limitation, reasonable attorneys' fees paid by Tenant in negotiating this
Lease), (B) the design, permitting and construction of the Premises, and/or (C)
the design, acquisition and installation of any improvements, fixtures,
furniture and equipment for the Premises (but only to the extent any of the
foregoing costs have not previously reimbursed or paid by Landlord from the
Tenant Improvement Allowance or otherwise). The Tenant Termination Amount shall
be paid by Landlord to Tenant within thirty (30) days following the effective
date of termination. The foregoing provisions of this Paragraph 1.5.5 shall
survive the termination of this Lease.

         1.6      Rentable Area of the Building.

                  1.6.1    Rentable Area. For purposes hereof, the "RENTABLE
AREA" of the Building shall mean the gross building area of the Building
measured by the drip line of the Building (i.e., the lines that form the
exterior perimeter of the Building and follow the most exterior drip line at the
perimeter of the roof systems of the Building at floor level), but excluding:
(i) any space or areas which are not roofed and/or fully enclosed (including,
without limitation, (A) unenclosed connecting links or area ways, (B) unenclosed
exterior staircases or fire escapes, and (C) unenclosed shipping/receiving
platforms; (ii) any mezzanine or office space or second (2nd) floor space; (iii)
any canopies, exterior steps, exterior landings and staging platforms; and (iv)
any projections that do not extend vertically for the full height of the
Building. The Rentable Area of the Building to be constructed by Landlord is
approximately as set forth on page 1 of this Lease and is the parties' good
faith estimate thereof as of the date of execution of this Lease. Simultaneously
with Landlord's delivery of possession of the Premises to Tenant in the Delivery
Condition, Landlord will cause Landlord's Architect (as defined in Exhibit C) to
certify to Landlord and Tenant the Rentable Area of the Building. Such
certification shall be subject to the reasonable approval of Tenant pursuant to
Paragraph 1.6.2 below. The approved Rentable Area of the Building will be
specified in a Commencement Certificate (as defined in Paragraph 1.7 below), and
the Fixed Rent and Tenant Improvement Allowance shall be adjusted accordingly.

                  1.6.2    Tenant's Remeasurement Right. Within twenty (20) days
after delivery of Landlord's Architect's certificate of Rentable Area of the
Building pursuant to Paragraph 1.6.1 above, Tenant shall approve or disapprove
of that determination, and during such period shall have the right to engage
another California licensed architect experienced in the design and

                                      -8-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

construction of industrial buildings to measure the Rentable Area of the
Building. If Landlord's and Tenant's respective determinations differ, and the
parties are unable to resolve the differences within ten (10) business days
after submission of Tenant's determination to Landlord, the dispute shall be
determined by a third California licensed architect selected by Tenant's
architect and Landlord's Architect. If Tenant's architect and Landlord's
Architect are unable to agree on a third architect within twenty (20) days after
the submission of Tenant's determination to Landlord, the Rentable Area of the
Building shall be determined by a third (3rd) California licensed architect
selected by the presiding judge of the Superior Court of Riverside or San
Bernardino County, California, upon application of either Landlord or Tenant.
Tenant's failure to object to Landlord's Architect's determination within the
above 20-day period shall be deemed to be Tenant's approval of the determination
of Landlord's Architect.

         1.7      Commencement Certificate. Within thirty (30) days after the
Commencement Date, Tenant and Landlord shall execute and deliver a "Commencement
Certificate" in the form attached hereto as Exhibit H. In the Commencement
Certificate, Landlord and Tenant shall confirm the Commencement Date, the
Expiration Date of the Term, the Rentable Area of the Building and the Fixed
Rent.

ARTICLE 2: RENTAL.

         2.1      Fixed Rent. Effective upon the Commencement Date, Tenant
shall, except as otherwise provided herein, pay to Landlord as "FIXED RENT"
during the Term of this Lease the sum(s) set forth below in Subparagraph(s)
2.1.1, et seq. Said annual Fixed Rent shall be paid in equal monthly
installments in the amount(s) set forth in said subparagraph(s). Said monthly
Fixed Rent payment shall be paid on the first (1st) day of each full calendar
month for each such month. For periods of less than a full calendar month, said
monthly Fixed Rent payment shall be prorated based on the ratio of the number of
days in such partial calendar month to the total number of days in such full
calendar month. The proportionately reduced Fixed Rent payment for a part of a
calendar month for which Fixed Rent may be due shall be paid at the same time
and together with the Fixed Rent payment for the first (1st) full calendar month
for which Fixed Rent may be due as provided herein.

                  2.1.1    Commencing on the Commencement Date set forth in
Paragraph 2.1 above, and continuing for the next sixty (60) full calendar months
(the "FIRST PERIOD"), the annual Fixed Rent referred to in said Paragraph 2.1
shall be equal to the product of (i) $2.85 and (ii) the Rentable Area of the
Building, to be paid in equal monthly installments equal to the product of (A)
$0.2375 and (B) the Rentable Area of the Building. The Rentable Area of the
Building shall be determined pursuant to Paragraph 1.6 above, and the Fixed Rent
for the First Period shall be calculated based upon such determination as
provided therein.

                  2.1.2    Commencing on the date (the "ADJUSTMENT DATE") which
is the first (1st) day following the last day of the First Period, and
continuing for the remainder of the initial Term of this Lease ("SECOND
PERIOD"), the annual Fixed Rent referred to in said Paragraph 2.1 shall be equal
to the product of (i) the annual amount set forth in Subparagraph 2.1.1 above,
multiplied by (ii) the lesser of (A) 1.10, or (B) a fraction, the numerator of
which is the Comparison Index (as defined in Paragraph 2.1.4 below) for the
Second Period and the

                                      -9-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

denominator of which is the Base Index (as defined in Paragraph 2.1.4 below) for
the Second Period, and shall be paid in equal monthly installments equal to
1/12th of such annual amount.

                  2.1.3    If Tenant extends the initial Term of this Lease for
any of the Option Periods as defined in and pursuant to Paragraph 15.1 hereof,
the annual Fixed Rent referred to in said Paragraph 2.1 and payable by Tenant
during the applicable Option Period shall be equal to the product of (i) the
annual Fixed Rent amount payable during the last year of the immediately
preceding Term of this Lease, multiplied by (ii) the lesser of (A) 1.10, or (B)
a fraction, the numerator of which is the Comparison Index for the applicable
Option Period, as set forth in Paragraph 2.1.4 below, and the denominator of
which is the Base Index for the applicable Option Period, as set forth in
Paragraph 2.1.4 below, and shall be paid in equal monthly installments equal to
1/12th of such annual amount.

                  2.1.4    As used herein: (i) the "INDEX" shall mean the
Consumer Price Index for Los Angeles-Riverside-Orange County, California, All
Urban Consumers, 1982-84=100, as published by the Bureau of Labor Statistics,
United States Department of Labor or any successor agency; (ii) the "COMPARISON
INDEX" shall mean (A) with respect to the Second Period, the Index published for
the calendar month which is three (3) months prior to the Adjustment Date, and
(B) with respect to each applicable Option Period, the Index published for the
calendar month which is three (3) months prior to the commencement date of such
applicable Option Period; and (iii) the "BASE INDEX" shall mean (A) with respect
to the Second Period, the Index published for the calendar month which is three
(3) months prior to the Commencement Date, and (B) with respect to each
applicable Option Period, the Index published for the calendar month which is
sixty-three (63) months prior to the commencement date of such applicable Option
Period.

                  2.1.5    As an illustration of the calculation of the annual
Fixed Rent payable during the Second Period, if the Comparison Index for the
Second Period is 225, the Base Index is 200, and the Rentable Area of the
Building equals 953,132 square feet, then the annual Fixed Rent payable during
the Second Period would equal $2,988,068.82, calculated as follows:
$2,716,426.20 (i.e., the annual Fixed Rent payable for the First Period)
multiplied by 1.10 (which is less than 1.125, the fraction resulting from
dividing the Comparison Index of 225 by the Base Index of 200).

         2.2      Abatement of Rent. If following the Commencement Date Tenant
is prevented from using and does not use any portion of the Building by reason
of (i) default of Landlord, (ii) any labor difficulty encountered by Landlord,
(iii) Landlord's making any repairs or alterations to the Premises, (iv) a
casualty event or eminent domain proceedings, (v) any interruption of any
utilities or services being furnished to the Premises resulting from the acts,
negligence or willful misconduct of Landlord or Landlord's agents, employees,
contractors or licensees, (vi) the existence of Hazardous Materials (as defined
in Paragraph 3.3 below) in, on or at the Premises which have not been (A)
introduced by Tenant or any of Tenant's agents, contractors, employees,
licensees or invitees, and/or (B) caused by the actions of any third parties
(other than Landlord or Landlord's agents, employees or contractors) on the
Premises, or (vii) any other cause beyond the reasonable control of Tenant, then
and in each and all such cases, Tenant may elect, at any time after either (A)
the commencement of such prevention of use with respect to any of the events
described in clauses (i), through (v) hereinabove, or (B) the

                                      -10-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

third (3rd) consecutive business day of such prevention of use with respect to
any of the events described in clauses (vi) or (vii) hereinabove, to abate Fixed
Rent, Real Property Taxes payable pursuant to Paragraph 6.1 below and all other
charges payable by Tenant under this Lease for the period that Tenant continues
to be prevented from using, and does not use, the Building or any portion
thereof. Landlord acknowledges that Tenant shall be entitled to such abatement
with respect to any such event described hereinabove which affects areas of the
Premises outside the Building (whether or not the Building is directly affected
thereby), such as, but not limited to, Tenant's inability to use the driveways,
accessways and/or parking areas of the Premises, so long as a result of such
event occurring with respect to such other areas of the Premises, Tenant is
prevented from using and does not use a portion of the Building. Such abatement
shall be in proportion to the Rentable Area of the Building that Tenant is
prevented from using, and does not use (other than for storage purposes), as a
result of any such event; provided, however, if as a result of any event
described in clauses (i) through (vii) hereinabove, less than all of the
Premises or Building is affected by such event but Tenant is nevertheless unable
to effectively conduct its business (other than for storage purposes) from the
remainder of the Building and does not conduct same (other than for storage
purposes) from the area affected by the event and all such remaining portions of
the Building, then the entire Fixed Rent, Real Property Taxes and other charges
payable by Tenant under this Lease shall be abated for such time that Tenant
continues to be so prevented from using, and does not use, the entire Building
for the conduct of its business (other than for storage purposes). If, however,
Tenant reoccupies and recommences its business operations (other than for
storage purposes) from any portion of the Building during such abatement period,
the Fixed Rent, Real Property Taxes and other charges payable by Tenant under
this Lease allocable to such reoccupied portion, based upon the proportion that
the Rentable Area of such reoccupied portion of the Building bears to the total
Rentable Area of the Building, shall be payable by Tenant from the date Tenant
reoccupies such portion of the Building (other than for storage purposes) and
recommences its business operations (other than for storage purposes) therefrom.

         2.3      Place of Payment. Payments of rental hereunder are to be made
pursuant to Paragraph 20.15 hereof.

         2.4      Definition of Rent and Additional Rent. Notwithstanding
anything in this Lease to the contrary, Tenant shall not be obligated to pay to
or reimburse Landlord for any common area or other operating expenses, or
expenses incurred by Landlord for any repairs, maintenance, replacements,
insurance or other services which are Landlord's obligation to perform, provide
or pay for under this Lease (other than reimbursement of Real Property Taxes
pursuant to Paragraph 6.1 below), and Landlord shall not be entitled to receive
any management or administrative fees in connection with the Premises, this
Lease or any such obligations. All sums payable by Tenant to Landlord pursuant
to this Lease other than Fixed Rent shall be deemed to be "ADDITIONAL RENT". The
term "RENT", "RENTS", "RENTAL" or "RENTALS" as used in this Lease shall mean
Fixed Rent and additional rent.

ARTICLE 3: POSSESSION AND TITLE.

         3.1      Landlord's Covenants. Landlord covenants to deliver to Tenant
upon the Delivery Date sole and exclusive possession of the Premises (subject,
however, to Landlord's rights to enter the Premises to complete Landlord's Work
and the Punchlist Items as provided in

                                      -11-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Paragraph 1.4 above), free and clear of: (i) all tenants and occupants (other
than Tenant) and the rights of either; (ii) any violations of Applicable Laws;
and (iii) all liens, encumbrances, easements, covenants, conditions and
restrictions (collectively, "ENCUMBRANCES"), except for the following items
(collectively, the "APPROVED TITLE EXCEPTIONS"): (A) those Encumbrances
specified in Exhibit D attached hereto and made a part hereof (collectively, the
"PERMITTED ENCUMBRANCES"); (B) any first priority deed of trust executed by
Landlord as trustor in favor of an institutional lender as beneficiary in
connection with any financing obtained by Landlord to acquire the Land or
construct the Improvements (the "PERMITTED DEED OF TRUST"), subject, however, to
Tenant's receipt of an executed SNDA from such lender pursuant to the provisions
of Article 16 below; and (C) any utility and landscape easements (reasonably
approved by Tenant) that are reasonably necessary to effect the Subdivision,
complete Landlord's Work and/or provide utilities to and for the Premises
(collectively, the "PERMITTED EASEMENTS"). In connection with the foregoing,
Landlord covenants that prior to the earlier of the Delivery Date and the
Outside Subdivision Date, Landlord shall cause all Encumbrances recorded against
the Property (other than the Approved Title Exceptions) to be removed from
record title to the Premises. With respect to any such utility easements
proposed by Landlord pursuant to clause (C) hereinabove, Tenant shall notify
Landlord of Tenant's reasonable approval or disapproval thereof within five (5)
days after Tenant's receipt from Landlord of the documents creating such
proposed easements. Tenant's taking possession of the Premises shall not
constitute a waiver of any defect in the Premises or of any breach by Landlord
of Landlord's obligations under Exhibit C attached hereto.

Landlord further covenants that Landlord will not, so long as this Lease is in
effect:

                  (1)      grant or create (or consent to the granting or
creation of) any leases or occupancy agreements affecting the Premises;

                  (2)      grant or create (or consent to the granting or
creation of) any Encumbrances or other agreements which would or could (x)
adversely affect or interfere with Tenant's access to the Premises, or
materially interfere with Tenant's operation of the Premises for the Permitted
Use (as defined in Paragraph 5.1 below), or (y) increase any of Tenant's
obligations under this Lease (including rent) or diminish or impair any of
Tenant's rights under this Lease, other than (I) a Permitted Deed of Trust
encumbering the Premises, subject to the provisions of Article 16 below, and
(II) the Permitted Easements;

                  (3)      vary or permit to be varied the designated means of
ingress to and egress from the Premises from that shown on the Site Plan or
otherwise approved by Tenant as part of Landlord's Work pursuant to Exhibit C;

                  (4)      alter or permit to be altered any street signs,
median cuts, traffic signals, driveways or the parking layout or parking areas
of and for the Premises from that shown on the Site Plan or otherwise approved
by Tenant as part of Landlord's Work pursuant to Exhibit C (except to the extent
required by applicable governmental agencies after consultation with Tenant and
subject to Tenant's reasonable review and approval of any such required
alterations);

                                      -12-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                  (5)      erect or permit to be erected any buildings or
structures on the Premises except for the initial Improvements to be constructed
by Landlord as part of Landlord's Work pursuant to Exhibit C; and/or

                  (6)      alter the Premises or permit the Premises to be
altered in any manner (except as necessary by Landlord in the performance of
Landlord's Work or any of its other obligations under this Lease) without first
obtaining the prior written consent of Tenant, which consent may be granted or
withheld in the sole and absolute discretion of Tenant.

         3.2      Quiet Enjoyment. Landlord covenants that Tenant, upon paying
the rent pursuant to the terms of this Lease, may quietly have, hold and enjoy
the Premises during the Term hereof.

         3.3      Landlord's Representations, Warranties and Covenants. Landlord
represents, warrants and covenants to Tenant that:

                  (i)      (A) Landlord has entered into a purchase and sale
agreement to acquire fee simple title to the Larger Parcel (including the Land)
from the current owner thereof, which agreement provides for a closing date to
occur by May 15, 2004, (B) such purchase and sale agreement is in full force and
effect and neither Landlord nor the seller is in default thereunder, (C)
Landlord shall not extend such closing date beyond the Acquisition Outside Date,
(D) Landlord shall not modify such purchase and sale agreement in any manner
which would increase Tenant's obligations or diminish or impair Tenant's rights
under this Lease, (E) Landlord shall diligently and timely perform all of its
obligations under such purchase and sale agreement and acquire fee simple title
to the Larger Parcel (including the Land) on or before the Acquisition Outside
Date, subject, however, to any material breach by the seller or the failure of
any other material condition in favor of Landlord thereunder not caused by
Landlord's default or Landlord's failure to use commercially reasonable efforts
to acquire fee simple title to the Land, and (F) upon the closing date of such
purchase and sale agreement, Landlord shall: (1) acquire fee simple title to the
Larger Parcel (including the Land) free of all Encumbrances, except for the
Approved Title Exceptions described in Paragraph 3.1 above, subject, however, to
the provisions of Article 16 below; (2) cause the Memorandum of Lease to be
recorded in the Official Records immediately after the grant deed conveying fee
simple title to the Larger Parcel (including the Land) to Landlord is recorded
in the Official Records; and deliver to Tenant a copy of Landlord's owner's
policy of title insurance insuring that Landlord has fee simple title to the
Larger Parcel (including the Land) subject only to those title matters set forth
in clause (1) hereinabove.

                  (ii)     the Land is currently part of the Larger Parcel which
will be acquired by Landlord as described hereinabove, but on or before the
Subdivision Outside Date, Landlord shall: (A) cause the Land to be subdivided
into a legally subdivided parcel of land in compliance with the California
Subdivision Map Act based upon and substantially in accordance with the Proposed
Final Map (which depicts the Land as Parcel 1 thereof) and subject to the
conditions specifically set forth on the Proposed Final Map (as described in
Recital B above) and no other conditions (all of which conditions Landlord
shall, at Landlord's expense, cause to be satisfied and deleted prior to the
recordation of the final parcel map for the Land); (B) if the Subdivision is not
effected concurrently with the Land Acquisition, execute with Tenant and record
the Memorandum of Lease Amendment in the Official Records immediately after the
final parcel

                                      -13-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

map for the Land is recorded in the Official Records; and (C) cause to be
delivered to Tenant, at Tenant's option, either (1) an ALTA Leasehold Title
Policy of Insurance issued by the same title company who issued the owner's
title insurance policy to Landlord, insuring Tenant's leasehold interest in the
Premises pursuant to the Lease in the amount of $20,000,000.00, subject only to
the Approved Title Exceptions, which policy shall be paid for by Tenant (but
Landlord shall contribute $2,500.00 toward the cost thereof) and shall be in
such form of and contain such endorsements as Tenant shall reasonably request or
approve (collectively, the "LEASEHOLD TITLE POLICY") or (2) an ALTA leasehold
title commitment issued by such title company and dated not sooner than the date
such final parcel map is recorded, which commitment shall be paid for by
Landlord and shall show as exceptions to title in Schedule B thereof only the
Approved Title Exceptions (the "LEASEHOLD TITLE COMMITMENT");

                  (iii)    Landlord has full right, power and lawful authority
to enter into this Lease and perform its obligations hereunder;

                  (iv)     Landlord has obtained (or will obtain prior to the
Delivery Date or the date the Premises are Ready for Occupancy) all governmental
and other permits and approvals necessary to perform its obligations pursuant to
this Lease, including Exhibit C attached hereto;

                  (v)      to Landlord's actual knowledge, the Premises are not
subject to any leases, subleases, tenancies, agreements or Encumbrances (other
than those specifically set forth in Exhibit D attached hereto), or violations
of Applicable Laws;

                  (vi)     to Landlord's actual knowledge: (A) there are no
environmental, zoning, archaeological or other Applicable Laws which will (1)
prevent Landlord from acquiring fee simple title to the Larger Parcel (including
the Land), subdividing the Land from the Larger Parcel pursuant to the Proposed
Final Map, or completing Landlord's Work, or (2) prevent Tenant from conducting
the Permitted Use at the Premises; (B) the Premises are properly zoned to permit
construction of Landlord's Work and the Permitted Use; (C) the Premises are not
subject to any existing environmental impact report (and the construction of
Landlord's Work as currently contemplated in Exhibit C will not subject the
Premises to any environmental impact reports); and (D) all Stephens Kangaroo Rat
habitat fees affecting the Premises have been paid in full;

                  (vii)    to Landlord's actual knowledge, the Permitted Use is
lawful under all Applicable Laws and all existing Encumbrances affecting the
Premises, and will be lawful under all insurance policies to be obtained
by Landlord pursuant to this Lease;

                  (viii)   the Building and all other Improvements to be
constructed and installed for the Premises as part of Landlord's Work
(including, without limitation, all parking spaces thereon, all public road
access and curb cuts, including access and curb cuts for trucks and all
driveways and accessways thereon and thereto, the construction of Crest Ridge
Drive as described in Exhibit C, all drainage facilities, and all utilities,
utilities connections and other improvements and facilities necessary to conduct
Tenant's Permitted Use at the Premises and to access the Premises) shall be
constructed and installed by Landlord in compliance with all Applicable Laws in
effect as of the date of completion thereof (including, without limitation, all
zoning laws and the California Subdivision Map Act), all existing Encumbrances
affecting the

                                      -14-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Premises and all insurance policies now obtained or hereafter to be obtained by
Landlord pursuant to this Lease;

                  (ix)     to Landlord's actual knowledge, there are no civil
lawsuits, condemnation or similar proceedings or other judicial actions or
proceedings which are presently pending against Landlord or the Premises and
which could have an adverse impact on the operation or use of the Premises as
contemplated or permitted in this Lease;

                  (x)      no joinder or approval of another person or entity is
required with respect to Landlord's right and authority to enter into this
Lease, and no approval of another person or entity is required with respect to
Landlord's performance of its obligations under this Lease, except for
Landlord's obligation to obtain the following approvals of the City of Riverside
with respect to the construction of Landlord's Work described in Exhibit C,
which shall be obtained by Landlord: (A) the grading permit, foundation permit
and building permit for Landlord's Work, the necessary governmental approvals
for the construction of Crest Ridge Drive as described in Exhibit C, and the
permits for electrical, plumbing, mechanical, sewer, storm drain and other
systems to be included within or at the Building or Premises and/or serving the
Premises; and (B) the certificate of occupancy to occupy the Premises issued by
the City of Riverside;

                  (xi)     (A) Landlord has received no notice from any
governmental agency or authority or from any third party relating to Hazardous
Materials in, on or under the Premises, (B) Landlord has not generated, treated,
stored or disposed of any Hazardous Materials in, on, under or about the
Premises, (C) to Landlord's actual knowledge, no Hazardous Materials exist in,
on or under the Premises in violation of any Applicable Laws in effect as of the
date of execution of this Lease, and (D) Landlord will not generate, handle,
treat, store or dispose of any Hazardous Materials upon or within the Building
or the Premises in connection with the construction of the Landlord's Work, or
any of its other activities conducted with respect to the Premises, except only
such Hazardous Materials which are routinely used in connection with such
construction work or activities, but then only in compliance with all Applicable
Laws. For purposes hereof, the term "HAZARDOUS MATERIALS" shall mean any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of California or the United States
Government, including, without limitation, any material or substance which is
(1) defined or listed as a "hazardous waste," "extremely hazardous waste,"
"restricted hazardous waste," "hazardous substance" or "hazardous material"
under any Applicable Laws, (2) petroleum, or (3) asbestos.

For purposes hereof, "TO LANDLORD'S ACTUAL KNOWLEDGE" means the actual knowledge
of Steven Palmer, one of Landlord's representatives who Landlord hereby
represents and warrants to Tenant is the employee of Landlord who is primarily
responsible for acquisition and development of the Premises.

         3.4      Effect of Breach; Indemnity. Any material breach or material
inaccuracy of the representations, warranties or covenants set forth in
Paragraphs 3.1, 3.2 or 3.3 above shall, for the purposes of Article 18 below,
constitute a failure by Landlord to perform a material obligation under this
Lease and a default by Landlord under this Lease, and in addition to Tenant's
remedies set forth in this Lease, at law and/or in equity, as a result of such
default

                                      -15-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

(including, without limitation, Tenant's remedies set forth in Article 18
below), Landlord shall indemnify, defend, protect and hold Tenant harmless from
and against any and all losses, damages, claims, expenses and liabilities
arising out of any such breach or inaccuracy (excluding, however, lost profits
or other consequential damages).

ARTICLE 4: SIGNS AND COMMUNICATION EQUIPMENT.

         Tenant shall have the exclusive right, at Tenant's expense, but subject
to Tenant's obtaining Landlord's prior consent pursuant to, and otherwise
complying with the other provisions of, Article 8 below, to: (i) affix to,
erect, install, paint and/or inscribe any and all signs (collectively, "SIGNS")
designated by Tenant anywhere in or at the Premises (including, without
limitation, any Signs on the exterior and/or interior of the Improvements), to
the extent permitted by Applicable Laws; and (ii) affix to, erect and/or install
any and all satellite dishes, antennae and other communications equipment for
use by Tenant in connection with or related to Tenant's operations of its
Permitted Use at the Premises (collectively, the "COMMUNICATION EQUIPMENT")
anywhere in or at the Premises (including, without limitation, on the roof of
the Building). Accordingly, Landlord shall have no right to place any Signs or
Communication Equipment or grant to any other party the right to place any Signs
or Communication Equipment in, on, under or at the Improvements or the Premises.
In the event Tenant elects to install any of Tenant's Signs and/or Communication
Equipment as part of the Fixturization Work described in Exhibit C or elects
that Landlord install any such items as part of the Tenant Improvements
described in Exhibit C, the costs incurred by Tenant or Landlord therefor, as
the case may be, shall be paid out of the Tenant Improvement Allowance as set
forth in Exhibit C. All of Tenant's Signs and Communication Equipment shall
comply with all Applicable Laws. Landlord shall use commercially reasonable
efforts to obtain, at Tenant's expense, any required governmental approvals,
including variances if necessary, for Tenant's Signs and Communication Equipment
and shall, throughout the Term of this Lease, take no action that might result
in a change in said Signs or Communication Equipment without the written consent
of Tenant. Tenant's signage rights and rights to install, modify and/or use the
Communication Equipment are transferable to any permitted assignee of this Lease
and/or to any subtenant of the Premises, subject, however, to Tenant's
compliance with and receipt of approvals under Applicable Laws with respect to
any changes to the Signs and Communication Equipment in connection therewith
(but the Communication Equipment shall not be transferable to any third party
for any use which is not in connection with such third party's occupancy of the
Premises; however, this restriction shall not prevent Tenant from having any
Communication Equipment owned by a third party and leased to Tenant for Tenant's
use). Tenant shall have the right from time to time to alter or replace the
Signs and/or Communication Equipment, including in connection with any
assignment or sublease allowed under this Lease, provided that the alterations
or replacements comply with then Applicable Laws.

ARTICLE 5: USE OF PREMISES; UTILITIES; COMPLIANCE WITH LAWS.

         5.1      Permitted Use. The Premises may be used for warehouse,
distribution, sales, advertising, assembly and/or light manufacturing purposes
and related retail, office and/or administrative uses (collectively, the
"PERMITTED USE") and for no other purpose without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, conditioned or
delayed.

                                      -16-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         5.2      Utility Services to Premises. During the Term of this Lease,
Tenant covenants to pay directly to the utility companies providing utilities to
the Premises, for the cost of all separately metered electricity, water and
other public utilities consumed by Tenant at the Premises in connection with its
occupancy and use of the Premises. Such utilities shall be separately metered
pursuant to meters installed by Landlord, at Landlord's cost, as part of the
Building/Site Work as defined in and pursuant to the provisions of Exhibit C.
Landlord hereby agrees to reasonably cooperate with Tenant, at Tenant's expense,
in obtaining a commitment from the City of Riverside for a guaranteed rate
reasonably acceptable to Tenant on all utility charges for the Premises which
will result in utility savings reasonably acceptable to Tenant.

         5.3      Compliance with Laws. Tenant shall at all times following the
Commencement Date conduct its business on the Premises in a lawful manner and in
substantial compliance with all Applicable Laws, such compliance to be at
Tenant's own cost and expense; provided, however, that any alterations,
improvements, or additions, structural or otherwise, to or of the Premises which
may be made necessary or required by reason of any Applicable Laws promulgated
by competent governmental authority, shall be made by and at the sole cost and
expense of Landlord, unless and to the extent necessitated solely by reason of:
(i) Tenant's particular and specific use of the Premises after the Commencement
Date and/or the introduction of any Hazardous Materials onto the Premises by
Tenant and/or any of Tenant's agents, contractors, employees, licensees or
invitees in violation of Applicable Laws at the time of such introduction;
and/or (ii) alterations made by Tenant to the Premises after the Commencement
Date. In the furtherance of the foregoing, Landlord acknowledges and agrees
that: (A) Tenant shall have no duty, liability or responsibility whatsoever to
study, remediate, remove, dispose or otherwise address any Hazardous Materials
which now or may hereafter be present in, on, under or about the Premises to the
extent such Hazardous Materials (1) existed in or under the Premises as of the
Delivery Date or were generated, handled, brought into, used, stored, disposed
or discharged by Landlord, any of Landlord's agents, contractors, employees,
licensees or invitees or any other person or entity, other than Tenant and its
agents, contractors, employees, licensees and/or invitees, and/or (2) migrated
from any offsite sources; and (B) Landlord shall, at its sole cost and expense,
promptly take all actions as are necessary to remove, treat, remediate and/or
dispose of such Hazardous Materials and return the Premises to the condition
existing prior to the introduction of any such Hazardous Materials to the
Premises, all in accordance with all Applicable Laws. Wherever there is a
conflict between the provisions of this Paragraph and the provisions of Article
7 hereof, the provisions of this Paragraph shall prevail.

         5.4      Tenant's Use of Hazardous Materials.

                  5.4.1    Permitted Use of Hazardous Materials. Landlord hereby
agrees that Tenant may store, use, generate and handle at or from the Premises
Hazardous Materials that are reasonably necessary in connection with Tenant's
Permitted Use conducted at the Premises (including, without limitation, the
installation and use of above and/or below ground fuel tanks and service bays
on-site for fueling of Tenant's vehicles and equipment and personal property at
the Premises); provided however, as a condition to any such storage, use,
generation, and/or handling of any such Hazardous Materials: (i) Tenant must
store, use, generate and handle such Hazardous Materials in compliance with all
Applicable Laws (including those pertaining to or governing Hazardous Materials)
and only for their intended purposes; (ii) prior to any such storage, use,
generation and/or handling of any such Hazardous Materials, Tenant shall provide

                                      -17-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

to Landlord copies of all governmental permits required to be obtained by Tenant
in connection therewith; and (iii) Tenant must eventually dispose off-site
(i.e., outside the Land), in compliance with all Applicable Laws, all such
Hazardous Materials stored, used, generated and/or handled by Tenant and its
agents, contractors, employees, licensees or invitees. Tenant shall be solely
responsible for obtaining and keeping current all of Tenant's governmental
permits relating to any Hazardous Materials stored, used, generated, handled
and/or disposed of by Tenant and its agents, contractors, employees, licensees
and invitees as may be required by Applicable Laws. Tenant further acknowledges
and agrees that Tenant shall be solely responsible for the preparation and
maintenance of any required waste manifests necessary for the transport and
disposal of any Hazardous Materials from the Premises.

                  5.4.2    Removal and Indemnity. If Tenant breaches any of its
obligations contained in this Paragraph 5.4, or if the presence of any Hazardous
Materials in the Building or on or at the Premises, stored, used, generated,
handled and/or disposed of by Tenant or Tenant's agents, contractors, employees,
licensees or invitees results in contamination of the Land, Building or any
other portion of the Premises, then Tenant shall promptly commence and pursue to
completion, at Tenant's expense, a remediation program designed to remediate
such contamination as required by Applicable Laws, provided that Landlord's
approval of such remediation program shall first be obtained (which approval
shall not be unreasonably withheld, conditioned or delayed). In addition, Tenant
shall indemnify defend and hold Landlord and the Landlord Representatives (as
defined in Paragraph 10.9.1 below) harmless from and against any and all Claims,
as defined in Paragraph 10.9.1 below (including, without limitation, (i) costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal or restoration work required by any federal, state or local
governmental agency or political subdivision because of Hazardous Materials
present in, on or about the Land, Building and/or any other portion of the
Premises, and in the air, in the soil or in the ground water, (ii) diminution in
value, if any, of the Land, Building and/or any other portion of the Premises,
and (iii) sums paid in settlement of claims, attorneys' fees, consultant fees
and expert fees, but excluding lost profits as other consequential damages)
which arise as a result of any such breach or contamination described in the
first sentence of this Paragraph 5.4.2.

                  5.4.3    Periodic Inspection. Landlord and/or Landlord's
environmental consultants shall be entitled, from time to time during the Term
(but only (i) after reasonable advance notice to Tenant, (ii) pursuant to
scheduling reasonably approved by Tenant, and (iii) in a manner that will not
unreasonably interfere with Tenant's normal business operations at the Premises
or cause any damage to the Building or Premises, and otherwise in compliance
with the provisions of Paragraph 7.5 below), to conduct environmental
inspections, investigations and studies of the Building and Premises. Such
inspections shall be at Landlord's sole cost and expense; however, if any such
inspection discloses (A) contamination of the Building or Premises with
Hazardous Materials stored, used, generated, handled and/or disposed of by
Tenant or Tenant's agents, contractors, employees, licensees or invitees, or (B)
a breach by Tenant of any of its covenants and obligations in this Paragraph
5.4, Tenant shall be solely responsible for the payment of all reasonable costs
of such inspection. Throughout the Term, Tenant shall maintain accurate and
complete records with respect to Tenant's storage, use, generation, handling and
disposal of Hazardous Materials in, on or about the Building and/or Premises,
and Tenant shall make such records reasonably available to Landlord and
Landlord's

                                      -18-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

environmental consultants in connection with any inspection or proposed
inspection of the Premises.

                  5.4.4    Survivability. The obligations of the parties under
this Paragraph 5.4 (including Tenant's indemnity of Landlord in Paragraph 5.4.2
above) shall survive the expiration or earlier termination of this Lease.

         5.5      Parking Rights. Following the Delivery Date, Tenant and
Tenant's employees, agents, contractors, licensees and invitees shall have the
sole and exclusive right to use the accessways, driveways, parking areas and
parking spaces to be constructed at the Premises, subject, however, to
Landlord's rights to access and use such areas as are reasonably necessary in
order to (i) complete Landlord's Work and make the Premises Ready for Occupancy
during the ninety (90) day period immediately following the Delivery Date (which
entry for such purposes shall be in accordance with a mutually approved schedule
therefor as set forth in Exhibit C), and/or (ii) perform Landlord's repairs and
comply with its other obligations under this Lease during the Term. Subject to
the provisions of Article 8 below, Tenant shall have the right from time to
time, in its sole discretion, to relocate, restripe and/or make any other
modifications to or of any portions of the accessways, driveways, parking areas
and parking spaces of the Premises, provided that such modifications comply with
all Applicable Laws (including, without limitation, maintaining the minimum
number of on-site striped parking spaces required by Applicable Laws for the
Building). In addition, in connection with and as part of Tenant's Permitted
Use, Tenant may: (A) maintain and/or store on-site in such locations at the
Premises or shall be designated from time to time by Tenant therefor
automobiles, trucks and other vehicles and any equipment and personal property
used in connection with the operation of Tenant's business; and (B) subject to
Tenant's compliance with the other provisions of this Paragraph 5 (specifically
including Paragraph 5.4 above), install above and/or below ground fuel tanks and
service bays on-site for fueling of any such vehicles and equipment.

         5.6      Trade Names. All trade names used by Tenant from time to time
in connection with its operations in the Premises, all patents and other
intellectual property rights of Tenant, and all other intangible personal
property of Tenant used or arising in connection with Tenant's operations in the
Premises shall not be subject to any lien or claim of ownership by Landlord.
Tenant may use any trade names(s) that it chooses in connection with its
operations in the Premises and may change such trade name(s) from time to time.

         5.7      No Covenant to Operate. Tenant shall have the right to conduct
its business operations at the Premises 24 hours a day, 7 days a week, every day
of the year, subject to any restrictions that may be imposed by Applicable Laws.
However, nothing in this Article or in any other provision of this Lease shall
be construed to require a business to be continuously operated or operated
during any minimum period of time in the Premises, or to require the Premises to
be continuously occupied or occupied during any minimum period of time.

ARTICLE 6: TAXES AND LIENS.

         6.1      Taxes and Assessments. All taxes and assessments of every kind
and character whatsoever assessed against the Premises shall be paid by Landlord
prior to delinquency without reimbursement from Tenant except as expressly
provided below in this Article 6, and except that

                                      -19-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

during the Term of this Lease: (i) any tax imposed on Tenant as a condition of
doing business, or any tax assessed against personal property owned by Tenant,
or any franchise tax or license fee levied against Tenant by the State of
California shall be paid by Tenant directly to the taxing authority prior to
delinquency; and (ii) Tenant shall pay, in the manner set forth in Paragraph 6.2
below, all ad valorem real property taxes (collectively, the "REAL PROPERTY
TAXES") assessed against the Premises for each fiscal tax year or portion
thereof during the Term.

         Notwithstanding the foregoing to the contrary, there shall be excluded
from Real Property Taxes payable by Tenant hereunder, and Tenant shall not be
obligated to pay or reimburse Landlord for any of the following, which shall be
paid by Landlord prior to delinquency:

                  (A)      taxes, assessments, bond payments (including
Mello-Roos or similar bond payments), development fees, license fees or other
fees or impositions for any on-site or off-site improvements, utilities or
utilities connections, site acquisition, subdivision, sewer or street
improvements (including, without limitation, the construction of Crest Ridge
Drive), or any other taxes, assessments, bond payments, development fees,
license fees or other fees or impositions now or hereafter assessed or imposed
against Landlord or the Premises in connection with or resulting from the
development and/or acquisition of the Land or the Improvements or any other part
of the Premises (including subdivision of the Larger Parcel and recordation of
the final parcel map for the Land) which are other than ad valorem real property
taxes, except that there shall be included in Real Property Taxes payable by
Tenant hereunder: (1) the Premises' share of bond payments assessed under
current storm water bond (CFD #92-1), not to exceed, however, $1,000 per acre of
the Land in any calendar year; and (2) the Premises' share of bond payments
assessed under current water bond (AD #1);

                  (B)      increases in taxes attributable to the period
occurring prior to the fifth (5th) anniversary of the Commencement Date and
resulting from a sale or other change of ownership of the Premises occurring
prior to such date, including any "Change of Ownership" (as defined in
California Revenue and Taxation Code Sections 60 et seq. or any modifications or
successor statutes thereto); provided, however, that the foregoing provisions of
this clause (B) shall not apply with respect to Landlord's acquisition of the
Land from the current owner thereof;

                  (C)      corporate, partnership, income, franchise,
inheritance, succession, estate, gift, excess profits, capital stock or similar
taxes;

                  (D)      taxes or charges imposed upon or measured by
Landlord's income or profits or the rents or rental income payable pursuant to
this Lease or any other lease; or

                  (E)      fines, penalties, late charges or interest imposed as
a result of Landlord's failure to timely pay or file returns or information for
any taxes, assessments or other charges.

         6.2      Payment of Real Property Taxes. If (i) any Real Property Taxes
to be paid by Tenant shall cover any period of time prior to or after the
expiration or sooner termination of the Term of this Lease, or (ii) any other
taxes or assessments contained in any Tax Statements (as defined below) received
by Tenant are Landlord's responsibility to pay pursuant to this Article 6,
Landlord shall be solely responsible for the payment of such Real Property Taxes
and other taxes

                                      -20-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

and assessments without reimbursement therefor from Tenant, and Landlord shall
reimburse Tenant, within thirty (30) days after Tenant's invoice therefor, for
any such Real Property Taxes attributable to such periods and such other taxes
and assessments actually paid for by Tenant. The parties desire that Tenant pay
the Real Property Taxes assessed against the Premises during the Term directly
to the taxing authority. In connection with the foregoing, Landlord covenants
and agrees to: (A) furnish Tenant with true and complete copies of all tax
bills, tax assessment notices and tax statements relating to the Premises
(collectively, the "TAX STATEMENTS") throughout the Term within thirty (30) days
following Landlord's receipt thereof from the applicable taxing authority or
authorities, whether or not such Tax Statements reflect a proposed increase in
assessment or amount of tax; and (B) endeavor to have all Tax Statements for the
Real Property Taxes be issued by the applicable taxing authority directly to
Tenant during the Term (including issued in Tenant's name if necessary for such
purposes). Tenant shall make payment directly to the applicable taxing authority
of the Real Property Taxes assessed against the Premises during the Term of this
Lease in the following manner:

                  (1) in the event Tenant receives the applicable Tax Statements
directly from the applicable taxing authority, Tenant shall make such payment of
the Real Property Taxes evidenced thereby not later than ten (10) days prior to
delinquency; or

                  (2) in the event Tenant does not receive the applicable Tax
Statements directly from the applicable taxing authority, Tenant shall make such
payment of the Real Property Taxes on or before the date which is the later of:
(x) thirty (30) days after receipt by Tenant of written demand by Landlord for
payment thereof (which demand shall include a copy of the proper tax bill
covering such Real Property Taxes); or (y) ten (10) days prior to delinquency.
Notwithstanding the foregoing to the contrary, if the applicable taxing
authority permits payment of Real Property Taxes to be made in installments,
Tenant's obligation to pay Real Property Taxes under this Article 6 shall be
limited to such installment payments.

         6.3      Tenant's Right to Contest. If Tenant desires to contest the
validity of any Real Property Taxes or any other taxes or assessments assessed
against the Premises, it may do so on Landlord's behalf, at Tenant's sole cost
and expense, provided that it shall indemnify Landlord against any loss,
liability or damage on account thereof, excluding lost profits or other
consequential damages. If Tenant is successful in said contest, any refund
received pertaining to any taxes and assessments paid by Tenant shall belong
entirely to Tenant. Landlord agrees to cooperate in a reasonable manner with
Tenant in such contest, including the execution of any documents of
authorization reasonably necessary therefor. Should (i) Landlord at any time
fail to furnish to Tenant true and complete copies of tax bills, tax assessment
notices or tax statements as required by this Article 6 at least thirty (30)
days prior to the date such taxes or assessments are due, and (ii) such failure
results in (A) Tenant's inability to contest (including contest after payment
under protest) any proposed new tax or tax increase, and (B) Tenant's obligation
to pay Real Property Taxes in an amount which is more than the amount paid by
Tenant as Real Property Taxes for the preceding tax year, and Tenant reasonably
establishes that it would have prevailed in such tax contest had such tax bills,
tax assessment notices or tax statements been delivered by such time deadline
set forth hereinabove, then Tenant's obligation for Real Property Taxes for the
tax year for which Tenant was not able to contest shall be limited to the
greater of (1) the amount paid for such purpose for the preceding tax year, or
(2) the

                                      -21-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

amount Tenant reasonably establishes would have been payable had Tenant
prevailed in such tax contest.

         6.4      Liens. Tenant covenants that it will not, during the Term
hereof, suffer or permit any lien to be attached to or upon the Premises by
reason of any act or omission on the part of Tenant, and hereby agrees to
indemnify and hold Landlord harmless from and against any such lien or claim of
lien. In the event any such lien is recorded against the Premises, Tenant shall
have the right to contest the validity of the same, but if the same shall not be
released of record (by payment, posting of a statutory bond or other method)
within thirty (30) days after notice from Landlord to Tenant to do so, Landlord
in its sole discretion, may pay and discharge the same and remove any such lien
from the Premises. Tenant agrees to repay Landlord, upon demand, for any amount
which may have been paid by Landlord in discharging such lien, together with
interest at an annual interest rate equal to the Interest Rate (as defined
below) from the date of the expenditure by Landlord to the date of repayment by
Tenant. As used herein, the "INTEREST RATE" shall mean the lesser of (i) ten
percent (10%) per annum, or (ii) the maximum interest rate allowed by Applicable
Laws.

         6.5      Landlord's Covenant to Pay. Landlord covenants that it will
not fail to pay when due any of the following, if such failure to pay would or
may (i) result in a termination of this Lease, or (ii) adversely affect Tenant's
leasehold interest in the Premises, or (iii) increase Tenant's obligations or
diminish or impair any of Tenant's rights under this Lease: (A) any installment
of taxes, assessments, bonds or other charges upon any mortgage, deed of trust
or other lien or encumbrance affecting the Premises; or (B) any taxes or
assessments payable by Landlord pursuant to this Article 6.

ARTICLE 7: REPAIRS.

         7.1      Tenant's Maintenance and Repair Obligations. During the Term,
but subject to Articles 9 and 12 below, Tenant shall, at Tenant's sole cost and
expense, diligently maintain, repair and replace (as necessary) in good order,
condition and repair, all aspects of the Premises, regardless of the cost
thereof and the time remaining in the Term and whether capital or non-capital,
except for obsolescence and ordinary wear and tear, and unless and to the extent
included in Landlord's obligations under this Lease, including, without
limitation, Paragraphs 5.3, 7.2, 7.3, 9.1 and 12.4 of this Lease (collectively,
"LANDLORD'S MAINTENANCE OBLIGATIONS"). Such obligations of Tenant shall include
(subject to Landlord's Maintenance Obligations), without limitation, all
equipment or facilities serving the Premises, including, mechanical, plumbing,
heating, air conditioning, ventilating and electrical systems (collectively, the
"SYSTEMS"), lighting facilities, interior demising walls, the roof membrane of
the Building (but not the structural components of the roof, and Tenant's repair
obligations shall not include the replacement of the roof or roof membrane or
any part thereof), windows, doors, plate glass, driveways, parking areas,
landscaping, fences, walls, Signs, sidewalks and parkways located in, on or at
the Premises. In addition, Tenant shall maintain the painting of and repaint the
exterior walls of the Building as and when reasonably necessary. Notwithstanding
the foregoing provisions of this Paragraph 7.1 to the contrary, to the extent
any damage to the Premises is caused by the negligence or willful misconduct of
Landlord or any of Landlord's agents, contractors, employees, licensees or
invitees, Landlord shall be solely responsible, at its expense, for repairing
such damage with all due diligence, in good and workmanlike manner, in

                                      -22-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

compliance with all Applicable Laws and in a manner which will not unreasonably
interfere with Tenant's access to or use of the Premises; if Landlord fails to
diligently complete such repairs, or if such repairs are of an emergency nature
which if not attended to may result in bodily injury or property damage or
material interference with or interruption of Tenant's business operations at
the Premises, Tenant may perform such repairs as provided in Paragraph 7.2
below, and Landlord shall reimburse Tenant for the reasonable out-of-pocket
costs incurred by Tenant in performing such repairs within thirty (30) days
after Landlord's receipt of invoices therefor. Landlord agrees that Landlord
will, as part of the cost of the Landlord's Work, obtain for the benefit of both
Landlord and Tenant (i) standard manufacturers' warranties for components of
Landlord's Work, and (ii) warranties against defective construction, workmanship
and materials from the contractors performing the Landlord's Work covering all
of Landlord's Work for a period of at least one (1) year from the date of full
completion of the Landlord's Work, except that with respect to the roof of the
Building, Landlord shall obtain for the benefit of both Landlord and Tenant, as
part of the cost of the Building/Site Work to be paid for by Landlord from
Landlord's own funds, from the subcontractor who installs the roof, a "NO DOLLAR
LIMIT" warranty without proration against defective construction, workmanship
and materials of the roof, covering all materials and labor for a period of at
least fifteen (15) years following the date of full completion of the Landlord's
Work. Landlord hereby assigns to Tenant all of its rights to such warranties and
all other warranties it may now or hereafter have covering those portions of the
Premises which Tenant is responsible to maintain, repair and/or replace, and
Landlord shall provide Tenant such good faith cooperation as is reasonably
necessary to permit enforcement of such warranties by Tenant.

         7.2      Landlord's Maintenance and Repair Obligations. Landlord shall,
at Landlord's sole cost and expense, diligently maintain, repair and replace (as
necessary) in good order, condition and repair: (i) Crest Ridge Drive (unless
such maintenance, repairs and replacements are the City of Riverside's
obligation following any dedication of Crest Ridge Drive to the City of
Riverside); (ii) any other roads, accessways and driveways that are located on
the Land and are made available for the common use of other properties in
addition to the Land (subject to Tenant's approval of any such common use and
the rules and procedures therefor); and (iii) the following elements of the
Building and the other Improvements: (A) the structural components of the roof
of the Building, but excluding the roof membrane, which, except as provided in
Paragraph 7.3 below, shall be Tenant's responsibility to repair as set forth in
Paragraph 7.1 above (provided, however, that in any event, Landlord shall be
responsible, at Landlord's cost, as part of Landlord's Maintenance Obligations,
for replacing the roof and/or roof membrane and any part thereof); (B) floor
slabs; (C) exterior walls (excluding painting thereof which shall be Tenant's
responsibility, as set forth in Paragraph 7.1 above); (D) foundations; (E)
footings; (F) underground utilities; (G) load bearing columns and walls; and (H)
all structural portions (both interior and exterior) thereof. Notwithstanding
the foregoing to the contrary, Tenant shall reimburse Landlord, within thirty
(30) days after receipt of invoices, for the reasonable out-of-pocket costs
incurred by Landlord for (1) repairing any damage to such portions of the
Building and Improvements required to be repaired by Landlord to the extent
caused by the negligence or willful misconduct of Tenant or any of Tenant's
agents, contractors, employees, licensees or invitees, and (2) the replacement
of the roof membrane necessitated solely as a result of Tenant's failure to
maintain the roof membrane as and when required pursuant to Paragraph 7.1 above,
which failure is not cured (or other work performed by Tenant which
substantially corrects the matter) within thirty (30) days after Landlord
notifies Tenant thereof and of Landlord's intent to

                                      -23-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

replace the roof as a result thereof. Landlord shall also repair, at its cost,
any and all damage to the Premises, including fixtures and equipment, which may
result from its failure to make any such maintenance, repairs or replacements
within a reasonable time after being notified by Tenant that such maintenance,
repairs and/or replacements are needed. If any maintenance, repair or
replacement matter for which Landlord is responsible under this Lease
(including, without limitation, under this Article 7) is of an emergency nature
which if not attended to may result in bodily injury or property damage or
material interference with or interruption of Tenant's business operations at
the Premises, Tenant may make such maintenance, repairs or replacements as are
reasonably necessary to remedy such situation without prior notice to Landlord
(provided, however, Tenant shall reasonably attempt to give Landlord oral notice
of such emergency situation prior to taking any such actions, which oral notice
shall be given to the representative of Landlord so designated therefor in
writing to Tenant), and Landlord shall reimburse Tenant for the cost of such
reasonably necessary maintenance, repairs or replacements so undertaken by
Tenant, which reimbursement shall be made within thirty (30) days after
Landlord's receipt of invoices from Tenant evidencing such costs together with a
written statement from Tenant specifying the nature of such emergency situation
and the needed maintenance, repairs or replacements. The obligations of Landlord
under this Article 7 shall not be modified or diminished due to the fact or the
manner in which Tenant shall undertake to make such emergency maintenance,
repairs and/or replacements pursuant to this Paragraph 7.2.

         7.3      Defects; Legally-Mandated Improvements. Landlord shall, at
Landlord's sole cost and expense, diligently make any and all repairs and
replacements of and to the Premises and repair to every part thereof (including
the membrane and other components of the roof of the Building, and all interior
and exterior portions of the Building and other Improvements at the Premises)
which may at any time be necessary by reason of any defects in the original
design and/or construction performed by Landlord or Landlord's contractors
(other than defects in any alterations or improvements installed by Tenant after
the Delivery Date), whether structural or otherwise, and whether capital or
non-capital in nature, and shall repair such defects and any and all damage to
the Premises which may result from any such defects; provided, however, unless
otherwise part of Landlord's maintenance and repair obligations in Paragraph 7.2
above (which provisions shall control with respect to any conflict with this
Paragraph 7.3), Landlord shall not be responsible for correcting any such
defects not disclosed by Tenant in writing to Landlord by the date which is the
later of: (i) ten (10) years (with respect to latent defects) and one (1) year
(with respect to patent defects) after the date of full completion of Landlord's
Work; (ii) ten (10) years (with respect to latent defects) and one (1) year
(with respect to patent defects) after the date such work was initially
installed by Landlord or Landlord's contractors; or (iii) the expiration of the
applicable warranty period under the warranty provided for such work by the
designer and/or contractor performing same. Any addition, alteration or
improvement, structural or otherwise, to or of the Premises, or any part
thereof, which may be necessary or required by reason of any Applicable Laws
promulgated by competent governmental authority shall be governed by the terms
and provisions of Paragraph 5.3 above.

         7.4      Cost and Timing of Repairs. Landlord shall make all
maintenance, repairs and replacements required to be made by it pursuant to this
Article 7: (i) at Landlord's sole cost and expense (and such expenses shall not
be included in any rental, operating expense or other payments required to be
made by Tenant under this Lease); and (ii) promptly following notice from
Tenant, taking into consideration the nature of the maintenance, repair and/or
replacement

                                      -24-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

and the inconvenience or interference with Tenant's ability to conduct its
business that failure or delay in performing such work will cause. Landlord
shall also make all such maintenance, repairs and replacements at such times and
in such a manner as to minimize any inconvenience to Tenant in the conduct of
its business.

         7.5      Right of Entry; Posting of Notices. Subject to the provisions
of this Lease, Landlord reserves the right for itself or its duly authorized
agents and representatives at all reasonable times during Tenant's business
hours, but subject to reasonable advance notice, to enter the Premises for the
purpose of inspecting the same or to show the same to any prospective purchaser,
and for the purpose of making any necessary maintenance, repairs and
replacements to the Premises. In conducting any such entries (including any
inspections pursuant to Paragraph 5.4.3 above), Landlord shall follow Tenant's
reasonable security procedures, shall be accompanied by a representative of
Tenant, and shall minimize any inconvenience to Tenant in the conduct of its
business at the Premises. Notwithstanding the foregoing, Tenant may designate
certain areas of the Premises as "secured areas" should Tenant require such
areas for the purposes of securing valuable property or confidential
information; Landlord may not enter such secured areas except in cases of
emergency or otherwise after reasonable advance notice to and approval of Tenant
and only when accompanied by a representative of Tenant. At all reasonable times
Landlord shall have the right to post and keep posted on the Premises any
notices permitted by Applicable Laws relating to Landlord's nonresponsibility
for mechanics liens or liens of a similar nature.

         7.6      Relationship to Article 9. Landlord and Tenant expressly
acknowledge (i) that the foregoing provisions of this Article 7 shall not apply
to any repairs or replacements required as a result of fire or other casualty
event, and (ii) that all repairs and replacements required by fire or other
casualty event shall be governed by the provisions of Article 9 below.

ARTICLE 8: ALTERATIONS; SURRENDER OF PREMISES.

         8.1      Alterations. From and after the Delivery Date, Tenant shall
have the right from time to time to make such additions, repairs, alterations,
changes or improvements, in, on or to the Premises, as Tenant may deem necessary
or proper (including, but not limited to, the installation of trade fixtures,
above and/or below ground storage tanks [subject to Tenant's compliance with the
provisions of Paragraph 5.4 above with respect to such storage tanks], service
bays, equipment, and partitions required or used from time to time in connection
with Tenant's business in the Premises, and Signs and Communication Equipment
described in Article 4 above), subject, however, to the following conditions:
(i) no work done by Tenant shall lessen the market value of the Premises; (ii)
Tenant shall pay promptly for all such work done by it or upon its order subject
to Landlord's contribution of the Tenant Improvement Allowance pursuant to
Exhibit C, to the extent applicable thereto; (iii) Tenant shall construct all
such alterations in compliance with all Applicable Laws and pursuant to a valid
building permit (if required for the work to be performed by Tenant); (iv)
Tenant shall obtain Landlord's prior consent, which shall not be unreasonably
withheld, conditioned or delayed, with respect to any such alterations
(including Tenant's Signs and Communication Equipment) (A) made to or affecting
the structural components of the Building, or (B) which adversely affect the
roof or exterior appearance of the Building; (v) if any such work affects the
roof of the Building, Tenant shall perform such work (A) in a manner which will
not void the roof warranty, and (B) if

                                      -25-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

material in nature, only under the reasonable supervision of Landlord's outside
independent roof consultant (who Landlord shall make reasonably available to
Tenant to permit Tenant to timely perform such work), and Tenant shall reimburse
Landlord for the reasonable fees of such consultant in providing such
supervision services within thirty (30) days after invoice from Landlord; and
(vi) any such work performed after the Delivery Date but prior to the
Commencement Date shall not unreasonably interfere with the completion of
Landlord's Work by Landlord and Landlord's contractors and shall be performed
pursuant to a mutually approved schedule therefor as set forth in Exhibit C. In
the event Landlord's prior consent is required for Tenant's alterations pursuant
to clause (iv) hereinabove, Landlord shall notify Tenant of its approval or
reasonable disapproval within ten (10) days after Tenant's request therefor; if
Landlord fails to notify Tenant of Landlord's approval or disapproval within
such 10-day period, and such failure continues for an additional five (5)
business days after notice thereof from Tenant, Landlord shall be deemed to have
approved the proposed alterations. Nothing contained herein shall be construed
to require Tenant to: (1) remove any alterations or improvements made by or on
behalf of Tenant to or at the Premises, although (x) Tenant shall have the right
to remove any such alterations and/or improvements made by or on behalf of
Tenant, so long as Tenant repairs, at its expense, any damage to the Premises
resulting from such removal, and (y) with respect to any alterations which are
other than Landlord's Work, Landlord may require Tenant to remove same at the
expiration or earlier termination of this Lease so long as Landlord notifies
Tenant of such removal request within ten (10) days after Tenant notifies
Landlord of such alterations work, in which case Tenant, at Tenant's expense,
shall cause such alterations to be removed on or before the expiration or sooner
termination of this Lease and repair any damage to the Premises resulting from
such removal; or (2) make or pay for any repair, alteration, improvement, or
addition, or to do any other act or thing which Landlord is required to make or
do under any provision of this Lease, or which is required or becomes necessary
at any time because of any failure of Landlord to perform any of its obligations
hereunder.

         8.2      Surrender of Premises. Tenant shall, at the expiration of the
Term hereof, surrender the Premises and any improvements and alterations made
thereto not removed or required to be removed by Tenant pursuant to Paragraph
8.1 above, together with any personal property therein belonging to Landlord, in
broom-clean condition.

         8.3      Removal of Tenant's Property. Within ten (10) business days
after the expiration or sooner termination of this Lease, Tenant shall (i)
remove from the Premises all merchandise, trade fixtures, furniture,
furnishings, partitions, equipment and other personal property installed therein
and owned by Tenant or leased by Tenant from third-parties (excluding, however,
at Tenant's option, any Signs installed on or at the Premises), and (ii) repair
any damage to the Premises caused by any such removal.

         8.4      Initial Improvements. The rights and obligations of Landlord
and Tenant with respect to the development and construction of the initial
Improvements and Landlord's Work (and the installation by Tenant of the
Fixturization Work for the Building) are set forth in Exhibit C attached hereto.

                                      -26-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

ARTICLE 9: DAMAGE OR DESTRUCTION.

         9.1      Landlord's Restoration Obligations.

                  9.1.1    If the Improvements or any other part of the Premises
shall be damaged or destroyed by fire, earthquake or other casualty event or
from any other cause other than ordinary wear and tear, ordinary physical
depreciation or obsolescence, Landlord shall promptly (in any event, within
thirty (30) days following the date Landlord receives notice from Tenant or
otherwise becomes aware of the damage or destruction), notify Tenant in writing
as to how long it will take to substantially restore the damage or destruction
(ignoring any absence of insurance proceeds or delays in receiving the same) as
estimated by a reputable, qualified, licensed, nonaffiliated contractor having
at least ten (10) years experience in the construction and repair of buildings
of similar class, size, quality, design and method of construction as the
Building (the "EXPERIENCED CONTRACTOR"). Landlord's failure to so notify Tenant
within such 30-day period, where such failure continues for an additional ten
(10) days after notice thereof from Tenant shall, if Tenant so chooses, be
deemed to be the Experienced Contractor's determination that such restoration
will take longer than twelve (12) months (measured from the date of the damage
or destruction).

                  9.1.2    Subject to and except as expressly provided in
Paragraphs 9.1.3, 9.2 and 9.3 below, if the Improvements or any other part of
the Premises shall be damaged or destroyed to any extent by fire, earthquake or
other casualty event, Landlord shall, at Landlord's sole cost and expense (but
subject to payment of any Excess Costs [as defined in Paragraph 9.1.3 below], if
applicable, and insurance proceeds therefor from the Property Damage Insurance
[as defined in Paragraph 10.4.1 below] to be placed in the Construction Escrow,
as defined in Paragraph 9.1.3 below, and as provided in Paragraphs 9.1.3 and
10.4.3 below), diligently repair and restore the same to substantially the same
condition existing immediately prior to said damage or destruction with all
reasonable dispatch and diligence as provided herein. Said repair and
restoration shall include all fixtures and equipment in or of the Building and
the Premises owned by Landlord (including, without limitation, the HVAC,
plumbing, electrical and other mechanical and utilities systems and equipment in
and/or serving the Premises) and all leasehold improvements and alterations in
and to the Building and Premises, to the extent so damaged or destroyed.
Landlord shall have no obligation to repair, restore or replace Tenant's stock
in trade, trade fixtures, equipment, furnishings, furniture or other personal
property. All such repair and restoration of the Premises by Landlord shall be
made in accordance with plans and specifications approved by Tenant, which
approval shall not be unreasonably withheld, conditioned or delayed. Landlord
shall comply, and shall require all its contractors to comply, with all
Applicable Laws in making any said repairs and restoration. Landlord shall
indemnify, defend, protect and hold Tenant harmless from and against any and all
damages, claims, expenses, losses and/or liabilities (excluding lost profits and
other consequential damages) resulting from Landlord's failure to comply with
said Applicable Laws and/or diligently perform such repair and restoration work.
After repair and restoration, Landlord shall return possession of the Premises
to Tenant without diminution in size of the Building or Premises or change of
location, except as required by Applicable Laws. If Landlord carries on any
restoration or repair pursuant to this Article 9 and Tenant continues to occupy
any portion of the Premises, Landlord shall take all such steps as may be
reasonable and practicable to prevent interference with Tenant's use and
enjoyment of the portion of the Premises which Tenant continues to occupy.

                                      -27-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Landlord shall also perform its obligations under this Article 9 in a manner
which will achieve restoration of any damage or destruction as soon as
practicable, giving due regard to the nature and scope of the damage or
destruction.

                  9.1.3    If (i) the Improvements shall be damaged or destroyed
by any fire, earthquake or other casualty event which is not required to be
covered by property damage insurance under Paragraph 10.4 below ("UNINSURED
CASUALTY"), and the cost of repair or restoration of such Uninsured Casualty
damage or destruction exceeds the "THRESHOLD AMOUNT" (which for purposes hereof
shall mean twenty percent (20%) of the full replacement cost of the Improvements
immediately prior to said damage or destruction), or (ii) such damage or
destruction is caused by an earthquake, and Earthquake Insurance Coverage (as
defined in Paragraph 10.4.2 below) is in effect but the cost to repair such
earthquake damage (inclusive of the deductible amounts under such Earthquake
Insurance Coverage) which is not payable from proceeds under such Earthquake
Insurance Coverage exceeds the Threshold Amount, then Landlord may notify Tenant
in writing, within thirty (30) days after determining the repair and restoration
cost (but in no event later than sixty (60) days after said damage or
destruction), that Landlord elects not to restore the Premises or repair said
damage to the extent of such excess ("EXCESS COSTS") and to terminate this Lease
pursuant to the following provisions of this Paragraph 9.1.3. Such notice by
Landlord (herein referred to as "LANDLORD'S TERMINATION NOTICE") shall be
accompanied by an estimate of such replacement cost and at least two (2) bids
prepared by contractors approved by Tenant, showing in detail the costs of the
required repairs or restoration. If, within thirty (30) days after Tenant's
receipt of Landlord's Termination Notice, Tenant notifies Landlord in writing
that Tenant agrees to pay the Excess Costs, then within ten (10) days after
approval by Landlord and Tenant (not to be unreasonably withheld or delayed) of
joint escrow and payment instructions pertaining to disbursement of funds
covering such repair and restoration costs, Tenant shall place in a joint
construction escrow account held by a bank or escrow company mutually approved
by the parties (the "CONSTRUCTION ESCROW") an amount equal to the Excess Costs,
together with said approved joint escrow and payment instructions. Landlord
shall thereafter with all reasonable dispatch and diligence, and at Landlord's
expense (but with the right to recover such Excess Costs from the Construction
Escrow pursuant to such approved joint escrow and payment instructions), make
all the necessary repairs or restoration in accordance with Paragraph 9.1.2
above, and this Lease shall continue in effect. The cost of the Construction
Escrow holder's fees for such Construction Escrow shall be shared and paid
equally by the parties. If Tenant fails to either (A) notify Landlord in writing
within thirty (30) days after Tenant's receipt of Landlord's Termination Notice
that Tenant agrees to pay the Excess Costs, or (B) deposit the Excess Costs
together with said approved joint escrow and payment instructions within such
ten (10) day period set forth hereinabove, then this Lease shall terminate at
the end of said thirty (30) day period set forth in clause (A) hereinabove or
said ten (10) day period set forth in clause (A) hereinabove, as the case may be
(but Tenant shall have up to ninety (90) days after such termination to vacate
and surrender possession of the Premises to Landlord), and the provisions of
Paragraph 9.5 below shall apply. If Landlord shall fail to notify Tenant of
Landlord's election not to repair the damage or restore the Premises to the
extent of the Excess Costs within ninety (90) days after such damage or
destruction, Landlord shall make all necessary repairs or restoration at
Landlord's sole cost and expense (subject to payment of any insurance proceeds
from the Property Damage Insurance to be placed in the Construction Escrow
pursuant to Paragraph 10.4.3 below), in accordance with Paragraph 9.1.2 above.

                                      -28-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                  9.1.4    During the period of any such damage, destruction,
restoration and repair, Landlord shall reasonably cooperate with Tenant to
provide Tenant with temporary space for the operation of Tenant's Permitted Use
therein within Landlord's existing buildings, if any, located in San Bernardino
County or Riverside County, California, to the extent such space is available,
in which case Tenant shall pay Landlord for the use of such temporary space so
provided prevailing market rent, taxes and operating costs for such temporary
space in such amounts as shall be mutually and reasonably approved by the
parties.

         9.2      Tenant's Termination Right. Notwithstanding the provisions of
Paragraph 9.1 above to the contrary, in the event that the Experienced
Contractor reasonably determines that substantial restoration of the damage or
destruction resulting from any fire, earthquake or other casualty event will
take longer than twelve (12) months (measured from the date of the damage or
destruction), Tenant may terminate this Lease by written notice to Landlord
within thirty (30) days following Tenant's receipt of the Experienced
Contractor's determination (or within thirty (30) days following the expiration
of the thirty (30) day period set forth in Paragraph 9.1.1 above for Landlord to
provide the Experienced Contractor's determination to Tenant, in the event such
Experienced Contractor's determination is not timely delivered). Such
termination shall be effective as of the date specified by Tenant in Tenant's
termination notice, which shall be not sooner than thirty (30) days nor later
than ninety (90) days after such termination notice is delivered to Landlord.

         9.3      Damage Near End of Term. Anything in this Article 9 to the
contrary notwithstanding, if the Improvements or any other part of the Premises
shall be destroyed or damaged during the last twelve (12) months of the Term
hereof by reason of any fire, earthquake or other casualty event, and the
Premises cannot be substantially restored within a period of sixty (60) working
days from the date of such damage or destruction, this Lease may be terminated
upon written notice by either party to the other. Provided, however, that if at
the time of said destruction or damage, Tenant has an unexercised right of
extension pursuant to Article 15 hereof which is still in effect, Landlord may
not terminate this Lease until it has given Tenant notice of its intent to
terminate and Tenant fails to exercise said right of extension within thirty
(30) days of receipt of said notice. If Tenant fails to exercise said right of
extension, this Lease shall terminate effective thirty (30) days after Tenant's
receipt of said notice from Landlord.

         9.4      Failure to Commence or Complete Restoration. Anything in this
Article 9 to the contrary notwithstanding, if the repair and restoration
provided for in Paragraph 9.1 hereof is not commenced within six (6) months from
the date of the damage or destruction referred to in said Paragraph, or once
commenced, if said repair or restoration is not completed within the later of
(i) twelve (12) months after the date of such damage or destruction or (ii) the
estimated restoration period originally determined by the Experienced Contractor
pursuant to Paragraph 9.1.1 above, Tenant may terminate this Lease upon written
notice to Landlord, which termination shall be effective as of the date
specified by Tenant in such termination notice which shall be not sooner than
thirty (30) nor later than ninety (90) days after such termination notice is
delivered to Landlord. Tenant's right to terminate this Lease as provided
hereinabove (and elsewhere in this Article 9) shall be in addition to any other
right or remedy Tenant may have arising out of Landlord's breach of any covenant
of this Lease.

                                      -29-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         9.5      Effect of Termination. Except as otherwise expressly provided
above in this Article 9, such destruction or damage to the Premises shall not
terminate this Lease, notwithstanding the provisions of California Civil Code
Sections 1932 and 1933 or any other Applicable Laws to the contrary. Upon any
such termination of this Lease by Landlord or Tenant pursuant to this Article 9,
Landlord and Tenant shall be relieved from all liabilities hereunder except
those liabilities accruing prior to the date of such termination or which
expressly survive such termination.

         9.6      Conflict with Article 8. Wherever the provisions of this
Article 9 are in conflict with the provisions of Article 8 hereof, the
provisions of this Article 9 shall prevail.

ARTICLE 10: INSURANCE AND INDEMNITY.

         10.1     Tenant's Liability Insurance. From the date Landlord delivers
possession of the Premises to Tenant in the Delivery Condition as provided in
Paragraph 1.1 hereof and throughout the Term of this Lease, Tenant shall
maintain in force a commercial general liability insurance policy or policies
for liability for personal injury, death and bodily injury to persons and damage
to property occurring upon, within or at the Premises and arising from Tenant's
use and/or occupancy of the Premises. Said insurance policy or policies shall
name Landlord as an additional insured and shall be in an amount of not less
than a combined single limit liability of Five Million Dollars ($5,000,000.00),
with a commercially reasonable deductible or self-insured retention amount
(currently Tenant proposes an initial self-insured retention amount of
$250,000.00, which Landlord agrees is commercially reasonable). Said insurance
policy or policies shall be primary and noncontributing with any insurance
maintained by Landlord and shall include a blanket contractual liability
endorsement.

         10.2     Tenant's Personal Property Insurance. From the date Landlord
delivers possession of the Premises to Tenant in the Delivery Condition as
provided in Paragraph 1.1 hereof and throughout the Term of this Lease, Tenant
shall maintain in force an insurance policy covering all perils generally
included within the classification "Special Form - Risks of Direct Physical
Loss", other than earthquake or flood, with an extended coverage endorsement, in
the amount of not less than one hundred percent (100%) of the full replacement
cost of all of Tenant's trade fixtures, equipment, inventory and other personal
property owned by Tenant at the Premises. Landlord shall have no interest in or
claim of any nature to the proceeds of any such insurance.

         10.3     Landlord's Liability Insurance. At Landlord's expense,
Landlord shall maintain in force from and after the date of execution of this
Lease and throughout the Term of this Lease a commercial general liability
insurance policy or policies for liability for personal injury, death and bodily
injury to persons and damage to property occurring upon, within or at the
Premises and arising out of Landlord's acts or omissions, including, without
limitation, Landlord's design and construction activities pursuant to Exhibit C.
Said insurance policy or policies shall name Tenant as additional insured and
shall be in the amount of not less than a combined single limit liability of
Five Million Dollars ($5,000,000), with a commercially reasonable deductible.
Said insurance policy or policies shall be primary and noncontributing with any
insurance maintained by Tenant and shall include a blanket contractual liability
endorsement covering, among other matters, the indemnities provided by Landlord
pursuant to Paragraph 10.9 below.

                                      -30-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         10.4     Property Damage Insurance.

                  10.4.1   From the date Landlord delivers possession of the
Premises to Tenant in the Delivery Condition as provided in Paragraph 1.1 hereof
and continuing thereafter throughout the Term of this Lease, Tenant shall, at
its sole cost and expense, maintain in force an insurance policy or policies
covering: (i) all perils generally included within the classification "Special
Form - Risks of Direct Physical Loss", other than earthquake or flood, with an
extended coverage endorsement, in the amount of not less than one hundred
percent (100%) of the full replacement cost (with a commercially reasonable
deductible) of the Building and all other Improvements within or on the
Premises, and all improvements, alterations, fixtures and equipment within the
Building and any such other Improvements, exclusive, however, of trade fixtures,
inventory and other personal property owned by Tenant, and exclusive of the
value of excavations, underground utilities, foundations and footings; and (ii)
earthquake damage to such property described in clause (i) hereinabove, in such
amounts and upon such terms as Tenant shall determine, subject, however, to the
limitations contained in Paragraph 10.4.2 below. The insurance described in this
Paragraph 10.4.1 shall sometimes be referred to herein as the "PROPERTY DAMAGE
INSURANCE."

                  10.4.2   Landlord and Tenant agree that the obligation of
Tenant to provide insurance coverage for the Building and all other Improvements
at the Premises against damage from earthquake ("EARTHQUAKE INSURANCE COVERAGE")
shall be subject to the following additional terms, conditions and limitations:

                  (i)      The deductible for Earthquake Insurance Coverage, so
long as Earthquake Insurance Coverage is required to be maintained in accordance
with this Paragraph 10.4.2, shall be the deductible amount which is generally
commercially available for Earthquake Insurance Coverage with a premium not in
excess of $0.25 per square foot of Rentable Area of the Building per year (the
"MAXIMUM EARTHQUAKE PREMIUM").

                  (ii)     Tenant shall not be required to carry Earthquake
Insurance Coverage if (A) the premium payable for Earthquake Insurance Coverage
will exceed the Maximum Earthquake Premium, and (B) following notice by Tenant
to Landlord of such election not to carry such Earthquake Insurance Coverage
pursuant to Paragraph 10.4.2(ii) below, neither Tenant nor Landlord elects to
pay such excess in accordance with Paragraph 10.4.2(iii) below. If Earthquake
Insurance Coverage becomes unobtainable, regardless of the premium amount, or if
Tenant otherwise determines in good faith that Earthquake Insurance Coverage is
not available with coverage limits, deductibles, exclusions and other terms and
conditions that are commercially reasonable or otherwise reasonably acceptable
to Tenant, then Tenant shall have the right to allow Earthquake Insurance
Coverage to lapse upon expiration of the Earthquake Insurance Coverage then in
effect by providing Landlord written notice of such election at least fifteen
(15) days prior to the date such coverage will lapse. Landlord shall thereafter
have the right to maintain Earthquake Insurance Coverage (if obtainable) at
Landlord's expense, subject to reimbursement by Tenant of the premiums paid for
by Landlord in obtaining such Earthquake Insurance Coverage, but such
reimbursement obligation shall not exceed the Maximum Earthquake Premium.

                                      -31-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                  (iii)    If, at any time from the date Landlord delivers
possession of the Premises to Tenant in the Delivery Condition and continuing
thereafter throughout the Term, the premium for Earthquake Insurance Coverage
will exceed the Maximum Earthquake Premium, Tenant shall have the right, at its
option, to elect either to (A) pay the portion of the proposed premium for
Earthquake Insurance Coverage in excess of the Maximum Earthquake Premium, and
thereby maintain Earthquake Insurance Coverage in effect, or (B) elect not to
pay such excess and allow Earthquake Insurance Coverage for the Premises to
lapse. If Tenant has the right to make the election described in the immediately
preceding sentence, Tenant shall give written notice to Landlord (herein
"TENANT'S ELECTION NOTICE") of the action intended by Tenant at least fifteen
(15) days prior to the date such coverage will lapse. If, in Tenant's Election
Notice, Tenant informs Landlord that it has elected to allow Earthquake
Insurance Coverage to lapse, Landlord shall have the right, within ten (10) days
after receipt of Tenant's Election Notice, by giving written notice to Tenant,
to cause Tenant to maintain Earthquake Insurance Coverage in effect by agreeing
to pay to Tenant, without reimbursement from Tenant, the full amount of the
excess (which payment shall be made within ten (10) business days after invoice
for such excess is delivered by Tenant to Landlord). If Landlord fails to timely
pay such excess, Tenant shall nevertheless have the right to allow the
Earthquake Insurance Coverage to lapse.

                  10.4.3   Tenant and Landlord (and any mortgagee of Landlord
with a first mortgage or first deed of trust encumbering the Premises of whom
Landlord has notified Tenant in writing) shall be loss payees of the Property
Damage Insurance maintained pursuant to this Paragraph 10.4, as their respective
interests may appear; however, any and all proceeds of such Property Damage
Insurance shall be deposited into the Construction Escrow to be established by
the parties pursuant to Paragraph 9.1.3 above and shall be used to pay for the
costs of the repair and restoration of the Premises as provided by Paragraph 9.1
hereof. Notwithstanding the foregoing to the contrary, if this Lease is
terminated pursuant to the provisions of Article 9 above as a result of any such
damage or destruction, Tenant shall be entitled to receive and retain the
following insurance proceeds (collectively, the "TENANT'S TERMINATION INSURANCE
PROCEEDS"): (i) all insurance proceeds pertaining to any leasehold improvements
or alterations at the Premises made by Landlord or Tenant from Tenant's own
funds; and (ii) all insurance proceeds pertaining to any leasehold improvements
or alterations at the Premises made by Landlord or Tenant from the Tenant
Improvement Allowance, but only with respect to any termination of this Lease
pursuant to this Article 10 which occurs after the initial 10-year Term of this
Lease. If by reason of the provisions of any first mortgage or first deed of
trust executed by Landlord on the Premises, Property Damage Insurance proceeds
are required to be made payable to the lien holder, Tenant hereby consents
thereto, provided that the lien holder in question (A) shall first agree in
writing with Landlord and Tenant to make such proceeds available for the repair
and restoration of the Premises to the extent required pursuant to Paragraph 9.1
hereof, and (B) shall not have any interest in the Tenant's Termination
Insurance Proceeds, and Tenant shall not be required to cause Tenant's
Termination Insurance Proceeds to be delivered to such lien holder.

         10.5     Rent Loss Insurance. From the date Landlord delivers
possession of the Premises to Tenant in the Delivery Condition as provided in
Paragraph 1.1 hereof and throughout the Term of this Lease, Tenant shall, at
Tenant's expense, maintain in force rent loss insurance for the benefit of the
Landlord as loss payee covering loss of rental income under this Lease for a
period of twelve (12) months.

                                      -32-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         10.6     Waiver of Subrogation. Landlord and Tenant shall each procure
from each of the insurers under all policies of property damage insurance
obtained pursuant to the provisions of this Article 10, a waiver of all rights
of subrogation which said insurer might otherwise have, as against the other
party hereto, said waiver to be in writing and for the express benefit of the
other. Landlord and Tenant hereby release each other and waive any claim against
the other relating to losses or liabilities for which the releasing party is
obligated to obtain property damage insurance under the provisions of this
Article 10. For purposes of the preceding sentence, Landlord and Tenant shall
include the directors, officers and employees of each.

         10.7     General Insurance Requirements. Any and all insurance policies
obtained by either Landlord or Tenant pursuant to the provisions of this Article
10 shall be issued only by a responsible insurer, properly licensed in the State
of California, having a rating of not less than A-/VII in Best's Insurance
Guide. Each such insurance policy shall include an endorsement obligating the
insurer to give the party hereto not obtaining said insurance policy thirty (30)
days' prior written notice of any cancellation or change in scope or amount of
coverage of such insurance policy. Each party hereto shall cause to be issued to
the other party appropriate certificates of insurance evidencing compliance with
the terms of the provisions of this Article 10 relating to insurance; Tenant
shall provide Landlord with such certificates for Tenant's insurance at least
ten (10) business days prior to the date Landlord delivers possession of the
Premises to Tenant in the Delivery Condition.

         10.8     Blanket Policies. Notwithstanding anything in this Article 10
to the contrary, Tenant and Landlord may each insure for the amount of any
insurance required to be carried by it pursuant to this Article 10 under a
blanket and/or umbrella policy or policies covering other liabilities of the
insuring party and/or its subsidiaries, controlling or affiliated entities.

         10.9     Indemnities. Notwithstanding anything in this Article 10 to
the contrary:

                  10.9.1   Tenant shall indemnify, defend, protect and hold
harmless Landlord and Landlord's managers, members, partners, officers,
directors, agents and employees (collectively, "LANDLORD'S REPRESENTATIVES")
from and against any and all liabilities, losses, costs, expenses and claims,
including reasonable attorneys' fees, but specifically excluding lost profits
and other consequential damages (collectively, "CLAIMS") to the extent (i)
resulting from an incident (A) which occurs at the Premises from and after the
date Landlord delivers possession of the Premises, Ready for Occupancy, to
Tenant as provided in Paragraph 1.4 above, and which results in bodily injury,
death or property damage, or (B) which arises out of the negligence or willful
misconduct of Tenant and/or Tenant's employees, contractors, agents and/or
licensees, and (ii) not insured or required to be insured against by Landlord
under this Lease; provided however, the foregoing indemnity shall not include
any Claims to the extent resulting from the negligence or willful misconduct of
Landlord or any of Landlord's Representatives.

                  10.9.2   Landlord shall indemnify, defend, protect and hold
harmless Tenant and Tenant's managers, members, partners, officers, directors,
agents and employees (collectively, "TENANT'S REPRESENTATIVES") from and against
any and all Claims to the extent (i) resulting from an incident (A) which occurs
at the Premises at any time prior to the date Landlord delivers possession of
the Premises, Ready for Occupancy, to Tenant as provided in Paragraph 1.4 above
and which results in bodily injury, death or property damage or (B) which arises
out of the

                                      -33-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

negligence or willful misconduct of Landlord and/or Landlord's employees,
contractors, agents and/or licensees, and (ii) not insured or required to be
insured against by Tenant under this Lease; provided however, the foregoing
indemnity shall not include any Claims to the extent resulting from the
negligence or willful misconduct of Tenant or any of Tenant's Representatives.

                  10.9.3   The foregoing mutual indemnities are intended to be
consistent with the waivers as set forth in Paragraph 10.6 above, pursuant to
which each party (i) has waived its respective rights against the other party to
the extent any losses, damages or other Claims are insured or required to be
insured under property damage policies by such party pursuant to the provisions
of this Lease, and (ii) has agreed to cause such party's respective insurance
carrier to include a waiver of subrogation in their respective property damage
insurance policies. In addition, the foregoing indemnities, and the waivers set
forth in Paragraph 10.6 above, are not intended to and shall not relieve any
insurance carrier of its obligations to provide insurance coverage pursuant to
insurance policies obtained pursuant to the provisions of this Lease.

                  10.9.4   In the event any action or proceeding is brought
against Landlord or any of Landlord's Representatives and such claim is a claim
from which Tenant is obligated to indemnify Landlord or Landlord's
Representatives pursuant to this Paragraph, Tenant, upon notice from Landlord,
shall resist and defend such action or proceeding (in the case of a lawsuit, by
legal counsel reasonably satisfactory to Landlord). In the event any action or
proceeding is brought against Tenant or any of Tenant's Representatives and such
claim is a claim from which Landlord is obligated to indemnify Tenant or
Tenant's Representatives pursuant to this Paragraph, Landlord, upon notice from
Tenant, shall resist and defend such action or proceeding (in the case of a
lawsuit, by legal counsel reasonably satisfactory to Tenant).

                  10.9.5   Notwithstanding anything in this Lease, including
without limitation this Paragraph 10.9 or Articles 17 or 18 below, to the
contrary, the terms of this Lease shall not impose any obligation on either
party to be responsible or liable for the other party's lost profits or other
consequential damages. Landlord and Tenant agree that Landlord's right to
recover future rent under California Civil Code Section 1951.2 upon a
termination of this Lease following a default by Tenant pursuant to Paragraph
17.1 below shall not be deemed consequential damages or lost profits for
purposes of this Paragraph 10.9.5.

                  10.9.6   The obligations of the parties under this Paragraph
10.9 shall survive termination of this Lease.

ARTICLE 11: ASSIGNMENT AND SUBLETTING.

         11.1     Tenant's Right to Assign or Sublet. Subject to Paragraphs 11.2
and 11.3 below, Tenant shall have the right, with Landlord's prior written
consent, which consent shall not be unreasonably withheld or conditioned, to
assign this Lease or sublet the Premises or any part thereof. If Tenant desires
to assign this Lease or sublet the Premises or any part thereof other than
pursuant to Paragraphs 11.2 or 11.3 below, Tenant shall notify Landlord of such
proposed assignment or sublease specifying the identity of the proposed assignee
or subtenant and the material terms of the proposed assignment or sublease
(which material terms may be evidenced by a letter of intent, correspondence
between the parties or other means designated by Tenant);

                                      -34-
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Landlord shall have a period of twenty (20) days following receipt of such
notice to notify Tenant of Landlord's approval of the proposed assignment or
sublease, or reasonable disapproval (with the reasons for such disapproval
specified in detail). If Landlord fails to notify Tenant in writing of the
approval or reasonable disapproval within such twenty (20) day period, Landlord
shall be deemed to have consented to such proposed assignment or sublease.

         11.2     Consent to Partial Subletting. Notwithstanding anything in
this Article 11 to the contrary, Landlord hereby agrees that Tenant may, at any
time and from time to time without having to obtain Landlord's prior consent,
sublet up to an aggregate of fifty percent (50%) of the Building and Premises,
whenever in the opinion of Tenant it shall be advisable to sublet any such
portions of the Building and Premises.

         11.3     Consent to Transfers to Tenant Affiliates. Notwithstanding
anything in this Article 11 to the contrary, Landlord hereby agrees that Tenant
may, at any time and from time to time without having to obtain Landlord's prior
consent, assign, sublet or transfer this Lease or the Premises or any part
thereof to any entity which owns or controls Tenant, to any entity owned or
controlled by Tenant, to any entity owned or controlled by or affiliated with
any entity which owns or controls Tenant, or to any entity resulting from a
consolidation, or to the surviving entity in case of a merger, to which
consolidation or merger Tenant shall be a party, or to an entity to which all or
substantially all of the assets of Tenant have been sold. In addition, Landlord
hereby agrees that any transfer or series of transfers of stock or other
ownership interests in Tenant whether or not resulting in a change in the
controlling interest in Tenant and whether voluntarily, by operation of law or
otherwise, shall not be deemed an assignment, subletting or other transfer of
Tenant's interest in this Lease or the Premises and thus shall not be subject to
the requirement that Tenant notify Landlord thereof or obtain Landlord's prior
consent thereto.

         11.4     No Release. No such assignment, subletting or transfer of this
Lease by Tenant pursuant to the foregoing provisions of this Article 11 shall
release Tenant from Tenant's obligations under this Lease.

ARTICLE 12: EMINENT DOMAIN.

         12.1     Total Taking. In the event of a "TOTAL TAKING", defined as
when the entire Premises or the entire Building is taken or appropriated under
the power of eminent domain, this Lease shall terminate as of the date of the
taking of physical possession of the Premises or Building (as the case may be),
and each party shall be released from any liability accruing thereafter under
this Lease (but shall not be released from any liability accruing prior to such
termination).

         12.2     Partial Taking.

                  12.2.1 In the event that through such eminent domain
proceedings there is a "PARTIAL TAKING", defined as when only a portion or
portions of the Building or Premises is taken, and Tenant in good faith
determines that such taking may have a material adverse effect on its ability to
conduct its business in the Premises, Tenant shall have the option (exercisable
by written notice to Landlord at any time within sixty (60) days after the
taking of physical possession under any such proceeding) to terminate this Lease
effective as of the later of (i) the

                                      -35-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

termination date set forth in Tenant's termination notice, which shall be no
later than the ninetieth (90th) day following such notice, or (ii) the day
before the date of the taking of physical possession of such portion(s) of the
Premises. Upon any such termination, each party shall be released from any
liability accruing thereafter under this Lease (but shall not be released from
any liability accruing prior to such termination). Except as provided in this
Article 12, such Partial Taking shall not be a basis to terminate this Lease,
notwithstanding any Applicable Laws of the State of California to the contrary.

                  12.2.2 Notwithstanding the foregoing provisions of Paragraph
12.2.1 to the contrary, in the event Landlord disputes that such taking would
have a material adverse effect on Tenant's ability to conduct its business at
the Premises and thus disputes the effectiveness of Tenant's exercise of its
right to terminate this Lease pursuant to Paragraph 12.2.1 above, then the
parties agree to resolve the dispute as provided in this Paragraph 12.2.2. Prior
to submitting any such dispute to JAMS arbitration (as provided below), Landlord
and Tenant agree that they shall meet and use good faith efforts, for a period
of fifteen (15) days, to attempt to resolve such dispute. If the parties fail to
resolve such dispute within said 15-day period, the parties agree to submit the
question to binding arbitration by the Judicial Arbitration and Mediation
Services ("JAMS") in Riverside County, California, in accordance with the
Comprehensive Arbitration Rules of JAMS, or the Streamlined Arbitration Rules of
JAMS if mutually agreed to by both parties hereunder. The parties agree to
cooperate with JAMS and with one another in selecting from JAMS' panel of
arbitrators (selecting, if available, an arbitrator experienced in commercial
real estate matters in Riverside County, California) and in scheduling the
arbitration proceedings. If the parties are unable to agree upon an arbitrator,
such arbitrator shall be appointed by JAMS. The party requesting arbitration
shall be responsible for completing and sending to the JAMS' office for
Riverside County, California, such forms as JAMS may require to commence such
arbitration proceedings. Each party shall initially advance one-half (1/2) of
JAMS' and the arbitrator's fees, and each party shall bear its own attorneys'
fees if it chooses to be represented by an attorney in the arbitration. The
arbitrator shall award to the prevailing party in the arbitration the fees it
paid to JAMS and the arbitrator, together with reasonable attorneys' fees, which
award will be payable by the other party within thirty (30) days after the
arbitrator mails his or her decision. Judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof. If JAMS is
not available in Riverside County, the parties shall use JAMS in Orange County.
If JAMS is not available in either Riverside or Orange Counties, the parties
shall use the arbitration and mediation services provided by the American
Arbitration Association ("AAA"). If JAMS and AAA are not available or no longer
in existence, then the parties agree to use good faith efforts to select an
alternative arbitration and mediation service, and the procedures set forth
above shall apply to such substitute service.

         12.3     Condemnation Award. Landlord shall be entitled to all damages
or compensation awarded in any eminent domain proceeding relating to its fee
simple interest in the Premises and Improvements paid for by Landlord at
Landlord's expense. Tenant shall be entitled to all damages, compensation and
proceeds awarded in any eminent domain proceeding that comprise Tenant's Eminent
Domain TI Proceeds (as defined below) and/or pertain to Tenant's leasehold
interest, loss of goodwill, relocation expenses, loss of business, business
interruption, loss and/or removal of Tenant's trade fixtures, furniture,
equipment and other personal property. For purposes hereof, "TENANT'S EMINENT
DOMAIN TI PROCEEDS" shall mean all damages, compensation and proceeds awarded in
any eminent domain proceeding for or pertaining to loss

                                      -36-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

and/or removal of leasehold improvements and alterations at the Premises made by
Tenant or Landlord from (i) the Tenant Improvement Allowance (but not with
respect to any eminent domain proceeding which results in a termination of this
Lease prior to the end of the initial 10-year Term of this Lease), and/or (ii)
Tenant's own funds.

         12.4     Landlord's Duty to Restore. In the event that there is a
taking and this Lease is not terminated pursuant to this Article 12, Landlord
shall, at its own expense (but only to the extent Landlord has received
condemnation proceeds therefor), repair and restore the Improvements and the
other portions of the Premises, including the fixtures, systems and equipment
owned by Landlord and all leasehold improvements and alterations within the
Improvements, to (i) a condition suitable for Tenant's use as close to their
original condition as possible, and (ii) as reasonably necessary to ensure that
the Premises continue to operate in accordance with all Applicable Laws and with
the standards prevailing from time to time for comparable
warehouse/distributions facilities in the vicinity of the Premises.

         12.5     Restoration Requirements. All repair and restoration of the
Premises to be made by Landlord pursuant to Paragraph 12.4 hereof shall be made
in accordance with plans and specifications approved by Tenant. Landlord shall
comply, and shall require all its contractors to comply, with all Applicable
Laws relating to conditions of employment in making such repairs and
restoration. In the event that there is a taking and this Lease is not
terminated pursuant to this Article 12, any and all proceeds owing to Landlord
resulting from any eminent domain proceedings based on such taking shall be
deposited into a mutually acceptable joint Construction Escrow to be established
by Landlord and Tenant in the same manner as provided in Paragraph 9.1.3 above,
and used to pay for the costs of such repairs and restoration. Notwithstanding
the foregoing, if by reason of the provisions of any such mortgage or deed of
trust executed by Landlord on the Premises, any such eminent domain proceeds are
required to be made payable to the lien holder, Tenant hereby consents thereto,
provided that the lien holder in question (i) shall first agree in writing with
Landlord to make said proceeds available for such repair and restoration to the
extent required pursuant to this Article 12, and (ii) shall not have any
interest in the Tenant's Eminent Domain TI Proceeds, and Tenant shall be
entitled to retain any such proceeds.

         12.6     Abatement and Adjustment of Rent. In the event that there is a
taking and this Lease is not terminated pursuant to this Article 12, in addition
to any right Tenant may have to abate Fixed Rent and Real Property Taxes
pursuant to Paragraph 2.2 hereof, a reduction of the annual Fixed Rent and Real
Property Taxes payable under Paragraphs 2.1 and 6.1 hereof shall be made as
follows: (i) if a portion of the Building is taken, the annual Fixed Rent and
Real Property Taxes shall be reduced by the ratio of the total Rentable Area
taken to the total Rentable Area of the Building; and (ii) if a portion of the
parking, landscaping and other areas of the Premises located outside the
Building is taken, an equitable reduction in the Fixed Rent and Real Property
Taxes shall be made, based on the amount taken and proximity of the portion
taken to the Building and the adverse effect on Tenant's business in the
Premises.

         12.7     Definition of Taking. A "TAKING OR APPROPRIATION", as used in
this Article 12, shall be deemed to include one or more takings or
appropriations, and the cumulative effect of more than one such taking or
appropriation shall be construed as one taking or appropriation.

                                      -37-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Appropriation or taking by eminent domain as used herein shall also include a
conveyance made as a settlement to an existing or threatened eminent domain
proceeding.

         12.8     Conflict with Article 8. Where the provisions of this Article
12 are in conflict with the Applicable Laws of the State of California, or with
the provisions of Article 8 hereof, the provisions of this Article 12 shall
apply.

ARTICLE 13: ATTORNEYS' FEES.

         In the event either party hereto commences legal proceedings to enforce
any of the terms of this Lease, or for damages resulting from a breach of this
Lease, the successful party in such action shall receive from the other party,
in each such action, including any appeal taken thereof, its reasonable
attorneys' fees and costs incurred. Whenever one party is obligated to indemnify
the other party under the terms of this Lease, said duty to indemnify shall
include the duty to defend the other party and to pay for all reasonable
attorneys' fees, costs and disbursements related to said defense. The term
attorneys' fees as used in this Article 13 shall include the fair market value
of Landlord's and Tenant's in-house counsel's services.

ARTICLE 14: PERMITS AND LICENSES.

         Landlord hereby covenants and agrees to fully and promptly cooperate
with Tenant, at no cost to Landlord, in Tenant's efforts (which shall be at
Tenant's sole cost and expense) to apply for and secure any building permit,
signage variances and/or permission of any duly constituted authority for the
purpose of doing any of the things which Tenant is required or permitted to do
under the provisions of this Lease, and Landlord shall indemnify Tenant for any
loss, cost or damage (excluding lost profits or other consequential damages)
suffered by Tenant as a result of Landlord's failure to so cooperate.

ARTICLE 15: EXTENSION OF TERM.

         15.1     Tenant's Right to Extend Lease Term. Tenant shall have the
right to extend the Term of this Lease upon the same terms, covenants, and
conditions as herein contained, and at the Fixed Rent rate herein reserved in
Paragraph 2.1.3 above, for three (3) additional consecutive periods of five (5)
years each (each an "OPTION PERIOD" and collectively the "OPTION PERIODS") from
and after the Expiration Date hereof, by giving Landlord notice at least six (6)
months prior to the Expiration Date, and prior to each such extended expiration
date (as the case may be), notifying Landlord of Tenant's election to so extend
the Term; provided, however, in the event that Tenant fails to give such notice
of extension, Tenant shall not be deemed to have waived the right to that
extension or any extension thereafter until Landlord gives Tenant written notice
of Tenant's failure to exercise such right of extension and affords Tenant a
period of thirty (30) days after receipt of such notice to exercise that right
of extension by giving Landlord notice thereof. Wherever there is a reference in
this Lease to the Term of this Lease, or to the expiration of this Lease, such
references shall be construed to include any extension of the Term of this
Lease. Notwithstanding the foregoing to the contrary, Tenant shall not have the
right to extend the Term for the applicable Option Period if at the time Tenant
delivers to Landlord Tenant's exercise notice, Tenant is then in monetary or
material non-monetary default under the Lease after expiration of all applicable
notice and cure periods.

                                      -38-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         15.2     Interference Period. Whenever Tenant shall be prevented in
whole or in part from the free, uninterrupted, and unimpeded enjoyment of the
use of the Premises and the fixtures therein by reason of default of Landlord,
or by reason of Landlord's making any repairs, alterations, extensions or
additions to the Premises, or the fixtures therein, or by reason of any casualty
event or eminent domain proceedings, and such prevention or disturbance lasts
for a period in excess of ninety (90) days, then, and in each and all of such
cases, Tenant shall have the right of extension, as hereinafter defined, which
right shall be cumulative and additional to any other rights given in such cases
by this Lease or Applicable Laws. Said right of extension shall give Tenant the
option (to be exercised at least ninety (90) days before the conclusion of the
Term) to add any such period or periods of loss of such enjoyment, or the
aggregate of all such periods, to the Term of this Lease.

ARTICLE 16: SUBORDINATION.

         16.1     Permitted Deed of Trust. In the event Landlord acquires fee
simple title to the Land with acquisition and/or construction financing secured
by a Permitted Deed of Trust (as defined in Paragraph 3.1 above), then
concurrently upon the closing of such acquisition, Landlord shall deliver to
Tenant a subordination, nondisturbance and attornment agreement ("SNDA")
executed by Landlord and the holder of such Permitted Deed of Trust in the form
attached hereto as Exhibit E, with any reasonable modifications thereto which do
not increase any of Tenant's obligations or diminish or impair any of Tenant's
rights under this Lease as shall be reasonably required by the holder of such
Permitted Deed of Trust and reasonably approved by Tenant. If Landlord fails to
deliver the executed SNDA to Tenant concurrently upon such closing, Tenant may,
at its option, in addition to its other remedies under this Lease: (i) terminate
this Lease effective upon the date written termination notice is delivered to
Landlord, which termination notice may be delivered at any time prior to the
date such executed SNDA is delivered to Tenant, in which event the provisions of
Paragraph 1.5.5 above shall apply; or (ii) defer the payment of any and all
rental due under this Lease until such executed SNDA is delivered to Tenant.
During such period of deferral, said rental shall accrue without interest.
Tenant shall pay such accrued rent in full to Landlord within forty-five (45)
days after Tenant's receipt of such executed SNDA in recordable form.

         16.2     Future Deeds of Trust. Tenant covenants that it will execute
an agreement subordinating this Lease to any first priority deed of trust
subsequently placed upon the Premises after Landlord's acquisition of fee simple
title to the Land in the form attached hereto as Exhibit E, with any reasonable
modifications thereto which do not increase any of Tenant's obligations or
diminish or impair any of Tenant's rights under this Lease as shall be
reasonably required by the holder of such deed of trust and reasonably approved
by Tenant. Tenant agrees to execute and deliver such agreement to Landlord
within twenty (20) days after such agreement is delivered by Landlord to Tenant
in the form (and with such modifications) as approved by Tenant in accordance
with the foregoing provisions of this Paragraph 16.2.

         16.3     Landlord's Waiver. Landlord hereby waives and releases any
lien or claim of lien, statutory or otherwise, which Landlord may be entitled to
assert under Applicable Laws upon or against any inventory, fixtures, furniture,
equipment and other personal property of Tenant situated at the Premises.
Landlord covenants that concurrently upon Landlord's execution of this Lease
and/or subsequent to the execution of this Lease at Tenant's request,

                                      -39-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Landlord will execute an agreement setting forth certain information regarding
this Lease, as well as acknowledging certain rights of Tenant and any lender of
Tenant, in the form attached hereto as Exhibit F. In addition, Landlord agrees
to execute any other document reasonably requested from time to time by Tenant
and/or any lender, supplier, vendor, lessor or other lienholder in connection
with Tenant's inventory, trade fixtures, furniture, equipment or other personal
property, pursuant to which Landlord expressly waives any lien Landlord might
otherwise have or acquire upon such property.

ARTICLE 17: TENANT'S DEFAULTS.

         17.1     Monetary Defaults. Should Tenant fail to make any payment of
rent required to be paid by Tenant to Landlord hereunder as and when due under
this Lease, and such failure shall continue for five (5) business days after
Tenant's receipt of written notice thereof from Landlord specifying in detail
such failure, then Tenant shall be in default under this Lease and Landlord may,
at its option, in addition to any other remedies provided for such default under
Applicable Laws (but subject to the provisions of Paragraph 10.9.5 above),
terminate and cancel this Lease, and re-enter and take possession of the
Premises, remove Tenant's property therefrom, and dispose of the same in the
manner provided by Applicable Laws. Said five (5) business day notice from
Landlord to Tenant shall be in addition to, and not in lieu of, any statutory
notice for eviction or foreclosure proceedings required under the Applicable
Laws of the State of California (including, without limitation, the provisions
of California Code of Civil Procedure Section 1161 regarding unlawful detainer
actions or any successor statute or law of a similar nature); provided, however,
if Tenant is in default in the payment of rent more than two (2) times in any
12-month period, for the third (3rd) and any subsequent default in such 12-month
period, such five (5) business day notice shall be in lieu of any such statutory
notice for eviction or foreclosure proceedings. Upon such termination, Landlord
may recover from Tenant:

                  (i)      the worth at the time of award of the unpaid rent
which had been earned at the time of termination;

                  (ii)     the worth at the time of award of the amount by which
the unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided;

                  (iii)    the worth at the time of award of the amount by which
the unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; and

                  (iv)     any other amount necessary to compensate Landlord for
all the expenses and 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.

The "worth at the time of award" of the amounts referred to in items (i) and
(ii) above is computed by allowing interest at the Interest Rate (defined in
Paragraph 6.4 above). The "worth at the time of award" of the amount referred to
in item (iii) above 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%). Except as otherwise herein provided, no entry into the Premises or

                                      -40-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

any other action by Landlord shall be construed as an election to terminate this
Lease unless written notice of such intention is given to Tenant, or unless
termination thereof is decreed by a court of competent jurisdiction.

                  17.1.1 In the event this Lease is terminated as provided in
this Paragraph 17.1, Tenant shall promptly remove all personal property to which
it has the right to possession. All property of Tenant not removed by Tenant
within ten (10) business days after Tenant's receipt of notice of a final
adjudication that the Lease has been terminated shall be disposed of by Landlord
in the manner provided by Applicable Laws.

                  17.1.2 Landlord shall also have the remedy described in
California Civil Code Section 1951.4 (which provides that lessor may continue
lease in effect after lessee's breach and abandonment and recover rent as it
becomes due, if lessee has the right to sublet or assign, subject only to
reasonable limitations). Accordingly, if Landlord does not elect to terminate
this Lease on account of any default by Tenant, Landlord may, from time to time,
without terminating this Lease, enforce all of its rights and remedies under
this Lease, including the right to recover all rent as it becomes due (in
accordance with California Civil Code Section 1951.4).

         17.2     Non-Monetary Defaults. If Tenant shall be in default in the
performance of any obligation under this Lease other than in the payment of
rent, and if Tenant shall fail to cure such default within thirty (30) days of
receipt of notice from Landlord, specifying in detail the nature of such
default, or in case the default is of such a character as to reasonably require
more than thirty (30) days to cure, then if Tenant shall fail to use reasonable
diligence in curing or attempting to cure such default, then Landlord may cure
such default for the account of and at the cost and expense of Tenant. The sum
so expended by Landlord shall be deemed to be additional rent if Tenant fails to
pay to Landlord the sum so expended within thirty (30) days after Tenant's
receipt of notice of a final adjudication that such amount is owing to Landlord,
including interest at the Interest Rate from the date of expenditure by Landlord
until paid.

                  17.2.1 In addition to the foregoing, if Tenant shall be in
material default in the performance of any non-monetary obligation under this
Lease which cannot be cured by Landlord by the payment of money or the exercise
of Landlord's self-help rights as set forth in Paragraph 17.2 above, and if
Tenant shall fail to cure such default within the time periods set forth in
Paragraph 17.2 above, Landlord shall be entitled to exercise all rights and
remedies set forth in Paragraph 17.1 above. In no event shall any such default,
other than the failure to pay rent, be the basis of a forfeiture of this Lease
or otherwise result in the eviction of Tenant or the termination of this Lease,
unless and except to the extent specifically and expressly permitted under this
Paragraph 17.2.

                  17.2.2 In addition to Landlord's right to cure such
non-monetary default and recover the amount so expended in curing such
non-monetary default, Landlord shall have the right to injunctive relief and/or
recover damages (subject, however, to the limitations in Paragraph 10.9.5 above)
for Tenant's default of any such obligation, covenant or agreement.

         17.3     Bankruptcy. In the event of the commencement of voluntary or
involuntary proceedings by or against Tenant under the United States Bankruptcy
Code, which proceedings are not dismissed within ninety (90) days after the same
are filed, then subject to and limited by

                                      -41-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

the provisions of the United States Bankruptcy Code, as amended, including any
subsequent amendments thereto, Tenant shall be deemed to be in default under
this Lease and Landlord shall be entitled to exercise all rights and remedies
set forth in Paragraph 17.1 above.

         17.4     Landlord's Remedies Cumulative. Any right or remedy Landlord
may have under this Paragraph 17 arising out of Tenant's uncured default under
this Lease shall be in addition to any other right or remedy for such uncured
default provided for by Applicable Law and/or in equity (subject, however, to
the limitations in Paragraphs 10.9.5 and 17.2.1 above), including, without
limitation, the right to recover damages as a result thereof.

ARTICLE 18: LANDLORD'S DEFAULTS.

         18.1     Tenant's Right to Cure. If Landlord (i) fails to pay any
installment of taxes or assessments or any interest, principal, costs or other
charges upon any lien or encumbrance affecting the Premises when any of the same
becomes due and such failure to pay could or would result in (A) a termination
of this Lease, (B) loss of quiet enjoyment of the Premises, (C) impairment or
loss of any of Tenant's rights under this Lease, or (D) increase in any of
Tenant's obligations under this Lease, or (ii) fails to pay any other monetary
amounts required to be paid by Landlord under this Lease (including, without
limitation, payments of any costs and/or the Tenant Improvement Allowance
pursuant to Exhibit C) when any of the same becomes due, or (iii) fails to
perform Landlord's Maintenance Obligations or make any other repairs or do any
other work required of Landlord by the provisions of this Lease, or (iv) in any
other respect fails to perform any other obligation under this Lease to be
performed by Landlord (including, without limitation, any obligation under
Exhibit C), then Landlord shall be in default under this Lease, and Tenant may
(but this shall not be deemed to impose an obligation upon Tenant to do so), in
addition to any other rights provided under this Lease, at law and/or in equity
(but subject to the provisions of Paragraph 10.9.5 above) as a result of any
such default:

                  (1)      recover from Landlord any and all damages resulting
         therefrom; and/or

                  (2)      at the expense of Landlord, pay such charges and/or
         cure such defaults on behalf of Landlord and/or do all necessary work
         and make all necessary payments in connection therewith.

Notwithstanding the foregoing, no right or remedy of Tenant shall be exercised
unless Landlord fails to cure such default within fifteen (15) business days
(with respect to monetary defaults) and thirty (30) days (with respect to
non-monetary defaults) after receipt of notice from Tenant specifying in detail
the nature of such default; provided, however, that with respect to non-monetary
defaults only, if such non-monetary default is of such nature as cannot be cured
within said 30-day period, Landlord shall not be deemed in default hereunder if,
and so long as, Landlord commences to cure such default within said 30-day
period and proceeds diligently and continuously to complete the cure of such
default within such reasonable additional time as is necessary to cure such
default; provided, further, however, that if a failure by Landlord to perform or
observe any term of this Lease gives rise to circumstances or conditions which
constitute an emergency threatening human health or safety or substantial damage
to the Premises or Tenant's personal property, or materially impeding the
conduct of the business of Tenant at the Premises, Tenant shall be entitled to
take immediate curative action (prior to the

                                      -42-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

expiration of any notice and cure period set forth above) to the extent
reasonably necessary to eliminate the emergency. Landlord shall pay to Tenant,
within ten (10) business days after demand, the amount so paid by Tenant in the
exercise of any such rights and remedies, together with interest thereon from
the date of such expenditure at the Interest Rate. However, if Landlord desires
to contest the validity or correctness of any lien or encumbrance described in
clause (i) hereinabove, it may do so, provided that if such lien or encumbrance
could or would result in any of the events described in clauses (A) through (D)
set forth in clause (i) hereinabove, Landlord shall first furnish Tenant with a
good and sufficient bond indemnifying Tenant against any loss, liability or
damage (excluding lost profits and consequential damages) on account thereof.

         18.2     Tenant's Right to Offset. If Landlord shall fail to pay to
Tenant the amount of such expenditures and interest within fifteen (15) business
days of written demand from Tenant to do so, in addition to any other rights
provided under this Lease, at law and/or in equity, Tenant may deduct the amount
of such expenditures and interest from any and all rental payments and other
payments thereafter becoming due to Landlord hereunder. In no event shall such
deduction by Tenant pursuant to the foregoing provisions of this Paragraph 18.2
be the basis of forfeiture of this Lease or constitute a default by Tenant in
the payment of rent unless Tenant shall fail to pay the amount of such deduction
within thirty (30) days after Tenant's receipt of notice of a final adjudication
that such amount is owing to Landlord. Nothing herein contained shall preclude
Tenant from proceeding to collect any amount paid by it pursuant to Paragraph
18.1 without waiting for rental offsets to accrue.

         18.3     Tenant's Rights Cumulative. Any right or remedy Tenant may
have under this Lease arising out of Landlord's breach of any representation,
warranty or covenant of this Lease shall be in addition to any other right or
remedy for such breach provided for by Applicable Law and/or in equity (subject,
however, to the limitations in Paragraph 10.9.5 above), including, without
limitation, the right to recover damages as a result thereof. The terms,
conditions and provisions of this Article 18 are in all respects subject and
subordinate to Landlord's covenant of quiet enjoyment to Tenant set forth in
Article 3 of this Lease, and the parties agree that the rights and remedies set
forth in this Article 18 are not intended to nullify, impair or negate in any
manner or to any extent the covenant of quiet enjoyment, and Landlord
acknowledges and agrees that in the event of conflict between Article 18 or any
other provision of this Lease, the covenant of quiet enjoyment shall control.

ARTICLE 19: NOTICES.

         19.1     Manner of Delivery. Any notices, demands, and the like, which
are required to be given hereunder or which either party hereto may desire to
give to the other shall be given in writing by (i) mailing the same by certified
or registered United States mail, return receipt requested, postage prepaid, or
(ii) sending the same by Federal Express or other comparable overnight express
courier service (with proof of receipt available), addressed to Landlord at the
address for notices shown in Paragraph 20.15 hereof, or to Tenant, at 2525 East
El Segundo Boulevard, El Segundo, California 90245, attention of the President
or Secretary of Tenant, or to such other addresses as the respective parties may
from time to time designate by notice given as provided in this Lease. Notices
shall be deemed effective upon receipt or refusal to accept receipt (as
evidenced by supporting documentation).

                                      -43-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         19.2     Statutory Service. Any notice served on Tenant pursuant to any
statutory procedure related to forfeiture or eviction proceedings under the
Applicable Laws of the State of California shall be served on Tenant's
authorized agent for service of process under such Applicable Laws, or the
President or Secretary of Tenant at the address specified in Paragraph 19.1
hereof. Wherever there is a conflict between the provisions of this Paragraph
19.2 and any such statutory procedure, the provisions of this Paragraph 19.2
shall prevail.

         19.3     Landlord Entity. If Landlord is a partnership, corporation or
limited liability company, Tenant may act on any notice given by any officer or
agent (which has been designated in writing by Landlord) of such corporation, or
of any general partner or agent (which has been designated in writing by
Landlord) of such partnership, or of any managing member or agent (which has
been designated in writing by Landlord) of such limited liability company.

ARTICLE 20: MISCELLANEOUS PROVISIONS.

         20.1     Effect of Words; Gender; Singular; Plural. Whenever in this
Lease any words of obligation or duty regarding either of the parties are used,
such words shall have the same force and effect as though in the express form of
covenants. Whenever appropriate from the context, the use of any gender shall
include any other or all genders, and the singular number shall include the
plural, and the plural shall include the singular.

         20.2     Memorandum of Lease; Recording Fees. Concurrently with the
execution of this Lease, the parties shall execute and acknowledge three (3)
originals of a memorandum of lease in the form of Exhibit G attached hereto and
incorporated herein by this reference (the "MEMORANDUM OF LEASE"). Each party
shall retain one (1) executed original of the Memorandum of Lease and deliver
the third (3rd) executed original to the escrow holder of the escrow for
Landlord's acquisition of the Larger Parcel (including the Land). Landlord shall
cause such escrow holder to record the Memorandum of Lease (or as described in
Recital B above, such modified version in substitution thereof to be executed by
the parties and delivered to such escrow holder if the Subdivision occurs
concurrently with the Land Acquisition, rather than after the Land Acquisition
as currently contemplated by the parties) in the Official Records upon the
closing date of Landlord's acquisition of fee simple title to the Larger Parcel
(including the Land), as described in Paragraph 3.3(i) above. If required by the
county recorder's office, or such escrow holder or title company in connection
with the recordation of the Memorandum of Lease, Landlord and Tenant shall
update the date of, execute and acknowledge the Memorandum of Lease prior to
recording same. If the Subdivision occurs after the Land Acquisition, the
parties shall execute and acknowledge the Memorandum of Lease Amendment and
cause the same to be recorded in the Official Records immediately after
recordation of the final parcel map subdividing the Land from the Larger Parcel.
Prior to attaching any legal description of the Land to the Memorandum of Lease
or Memorandum of Lease Amendment, Tenant shall approve same for accuracy. This
Lease, the Memorandum of Lease (or modified version thereof, as the case may be)
and the Memorandum of Lease Amendment (if applicable) shall be construed
together as one instrument. Neither party shall record this Lease or permit the
same to be recorded without the written consent of the other party. Tenant
agrees to pay all recording fees due for bringing about the recording of the
Memorandum of Lease and Memorandum of Lease Amendment (if applicable).

                                      -44-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         20.3     No Waiver of Subsequent Breaches. No waiver of any breach of
any of the covenants, agreements or provisions contained herein shall be
construed as a waiver of any subsequent breach of the same or any other
covenant, agreement or provision. No payment of rent or other charges payable
hereunder by Tenant shall be construed as a waiver by Tenant of any breach by
Landlord under this Lease.

         20.4     Successors and Assigns. This Lease binds, applies to and
inures to the benefit of, as the case may require, the heirs, executors,
administrators, successors and assigns of Landlord and the successors and
assigns of Tenant.

         20.5     Conflicting Claims to Money Payable by Tenant. Tenant may make
any payment or give any notice to Landlord, despite any succession or
assignments, and be protected in so doing, until it has received written notice
to do otherwise from Landlord, or, in case of Landlord's death if Landlord is a
natural person, from the executor or administrator, together with a certified
copy of letters testamentary or letters of administration. If there are
conflicting claims to money payable by Tenant under this Lease, Tenant may
discharge its obligation to pay such amounts by depositing such money in trust
with the holder of any first mortgage or first deed of trust on the Premises of
whom Tenant has received written notice and in all other events in any bank or
trust company designated from time to time in writing by Landlord (provided such
designation is given prior to receipt by Tenant of conflicting claims), and if
no such designation is given, then in any bank or trust company in the county in
which the Premises are located, to be distributed pursuant to court order;
provided, however, Tenant need not recognize any such adverse claims, and may
pay the money directly to Landlord. All sums payable hereunder by either party
to the other are payable in lawful money of the United States of America.

         20.6     Table of Contents; Headings. The table of contents and the
captions heading the various articles of this Lease are for convenience and
identification only, and shall not be deemed to expand, limit or define the
contents of their respective paragraphs.

         20.7     Brokers' Commissions. Each party hereby represents and
warrants to the other that it has not caused or incurred any claims for
brokerage commissions or finder's fees in connection with the execution and
delivery of this Lease, the Memorandum of Lease and the Memorandum of Lease
Amendment (if applicable), other than to Charles Ogburn of Ogburn & Associates
(representing Tenant) and CB Richard Ellis, Inc. (representing Landlord)
(collectively, the "BROKERS"), the payment of which shall be the sole
responsibility of Landlord, which payment shall be made in accordance with the
terms of a separate listing agreement made by and among Landlord and the
Brokers. Each party shall indemnify and hold harmless the other from and against
any other claims for commissions or finder's fees caused by the party whose
actions or alleged commitments form the basis of such claim.

         20.8     Approvals. Whenever the approval of Landlord or Tenant is
required hereunder, such approval shall be in writing and be given pursuant to
Article 19 hereof. Such approval shall not be unreasonably withheld, conditioned
or delayed (unless another standard for approval is specifically provided for in
this Lease with respect to a particular matter, which specific approval standard
shall control).

                                      -45-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         20.9     Amendments to Lease. This Lease, the Memorandum of Lease and
the Memorandum of Lease Amendment (if applicable), taken together, comprise the
entire agreement between the parties hereto. There shall be no amendments to
this Lease except by written agreement between the parties.

         20.10    Severability of Provisions; Governing Law. In the event that
any provision of this Lease shall be held invalid or unenforceable, such
provision shall be severable from, and such invalidity or unenforceability shall
not be construed to have any effect on, the remaining provisions of this Lease.
This Lease shall be construed and interpreted in accordance with the laws of the
State of California.

         20.11    Lease Freely Negotiated. This Lease was freely and voluntarily
negotiated between the parties and shall not be construed against one or the
other party.

         20.12    Time of the Essence. Time is of the essence hereof.

         20.13    Counterparts. This Lease may be executed in multiple
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same agreement. 20.14 Mutual Warranty of
Authority. Landlord warrants to Tenant that Landlord is a validly existing
limited liability company under the laws of the State of California and that it
is duly qualified to do business in the State of California, that its entry into
and performance of this Lease has been duly authorized, and that each of the
parties executing this Lease on its behalf is authorized to do so. Tenant
warrants to Landlord that Tenant is a validly existing corporation under the
laws of the State of Delaware and that it is duly qualified to do business in
the State of California, that its entry into and performance of this Lease has
been duly authorized, and that the officers executing this Lease on its behalf
are duly authorized to do so.

         20.15    Payments of Rent; Notices.

                  Payments of rent to Landlord are to be made to:

                  Panattoni Development Company, LLC
                  8401 Jackson Road
                  Sacramento, California 95876
                  Attention: Accounting Department

                  Notices to Landlord are to be sent to:

                  Panattoni Development Company, LLC
                  19660 Fairchild Road
                  Irvine, California 92612
                  Attention: Steven Palmer

or to such other person or entity and at such other place as shall be designated
by Landlord in writing by notice as provided in Article 19 of this Lease (and in
the case of rent payments, at

                                      -46-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

least thirty (30) days prior to the next ensuing rental payment due date).
Landlord's Tax I.D. number is 68-0423919.

         20.16    Minimization of Interference. Without limiting any other
provision in this Lease, Landlord shall exercise its rights and perform its
obligations hereunder in such a way as to minimize (given the circumstances,
including, without limitation the existence of an emergency situation) any
resulting interference with Tenant's use of and access to the Premises for the
conduct of Tenant's business from the Premises.

         20.17    When Payment is Due. Whenever a payment is required to be made
by one party to the other under this Lease, but a specific date for payment or a
specific number of days within which payment is to be made is not set forth in
this Lease, or the words "immediately", "promptly" and/or "on demand", or their
equivalent, are used to specify when such payment is due, then such payment
shall be due thirty (30) days after the party which is entitled to such payment
sends written notice to the other party demanding such payment.

         20.18    Exhibits. The following Exhibits are attached hereto and by
this reference made a part hereof:

         Exhibit A       Description of Land
         Exhibit B-1     Site Plan of Land
         Exhibit B-2     Proposed Final Map
         Exhibit C       Construction
         Exhibit D       Permitted Encumbrances
         Exhibit E       Non-Disturbance, Attornment and Subordination Agreement
         Exhibit F       Landlord's Waiver-Inventory
         Exhibit G       Memorandum of Lease
         Exhibit H       Commencement Certificate
         Exhibit I       Delivery Condition

         IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.

LANDLORD:                                   TENANT:

PANATTONI DEVELOPMENT COMPANY, LLC, a       BIG 5 CORP.,
California limited liability company        a Delaware corporation

By: /s/ Jeff Phelan                         By: /s/ Steven G. Miller
    --------------------------------            --------------------------------
    Print Name: Jeff Phelan                     Steven G. Miller
    Its.: Senior Partner                        Its: President

                                            By: /s/ Gary S. Meade
                                                --------------------------------
                                                Gary S. Meade
                                                Its: Secretary

                                      -47-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                    EXHIBIT A

                               DESCRIPTION OF LAND

                              Panattoni Development

                                      BIG 5
                           "GROSS" PARCEL DESCRIPTION

                  All of Parcels 8 through 14, inclusive, and Parcels 82 and 83,
         together with portions of Parcels 1 through 5, inclusive, and Parcel 15
         of Parcel Map No. 24535 as shown by map on file in Book 162 of Parcel
         Maps, at Pages 84 through 90 thereof. Records of Riverside County,
         California, more particularly described as follows:

                  BEGINNING at the southwest corner of said Parcel 82;

                  Thence N. 00 degrees 08'48" W., along the west line of Parcels
         82, 14, 11, 83 and 1,a distance of 963.07 feet;

                  Thence N. 89 degrees 20'44" E., a distance of 1665.44 feet;

                  Thence easterly and northerly along a curve concave
         northwesterly, having a radius of 100.00 feet, through a central angle
         of 90 degrees 00'00" and an arc length of 157.08 feet;

                  Thence N. 00 degrees 39'16" W., a distance of 77.78 feet;

                  Thence northerly and easterly along a curve concave to the
         southeast, having a radius of 100.00 feet, through a central angle of
         69 degrees 17'44" and an arc length of 120.94 feet;

                  Thence N. 68 degrees 38'28" E., a distance of 54.06 feet to
          the east line of said Parcel 5, also being the west line of Parcel 86
          (Sycamore Canyon Boulevard) of said Parcel Map No. 24535;

                  Thence south along the east line of said Parcel 5 along a
         curve concave to the west, having a radius of 1166.82 feet, through a
         central angle of 19 degrees 24'37" and an arc length of 395.29 feet,
         (the initial radial line bears N. 70 degrees 08'31" E.);

                  Thence S. 00 degrees 26'52" E., continuing along the east line
         of said Parcel 5, and the east lines of said Parcels 83, 8 and 15, a
         distance of 938.94 feet;

                  Thence S. 89 degrees 20'44" W., a distance of 221.19 feet;

                  Thence S. 00 degrees 39'16" E., a distance of 17.00 feet;

                                    EXHIBIT A
                                       -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                    EXHIBIT A

                               DESCRIPTION OF LAND

                  Thence S. 89 degrees 20'44" W., a distance of 1062.18 feet to
         the west line of said Parcel 15:

                  Thence N. 00 degrees 14'56" W., along the west line of said
         Parcel 15, a distance of 90.47 feet to the northwest corner thereof,
         also being a point on the south line of said Parcel 12;

                  Thence S. 89 degrees 20'44" W., along the south lines of said
         Parcels 12 and 82, a distance of 668.00 feet to the POINT OF BEGINNING.

                  The above described Parcel of Land contains 46.64 acres, more
         or less.

                                    EXHIBIT A
                                       -2-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                   EXHIBIT B-1

                                SITE PLAN OF LAND

                                   [Attached]

                                 [PLAN DRAWING]

                                   EXHIBIT B-1
                                       -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                   EXHIBIT B-2

                               PROPOSED FINAL MAP

                                  [MAP DRAWING]

                                   EXHIBIT B-2
                                       -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                    EXHIBIT C

                                  CONSTRUCTION

         Attached to and forming a part of that certain Lease executed under
date of April 14, 2004, by and between PANATTONI DEVELOPMENT COMPANY, LLC, a
California limited liability company, as Landlord, and BIG 5 CORP., a Delaware
corporation, as Tenant.

1.       Landlord's Work; Minimum Specifications.

         1.1      Definition of Landlord's Work. Landlord hereby covenants that
immediately upon the execution of this Lease it will proceed with all reasonable
diligence and dispatch to design and obtain all applicable building permits and
governmental approvals for, and thereafter (and following acquisition of the
Land) commence and complete construction upon and/or adjacent to the Land of,
the Building described in Paragraph 1.1 of the Lease and related facilities and
Improvements (including, without limitation, all parking areas, landscaping,
utilities and utilities connections, driveways, parkways, accessways, curb cuts,
the construction of Crest Ridge Drive, all site work for the Premises and all
other on-site and off-site improvements), and interior tenant improvements for
the Building, all: (i) in first-class condition; (ii) as specified on the Final
Plans (as defined below) to be prepared and approved by the parties pursuant to
the provisions of this Exhibit C; and (iii) in compliance with all such building
permits and governmental approvals and all Applicable Laws.

                  The Building and such related facilities and other
Improvements set forth on the Final Plans (as the same may be revised pursuant
to the provisions of Paragraphs 2 and 3 below) shall be referred to herein,
collectively, as the "LANDLORD'S WORK", and shall consist of, collectively, two
(2) separate components of work, the Tenant Improvements and the Building
Site/Work (as defined below).

                  For purposes hereof, the "TENANT IMPROVEMENTS" shall consist
of, collectively, (A) those interior tenant improvements (including, without
limitation, the office area demising walls and other interior office area
improvements within the Building) to be constructed within the interior of the
Building, including the office area portion of the Building designated as such
by Tenant on the TI Layout Plans, as defined in Paragraph 2.1 below (which is
currently contemplated by Tenant to contain approximately 47,000 square feet),
and (B) certain exterior improvements to be constructed or installed on portions
of the Land located outside the Building, and consisting of a truck wash,
maintenance facility, guard shack, above-ground fuel tank, fencing, an asphalt
automobile parking lot on the east side of the Building, an asphalt truck
driveway on the south side of the Building, and an asphalt expansion on the west
side of the Building, all as to be specified on those portions of the Final
Plans described hereinbelow as the "Final TI Plans" to be prepared by Landlord,
at Tenant's expense (subject to Landlord's contribution of the Tenant
Improvement Allowance, as defined below), and approved by Tenant as provided in
Paragraph 2 below. Except for Tenant's racking systems, the Tenant Improvements
shall also include any items which would otherwise constitute Fixturization Work
(as defined below) to the extent Tenant specifically designates such items on
the TI Layout Plans

                                    EXHIBIT C
                                       -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

to be part of the Tenant Improvements for Landlord (rather than Tenant) to
install (but any cabling for Tenant's telephone, data and security systems for
the Building shall only be included in the Tenant Improvements if Tenant
designates its preferred subcontractors and/or vendors who shall be used by
Landlord's Contractor [as defined in Paragraph 5.2 below] to perform such work).

                  For purposes hereof, the "BUILDING/SITE WORK" shall consist
of, collectively, all portions of the Building, such site work, related
facilities and other Improvements which are other than the Tenant Improvements,
all as to be specified on those portions of the Final Plans described
hereinbelow as the "Final Building/Site Work Plans" to be prepared by Landlord,
at Landlord's expense, and approved by Tenant as provided in Paragraph 2 below.
With respect to utilities, as part of the Building/Site Work, Landlord shall
provide or make available to the Building and Premises telephone, water, sewer,
storm drainage, electricity and all other utilities and connections therefor to
and/or within the boundaries of the Building and Premises with public or private
means of access to public, governmental or private utility company lines or
conduits, as applicable, including, if necessary, easements over lands adjacent
to the Land, all as specified in the Final Building/Site Work Plans. The
approximate location of the Building and such site work, related facilities and
Improvements comprising the Building/Site Work shall be consistent with the Site
Plan attached to the Lease as Exhibit B (as the same may be modified by the
Final Building/Site Work Plans), with specifications that meet or exceed the
minimum specifications and requirements set forth on Schedule 1 attached to this
Exhibit C (collectively, the "MINIMUM BUILDING/SITE WORK SPECIFICATIONS").
Landlord covenants to incorporate the Minimum Building/Site Work Specifications
into the Final Building/Site Work Plans to the extent consistent with the other
specifications for the Building, site work and related facilities and
Improvements approved by Tenant as provided herein and otherwise in a manner
acceptable to Tenant.

         1.2      Landlord's Covenants for Landlord's Work. Landlord covenants
that it will diligently prosecute the design and construction of Landlord's Work
until completed in all details and deliver possession of the Premises to Tenant
in the Delivery Condition as defined in Paragraph 1.4 of the Lease, and within
ninety (90) days thereafter (subject to Force Majeure and Tenant Delays as
provided in Paragraph 1.5.4 of the Lease), cause the Premises to be Ready for
Occupancy, as defined and provided in Paragraph 1.4 of the Lease.

2.       Construction Drawings and Final Plans.

         2.1      Layout Plans for Tenant Improvements. On or before May 1,
2004, Tenant shall deliver to Landlord layout plans prepared by architects,
engineers and consultants of Tenant's choice showing the layout of, and certain
minimum specifications for, the Tenant Improvements (collectively, the "TI
LAYOUT PLANS").

         2.2      Construction Drawings. Landlord shall, at Landlord's expense,
cause all plans, specifications and working drawings for the Building/Site Work
(which shall include, without limitation, all exterior elevations, Systems
requirements, restroom requirements, floor loads and exiting requirements for
the Building and Premises) to be prepared promptly and diligently following the
execution of the Lease (collectively, the "BUILDING/SITE WORK CONSTRUCTION
DRAWINGS"). In addition, promptly following the date Tenant delivers to Landlord
the TI Layout

                                    EXHIBIT C
                                       -2-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Plans, Landlord shall, at Tenant's expense (but subject to Landlord's
contribution of the Tenant Improvement Allowance), cause all plans,
specifications and working drawings for the Tenant Improvements to be prepared
in accordance with, based upon and incorporating the minimum specifications set
forth in the TI Layout Plans (collectively, the "TI CONSTRUCTION DRAWINGS"). The
Building/Site Work Construction Drawings and the TI Construction Drawings
(collectively, the "CONSTRUCTION DRAWINGS") shall be prepared by Carlisle
Coatsworth Architects (or by another architect selected by Landlord and approved
by Tenant), and by engineers and other consultants selected by Landlord and
approved by Tenant. The Building/Site Work Construction Drawings shall
incorporate the Minimum Building/Site Work Specifications as set forth above.
The Construction Drawings shall be in such form and detail as (i) required for
submission to the applicable governmental authorities for the issuance of all
applicable building permits and governmental approvals, and (ii) shall be
adequate for construction of Landlord's Work by Landlord's Contractor and
bidding by all subcontractors. The Construction Drawings shall be submitted by
Landlord to Tenant for Tenant's approval, by no later than July 1, 2004, and
shall be approved by both Tenant and Landlord pursuant to the procedures set
forth below in this Paragraph 2 prior to (A) commencement of construction of
Landlord's Work, and (B) Landlord's submission of the Construction Drawings to
the appropriate governmental authorities (including but not limited to Building
and Health Departments) for approval and issuance of permits. All plans and
specifications delivered to Tenant pursuant to this Paragraph 2 shall consist of
two (2) sets of plans and specifications plus one (1) reproducible set of plans
and specifications.

         2.3      Tenant's Approval of Construction Drawings. Landlord shall
cooperate and coordinate with Tenant and Tenant's consultants in Landlord's
preparation of the Construction Drawings. Landlord shall keep Tenant and
Tenant's consultants informed of the progress thereof to enable consideration of
Tenant's needs and suggestions therefor, as well as to enable coordination with
the planning for the design and installation of the Tenant Fixturization Work to
be performed by Tenant as provided in this Exhibit C. Tenant shall review and
approve (or reasonably disapprove) all phases of the Construction Drawings
(including, but not limited to, elevations, grading plans, schematic plans, and
architectural and engineering drawings and specifications); provided, however,
that notwithstanding Tenant's review and approval of any such phases of the
Construction Drawings, Tenant shall not have any responsibility or liability for
any such Construction Drawings, any design errors or defects therein and/or
compliance of same with Applicable Laws and the other requirements in this
Exhibit C. Tenant shall approve or reasonably disapprove the Construction
Drawings as submitted by Landlord to Tenant within ten (10) business days after
Tenant's receipt thereof. Notwithstanding anything to the contrary contained
herein, Tenant shall not be required to approve (i) any portion of the
Building/Site Work Construction Drawings that do not incorporate, or are
otherwise inconsistent with, the Minimum Building/Site Work Specifications, or
(ii) any portion of the TI Construction Drawings that are inconsistent with,
and/or do not incorporate the minimum specifications set forth in, the TI Layout
Plans. Any notice of disapproval of any portions of the Construction Drawings
from Tenant shall state the reasons for disapproval and the specific changes
which Tenant requests be made. Landlord, upon receipt of any such notice of
disapproval from Tenant, shall revise such portion(s) of the Construction
Drawings as have been disapproved in a manner so as to incorporate Tenant's
proposed specific changes, and resubmit such revised Construction Drawings to
Tenant as soon as reasonably possible thereafter, but in any event within ten
(10) business days after receipt of such notice of disapproval. Tenant shall
have five (5) business days after receipt of such revised Construction Drawings
to notify Landlord of Tenant's approval

                                    EXHIBIT C
                                       -3-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

or reasonable disapproval of such revised Construction Drawings (with any
changes required by Tenant for Tenant's approval to be specified in such
notice), and Landlord shall, upon receipt of such notice of disapproval from
Tenant, revise such portion(s) of the Construction Drawings as have been
disapproved in a manner so as to incorporate Tenant's proposed revisions, and
resubmit such revised Construction Drawings to Tenant as soon as reasonably
possible thereafter, but in any event within five (5) business days after
Landlord's receipt of such notice of disapproval. The foregoing process shall
continue until all phases of the Construction Drawings have been approved by
Tenant.

         2.4      Final Plans. The Building/Site Work Construction Drawings for
the Building/Site Work, as so finally approved by Tenant pursuant to the
foregoing provisions of this Paragraph 2, shall be referred to herein,
collectively, as the "FINAL BUILDING/SITE WORK PLANS". The TI Construction
Drawings for the Tenant Improvements, as so finally approved by Tenant pursuant
to the foregoing provisions of this Paragraph 2, shall be referred to herein,
collectively, as the "FINAL TI PLANS".

3.       No Changes by Landlord to Final Plans. Once the Final Building/Site
Work Plans and Final TI Plans (collectively, the "FINAL PLANS") have been so
approved by Tenant, Landlord may make no changes thereto without Tenant's prior
approval, which may be withheld or granted in Tenant's sole and absolute
discretion; provided, however, to the extent such changes (i) are required by
any applicable governmental authority as a condition to the issuance of the
applicable governmental permits and approvals for Landlord's Work, (ii) pertain
to substitution of any materials that are specified in the Final Plans but are
not readily available to meet the schedule of construction of Landlord's Work
contemplated in this Exhibit C, and/or (iii) are minor changes which shall not
adversely affect Tenant's use of or operation of its business in the Premises
for the Permitted Use, Tenant shall not unreasonably withhold its consent
thereto so long as (A) such changes do not create a Tenant Design Problem (as
defined below), and (B) any substituted materials are of at least equivalent
quantity and quality as the original materials specified on the Final Plans. For
purposes hereof, a "TENANT DESIGN PROBLEM" shall mean changes that are (1)
inconsistent with the Minimum Building/ Site Work Specifications or the TI
Layout Plans, or (2) materially inconsistent with any portion of the Final Plans
initially approved by Tenant.

4.       Tenant Change Orders.

         4.1      Request for Tenant Change Orders. At any time following
Tenant's and Landlord's approval of any portion of the Final Plans, Tenant may
direct, by a written change order request ("TENANT CHANGE ORDER"), any change in
Landlord's Work depicted on the Final Plans, including, without limitation, in
order to reduce (by "value engineering" or otherwise) the cost of any Tenant
Improvements depicted on the Final Plans. No Tenant Change Order shall, however:
(i) materially adversely affect the exterior appearance (other than Tenant's
Signs) of the Land or the Building; or (ii) cause a violation of any Applicable
Laws pertaining to the construction and occupancy of the Improvements. Subject
to the provisions of Paragraph 4.2 below, and the immediately preceding
sentence, Landlord shall diligently implement any Tenant Change Order requested
by Tenant. Any Tenant Change Order shall outline in reasonably specific detail
the change requested and shall further specify the reasons for such proposed

                                    EXHIBIT C
                                       -4-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

change. Tenant's request for any Tenant Change Order, and the implementation
thereof, may constitute a Tenant Delay as and to the extent provided in
Paragraph 6 below.

         4.2      Pricing Requests. Tenant may, at its option and before the
issuance of a Tenant Change Order pursuant to the provisions of this Paragraph
4, submit to Landlord a "PRICING REQUEST", which shall outline with reasonably
specific detail the changes Tenant desires to have priced. Upon receipt of a
Pricing Request, Landlord shall, as soon thereafter as reasonably possible, but
in no event later than seven (7) business days thereafter, deliver a statement
to Tenant which sets forth: (i) the estimated cost of such change, together with
a reasonably detailed breakdown thereof ("PRICING STATEMENT") and reasonable
information concerning the availability of materials and labor required in
connection with the proposed change; (ii) the effect that such change would have
on the time of construction (either as an increase or a decrease) and the costs
of the delays resulting therefrom; and (iii) Landlord's determination whether
the proposed change would violate the provisions of clauses (i) and/or (ii) of
Paragraph 4.1 above. In the event Tenant approves the applicable Tenant Change
Order as provided in Paragraph 4.3 below, Tenant shall be responsible for the
cost of the Tenant Change Order as and to the extent provided in Paragraph 5.4.2
below.

         4.3      Review of Pricing Statements. Upon receipt of any Pricing
Statement, Tenant shall have five (5) business days to review such Pricing
Statement. Upon completion of such review, Tenant shall have the option to
either: (i) accept the Pricing Statement and request a Tenant Change Order
conforming to the Pricing Statement, as applicable, in which event Tenant shall
be deemed to have agreed, for all purposes of this Exhibit C, to the estimates
and determinations of Landlord pursuant to clauses (ii) and (iii) of Paragraph
4.2 above; or (ii) reject the Pricing Statement. Should Tenant timely accept the
Pricing Statement, Landlord shall promptly thereafter prepare a Tenant Change
Order in accordance with the provisions of Paragraph 4.1 above. In no event,
however, shall Landlord be required to perform any Tenant Change Order which
would be technically impossible to perform or which would be unlawful. If within
such five (5) business day period Tenant rejects a Pricing Statement, or fails
to respond to such Pricing Statement, then Tenant shall be deemed to have
elected not to proceed with the proposed Tenant Change Order which is the
subject of such Pricing Statement, and Landlord shall perform Landlord's Work in
accordance with the Final Plans therefor without the implementation of such
proposed Tenant Change Order.

5.       Permits; Construction of Landlord's Work.

         5.1      Permits. Promptly following Tenant's approval of the Final
Building/Site Work Plans, Landlord shall, at Landlord's cost (and promptly
following Tenant's approval of the Final TI Plans, Landlord shall, at Tenant's
expense, subject to contribution of the Tenant Improvement Allowance), commence
and diligently proceed to obtain, and shall be solely responsible for obtaining,
all applicable permits and other governmental approvals for the construction of
the Building/Site Work and Tenant Improvements, respectively (collectively, the
"PERMITS"). All fees and other charges required to be paid to any governmental
authority in connection with Landlord's Work shall be timely paid by Landlord
(subject, however, to the provisions of Paragraph 5.4.2 below). In the event
that it is not possible to obtain the necessary Permits for Landlord's Work
without incorporating changes to the Final Plans which would both cause a Tenant
Design Problem and materially adverse affect Tenant's use of or operation of its
business

                                    EXHIBIT C
                                       -5-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

in the Premises for the Permitted Use (hereinafter, a "TERMINABLE EVENT"), then,
notwithstanding Landlord's and Tenant's reasonable efforts to resolve the
requested change in a manner that would not result in a Terminable Event, Tenant
shall have the right, upon written notice to Landlord, to terminate the Lease
unless, within ten (10) business days after such termination notice is delivered
to Landlord, such Permits are obtained in a manner that would not result in a
Terminable Event or is otherwise reasonably acceptable to Tenant. All costs
incurred in connection with modifying the Final Plans to meet the requirements
of all applicable governmental agencies, and all additional improvements
required in connection therewith, shall be paid by Landlord (subject, however,
to the provisions of Paragraph 5.4.2 below).

         5.2      Construction of Landlord's Work; Guaranteed Maximum
Construction Contract for Tenant Improvements. Following Tenant's approval of
the Final Building/Site Work Plans and Landlord's receipt of all applicable
Permits for the Building/Site Work, Landlord shall diligently commence and
complete the construction of the Building/Site Work in a good and workmanlike
manner and in strict compliance with the Final Building/Site Work Plans, all
Applicable Laws and such Permits. Following Tenant's approval of the Final TI
Plans and Landlord's receipt of all applicable Permits for the Tenant
Improvements, Landlord shall diligently commence and complete the construction
of the Tenant Improvements in a good and workmanlike manner and in strict
compliance with the Final TI Plans, all Applicable Laws and such Permits.
Landlord shall cause Landlord's Work (i.e., the Building/Site Work and Tenant
Improvements) to be constructed through a single licensed general contractor
(the "LANDLORD'S CONTRACTOR") and licensed subcontractors, laborers, vendors and
materialmen selected and retained by Landlord, and reasonably approved by Tenant
pursuant to a competitive bidding procedure mutually acceptable to Landlord and
Tenant. Notwithstanding the foregoing to the contrary, Tenant hereby approves
Landlord's selection of Panattoni Construction Inc., a California corporation
("PANATTONI CONSTRUCTION") as Landlord's Contractor, without any competitive
bidding of general contractors, so long as with respect to the Tenant
Improvements component of Landlord's Work only (and not the Building/Site Work):
(i) Panattoni Construction's total compensation for overhead, general conditions
and profit pertaining to the Tenant Improvements constructed hereunder does not
exceed four percent (4%) of the total "hard" costs of constructing the Tenant
Improvements (exclusive of such overhead, general conditions and profit); (ii)
Panattoni Construction competitively bids all work of the Tenant Improvements to
be performed by subcontractors, laborers and materialmen in accordance with a
competitive bidding procedure mutually acceptable to Landlord and Tenant, and
pursuant to which the lowest qualified bidders shall be selected to perform such
work (however, Landlord and Panattoni Construction shall not be required to
competitively bid the Building Site/Work); and (iii) Landlord and Panattoni
Construction enter into a guaranteed maximum construction contract for the
construction of the Tenant Improvements (the "TI CONTRACT"), which TI Contract
shall be reasonably approved by Tenant and based upon and incorporate such
competitive bids and the four percent (4%) maximum overhead, general conditions
and profit payable to Panattoni Construction as provided hereinabove, with all
costs of construction of the Tenant Improvements in excess of the guaranteed
maximum construction contract amount set forth in the approved TI Contract (the
"GMAX TI AMOUNT") to be borne and paid for solely and exclusively by Landlord
from Landlord's own funds (and not deducted from the Tenant Improvement
Allowance), except: (A) with respect to the cost of any Tenant Change Orders to
the extent Tenant is responsible for the payment therefor pursuant to Paragraph
5.4.2 below; and (B) Landlord shall be entitled to receive a supervision fee in
connection with the design and

                                    EXHIBIT C
                                       -6-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

construction of the Tenant Improvements, only (the "TI SUPERVISION FEE") to be
deducted from the Tenant Improvement Allowance, equal to two percent (2%) of the
total "hard" costs of constructing the Tenant Improvements (exclusive of such TI
Supervision Fee, and exclusive of the overhead, general conditions and profit
payable to Panattoni Construction).

5.3      General Requirements for Landlord's Work.

                  5.3.1    Insurance. At all times during the course of
Landlord's Work, Landlord shall maintain in effect, at Landlord's sole cost and
expense: (i) "builder's risk--all risk" insurance covering 100% of the
replacement cost of Landlord's Work constructed by Landlord during the course of
construction in the event of fire, lightening, windstorm, vandalism, malicious
mischief and all other perils (other than earthquake) generally included within
the classification "Special Form--Risk of Direct Physical Loss", and otherwise
meeting the Property Damage Insurance requirements set forth in Paragraph 10.4.1
of this Lease; (ii) workers compensation insurance and all other insurance
required by Applicable Laws in connection with Landlord's Work; and (iii) all
liability insurance required under Paragraph 10.3 of the Lease, except to the
extent that any requirement set forth therein is clearly inapplicable during the
construction period. Tenant shall be named as an additional insured with respect
to the policy required pursuant to clause (iii) hereinabove.

                  5.3.2    Payment of all Liens and Costs. Landlord shall,
subject to any rights to contest set forth elsewhere in the Lease, keep the
Premises free of all liens relating to Landlord's Work and shall diligently file
all appropriate notices of completion for such purpose.

                  5.3.3    Guaranty. Concurrently with the execution of this
Lease, Landlord shall provide to Tenant a Payment and Performance Guaranty (the
"GUARANTY") executed by Panattoni Investments, LLC, a California limited
liability company ("GUARANTOR") guaranteeing, among other things, the prompt and
diligent payment and performance by Landlord of Landlord's Work, and the prompt
and diligent payment, performance and observance by Landlord of all of
Landlord's other covenants and obligations set forth in this Exhibit C. Such
Guaranty shall be in the form of Schedule 3 attached to this Exhibit C.

                  5.3.4    Cooperation and Coordination. Landlord shall use
reasonable efforts to cooperate with Tenant, and to cause Landlord's Contractor,
subcontractors, consultants and all other persons involved in the Landlord's
Work to cooperate with Tenant to the extent reasonably necessary to ensure the
expeditious preparation and approval of the Final Plans, issuance of Permits and
commencement and completion of Landlord's Work. Without limiting the generality
of the foregoing: (i) Landlord shall provide Tenant with copies of all plans and
specifications and construction schedules reasonably requested by Tenant from
time to time to permit all appropriate review and coordination of Landlord's
Work, and shall provide reasonably detailed reports with respect to the status
of the design, permitting and construction of Landlord's Work on a monthly basis
(or such other periods of time as is reasonably requested by Tenant); (ii) upon
Tenant's request, Landlord shall provide Tenant with copies of all studies,
reports and/or inspections relating to Landlord's Work and/or the Premises; and
(iii) Landlord shall permit Tenant and Tenant's employees, consultants,
contractors and other representatives to enter onto the Premises and into the
Building at reasonable times during the course of the design and construction of
Landlord's Work, to monitor the status and progress of the design and

                                    EXHIBIT C
                                       -7-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

construction; however, any such entry by Tenant shall not in any way materially
and unreasonably interfere with Landlord's completion of Landlord's Work.
Landlord and Tenant, and their respective design and construction
representatives, shall meet at least monthly regarding such design, permitting
and construction, provided that Tenant, upon reasonable advance notice, may
convene additional meetings as may be reasonably necessary, and Tenant's
construction and design representatives shall have the right to attend all such
design and construction progress meetings.

         5.4      Cost of Landlord's Work.

                  5.4.1    Landlord's Work Costs. Except as otherwise expressly
provided in Paragraph 5.4.2 below, Landlord shall pay for, at its own expense,
without limit and without contribution from Tenant, all of the costs of the
design and construction of Landlord's Work (collectively, the "LANDLORD'S WORK
COSTS") which shall include, without limitation, the following: (i) the cost of
preparing the Final Plans and all preliminary and prior stages thereof and
subsequent changes thereto; (ii) the cost of equipment, materials, temporary
facilities and labor used in the design, development and/or construction of
Landlord's Work, including, without limitation, transportation and storage
costs; (iii) payments to Landlord's Contractor, and the subcontractors,
laborers, material suppliers and others providing such equipment, materials,
temporary facilities and labor; (iv) costs of clean-up and removal of debris;
(v) fees for Permits, licenses and inspections, including, without limitation,
school fees and other government imposed fees in connection with the design,
development and/or construction of Landlord's Work; (vi) fees of engineers,
surveyors, architects, environmental consultants, and others providing
professional or extra services to Landlord in connection with the design,
development and/or construction of Landlord's Work and the supervision thereof;
(vii) insurance premiums attributable to the construction period; (viii)
premiums for mechanics' lien and stop notice bonds; (ix) cost to serve the
Premises with all applicable utilities, including, without limitation,
connection service fees and hook-up fees; (x) recording costs and filing fees;
(xi) fees for foundation reports, engineering reports, topographic and ALTA
surveys and environmental surveys obtained by Landlord for the design and
construction of Landlord's Work; (xii) costs of grading and filling in
connection with the Premises or remedial action due to the presence of Hazardous
Materials (as defined in the Lease) on, under or about the Premises; (xiii)
expenses such as telegrams, telephone, postage, reproduction and copying
services incurred in connection with the design, development and/or construction
of Landlord's Work; and (xiv) such other costs as may be incurred by Landlord in
connection with the design, development and/or construction of Landlord's Work.

                  5.4.2    TI Costs and Tenant Change Order Costs.
Notwithstanding anything to the contrary contained in this Exhibit C:

                           5.4.2.1  Subject to Paragraph 6.2 below, Landlord
shall only be obligated to contribute up to, but not exceeding, the sum of $3.25
per square foot of Rentable Area of the Building (i.e., Three Hundred
Eighty-Seven Thousand Six Hundred Eighty-Nine Dollars ($3,097,679.00), subject
to adjustment pursuant to Paragraph 1.6 of the Lease) (the "TENANT IMPROVEMENT
ALLOWANCE") to pay for those portions of the Landlord's Work Costs described in
clauses (i) through (vii), and clauses (xiii) and (xiv) in Paragraph 5.4.1 above
to the extent the same are paid and/or incurred for any of the following
(collectively, the "TI COSTS):

                                    EXHIBIT C
                                       -8-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

(i) the costs (including, without limitation, the fees of the architects,
engineers, project managers and other consultants engaged by Tenant) paid and/or
incurred by Tenant in connection with the design of the Tenant Improvements,
preparation of the TI Layout Plans and the review and approval of the
Construction Drawings and Final Plans; (ii) the amounts actually and reasonably
incurred by Landlord for, and are specifically allocable to, the out-of-pocket
expenditures paid to third parties engaged by Landlord for the preparation of
the TI Construction Drawings and Final TI Plans, and the installation and/or
construction of the Tenant Improvements depicted on the Final TI Plans, and/or
(iii) the TI Supervision Fee. Tenant may require Landlord to make all or any of
such payments of the Tenant Improvement Allowance to which Tenant is otherwise
entitled hereunder for the TI Costs directly to Tenant if Tenant has previously
paid any such TI Costs and/or directly to those who are entitled to such payment
because they provided or performed services in connection with the TI Costs. Any
such payments shall be made within thirty (30) days after invoice therefor is
delivered by Tenant to Landlord. The Rentable Area of the Building shall be
determined pursuant to Paragraph 1.6 of the Lease, and the Tenant Improvement
Allowance shall be calculated based upon such determination as provided therein.
Notwithstanding the foregoing, the TI Costs shall specifically exclude the
following: (A) any supervision, coordination or other fees payable to Landlord,
its agents or employees in connection with the Tenant Improvements (other than
the TI Supervision Fee); (B) costs resulting from the negligence or willful
misconduct of Landlord or Landlord's employees, agents, contractors or
subcontractors, and/or Landlord's failure to diligently cause the Tenant
Improvements to be constructed; (C) the cost of any changes to the Final TI
Plans or the Tenant Improvements depicted on the Final TI Plans not approved by
Tenant pursuant to the procedures and standards for approval set forth in
Paragraph 3 above; (D) any defects in the construction of the Tenant
Improvements; (E) any costs described in clause (viii) and clauses (ix) through
(xii) in Paragraph 5.4.1 above; (F) any overhead, general conditions or profit
payable to Panattoni Construction in connection with the design and construction
of the Tenant Improvements in excess of the maximum four percent (4%) amount
therefor as set forth in Paragraph 5.2 above; (G) any costs of construction of
the Tenant Improvements in excess of the GMax TI Amount therefor set forth in
the TI Contract approved by Tenant pursuant to Paragraph 5.2 above, except for
the cost of any Tenant Change Orders to the extent Tenant is responsible for
same pursuant to Paragraph 5.4.2.2 below; (H) any costs due to the errors in the
Final Plans or resulting from Final Plans which are incorrect or incomplete,
which do not comply with Applicable Laws or which otherwise fail to meet the
requirements therefor set forth in this Exhibit C; and/or (I) Landlord's failure
to construct Landlord's Work in compliance with Applicable Laws, the Final
Plans, and/or the other requirements and provisions set forth in the Lease or
this Exhibit C. Such excluded costs shall be Landlord's responsibility to pay,
at Landlord's sole cost, without deduction from the Tenant Improvement
Allowance; and

                           5.4.2.2  Any increase in Landlord's Work Costs
resulting from a Tenant Change Order requested and implemented by Tenant
pursuant to Paragraph 4 above, which increased cost would not have been incurred
but for such Tenant Change Order, shall be paid for by Tenant within fifteen
(15) days after invoice, which costs may be paid out of and credited against the
Tenant Improvement Allowance. Landlord agrees to credit Tenant with any cost
savings arising out of any Tenant Change Orders such that the cost savings may
be applied by Tenant to the cost of any Tenant Change Orders which actually
increase Landlord's Work Costs.

                                    EXHIBIT C
                                       -9-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

6.       Fixturization Work; Disbursement of Tenant Improvement Allowance.

         6.1      Fixturization Work. The parties acknowledge and agree that:
(i) Tenant will be responsible for retaining architects, engineers, contractors
and other consultants of Tenant's choice to design, and from and after the
Delivery Date install, Tenant's racking systems, security systems, data systems
and other fixtures, furniture, equipment, systems and personal property (and
related cabling and wiring) within the Building and/or at the Premises, and any
Signs and Communication Equipment (as defined in Article 4 of the Lease) that
Tenant elects to be installed (collectively, the "FIXTURIZATION WORK") (however,
the Fixturization Work shall not include any such items that are other than
Tenant's racking systems and are specifically designated by Tenant to be
installed by Landlord as part of the Tenant Improvements pursuant to Paragraph
1.1 above, subject to the restrictions therein regarding cabling for Tenant's
telephone, data and security systems); (ii) Tenant shall be solely responsible
for the costs of design and construction of such Fixturization Work, except as
expressly provided in Paragraph 6.2 below regarding the cost of the Tenant's
Signs and Communication Equipment; and (iii) the Fixturization Work will be
performed while Landlord is completing Landlord's Work and making the Premises
Ready for Occupancy as described in Paragraphs 1.2 and 1.4 of the Lease.
Performance by Tenant of the Fixturization Work will be subject to the following
additional terms and conditions:

                  (A)      each party shall cooperate with the other party, and
cause its contractors to cooperate with the other party's contractors, in the
performance of the Fixturization Work and Landlord's Work so that (1) the
concurrent construction of such work will be performed pursuant to a schedule
mutually acceptable to Landlord and Tenant and their respective contractors, and
(2) disruption of the Fixturization Work and Landlord's Work can be kept to a
commercially reasonable minimum;

                  (B)      Tenant, or Tenant's representative, shall secure the
approval of governmental authorities and all permits required by governmental
authorities having jurisdiction over such approvals and permits for the
Fixturization Work, with Landlord's cooperation to the extent practicable, and
Tenant shall promptly provide Landlord copies of such approvals and permits
following Tenant's receipt thereof; and

                  (C)      Tenant's contractors' construction materials, tools,
equipment and debris for the Fixturization Work may be stored or "staged" on or
within the Building, and/or in other reasonably accessible areas of the Premises
which shall be designated for that purpose by Landlord and provided by Landlord
without charge. Landlord shall reasonably cooperate with Tenant to provide an
adequate staging area in the Building and/or at the Premises for Tenant and its
contractors. Tenant hereby agrees that the storage of any such materials, tools,
equipment and debris, and any damage to or loss of any such property, shall be
at Tenant's sole risk and at Tenant's sole cost and expense, and Tenant shall
indemnify, defend and hold Landlord harmless from and against any claims for
such damage to or loss of such property, except to the extent such damage or
loss is due to the negligence or willful misconduct of Landlord.

         6.2      Disbursement of Tenant Improvement Allowance. Landlord shall
pay for the TI Costs from the Tenant Improvement Allowance as and when such TI
Costs are incurred. To the extent the Tenant Improvement Allowance exceeds the
TI Costs, the remaining balance

                                    EXHIBIT C
                                      -10-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

thereof (not to exceed one-third (1/3) of the entire Tenant Improvement
Allowance) may be used by Tenant to: (i) pay for the costs of the design and
construction of Tenant's Signs and Communication Equipment included as part of
the Fixturization Work; (ii) pay for the costs incurred by Tenant in relocating
to the Premises; (iii) pay for the cost of any Tenant Change Orders to
Landlord's Work required to be paid for by Tenant pursuant to Paragraph 5.4.2
above; and/or (iv) as a credit against the Rent next due and payable under this
Lease. Disbursement of the Tenant Improvement Allowance for the costs described
in clauses (i) and (ii) hereinabove shall be made by Landlord to Tenant (or, at
Tenant's option, directly to those who are entitled to such payment because they
provided materials or products or performed services in connection therewith)
after Tenant has delivered to Landlord invoices for such costs.

         6.3      Over-Allowance Amount. Prior to the commencement of the
construction of the Tenant Improvements, and after Landlord has accepted all
subcontractor bids for the Tenant Improvements and entered into the TI Contract
with Landlord's Contractor approved by Tenant pursuant to Paragraph 5.2 above,
Landlord shall provide to Tenant for Tenant's approval, which shall not be
unreasonably withheld or delayed, a written detailed cost breakdown (the "FINAL
TI COSTS STATEMENT"), by trade, of the final TI Costs to be incurred, or which
have been incurred, in connection with the design and construction of the Tenant
Improvements to be performed by or at the direction of Landlord's Contractor
(which TI Costs for construction of the Tenant Improvements shall not exceed the
GMax TI Amount approved by Tenant as part of the TI Contract) (collectively, the
"FINAL TI COSTS"). In the event the Final TI Costs specified on the Final TI
Costs Statement exceed the Tenant Improvement Allowance (the "OVER-ALLOWANCE
AMOUNT), Tenant shall pay to Landlord the Over-Allowance Amount as follows, but
only to the extent Tenant is responsible for such excess TI Costs pursuant to
the foregoing provisions of this Exhibit C (which funds from Tenant Landlord
shall disburse only to pay for the TI Costs):

                  (i) Tenant shall pay to Landlord fifty percent (50%) of the
Over-Allowance Amount within ten (10) business days after the Delivery Date;

                  (ii) Tenant shall pay to Landlord twenty-five percent (25%) of
the Over-Allowance Amount by the date which is the later of (A) forty-five (45)
days after the Delivery Date, or (B) ten (10) business days after the date
one-half (1/2) of the Tenant Improvements have been completed and Landlord has
delivered to Tenant evidence that such work has been completed (including a
certificate from Landlord's Contractor to such effect);

                  (iii) Tenant shall pay to Landlord fifteen percent (15%) of
the Over-Allowance Amount within ten (10) business days after the later of (A)
the date Landlord causes the Premises to be Ready for Occupancy, and (B) the
date Landlord delivers to Tenant written evidence that the entire Tenant
Improvement Allowance (except for up to a ten percent (10%) retention of the
Tenant Improvement Allowance which may be held by Landlord to protect against
mechanics' liens) and the entire portions of the Over-Allowance Amount
previously paid by Tenant have been fully disbursed by Landlord to pay for the
TI Costs; and

                  (iv) Tenant shall pay to Landlord the remaining ten percent
(10%) of the Over-Allowance Amount within ten (10) business days after the date
all of the Tenant Improvements (including Punchlist Items) have been completed
and Landlord has delivered to Tenant (A) a written request for such payment
together with evidence that all such work has been completed

                                    EXHIBIT C
                                      -11-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

(including a certificate from Landlord's Contractor to such effect), (B) written
evidence that, except for such balance of the Over-Allowance Amount, the entire
TI Costs have been paid for by Landlord and the entire Tenant Improvement
Allowance and portions of the Over-Allowance Amount previously paid by Tenant
have been fully disbursed by Landlord to pay for such TI Costs, and (C) fully
executed unconditional and final mechanics' lien releases from Landlord's
Contractor and all subcontractors performing the Tenant Improvements.

         6.4      No Payments to Landlord. From and after the Delivery Date,
Landlord shall provide to Tenant and its designers, consultants, architects,
engineers, contractors and subcontractors, uninterrupted use of and access to
the parking areas, loading docks, and related facilities of the Premises as may
be reasonably required to enable Tenant and Tenant's contractors and
subcontractors to install the Fixturization Work, all of which shall be provided
without charge to Tenant or its designers, consultants, architects, engineers,
contractors and subcontractors, and without deduction from the Tenant
Improvement Allowance. In addition, Landlord shall not be entitled to receive,
and there shall be no deduction from the Tenant Improvement Allowance for, any
supervision or coordination fee, profit, overhead or general conditions or
payment of or reimbursement for any other costs incurred by Landlord (including,
without limitation, costs or fees of Landlord's architects, engineers and other
consultants) in connection with the design and installation of the Fixturization
Work.

7.       Tenant Delays.

         7.1      Definition of Tenant Delays. As used herein, "TENANT DELAYS"
are defined as delays (not caused by a Landlord Delay or Force Majeure Delay),
to the extent such delays necessarily and actually delay Landlord's delivery of
possession of the Premises to Tenant in the Delivery Condition as set forth in
Paragraph 1.1 of the Lease, due to any of the following:

                  (i)      Tenant's failure to comply with the time deadlines
imposed upon Tenant as set forth in this Exhibit C;

                  (ii)     Tenant's failure to timely approve or disapprove any
matter expressly requiring Tenant's approval or disapproval pursuant to this
Exhibit C;

                  (iii)    Tenant's breach of any provision of the Lease or this
Exhibit C;

                  (iv)     any Tenant Change Orders requested by Tenant pursuant
to Paragraph 3 above; or

                  (v)      any other wrongful acts or omissions, negligence or
willful misconduct of Tenant or any of Tenant's agents, employees or
contractors.

         7.2      Delivery Condition Delay. In the event the Delivery Date and
Landlord's delivery of possession of the Premises to Tenant in the Delivery
Condition are actually delayed as a result of any Tenant Delays, the Delivery
Date shall be deemed to occur on the date it would have occurred "but for" such
Tenant Delays.

         7.3      Limitations. Notwithstanding the foregoing provisions of this
Paragraph 7 to the contrary:

                                    EXHIBIT C
                                      -12-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                  (i)      if a Tenant Delay occurs, but Landlord fails to
provide written notice thereof to Tenant within five (5) business days after
Landlord actually becomes aware of same (which notice shall specify in
reasonable detail the actions, inactions or other circumstances Landlord claims
constitutes such Tenant Delay), then no such Tenant Delay shall be deemed to
have occurred until and from and after the date Landlord delivers such notice to
Tenant;

                  (ii)     no Tenant Delay shall be deemed to have occurred if
Tenant cures the action, inaction or circumstance which Landlord claims
constitutes such Tenant Delay within two (2) business days after such notice is
received by Tenant (however, Tenant shall only be entitled to an aggregate of
fifteen (15) business days in which to cure any such actions, inactions or
circumstances, and any such Tenant Delays occurring after such fifteen (15)
business days of aggregate cure days utilized by Tenant shall be deemed to have
occurred without taking into account any subsequent cure periods hereinabove);
and

                  (iii)    Tenant Delays shall be recognized under this
Paragraph 7 and the Lease only in the event that satisfaction of the Delivery
Condition is delayed, despite Landlord's commercially reasonable efforts to
adapt and compensate for such delays after Landlord becomes aware of same, which
efforts Landlord shall be obligated to make after Landlord becomes aware of
same.

8.       Representatives. Landlord has designated Steven Palmer as its
representative and Tenant has designated Richard Smith as its representative to
act for purposes of this Exhibit C and to receive notices, requests and demands
under or pursuant to this Exhibit C. All such notices, requests and demands
under or pursuant to this Exhibit C may be given to such representatives in lieu
of those designated to receive notices pursuant to Paragraph 20.15 of the Lease,
and the same shall be deemed delivered to and received by such representatives
upon receipt thereof by such representatives. Notice given by telecopy, with
respect to the parties' rights and obligations under this Exhibit C only, shall
be sufficient for purposes of this Exhibit C (and, in connection therewith, the
telecopy number of Landlord's representative is (949) 474-7833 and the telecopy
number of Tenant's representative is (310) 297-7592). Landlord and Tenant may
change their respective designation of representative hereunder by notice given
to the other.

                                    EXHIBIT C
                                      -13-
<PAGE>
   BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                             SCHEDULE 1 TO EXHIBIT C

                    MINIMUM BUILDING/SITE WORK SPECIFICATIONS

                                   [Attached]

                         [PANATTONI CONSTRUCTION LOGO]

                    MINIMUM BUILDING/SITEWORK SPECIFICATIONS

                                       FOR

                              BIG 5 SPORTING GOODS

                        SYCAMORE CANYON LOGISTICS CENTER
                              Riverside, California
                                     Revised
                                  April 13,2004

PREPARED FOR:                                     PREPARED BY:
Big 5                                             Panattoni Development Company
                                                  19600 Fairchild Road, #285
                                                  Irvine, CA 92612
                                                  (949) 474-7830
                                                  (949) 474-7833 Fax

                                        1

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                PAGE
<S>                                                                             <C>
DIVISION 1: GENERAL REQUIREMENTS                                                  6

  1.00   DEFINED TERMS                                                            6

  1.01   LAWS, ORDINANCES, RULES & REGULATIONS                                    6

  1.02   FIELD ADMINISTRATION PERSONNEL                                           6

  1.03   TECHNICAL AND ADMINISTRATIVE                                             6

  1.04   MOBILIZATION/DEMOBILIZATION                                              6

  1.05   TEMPORARY CONSTRUCTION FACILITIES                                        7

  1.06   QUALITY/TRAINING/SAFETY/PROGRAMS                                         7

  1.07   DAILY CLEANUP                                                            7

  1.08   TESTING                                                                  7

  1.09   FINAL CLEANUP AND PUNCH LIST                                             7

  1.10   IMPACT, PERMIT, & CONNECTION FEES                                        7

  1.11   SIGNAGE                                                                  7

DIVISION 2: SITEWORK                                                              8

  2.01   CLEAR AND GRUB                                                           8

  2.02   LAYOUT ENGINEERING                                                       8

  2.03   MASS EARTHWORK                                                           8

  2.04   FINE GRADE                                                               8

  2.05   UNDERGROUND UTILITIES                                                    8

  2.06   ASPHALT PAVING                                                           8

  2.07   CONCRETE UTILITY SLABS                                                   9

  2.08   SITE CONCRETE                                                            9

  2.09   CONCRETE LOADING DOCKS & APRONS                                          9

  2.10   LANDSCAPE AND IRRIGATION                                                 9
</TABLE>

                                        2

<PAGE>

<TABLE>
<S>                                                                              <C>
  2.11   EXTERIOR SIGNAGE                                                         9

  2.12   EROSION PROTECTION                                                       9

  2.13   OFFSITE CONSTRUCTION                                                     9

DIVISION 3: CONCRETE                                                             10

  3.01   BUILDING FOUNDATIONS                                                    10

  3.02   FLOOR SLAB                                                              10

  3.03   TILT-UP WALLS                                                           10

  3.04   RETAINING/SCREEN WALLS                                                  10

DIVISION 4: MASONRY                                                              10

  4.01   CMU BLOCK WALLS                                                         10

DIVISION 5: STRUCTURAL STEEL & METALS                                            10

  5.01   STRUCTURAL STEEL                                                        10

  5.02   MISCELLANEOUS METALS                                                    11

DIVISION 6: CARPENTRY                                                            11

  6.01   MISCELLANEOUS CARPENTRY                                                 11

  6.02   MECHANICAL SCREEN WALLS                                                 11

  6.03   SMOKE CURTAIN WALLS                                                     11

DIVISION 7: THERMAL & MOISTURE PROTECTION                                        11

  7.01   ROOFING                                                                 11

  7.02   ROOF ACCESS                                                             11

  7.03   MISCELLANEOUS CAULKING                                                  11

  7.04   FLOOR JOINT CAULKING                                                    11

  7.05   INSULATION                                                              11

  7.06   SMOKE HATCHES                                                           11

DIVISION 8: DOORS AND WINDOWS                                                    11

  8.01   EXTERIOR DOORS                                                          11
</TABLE>

                                        3

<PAGE>

<TABLE>
<S>                                                                              <C>
  8.02   INTERIOR DOORS                                                          12

  8.03   ALUMINUM STOREFRONT AND GLAZING                                         12

  8.04   ROLL-UP DOORS                                                           12

DIVISION 9: FINISHES                                                             12

  9.01   EXTERIOR WALL PAINTING                                                  12

  9.02   METAL FRAMING AND DRYWALL                                               12

  9.03   CEILINGS                                                                12

  9.04   FLOOR COVERINGS                                                         12

  9.05   INTERIOR PAINTING                                                       12

  9.06   VINYL WALL COVERING                                                     12

  9.07   CERAMIC TILE                                                            12

  9.08   MISC. PAINTING                                                          12

DIVISION 10: SPECIALTY                                                           13

  10.01  BATHROOM ACCESSORIES                                                    13

  10.02  FENCING                                                                 13

  10.03  FLAGPOLES                                                               13

DIVISION 11: DOCK EQUIPMENT                                                      13

  11.01  LOADING DOCK EQUIPMENT                                                  13

  11.02  MISCELLANEOUS EQUIPMENT                                                 13

DIVISION 12: FURNISHINGS                                                         13

DIVISION 13: SPECIAL CONSTRUCTION                                                13

  13.01  SECURITY SYSTEM                                                         13

  13.02  DETECTION AND ALARM - FIRE/LIFE/SAFETY                                  13

  13.03  FIRE PROTECTION                                                         14

DIVISION 14: CONVEYING SYSTEM                                                    14
</TABLE>

                                        4

<PAGE>

<TABLE>
<S>                                                                              <C>
DIVISION 15: MECHANICAL                                                          14

  15.01  PLUMBING DESIGN/BUILD                                                   14

  15.02  HVAC DESIGN/BUILD                                                       14

DIVISION 16: ELECTRICAL                                                          14

  16.01  LIGHTING DESIGN/BUILD                                                   14

  16.02  ELECTRICAL SERVICE DESIGN/BUILD                                         15

ALLOWANCES                                                                       16
</TABLE>

                                        5

<PAGE>

INTRODUCTION

The intent of this specification is to outline the requirements of an
attractive, high quality, cost efficient building constructed to reflect local
design standards

The Project:

The project will consist of an approximately 953,132 square foot warehouse and
distribution facility. The total site is located on approximately +/- 46.64
acres. The building structure will consist of a concrete tilt-up, with a minimum
clear height per section 3.03. The building will be equipped with an ESFR fire
protection system.

Exterior building elevations shall be constructed of load-bearing, or tilt-up
concrete wall panels.

DIVISION 1: GENERAL REQUIREMENTS

1.0      DEFINED TERMS:

         Owner/Developer: Panattoni Development, LLC; Architect: CC Architects;
         Structural Engineer: Randhava & Associates; Contractor: Panattoni
         Construction Company; Tenant: Big 5 Sporting Goods.

1.01     LAWS, ORDINANCES, RULES & REGULATIONS

         All applicable laws, ordinances, rules and regulations pertaining to
         the City of Riverside, the State of California and Federal Government,
         shall be complied with. Building design in strict compliance with all
         local building codes, including but not limited to the Uniform Building
         Code, Uniform Fire Code and the Americans with Disabilities Act.

1.02     FIELD ADMINISTRATION PERSONNEL

         The field administration personnel shall consist of a full time,
         exclusive project superintendent, and a skilled labor force appropriate
         to the current phase of construction.

1.03     TECHNICAL AND ADMINISTRATIVE

         A design team of experienced architects and engineers familiar with
         this type of building will be assembled to create construction
         drawings, and to consult throughout the construction phase. All
         structures will be designed to meet the applicable seismic zone
         criteria. The Contractor will provide plumbing, mechanical, fire
         protection and electrical construction documents. Contractor may, at
         its option, utilize design/build subcontractors to prepare some of the
         design documents.

         The Architect, Structural Engineer and Civil Engineer will be providing
         errors and omission insurance coverage for their work in the amount of
         $1,000,000 per occurrence and $2,000,000 in aggregate. General
         Contractor shall carry general liability insurance of $2,000,000 per
         occurrence and $5,000,000 umbrella coverage.

         Architect will control the distribution of all prints and maintain a
         record of such distribution.

         Architect to employ line-of-site analysis to assure wall parapets are
         tall enough to screen anticipated roof mounted equipment.

1.04     MOBILIZATION/DEMOBILIZATION

         As work is commenced, temporary utilities and facilities will be
         provided as required. The contractor will be responsible for providing
         and/or coordinating for equipment and materials. Temporary yards and
         facilities will be removed and/or relocated as the job progresses.

                                        6

<PAGE>

1.05     TEMPORARY CONSTRUCTION FACILITIES

         The contractor at various locations on the site will provide temporary
         restrooms. A job site trailer will be furnished with telephone,
         computer, printer, fax machine, and conference room.

1.06     QUALITY AND SAFETY PROGRAMS

         Quality assurance shall be accomplished through direct supervision by
         the on-site superintendent, the project manager, and periodic
         inspection by the architect, as needed. Additionally, the contractor
         will provide for an independent laboratory will conduct specialized
         testing and certification on all required phases of construction. The
         contractor will maintain project safety standards in accordance with
         state and local safety standards.

1.07     DAILY CLEANUP

         Maintain premises and public properties free from accumulation of
         waste, debris, and rubbish caused by operations or wind during and
         after construction. Provide on-site containers for collection of waste
         materials, debris, and rubbish.

1.08     TESTING

         Initial geotechnical report will be provided by Developer, which will:
         address soil shrinkage and subsidence; recommend R-valves, traffic
         indices and paving sections; and indicate soil corrosivity.

         Contractor responsible to provide independent inspection, observation
         and testing as required by all governmental agencies, including but not
         limited to soils, concrete, welding and roofing. Test results shall be
         promptly distributed to the Developer and the local jurisdiction.

1.09     FINAL CLEANUP AND PUNCH LIST

         Contractor shall employ experienced workmen, or professional cleaners
         for final cleanup. In preparation of substantial completion or
         occupancy, conduct final inspection of sight-exposed interior and
         exterior surfaces, and concealed spaces. Remove grease, dust, dirt,
         stains, labels, fingerprints and other foreign materials from exposed
         interior and exterior finishes. At time of substantial completion
         perform "walk-through" with the Tenant and/or Owner. Compile a "punch
         list" as work to be finished, repaired, patched, or touched-up. At the
         completion of punch list work, perform a final walk through with the
         Tenant and/or Owner.

         Contractor is responsible for obtaining final Certificate of Occupancy
         upon completion of all permitted work including Tenant's fixturization
         work.

1.10     IMPACT, PERMIT, & CONNECTION FEES

         Contractor will obtain the building permits that shall be paid for by
         Developer.

         Processing of PUD applications, lot line Adjustments, and other
         required entitlements will be provided by Developer.

         The Tenant is to obtain all the required permits relating to
         environmental issues and operations specific to its business.

1.11     SIGNAGE

         No signage shall be allowed on site or buildings by Contractor or sub
         contractors, unless approved in writing by Developer.

                                        7

<PAGE>

DIVISION 2: SITEWORK

2.01     CLEAR AND GRUB

         Clear site of trees, stumps, debris, surface vegetation and soil of
         organic materials.

2.02     LAYOUT ENGINEERING

         Contractor to provide licensed surveyor to locate pertinent boundaries,
         grades, and building corners. Contractor's superintendent to locate
         footings. Owner shall locate and mark the parcel lines and provide an
         elevation benchmark.

2.03     MASS EARTHWORK

         On-site soils are assumed acceptable for use in engineered fill. The
         site will be graded to balance. All earthwork shall comply with the
         recommendations of the soils engineer. Contractor to be responsible for
         all costs to comply with all local, state and federal handicap
         requirements per drawings.

2.04     FINE GRADE

         Fine grade pad to required +/- 4/100th of a foot.

2.05     UNDERGROUND UTILITIES

         Contractor is responsible to have all utilities including power, phone,
         domestic water, sewer, and storm drains available at the lot lines. Any
         costs associated with additional or the relocation of utilities will be
         at Landlord's expense. Connections will be made and meters set by the
         respectable utility company with the coordination of the Contractor.

         All items shall be designed to meet state and local requirements.

         Domestic Water:   Domestic water service to be installed by Contractor
                           per civil drawings to building and at each office
                           area. Service to include a meter and back flow
                           device. In the case of multiple office locations: one
                           location to be fully operational and the other
                           location(s) to have a suitably sized pipe stubbed
                           into the building from the property line without the
                           final connection of a hot top or meter. Contractor
                           responsible for correct location (including depth) of
                           tie-ins to the public system.

         Irrigation:       Irrigation water service will be provided by
                           Contractor to building. Services will include a
                           meter, back flow device and pressure reducer as
                           required. Contractor responsible for correct location
                           (including depth) of tie-ins to the public system.

         Fire Water:       Contractor responsible for correct location
                           (including depth) of tie-ins to the public system as
                           required by the Fire Department.

         Sewer:            Sewer service will be connected to the sewer main.
                           Contractor to stub sewer 20' into building at primary
                           office location. The location to have a clean-out in
                           pour strip. Contractor responsible for correct
                           location (including depth) of tie-ins to the public
                           system.

         Storm Drain:      The storm drain system will drain the entire site and
                           tie into the Public Storm System. Contractor
                           responsible for correct location (including depth) of
                           tie-ins to the public systems. Any on-site
                           retention/detention systems, as required, will be the
                           responsibility of the Contractor.

2.06     ASPHALT PAVING

         Paving section for truck traffic areas will be per recommendations of
         soils engineer.

                                        8

<PAGE>

         Paving section for auto and truck traffic areas will be per
         recommendations of soils engineer.

         Civil drawings to indicate paving sections.

         Approximately 168 trailer spaces and 437 automobile spaces shall be
         striped.

2.07     CONCRETE UTILITY SLABS

         Trash enclosure pad will be 6", 3,000 psi, concrete slab

2.08     SITE CONCRETE

         Curbs shall be 6" extruded concrete curbs except for poured in place
         curb and gutter where applicable between all paving and landscaping.

         Provide 4" concrete slabs for the sidewalks.

2.09     CONCRETE LOADING DOCKS & APRONS

         Loading Docks:    Only docks and aprons to be concrete, balance to be
                           asphalt paving. Aprons will be located on the North
                           and South side of the building, built out 60'0" from
                           the dock doors and will be built to the outside edge
                           of each ramp in width, of a 6" nominal thickness
                           unreinforced concrete slab with a compressive
                           strength of 3,500 psi on compacted native soils as
                           designed by engineer. All construction joints to have
                           3/4" smooth greased dowels at 24" O.C. Dock height to
                           be 48".

2.10     LANDSCAPE AND IRRIGATION

         Contractor will use Hunter Landscape as the design-build landscaping
         sub-contractor. Contractor will be responsible for all costs associated
         with obtaining final City or jurisdiction approval.

         Landscape:        Provide a mix of trees and ground cover. All
                           landscaping shall be installed per City guidelines.

         Irrigation:       Provide 100% coverage to landscaped area with a fully
                           automated commercial grade irrigation system, which
                           shall be designed to prevent water over spray from
                           hitting all building surfaces.

         Erosion Control:  To be provided as needed.

         Final design to be approved by City.

2.11     EXTERIOR SIGNAGE

         By Tenant

2.12     EROSION PROTECTION

         To be provided per local requirements. Civil engineer will provide SWPP
         program with full implementation by General Contractor.

         Provide an allowance for erosion control.

2.13     OFFSITE CONSTRUCTION

         Contractor to provide curb, gutter, sidewalk, streetlights, fire
         hydrants, median work, paving, street work and utility modifications
         (including any removal, relocation, and/or under-grounding as required
         by the governing jurisdiction) as required to complete subject project.

                                        9

<PAGE>

DIVISION 3: CONCRETE

3.01     BUILDING FOUNDATIONS

         The foundations will be reinforced 2,500 psi concrete isolated, spread
         footings designed to a specified structural yield as directed by
         structural drawings.

3.02     FLOOR SLAB

         The following specification is subject to approval by the structural
         engineer. It will provide a strong, high quality industrial floor of
         superior strength and flatness suitable for warehousing and
         distribution.

         The concrete floor slab shall be 6" thick, 4,000 psi compressive
         strength concrete placed over compacted native soil. In the office
         area, a visqueen vapor barrier will be used under a 6" slab of 4,000
         psi compressive strength concrete on compacted native soil or as
         recommended by soils engineer. Slab slope to be 0.5% or less. The
         concrete will be placed with a laser screed and finished with riding
         power trowels to a burnished finish to meet or exceed Ff50 and Fl 30.

         All construction joints to receive 16" long, 3/4" dowels greased at one
         end,placed at 18" O.C. All control joints to receive dowel baskets with
         dowels placed at a minimum of 24" O.C. and with all joints cut
         perpendicular at a distance not to exceed 18'0". Floor slab will be
         reinforced (1) column bay deep at the entire perimeter of warehouse
         area and throughout office pod areas. Reinforcing will consist of #3
         bars at 18" on center each way.

         Floor will be sealed with one (1) coat of Ashford Formula floor sealer.

3.03     TILT-UP WALLS

         The exterior of building shall be constructed of reinforced concrete.
         Construction and erection of the wall panels to be standard tilt-up
         method. Panel thickness shall be specified by the structural engineer.

         Exterior face of panels shall receive a floor slab finish, and shall be
         prepared to receive finish paint. Panel height shall be per
         architectural drawings to provide a minimum clear height of 30'0" from
         the dock doors to the first column line in at the north and south sides
         of the building and a minimum clear height of 32' from the first column
         line from the north and the south and will continue to the outside
         east/west walls. Interior pick points will be covered by concrete
         patch. The interior panel surfaces will be smooth troweled. Exterior
         panel joints to be caulked. All panels shall be tied together per
         structural drawings and shall meet all applicable seismic codes.

3.04     RETAINING/SCREEN WALLS

         Contractor to provide retaining walls and screen walls as shown on
         drawings.

DIVISION 4: MASONRY

4.01     CMU BLOCK WALLS

         Contractor shall be responsible for all costs associated with any block
         walls on site.

DIVISION 5: METALS

5.01     STRUCTURAL STEEL

         Steel framing shall be a combination of long-span steel bar joists,
         beams and wide-flange columns or truss girders and tube columns, or
         other approved structural assembly. Structural steel shall conform to
         structural engineers design. Column spacing will be 50' x 57' 8" for
         all areas. Minimum clear height from top of floor slab to bottom of
         roof joists is 32' from the first column line from the North and South
         sides of the building.

                                       10

<PAGE>

         Provide interior roof hatch with ladder and cage.

5.02     MISCELLANEOUS METALS

         Install pipe handrails at concrete stairs at each exit man door in the
         dock area, if required.

DIVISION 6: CARPENTRY

6.01     MISCELLANEOUS CARPENTRY

         All miscellaneous carpentry will be performed to provide a professional
         finish.

6.02     MECHANICAL SCREEN WALLS

         Per architectural and structural drawings.

6.03     SMOKE CURTAIN WALLS (SEE 13.03-FIRE PROTECTION)

DIVISION 7: THERMAL & MOISTURE PROTECTION

7.01     ROOFING

         Four-ply built-up roof with a 15 year manufacturer's warranty by Intec
         Permaglas, John-Manville, or equal. Four-ply to include a base, two
         plies (Type IV) and a mineral cap-sheet.

7.02     ROOF ACCESS

         Provide roof access via interior mounted ladder. Ladder to meet all
         applicable codes

7.03     MISCELLANEOUS CAULKING

         Panel joints will be caulked on the exterior to the full panel height.

7.04     FLOOR JOINT CAULKING

         Caulking using a polyurethane product will be done at all construction
         joints and in the warehouse speed bay area, or first bay from dock
         doors, (excluding office pods).

7.05     INSULATION

         Warehouse: Provide white foil type insulation, with scrim reinforcing,
         on underside of roof sheathing, stapled to roof joist vented to prevent
         condensation.

7.06    SMOKE HATCHES

         A quantity of 2.5% of the roof square footage will be curb mounted
         smoke hatches. The cost of additional smoke hatches that may be
         required as a result of Tenant's use/racking or storage plan shall be
         the sole cost of Tenant.

DIVISION 8: DOORS & WINDOWS

8.01     EXTERIOR DOORS

         Exterior man doors to be 3'0" x 7'0" hollow metal doors and frames as
         required by the UBC code exiting requirements. All hardware to be
         Schlage 'D' series Sparta, brushed aluminum, or equivalent. Exterior
         doors will include key cylinder and pull hardware for Fire Department
         access. Final keying will be the Tenant's responsibility. Knox boxes to
         be provided per Fire Department's requirements.

                                       11

<PAGE>

8.02     INTERIOR DOORS

         N/A

8.03     ALUMINUM STOREFRONT AND GLAZING

         Provide storefront system (2" x 4-1/2" front-loaded configuration) at
         main entrances with double leaf storefront doors. Glass to be sized per
         opening, 1/4" single glazed, medium performance, Aluminum and
         safety-glass entrance doors and sidelights, as well as exterior window
         assemblies shall be Kawneer or approved equal. Versalux Blue 2000 R
         reflective glass, tempered as required by code. Glazing to be installed
         with reflective coating on the interior surface.

8.04     ROLL-UP DOORS

         Provide doors at dock area, and four (4) 12' x 14' grade level doors.
         Doors will be heavy duty, 24 gauge, vertical push up sectional
         (not coiling) track doors with 8" x 16" vision lights.

         All doors to have (1) standard view window installed on the opposite
         side as the door latch.

DIVISION 9: FINISHES

9.01     EXTERIOR WALL PAINTING

         The building exterior will be prepared per paint manufactures
         specifications to receive one coat of primer and one coat of exterior
         latex paint; include paint colors per City of Riverside requirements.
         Exterior man doors, roll-up doors and handrails will be enamel.

9.02     METAL FRAMING AND DRYWALL

         N/A

9.03     CEILINGS

         N/A

9.04     FLOOR COVERINGS

         N/A

9.05     WAREHOUSE INTERIOR PAINTING

         Paint interior warehouse walls one (1) coat to cover. Interior columns
         to be painted yellow to a height of 10' above Finished Floor.

9.06     VINYL WALL COVERING

         N/A

9.07     CERAMIC TILE

         N/A.

9.08     MISC. PAINTING

         All above ground piping such as back-flow preventers shall be painted
         per City's requirements. All fire hydrants and PIV's painted per Fire
         Department Specs. Contractor to provide all handicap and traffics
         signage as well as parking lot curb painting and striping. Contractor
         to stripe all trailer spaces.

                                       12

<PAGE>

DIVISION 10: SPECIALTIES

10.01    BATHROOM ACCESSORIES

         N/A

10.02    FENCING

         1) All gates to be wrought iron and shall either slide or swing. Gate
         tracks cast in place during placing of asphalt. 8' tall wrought iron
         fencing shall be installed on the north and south sides of building. 8'
         tall chain link fencing shall be installed on the west side of
         building.

10.03    FLAGPOLES

         N/A

DIVISION 11: EQUIPMENT

11.01    LOADING DOCK EQUIPMENT

         N/A

11.02    MISCELLANEOUS EQUIPMENT

         N/A

DIVISION 12: FURNISHINGS

         N/A

DIVISION 13: SPECIAL CONSTRUCTION

13.01    SECURITY SYSTEM

         N/A

13.02    DETECTION AND ALARM - FIRE LIFE SAFETY

         Contractor shall provide a turn-key, design/build cost to install a
         fire alarm monitoring system for the shell only that will meet all
         current state and local building codes. Design shall be by a qualified
         electrical engineer and or qualified electrical designer.

         Contractor will also be responsible to establish service with the local
         telephone company to provide (2) voice grade, dedicated lines to the
         fire alarm panel and to coordinate with the fire alarm contractor so
         that system is operational and does not delay final sign-off by the
         City and Fire Department. Monthly monitoring and phone company cost to
         be Tenant responsibility.

     1)  Provide design build alarm system to meet minimum code requirements of
         the City, Fire Marshall, NFPA.

     2)  To include but not be limited to the following:

         a) UL central station listed

         b) Double Detector Check Valves

         c) Post Indicator Valves

         d) Riser Valves

                                       13

<PAGE>

         e) Riser flow switches

         f) Pump Room valves

         g) Pump Running

         h) Loss of power

         Security system is the Tenant's responsibility.

13.03    FIRE PROTECTION

         The warehouse area will be fully sprinklered. Building to be equipped
         with an ESFR system. Temperature rating of fire sprinkler heads to be
         165 degrees (F) or per code.

         A complete on-site fire protection underground system shall be provided
         per the specific requirements of the local authorities. This system
         shall include hydrants, sectional valves, back flow prevention, Fire
         Department connection and connections to the public water supply per
         local codes. Provide 6" concrete filled pipe bollards at all risers and
         hydrants. Splash blocks will be provided in the landscaping at all fire
         sprinkler inspector test valves at the exterior perimeter of the
         building.

         Riser assemblies shall include mechanical alarm valves. System control
         valves shall either be riser mounted with wall post extensions or
         exterior post indicator valves as required by the local authority. All
         required devices for central station alarm system interface shall be
         provided, but maintained by the Tenant.

         System design, material and installation shall comply with NFPA 13 and
         the other previous NFPA standards. It shall also comply with UBC and
         UFC standards. Approvals will also be obtained from the Owner's
         insurance authority.

         The cost of the fire hose cabinets and fire extinguishers as required
         by code and due to installation of Tenant's racking shall be a Tenant
         expense.

DIVISION 14: CONVEYING SYSTEM

         N/A

DIVISION 15: MECHANICAL

15.01    PLUMBING DESIGN/BUILD

         See Underground Utilities section 2.05.

15.02    HVAC-DESIGN/BUILD

         Provide exhaust fans and louvers to provide for code air changes in
         warehouse.

DIVISION 16: ELECTRICAL

16.01    LIGHTING DESIGN/BUILD

         Shell scope to include an emergency exit light and an illuminated exit
         sign above each man door. Tenant shall be responsible for the cost of
         any additional emergency exit lighting that may be required due to the
         effects of the tenant's build out and/or racking/storage plan.

         Parking lot lighting not less than one (1) foot candle average and
         shall be limited to exterior mounted wall packs. No light poles will be
         allowed unless required to meet minimum photometric levels.

                                       14

<PAGE>

16.02    ELECTRICAL SERVICE DESIGN/BUILD

         General contractor shall provide a design build cost for the project.
         Design shall be by a qualified electrical engineer and or qualified
         electrical designer. Liability and Errors & Omissions insurance shall
         conform to Section 1.03 of this specification. Plans shall be processed
         with Riverside Public Utility Agency by the General contractor, the
         Electrical designer or the Electrical contractor. Any fees shall be
         paid by the General Contractor.

     1)  Primary Service

         a) Primary conduit to Riverside Public Utility Agency designated
            location per Riverside Public Utility Agency approved drawings.
            Transformer pad and substructure approved by Riverside Public
            Utility Agency.

         b) Secondary conduit and conductor shall be sized and bussed according
            to the table below, and as required by the Riverside Public Utility
            to the underground pull section.

         c) The underground pull section (UPS), shall be sized and bussed
            according to the table below.

         d) The location of the primary service shall be in an electrical room.
            The electrical room will be located inside the building, constructed
            of a drywall enclosure with a single man door and access to the
            room. Switchgear will be installed on the exterior perimeter
            concrete tilt wall. Alternate locations approved by the Riverside
            Public Utility Agency and the owner will be considered. Final size
            and dimensions of the electrical room shall be recommended by the
            Electrical designer and approved by the Owner and the project
            Architect.

     2)  House Service

         a) An independently metered House Service shall be sized at 200 Amps,
            277/480 volts, three phase.

            i) The House Meter may be either a Meter Section or a Meter Main
               Service Panel

           ii) The house Service shall serve the following design/build
               components:

               (1) Exterior lighting to meet Local Building Department
                   standards. Inclusive but not limited to an average of 1 Foot
                   Candle maintained on all parking, drive, and truck surfaces.
                   Lighting control to clock on, photo-cell off.

               (2) Lighting in the Electrical room.

               (3) 110 volt circuits in the Electrical room to serve:

                   a) Telephone backboard, irrigation time clock

                   b) Alarm panel

                   c) Code required circuit at all fire risers for riser flow
                      alarm.

                   d) Exit lights over all doors to the exterior (either 110 or
                      277).

     3)  Electrical Service, Design build:

         a) Meter Main bussed to Underground Pull Section.

         b) Conduit and conductor to serve additional tenant.

     4)  General Notes:

         a) Provide photometric layout with all engineered drawings.

<TABLE>
<CAPTION>
2ND CONDUITS   PULL SECTION   HOUSE SERVICE   TENANT I SERVICE   TENANT II SERVICE
------------   ------------   -------------   ----------------   -----------------
<S>            <C>            <C>             <C>                <C>
1600 amps      3,000 amps     N/A             1600 amps          N/A
</TABLE>

Distribution to equipment is not assumed.

                                       15

<PAGE>

ALLOWANCES

A total of $3.25 per building square foot to be used for the following Tenant
requested improvements:

BIG 5 - REQUESTED SHELL IMPROVEMENTS

1.   Approximately 47,000 SF of improved office space.

2.   Approximately 23,600 SF of mezzanine with code stairs.

3.   Two-Stop elevator, 2500 lbs., holeless hydraulic with pit.

4.   1,600 amp meter section, 277-480 volt 3 ph 4 wire (no electrical
     distribution except to office sub-panel).

5.   15-year Manufacturer roof Warranty in lieu of 10 year.

6.   400 watt metal halide fixture 25 fc average in warehouse, (no racking).

7.   Lenses for 400-watt metal halide fixtures.

8.   Ashford sealer for warehouse slab.

9.   Sewer line to southwest corner of the building.

10.  Conduit for future electrical service at west end of the building.

11.  Dock equipment.

12.  White gasroom - approximately 2,080 SF

13.  Aerosol room - approximately 3,952 SF

14.  Valuable room - approximately 21,994 SF

15.  Gun room - approximately 3,952 SF

16.  Ammo room - approximately 3,640 SF

17.  Concrete separation wall.

18.  Interior maintenance facility.

19.  Diesel ESFR fire pump (in lieu of electric pump).

20.  Energy management system for warehouse lighting.

21.  Pick level lighting.

     -    Fans and additional electric service to be design/build per Tenant's
          specifications.

22.  Two (2) patio areas.

BIG 5 - REQUESTED SITE IMPROVEMENTS

1.   West yard expansion, grading and paving - 106,464 SF.

2.   South truck driveway (Inbound/Outbound lane - 47,701 SF. of additional
     land).

3.   East employee parking area expansion - approx. 53,000 SF. to include
     approximately 1,900 lf of 8" tall tube steel fencing and pilasters.

4.   Pipe for future secondary water source at west end of building.

5.   Fuel island: Includes concrete slab, walls and 2 - 6,000 gallon above
     ground diesel fuel tanks per Big 5 provided specifications.

6.   Exterior maintenance/truck wash area: Includes water source, concrete slab,
     drains, an approximate 200-gallon oil interceptor and an approximate
     1,200-gallon clarifier with sample pit.

7.   Guard shack complete with sewer and electrical.

                                       16

<PAGE>

[PANATTONI CONSTRUCTION LOGO]

DATE: 4/6/04
PROJECT NAME: Big 5, Sycamore Cyn., Riverside

<TABLE>
<CAPTION>
                                                                                                     QTY    UNIT
                                                                                                     ---    ----
<S>                                                                                                 <C>     <C>
REQUESTED SHELL IMPROVEMENTS ADDS:

  1     APPROXIMATELY 47,000 SF OF IMPROVED OFFICE SPACE:                                           47,000  sf

  2     APPROXIMATELY 23,600 SF OF MEZZANINE WITH CODE STAIRS:                                      23,600  sf

  3     TWO-STOP ELEVATOR, 2500 LBS., HOLELESS HYDRAULIC W/ PIT:                                         1  each

  4     1,600 AMP METER SECTION, 277-480 VOLT 3 PH 4 WIRE (NO ELECTRICAL DISTRIBUTION
        EXCEPT TO OFFICE SUB-PANEL).                                                                     1  lsum

  5     15-YEAR MANUFACTURER WARRANTY IN LIEU OF 10-YEAR:

  6     400 WATT METAL HALIDE FIXTURE 25 FC AVERAGE IN WAREHOUSE: (NO RACKING)                           1  lsum

  7     LENSES FOR 400-WATT METAL HALIDE FIXTURES:                                                       1  lsum

  8     ASHFORD SEALER FOR WAREHOUSE SLAB IN LIEU OF LOPIDALITH:                                         1  lsum

  9     SEWER LINE TO SOUTHWEST CORNER OF THE BUILDING (FROM MAINLINE AT CRESTRIDGE):                  100  lf

  10    CONDUIT FOR FUTURE ELECTRICAL SERVICE AT WEST END OF THE BUILDING:                               1  lsum

  11    DOCK EQUIPMENT:

        a) 30,000 lb. hydraulic levelers, Serco HL-18735, VB420-11SF vertical bumpers:                  12  each
        b) Edge of dock levelers, Serco meod7220-15, VB420 11SF vertical bumpers:                       92  each
        c) Trailer restraints - Serco SL60 with exterior LED lights:                                   104  each
        d) Dock seals, Serco "Ultra seal" model S-2000, XL-100 4" wear pleats:                         104  each
        e) Combination fans/lights at dock leveler locations:                                          104  each
        g) Pits for hydraulic levelers:                                                                 12  each
        h) Pits for edge-of-dock levelers:                                                              92  each
        i) Electrical for dock equipment:                                                              116  each

  12    WHITE GAS ROOM - 2,080 SF:
        Concrete tilt walls with footings & rebar:                                                     176  lf
        *(White Gas room and Ammo room share a common wall)
        Sunken slab & metal grate floor with waterproofing:                                          2,080  sf
        10 x 12 fire rated vertical lift, manual door:                                                   1  each
        3 x 7 mandoor, fire rated:                                                                       1  each
        Paint interior walls:                                                                        8,748  sf

  13    AEROSOL (HAZ/MAT) ROOM - 3,952 SF:
</TABLE>

                                     1 of 3

<PAGE>

[PANATTONI CONSTRUCTION LOGO]

DATE: 4/6/04
PROJECT NAME: Big 5, Sycamore Cyn., Riverside

<TABLE>
<CAPTION>

                                                                                            QTY    UNIT
                                                                                            ---    ----
<S>                                                                                        <C>     <C>
           6" metal studs & 2-hour drywall:                                                   139  lf
           Paint walls:                                                                     8,748  sf
           10 x 12 1-hour rated vertical lift door:                                             1  each
           3 x 7 1-hour rated mandoor:                                                          1  each

  14       Valuable room - 21,944 SF:

           Wire mesh partitions, to underside of roof:                                     11,340  sf
           Paint one side of wall:                                                          3,744  sf
           Openings 10 x 12:                                                                    1  each
           Mangate:                                                                             1  each

  15       GUN ROOM - 3,952 SF:

           Wire mesh partitions including door openings:                                    4,752  sf
           Openings 10 x 12:                                                                    1  each
           Mangate:                                                                             1  each

  16       AMMO ROOM - 3,640 SF:

           6" metal studs & 2-hour drywall:                                                   119  lf
           * (White Gas room and Ammo room share a common wall)
           10 x 12 fire rated vertical lift, manual door:                                       1  each
           3 x 7 mandoor, fire rated:                                                           1  each
           Paint interior walls:                                                            8,748  sf

  17       CONCRETE SEPARATION WALL:

           a) Concrete tilt single wall through roof with footing and
              rebar:                                                                          600  lf
           b) Paint both sides of wall interior only:                                           1  lsum
           c) 16' x 20' fire rated vertical lift manual doors:                                  3  each
           d) 3' x 7' fire rated mandoors:                                                      3  each

  18       INTERIOR MAINTENANCE FACILITY:                                                  13,624  sf

           100 gallon oil interceptor:
           750 gallon 3 stage clarifier with sample pit:
           * Includes epoxy acid resistant floor, lighting to 30 fc,
           2-hour drywall & metal stud separation wall and one 10 x 12
           fire rated vertical lift manual door.

  19       DIESEL FIRE PUMP FOR MAIN SYSTEM IN LIEU OF ELECTRICAL PUMP:                         1  lsum

  20       ENERGY MANAGEMENT SYSTEM FOR WAREHOUSE LIGHTING:                                     1  lsum

           * Estimated payback on energy savings is 11 months.

  21       PICK LEVEL LIGHTING                                                                  1  lsum
</TABLE>

                                     2 of 3

<PAGE>

[PANATTONI CONSTRUCTION LOGO]

DATE: 4/6/04
PROJECT NAME: Big 5, Sycamore Cyn., Riverside

<TABLE>
<CAPTION>
                                                                                                QTY  UNIT
                                                                                                ---  ----
<S>                                                                                             <C>  <C>
          Florescent lighting @ 1st. and 2nd. Levels of the picking racks to be lit with 8'
          florescent fixtures and top level to be lit by area lighting:

22        PATIO AREAS:                                                                            2  each

          1000 sf patios with concrete tilt screen walls, solid
          cover roof and metal screen above tilts:

                       TOTAL REQUESTED SHELL IMPROVEMENTS:

NOTE:     The foregoing is based on the following plans:

          * Preliminary Precise Grading plan from KCT, 13 sheets
            dated 1/28/04.

          * Preliminary Street Improvements plan from KCT, 8 sheets dated 1/28/04.

          * Preliminary Sewer plan from KCT, 4 sheets dated 1/28/04.

          * Preliminary Water plan from KCT, 4 sheets dated 1/28/04.

          * Preliminary Sycamore Cyn. Storm Drainage plan from KCT, 10 sheets dated 1/28/04.

          * PL-16 Bldg. 2 Sycamore Canyon Conceptual plan from CCA dated 12/16/03, 3 sheets.

NOTE:     All costs above include General Contractor's fee and insurance.
</TABLE>

                                     3 of 3

<PAGE>

[PANATTONI CONSTRUCTION LOGO]

DATE: 4/6/04
PROJECT NAME: Big 5, Sycamore Cyn., Riverside

<TABLE>
<CAPTION>
                                                                                                   QTY     UNIT
                                                                                                   ---     ----
<S>                                                                                               <C>     <C>
REQUESTED SITE IMPROVEMENTS

    1    WEST YARD EXPANSION, GRADING AND PAVING - 106,464 SF:

         a) Staking:                                                                                   1  lsum
         b) Grading, sloping, over-exc. & re-compact:                                                  1  lsum
         c) 3.5" AC paving over 5" base:                                                          81,464  sf
         d) Additional curb only:                                                                    379  lf
         e) Additional double swing gate:                                                              1  lf
         f) Additional landscaping:                                                               25,000  sf
         g) Additional tube steel fencing 8' high:                                                   300  lf

    2    SOUTH TRUCK DRIVEWAY [INBOUND/OUTBOUND LANE - 47,701 SF):

         a) Staking:                                                                                   1  lsum
         b) Grading:
         c) 3.5" AC paving over 3" base:                                                          47,701  sf
         d) Striping:                                                                                  1  lsum
         d) Curb & Gutter:                                                                         1,110  lf
         e) Curb only:                                                                             1,280  lf
         f) Additional swing gate:                                                                     1  each

    3    EAST EMPLOYEE PARKING AREA EXPANSION - 53,000 SF:

         a) Staking:                                                                                   1  lsum
         b) Grading:                                                                              53,000  sf
         c) 3.5" AC paving over 3" base:                                                          40,000  sf
         d) Curb:                                                                                  1,800  lf
         e) Striping:                                                                                170  stalls
         f) Landscaping:                                                                          13,000  sf
         g) Light poles:                                                                               6  each
         h) Approximately 1,900 lf of 8' tall tube steel fencing w/ CMU pilasters every 100
         feet for employee parking lot security:
         i) Additional swing gates at entries:                                                         3  each

    4    PIPE FOR FUTURE SECONDARY WATER SOURCE AT WEST END OF BUILDING:                             100  lf

    5    FUEL ISLAND: INCLUDES CONCRETE SLAB, WALLS AND 2 - 6,000 GALLON ABOVE GROUND
         DIESEL FUEL TANKS:

    6    EXTERIOR MAINTENANCE/TRUCK WASH AREA: INCLUDES WATER SOURCE, CONCRETE SLAB,
         DRAINS, 200-GALLON OIL INTERCEPTOR AND A 1,200-GALLON CLARIFIER WITH SAMPLE PIT:              1  lsum

    7    GUARD SHACK ALLOWANCE COMPLETE WITH SEWER AND ELECTRICAL:

                                          TOTAL REQUESTED SITE IMPROVEMENTS:
</TABLE>

                                     1 of 2
<PAGE>

[PANATTONI CONSTRUCTION LOGO]

DATE: 4/6/04
PROJECT NAME: Big 5, Sycamore Cyn., Riverside

<TABLE>
<CAPTION>
                                                                                                  QTY     UNIT
                                                                                                  ---     ----
<S>                                                                                               <C>     <C>
    ALTERNATE COST:

1   SECONDARY DIESEL FIRE PUMP SYSTEM WITH 200,000 GAL. TANK:                                      1      lsum
</TABLE>

NOTE: The foregoing is based on the following plans:

      * Preliminary Precise Grading plan from KCT, 13 sheets dated 1/28/04.

      * Preliminary Street Improvements plan from KCT, 8 sheets dated 1/28/04.

      * Preliminary Sewer plan from KCT, 4 sheets dated 1/28/04.

      * Preliminary Water plan from KCT, 4 sheets dated 1/28/04.

      * Preliminary Sycamore Cyn. Storm Drainage plan from KCT, 10 sheets
        dated 1/28/04.

      * PL-16 Bldg. 2 Sycamore Canyon Conceptual plan from CCA dated 12/16/03,
        3 sheets.

NOTE: All costs above include General Contractor's fee and insurance.

                                     2 of 2
<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                             SCHEDULE 2 TO EXHIBIT C

                        GENERAL CONTRACTOR'S CERTIFICATE

_____________ [Date]

______________________________
______________________________
______________________________
______________________________
Attention: ___________________

         Re:      ________________________________________________

Gentlemen:

         As general contractor for the construction of the above-referenced
project, the undersigned hereby certifies that all construction has been done in
a good and workmanlike manner and that all of the work materials and fixtures
are hereby approved.

                                              Sincerely,

                                              ________________________________
                                              a ______________________________

                                              By:  ___________________________
                                              Name:___________________________
                                              Its:____________________________

                                  SCHEDULE 2 TO
                                    EXHIBIT C
                                       -1-

<PAGE>

                             SCHEDULE 3 TO EXHIBIT C

                        PAYMENT AND PERFORMANCE GUARANTY

         This PAYMENT AND PERFORMANCE GUARANTY ("GUARANTY"), dated as of April
14, 2004, is executed by PANATTONI INVESTMENTS, LLC, a California limited
liability company ("GUARANTOR") in favor of BIG 5 CORP., a Delaware corporation
("TENANT"), in conjunction with, and to induce Tenant to enter into, that
certain Lease of even date herewith (the "LEASE") between Tenant and PANATTONI
DEVELOPMENT COMPANY, LLC, a California limited liability company ("LANDLORD"),
pursuant to which Landlord is leasing to Tenant certain "Premises" more
particularly described in the Lease. Capitalized terms used and not otherwise
defined in this Guaranty shall have the meanings set forth for them in the
Lease.

         In consideration of the foregoing, and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby agrees as follows:

         1.       Guaranty of Landlord's Obligations. Guarantor hereby
unconditionally and irrevocably guarantees to Tenant the following
(collectively, the "GUARANTEED LANDLORD OBLIGATIONS"):

                  (i)      the prompt and diligent payment and performance of
Landlord's Work, and the prompt and diligent payment, performance and observance
by Landlord of all of Landlord's other covenants and obligations set forth in
Exhibit C attached to the Lease and in the other provisions of the Lease
pertaining and/or relating to Exhibit C and Landlord's delivery of possession of
the Premises to Tenant in the condition required therefor as set forth in the
Lease and Exhibit C (including, without limitation, Landlord's obligations and
covenants under Paragraphs 1.4 and 1.5 of the Lease and the first paragraph of
Paragraph 3.1 of the Lease); provided, however, except for (A) the payment of
the costs of Landlord's Work, and (B) the payment and performance of the
correction of any defects in Landlord's Work which are disclosed by Tenant in
writing to Guarantor prior to the Outside Date (as defined below). Guarantor's
obligations under this clause (i) with respect to the performance of Landlord's
Work shall not extend beyond the Outside Date. As used herein, the "OUTSIDE
DATE" shall mean the date which is one (1) year after Landlord's Work has been
completed as evidenced by a Notice of Completion recorded in the Official
Records;

                  (ii)     the prompt payment by Landlord to Tenant of any
Tenant Termination Amount pursuant to Paragraph 1.5.5 of the Lease, if
applicable; and

                  (iii)    the prompt payment and performance of the correction
of any defects which are Landlord's responsibility to perform pursuant to
Paragraph 7.3 of the Lease and which are disclosed in writing by Tenant to
Guarantor on or prior to the Outside Date.

         2.       Modification of Lease; Assignment and Subletting. Guarantor
agrees that the Lease and the Guaranteed Landlord Obligations may be
supplemented, amended and/or otherwise modified from time to time without
Guarantor's consent, in which event this Guaranty shall continue to apply to the
Lease and Guaranteed Landlord Obligations thereunder as so

                                  SCHEDULE 3 TO
                                    EXHIBIT C
                                       -1-

<PAGE>

modified. In addition, no transfer of all or any portion of Landlord's interests
in the Lease shall impair or affect the continuing force of this Guaranty.

         3.       Guarantor Waivers. Guarantor hereby waives, to the fullest
extent allowed by law, all suretyship rights, defenses and other benefits to
which it might otherwise be entitled. Without limiting the generality of the
foregoing:

                  (i)      Tenant shall be entitled to proceed against Guarantor
         with respect to any unfulfilled Guaranteed Landlord Obligations
         regardless of whether Tenant has proceeded, is then proceeding, or
         intends to proceed, against Landlord or any other person with respect
         thereto, and Guarantor expressly waives the benefits of Section 2845 of
         the Civil Code of California;

                  (ii)     Tenant shall not be required to furnish Guarantor
         with copies of any notices given or required to be given to Landlord
         under the Lease, including without limitation notices of default;

                  (iii)    Guarantor's liability for the Guaranteed Landlord
         Obligations shall not be affected, released, terminated, discharged or
         impaired by: (A) the existence of any bankruptcy, insolvency,
         reorganization or similar proceeding with respect to Landlord or any
         other person; (B) any exercise, non-exercise or delay or lack of
         diligence in the exercise of remedies by Tenant against Landlord or any
         other person of the applicable Guaranteed Landlord Obligation; (C) any
         assignment or other transfer (voluntary or involuntary) of Landlord's
         interests in the Lease; (D) the rejection of the Lease in any
         bankruptcy proceeding with respect to Landlord, or any other release or
         discharge of Landlord in any bankruptcy, insolvency, reorganization or
         similar proceeding; (E) any amendment of the Lease; (F) any change in
         the time, manner or place of payment, performance or observance of any
         of the Guaranteed Landlord Obligations; (G) any waiver of, or any
         assertion or enforcement or failure or refusal to assert or enforce, or
         any consent or indulgence granted by Tenant with respect to a departure
         from, any term of the Lease, including without limitation the waiver of
         any default by Landlord, or the making of any other arrangement with,
         or the accepting of any compensation or settlement from, Landlord; or
         (H) any other guaranty now or hereafter executed by Guarantor or any
         other guarantor or the release of any other guarantor from liability
         for the payment, performance or observance of any of the Guaranteed
         Landlord Obligations, whether by operation of law or otherwise; and

                  (iv)     Guarantor hereby expressly waives: (A) notice of
         acceptance of this Guaranty and of any change in the financial
         condition of Landlord; (B) presentment, demand and protest; (C) until
         such time as all defaulted Guaranteed Landlord Obligations are
         fulfilled, all right of subrogation with respect to any obligation of
         Landlord that is fulfilled by Guarantor hereunder; (D) the right to
         trial by jury in any action or proceeding arising out of or with
         respect to this Guaranty or the interpretation, breach or enforcement
         hereof; (E) the right to interpose any setoff or counterclaim in any
         action or proceeding arising out of or with respect to this Guaranty;
         and (F) any right or claim of right to cause a marshalling of the
         assets of Landlord or to cause Tenant to proceed against any collateral
         or security held by Tenant at any time or in any particular order.

                                  SCHEDULE 3 TO
                                    EXHIBIT C
                                       -2-

<PAGE>

The liability of Guarantor hereunder shall be reinstated and revived, and the
rights of Tenant under this Guaranty shall continue, with respect to any amount
at any time paid on account of any Guaranteed Landlord Obligations which shall
thereafter be required to be restored or returned by Tenant upon the bankruptcy,
insolvency or reorganization of Landlord or any other person, or otherwise, as
though such amount had not been paid. Guarantor subordinates any liability or
indebtedness of Landlord held by Guarantor to the Guaranteed Landlord
Obligations.

         4.       Jurisdiction. All disputes with respect to this Guaranty, and
all actions to enforce this Guaranty, may be adjudicated in the state courts of
California or the federal court sitting in California; and Guarantor hereby
irrevocably submits to the jurisdiction of such courts in any action relating to
this Guaranty. To the fullest extent permitted by law, this submission to
California jurisdiction shall be self-operative and no further instrument or
action, other than service of process, shall be required to confer jurisdiction
over Guarantor in any such court. Nothing in this paragraph shall be construed
to limit the right of Tenant to serve process in any manner permitted by law or
to institute any action against Guarantor in the courts of other appropriate
jurisdictions.

         5.       Notices. All notices and other communications provided for in
this Guaranty shall be in writing and be delivered to the appropriate party at
its address as follows:

                  If to Guarantor:

                           Panattoni Investments, LLC
                           8401 Jackson Road
                           Sacramento, California 95826
                           Attn: Carl D. Panattoni

                  If to Tenant:

                           Big 5 Corp.
                           2525 East El Segundo Boulevard
                           El Segundo, California 90245
                           Attn: President or Secretary

Addresses for notice may be changed from time to time by written notice to all
other parties. All communications shall be effective when actually received;
provided, however, that nonreceipt of any communication as the result of a
change of address of which the sending party was not notified or as the result
of a refusal to accept delivery shall be deemed receipt of such communication.

         6.       Attorneys' Fees. In the event that any litigation is commenced
with respect to this Guaranty, the party prevailing in such litigation shall be
entitled to recover, in addition to such other relief as may be granted, its
reasonable costs and expenses, including without limitation reasonable
attorneys' fees and court costs, whether or not taxable, as awarded by a court
of competent jurisdiction.

         7.       Representations and Warranties. Guarantor represents and
warrants to Tenant that: (i) the execution, delivery and performance of this
Guaranty by Guarantor will not violate

                                  SCHEDULE 3 TO
                                    EXHIBIT C
                                       -3-

<PAGE>

any provision of any law, regulation, order or decree of any governmental
authority or of any court binding on Guarantor, or conflict with, result in a
breach of or constitute a default under any provision of any instrument to which
Guarantor is a party or which it or any of its property is bound, and will not
result in the imposition or creation of any lien, charge or encumbrance on, or
security interest in, any of its property pursuant to the provisions of any of
the foregoing; and (ii) this Guaranty has been duly executed and delivered by
Guarantor and constitutes a legal, valid and binding obligation of Guarantor,
enforceable against it in accordance with its terms, subject as to enforcement
of rights and remedies to any applicable bankruptcy, reorganization, moratorium
or other laws affecting the enforcement of creditors' rights generally and
doctrines of equity affecting the availability of specific enforcement or other
equitable remedies.

         8.       Estoppel Certificate. Guarantor hereby agrees that: (i)
Guarantor will, from time to time, within ten (10) days following request by
Tenant, execute and deliver to Tenant a statement certifying that this Guaranty
is unmodified and in full force and effect (or if modified, that it is in full
force and effect as modified and stating such modifications); and (ii) such
certified statement may be relied upon by anyone holding or proposing to acquire
from or through Tenant any interest in the Premises by any prospective assignee
or subtenant of Tenant.

         9.       Miscellaneous. This Guaranty shall: (i) remain in full force
and effect until the payment, performance and observance in full of all of the
Guaranteed Landlord Obligations and all other amounts payable under this
Guaranty; (ii) be binding upon Guarantor, its heirs, legal representatives,
successors and assigns; and (iii) inure to the benefit of and be enforceable by
Tenant and its successors and assigns or by any person to whom Tenant's interest
in the Lease or any part thereof, may be assigned. Wherever in this Guaranty
reference is made to Landlord or Tenant, the same shall be deemed to refer also
to the then heir, legal representative, successor or assign of Landlord or
Tenant, respectively. No provision of this Guaranty that is held to be
inoperative, unenforceable or otherwise invalid shall affect the remaining
provisions, and to this end all provisions hereof shall be severable. In the
event that more than one person or entity executes this Guaranty as Guarantor,
the obligations of each shall be joint and several. Time is of the essence of
this Guaranty. This Guaranty shall be governed by the laws of the State of
California. By accepting this Guaranty, Tenant agrees that it waives the right
to trial by jury in any action or proceeding arising out of or with respect to
this Guaranty or the interpretation, breach or enforcement hereof.

                       [SIGNATURE BLOCK ON FOLLOWING PAGE]

                                  SCHEDULE 3 TO
                                    EXHIBIT C
                                       -4-

<PAGE>

         IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed as of the date first written above.

                                   "Guarantor"

                                   PANATTONI INVESTMENTS, LLC,
                                   a California limited liability company

                                   By: _________________________________________
                                       Carl D. Panattoni, trustee of the
                                       Panattoni Living Trust dated April 8,
                                       1998, Managing Member

                                  SCHEDULE 3 TO
                                    EXHIBIT C
                                       -5-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                    EXHIBIT D

                             PERMITTED ENCUMBRANCES

         Attached to and forming a part of that certain Lease executed under
date of April 14, 2004, by and between PANATTONI DEVELOPMENT COMPANY, LLC, a
California limited liability company, as Landlord, and BIG 5 CORP., a Delaware
corporation, as Tenant.

         The following constitute the "Permitted Encumbrances" described in
Paragraph 3.1 of the Lease:

1.       All non-delinquent general and special taxes and supplemental taxes
         listed as Exception Nos. 1 through 27 of that certain preliminary title
         report dated as of February 20, 2004, issued by First American Title
         Company, order no. NCS-29009-SF (the "PTR"), but only to the extent the
         same affect the Land (and no other property included in the PTR).

2.       Exception No. 28 of the PTR, so long as the Leasehold Title Policy or
         Leasehold Title Commitment issued to Tenant pursuant to the Lease
         modifies this exception to specifically reference the AD #1 water bond,
         only.

3.       Exception No. 30 of the PTR, so long as the Leasehold Title Policy or
         Leasehold Title Commitment issued to Tenant pursuant to the Lease
         includes a 103.1 Endorsement therefor.

4.       Exception Nos. 29, 31, 39 and 40 of the PTR.

                                    EXHIBIT D
                                       -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                    EXHIBIT E

             SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

Recorded at the request of
BIG 5 CORP., and
to be mailed after recording to:

BIG 5 CORP.
P.O. Box 92088
Los Angeles, CA  90009
Attn: A. Saucedo, Legal Dept.

                       SUBORDINATION, NON-DISTURBANCE AND
                              ATTORNMENT AGREEMENT

         THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
"AGREEMENT") is made and entered into as of the ________ day of ____________,
_____, by and among BIG 5 CORP., a Delaware corporation ("TENANT"), PANATTONI
DEVELOPMENT COMPANY, LLC, a California limited liability company ("LANDLORD")
and _______________________________________________, a(n)
________________________ ("BENEFICIARY").

                                R E C I T A L S:

         Landlord and Tenant entered into a Lease dated April 14, 2004 (the
"LEASE") of certain real property more particularly described in Exhibit "A"
attached hereto (said real property, together with the improvements now or
hereafter constructed thereon, collectively, the "PREMISES").

         Beneficiary is the holder of the beneficial interest under a Deed of
Trust dated ________________________, recorded on _______________________, in
the Official Records in the County of Riverside, State of California, as
Instrument No. ____________________, in Book No. ____________, Page No.
______________, on the Premises (the "DEED OF TRUST"). Tenant and Beneficiary
desire hereby to establish certain rights, safeguards, obligations and
priorities with respect to their respective interests by means of the following
non-disturbance, attornment and subordination agreements.

         NOW, THEREFORE, the parties hereto covenant and agree as follows:

                               A G R E E M E N T:

1.       Provided the Lease is in full force and effect and there are no
defaults by Tenant thereunder (beyond all applicable notice and cure periods),
then:

                                    EXHIBIT E
                                       -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         1.1.     The right of possession of Tenant to the Premises and Tenant's
rights arising out of the Lease shall not be affected or disturbed by
Beneficiary in the exercise of any of its rights under the Deed of Trust or the
Note secured thereby.

         1.2.     Tenant shall not be named in any foreclosure action related to
the Deed of Trust, unless such joinder is necessary under applicable law to
foreclose the Deed of Trust, and then only for such purpose and not for the
purpose of terminating the Lease.

         1.3.     In the event that Beneficiary or any other person
("PURCHASER") acquires title to the Premises or succeeds to Landlord's interest
in the Lease pursuant to the exercise of any remedy provided for in the Deed of
Trust or under the laws of the state in which the Premises are located
(including any foreclosure of the Deed of Trust or conveyance in lieu of
foreclosure), the Lease shall not be terminated or affected by the exercise of
any such remedies or by said foreclosure or sale resulting from any such
proceedings; and Beneficiary hereby covenants that any acquisition or sale by it
of the Premises pursuant to the exercise of any rights and remedies under the
Deed of Trust or otherwise, shall be made subject to the Lease and the rights of
Tenant thereunder; and Tenant covenants and agrees to attorn to Beneficiary or
Purchaser as its new landlord; and the Lease shall continue in full force and
effect as a direct lease between Tenant and Beneficiary or Purchaser, as
Landlord, upon all the terms, covenants, conditions and agreements set forth in
the Lease between Tenant and Landlord. However, in no event shall Beneficiary or
Purchaser be:

                  1.3.1.   liable for any act or omission of Landlord, except
for those acts or omissions for which Tenant has given Beneficiary notice
thereof prior to said foreclosure or sale and which Beneficiary has thereafter
failed to cure within the time periods provided for in Paragraph 6 of this
Agreement (except that in no event shall Beneficiary be liable for any
incidental, special or consequential damages [including for property damage or
personal injury], that have accrued prior to said foreclosure or sale resulting
from any acts or omissions of any prior landlord [including Landlord] which
occurred prior to the date such notice was delivered to Beneficiary).
Beneficiary shall provide Tenant with written notice of any such foreclosure or
sale of the Premises as required by law, but in no event less than thirty (30)
days prior to such foreclosure or sale; or

                  1.3.2.   bound by any payment of rent made by Tenant more than
thirty (30) days in advance of the due date under the Lease or liable for any
security deposit unless actually received by Beneficiary or Lender; or

                  1.3.3.   subject to any offsets or defenses which Tenant may
have against any prior landlord (including Landlord) arising prior to said
foreclosure or sale, except for any defenses expressly provided for in the Lease
and any offset and abatement rights expressly provided in Paragraphs 1.5, 2.2,
12.6 and 18.2 of the Lease, provided that Tenant has given Beneficiary notice of
such offsets or defenses prior to said foreclosure or sale. Beneficiary shall
provide Tenant with written notice of any such foreclosure or sale of the
Premises as required by law, but in no event less than thirty (30) days prior to
such foreclosure or sale; or

                                    EXHIBIT E
                                       -2-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                  1.3.4.   bound by any amendment to the Lease made subsequent
to the date of this Agreement without the written consent of Beneficiary, which
consent shall not be unreasonably withheld or withheld for the purpose of
effectuating a change in terms to the Deed of Trust.

Notwithstanding the foregoing, the rights and obligations of Tenant and
Beneficiary, respectively, upon such attornment shall, to the extent of the then
remaining balance of the term of the Lease, including any renewals or extensions
thereof, be the same as now set forth in the Lease and by this reference the
Lease is incorporated herein as part of this Agreement.

2.       The Lease shall be subject and subordinate to the lien of the Deed of
Trust and to all the terms, conditions and provisions thereof, to all advances
made or to be made thereunder, and to any renewals, extensions, modifications or
replacements thereof, not inconsistent with Paragraph 1 of this Agreement.

3.       Beneficiary hereby consents to the application of insurance and
property damage proceeds and condemnation proceeds in accordance with the
applicable provisions of Paragraphs 9, 10 and 12 of the Lease between Landlord
and Tenant (including, without limitation, the provisions of Paragraph 10.4.3 of
the Lease which permit disbursement of insurance proceeds to a beneficiary of
Landlord under a first deed of trust encumbering the Premises to apply towards
the repair of damage to the Premises), whether or not the Deed of Trust is then
foreclosed.

4.       Any notices or other communication required or desired to be given by
one party to the other party hereto shall be given in writing by (i) mailing the
same by certified or registered United States mail, return receipt requested,
postage prepaid, or (ii) sending the same by Federal Express or other comparable
overnight express courier service (with proof of receipt available), addressed
as follows:

                  To Tenant:      Big 5 Corp.
                                  2525 East El Segundo Boulevard
                                  El Segundo, California 90245
                                  Attention: President or Secretary

                  To Landlord:    Panattoni Development Company, LLC
                                  19660 Fairchild Road
                                  Irvine, California 92612
                                  Attention: Steven Palmer

                  To Beneficiary: ______________________________________________
                                  ______________________________________________
                                  ______________________________________________
                                  ______________________________________________

or to such other addresses as the respective parties may from time to time
designate by notice given as provided in this Agreement. Notices shall be deemed
effective upon receipt or refusal to accept receipt (as evidenced by supporting
documentation).

5.       Landlord hereby acknowledges and represents that the rent and all other
amounts due under the Lease have been assigned to Beneficiary as security for
the loan secured by the Deed

                                    EXHIBIT E
                                       -3-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

of Trust. In the event that Beneficiary shall notify Tenant that Landlord has
defaulted under the terms of the Deed of Trust and shall demand in writing that
Tenant pay its rent and all other amounts due under the Lease to Beneficiary,
then Tenant shall pay to Beneficiary all rent and other payments required to be
paid by Tenant to Landlord pursuant to the terms of the Lease for the duration
of the Lease. Such amounts payable by Tenant to Beneficiary shall include only
those payments which become due to Landlord under the terms of the Lease after
the time Tenant has received written notice and demand from Beneficiary as
provided in this Paragraph 5; provided, however, Tenant shall not be liable to
Beneficiary for any payments made to Landlord under the terms of the Lease for
the fifteen (15) business day period following such notice and demand from
Beneficiary, such fifteen (15) business day period being deemed by the parties
hereto to be a reasonable period to permit Tenant to implement any such payment
change. Landlord hereby agrees that, in complying with the provisions of this
Paragraph 5, Tenant shall be entitled to rely solely upon the notices given by
Beneficiary, and Landlord agrees to indemnify, defend, protect and hold Tenant
harmless from and against any and all loss, claim, damage or liability arising
out of Tenant's payment to Beneficiary in compliance with such notice. Landlord
hereby releases and forever discharges Tenant from any all liability for losses
suffered by Landlord as a result of Tenant's compliance with the provisions of
this Paragraph 5, and Tenant shall be entitled to full credit under the Lease
for any rents or other amounts paid to Beneficiary in accordance with this
Paragraph 5 to the same extent as if such payments were made directly to
Landlord. Any dispute between Beneficiary or Purchaser and Landlord as to the
existence or continuance of a default by Landlord under the terms of the Deed of
Trust or the Note secured thereby, or with respect to the extent or nature of
such default, or with respect to foreclosure of the Deed of Trust by
Beneficiary, shall be dealt with and adjusted solely between Beneficiary or
Purchaser and Landlord, and Tenant shall not be made a party thereto.

6.       So long as the Deed of Trust remains an encumbrance against the
Premises, Tenant agrees to concurrently provide Beneficiary with a copy of any
notice of default served upon Landlord. Tenant further agrees that if Landlord
shall have failed to cure such default within the time period provided for in
the Lease, and if such default is curable by Beneficiary, then Beneficiary shall
have the right, at its election, to cure said Landlord default within thirty
(30) days following the expiration of Landlord's cure period, or, in the case of
any non-monetary default which cannot be cured within said 30-day period, to
promptly commence such cure within said 30-day period and thereafter diligently
prosecute same to completion, which completion period shall not exceed one
hundred twenty (120) days. Notwithstanding the foregoing, Tenant may proceed
immediately to cure or cause to be cured any default of Landlord pursuant to the
provisions of the Lease. Any failure by Tenant to give such duplicate notice to
Beneficiary shall not be a default by Tenant either under this Agreement or
under the Lease; provided, however, until such time as Beneficiary has received
such duplicate notice from Tenant and has had a opportunity to cure such default
as required under this Paragraph 6, Tenant shall have no right to (i) terminate
the Lease as a result of Landlord's default or (ii) exercise any offset rights
Tenant may have resulting from such default. Notwithstanding the foregoing
sentence, if any repair or maintenance matter for which Landlord is responsible
is of an emergency nature which if not attended to might result in bodily injury
or damage to Tenant's property, Tenant may make such repair (as provided in
Paragraph 7.2 of the Lease) without prior notice to Beneficiary, and such action
by Tenant shall not waive or limit Tenant's offset and defense rights under
Paragraph 1.3.3 above. Notwithstanding anything to the contrary herein, nothing
herein shall prohibit Tenant from exercising any termination rights it may have
under the

                                    EXHIBIT E
                                       -4-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

Lease (including under Articles 9 and 12 of the Lease) which are not predicated
upon a default of Landlord.

7.       If Beneficiary or Purchaser, by succeeding to the interest of the
landlord under the Lease, shall become obligated to perform the covenants of the
landlord thereunder, then, upon further transfer of the landlord's interest in
the Lease by Beneficiary or Purchaser and provided that the transferee shall
have assumed in writing all of the obligations of the landlord under the Lease
from and after the time of such transfer, all such landlord obligations shall
terminate as to Beneficiary or Purchaser, except for those obligations which
have accrued prior to such transfer.

8.       This Agreement may not be modified other than by an agreement in
writing signed by the parties hereto or by their respective successors in
interest.

9.       This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their successors and assigns.

10.      The foregoing provisions shall be self operative and effective without
the execution of any further instruments on the part of either party hereto.

11.      Should Beneficiary cease to have a beneficial interest under the Deed
of Trust, Beneficiary shall give prompt written notice to Tenant of the
reconveyance, assignment or other form of termination of said beneficial
interest.

12.      This Agreement may be executed in multiple counterparts, each of which
shall constitute an original, but all of which taken together shall constitute
one and the same agreement.

                       [SIGNATURE BLOCK ON FOLLOWING PAGE]

                                    EXHIBIT E
                                       -5-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

                                     By: _______________________________________
                                           Print Name: _________________________
                                           Its.: _______________________________

                                     By: _______________________________________
                                           Print Name: _________________________
                                           Its.: _______________________________

                                                                     BENEFICIARY

                                     BIG 5 CORP.,
                                     a Delaware corporation

                                     By: _______________________________________
                                           Print Name: _________________________
                                           Its.: _______________________________

                                     By: _______________________________________
                                           Print Name: _________________________
                                           Its.: _______________________________

                                                                          TENANT

                                     PANATTONI DEVELOPMENT COMPANY, LLC, a
                                     California limited liability company

                                     By: _______________________________________
                                           Print Name: _________________________
                                           Its.: _______________________________

                                     By: _______________________________________
                                           Print Name: _________________________
                                           Its.: _______________________________

                                                                        LANDLORD

                                    EXHIBIT E
                                       -6-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

STATE OF                              )

                                      ) SS.

COUNTY OF                             )

On _______________, before me, ____________________________, a Notary Public,
personally appeared _____________________ and _______________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

WITNESS my hand and official seal.

Signature_________________________

STATE OF                              )

                                      ) SS.

COUNTY OF                             )

On _______________, before me, ____________________________, a Notary Public,
personally appeared _____________________ and _______________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

WITNESS my hand and official seal.

Signature_________________________

                                    EXHIBIT E
                                      -7-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

STATE OF                              )

                                      ) SS.

COUNTY OF                             )

On _______________, before me, ____________________________, a Notary Public,
personally appeared _____________________ and _______________________,
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.

WITNESS my hand and official seal.

Signature_________________________

                                   EXHIBIT E
                                      -8-

<PAGE>

                            EXHIBIT "A" TO EXHIBIT E

                          LEGAL DESCRIPTION OF PREMISES

                                [To be attached]

                                 EXHIBIT "A" TO
                                    EXHIBIT E
                                       -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                    EXHIBIT F

                           LANDLORD'S WAIVER-INVENTORY

                                             Big 5 Warehouse/Distribution Center
                                                           Riverside, California

State of California                 )
                                    ) ss.
County of Riverside                 )

         WHEREAS, Big 5 Corp., (herein the "CLIENT") has pledged and granted to
THE CIT GROUP/BUSINESS CREDIT, INC., as Agent (herein "CITBC") of 300 South
Grand Avenue, Los Angeles, California 90071, a continuing general lien upon and
security interest in its present and future merchandise, inventory and goods
(herein "INVENTORY") pursuant to a certain Financing Agreement between CITBC as
agent, the Lenders thereto and the Client, as amended; and

         WHEREAS, said lien and security interest covers all said Inventory now
or hereafter located or to be located on Sycamore Canyon Boulevard, Riverside,
California ("PREMISES"), which Premises are owned by the undersigned Landlord
and leased to Tenant pursuant to that certain Lease with Landlord dated April
14, 2004 (the "LEASE") ; now therefore,

         THE UNDERSIGNED, in consideration of the foregoing, and for other good
and valuable consideration, receipt of which is hereby acknowledged, does by
these presents, hereby waives and relinquishes in favor of CITBC, its successors
and assigns, all right of levy for rent and all claims of every kind against
said Inventory now or hereafter kept or to be kept at said Premises, this waiver
to continue until full compliance by the Client with all the terms and
conditions of the Financing Agreement, and until payment and satisfaction of all
Obligations secured thereby; and the undersigned further agrees that, /* it will
not hinder or delay CITBC in enforcing its rights under said Financing
Agreement; that said Inventory may be repossessed or removed by CITBC at any
time and from time to time/** and the undersigned will, /*** provide access
accordingly/****.

* subject to the provisions herein,

** during the term of the Lease and within ten (10) days following the
expiration or earlier termination of the Lease;

*** upon reasonable prior written notice,

**** , provided that: (i) CITBC's exercise of its rights hereunder shall not
delay or limit Landlord's enforcement rights under the Lease against Tenant in
the event of Tenant's default, except that Landlord shall not seize the
Inventory; (ii) CITBC shall use due care in removing any property from the
Premises and shall repair any damage to the Premises caused by its repossession
and removal at CITBC's sole expense; and (iii) in the event CITBC enters the
Premises after expiration or earlier termination of the Lease, and Landlord has
been notified by CITBC in writing that Tenant's liability policy required to be
maintained by Tenant pursuant to the Lease has expired or terminated, CITBC
shall provide Landlord with a certificate of insurance or other evidence that
CITBC has in force a commercial general liability policy for liability for
personal injury, death and bodily injury to persons and damage to property
occurring upon, within or at the Premises and arising from CITBC's activities at
the Premises, which policy shall name Landlord as an additional insured and be
in an amount of not less than a combined single limit of $2,000,000.00.

                                   EXHIBIT F
                                      -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

         Notwithstanding the foregoing, /***** the expiration or sooner
termination of the Lease, the undersigned shall have the right to have any
Inventory that may be located on the Premises removed in accordance with
applicable law and the terms of the Lease./******

***** if CITBC has not removed the Inventory from the Premises within ten (10)
days following

****** If Landlord or CITBC commences legal proceedings to enforce any of the
terms of this Landlord's Waiver, or for damages resulting from a breach of this
Landlord's Waiver, the successful party in such action shall receive from the
other party, in each such action, including any appeal taken thereof, its
reasonable attorneys' fees and costs incurred.

         IN WITNESS WHEREOF, the undersigned, owner-Landlord, has signed below
this __________ day of _______________, _____________.

                                PANATTONI DEVELOPMENT COMPANY, LLC,
                                a California limited liability company

                                By: ____________________________________________
                                Name: __________________________________________
                                Title: _________________________________________

                                By: ____________________________________________
                                Name: __________________________________________
                                Title: _________________________________________

                                Landlord's Address:

                                19660 Fairchild Road
                                Irvine, California 92612
                                Attention:  Steven Palmer

                                    EXHIBIT F
                                       -2-

<PAGE>

                                    EXHIBIT G

                               MEMORANDUM OF LEASE

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

Big 5 Corporation
2525 East El Segundo Boulevard
El Segundo, California 90245
Attention: Jeanne Dawson, Esq.

________________________________________________________________________________
                                                (Space Above For Recorder's Use)

                               MEMORANDUM OF LEASE

         This Memorandum of Lease ("MEMORANDUM"), dated as of April 14, 2004, is
entered into by and between PANATTONI DEVELOPMENT COMPANY, LLC, a California
limited liability company ("LANDLORD"), whose address is 19660 Fairchild Road,
Irvine, CA 92612, and BIG 5 CORP., a Delaware corporation ("TENANT"), whose
address is 2525 East El Segundo Boulevard, El Segundo, California 90245.

         1.       Leased Premises. Landlord and Tenant have entered into that
certain unrecorded Lease (the "LEASE") dated as of April 14, 2004, pursuant to
which:

                  (i)      Landlord has acquired that certain real property
located in the City of Riverside, County of Riverside, State of California, as
more particularly described on Exhibit "A" attached hereto (the "LARGER
PARCEL");

                  (ii)     Landlord is in the process of subdividing the Larger
Parcel into several parcels of land, including that certain parcel of land (the
"LAND") (A) depicted as Parcel 1 on that certain proposed final parcel map no.
31139-1 (the "PROPOSED FINAL MAP"), a copy of the first page of which is
attached hereto as Exhibit "B-1", (B) containing approximately 44.81 net acres
after dedication of Crest Ridge Drive and the expansion parcel for Sycamore
Canyon Boulevard to the City of Riverside, as contemplated by the Proposed Final
Map, and (C) the legal description of which following such subdivision is
anticipated to be as set forth on Exhibit "B-2" attached hereto;

                  (iii)    Landlord leased to Tenant and Tenant leased from
Landlord, and Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, the Land, together with (A) the warehouse/distribution building
containing approximately 953,132 square feet of Rentable Area to be constructed
thereon (the "BUILDING"), and (B) all easements and other public and private
rights now or hereafter appurtenant thereto (collectively, the "PREMISES"), for
a lease term which is conditioned upon and will not commence until after the
occurrence of such subdivision of the Land from the Larger Parcel; and

                                    EXHIBIT G
                                       -1-

<PAGE>

                  (iv)     following such subdivision of the Land from the
Larger Parcel, Landlord and Tenant shall record an amendment to this Memorandum
to (A) reflect that such subdivision has occurred, and (B) attach thereto the
legal description of the Land, as so subdivided, as the land component of the
Premises, which shall reflect the recording information for the recorded final
parcel map for such subdivision.

         2.       Term. The initial Term of the Lease is for a period of
approximately ten (10) years, commencing on the Commencement Date as defined in
the Lease, and ending upon the last day of the calendar month which is ten (10)
years after the Commencement Date.

         3.       Options to Extend. Tenant may, at Tenant's option in
accordance with the terms of the Lease, extend the Term of the Lease for up to
three (3) additional five (5) year terms, on the terms and conditions set forth
in the Lease.

         4.       Incorporation of Lease. This Memorandum is a memorandum of the
Lease. The purpose of this Memorandum is to give notice of the rights and
obligations of the parties hereto under the Lease, and all of the terms and
conditions of the Lease are incorporated herein by reference as if they were
fully set forth herein. In the event of any inconsistency between the terms of
this Memorandum and the terms of the Lease, the terms of the Lease shall
prevail.

         5.       Successors. Subject to the terms of the Lease, this Memorandum
shall be binding upon and inure to the benefit of the respective successors in
interest and assigns of the parties hereto.

         6.       Counterparts. This Memorandum may be executed in multiple
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same agreement.

                       [SIGNATURE BLOCK ON FOLLOWING PAGE]

                                    EXHIBIT G
                                       -2-

<PAGE>

         IN WITNESS WHEREOF, Landlord and Tenant have caused this Memorandum to
be duly executed as of the date first above written.

                                          "Landlord"

                                          PANATTONI DEVELOPMENT COMPANY, LLC,
                                          a California limited liability company

                                          By: __________________________________
                                              Print Name: ______________________
                                              Its.: ____________________________

                                          By: __________________________________
                                              Print Name: ______________________
                                              Its.: ____________________________

                                          "Tenant"

                                          BIG 5 CORP.,
                                          a Delaware corporation

                                          By: __________________________________
                                              Steven G. Miller
                                              Its: President

                                          By: __________________________________
                                              Gary S. Meade
                                              Its: Secretary

                                    EXHIBIT G
                                       -3-

<PAGE>

STATE OF CALIFORNIA                            )
                                               ) ss.
COUNTY OF LOS ANGELES                          )

         On ______________________, before me, ______________________, a Notary
Public in and for said state, personally appeared Steven G. Miller and Gary S.
Meade, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the persons whose names are subscribed to the within instrument
and acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity, and that by his/her/their signature on the instrument, the
persons, or the entity upon behalf of which the persons acted, executed the
instrument.

         WITNESS my hand and official seal.

                                          ______________________________________
                                          Notary Public in and for said State

(SEAL)

STATE OF CALIFORNIA                            )
                                               ) ss.
COUNTY OF ____________                         )

         On ______________________, before me, ______________________, a Notary
Public in and for said state, personally appeared
________________________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument, the person, or the entity upon behalf of which the person acted,
executed the instrument.

         WITNESS my hand and official seal.

                                          ______________________________________
                                          Notary Public in and for said State

(SEAL)

                                    EXHIBIT G
                                       -4-

<PAGE>

STATE OF CALIFORNIA                            )
                                               ) ss.
COUNTY OF ____________                         )

         On ______________________, before me, ______________________, a Notary
Public in and for said state, personally appeared
________________________________________, personally known to me (or proved to
me on the basis of satisfactory evidence) to be the person whose name is
subscribed to the within instrument and acknowledged to me that he/she executed
the same in his/her authorized capacity, and that by his/her signature on the
instrument, the person, or the entity upon behalf of which the person acted,
executed the instrument.

         WITNESS my hand and official seal.

                                          _____________________________________
                                          Notary Public in and for said State

(SEAL)

                                    EXHIBIT G
                                       -5-

<PAGE>

                            EXHIBIT "A" TO EXHIBIT G

                       LEGAL DESCRIPTION OF LARGER PARCEL

Real property in the City of Riverside, County of Riverside, State of
California, described as follows:

PARCEL 1:

PARCELS 1 THROUGH 5 AND 8 THROUGH 10, 15 THROUGH 17, INCLUSIVE, AND 85 OF PARCEL
MAP NO. 24535, AS SHOWN BY MAP ON FILE IN BOOK 162 PAGES 84 THROUGH 90, OF
PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

PARCEL 2:

PARCEL 19 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

THOSE PORTIONS OF PARCELS 12 AND 82 OF PARCEL MAP NO. 24535 AS SHOWN BY MAP ON
FILE IN BOOK 162 PAGES 84 THROUGH 90 OF PARCEL MAPS, RECORDS OF RIVERSIDE
COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHEAST CORNER OF SAID PARCEL 12;
THENCE NORTH 00 DEGREES 08' 36" WEST ALONG THE EAST LINE OF SAID PARCEL 12, A
DISTANCE OF 205.00 FEET TO THE POINT THEREIN;
THENCE SOUTH 89 DEGREES 50' 40" WEST, A DISTANCE OF 342.66 FEET TO AN
INTERSECTION WITH THE NORTHERLY PROLONGATION OF THE EAST LINE OF PARCEL 58 OF
PARCEL MAP 24733 AS SHOWN BY MAP ON FILE IN BOOK 175 PAGES 30 THROUGH 36, OF
PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, SAID EAST LINE HAVING A
BEARING OF NORTH 00 DEGREES 09' 20" WEST;
THENCE SOUTH 00 DEGREES 09' 20" EAST ALONG SAID NORTHERLY PROLONGATION, A
DISTANCE OF 207.99 FEET TO A POINT IN THE SOUTH LINE OF SAID PARCEL 82;
THENCE NORTH 89 DEGREES 20' 39" EAST ALONG SAID SOUTH LINE AND ALONG THE SOUTH
LINE OF SAID PARCEL 12, A DISTANCE OF 342.63 FEET TO THE POINT OF BEGINNING.

PARCEL 3:

PARCEL 20 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA
DESCRIBED AS FOLLOWS:

                                 EXHIBIT "A" TO
                                    EXHIBIT G
                                       -1-

<PAGE>

THOSE PORTIONS OF PARCELS 11 AND 12 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP ON
FILE IN BOOK 162 PAGES 84 THROUGH 90 OF PARCEL MAPS, RECORDS OF RIVERSIDE
COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS:

COMMENCING AT THE SOUTHEAST CORNER OF SAID PARCEL 12;
THENCE NORTH 0 DEGREES 08' 36" WEST ALONG THE EAST LINE OF SAID PARCEL 12, A
DISTANCE OF 205.00 FEET TO THE TRUE POINT OF BEGINNING;
THENCE CONTINUING NORTH 00 DEGREES 08' 36" WEST ALONG SAID EAST LINE AND ALONG
THE EAST LINE OF SAID PARCEL 11, A DISTANCE OF 205.00 FEET TO A POINT THEREON;
THENCE SOUTH 89 DEGREES 50' 40" WEST, A DISTANCE OF 342.70 FEET TO AN
INTERSECTION WITH THE NORTHERLY PROLONGATION OF THE EAST LINE OF PARCEL 58 OF
PARCEL MAP NO. 24733, AS SHOWN BY MAP ON FILE IN BOOK 175 PAGES 30 THROUGH 36,
INCLUSIVE, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, SAID EAST
LINE HAVING A BEARING OF NORTH 00 DEGREES 09' 20" WEST;
THENCE SOUTH 00 DEGREES 09' 20" EAST ALONG SAID NORTHERLY PROLONGATION, A
DISTANCE OF 205.00 FEET;
THENCE NORTH 89 DEGREES 50' 40" EAST, A DISTANCE OF 342.66 FEET TO THE TRUE
POINT OF BEGINNING.

PARCEL 4:

PARCEL 20 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

THAT PORTION OF PARCEL 11 OF PARCEL MAP 24535, AS SHOWN BY MAP ON FILE IN BOOK
162 PAGES 84 THROUGH 90, INCLUSIVE, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY,
CALIFORNIA, DESCRIBED AS FOLLOWS:

COMMENCING AT THE SOUTHEAST CORNER OF PARCEL 12 OF SAID PARCEL MAP NO. 24535;
THENCE NORTH 00 DEGREES 08' 36" WEST ALONG THE EAST LINES OF SAID PARCELS 12 AND
11, A DISTANCE OF 410.00 FEET TO THE TRUE POINT OF BEGINNING;
THENCE CONTINUING NORTH 00 DEGREES 08' 36" WEST ALONG SAID EAST LINE OF PARCEL
11, A DISTANCE OF 205.45 FEET TO THE NORTHEAST CORNER THEREOF;
THENCE SOUTH 89 DEGREES 32' 39" WEST ALONG THE NORTH LINE OF SAID PARCEL 11, A
DISTANCE OF 317.88 FEET TO A POINT THEREIN;
THENCE SOUTH 44 DEGREES 41' 40" WEST, A DISTANCE OF 35.26 FEET TO AN
INTERSECTION WITH THE NORTHERLY PROLONGATION OF THE EAST LINE OF PARCEL 58 OF
PARCEL MAP NO. 24733 AS SHOWN BY MAP ON FILE IN BOOK 175 PAGES 30 THROUGH 36,
INCLUSIVE, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, SAID EAST
LINE HAVING A BEARING OF NORTH 00 DEGREES 09' 20" WEST;

                                 EXHIBIT "A" TO
                                    EXHIBIT G
                                       -2-

<PAGE>

THENCE SOUTH 00 DEGREES 09' 20" EAST ALONG THE NORTHERLY PROLONGATION, A
DISTANCE OF 178.78 FEET;
THENCE NORTH 89 DEGREES 50' 40" EAST, A DISTANCE OF 342.70 FEET TO THE TRUE
POINT OF BEGINNING.

PARCEL 5:

PARCEL 22 AS SHOWN ON CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

THAT PORTION OF PARCEL 11 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP ON FILE IN
BOOK 162 PAGES 84 THROUGH 90, INCLUSIVE, OF PARCEL MAPS, RECORDS OF RIVERSIDE
COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHWEST CORNER OF SAID PARCEL 11;
THENCE SOUTH 00 DEGREES 09' 25" EAST ALONG THE WEST LINE OF SAID PARCEL 11, A
DISTANCE OF 207.92 FEET TO A POINT THEREIN;
THENCE NORTH 89 DEGREES 50' 40" EAST, A DISTANCE OF 305.00 FEET TO AN
INTERSECTION WITH THE NORTHERLY PROLONGATION OF THE WEST LINE OF PARCEL 58 OF
PARCEL MAP NO. 24733 AS SHOWN BY MAP ON FILE IN BOOK 175 PAGES 30 THROUGH 36,
INCLUSIVE, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, SAID WEST
LINE HAVING A BEARING OF NORTH 00 DEGREES 09' 20" WEST;
THENCE NORTH 00 DEGREES 09' 20" WEST ALONG SAID NORTHERLY PROLONGATION, A
DISTANCE OF 184.38 FEET;
THENCE NORTH 45 DEGREES 18' 21" WEST, A DISTANCE OF 35.45 FEET TO A POINT IN THE
NORTH LINE OF SAID PARCEL 11;
THENCE SOUTH 89 DEGREES 32' 39" WEST ALONG SAID NORTH LINE, A DISTANCE OF 279.88
FEET TO THE TRUE POINT OF BEGINNING.

PARCEL 6:

PARCEL 23 AS SHOWN ON CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

THOSE PORTIONS OF PARCELS 11, 13 AND 14 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP
ON FILE IN BOOK 162 PAGES 84 THROUGH 90, INCLUSIVE, OF PARCEL MAPS, RECORDS OF
RIVERSIDE COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS:

COMMENCING AT THE NORTHWEST CORNER OF SAID PARCEL 11;
THENCE SOUTH 00 DEGREES 09' 25" EAST ALONG THE WEST LINE OF SAID PARCEL 11, A
DISTANCE OF 207.92 FEET TO THE TRUE POINT OF BEGINNING;
THENCE CONTINUING SOUTH 00 DEGREES 09' 25" EAST ALONG THE WEST LINE AND ALONG
SAID WEST LINE OF PARCEL 14, A DISTANCE OF 205.00 FEET TO A POINT THEREIN;

                                 EXHIBIT "A" TO
                                    EXHIBIT G
                                       -3-

<PAGE>

THENCE NORTH 89 DEGREES 50' 40" EAST, A DISTANCE OF 305.00 FEET TO AN
INTERSECTION WITH THE NORTHERLY PROLONGATION OF THE WEST LINE OF PARCEL 58 OF
PARCEL MAP NO. 24733 AS SHOWN BY MAP ON FILE IN BOOK 175 PAGES 30 THROUGH 36,
INCLUSIVE, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, SAID WEST
LINE HAVING A BEARING OF NORTH 00 DEGREES 09' 20" WEST;
THENCE NORTH 00 DEGREES 09' 20" WEST ALONG SAID NORTHERLY PROLONGATION, A
DISTANCE OF 205.00 FEET;
THENCE SOUTH 89 DEGREES 50' 40" WEST, A DISTANCE OF 305.00 FEET TO THE TRUE
POINT OF BEGINNING.

PARCEL 7:

PARCEL 24 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

THOSE PORTIONS OF PARCELS 13, 14 AND 82 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP
ON FILE IN BOOK 162 PAGES 84 THROUGH 90, INCLUSIVE, OF PARCEL MAPS, RECORDS OF
RIVERSIDE COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE SOUTHWEST CORNER OF SAID PARCEL 82;
THENCE NORTH 00 DEGREES 09' 25" WEST ALONG THE WEST LINES OF SAID PARCELS 82 AND
14, A DISTANCE OF 205.00 FEET TO A POINT IN THE WEST LINE OF SAID PARCEL 14
WHICH BEARS SOUTH 00 DEGREES 09' 25" EAST 412.92 FROM THE NORTHWEST CORNER OF
PARCEL 11 OF SAID PARCEL MAP NO. 24535;
THENCE NORTH 89 DEGREES 50' 40" EAST, A DISTANCE OF 305.00 FEET TO AN
INTERSECTION WITH THE NORTHERLY PROLONGATION OF THE WEST LINE OF PARCEL 58 OF
PARCEL MAP NO. 24733 AS SHOWN BY MAP ON FILE IN BOOK 175 PAGES 30 THROUGH 36,
INCLUSIVE, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, SAID WEST
LINE HAVING A BEARING NORTH 00 DEGREES 09' 20" WEST;
THENCE SOUTH 00 DEGREES 09' 20" EAST ALONG SAID NORTHERLY PROLONGATION, A
DISTANCE OF 202.34 FEET TO A POINT IN THE SOUTH LINE OF SAID PARCEL 82;
THENCE SOUTH 89 DEGREES 20' 39" WEST ALONG SAID SOUTH LINE, A DISTANCE OF 305.01
FEET TO THE POINT OF BEGINNING.

PARCEL 8:

PARCEL 47 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

THOSE PORTIONS OF PARCELS 11, 12, 13 AND 82 OF PARCEL MAP NO. 24535, AS SHOWN BY
MAP ON FILE IN BOOK 162 PAGES 84 THROUGH 90, INCLUSIVE, OF

                                 EXHIBIT "A" TO
                                   EXHIBIT G
                                      -4-

<PAGE>

PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS:

COMMENCING AT THE NORTHEAST CORNER OF SAID PARCEL 11;
THENCE SOUTH 89 DEGREES 32' 39" WEST ALONG THE NORTH LINE OF SAID PARCEL 11, A
DISTANCE OF 317.88 FEET TO THE TRUE POINT OF BEGINNING;
THENCE SOUTH 44 DEGREES 41' 40" WEST, A DISTANCE OF 35 26 FEET TO AN
INTERSECTION WITH THE NORTHERLY PROLONGATION OF THE EAST LINE OF PARCEL 58 OF
PARCEL MAP NO. 24733 AS SHOWN BY MAP ON FILE IN BOOK 175 PAGES 30 THROUGH 36,
INCLUSIVE, OF PARCEL MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA, SAID EAST
LINE HAVING A BEARING OF 00 DEGREES 09'20" WEST;
THENCE SOUTH 00 DEGREES 09' 20" EAST ALONG SAID NORTHERLY PROLONGATION, A
DISTANCE OF 591.77 FEET TO A POINT IN THE SOUTH LINE OF SAID PARCEL 82;
THENCE SOUTH 89 DEGREES 20' 39" WEST ALONG SAID SOUTH LINE, A DISTANCE OF 60.00
FEET TO THE NORTHWEST CORNER OF SAID PARCEL 58;
THENCE NORTH 00 DEGREES 09' 20" WEST ALONG THE NORTHERLY PROLONGATION OF THE
WEST LINE OF SAID PARCEL 58, A DISTANCE OF 591.72 FEET;
THENCE NORTH 45 DEGREES 18' 20" WEST, A DISTANCE OF 35.45 FEET TO A POINT IN THE
NORTH LINE OF SAID PARCEL 11;
THENCE NORTH 89 DEGREES 32' 39" EAST ALONG SAID NORTH LINE, A DISTANCE OF 110.00
FEET TO THE TRUE POINT OF BEGINNING.

PARCEL 9:

PARCEL 14 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA
DESCRIBED AS FOLLOWS:

THOSE PORTIONS OF PARCELS 18 AND 19 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP ON
FILE IN BOOK 162 PAGES 84 THROUGH 90, OF PARCEL MAPS, RECORDS OF RIVERSIDE
COUNTY, CALIFORNIA, DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHEAST CORNER OF SAID PARCEL 18;
THENCE SOUTH 89 DEGREES 20' 39" WEST ALONG THE NORTH LINE OF SAID PARCELS 18 AND
19, A DISTANCE OF 706.85 FEET TO THE NORTHWEST CORNER OF SAID PARCEL 19;
THENCE SOUTH 00 DEGREES 27' 21" EAST ALONG THE WEST LINE OF SAID PARCEL 19 A
DISTANCE OF 368.10 FEET TO A POINT THEREIN, SAID POINT BEING IN A LINE PARALLEL
WITH AND DISTANT NORTHERLY 24.00 FEET, MEASURED AT A RIGHT ANGLE, FROM THE SOUTH
LINE OF SAID PARCEL 19;
THENCE NORTH 89 DEGREES 28' 31" EAST ALONG SAID PARALLEL LINE, A DISTANCE OF
322.39 FEET TO THE BEGINNING OF A TANGENT CURVE, CONCAVE TO THE NORTH, HAVING A
RADIUS OF 1, 758.00 FEET;

                                 EXHIBIT "A" TO
                                   EXHIBIT G
                                      -5-

<PAGE>

THENCE EASTERLY ALONG SAID CURVE, TO THE LEFT, THROUGH A CENTRAL ANGLE OF 09
DEGREES 15' 38" AN ARC DISTANCE OF 284.14 FEET TO THE END THEREOF;
THENCE NORTH 80 DEGREES 12' 53" EAST, A DISTANCE OF 87.24 FEET;
THENCE NORTH 36 DEGREES 59' 47" EAST, A DISTANCE OF 34.24 FEET TO A POINT IN THE
EAST LINE OF SAID PARCEL 18, SAID POINT BEING IN A NON-TANGET CURVE, CONCAVE TO
THE EAST, HAVING A RADIUS OF 1, 053.00 FEET, THE RADIAL LINE AT SAID POINT BEARS
SOUTH 83 DEGREES 46' 41" WEST;
THENCE NORTHERLY ALONG SAID EAST LINE AND ALONG SAID CURVE, TO THE RIGHT,
THROUGH A CENTRAL ANGLE OF 05 DEGREES 45' 58", AN ARC DISTANCE OF 105.97 FEET TO
THE END THEREOF;
THENCE NORTH 00 DEGREES 27' 21" WEST ALONG SAID EAST LINE, A DISTANCE OF 199.82
FEET TO THE POINT OF BEGINNING.

PARCEL 10:

PARCEL 15 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

PARCEL 20 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP ON FILE IN BOOK 162 PAGES 84
THROUGH 90, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA;

EXCEPTING THEREFROM THE SOUTHERLY 24.00 FEET THEREOF.

PARCEL 11:

PARCEL 16 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

PARCEL 21 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP ON FILE IN BOOK 162 PAGES 84
THROUGH 90 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA;

EXCEPTING THEREFROM THE SOUTHERLY 24.00 FEET THEREOF.

PARCEL 12:

PARCEL 17 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA,
DESCRIBED AS FOLLOWS:

PARCEL 22 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP ON FILE IN BOOK 162 PAGES 84
THROUGH 90 OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA;

EXCEPTING THEREFROM THE SOUTHERLY 24.00 FEET THEREOF.

PARCEL 13:

                                 EXHIBIT "A" TO
                                    EXHIBIT G
                                       -6-

<PAGE>

PARCEL 18 AS SHOWN ON A CERTIFICATE OF COMPLIANCE RECORDED JULY 27, 1992 AS
INSTRUMENT NO. 277677 OF OFFICIAL RECORDS OF RIVERSIDE COUNTY, CALIFORNIA
DESCRIBED AS FOLLOWS:

PARCEL 23 OF PARCEL MAP NO. 24535, AS SHOWN BY MAP ON FILE IN BOOK 162 PAGES 84
THROUGH 90, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA;

EXCEPTING THEREFROM THE SOUTHERLY 24.00 FEET THEREOF.

PARCEL 14:

PARCEL 83 OF PARCEL MAP NO. 24535, AS SHOWN BY ON FILE IN BOOK 162 PAGES 84
THROUGH 90, OF MAPS, RECORDS OF RIVERSIDE COUNTY, CALIFORNIA.

APN: 263-020-015-7, 263-020-016-8, 263-020-017-9, 263-020-018-0, 263-020-0191,
263-020-024-5, 263-020-025-6, 263-020-027-8, 263-020-039-9, 263-020-040-9,
263-040-041-0, 263-020-042-1, 263-020-043-2, 263-020-044-3, 263-020-045-4,
263-020-026-7, 263-280-025-0, 263-280-026-1, 263-280-027-2, 263-280-037-1,
263-280-038-2, 263-280-039-3, 263-280-040-3, 263-280-041-4, and 263-280-042-5

                                 EXHIBIT "A" TO
                                    EXHIBIT G
                                       -7-

<PAGE>

                           EXHIBIT "B-1" TO EXHIBIT G

                     DEPICTION OF LAND ON PROPOSED FINAL MAP

                                  [MAP DRAWING]

                                EXHIBIT "B-1" TO
                                    EXHIBIT G
                                       -1-

<PAGE>

                           EXHIBIT "B-2" TO EXHIBIT G

                      ANTICIPATED LEGAL DESCRIPTION OF LAND

Parcel 1, Parcel Map 31139-1 as shown in book ___ of Parcel Maps, at Pages ____
through _____ inclusive, records of Riverside County, California.

                                EXHIBIT "B-2" TO
                                    EXHIBIT G
                                       -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                    EXHIBIT H

                            COMMENCEMENT CERTIFICATE

         This Commencement Certificate, dated as of ____________, 20____, is
entered into by and between PANATTONI DEVELOPMENT COMPANY, LLC, a California
limited liability company ("LANDLORD"), and BIG 5 CORP., a Delaware corporation
("TENANT"), with respect to the following facts:

                          W I T N E S S E T H T H A T:

         WHEREAS, Landlord and Tenant entered into that certain Lease (the
"LEASE") dated April 14, 2004 for certain "Premises" as defined in the Lease
located in Riverside, California; and

         WHEREAS, Landlord and Tenant agreed to execute this Certificate to
confirm the actual Commencement Date and Expiration Dates of the Lease, and for
other purposes;

         NOW, THEREFORE, pursuant to the provisions of Paragraph 1.7 of the
Lease, Landlord and Tenant mutually agree as follows:

                  1.       Capitalized terms used and otherwise defined herein
shall have the meanings set forth for them in the Lease.

                  2.       The following dates, amounts of square footage and
dollar amounts are hereby agreed to and confirmed for all purposes of the Lease
as of the Commencement Date and as of the date of this Certificate.

                  Commencement Date:                 ___________________________

                  Expiration Date:                   ___________________________

                  Rentable Area of the Building:     ___________________________

                  Fixed Rent for the First Period
                  under the Lease (i.e., the first
                  5-years of the Term):              ___________________________

                       [SIGNATURE BLOCK ON FOLLOWING PAGE]

                                   EXHIBIT H
                                      -1-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA
                                          "Landlord"

                                          PANATTONI DEVELOPMENT COMPANY, LLC,
                                          a California limited liability company

                                          By: _______________________________
                                              Print Name: ___________________
                                              Its.: _________________________

                                          By: _______________________________
                                              Print Name: ___________________
                                              Its.: _________________________

                                          "Tenant"

                                          BIG 5 CORP.,
                                          a Delaware corporation

                                          By: _______________________________
                                              Print Name: ___________________
                                              Its.: _________________________

                                          By: _______________________________
                                              Print Name: ___________________
                                              Its.: _________________________

                                    EXHIBIT H
                                       -2-

<PAGE>

BIG 5 WAREHOUSE
RIVERSIDE, CALIFORNIA

                                    EXHIBIT I

                               DELIVERY CONDITION

The Delivery Condition shall include the following: finished slab with sealer, a
completed building foundation, all exterior walls shall be tilted, the roof
structure and roof membrane shall be completed, the on-site fire loop and
hydrants shall be installed and operational, the ESFR diesel pump and pump room
will be installed and operational, foil insulation will be in the process of
being installed, the interior warehouse walls will be painted, the separation
wall will be completed, the entire parcel will be rough graded and Building
access will be from two (2) grade level doors, utilities will not be available,
all smoke hatches will be installed, the sanitary sewer stubs will be in the
slab per the Big 5 provided office plan, all man doors shall be installed in a
lockable condition, all vertical lift loading doors shall be installed and
operational, all glazing shall be installed, the aluminum store fronts shall be
installed and the doors lockable, all Building inspections shall be current
based upon the percentage of Building completion.

The Building/Site Work shall be constructed in accordance with the permits
issued by the City of Riverside based upon the Final Building/Site Work Plans
approved by the parties pursuant to the Lease.

The City of Riverside deems that the Building is in a suitable condition to
commence racking and other Fixturization Work provided that Big 5 has been
issued the applicable permits for such work by the City of Riverside.

                                   EXHIBIT I
                                      -1-<PAGE>

                                                                   EXHIBIT 10.1

                        GRANITE CONSTRUCTION INCORPORATED
                              AMENDED AND RESTATED
                           1999 EQUITY INCENTIVE PLAN

                       (AS ADOPTED EFFECTIVE MAY 24, 2004)

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
SECTION 1.  ESTABLISHMENT, PURPOSE, AND TERM OF PLAN..........................................................     1
         1.1      Establishment...............................................................................     1
         1.2      Purpose.....................................................................................     1
         1.3      Term of Plan................................................................................     1

SECTION 2.  DEFINITIONS AND CONSTRUCTION......................................................................     1
         2.1      Definitions.................................................................................     1
         2.2      Construction................................................................................     5

SECTION 3.  ELIGIBILITY AND AWARD LIMITATIONS.................................................................     5
         3.1      Persons Eligible for Incentive Stock Options................................................     5
         3.2      Persons Eligible for Other Awards...........................................................     6
         3.3      Section 162(m) Award Limits.................................................................     6
         3.4      Maximum Number of Shares Issuable Pursuant to Incentive Stock Options.......................     6
         3.5      Aggregate Limit on Restricted Stock, Restricted Stock Unit,
                  Performance Share and Performance Unit
                  Awards Not Providing for Certain Minimum Vesting............................................     7

SECTION 4.  ADMINISTRATION....................................................................................     7
         4.1      Administration by the Committee.............................................................     7
         4.2      Authority of Officers.......................................................................     7
         4.3      Administration with Respect to Insiders.....................................................     7
         4.4      Committee Complying with Section 162(m).....................................................     7
         4.5      Powers of the Committee.....................................................................     7
         4.6      Option Repricing............................................................................     8

SECTION 5.  STOCK SUBJECT TO PLAN.............................................................................     9
         5.1      Maximum Number of Shares Issuable...........................................................     9
         5.2      Share Accounting............................................................................     9
         5.3      Adjustment in Capitalization................................................................     9

SECTION 6.  STOCK OPTIONS.....................................................................................     9
         6.1      Grant of Options............................................................................     9
         6.2      Exercise Price..............................................................................    10
         6.3      Exercise Period.............................................................................    10
         6.4      Payment of Exercise Price...................................................................    10
         6.5      Effect of Termination of Service............................................................    11
         6.6      Transferability of Options..................................................................    12

SECTION 7.  RESTRICTED STOCK..................................................................................    12
         7.1      Grant of Restricted Stock...................................................................    12
         7.2      Purchase Price..............................................................................    13
</TABLE>

                                       -i-
<PAGE>

                                TABLE OF CONTENTS
                                   (continued)
<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
         7.3      Vesting and Restrictions on Transfer........................................................    13
         7.4      Other Restrictions..........................................................................    13
         7.5      Voting Rights; Dividends and Distributions..................................................    13
         7.6      Dividends and Other Distribution............................................................    14
         7.7      Effect of Termination of Service............................................................    14

SECTION 8.  RESTRICTED STOCK UNITS............................................................................    14
         8.1      Grant of Restricted Stock Units.............................................................    14
         8.2      Purchase Price..............................................................................    15
         8.3      Vesting.....................................................................................    15
         8.4      Voting, Dividend Equivalent Rights and Distributions........................................    15
         8.5      Effect of Termination of Service............................................................    15
         8.6      Settlement of Awards........................................................................    15
         8.7      Nontransferability of Restricted Stock Unit Awards..........................................    16

SECTION 9.  PERFORMANCE SHARES AND PERFORMANCE UNITS..........................................................    16
         9.1      Grant of Performance Shares or Performance Units............................................    16
         9.2      Value of Performance Shares and Performance Units...........................................    16
         9.3      Establishment of Performance Goals and Performance Period...................................    16
         9.4      Measurement of Performance Goals............................................................    17
         9.5      Determination of Value of Performance Shares and Performance Units..........................    17
         9.6      Dividend Equivalents........................................................................    18
         9.7      Form and Timing of Payment..................................................................    18
         9.8      Restrictions Applicable to Payment in Shares................................................    18
         9.9      Effect of Termination of Service............................................................    18
         9.10     Nontransferability..........................................................................    19

SECTION 10.  DIRECTOR FEE AWARDS..............................................................................    19
         10.1     Effective Date and Duration of this Section.................................................    19
         10.2     Mandatory and Elective Director Fee Awards..................................................    19
         10.3     Time and Manner of Election.................................................................    20
         10.4     Automatic Grant of Director Fee Awards......................................................    20
         10.5     Option Payment..............................................................................    21
         10.6     Stock Units Payment.........................................................................    22
         10.7     Fractional Shares...........................................................................    24

SECTION 11.  CHANGE IN CONTROL................................................................................    24
         11.1     Effect of Change in Control.................................................................    24
         11.2     Termination of Service After a Change in Control............................................    25
         11.3     Definition..................................................................................    25

SECTION 12.  REQUIREMENTS OF LAW..............................................................................    26
         12.1     Compliance with Securities Law..............................................................    26
</TABLE>

                                      -ii-
<PAGE>

                                TABLE OF CONTENTS
                                  (continued)
<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
         12.2     Governing Law...............................................................................   26

SECTION 13.  TAX WITHHOLDING..................................................................................   26
         13.1     Tax Withholding In General..................................................................   26
         13.2     Withholding of Shares.......................................................................   26
SECTION 14.  AMENDMENT AND TERMINATION OF PLAN................................................................   26
         14.1     Amendment and Termination of Plan...........................................................   26
         14.2     Effect of Amendment or Termination..........................................................   27

SECTION 15.  MISCELLANEOUS PROVISIONS.........................................................................   27
         15.1     Beneficiary Designation.....................................................................   27
         15.2     Rights as an Employee or Director...........................................................   27
         15.3     Rights as a Stockholder.....................................................................   27
         15.4     Provision of Information....................................................................   27
         15.5     Unfunded Obligation.........................................................................   27
         15.6     Indemnification.............................................................................   28
</TABLE>

                                     -iii-
<PAGE>

                        GRANITE CONSTRUCTION INCORPORATED
                              AMENDED AND RESTATED
                           1999 EQUITY INCENTIVE PLAN
                       (AS ADOPTED EFFECTIVE MAY 24, 2004)

               SECTION 1. ESTABLISHMENT, PURPOSE, AND TERM OF PLAN

      1.1   ESTABLISHMENT. The Granite Construction Incorporated 1999 Equity
Incentive Plan was initially established effective May 24, 1999 (the "INITIAL
PLAN"). The Initial Plan is hereby amended and restated in its entirety as the
Granite Construction Incorporated Amended and Restated 1999 Equity Incentive
Plan (the "PLAN") effective as of May 24, 2004, the date of its approval by the
stockholders of the Company (the "EFFECTIVE DATE").

      1.2   PURPOSE. The purpose of the Plan is to advance the interests of the
Company, by encouraging and providing for the acquisition of an equity interest
in the success of the Company by Employee and Directors, by providing additional
incentives and motivation toward superior performance of the Company, and by
enabling the Company to attract and retain the services of Employees and
Directors upon whose judgment, interest, and special effort the successful
conduct of its operations is largely dependent. The Plan seeks to achieve this
purpose by providing for Awards in the form of Options, Restricted Stock,
Restricted Stock Units, Performance Shares and Performance Units, by providing
Nonemployee Directors with the opportunity to receive Options or Stock Units in
lieu of compensation otherwise payable in cash, and by providing for payments in
the form of shares of Stock or cash.

      1.3   TERM OF PLAN. The Plan shall remain in effect until the earlier of
(a) its termination by the Committee pursuant to Section 14 or (b) the date on
which all of the shares of Stock available for issuance under the Plan have been
issued and all restrictions on such shares under the terms of the Plan and the
agreements evidencing Awards granted under the Plan have lapsed. However, all
Awards shall be granted, if at all, within ten (10) years from the Effective
Date.

                     SECTION 2. DEFINITIONS AND CONSTRUCTION

      2.1   DEFINITIONS. Whenever used herein, the following terms shall have
their respective meanings set forth below:

            (a)   "AWARD" means any Option, Restricted Stock, Restricted Stock
Unit, Performance Share, Performance Unit or Director Fee Award granted under
the Plan.

            (b)   "AWARD AGREEMENT" means a written agreement between the
Company and a Participant setting forth the terms, conditions and restrictions
of the Award granted to the Participant. An Award Agreement may be an "Option
Agreement," a "Restricted Stock Agreement," a "Restricted Stock Units
Agreement," a "Performance Share Agreement," a "Performance Unit Agreement," a
"Nonemployee Director Option Agreement," or a "Stock Units Agreement."

                                       1
<PAGE>

            (c)   "BOARD" means the Board of Directors of the Company.

            (d)   "CAUSE" means, unless otherwise defined by the Participant's
Award Agreement or contract of employment or service, any of the following: (i)
the Participant's theft, dishonesty, or falsification of any Participating
Company documents or records; (ii) the Participant's repeated failure to report
to work during normal hours, other than for customarily excused absences for
personal illness or other reasonable cause; (iii) the Participant's conviction
(including any plea of guilty or nolo contendere) of theft or felony; (iv) the
Participant's wrongful disclosure of a Participating Company's trade secrets or
other proprietary information; (v) any other dishonest or intentional action by
the Participant which has a detrimental effect on a Participating Company; or
(vi) the Participant's habitual and repeated nonperformance of the Participant's
duties.

            (e)   "CODE" means the Internal Revenue Code of 1986, as amended,
and any applicable regulations promulgated thereunder.

            (f)   "COMMITTEE" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. If no committee of the Board has been
appointed to administer the Plan, the Board shall exercise all of the powers of
the Committee granted herein, and, in any event, the Board may in its discretion
exercise any or all of such powers.

            (g)   "COMPANY" means Granite Construction Incorporated, a Delaware
corporation, or any successor corporation thereto.

            (h)   "DIRECTOR" means a member of the Board.

            (i)   "DIRECTOR FEE AWARD" means any Nonemployee Director Option or
Stock Unit granted pursuant to Section 9.

            (j)   "DISABILITY" means a permanent and total disability as defined
under the Company's Long Term Disability Plan or any successor plan, regardless
of whether the Participant is covered by such Long Term Disability Plan.

            (k)   "DIVIDEND EQUIVALENT" means a credit, made at the discretion
of the Committee or as otherwise provided by the Plan, to the account of a
Participant in an amount equal to the cash dividends paid on one share of Stock
for each share of Stock represented by an Award held by such Participant.

            (l)   "EMPLOYEE" means any person treated as an employee (including
an officer or a Director who is also treated as an employee) in the records of a
Participating Company and, with respect to any Incentive Stock Option granted to
such person, who is an employee for purposes of Section 422 of the Code;
provided, however, that neither service as a Director nor payment of a
director's fee shall be sufficient to constitute employment for purposes of the
Plan. The Company shall determine in good faith and in the exercise of its
discretion whether an individual has become or has ceased to be an Employee and
the effective date of such individual's employment or termination of employment,
as the case may be. For purposes of an individual's rights, if any, under the
Plan as of the time of the Company's determination, all such

                                       2
<PAGE>

determinations by the Company shall be final, binding and conclusive,
notwithstanding that the Company or any court of law or governmental agency
subsequently makes a contrary determination.

            (m)   "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.

            (n)   "FAIR MARKET VALUE" means, as of any relevant date, the
closing sale price of a share of Stock (or the mean of the closing bid and asked
prices if the Stock is so quoted instead) on the relevant date on the New York
Stock Exchange or such other national or regional securities exchange or market
system constituting the primary market for the Stock, as reported in The Wall
Street Journal or such other source as the Company deems reliable. If the
relevant date does not fall on a day on which the Stock has traded on such
securities exchange or market system, the date on which the Fair Market Value
shall be established shall be the last day on which the Stock was so traded
prior to the relevant date, or such other appropriate day as shall be determined
by the Committee, in its discretion. If, on such date, there is no public market
for the Stock, the Fair Market Value of a share of Stock shall be as determined
by the Committee.

            (o)   "INCENTIVE STOCK OPTION" means an Option intended to be (as
set forth in the Award Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.

            (p)   "INSIDER" means an officer, a Director or any other person
whose transactions in Stock are subject to Section 16 of the Exchange Act.

            (q)   "NONEMPLOYEE DIRECTOR" means a Director who is not an
Employee.

            (r)   "NONEMPLOYEE DIRECTOR OPTION" means a Director Fee Award in
the form of Nonstatutory Stock Option granted pursuant to the terms and
conditions of Section 10.

            (s)   "NONSTATUTORY STOCK OPTION" means an Option not intended to be
(as set forth in the Award Agreement) or which does not qualify as an Incentive
Stock Option.

            (t)   "OPTION" means the right to purchase Stock at a stated price
for a specified period of time pursuant to the terms and conditions of the Plan.
An Option may be either an Incentive Stock Option or a Nonstatutory Stock
Option.

            (u)   "PARENT CORPORATION" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.

            (v)   "PARTICIPANT" means any eligible person who has been granted
one or more Awards.

            (w)   "PARTICIPATING COMPANY" means the Company or any Parent
Corporation or Subsidiary Corporation.

            (x)   "PARTICIPATING COMPANY GROUP" means, at any point in time, all
corporations collectively which are then Participating Companies.

                                       3
<PAGE>

            (y)   "PERFORMANCE GOAL" means a performance goal established by the
Committee pursuant to Section 9.3.

            (z)   "PERFORMANCE PERIOD" means a period established by the
Committee pursuant to Section 9.3 at the end of which one or more Performance
Goals are to be measured.

            (aa)  "PERFORMANCE SHARE" means a bookkeeping entry representing a
right granted to a Participant pursuant to the terms and conditions of Section 8
to receive a payment equal to the value of a Performance Share, as determined by
the Committee, based on performance.

            (bb)  "PERFORMANCE UNIT" means a bookkeeping entry representing a
right granted to a Participant pursuant to the terms and conditions of Section 9
to receive a payment equal to the value of a Performance Unit, as determined by
the Committee, based upon performance.

            (cc)  "RESTRICTED STOCK" means Stock granted to a Participant
pursuant to the terms and conditions of Section 7.

            (dd)  "RESTRICTED STOCK UNIT" means a bookkeeping entry representing
a right granted to a Participant pursuant to Section 8 to receive a share of
Stock on a date determined in accordance with the provisions of Section 8 and
the Participant's Award Agreement.

            (ee)  "RESTRICTION PERIOD" means the period established in
accordance with Section 7.3 of the Plan during which shares subject to a
Restricted Stock Award are subject to Vesting Conditions.

            (ff)  "RETIREMENT" means (i) with respect to an Employee,
termination of employment for retirement under the terms of the Company's
defined contribution plans, and (ii) with respect to a Nonemployee Director,
resignation from Service on the Board after attaining the age of 55 and after at
least ten years of Service on the Board.

            (gg)  "RULE 16b-3" means Rule 16b-3 under the Exchange Act, as
amended from time to time, or any successor rule or regulation.

            (hh)  "SECTION 162(m)" means Section 162(m) of the Code.

            (ii)  "SECURITIES ACT" means the Securities Act of 1933, as amended.

            (jj)  "SERVICE" means a Participant's employment or service with the
Participating Company Group, whether in the capacity of an Employee or a
Director. A Participant's Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders such
Service or a change in the Participating Company for which the Participant
renders such Service, provided that there is no interruption or termination of
the Participant's Service. Furthermore, a Participant's Service shall not be
deemed to have terminated if the Participant takes any military leave, sick
leave, or other bona fide leave of absence approved by the Company; provided,
however, that if any such leave exceeds ninety (90) days, on the one hundred
eighty-first (181st) day following the

                                       4
<PAGE>

commencement of such leave any Incentive Stock Option held by the Participant
shall cease to be treated as an Incentive Stock Option and instead shall be
treated thereafter as a Nonstatutory Stock Option unless the Participant's right
to return to Service with the Participating Company Group is guaranteed by
statute or contract. Notwithstanding the foregoing, unless otherwise designated
by the Company or required by law, a leave of absence shall not be treated as
Service for purposes of determining vesting under the Participant's Award
Agreement. A Participant's Service shall be deemed to have terminated either
upon an actual termination of Service or upon the corporation for which the
Participant performs Service ceasing to be a Participating Company. Subject to
the foregoing, the Company, in its discretion, shall determine whether a
Participant's Service has terminated and the effective date of such termination.

            (kk)  "STOCK" means the Common Stock of the Company, as adjusted
from time to time in accordance with Section 5.3.

            (ll)  "STOCK UNIT" means a Director Fee Award in the form of a
bookkeeping entry representing a right granted to a Participant pursuant to the
terms and conditions of Section 10 to receive payment of one (1) share of Stock.

            (mm)  "SUBSIDIARY CORPORATION" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.

            (nn)  "TEN PERCENT OWNER" means a Participant who, at the time an
Option is granted to the Participant, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of a
Participating Company within the meaning of Section 422(b)(6) of the Code.

            (oo)  "VESTING CONDITIONS" mean those conditions established in
accordance with Section 7.3 or Section 8.3 of the Plan prior to the satisfaction
of which shares subject to a Restricted Stock Award or Restricted Stock Unit
Award, respectively, remain subject to forfeiture or a repurchase option in
favor of the Company upon the Participant's termination of Service.

      2.2   CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, words in
the masculine gender, when used in the Plan shall include the feminine gender,
the singular shall include the plural, and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.

                  SECTION 3. ELIGIBILITY AND AWARD LIMITATIONS

      3.1   PERSONS ELIGIBLE FOR INCENTIVE STOCK OPTIONS. Incentive Stock
Options may be granted only to Employees. For purposes of the foregoing
sentence, the term "Employees" shall include prospective Employees to whom
Options are granted in connection with written offers of employment with the
Participating Company Group, provided that any such Option shall be deemed
granted effective on the date that the Participant commences Service as an
Employee, with an exercise price determined as of such date in accordance with
Section 6.2.

                                       5
<PAGE>

      3.2   PERSONS ELIGIBLE FOR OTHER AWARDS. Awards other than Incentive Stock
Options may be granted only to Employees and Directors. For purposes of the
foregoing sentence, the terms "Employees" and "Directors" shall include
prospective Employees and prospective Directors to whom Awards are granted in
connection with written offers of employment or service as a Director with the
Participating Company Group, provided that no Stock subject to any such Award
shall vest, become exercisable or be issued prior to the date on which the
Participant commences Service. A Director Fee Award may be granted only to a
person who, at the time of grant, is a Nonemployee Director. Eligible persons
may be granted more than one (1) Award.

      3.3   SECTION 162(m) AWARD LIMITS. The following limitations shall apply
to the grant of any Award if, at the time of grant, the Company is a "publicly
held corporation" within the meaning of Section 162(m).

            (a)   STOCK OPTIONS. Subject to adjustment as provided in Section
5.3, no Employee shall be granted one or more Options within any fiscal year of
the Company which in the aggregate are for the purchase of more than one hundred
thousand (100,000) shares; provided, however, that the Company may make an
additional one-time grant to any newly-hired Employee of an Option for the
purchase of up to two hundred fifty thousand (250,000) shares. An Option which
is canceled in the same fiscal year of the Company in which it was granted shall
continue to be counted against the limits described in this subsection for such
period.

            (b)   RESTRICTED STOCK. Subject to adjustment as provided in Section
5.3, no Employee may be granted within any fiscal year of the Company more than
one hundred thousand (100,000) shares of Restricted Stock, provided that such
limit shall apply only to Awards of Restricted Stock which are granted or
subject to Vesting Conditions based upon the attainment of Performance Goals.

            (c)   RESTRICTED STOCK UNITS. Subject to adjustment as provided in
Section 5.3, no Employee shall be granted within any fiscal year of the Company
more than one hundred thousand (100,000) Restricted Stock Units, provided that
such limit shall apply only to Awards of Restricted Stock Units which are
granted or subject to Vesting Conditions based upon the attainment of
Performance Goals.

            (d)   PERFORMANCE SHARES AND PERFORMANCE UNITS. Subject to
adjustment as provided in Section 5.3, no Employee may be granted (i)
Performance Shares which could result in such Employee receiving more than one
hundred thousand (100,000) shares of Stock for each full fiscal year of the
Company contained in the Performance Period for such Award, or (ii) Performance
Units which could result in such Employee receiving more than one million five
hundred thousand dollars ($1,500,000) for each full fiscal year of the Company
contained in the Performance Period for such Award. No Participant may be
granted more than one Performance Share Award or one Performance Unit Award (but
not both such Awards) for the same Performance Period.

      3.4   MAXIMUM NUMBER OF SHARES ISSUABLE PURSUANT TO INCENTIVE STOCK
OPTIONS. Subject to adjustment as provided in Section 5.3, the maximum aggregate
number of shares of Stock that may be issued under the Plan pursuant to the
exercise of Incentive Stock Options shall

                                       6
<PAGE>

not exceed four million two hundred fifty thousand (4,250,000) shares. The
maximum aggregate number of shares of Stock that may be issued under the Plan
pursuant to all Awards other than Incentive Stock Options shall be the number of
shares determined in accordance with Section 5.1, subject to adjustment as
provided in Section 5.2 and Section 5.3.

      3.5   AGGREGATE LIMIT ON RESTRICTED STOCK, RESTRICTED STOCK UNIT,
PERFORMANCE SHARE AND PERFORMANCE UNIT AWARDS NOT PROVIDING FOR CERTAIN MINIMUM
VESTING. Notwithstanding any provision of the Plan to the contrary, no more than
five percent (5%) of the maximum aggregate number of shares of Stock that may be
issued under the Plan determined in accordance with Section 5.1 (as adjusted
from time to time pursuant to Sections 5.2 and 5.3) shall be issued pursuant to
(a) Restricted Stock or Restricted Stock Unit Awards having Vesting Conditions
which (i) if based upon a Service requirement, provide for vesting more rapid
than annual pro rata vesting over a period three (3) years or (ii) if based upon
the attainment of one or more Performance Goals, provide for a Performance
Period of less than twelve (12) months, or (b) Performance Share or Performance
Unit Awards having a Performance Period of less than twelve (12) months.

                            SECTION 4. ADMINISTRATION

      4.1   ADMINISTRATION BY THE COMMITTEE. The Plan shall be administered by
the Committee. All questions of interpretation of the Plan or of any Award shall
be determined by the Committee, and such determinations shall be final, binding
and conclusive for all purposes and upon all persons whomsoever.

      4.2   AUTHORITY OF OFFICERS. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, determination or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, determination or
election.

      4.3   ADMINISTRATION WITH RESPECT TO INSIDERS. With respect to
participation by Insiders in the Plan, at any time that any class of equity
security of the Company is registered pursuant to Section 12 of the Exchange
Act, the Plan shall be administered in compliance with the requirements, if any,
of Rule 16b-3.

      4.4   COMMITTEE COMPLYING WITH SECTION 162(m). If the Company is a
"publicly held corporation" within the meaning of Section 162(m), the Board may
establish a Committee of "outside directors" within the meaning of Section
162(m) to approve the grant of any Award which might reasonably be anticipated
to result in the payment of employee remuneration that would otherwise exceed
the limit on employee remuneration deductible for income tax purposes pursuant
to Section 162(m).

      4.5   POWERS OF THE COMMITTEE. In addition to any other powers set forth
in the Plan and subject to the provisions of the Plan, the Committee shall have
the full and final power and authority, in its discretion:

                                       7
<PAGE>

            (a)   to determine the persons to whom, and the time or times at
which, Awards shall be granted and the number of shares of Stock or units to be
subject to each Award and the value of a unit;

            (b)   to determine the type of Award granted and to designate
Options as Incentive Stock Options or Nonstatutory Stock Options;

            (c)   to determine the Fair Market Value of shares of Stock or other
property;

            (d)   to determine the terms, conditions and restrictions applicable
to each Award (which need not be identical) and any shares acquired pursuant
thereto, including, without limitation, (i) the exercise price of any Option,
(ii) the method of payment for shares purchased upon the exercise of any Option,
(iii) the method for satisfaction of any tax withholding obligation arising in
connection with any Award, including by the withholding or delivery of shares of
stock, (iv) the timing, terms and conditions of the exercisability or vesting of
any Award or any shares acquired pursuant thereto, (v) the Performance Goals
applicable to any Award and the extent to which such Performance Goals have been
attained, (vi) the time of the expiration of any Award, (vii) the effect of the
Participant's termination of Service on any of the foregoing, and (viii) all
other terms, conditions and restrictions applicable to the Award or shares
acquired pursuant thereto not inconsistent with the terms of the Plan;

            (e)   to determine whether an Award of Performance Shares or
Performance Units will be settled in shares of Stock, cash, or in any
combination thereof;

            (f)   to approve one or more forms of Award Agreement;

            (g)   to amend, modify, extend, cancel or renew any Award or to
waive any restrictions or conditions applicable to any Award or any shares
acquired pursuant thereto;

            (h)   to accelerate, continue, extend or defer the exercisability or
vesting of any Award or any shares acquired pursuant thereto, including with
respect to the period following a Participant's termination of Service;

            (i)   to prescribe, amend or rescind rules, guidelines and policies
relating to the Plan, or to adopt sub-plans or supplements to, or alternative
versions of, the Plan, including, without limitation, as the Committee deems
necessary or desirable to comply with the laws or regulations of, or to
accommodate the tax policy, accounting principles or custom of, foreign
jurisdictions whose citizens may be granted Awards; and

            (j)   to correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award Agreement and to make all other
determinations and take such other actions with respect to the Plan or any Award
as the Committee may deem advisable to the extent not inconsistent with the
provisions of the Plan or applicable law.

      4.6   OPTION REPRICING. Without the affirmative vote of holders of a
majority of the shares of Stock cast in person or by proxy at a meeting of the
stockholders of the Company at which a quorum representing a majority of all
outstanding shares of Stock is present or represented by proxy, the Board shall
not approve a program providing for either (a) the

                                       8
<PAGE>

cancellation of outstanding Options and the grant in substitution therefore of
new Options having a lower exercise price or (b) the amendment of outstanding
Options to reduce the exercise price thereof. This paragraph shall not be
construed to apply to "issuing or assuming a stock option in a transaction to
which section 424(a) applies," within the meaning of Section 424 of the Code.

                        SECTION 5. STOCK SUBJECT TO PLAN

      5.1   MAXIMUM NUMBER OF SHARES ISSUABLE. Subject to adjustment as provided
in Section 5.3, the maximum aggregate number of shares of Stock that may be
issued under the Plan shall be four million two hundred fifty thousand
(4,250,000) and shall consist of authorized but unissued or reacquired shares of
Stock not reserved for any other purpose, or any combination thereof.

      5.2   SHARE ACCOUNTING. If an outstanding Award for any reason expires or
is terminated or canceled without having been exercised or settled in full, or
if shares of Stock acquired pursuant to an Award subject to forfeiture or
repurchase are forfeited or repurchased by the Company at the Participant's
purchase price, the shares of Stock allocable to the terminated portion of such
Award or such forfeited or repurchased shares of Stock shall again be available
for issuance under the Plan. Shares of Stock shall not be deemed to have been
issued pursuant to the Plan (a) with respect to any portion of an Award that is
settled in cash or (b) to the extent such shares are withheld in satisfaction of
tax withholding obligations pursuant to Section 13.2. If the exercise price of
an Option is paid by tender to the Company, or attestation to the ownership, of
shares of Stock owned by the Participant, the number of shares available for
issuance under the Plan shall be reduced by the net number of shares for which
the Option is exercised.

      5.3   ADJUSTMENT IN CAPITALIZATION. In the event of any stock dividend,
stock split, reverse stock split, recapitalization, merger, combination,
exchange of shares, reclassification or similar change in the capital structure
of the Company, appropriate adjustments shall be made in the number and class of
shares subject to the Plan and to any outstanding Awards, in the award limits
set forth in Sections 3.3 and 3.4, and in the exercise price per share of any
outstanding Options. If a majority of the shares which are of the same class as
the shares that are subject to outstanding Awards are exchanged for, converted
into, or otherwise become (whether or not pursuant to a Change in Control, as
defined in Section 11.3) shares of another corporation (the "NEW SHARES"), the
Committee may unilaterally amend the outstanding Awards to provide that such
Awards are for New Shares. In the event of any such amendment, the number of
shares subject to outstanding Awards and the exercise price per share of
outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Committee, in its discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 5.3
shall be rounded down to the nearest whole number, and in no event may the
exercise price of any Option be decreased to an amount less than the par value,
if any, of the stock subject to the Option. The adjustments determined by the
Committee pursuant to this Section 5.3 shall be final, binding and conclusive.

                            SECTION 6. STOCK OPTIONS

      6.1   GRANT OF OPTIONS. Subject to the provisions of Sections 1.3, 3 and
5, Options (other than pursuant to a Director Fee Award) may be granted to
Participants at any time and

                                       9
<PAGE>

from time to time as shall be determined by the Committee. Each Option shall be
evidenced by an Award Agreement that shall specify the type of Option granted,
the exercise price, the duration of the Option, the number of shares of Stock to
which the Option pertains, and such other provisions as the Committee shall
determine. No Option or purported Option shall be a valid and binding obligation
of the Company unless evidenced by a fully executed Award Agreement. Award
Agreements evidencing Options may incorporate all or any of the terms of the
Plan by reference and, except as otherwise set forth in Section 10 with respect
to a Nonemployee Director Option, shall comply with and be subject to the terms
and conditions set forth in Sections 6.2 through 6.6 below.

      6.2   EXERCISE PRICE. The exercise price for each Option shall be
established in the discretion of the Committee; provided, however, that (a) the
exercise price per share shall be not less than the Fair Market Value of a share
of Stock on the effective date of grant of the Option and (b) no Incentive Stock
Option granted to a Ten Percent Owner shall have an exercise price per share
less than one hundred ten percent (110%) of the Fair Market Value of a share of
Stock on the effective date of grant of the Option. Notwithstanding the
foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock
Option) may be granted with an exercise price lower than the minimum exercise
price set forth above if such Option is granted pursuant to an assumption or
substitution for another option in a manner qualifying under the provisions of
Section 424(a) of the Code.

      6.3   EXERCISE PERIOD. Options shall be exercisable at such time or times,
or upon such event or events, and subject to such terms, conditions, performance
criteria and restrictions as shall be determined by the Committee and set forth
in the Award Agreement evidencing such Option; provided, however, that (a) no
Option shall be exercisable after the expiration of ten (10) years after the
effective date of grant of such Option, (b) no Incentive Stock Option granted to
a Ten Percent Owner shall be exercisable after the expiration of five (5) years
after the effective date of grant of such Option, and (c) no Option granted to a
prospective Employee or prospective Director may become exercisable prior to the
date on which such person commences Service. Subject to the foregoing, unless
otherwise specified by the Committee in the grant of an Option, any Option
granted hereunder shall have a term of ten (10) years from the effective date of
grant of the Option, unless earlier terminated in accordance with its
provisions.

      6.4   PAYMENT OF EXERCISE PRICE. The purchase price of Stock upon exercise
of any Option shall be paid in full by such methods as shall be permitted by the
Committee or as provided in a Participant's Award Agreement, which need not be
the same for all Participants, and subject to the following:

            (a)   FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the exercise price for the number of shares of Stock
being purchased pursuant to any Option shall be made (i) in cash, by check, or
cash equivalent, (ii) by tender to the Company, or attestation to the ownership,
of shares of Stock owned by the Participant having a Fair Market Value not less
than the exercise price, (iii) by delivery of a properly executed notice of
exercise together with irrevocable instructions to a broker providing for the
assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares being acquired upon the exercise of the Option (including,
without limitation, through an exercise complying with the provisions of
Regulation T as promulgated from time to time by the Board of

                                       10
<PAGE>

Governors of the Federal Reserve System) (a "CASHLESS EXERCISE"), (iv) by such
other consideration as may be approved by the Committee from time to time to the
extent permitted by applicable law, or (v) by any combination thereof. The
Committee may at any time or from time to time grant Options which do not permit
all of the foregoing forms of consideration to be used in payment of the
exercise price or which otherwise restrict one or more forms of consideration.
The proceeds from payment of the Option exercise prices shall be added to the
general funds of the Company and shall be used for general corporate purposes.

            (b)   LIMITATIONS ON FORMS OF CONSIDERATION.

                  (i)   TENDER OF STOCK. Notwithstanding the foregoing, an
Option may not be exercised by tender to the Company, or attestation to the
ownership, of shares of Stock to the extent such tender or attestation would
constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company's stock. Unless otherwise provided by
the Committee, an Option may not be exercised by tender to the Company, or
attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Participant for more than six (6) months (and not used for
another Option exercise by attestation during such period) or were not acquired,
directly or indirectly, from the Company.

                  (ii)  CASHLESS EXERCISE. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to establish,
decline to approve or terminate any program or procedures for the exercise of
Options by means of a Cashless Exercise, including with respect to one or more
Participants specified by the Company notwithstanding that such program or
procedures may be available to other Participants.

      6.5   EFFECT OF TERMINATION OF SERVICE.

            (a)   OPTION EXERCISABILITY. Subject to earlier termination of the
Option as otherwise provided herein and unless otherwise provided by the
Committee in the grant of an Option and set forth in the Award Agreement, an
Option shall be exercisable after a Participant's termination of Service only
during the applicable time period determined in accordance with this Section and
thereafter shall terminate:

                  (i)   DEATH OR DISABILITY. If the Participant's Service is
terminated by reason of the death or Disability of the Participant, the Option,
to the extent unexercised and exercisable on the date on which the Participant's
Service terminated, may be exercised by the Participant (or the Participant's
guardian or legal representative or other person who acquired the right to
exercise the Option by reason of the Participant's death) at any time prior to
the expiration of six (6) months (or such longer period of time as determined by
the Committee, in its discretion) after the date on which the Participant's
Service terminated, but in any event no later than the date of expiration of the
Option's term as set forth in the Award Agreement evidencing such Option (the
"OPTION EXPIRATION DATE"). If an Option intended to be an Incentive Stock Option
is exercised by a Participant more than three (3) months following the
Participant's termination of Service by reason of a Disability which is not a
"permanent and total disability" as defined in Section 22(e)(3) of the Code,
such exercise will be treated as the exercise of a Nonstatutory Stock Option to
the extent required by Section 422 of the Code. The

                                       11
<PAGE>

Participant's Service shall be deemed to have terminated on account of death if
the Participant dies within three (3) months after the Participant's termination
of Service.

                  (ii)  RETIREMENT. If the Participant's Service is terminated
by reason of the Retirement of the Participant, the Option may be exercised at
such time (but in any event no later than the Option Expiration Date) and in
such amounts as shall be determined by the Committee at the time of grant of the
Option and set forth in the Award Agreement.

                  (iii) TERMINATION FOR CAUSE. Notwithstanding any other
provision of the Plan to the contrary, if the Participant's Service is
terminated for Cause, the Option shall terminate and cease to be exercisable
immediately upon such termination of Service.

                  (iv)  OTHER TERMINATION OF SERVICE. If the Participant's
Service terminates for any reason, except death, Disability, Retirement or
Cause, the Option, to the extent unexercised and exercisable by the Participant
on the date on which the Participant's Service terminated, may be exercised by
the Participant within thirty (30) days (or such longer period of time as
determined by the Committee, in its discretion) after the date on which the
Participant's Service terminated, but in any event no later than the Option
Expiration Date.

            (b)   EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, other than termination of Service for Cause, if the exercise of an
Option within the applicable time periods set forth in Section 6.5(a) is
prevented by the provisions of Section 12.1 below regarding compliance with
securities laws, the Option shall remain exercisable until thirty (30) days
after the date the Participant is notified by the Company that the Option is
exercisable, but in any event no later than the Option Expiration Date.

            (c)   EXTENSION IF PARTICIPANT SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, other than termination of Service for Cause, if a
sale within the applicable time periods set forth in Section 6.5(a) of shares
acquired upon the exercise of the Option would subject the Participant to suit
under Section 16(b) of the Exchange Act, the Option shall remain exercisable
until the earliest to occur of (i) the tenth (10th) day following the date on
which a sale of such shares by the Participant would no longer be subject to
such suit, (ii) the one hundred and ninetieth (190th) day after the
Participant's termination of Service, or (iii) the Option Expiration Date.

      6.6   TRANSFERABILITY OF OPTIONS. During the lifetime of the Participant,
an Option shall be exercisable only by the Participant or the Participant's
guardian or legal representative. No Option shall be assignable or transferable
by the Participant, except by will or by the laws of descent and distribution.
Notwithstanding the foregoing, to the extent permitted by the Committee, in its
discretion, and set forth in the Award Agreement evidencing such Option, a
Nonstatutory Stock Option shall be assignable or transferable subject to the
applicable limitations, if any, described in the General Instructions to Form
S-8 Registration Statement under the Securities Act.

                           SECTION 7. RESTRICTED STOCK

      7.1   GRANT OF RESTRICTED STOCK. Subject to the provisions of Sections
1.3, 3 and 5, Awards of Restricted Stock may be granted to Participants at any
time and from time to time as

                                       12
<PAGE>

shall be determined by the Committee, including, without limitation, upon the
attainment of one or more Performance Goals as described in Section 9.4. If
either the grant of Restricted Stock or the lapsing of the Restriction Period is
to be contingent upon the attainment of one or more Performance Goals, the
Committee shall follow procedures substantially equivalent to those set forth in
Sections 9.3 through 9.5. Each grant of Restricted Stock shall be evidenced by
an Award Agreement that shall specify the number of shares of Stock subject to
and the other terms, conditions and restrictions of such Award as the Committee
shall determine. No Restricted Stock Award or purported Restricted Stock Award
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement. Award Agreements evidencing Restricted Stock
Awards may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the terms and conditions set forth in
Sections 7.2 through 7.7 below.

      7.2   PURCHASE PRICE. No monetary payment (other than applicable tax
withholding) shall be required as a condition of receiving shares of Restricted
Stock, the consideration for which shall be services actually rendered to a
Participating Company or for its benefit. Notwithstanding the foregoing, the
Participant shall furnish consideration in the form of cash or past services
rendered to a Participating Company or for its benefit having a value not less
than the par value of the shares of Stock subject to such Restricted Stock
Award.

      7.3   VESTING AND RESTRICTIONS ON TRANSFER. Shares issued pursuant to any
Restricted Stock Award may or may not be made subject to Vesting Conditions
based upon the satisfaction of such Service requirements, conditions,
restrictions or performance criteria, including, without limitation, Performance
Goals as described in Section 9.4, as shall be established by the Committee and
set forth in the Award Agreement evidencing such Award. During any Restriction
Period in which shares acquired pursuant to a Restricted Stock Award remain
subject to Vesting Conditions, such shares may not be sold, exchanged,
transferred, pledged, assigned or otherwise alienated or hypothecated, other
than pursuant to an Ownership Change Event, as defined in Section 14.1. Upon
request by the Company, each Participant shall execute any agreement evidencing
such transfer restrictions prior to the receipt of shares of Stock hereunder and
shall promptly present to the Company any and all certificates representing
shares of Stock acquired hereunder for the placement on such certificates of
appropriate legends evidencing any such transfer restrictions. All rights with
respect to Restricted Stock granted to a Participant hereunder shall be
exercisable during his or her lifetime only by such Participant.

      7.4   OTHER RESTRICTIONS. The Committee may impose such other restrictions
on any shares of Restricted Stock granted hereunder as it may deem advisable,
including, without limitation, restrictions under applicable Federal securities
law and under any blue sky or state securities laws applicable to such shares,
and may legend the certificates representing the Restricted Stock to give
appropriate notice of such restrictions.

      7.5   VOTING RIGHTS; DIVIDENDS AND DISTRIBUTIONS. Except as provided in
this Section, Section 7.4 and any Award Agreement, during the Restriction Period
applicable to shares subject to a Restricted Stock Award, the Participant shall
have all of the rights of a stockholder of the Company holding shares of Stock,
including the right to vote such shares and to receive all dividends and other
distributions paid with respect to such shares. However, in the event of a
dividend or distribution paid in shares of Stock or any other adjustment made
upon a

                                       13
<PAGE>

change in the capital structure of the Company as described in Section 5.3, then
any and all new, substituted or additional securities or other property (other
than normal cash dividends) to which the Participant is entitled by reason of
the Participant's Restricted Stock Award shall be immediately subject to the
same Vesting Conditions as the shares subject to the Restricted Stock Award with
respect to which such dividends or distributions were paid or adjustments were
made.

      7.6   DIVIDENDS AND OTHER DISTRIBUTION. During the Restriction Period,
Participants holding shares of Restricted Stock granted hereunder shall be
entitled to receive all dividends and other distributions paid with respect to
those shares while they are so held. If any such dividends or distributions are
paid in shares of stock, the shares shall be subject to the same restrictions on
transferability pursuant to Section 7.3 as the shares of Restricted Stock with
respect to which they were paid.

      7.7   EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by the
Committee in the grant of a Restricted Stock Award and set forth in the Award
Agreement, the effect of a Participant's termination of Service on his or her
Restricted Stock Award shall be as follows:

            (a)   DEATH OR DISABILITY. If the Participant's Service is
terminated by reason of the death or Disability of the Participant during the
Restriction Period, the restrictions applicable to the shares of Restricted
Stock pursuant to Section 7.3 shall terminate automatically with respect to all
such shares.

            (b)   OTHER TERMINATION OF SERVICE. If the Participant's Service
terminates during the Restriction Period for any reason except death or
Disability, any shares of Restricted Stock still subject to restrictions
pursuant to Section 7.3 at the date of such termination shall be forfeited and
automatically reacquired by the Company; provided, however, that, in the event
of an involuntary termination of the Participant's Service, the Committee, in
its sole discretion, may waive the automatic forfeiture of any or all such
shares and/or add such new restrictions to such shares of Restricted Stock as it
deems appropriate.

                        SECTION 8. RESTRICTED STOCK UNITS

      8.1   GRANT OF RESTRICTED STOCK UNITS. Subject to the provisions of
Sections 1.3, 3 and 5, Awards of Restricted Stock Units may be granted to
Participants at any time and from time to time as shall be determined by the
Committee, including, without limitation, upon the attainment of one or more
Performance Goals as described in Section 9.4. If either the grant of a
Restricted Stock Unit Award or the Vesting Conditions with respect to such Award
is to be contingent upon the attainment of one or more Performance Goals, the
Committee shall follow procedures substantially equivalent to those set forth in
Sections 9.3 through 9.5(a). Restricted Stock Unit Awards shall be evidenced by
Award Agreements specifying the number of Restricted Stock Units subject to the
Award, in such form as the Committee shall from time to time establish. No
Restricted Stock Unit Award or purported Restricted Stock Unit Award shall be a
valid and binding obligation of the Company unless evidenced by a fully executed
Award Agreement. Award Agreements evidencing Restricted Stock Units may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the terms and conditions set forth in Sections 8.2
through 8.7 below.

                                       14
<PAGE>

      8.2   PURCHASE PRICE. No monetary payment (other than applicable tax
withholding, if any) shall be required as a condition of receiving a Restricted
Stock Unit Award, the consideration for which shall be services actually
rendered to a Participating Company or for its benefit.

      8.3   VESTING. Restricted Stock Units may or may not be made subject to
Vesting Conditions based upon the satisfaction of such Service requirements,
conditions, restrictions or performance criteria, including, without limitation,
Performance Goals as described in Section 9.4, as shall be established by the
Committee and set forth in the Award Agreement evidencing such Award.

      8.4   VOTING, DIVIDEND EQUIVALENT RIGHTS AND DISTRIBUTIONS. Participants
shall have no voting rights with respect to shares of Stock represented by
Restricted Stock Units until the date of the issuance of such shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). However, the Committee, in its
discretion, may provide in a Participant's Award Agreement that the Participant
shall be entitled to receive Dividend Equivalents with respect to the payment of
cash dividends on Stock having a record date prior to date on which Restricted
Stock Units held by such Participants are settled. Such Dividend Equivalents, if
any, shall be paid by crediting the Participant with additional whole Restricted
Stock Units as of the date of payment of such cash dividends on Stock. The
number of additional Restricted Stock Units (rounded to the nearest whole
number) to be so credited shall be determined by dividing (a) the amount of cash
dividends paid on such date with respect to the number of shares of Stock
represented by the Restricted Stock Units previously credited to the Participant
by (b) the Fair Market Value per share of Stock on such date. Such additional
Restricted Stock Units shall be subject to the same terms and conditions and
shall be settled in the same manner and at the same time (or as soon thereafter
as practicable) as the Restricted Stock Units originally subject to the
Restricted Stock Unit Award. In the event of a dividend or distribution paid in
shares of Stock or any other adjustment made upon a change in the capital
structure of the Company as described in Section 5.3, appropriate adjustments
shall be made in the Participant's Restricted Stock Unit Award so that it
represents the right to receive upon settlement any and all new, substituted or
additional securities or other property (other than normal cash dividends) to
which the Participant would entitled by reason of the shares of Stock issuable
upon settlement of the Award, and all such new, substituted or additional
securities or other property shall be immediately subject to the same Vesting
Conditions as are applicable to the Award.

      8.5   EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by the
Committee in the grant of a Restricted Stock Unit Award and set forth in the
Award Agreement, if a Participant's Service terminates for any reason, whether
voluntary or involuntary (including the Participant's death or disability), then
the Participant shall forfeit to the Company any Restricted Stock Units pursuant
to the Award which remain subject to Vesting Conditions as of the date of the
Participant's termination of Service.

      8.6   SETTLEMENT OF AWARDS. The Company shall issue to a Participant on
the date on which Restricted Stock Units subject to the Participant's Restricted
Stock Unit Award vest or on such other date determined by the Committee, in its
discretion, and set forth in the Award Agreement one (1) share of Stock (and/or
any other new, substituted or additional securities or

                                       15
<PAGE>

other property pursuant to an adjustment described in Section 8.4) for each
Restricted Stock Unit then becoming vested or otherwise to be settled on such
date, subject to the withholding of applicable taxes. Notwithstanding the
foregoing, if permitted by the Committee and set forth in the Award Agreement,
the Participant may elect in accordance with terms specified in the Award
Agreement to defer receipt of all or any portion of the shares of Stock or other
property otherwise issuable to the Participant pursuant to this Section.

      8.7   NONTRANSFERABILITY OF RESTRICTED STOCK UNIT AWARDS. Prior to the
issuance of shares of Stock in settlement of a Restricted Stock Unit Award, the
Award shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or garnishment by creditors of the
Participant or the Participant's beneficiary, except transfer by will or by the
laws of descent and distribution.

               SECTION 9. PERFORMANCE SHARES AND PERFORMANCE UNITS

      9.1   GRANT OF PERFORMANCE SHARES OR PERFORMANCE UNITS. Subject to the
provisions of Sections 1.3, 3 and 5, the Committee, at any time and from time to
time, may grant Awards of Performance Shares or Performance Units to such
Participants and in such amounts as it shall determine. Each grant of a
Performance Share or Performance Unit Award shall be evidenced by an Award
Agreement that shall specify the number of Performance Shares or Performance
Units subject thereto, the value of each Performance Share or Performance Unit,
the Performance Goals and Performance Period applicable to the Award, and the
other terms, conditions and restrictions of the Award as the Committee shall
determine. No Performance Share or Performance Unit Award or purported Award
shall be a valid and binding obligation of the Company unless evidenced by a
fully executed Award Agreement. Award Agreements evidencing Performance Share or
Performance Unit Awards may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the terms and conditions set
forth in Sections 9.2 through 9.10 below.

      9.2   VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS. Unless otherwise
provided by the Committee in granting an Award, each Performance Share shall
have an initial value equal to the Fair Market Value of one (1) share of Stock,
subject to adjustment as provided in Section 5.3, on the effective date of grant
of the Performance Share, and each Performance Unit shall have an initial value
of one hundred dollars ($100). The final payable to the Participant in
settlement of a Performance Share or Performance Unit will depend on the extent
to which Performance Goals established by the Committee are attained within the
applicable Performance Period established by the Committee.

      9.3   ESTABLISHMENT OF PERFORMANCE GOALS AND PERFORMANCE PERIOD. The
Committee, in its discretion, shall establish in writing the Performance Period
and Performance Goal(s) applicable to each Performance Share or Performance Unit
Award. Unless otherwise permitted in compliance with the requirements under
Section 162(m) with respect to "performance-based compensation," the Committee
shall establish the Performance Goal(s) applicable to each Award no later than
the earlier of (a) the date ninety (90) days after the commencement of the
applicable Performance Period or (b) the date on which 25% of the Performance
Period has elapsed, and, in any event, at a time when the outcome of the
Performance Goals remains substantially uncertain. Such Performance Goal(s),
when measured

                                       16
<PAGE>

at the end of the Performance Period, shall determine the ultimate value of the
Award to be paid to the Participant. Once established, the Performance Goals
shall not be changed during the Performance Period. The Company shall notify
each Participant granted a Performance Share or Performance Unit Award of the
terms of such Award, including the Performance Period and applicable Performance
Goal(s).

      9.4   MEASUREMENT OF PERFORMANCE GOALS. Performance Goals shall be
established by the Committee on the basis of targets to be attained
("PERFORMANCE TARGETS") with respect one or more measures of business or
financial performance (each, a "PERFORMANCE MEASURE"). Performance Measures
shall have the same meanings as used in the Company's financial statements, or
if such terms are not used in the Company's financial statements, they shall
have the meaning applied pursuant to generally accepted accounting principles,
or as used generally in the Company's industry. Performance Targets may include
a minimum, maximum, target level and intermediate levels of performance, with
the ultimate value of a Performance Share or Performance Unit Award determined
by the level attained during the applicable Performance Period. A Performance
Target may be stated as an absolute value or as a value determined relative to a
standard selected by the Committee. Performance Measures shall be calculated
with respect to the Company and each Subsidiary Corporation consolidated
therewith for financial reporting purposes or such division or other business
unit thereof as may be selected by the Committee. For purposes of the Plan, the
Performance Measures applicable to an Award shall be calculated in accordance
with generally accepted accounting principles, but prior to the accrual or
payment of any Performance Share or Performance Unit Award for the same
Performance period and excluding the effect (whether positive or negative) of
any change in accounting standards or any extraordinary, unusual or nonrecurring
item, as determined by the Committee, occurring after the establishment of the
Performance Goals applicable to the Award. Performance Measures may be one or
more of the following as determined by the Committee: (a) revenue, (b) operating
income, (c) pre-tax profit, (d) net income, (e) gross margin, (f) operating
margin, (g) earnings per share, (h) return on stockholder equity, (i) return on
capital, (j) return on net assets, (k) economic value added and (l) cash flow.

      9.5   DETERMINATION OF VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS.
As soon as practicable following the completion of the Performance Period for
each Performance Share and Performance Unit Award, the Committee shall certify
in writing the extent to which the applicable Performance Goals have been
attained and the resulting final value of the Award earned by the Participant
and to be paid upon its settlement in accordance with the terms of the Award
Agreement. The Committee shall have no discretion to increase the value of an
Award payable upon its settlement in excess of the amount called for by the
terms of the Award Agreement on the basis of the degree of attainment of the
Performance Goals as certified by the Committee. However, notwithstanding the
attainment of any Performance Goal, if permitted under a Participant's Award
Agreement evidencing a Performance Share or Performance Unit Award, the
Committee shall have the discretion, on the basis of such criteria as may be
established by the Committee, to reduce some or all of the value of an Award
that would otherwise be paid upon its settlement. No such reduction may result
in an increase in the amount payable upon settlement of another Participant's
Award. As soon as practicable following the Committee's certification, the
Company shall notify the Participant of the determination of the Committee.

                                       17
<PAGE>

      9.6   DIVIDEND EQUIVALENTS. The Committee may, in its discretion, provide
that any Performance Share shall include a right to Dividend Equivalents with
respect to cash dividends paid on Stock for which the record date is prior to
the date on which the Performance Share is settled or forfeited. Dividend
Equivalents may be paid currently or may be accumulated and paid to the extent
that Performance Shares become nonforfeitable, as determined by the Committee.
Settlement of Dividend Equivalents may be in cash, shares of Stock, or a
combination thereof as determined by the Committee, and may be paid on the same
basis as settlement of the related Performance Share as provided in Section 9.7.
Dividend Equivalents shall not be paid with respect to Performance Units.

      9.7   FORM AND TIMING OF PAYMENT. Payment of the ultimate value of a
Performance Share or Performance Unit Award earned by a Participant as
determined following the completion of the applicable Performance Period
pursuant to Sections 9.5 and 9.6 may be made in cash, shares of Stock, or a
combination thereof as determined by the Committee. Payments in shares of Stock
shall be determined by the Fair Market Value of a share of Stock on the last day
of such Performance Period. Payment may be made in a lump sum or installments as
prescribed by the Committee. If any payment is to be made on a deferred basis,
the Committee may, but shall not be obligated to, provide for the payment of
Dividend Equivalents or interest during the deferral period.

      9.8   RESTRICTIONS APPLICABLE TO PAYMENT IN SHARES. Shares of Stock issued
in payment of any Performance Share or Performance Unit Award may be fully
vested and freely transferable shares or may be shares of Restricted Stock
subject to Vesting Conditions as provided in Section 7.3. Any such shares of
Restricted Stock shall be evidenced by an Award Agreement and shall be subject
to the terms and conditions set forth in Sections 7.3 through 7.7 above.

      9.9   EFFECT OF TERMINATION OF SERVICE. Unless otherwise provided by the
Committee in the grant of a Performance Share or Performance Unit Award and set
forth in the Award Agreement, the effect of a Participant's termination of
Service on his or her Performance Share or Performance Unit Award shall be as
follows:

            (a)   DEATH, DISABILITY OR RETIREMENT. If the Participant's Service
is terminated by reason of the death, Disability or Retirement of the
Participant while he or she is the holder of a Performance Share or Performance
Unit Award but before the completion of the applicable Performance Period, the
value of the Participant's Award shall be determined by the extent to which the
applicable Performance Goals have been attained with respect to the entire
Performance Period and shall be prorated based on the number of months of the
Participant's Service during the Performance Period. Payment shall be made
following the end of the Performance Period in any manner permitted by Section
9.7.

            (b)   OTHER TERMINATION OF SERVICE. If the Participant's Service
terminates for any reason except death, Disability or Retirement before the
completion of the Performance Period applicable to a Performance Share or
Performance Unit Award held by such Participant, such Award shall be forfeited
in its entirety; provided, however, that in the event of an involuntary
termination of the Participant's Service, the Committee, in its sole discretion,
may waive the automatic forfeiture of all or any portion of any such Award and
provide for payment

                                       18
<PAGE>

of such Award or portion thereof on the same basis as if the Participant's
Service had terminated by reason of Retirement.

      9.10  NONTRANSFERABILITY. Prior to settlement in accordance with the
provisions of the Plan, no Performance Shares or Performance Units may be
subject in any manner to anticipation, alienation, sale, exchange, transfer,
assignment, pledge, encumbrance, or garnishment by creditors of the Participant
or the Participant's beneficiary, except transfer by will or by the laws of
descent and distribution. All rights with respect to a Performance Share or
Performance Unit Award granted to a Participant hereunder shall be exercisable
during his or her lifetime only by such Participant or the Participant's
guardian or legal representative.

                         SECTION 10. DIRECTOR FEE AWARDS

      10.1  EFFECTIVE DATE AND DURATION OF THIS SECTION. This Section 10 shall
become effective on the first day (the "SECTION 10 EFFECTIVE DATE") of the first
calendar quarter beginning after the Effective Date, provided that elections
pursuant to Section 10.2 may be made prior to the Section 10 Effective Date.
Notwithstanding the foregoing, Director Fee Awards shall be granted pursuant to
this Section with respect to elections made by Participants under the Initial
Plan for the Plan Year quarter which ends on or after the Effective Date of the
Plan. This Section 10 shall continue in effect for the remainder of the calendar
year commencing on the Section 10 Effective Date (the "INITIAL PLAN YEAR") and
for each subsequent calendar year commencing during the term (as provided in
Section 1.3) of the Plan (a "PLAN YEAR"). Notwithstanding any Participant's
prior election pursuant to Section 10.2, no Director Fee Award shall be granted
after termination of the Plan, and all Director Fees (as defined below) with
respect to which Director Fee Awards have not been granted prior to termination
of the Plan shall thereafter be paid in cash in accordance with the Company's
normal Director Fee payment procedures. However, subject to compliance with
applicable law as provided in Section 12, all Director Fee Awards granted prior
to termination of the Plan shall continue to be governed by and may be exercised
or settled in accordance with the terms of the Plan and the Award Agreement
evidencing such Director Fee Award.

      10.2  MANDATORY AND ELECTIVE DIRECTOR FEE AWARDS. Except as otherwise
provided below, each Nonemployee Director shall be granted one or more Director
Fee Awards in lieu of payment in cash of fifty percent (50%) of such
Participant's annual retainer fee, meeting fees and other compensation payable
with respect to such Participant's service as a Director ("DIRECTOR FEES")
during the Initial Plan Year and each subsequent Plan Year (or the portion of
such Plan Year following an individual's initial appointment or election as a
Nonemployee Director). In addition, each Participant may elect to receive
Director Fee Awards in lieu of payment in cash of all or any portion of the
remaining fifty percent (50%) of such Participant's Director Fees for the
Initial Plan Year and each subsequent Plan Year or applicable portion thereof.
For the Initial Plan Year and each subsequent Plan Year or applicable portion
thereof, a Participant shall be entitled to elect one of the following
alternative forms of payment of the value of the Participant's Director Fees:

            (a)   OPTION PAYMENT. A minimum of fifty percent (50%), together
with such additional portion, if any, elected by the Participant up to a maximum
of one hundred percent (100%), of the Participant's Director Fees will be paid
in the form of a Nonemployee Director

                                       19
<PAGE>

Option (an "OPTION PAYMENT") and the balance will be paid in cash in accordance
with the Company's normal Director Fee payment procedures.

            (b)   STOCK UNITS PAYMENT. A minimum of fifty percent (50%),
together with such additional portion, if any, elected by the Participant up to
a maximum of one hundred percent (100%), of the Participant's Director Fees will
be paid in the form of Stock Units (a "STOCK UNITS PAYMENT") and the balance
will be paid in cash in accordance with the Company's normal Director Fee
payment procedures. In connection with an election to receive a Stock Units
Payment, the Participant may elect an "Early Settlement Date" (as defined below)
upon which the Stock Units will be settled in accordance with Section 10.6(d);
provided, however, that upon termination of the Participant's Service as a
Director prior to the Early Settlement Date, settlement shall be made as
provided in Section 10.6(d). Any "EARLY SETTLEMENT DATE" elected by the
Participant shall become irrevocable as provided in Section 10.3(b) and shall be
December 1 of the third Plan Year following the Plan Year of the Stock Units
Payment or December 1 of any subsequent Plan Year.

      10.3  TIME AND MANNER OF ELECTION.

            (a)   TIME OF ELECTION. Each Nonemployee Director shall make an
election pursuant to Section 10.2:

                  (i)   for the Initial Plan Year: prior to the earlier of (1)
the date thirty (30) days following the Effective Date or (2) the Section 10
Effective Date;

                  (ii)  for each subsequent Plan Year: prior to the first day of
such Plan Year; and

                  (iii) in the case of a newly appointed or elected Nonemployee
Director: on the date of such appointment or election for the remainder of the
Initial Plan Year or subsequent Plan Year of appointment or election, as the
case may be.

            (b)   ELECTION IRREVOCABLE. An election pursuant to Section 10.2
shall become irrevocable as of the commencement of the Plan Year or portion
thereof to which it applies.

            (c)   FAILURE TO TIMELY ELECT. Any Nonemployee Director who fails to
make an election in accordance with this Section for any Plan Year (or the
Initial Plan Year, as the case may be) shall be deemed to have elected pursuant
to Section 10.2 to receive Option Payments for fifty (50%) of the value of such
Participant's Director Fees earned during such Plan Year (or Initial Plan Year)
and to receive the balance of such Participant's Director Fees in cash in
accordance with the Company's normal Director Fee payment procedures.

            (d)   MANNER OF ELECTION. Each election in accordance with this
Section shall be made on a form prescribed by the Company for this purpose and
filed with the Chief Financial Officer of the Company.

      10.4  AUTOMATIC GRANT OF DIRECTOR FEE AWARDS. Subject to the provisions of
Sections 1.3, 3 and 5, effective as of the last day of each quarter during any
Plan Year (or the Initial Plan Year, as the case may be), each Nonemployee
Director shall be granted automatically

                                       20
<PAGE>

and without further action of the Committee a Director Fee Award in lieu of that
portion of the Director Fees earned by the Participant during such quarter and
specified by the Participant's election under Section 10.2 for such Plan Year
(or Initial Plan Year) and any fractional share amount carried over from the
prior quarter as provided in Section 10.7 (the "QUARTERLY DIRECTOR FEES"). In
accordance with the Participant's election under Section 10.2 for the Plan Year
(or Initial Plan Year), the Director Fee Award shall be either in the form of an
Option Payment pursuant to Section 10.5 or a Stock Units Payment pursuant to
Section 10.6.

      10.5  OPTION PAYMENT. Each Option Payment shall be in the form of a
Nonemployee Director Option and shall be evidenced by an Award Agreement that
shall specify the exercise price, the duration of the Nonemployee Director
Option, the number of shares of Stock to which the Nonemployee Director Option
pertains, and such other provisions as the Committee shall determine. No such
Nonemployee Director Option or purported Nonemployee Director Option shall be a
valid and binding obligation of the Company unless evidenced by a fully executed
Award Agreement. Such Award Agreements may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the terms and
conditions of Section 6 to the extent not inconsistent with this Section and the
terms and conditions set forth in Sections 10.5(a) through 10.5(d) below:

            (a)   EXERCISE PRICE. The exercise price per share for each
Nonemployee Director Option shall be fifty percent (50%) of the average of the
Fair Market Values of a share of Stock for the ten (10) trading days preceding
the effective date of grant of the Nonemployee Director Option.

            (b)   NUMBER OF SHARES SUBJECT TO NONEMPLOYEE DIRECTOR OPTION. The
number of shares of Stock subject to a Nonemployee Director Option shall be
determined by the following formula (with any resulting fractional share being
disregarded):

                       X = A / (B x 50%)

            where,

                  "X" is the number of shares subject to the Nonemployee
                  Director Option;

                  "A" is the amount of Quarterly Director Fees in lieu of which
                  the Option Payment is made; and

                  "B" is the average of the Fair Market Values of a share of
                  Stock for the ten (10) trading days preceding the effective
                  date of grant of the Nonemployee Director Option.

            (c)   EXERCISE PERIOD. Each Nonemployee Director Option shall be
vested and exercisable on and after the date of grant of the Nonemployee
Director Option and shall terminate and cease to be exercisable on the date ten
(10) years after the date of grant of the Nonemployee Director Option, unless
earlier terminated pursuant to the terms of the Plan or the Award Agreement.

                                       21

<PAGE>

      (d) EFFECT OF TERMINATION OF SERVICE.

            (i) NONEMPLOYEE DIRECTOR OPTION GRANT. No Participant shall be
granted a Nonemployee Director Option following the date on which such
Participant's Service as a Director terminates for any reason. All of such
Participant's Director Fees with respect to which Director Fee Awards have not
been granted prior to the Participant's termination of Service as a Director
shall be paid in cash in accordance with the Company's normal Director Fee
payment procedures.

            (ii) NONEMPLOYEE DIRECTOR OPTION EXERCISABILITY. Subject to earlier
termination as otherwise provided herein, a Nonemployee Director Option shall
remain exercisable after a Participant's termination of Service at any time
prior to the expiration of thirty-six (36) months after the date on which the
Participant's Service terminated, but in any event no later than the Option
Expiration Date.

            (iii) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of a Nonemployee Director Option within the
applicable time period set forth in Section 10.5(d)(ii) is prevented by the
provisions of Section 12.1 below, the Nonemployee Director Option shall remain
exercisable until thirty (30) days after the date the Participant is notified by
the Company that the Nonemployee Director Option is exercisable, but in any
event no later than the Option Expiration Date.

            (iv) EXTENSION IF PARTICIPANT SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time period set
forth in Section 10.5(d)(ii) of shares acquired upon the exercise of the
Nonemployee Director Option would subject the Participant to suit under Section
16(b) of the Exchange Act, the Option shall remain exercisable until the
earliest to occur of (i) the tenth (10th) day following the date on which a sale
of such shares by the Participant would no longer be subject to such suit, (ii)
the one hundred and ninetieth (190th) day after the Participant's termination of
Service, or (iii) the Option Expiration Date.

      10.6 STOCK UNITS PAYMENT. Each Stock Units Payment shall be evidenced by
an Award Agreement that shall specify the number of Stock Units to which such
agreement pertains, the form and time of settlement of such Stock Units and such
other provisions as the Committee shall determine. No such Stock Units Award or
purported Stock Units Award shall be a valid and binding obligation of the
Company unless evidenced by a fully executed Award Agreement. Such Award
Agreements may incorporate all or any of the terms of the Plan by reference and
shall comply with and be subject to the terms and conditions set forth in
Sections 10.6(a) through 10.6(f) below:

            (a)   PAYMENT. No additional cash consideration shall be required
upon settlement of a Stock Units Award.

            (b)   NUMBER OF STOCK UNITS SUBJECT TO STOCK UNITS AWARD. The number
of Stock Units subject to a Stock Units Award shall be determined by the
following formula (with any resulting fractional Stock Unit being disregarded):

                                       22
<PAGE>

                  X = A / B

            where,

                  "X" is the number of Stock Units subject to the Stock Units
                  Award;

                  "A" is the amount of Quarterly Director Fees in lieu of which
                  the Stock Units Payment is made; and

                  "B" is the average of the Fair Market Values of a share of
                  Stock for the ten (10) trading days preceding the effective
                  date of grant of the Stock Units Award.

            (c)   VOTING AND DIVIDEND EQUIVALENT RIGHTS. Participants shall have
no voting rights with respect to shares of Stock represented by Stock Units
until the date of the issuance of a certificate for such shares (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company). Prior to settlement of a Stock Units Award, such
Award shall include the right to Dividend Equivalents, pursuant to which the
Participant shall be credited with additional whole and/or fractional Stock
Units as of the record date of any payment of cash dividends with respect to the
Stock occurring prior to such settlement date. Such additional Stock Units shall
be subject to the same terms and conditions and shall be settled in the same
manner and at the same time as the Stock Units originally subject to the Stock
Units Award. The number of such whole and/or fractional Stock Units to be
credited with respect to any Stock Units Award on the record date of any cash
dividend paid on the Stock shall be determined by the following formula:

                  X = (A x B) / C

            where,

                  "X" is the number of whole and/or fractional Stock Units to be
                  credited with respect to the Stock Units Award;

                  "A" is the amount of cash dividends paid on one share of
                  Stock;

                  "B" is the number of whole and fractional Stock Units subject
                  to the Stock Units Award as of the cash dividend record date;
                  and

                  "C" is the Fair Market Value of a share of Stock on the cash
                  dividend record date.

            (d)   SETTLEMENT OF STOCK UNITS. Subject to the provisions of
Section 12.1 below, the Company shall issue to the Participant, within thirty
(30) days following the earlier of (i) the Early Settlement Date elected by the
Participant with respect to the Stock Units Award or (ii) the date of
termination of the Participant's Service as a Director, a number of whole shares
of Stock equal to the number of whole Stock Units subject to the Stock Units
Award. Such shares of Stock shall not be subject to any restriction on transfer
other than any such restriction as may

                                       23
<PAGE>

be required pursuant to Section 12.1 or any applicable law, rule or regulation.
On the same settlement date, the Company shall pay to the Participant cash in
lieu of any fractional Stock Unit subject to the Stock Units Award in an amount
equal to the Fair Market Value on the settlement date of such fractional share
of Stock.

            (e)   EFFECT OF TERMINATION OF SERVICE. No Participant shall be
granted a Stock Units Award following the date on which such Participant's
Service as a Director terminates for any reason. All of such Participant's
Director Fees with respect to which Director Fee Awards have not been granted
prior to the Participant's termination of Service as a Director shall be paid in
cash in accordance with the Company's normal Director Fee payment procedures.

            (f) NONTRANSFERABILITY OF STOCK UNITS. Prior to their settlement
pursuant to Section 10.6(d), no Stock Units granted to a Participant shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, or garnishment by creditors of the Participant or the
Participant's beneficiary, except by will or by the laws of descent and
distribution.

      10.7 FRACTIONAL SHARES. No fractional shares of Stock shall be issued upon
the exercise of any Nonemployee Director Option or settlement of any Stock
Units. Any portion of a Participant's Quarterly Director Fees subject to the
Participant's election under Section 10.2 representing a fractional share amount
that would otherwise be paid in the form of an Option Payment or a Stock Units
Payment shall instead be carried over and combined with the Quarterly Director
Fees for the following quarter of the Plan Year (or Initial Plan year, as the
case may be) or the subsequent Plan Year. Any such fractional share amount
remaining upon termination of a Participant's Service as a Director shall be
paid to the Participant in cash, without interest.

                          SECTION 11. CHANGE IN CONTROL

      11.1 EFFECT OF CHANGE IN CONTROL. In the event of a Change in Control of
the Company as defined in Section 11.3 below, the surviving, continuing,
successor, or purchasing corporation or parent corporation thereof, as the case
may be (the "ACQUIRING CORPORATION"), shall either assume all outstanding Awards
or substitute new Awards having an equivalent value for such outstanding Awards.
In the event the Acquiring Corporation elects not to assume or substitute for
such outstanding Awards, and provided that the Participant's Service has not
terminated prior to the effective date of the Change in Control (unless, with
respect to Performance Shares or Performance Units, the Participant's Service
terminated by reason of the death, Disability or Retirement of the Participant),
all unexercisable, unvested or unpaid portions of such outstanding Awards shall
become immediately exercisable, immediately payable and vested in full
immediately prior to the effective date of the Change in Control. For purposes
of the preceding sentence:

            (a)   the value of Performance Shares and Performance Units shall be
determined and paid based upon the greater of (i) the extent to which the
applicable Performance Goals have been attained during the Performance Period up
to the effective date of the Change in Control or (ii) the pre-established 100%
of target level with respect to each Performance Target comprising the
applicable Performance Goals;

                                       24
<PAGE>

            (b)   any outstanding Stock Units Award not assumed or substituted
for by the Acquiring Corporation shall be settled in accordance with Section
10.610.6(d) immediately prior to the effective date of the Change in Control;
and

            (c)   any Director Fees with respect to which the Company has not
made either an Option Payment or a Stock Units Payment pursuant to Section 10
prior to the effective date of the Change in Control shall be paid in cash
immediately prior to such effective date.

Any Options which are neither assumed or substituted for by the Acquiring
Corporation nor exercised as of the date of the Change in Control shall
terminate as of the effective date of the Change in Control.

      11.2 TERMINATION OF SERVICE AFTER A CHANGE IN CONTROL. The Committee may,
in its discretion, provide in any Award Agreement that if the Participant's
Service is terminated within twelve (12) months (or such other period specified
by the Committee) following a Change in Control by reason of (a) the involuntary
termination by the Participating Company Group of the Participant's Service for
any reason other than "Cause" (as such term is defined in the Award Agreement)
or the Participant's death or Disability, or (b) the Participant's resignation
for "Good Reason" (as such term is defined in the Award Agreement) from all
capacities in which the Participant is then rendering Service to the
Participating Company Group, then (i) the exercisability, vesting and payment of
the outstanding Award held by such Participant shall be accelerated effective as
of the date on which the Participant's Service terminated to such extent, if
any, as shall have been specified by the Committee and set forth in the Award
Agreement, and (ii) the outstanding Option held by such Participant, to the
extent unexercised and exercisable on the date on which the Participant's
Service terminated, may be exercised by the Participant (or the Participant's
guardian or legal representative) at any time prior to the expiration of six (6)
months (or such other period of time specified by the Committee) after the date
on which the Participant's Service terminated, but in any event no later than
the Option Expiration Date.

      11.3 DEFINITION. A "CHANGE IN CONTROL" shall be deemed to have occurred in
the event of:

            (a)   an acquisition, consolidation, or merger of the Company with
or into any other corporation or corporations, unless the stockholders of the
Company retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the surviving or acquiring corporation or
corporations; or

            (b)   the sale, exchange, or transfer of all or substantially all of
the assets of the Company to a transferee other than a corporation or
partnership controlled by the Company or the stockholders of the Company; or

            (c)   a transaction or series of related transactions in which stock
of the Company representing more than thirty percent (30%) of the outstanding
voting power of the Company is sold, exchanged, or transferred to any single
person or affiliated persons leading to a change of a majority of the members of
the Board.

                                       25
<PAGE>

      The Board shall have final authority to determine whether multiple
transactions are related and the exact date on which a Change in Control has
been deemed to have occurred under subsections (a), (b), and (c) above.

                         SECTION 12. REQUIREMENTS OF LAW

      12.1 COMPLIANCE WITH SECURITIES LAW. The granting of Awards and the
issuance of shares of Stock pursuant to any Award shall be subject to compliance
with all applicable laws, rules, and regulations, and to such approvals by any
governmental agencies, securities exchanges or market systems as may be
required. In addition, no Option may be exercised unless (a) a registration
statement under the Securities Act shall at the time of exercise of the Option
be in effect with respect to the shares issuable upon exercise of the Option or
(b) in the opinion of legal counsel to the Company, the shares issuable upon
exercise of the Option may be issued in accordance with the terms of an
applicable exemption from the registration requirements of the Securities Act.
The inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to be
necessary to the lawful issuance and sale of any shares hereunder shall relieve
the Company of any liability in respect of the failure to issue or sell such
shares as to which such requisite authority shall not have been obtained. As a
condition to the issuance of any Stock, the Company may require the Participant
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.

      12.2 GOVERNING LAW. The Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of
California.

                           SECTION 13. TAX WITHHOLDING

      13.1 TAX WITHHOLDING IN GENERAL. The Company shall have the power to
withhold, or require a Participant to remit to the Company, an amount sufficient
to satisfy the Federal, state, local and foreign tax withholding obligations, if
any, of any Participating Company with respect to any Award. The Company shall
have no obligation to deliver shares of Stock or make any payment of cash under
the Plan until such tax withholding obligations have been satisfied.

      13.2 WITHHOLDING OF SHARES. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable to a Participant upon
the exercise or settlement of an Award, or to accept from the Participant the
tender of, a number of whole shares of Stock having a Fair Market Value, as
determined by the Company, equal to all or any part of the tax withholding
obligations of the Participating Company Group. The Fair Market Value of any
shares of Stock withheld or tendered to satisfy any such tax withholding
obligations shall not exceed the amount determined by the applicable minimum
statutory withholding rates.

                  SECTION 14. AMENDMENT AND TERMINATION OF PLAN

      14.1 AMENDMENT AND TERMINATION OF PLAN. The Committee at any time may
terminate, and from time to time, may amend, the Plan; provided, however, that
no such amendment may be made without approval of the stockholders of the
Company to the extent that the Committee deems such stockholder approval to be
necessary or advisable for compliance

                                       26
<PAGE>

with applicable tax and securities laws or other regulatory requirements,
including the requirements of any stock exchange or market system on which the
Stock is then listed.

      14.2 EFFECT OF AMENDMENT OR TERMINATION. No termination or amendment of
the Plan shall affect any then outstanding Award unless expressly provided by
the Committee. In any event, no termination or amendment of the Plan shall in
any manner adversely affect any Award theretofore granted under the Plan,
without the consent of the Participant, unless such termination or amendment is
necessary to comply with any applicable law, regulation or rule.

                      SECTION 15. MISCELLANEOUS PROVISIONS

      15.1 BENEFICIARY DESIGNATION. Each Participant may name, from time to
time, any beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid in case of such
Participant's death before he or she receives any or all of such benefit. Each
designation will revoke all prior designations by the same Participant, shall be
in a form prescribed by the Company, and will be effective only when filed by
the Participant in writing with the Company during the Participant's lifetime.
In the absence of any such designation, benefits remaining unpaid at the
Participant's death shall be paid to his or her estate.

      15.2 RIGHTS AS AN EMPLOYEE OR DIRECTOR. No individual, even though
eligible pursuant to Section 3, shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
Nothing in the Plan or any Award granted under the Plan shall confer on any
Participant a right to remain an Employee or Director, or interfere with or
limit in any way the right of a Participating Company to terminate the
Participant's Service at any time.

      15.3 RIGHTS AS A STOCKHOLDER. A Participant shall have no rights as a
stockholder with respect to any shares covered by an Award until the date of the
issuance of a certificate for such shares (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 5.3 or another provision of the Plan.

      15.4 PROVISION OF INFORMATION. Each Participant shall be given access to
information concerning the Company equivalent to that information generally made
available to the Company's common stockholders.

      15.5 UNFUNDED OBLIGATION. Any amounts payable to Participants pursuant to
the Plan shall be unfunded obligations for all purposes, including, without
limitation, Title I of the Employee Retirement Income Security Act of 1974. No
Participating Company shall be required to segregate any monies from its general
funds, or to create any trusts, or establish any special accounts with respect
to such obligations. The Company shall retain at all times beneficial ownership
of any investments, including trust investments, which the Company may make to
fulfill its payment obligations hereunder. Any investments or the creation or
maintenance of any trust or any Participant account shall not create or
constitute a trust or fiduciary relationship between the Committee or any
Participating Company and a Participant, or otherwise create any vested or
beneficial interest in any Participant or the Participant's creditors in any
assets of any

                                       27
<PAGE>

Participating Company. The Participants shall have no claim against any
Participating Company for any changes in the value of any assets which may be
invested or reinvested by the Company with respect to the Plan.

      15.6 INDEMNIFICATION. In addition to such other rights of indemnification
as they may have as members of the Committee or officers or employees of the
Participating Company Group, members of the Committee and any officers or
employees of the Participating Company Group to whom authority to act for the
Committee or the Company is delegated shall be indemnified by the Company
against all reasonable expenses, including attorneys' fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan, or any right granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such person is liable for gross negligence, bad faith or
intentional misconduct in duties; provided, however, that within sixty (60) days
after the institution of such action, suit or proceeding, such person shall
offer to the Company, in writing, the opportunity at its own expense to handle
and defend the same.

      IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing sets forth the Granite Construction Incorporated Amended and
Restated 1999 Equity Incentive Plan as duly adopted by the Board on March 11,
2004, to be effective as of May 24, 2004, the date of approval by the
stockholders of the Company.

                                      GRANITE CONSTRUCTION INCORPORATED

                                      /s/ Michael Futch
                                      -----------------------------------------
                                      Michael Futch, Secretary

                                       28

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}]]