Document:

<PAGE>

                                                                [EXECUTION COPY]

                              AMENDED AND RESTATED
                       LIMITED LIABILITY COMPANY AGREEMENT

                                       of

                          TEJON DERMODY INDUSTRIAL LLC,

                      a Delaware Limited Liability Company

                              As of March 20, 2001

<PAGE>

                                TABLE OF CONTENTS
                                -----------------

<TABLE>
<S>                                                                                              <C>
ARTICLE 1 ORGANIZATIONAL MATTERS.................................................................106
                  1.1    Formation...............................................................106
                  1.2    Name....................................................................107
                  1.3    Principal Place of Business; Other Places of Business...................107
                  1.4    Business Purpose........................................................107
                  1.5    Certificate of Formation; Filings.......................................107
                  1.6    Registered Office and Designated Agent for Service of Process...........107
                  1.7    Term....................................................................108
ARTICLE 2 DEFINITIONS............................................................................108
                  2.1    "Act"...................................................................108
                  2.2    "Additional Members"....................................................108
                  2.3    "Adjusted Capital Account"..............................................108
                  2.4    "Affiliate".............................................................108
                  2.5    "Agreement".............................................................108
                  2.6    "Approved by the Members" and "Approval of the Members".................108
                  2.7    "Assignee"..............................................................108
                  2.8    "Builder Development Covenants".........................................108
                  2.9    "Business Plan".........................................................109
                  2.10   "Buy Out Notice"........................................................109
                  2.11   "Buy Out Option"........................................................109
                  2.12   "Capital Account".......................................................109
                  2.13   "Capital Call"..........................................................110
                  2.14   "Capital Contributions".................................................110
                  2.15   "Cash Available for Distribution".......................................110
                  2.16   "Class A Members".......................................................110
                  2.17   "Class B Interests".....................................................110
                  2.18   "Class B Members".......................................................110
                  2.19   "Code"..................................................................110
                  2.20   "Community Facilities District".........................................110
                  2.21   "Company"...............................................................110
                  2.22   "Company Assets"........................................................110
                  2.23   "Company Minimum Gain"..................................................110
                  2.24   "Contribution Date".....................................................110
                  2.25   "CPI"...................................................................110
                  2.26   "Covered Person"........................................................110
                  2.27   "Defaulting Member".....................................................111
                  2.28   "Depreciation"..........................................................111
                  2.29   "Economic Interest".....................................................111
                  2.30   "Effective Date"........................................................111
                  2.31   "Gross Asset Value".....................................................111
                  2.32   "Immediate Family"......................................................112
                  2.33   "Improvement Budget"....................................................112
                  2.34   "Improvement Plan"......................................................112
</TABLE>
<PAGE>

<TABLE>
                  <S>                                                                            <C>
                  2.35   "Incapacity"............................................................112
                  2.36   "Industrial Park".......................................................112
                  2.37   "Leasing Budget"........................................................112
                  2.38   "Leasing Program".......................................................112
                  2.39   "Majority in Interest"..................................................112
                  2.40   "Marketing Budget"......................................................112
                  2.41   "Marketing Fund"........................................................112
                  2.42   "Marketing Program".....................................................112
                  2.43   "Master Plan"...........................................................112
                  2.44   "Members"...............................................................113
                  2.45   "Member Minimum Gain"...................................................113
                  2.46   "Member Nonrecourse Debt"...............................................113
                  2.47   "Member Nonrecourse Deductions".........................................113
                  2.48   "Membership Interest" or "Interest".....................................113
                  2.49   "Net Profits" or "Net Losses"...........................................113
                  2.50   "Non-Defaulting Member".................................................114
                  2.51   "Nonrecourse Deductions"................................................114
                  2.52   "Nonrecourse Liability".................................................114
                  2.53   "Notice Period" is defined in Section 7.10..............................114
                                                       -------
                  2.54   "Offeree Member"........................................................114
                  2.55   "Offering Notice".......................................................114
                  2.56   "Offeror Member"........................................................114
                  2.57   "Operating Cash Expenses"...............................................114
                  2.58   "Operating Budget"......................................................114
                  2.59   "Operating Program".....................................................114
                  2.60   "Option Interest".......................................................114
                  2.61   "Percentage Interest"...................................................115
                  2.62   "Person"................................................................115
                  2.63   "Pre-Contribution Improvement Costs"....................................115
                  2.64   "Property"..............................................................115
                  2.65   "Property Contribution".................................................115
                  2.66   "Prime Rate"............................................................115
                  2.67   "Proportionate" and "Proportionately"...................................115
                  2.68   "Recourse Liability"....................................................115
                  2.69   "Refinancing Proceeds"..................................................115
                  2.70   "Regulations"...........................................................115
                  2.71   "Regulatory Allocations"................................................115
                  2.72   "Reserves"..............................................................115
                  2.73   "Responsible Party".....................................................115
                  2.74   "Sales Proceeds"........................................................116
                  2.75   "Selling Member"........................................................116
                  2.76   "Specified Amount"......................................................116
                  2.77   "Stabilization".........................................................116
                  2.78   "Substitute Member".....................................................116
                  2.79   "Target Final Balances".................................................116
                  2.80   "Terminating Capital Transaction".......................................116
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                              <C>
                  2.81   "Termination Payment"...................................................116
                  2.82   "Title Policy"..........................................................116
                  2.83   "Total Amount"..........................................................116
                  2.84   "Transfer"..............................................................116
                  2.85   "Unreturned Capital"....................................................116
                  2.86   "Voluntary Capital Call"................................................116
                  2.87   "Water District" is defined in Section 6.1.2(i).........................116
                                                        -------
ARTICLE 3 CAPITALIZATION.........................................................................117
                  3.1    Initial Capitalization of Members.......................................117
                  3.2    Additional Capital Contributions by Members.............................117
                  3.3    Capital Accounts........................................................120
                  3.4    Member Capital..........................................................120
                  3.5    Member Loans............................................................120
                  3.6    Liability of Members....................................................120
ARTICLE 4 DISTRIBUTIONS..........................................................................121
                  4.1    Timing and Amount of Distributions......................................121
                  4.2    Order of Distributions..................................................121
                  4.3    Distributions in Kind...................................................121
                  4.4    Withholding.............................................................121
ARTICLE 5 ALLOCATIONS OF NET PROFITS AND NET LOSSES..............................................122
                  5.1    Allocation of Net Profits and Losses....................................122
                  5.2    Additional Special Allocations..........................................122
                  5.3    Other Provisions........................................................125
ARTICLE 6 GOVERNANCE AND OPERATIONS..............................................................125
                  6.1    Management..............................................................125
                  6.2    Compensation and Reimbursement of Members and Member Affiliates.........129
                  6.3    Officers................................................................129
                  6.4    Records and Reports.....................................................130
                  6.5    Meetings of Members.....................................................131
                  6.6    Standards of Conduct....................................................131
                  6.7    Other Activities........................................................131
ARTICLE 7 INTERESTS AND TRANSFERS OF INTERESTS...................................................131
                  7.1    Transfers of Membership Interests.......................................131
                  7.2    Sale or Transfer of a Member's Interest.................................133
                  7.3    Rights of Assignees.....................................................133
                  7.4    Admissions, Withdrawals, and Removals...................................134
                  7.5    Payment Upon Withdrawal or Removal of Member............................134
                  7.6    Admission of Assignees as Substitute Members............................134
                  7.7    Withdrawal of Members...................................................135
                  7.8    Conversion of Membership Interest.......................................135
                  7.9    Buy/Sell................................................................135
                  7.10   Option to Purchase Defaulting Member's Interest.........................138
ARTICLE 8 LIABILITY, EXCULPATION, AND INDEMNIFICATION............................................139
                  8.1    Liability...............................................................139
                  8.2    Exculpation.............................................................139
                  8.3    Indemnification.........................................................140
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                              <C>
                  8.4    Expenses................................................................140
                  8.5    Insurance...............................................................140
ARTICLE 9 DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY...............................140
                  9.1    Limitations.............................................................140
                  9.2    Exclusive Causes........................................................141
                  9.3    Effect of Dissolution...................................................141
                  9.4    No Capital Contribution Upon Dissolution................................141
                  9.5    Liquidation.............................................................141
ARTICLE 10 MISCELLANEOUS.........................................................................142
                  10.1   Amendments..............................................................142
                  10.2   Accounting and Fiscal Year..............................................142
                  10.3   Entire Agreement........................................................142
                  10.4   Further Assurances......................................................142
                  10.5   Notices.................................................................142
                  10.6   Tax Matters.............................................................143
                  10.7   Governing Law; Certain Waivers..........................................143
                  10.8   Construction............................................................143
                  10.9   Captions - Pronouns.....................................................143
                  10.10  Binding Effect..........................................................143
                  10.11  Confidentiality.........................................................143
                  10.12  Member Representations..................................................144
                  10.13  Counterparts............................................................144
                  10.14  Attorney Fees...........................................................145
                  10.15  Titles..................................................................145
                  10.16  Successors..............................................................145
                  10.17  Computation of Time Periods.............................................145
                  10.18  Severability............................................................145
                  10.19  Signatory Authority.....................................................145
                  10.20  Arbitration.............................................................145
                  10.21  Approvals...............................................................146
                  10.22  Interpretations.........................................................146
                  10.23  No Third-Party Beneficiaries............................................146
</TABLE>
<PAGE>

                              AMENDED AND RESTATED
                       LIMITED LIABILITY COMPANY AGREEMENT
                                       OF
                          TEJON DERMODY INDUSTRIAL LLC

     This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (the
"Agreement") for Tejon Dermody Industrial LLC (the "Company"), by and between
Tejon Industrial Corp., a California corporation ("Tejon"), and Dermody
Properties, a Nevada corporation ("Dermody"), which are referred to herein as
the "Members" and each as a "Member," is made effective as of March 20, 2001
(the "Effective Date").

          WHEREAS, Tejon caused the formation of the Company on January 19, 2001
by filing with the Secretary of State of the State of Delaware that certain
Certificate of Formation of the Company dated January 19, 2001;

          WHEREAS, Tejon, as the sole Member of the Company, organized the
Company under the Delaware Limited Liability Company Act (as such may be amended
from time to time, the "Act") with the execution of that certain Limited
Liability Company Agreement on January 19, 2001 (the "Original LLC Agreement");

          WHEREAS, pursuant to the terms and conditions of that certain Letter
of Intent by and between Tejon and Dermody, dated December 12, 2000, Tejon and
Dermody agreed to negotiate the terms of a joint venture between the parties on
the terms and conditions and for the purposes set forth therein and herein; and

          WHEREAS, the Members have reached agreement with respect to the joint
venture and have elected to use the Company as the entity through which the
joint venture will be conducted; and

          WHEREAS, the Members have decided to make certain amendments to the
Original LLC Agreement, and, as so amended, to restate the Original LLC
Agreement in its entirety.

          NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements herein contained, the Original LLC Agreement is hereby amended
and restated in its entirety as follows:

                                   ARTICLE 1
                             ORGANIZATIONAL MATTERS

          1.1 Formation. The Members formed the Company as a limited liability
company under the Act for the purposes and upon the terms and conditions set
forth in this Agreement. The rights, powers, duties, and liabilities of the
Members shall be as provided in the Act, except as otherwise expressly provided
herein. In the event of any inconsistency between any terms and conditions
contained in the Agreement and any non-mandatory provisions of the Act, the
Agreement shall govern.
<PAGE>

          1.2 Name. The name of the Company shall be "Tejon Dermody Industrial
LLC." The Company may conduct business under one or more fictitious names
Approved by the Members.

          1.3 Principal Place of Business; Other Places of Business. The
principal place of business of the Company is 4436 Lebec Road, Lebec, California
93243, or such other place Approved by the Members. The Company may maintain
offices and places of business at such other place or places within or outside
the State of Delaware, as Approved by the Members.

          1.4 Business Purpose. Tejon is owner of the Tejon Industrial Complex,
consisting of approximately 346 acres of land (the "Industrial Park"). The
principal purposes of the Company shall be to develop and improve the real
property described on Exhibit "B" attached hereto and incorporated herein (the
                      -------
"Property"). The contemplated improvements to the Property include one or more
buildings, totaling up to (but no more than) 700,000 gross interior square feet.
The Property shall be developed, entitled and improved consistent with the plan
and related budgets attached hereto as Exhibit "C" and incorporated herein, as
                                       -------
such may be amended or supplemented from time to time as provided herein or
otherwise with the Approval of the Members (the "Business Plan"), and Builder
Development Restrictions in substantially the form and content of Exhibit "D"
                                                                  -------
attached hereto (which the Members shall execute on behalf of the Company) (as
such may be amended from time to time as provided therein or herein, the
"Builder Development Covenants"). In addition to the foregoing, the purposes of
the Company shall include (a) constructing any off-site improvements necessary
or desirable to develop, entitle and improve the Property consistent with the
Business Plan, which improvements are not to be constructed by the Community
Facilities District and which are Approved by the Members, (b) financing the
activities of the Company, consistent with the Business Plan or as otherwise
provided in this Agreement, (c) leasing the improvements on the Property to one
or more tenants, including entering into build-to-suit and similar pre-lease
arrangements with respect to such improvements, consistent with the Business
Plan, (d) operating, maintaining and managing the improvements on the Property
consistent with the Business Plan, and (e) selling or exchanging the Property
and/or the improvements thereon (or an interest or interests in the Property
and/or the improvements thereon) pursuant to the terms hereof. Any proposal to
amend the Business Plan must, prior to being given effect, be Approved by the
Members.

          Subject to the limitations set forth in this Agreement, the Company
shall have the power to do and perform all things Approved by the Members to be
necessary, desirable or appropriate for, incident to or connected with or
arising out of such activities.

          1.5 Certificate of Formation; Filings. The Members have caused to be
executed and filed a Certificate of Formation in the Office of the Delaware
Secretary of State. The Members may execute and file any duly authorized
amendments to the Certificate of Formation from time to time in a form
prescribed by the Act. The Members shall also cause to be made, on behalf of the
Company, such additional filings and recordings as it shall deem necessary or
advisable.

          1.6 Registered Office and Designated Agent for Service of Process. The
Company shall continuously maintain a registered office and a designated and
duly qualified
<PAGE>

agent for service of process for the Company in the State of Delaware. The
address of the registered office in Delaware and of the registered agent for
service of process as of the effective date of this Agreement is c/o The
Corporation Service Company, 2711 Centerville Road, Suite 400, Wilmington,
Delaware 19808.

          1.7 Term. The Company commenced existence on the date that the
Certificate was first properly filed with the Office of the Delaware Secretary
of State, and shall continue perpetually until duly terminated.

                                    ARTICLE 2
                                   DEFINITIONS

     Capitalized words and phrases used and not otherwise defined elsewhere in
this Agreement shall have the following meanings:

          2.1 "Act" is defined in the Preamble.

          2.2 "Additional Members" means those Persons admitted as Members
pursuant to Section 3.2.2(d).
            -------

          2.3 "Adjusted Capital Account" means, with respect to any Member, the
balance, if any, in such Member's Capital Account as of the end of the relevant
fiscal year, after: adding to such Capital Account the amount that such Member
is deemed to be obligated to restore pursuant to Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and subtracting from such Capital Account such
Member's share of the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), (5) and (6).

          2.4 "Affiliate" means, with reference to a specified Person: (a) a
Person that, directly or indirectly, controls, is controlled by, or is under
common control with, the specified Person, (b) any Person that is an officer,
director, general partner, manager or managing member, or trustee of, or serves
in a similar capacity with respect to, the specified Person, or for which the
specified Person is an officer, director, general partner, manager or managing
member, or trustee, or serves in a similar capacity, or (c) any member of the
Immediate Family of the specified Person.

          2.5 "Agreement" is defined in the Preamble.

          2.6 "Approved by the Members" and "Approval of the Members" mean, as
to the subject matter thereof and as the context may require or permit, an
express approval, consent, ratification or determination contained in a written
statement, in minutes or a consent action signed by a Majority in Interest of
the Members.

          2.7 "Assignee" means any Person (a) to whom a Member (or Assignee
thereof) Transfers all or any part of its Interest, and (b) which has not been
admitted as a Substitute Member pursuant to Section 7.6.
                                            -------

          2.8 "Builder Development Covenants"is defined in Section 1.4.
                                                           -------
<PAGE>

          2.9 "Business Plan" is defined in Section 1.4.
                                            -------

          2.10 "Buy Out Notice"is defined in Section 7.10.
                                             -------

          2.11 "Buy Out Option" is defined in Section 7.10.
                                              -------

          2.12 "Capital Account" means Capital Account maintained for each
Member in accordance with the following provisions:

               2.12.1 To each Member's Capital Account there shall be added (a)
such Member's Capital Contributions and (b) such Member's allocable share of Net
Profits and any items in the nature of income or gain that are specially
allocated to such Member pursuant to Article 5 hereof or other provisions of
                                     -------
this Agreement.

               2.12.2 From each Member's Capital Account there shall be
subtracted (a) the amount of (i) cash and (ii) the Gross Asset Value of any
Company Property distributed to such Member pursuant to any provision of this
Agreement (net of liabilities encumbering the distributed Company Property that
such Member is considered to assume or take subject to under Code Section 752),
(b) such Member's allocable share of Net Losses and any other items in the
nature of expenses or losses that are specially allocated to such Member
pursuant to Article 5 hereof and (c) liabilities of such Member assumed by the
            -------
Company or which are secured by any property contributed by such Member to the
company, calculated by reference to Code Section 752. With respect to
distributions of Company Property, Capital Accounts shall first be adjusted to
reflect the manner in which the unrealized income, gain, loss and deduction
inherent in such property (that has not been previously reflected in Capital
Accounts) would be allocated, pursuant to Article 5 hereof, to the Members if
there were a taxable disposition of such property for its fair market value
(taking Code Section 7701(g) into account) on the date of distribution.

               2.12.3 The Members may cause an increase or decrease in the
Capital Accounts of the Members to reflect a revaluation of Company Property on
the Company's books and records. Any such adjustments shall be made in
accordance with Regulations Section 1.704-1(b)(2)(iv)(g).

               2.12.4 Additional adjustments shall be made to the Members'
Capital Accounts as required by Regulations Sections 1.704-1(b) and 1.704-2 or,
as permitted but not required, Approved by the Members. Adjustments to Capital
Accounts in respect to Company income, gain, loss, deduction and non-deductible
expenditures (or any item thereof) shall be made with reference to the federal
tax treatment of such items (and, in the case of book items, with reference to
federal tax treatment of the corresponding tax items) at the Company level,
without regard to any requisite or elective tax treatment of such items at the
Member level.

               2.12.5 The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Sections 1.704-1(b) and 1.704-2 and shall be interpreted and
applied in a manner consistent with such Regulations.
<PAGE>

          2.13 "Capital Call" is defined in Section 3.2.1.
                                            -------

          2.14 "Capital Contributions" means, with respect to any Member, the
total amount of money and the fair market value of property (other than money)
contributed to the capital of the Company by such Member, less the amount of
liabilities to which any contributed property is subject, whether contributed as
an initial Capital Contribution or as an additional Capital Contribution.

          2.15 "Cash Available for Distribution" means, with respect to any
fiscal year, all Company cash receipts (excluding Refinancing Proceeds, Sales
Proceeds and the proceeds from any Terminating Capital Transaction), after
deducting payments for Operating Cash Expenses, payments required to be made in
connection with any loan to the Company or any other loan secured by a lien on
any Company Assets, capital expenditures, and any other amounts set aside for
the restoration, increase, or creation of Reserves.

          2.16 "Class A Members" means the persons identified as such on Exhibit
                                                                         -------
"A" to this Agreement, as such may be amended from time to time.

          2.17 "Class B Interests" is defined in Section 3.2.2(d).

          2.18 "Class B Members" means the person(s), if any, who are granted
Class B Interests pursuant to Section 3.2.2(d) and who are identified as Class B
                              -------
Members on Exhibit "A" to this Agreement, as such may be amended from time to
           -------
time.

          2.19 "Code" means the Internal Revenue Code of 1986, as amended from
time to time (or corresponding provisions of succeeding law).

          2.20 "Community Facilities District" is defined in Section 3.1.1.
                                                             -------

          2.21 "Company" is defined in the Preamble.

          2.22 "Company Assets" means all direct and indirect interests in real
and personal property owned by the Company, including both tangible and
intangible property (including cash).

          2.23 "Company Minimum Gain" has the meaning set forth in Regulations
Sections 1.704-2(b)(2) and 1.704-2(d)(1) for the phrase "partnership minimum
gain."

          2.24 "Contribution Date" is defined in Section 3.2.2(c).
                                                 -------

          2.25 "CPI" means the Consumer Price Index (all items) for all urban
consumers in the Los Angeles Region published by the United States Department of
Labor Statistics.

          2.26 "Covered Person" means each Member, an officer of the Company or
of a Member, a Person to whom management responsibilities are delegated, an
Affiliate of a Member, or an employee or agent of the Company or of a Covered
Person.
<PAGE>

          2.27 "Defaulting Member" is defined in Section 7.10.
                                                 -------

          2.28 "Depreciation" means, for each fiscal year, an amount equal to
the federal income tax depreciation, amortization or other cost recovery
deduction allowable with respect to an asset for such year or other period,
except that (a) with respect to any asset the Gross Asset Value of which differs
from its adjusted tax basis for federal income tax purposes, which difference is
being eliminated by use of the "remedial method" pursuant to Section 1.704-3(d)
of the Regulations, Depreciation for such fiscal year shall be the amount of
book basis recovered for such fiscal year under the rules prescribed by Section
1.704-3(d)(2) of the Regulations, and (b) with respect to any other asset the
Gross Asset Value of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of such year, Depreciation shall be an amount that
bears the same ratio to such beginning Gross Asset Value as the federal income
tax depreciation, amortization or other cost recovery deduction for such year or
other period bears to such beginning adjusted tax basis; provided, however, that
if the federal income tax depreciation, amortization or other cost recovery
deduction for such year is zero, Depreciation shall be determined with reference
to such beginning Gross Asset Value using any method Approved by the Members.

          2.29 "Economic Interest" means a Person's right to share in the Net
Profits, Net Losses, or similar items of, and to receive distributions from, the
Company, but does not include any other rights of a Member including, without
limitation, the right to vote or to participate in the management of the
Company, or, except as specifically provided in this Agreement or required under
the Act, any right to information concerning the business and affairs of the
Company.

          2.30 "Effective Date" is defined in the Preamble.

          2.31 "Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:

               2.31.1 The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such asset, as
provided herein or as Approved by the Members.

               2.31.2 The Gross Asset Values of all Company assets immediately
prior to the occurrence of any event described in subsection (a), subsection
(b), subsection (c) or subsection (d) hereof shall be adjusted to equal their
respective gross fair market values, as Approved by the Members, as of the
following times:

                    (a) the acquisition of an additional interest in the Company
     (other than in connection with the execution of this Agreement) by a new or
     existing Member in exchange for more than a de minimis Capital
     Contribution;

                    (b) the distribution by the Company to a Member of more than
     a de minimis amount of Company property as consideration for an interest in
     the Company;

                    (c) the liquidation of the Company within the meaning of
     Regulations Section 1.704-1(b)(2)(ii)(g); and
<PAGE>

                    (d) at such other times as the Members may determine as
     necessary or advisable in order to comply with Regulations Sections
     1.704-1(b) and 1.704-2.

               2.31.3 The Gross Asset Value of any Company asset distributed to
a Member shall be the gross fair market value of such asset on the date of
distribution, as Approved by the Members.

               2.31.4 The Gross Asset Values of Company assets shall be
increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section 734(b) or Code Section 743(b), but only to
the extent that such adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m).

               2.31.5 If the Gross Asset Value of a Company asset has been
determined or adjusted pursuant to Section 2.31.1, Section 2.31.2 or Section
                                   -------         -------           -------
2.31.4 above, such Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for purposes of
computing Net Income and Net Losses.

          2.32 "Immediate Family" means, and is limited to, an individual
Member's current spouse, parents, parents-in-law, grandparents, children,
siblings, and grandchildren, or a trust, estate, or other estate-planning
vehicle, all of the beneficiaries of which consist of such Member or members of
such Member's Immediate Family.

          2.33 "Improvement Budget" is defined in Section 6.1.2.
                                                  -------

          2.34 "Improvement Plan" is defined in Section 6.1.2.
                                                -------

          2.35 "Incapacity" means the entry of an order of incompetence or of
insanity, or the death, dissolution, an event of bankruptcy (as defined in the
Act), or termination (other than by merger or consolidation) of any Person.

          2.36 "Industrial Park" is defined in Section 3.1.1.
                                               -------

          2.37 "Leasing Budget" is defined in Section 6.1.2.
                                              -------

          2.38 "Leasing Program"is defined in Section 6.1.2.
                                              -------

          2.39 "Majority in Interest" means Members entitled to vote (or any
specified subset thereof) holding, in the aggregate, a majority of the
Percentage Interests entitled to vote held by all Members entitled to vote (or
by such specified subset).

          2.40 "Marketing Budget" is defined in Section 6.1.2.
                                                -------

          2.41 "Marketing Fund" is defined in Section 3.1.1.
                                              -------

          2.42 "Marketing Program" is defined in Section 6.1.2.
                                                 -------

          2.43 "Master Plan" is defined in Section 6.1.2.
                                           -------
<PAGE>

          2.44 "Members" means the Persons owning Membership Interests,
including any Additional Members, and any Substitute Members, with each Member
being referred to, individually, as a "Member."

          2.45 "Member Minimum Gain" means an amount, with respect to each
Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if
such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined
in accordance with Regulations Section 1.704-2(i) with respect to "partner
minimum gain."

          2.46 "Member Nonrecourse Debt" has the meaning set forth in
Regulations Section 1.704-2(b)(4) for the phrase "partner nonrecourse debt."

          2.47 "Member Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i) for the phrase "partner nonrecourse deductions."

          2.48 "Membership Interest" or "Interest" means the entire ownership
interest of a Member in the Company at any particular time, including without
limitation, the Member's Economic Interest, any and all rights to vote and
otherwise participate in the Company's affairs, and the rights to any and all
benefits to which a Member may be entitled as provided in this Agreement,
together with the obligations of such Member to comply with all of the terms and
provisions of this Agreement.

          2.49 "Net Profits" or "Net Losses" means, for each fiscal year or
other period, an amount equal to the Company's taxable income or loss for such
year or period determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain, loss or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:

               2.49.1 Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Profits or Net
Losses pursuant to this Section 2.49 shall be added to such taxable income or
                        -------
loss;

               2.49.2 Any expenditure of the Company described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Net Profits or Net Losses pursuant to this Section 2.49, shall be
                                                        -------
subtracted from such taxable income or loss;

               2.49.3 Gain or loss resulting from any disposition of Company
Property where such gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the Company Property
disposed of, notwithstanding that the adjusted tax basis of such Company
Property differs from its Gross Asset Value;

               2.49.4 To the extent an adjustment to the adjusted tax basis of
any asset included in Company Property pursuant to Code Section 734(b) or Code
Section 743(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining capital accounts
as a result of a distribution other than in liquidation of a Member's Membership
Interest, the amount of such adjustment shall be
<PAGE>

treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases the basis of the asset) from the
disposition of the asset and shall be taken into account for the purposes of
computing Net Profits and Net Losses.

               2.49.5 If the Gross Asset Value of any Company asset is adjusted
in accordance with the terms of this Agreement, the amount of such adjustment
shall be taken into account in the taxable year of such adjustment as gain or
loss from the disposition of such asset for purposes of computing Net Profits or
Net Losses;

               2.49.6 Notwithstanding any other provision of this Section 2.49,
                                                                  -------
any items that are specially allocated pursuant to Section 5.2 hereof shall not
                                                   -------
be taken into account in computing Net Profits or Net Losses.

          2.50 "Non-Defaulting Member" is defined in Section 7.10.
                                                     -------

          2.51 "Nonrecourse Deductions" has the meaning set forth in Regulations
Sections 1.704-2(b)(1) and 1.704-2(c).

          2.52 "Nonrecourse Liability" has the meaning set forth in Regulations
Sections 1.704-2(b)(3) and 1.752-1(a)(2).

          2.53 "Notice Period" is defined in Section 7.10.
                                             -------

          2.54 "Offeree Member" is defined in Section 7.9.
                                              -------

          2.55 "Offering Notice" is defined in Section 7.9.
                                               -------

          2.56 "Offeror Member" is defined in Section 7.9.
                                              -------

          2.57 "Operating Cash Expenses" means, with respect to any fiscal
period, the amount of cash disbursed in the ordinary course of business during
the period, including without limitation, all cash expenditures (including
capital expenditures) for advertising, promotion, property acquisition,
development, construction, operation and management, insurance premiums, taxes,
utilities, repair, maintenance, legal, accounting, bookkeeping, computing,
equipment use, travel on Company business, telephone expenses, and salaries, and
direct expenses of Company employees (if any) and agents while engaged in
Company business. Operating Cash Expenses shall include fees paid by the Company
to any Affiliate permitted by this Agreement, and the actual cost of goods,
materials and administrative services used for or by the Company, whether
incurred by the Affiliate or any non-Affiliate in performing functions set forth
in this Agreement reasonably requiring the use of such goods, materials, or
administrative services. Operating Cash Expenses shall not include expenditures
paid from Reserves.

          2.58 "Operating Budget" is defined in Section 6.1.2.
                                                -------

          2.59 "Operating Program" is defined in Section 6.1.2.
                                                 -------

          2.60 "Option Interest" is defined in Section 7.10.
                                               -------
<PAGE>

          2.60A "Original LLC Agreement" is defined in the recitals hereto.

          2.61 "Percentage Interest" means, with respect to each Member, the
percentage set forth opposite such Member's name on Exhibit "A", attached hereto
                                                    -------
and, as it may be amended, modified or supplemented from time to time,
incorporated herein.

          2.62 "Person" means and includes an individual, a corporation, a
partnership, a limited liability company or partnership, a trust, an
unincorporated organization, a government, or any department or agency thereof,
or any other juridical entity.

          2.63 "Pre-Contribution Improvement Costs" is defined in Section 6.2.1.
                                                                  -------

          2.64 "Property" is defined in Section 1.4.
                                        -------

          2.65 "Property Contribution" is defined in Section 3.1.1.
                                                     -------

          2.66 "Prime Rate" means the highest prime or reference rate as quoted
from time to time by The Wall Street Journal, which shall be a variable rate.
                     -----------------------
Interest rates and quasi-rates of return set forth in this Agreement that are
determined with reference to the Prime Rate shall similarly be variable rates
and shall change immediately effective upon a change in the Prime Rate.

          2.67 "Proportionate" and "Proportionately" means, when used with
respect to the Members (or a group of them), the proportion that each such
Member's Percentage Interest bears to the total outstanding Percentage Interests
of all Members to whom reference is made.

          2.68 "Recourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(1).

          2.69 "Refinancing Proceeds" means all net cash proceeds which directly
or indirectly result from the refinancing or restructuring of debt of the
Company, including debts secured by the Company Property or any portion thereof,
less any addition to Reserves.

          2.70 "Regulations" means Treasury Regulations promulgated under the
Code and in effect, as such Regulations may be amended and succeeded from time
to time.

          2.71 "Regulatory Allocations" is defined in Section 5.2.9.
                                                      -------

          2.72 "Reserves" means funds set aside or amounts allocated to reserves
that shall be maintained in amounts Approved by the Members for working capital
(including amounts to make necessary or desirable capital improvements and to
provide a fund for deferred maintenance), to pay taxes, insurance, debt service,
and other costs or expenses and liabilities (actual and contingent) incident to
the conduct of business by the Company or the liquidation of its assets and
termination of its existence.

          2.73 "Responsible Party" is defined in Section 6.6.
                                                 -------
<PAGE>

          2.74 "Sales Proceeds" means all proceeds (other than Refinancing
Proceeds) arising from the sale or other transfer of less than all of the
Company's interest in the Property, less the following: (a) proceeds necessary
for the payment of all debts and obligations of the Company, to the extent then
due but excluding debts assumed by the transferee; and (b) any addition to
Reserves.

          2.75 "Selling Member" is defined in Section 7.2.
                                              -------

          2.76 "Specified Amount" is defined in Section 7.9.
                                                -------

          2.77 "Stabilization" means the first date on which (a) at least
ninety-five percent (95%) of the rentable square footage of the improvements
constructed by the Company on the Property has been leased pursuant to the
Leasing Program and (b) the Company's permanent or "take out" financing has
funded and the Company's construction financing has been paid in full.

          2.78 "Substitute Member" means any Person (a) to whom a Member (or
Assignee thereof) Transfers all or any part of its Interest, and (b) which has
been admitted to the Company as a Substitute Member pursuant to Section 7.6.
                                                                -------

          2.79 "Target Final Balances" is defined in Section 5.2.10.

          2.80 "Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Company or a
related series of transactions that, taken together, result in the sale or other
disposition of all or substantially all of the assets of the Company.

          2.81 "Termination Payment" is defined in Section 7.6.
                                                   -------

          2.82 "Title Policy" is defined in Section 3.1.1.
                                            -------

          2.83 "Total Amount" is defined in Section 3.2.2(c).
                                            -------

          2.84 "Transfer" means, with respect to any Interest, a sale,
conveyance, exchange, assignment, pledge, encumbrance, gift, bequest,
hypothecation, or other transfer or disposition by any other means, whether for
value or not and whether voluntary or involuntary (including, without
limitation, by operation of law), or an agreement to do any of the foregoing.
Used as a verb, the term shall mean effecting any of the foregoing.

          2.85 "Unreturned Capital" means, with respect to each Member, the
cumulative Capital Contributions by such Member less the distributions to such
Member with respect to his Unreturned Capital.

          2.86 "Voluntary Capital Call" is defined in Section 3.2.2(c).
                                                      -------

          2.87 "Water Districts" is defined in Section 6.1.2(i).
                                               -------
<PAGE>

                                   ARTICLE 3
                                 CAPITALIZATION

          3.1 Initial Capitalization of Members.

               3.1.1 Tejon previously make a Capital Contribution of all of its
right, title and interest to the Property, in its condition on the date of such
Capital Contribution and on an "as is" basis without representation or warranty
(the "Property Contribution"). Although previously made by Tejon, for
simplicity's sake the Members agree to account for Tejon's contribution of the
Property as a part of its initial Capital Contribution pursuant to this Section.

     Contemporaneously with the Property Contribution, the Company obtained a
title insurance policy from Chicago Title Company, the material terms,
conditions and exceptions of which have been reviewed by the Members and which
are hereby Approved by the Members (the "Title Policy"). The Company owns the
Property subject to all encumbrances set forth in the Title Policy, including
liens securing property taxes and other assessments not yet due and payable. The
Members acknowledge that the Property is located in a community facilities
district (the "Community Facilities District"), and the Company shall be
responsible for paying all assessments imposed by the Community Facilities
District or any successor or similar district with respect to the Property.
Tejon shall be responsible for causing utilities (i.e., water, gas, electricity
and communications) and public roads to be available to the Property and for
making (or causing to be made) all off-site improvements (other than
tenant-specific off-site improvements and other off-site improvements to be made
by the Company which are Approved by the Members) necessary to develop and
improve the Property as provided herein, any or all of which may be done through
the Community Facilities District.

     On the Effective Date, Tejon shall contribute fifty thousand dollars
($50,000), to be set aside in a separate fund to used as a fund for marketing of
the Property and the Industrial Park pursuant to a marketing program Approved by
the Members (the "Marketing Fund").

               3.1.2 As its initial Capital Contribution, which shall be made on
the Effective Date, Dermody shall contribute one million four hundred
seventy-eight thousand eight hundred sixty-two dollars ($1,478,862), plus fifty
thousand dollars ($50,000) to the Marketing Fund.

               3.1.3 The names, addresses, initial Capital Contributions and
Percentage Interests of the Members shall be set forth on Exhibit "A", which
                                                          -------
shall be amended from time to time as Dermody contributes additional amounts
pursuant to Section 3.1.2 hereof. All Members acknowledge and agree that the
            -------
initial Capital Contributions set forth in Exhibit "A" represent the amount of
                                           -------
cash and the fair market value of property other than cash initially contributed
by the Members.

          3.2 Additional Capital Contributions by Members.

               3.2.1 If either Tejon or Dermody reasonably determines that the
Company requires or would benefit from additional funds, such funds may be
solicited
<PAGE>

via written notice from either Tejon or Dermody to the other Members (a "Capital
Call") specifying the total amount of capital to be obtained via Capital
Contributions pursuant to this Section 3.2.1 and the use(s) therefor.
                               -------

               3.2.2 If a Majority in Interest of the Members determines that
the Company requires or would benefit from additional funds not provided
pursuant to Section 3.1, either Tejon or Dermody, on behalf of the Company, may,
            -------
but he shall not be obligated to, do any of the following:

                    (a) Obtain the funds via third-party debt financing from one
     or more sources and on commercially reasonable terms and conditions
     Approved by the Members (which may include, for example, (i) the granting
     of a lien or liens on certain or all of the Company's assets to secure
     repayment or (ii) the granting of a Membership or Economic Interest and/or
     the right to subsequently convert all or a portion of the loan funds
     provided into a Membership or Economic Interest).

                    (b) To the extent not obtained pursuant to Section 3.2.2(a),
                                                               -------
     obtain the funds via voluntary Member loans to the Company, on terms and
     conditions Approved by the Members (which may include, for example, the
     granting of an additional Percentage Interest in the Company and/or the
     right to convert all or a portion of the loan funds provided into an
     additional Percentage Interest), of all or a portion of the total funds
     required. Such loans shall be considered permitted Member loans. The
     Members acknowledge and agree that it shall be reasonable for any Member to
     withhold its approval to a loan with an interest rate or other terms which
     would not, in such Member's sole and absolute opinion, justify the risk
     associated with the loan or which loan or any term thereof would violate
     applicable law. If multiple Members are interested in making loans to the
     Company on terms and conditions Approved by the Members, and the aggregate
     amount that such Members wish to loan exceeds the total amount of required
     funds, each interested Member may loan its Proportionate share of the
     required funds. If any Member does not wish to loan its entire
     Proportionate share of the required funds, such share may be lent by the
     other interested Members on a Proportionate basis. This process shall be
     repeated until all required funds have been received, but in no event
     longer than fifteen (15) days after Tejon or Dermody has sent out written
     notice to all Members soliciting loans pursuant to this Section.
                                                             -------

                    (c) To the extent not obtained pursuant to Sections 3.2.2(a)
                                                               -------
     and (b), obtain the funds via voluntary Member Capital Contributions, which
     shall be solicited via written notice from Tejon or Dermody (a "Voluntary
     Capital Call") to all Members specifying the total amount of capital to be
     obtained via Capital Contributions pursuant to the Capital Call ("Total
     Amount"), the use(s) therefor, each Member's Proportionate share of the
     Total Amount and the date by which Capital Contributions in response to the
     Capital Call are to be made (the "Contribution Date"). Each Member shall be
     entitled to elect to make a Capital Contribution in response to the Capital
     Call, equal to its Proportionate share of the Total Amount specified
     therein, by making
<PAGE>

     a Capital Contribution of all or any portion of such amount by the
     Contribution Date. If any Member does not contribute its entire
     Proportionate share of the Total Amount by the Contribution Date, the
     shortfall may be contributed by the other Members who have elected to make
     Capital Contributions of their entire Proportionate shares of the Total
     Amount by the Contribution Date, and this process shall be repeated until
     all required funds have been received or until no Member has any additional
     interest in making further Capital Contributions (but in no event longer
     than fifteen (15) days after the Contribution Date).

                    (d) To the extent not obtained pursuant to Sections
                                                               -------
     3.2.2(a), (b) and (c), obtain the funds via one or more issuances of a
     separate class of Membership Interests ("Class B Interests"), the terms and
     conditions of each issuance of which, and the rights, preferences,
     privileges and obligations associated with the ownership of which, are
     Approved by the Members. Prior to issuing any Class B Interests to outside
     persons in exchange for funds, such interests shall first be offered to
     existing Members on a Proportionate basis, and if an existing Member does
     not purchase his entire Proportionate share of the Class B Interests being
     offered to it, such share may be purchased by the other Members on a
     Proportionate basis. This process shall be repeated until all of the Class
     B Interests have been purchased by the existing Members or until no
     existing Member has any further interest in purchasing the Class B
     Interests, but in no event longer than fifteen (15) days after Tejon or
     Dermody has sent out a written notice to all Members soliciting the
     purchase of the Class B Interests and setting forth the material terms and
     conditions pertinent thereto. If existing Members do not purchase all of
     the Class B Interests, the unpurchased Class B Interests shall then be
     offered to outside investors (including any interested Affiliates of one or
     more of the Members) on the same terms and conditions offered to the
     Members. Upon issuance of one or more Class B Interests pursuant hereto,
     the Percentage Interests of all other Members shall be diluted as
     appropriate to reflect the issuance of the Class B Interests, and Exhibit
     "A" shall be revised appropriately and distribute the revised version to
     all of the Members.

However, no person may loan funds pursuant to (b) above, make a contribution
pursuant to (c) above or make an investment (or additional investment) in the
Company pursuant to (d) above unless such person is, at the time his money is to
be lent, invested or contributed, an "accredited investor" as that term is
defined in Regulation D to the Securities Act of 1933 (as such may be amended
from time to time).

               3.2.3 If any Member makes more than its Proportionate share of
Capital Contributions in response to a Voluntary Capital Call pursuant to
Section 3.2.2(c), the Percentage Interest of such Member would be increased by
-------
one hundred fifty percent (150%) times that percent determined by dividing the
amount so contributed by the sum of all Capital Contributions to the Company. To
the extent that a Member's Percentage Interest is increased pursuant hereto, the
other Members' Percentage Interests would be correspondingly and Proportionately
decreased.
<PAGE>

               3.2.4 Except as provided above, no Member shall be permitted or
required to make any additional Capital Contributions to the Company.

               3.2.5 The Company shall endeavor to obtain construction financing
on terms and conditions Approved by the Members, for the purpose of improving
the Property consistent with the Business Plan and making any required off-site
improvements which are not made by the Community Facilities District and which
are Approved by the Members. As soon as possible after all such improvements
have been completed, the Company shall endeavor to obtain permanent financing on
terms and conditions Approved by the Members. Each Member shall provide, or
cause to be provided, without fee or other compensation, any guarantees required
to obtain approved financing. Any amount paid by a Member or any Affiliate
thereof pursuant to a guarantee of Company debt or the debt of any project or
entity in which the Company has an interest shall be accounted for, at the
option of the person making the payment pursuant to the guaranty (exercised via
written notice to the other Members within ninety (90) days after the date such
payment was made), as either (a) a permitted Member loan to the Company bearing
interest at the Prime Rate, plus two percent (2%), per annum, but not to exceed
the maximum permissible rate under applicable usury laws or (b) a voluntary
Capital Contribution pursuant to Section 3.2.2(c) by the Member who gave the
                                 -------
guaranty or whose Affiliate gave the guaranty (as the case may be).

          3.3 Capital Accounts. A Capital Account shall be established and
maintained for each Member.

          3.4 Member Capital. Except as otherwise provided in this Agreement or
with the Approval of the Members: (a) no Member shall demand or be entitled to
receive a return of or interest on its Capital Contributions or Capital Account;
and (b) no Member shall withdraw any portion of its Capital Contributions or
receive any distributions from the Company as a return of capital on account of
such Capital Contributions; and (c) the Company shall not redeem or repurchase
the Interest of any Member.

          3.5 Member Loans. No Member shall be required or permitted to make any
loans or otherwise lend any funds to the Company, except as otherwise provided
in this Agreement or the Business Plan or as otherwise Approved by the Members.
Except as otherwise permitted or provided in this Agreement, no loans made by
any Member to the Company shall have any effect on such Member's Percentage
Interest or Capital Account. Each Member loan shall represent a debt of the
Company payable or collectible solely from the assets of the Company in
accordance with the terms and conditions upon which such loan was made. All
permitted Member loans shall be repaid in accordance with any documents and
instruments evidencing such loans or, absent any such documents or instruments,
shall be repaid prior to making any distributions to the Members.

          3.6 Liability of Members. Except as otherwise required by any
non-waivable provision of the Act or other applicable law, or as provided in any
guaranty by one or more Members of one or more Company obligations: (a) no
Member shall be personally liable for any debt, liability, or other obligation
of the Company; and (b) no Member shall have any liability to any Person in
excess of (i) the amount of its Capital Contributions, and (ii) without
duplication, its share of any assets and undistributed profits of the Company.
<PAGE>

                                    ARTICLE 4
                                  DISTRIBUTIONS

          4.1 Timing and Amount of Distributions.Except as otherwise provided in
Article 9 hereof, all Cash Available for Distribution, Refinancing Proceeds,
-------
Sales Proceeds and net proceeds from any Terminating Capital Transaction shall
be distributed to the Members at such times and in such amounts Approved by the
Members.

          4.2 Order of Distributions.

               4.2.1 Subject to Article 9 hereof, any Cash Available for
                                -------
Distribution shall be distributed as follows:

                    (a) first, to the Members in the proportion and to the
     extent necessary to cause their respective Unreturned Capital amounts to be
     proportionate to their respective Percentage Interests; and

                    (b) thereafter, to the Members in proportion to their
     respective Percentage.

               4.2.2 Subject to Article 9 hereof, any Refinancing Proceeds and
                                -------
any Sales Proceeds shall be distributed as follows:

                    (a) first, to the Members in the proportion and to the
     extent necessary to cause their respective Unreturned Capital amounts to be
     proportionate to their respective Percentage Interests;

                    (b) second, to the Members in proportion to and to the
     extent of their respective amounts of Unreturned Capital;

                    (c) third, to the Members with positive Adjusted Capital
     Accounts, in proportion to and to the extent of their respective positive
     Adjusted Capital Accounts; and

                    (d) thereafter, to the Members in proportion to their
     respective Percentage Interests.

               4.2.3 Distributions made in conjunction with the final
liquidation of the Company, including, without limitation, the net proceeds of a
Terminating Capital Transaction, shall be applied or distributed as provided in
Article 9 hereof.
-------

          4.3 Distributions in Kind. No Member shall have a right to receive
property other than cash as provided in this Agreement. No other distribution of
property or an interest or interest therein may be made without the Approval of
the Members. Any distribution of Company property shall be distributed in such a
fashion as to ensure that the fair market value thereof is distributed and
allocated in accordance with this Article 4 and Articles 5 and 9 hereof.
                                  -------       -------

          4.4 Withholding. The Company may withhold distributions or portions
thereof if it is required to do so by any applicable rule, regulation, or law,
and each
<PAGE>

Member hereby authorizes the Company to withhold from or pay on behalf of or
with respect to such Member any amount of federal, state, local or foreign taxes
that the Company's accountants determine that the Company is required to
withhold or pay with respect to any amount distributable or allocable to such
Member pursuant to this Agreement. Any amounts so paid or withheld with respect
to a Member pursuant to this Section 4.4 shall be treated as having been
                             -------
distributed to such Member and shall reduce any amounts otherwise distributable
to such Member (either currently or in the future) pursuant to Section 4.2 or
                                                               -------
Article 9.
-------

                                   ARTICLE 5
                    ALLOCATIONS OF NET PROFITS AND NET LOSSES

          5.1 Allocation of Net Profits and Losses. Subject to Sections 5.2 and
                                                               -------
5.3 hereof, Net Profits, Net Losses and any other items of income, gain, loss
and deduction for any fiscal year shall be allocated, for purposes of adjusting
the Capital Accounts of the Members, as provided in this Section 5.1:
                                                         -------

               5.1.1 The Net Losses of the Company shall be allocated as
follows:

                    (a) first, to the Members with positive Adjusted Capital
     Account Balances, in proportion to and to the extent thereof;

                    (b) second, to the Members who are allocated a share of the
     Company's indebtedness pursuant to Code Section 752, in proportion to and
     to the extent of each such Member's share of the indebtedness that funded
     the Net Losses being allocated pursuant to this Section 5.1.1(b)
                                                     -------
     (determined by assuming that, once no Member's Adjusted Capital Account is
     positive, the Net Losses of the Company are funded in inverse order of, and
     to the extent of, the Company's creditors' claims to the assets of the
     Company); and

                    (c) thereafter, to the Members in proportion to their
     Percentage Interests.

               5.1.2 The Net Profits shall be allocated as follows:

                    (a) first, to the Members in proportion to and to the extent
     of the Net Losses allocated to them pursuant to Section 5.1.1(c);
                                                     -------

                    (b) second, to the Members in the proportion and to the
     extent of the Net Losses allocated to them pursuant to Section 5.1.1(b);
                                                            -------

                    (c) third, to the Members in the proportion and to the
     extent of the Net Losses allocated to them pursuant to Section 5.1.1(a);
                                                            -------

                    (d) thereafter, to the Members in proportion to their
     respective Percentage Interests.

          5.2 Additional Special Allocations. Notwithstanding the foregoing
provisions of this Article 5:
                   -------
<PAGE>

               5.2.1 Tax items with respect to Company Property that is
contributed to the Company with a Gross Asset Value that varies from its basis
in the hands of the contributing Member immediately preceding the date of
contribution shall be allocated among the Members for income tax purposes
pursuant to Regulations promulgated under Code Section 704(c) so as to take into
account such variation. The Company shall account for such variation under the
so-called "remedial method" pursuant to Regulation Section 1.704-3(b). If the
Gross Asset Value of any Company asset is adjusted pursuant to Section 2.31.2
                                                               -------
hereof, subsequent allocations of income, gain, loss and deduction with respect
to such asset shall take account of any variation between the adjusted basis of
such asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations promulgated thereunder.
Allocations pursuant to this Section 5.2.1 are solely for purposes of federal,
                             -------
state and local taxes and shall not affect, or in any way be taken into account
in computing, any Member's Capital Account or share of Net Profits, Net Losses
and any other items or distributions pursuant to any provision of this
Agreement.

               5.2.2 The Nonrecourse Deductions for each taxable year of the
Company shall be allocated to the Members in proportion to their Percentage
Interests.

               5.2.3 If there is a net decrease in Company Minimum Gain during a
Company taxable year, then each Member shall be allocated items of Company
income and gain for such taxable year (and, if necessary, for subsequent years)
in an amount equal to such Member's share of the net decrease in Company Minimum
Gain, determined in accordance with Regulations Section 1.704-2(g)(2). This
Section 5.2.3 is intended to comply with the minimum gain chargeback requirement
-------
of Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith. The allocation otherwise required pursuant to this Section 5.2.3
                                                              -------
shall, however, not apply to a Member to the extent that the minimum gain
chargeback rules are inapplicable in a particular circumstance as specified in
or under the Regulations.

               5.2.4 The Member Nonrecourse Deductions shall be allocated each
year to the Member that bears the economic risk of loss (within the meaning of
Regulations Section 1.752-2) for the Member Nonrecourse Debt to which such
Member Nonrecourse Deductions are attributable.

               5.2.5 If there is a net decrease in Member Minimum Gain
attributable to a Member Nonrecourse Debt during any Company taxable year, each
Member who has a share of the Member Minimum Gain attributable to such Member
Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5), shall be specially allocated items of Company income and gain for
such taxable year (and, if necessary, subsequent years) in an amount equal to
such Member's share of the net decrease in Member Minimum Gain attributable to
such Member Nonrecourse Debt, determined in a manner consistent with the
provisions of Regulations Section 1.704-2(g)(2). This Section 5.2.5 is intended
                                                      -------
to comply with the partner nonrecourse debt minimum gain chargeback requirement
of Regulations Section 1.704-2(i)(4) and shall be interpreted consistently
therewith.
<PAGE>

               5.2.6 If any Member unexpectedly receives an adjustment,
allocation or distribution of the type contemplated by Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes or increases a deficit Adjusted
Capital Account, items of income and gain shall be allocated to all such Members
(in proportion to the amounts of their respective deficit Adjusted Capital
Accounts) in an amount and manner sufficient to eliminate the deficit balances
in such Members' Adjusted Capital Accounts as quickly as possible as of the end
of the Company's taxable year to which adjustment, allocation or distribution
relates. It is intended that this Section 5.2.6 qualify and be construed as a
"qualified income offset" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(d).

               5.2.7 If the allocation of Net Loss to a Member as provided in
Section 5.1.1 hereof (other than 5.1.1(b)) would create or increase a deficit
-------
Adjusted Capital Account, there shall be allocated to such Member only that
amount of Net Loss as will not create or increase a deficit Adjusted Capital
Account. The Net Loss that would, absent the application of the preceding
sentence, otherwise be allocated to such Member shall be allocated to the other
Members Proportionately.

               5.2.8 To the extent that an adjustment to the adjusted tax basis
of any Company asset pursuant to Code Section 734(b) or Code Section 743(b) is
required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(2) or Regulations
Section 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital
Accounts as the result of a distribution to a Member in complete liquidation of
such Member's Membership Interest in the Company, the amount of such adjustment
to the Capital Accounts shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment decreases such
basis), and such gain or loss shall be specially allocated to the Members in
accordance with their interests in the Company in the event that Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Members to whom such
distribution was made in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.

               5.2.9 The allocations set forth in Sections 5.2.2, 5.2.3, 5.2.4,
                                                  -------
5.2.5, 5.2.6, 5.2.7 and 5.2.8 hereof (the "Regulatory Allocations") are intended
to comply with certain requirements of Regulations Sections 1.704-1(b) and
1.704-2(i). The Regulatory Allocations may not be consistent with the manner in
which the Members intend to distribute the cash of the Company or allocate
Company income or loss. Accordingly, the Members shall cause the allocation of
Net Profits, Net Losses and other items of income, gains, loss and deductions to
the Members so as to prevent the Regulatory Allocations from distorting the
manner in which Company distributions will be divided among the Members. In
general, the Members anticipate that this will be accomplished by specially
allocating other Net Profits, Net Losses and other items of income, gain, loss
and deduction to the Members so that, to the extent possible, the net amount of
such allocations of other Net Profits, Net Losses and other items and the
Regulatory Allocations to the Members shall be equal to the net amount that
would have been allocated among the Members if the Regulatory Allocations had
not occurred.

               5.2.10 The tax allocation provisions of this Agreement are
intended to produce final Capital Account balances that are at levels ("Target
Final Balances") which permit liquidating distributions that are made pursuant
to Section
   -------
<PAGE>

9.5.1(b) to equal the distributions that would occur if all proceeds of a
Terminating Capital Transaction were to be distributed pursuant to Section
4.2.2. To the extent that the tax allocation provisions of this Agreement would
not produce the Target Final Balances, the Members shall take such actions as
are necessary to amend such provisions to produce such Target Final Balances.
Allocations of Company gross income, gain, deductions and losses shall be made
prospectively as necessary to produce the Target Final Balances and, to the
extent prospective allocations do not produce such Target Final Balances, the
prior tax returns of the Company shall be amended to reallocate Company gross
income, gains, deductions and losses to produce such Target Final Balances.

               5.2.11 For purposes of determining the Net Profits, Net Losses
and any other items of income, gain, loss and deduction allocable to any period,
Net Profits, Net Losses and any such other items shall be determined on a daily,
monthly or other basis permissible method under Code Section 706 and the
Regulations thereunder which is Approved by the Members.

          5.3 Other Provisions.

               5.3.1 For any fiscal year during which any part of a Membership
Interest or Economic Interest is transferred between the Members or to another
Person, the portion of the Net Profits, Net Losses and other items of income,
gain, loss, deduction and credit that are allocable with respect to such part of
a Membership Interest or Economic Interest shall be apportioned between the
transferor and the transferee based on an interim closing of the Company's
books, except as otherwise mandated by the Code and the applicable Regulations.

               5.3.2 Except as provided in Section 5.2.1 hereof, for income tax
                                           -------
purposes under the Code and the Regulations each Company item of income, gain,
loss and deduction shall be allocated among the Members as its correlative item
of "book" income, gain, loss or deduction is allocated pursuant to this Article
                                                                        -------
5.

               5.3.3 In the event that the Code or any Regulations require
allocations of items of income, gain, loss, deduction or credit different from
those set forth in this Article 5, the Members shall make new or different
                        -------
allocations in reliance on the Code and such Regulations, as determined by
Company counsel.

               5.3.4 For purposes of determining a Member's proportional share
of the Company's "excess nonrecourse liabilities" within the meaning of
Regulations Section 1.752-3(a)(3), each Member's interest in Company profits
shall be such Member's Percentage Interest.

                                   ARTICLE 6
                            GOVERNANCE AND OPERATIONS

          6.1 Management.

               6.1.1 Subject to delegation of responsibilities set forth in
Section 6.1.2, the restrictions on authority set forth in Sections 6.1.3 and
-------                                                   -------
6.1.5, the other provisions of this Agreement and the Business Plan, each of
Tejon and Dermody shall
<PAGE>

have full, exclusive and complete discretion to manage and control the business
and affairs of the Company, to make all decisions affecting the business and
affairs of the Company and to do or cause to be done any and all acts, at the
expense of the Company, as it deems necessary, appropriate or desirable to
accomplish the purposes and direct the affairs of the Company.

               6.1.2 Subject to the restrictions on authority set forth in
Sections 6.1.3 and 6.1.5, the other provisions of this Agreement and the
-------
Business Plan, Tejon and Dermody agree as follows:

                    (a) Tejon shall have the right and authority to develop,
     amend and implement the master plan for the Industrial Park (the "Master
     Plan"), but Dermody may review and comment to Tejon regarding the Master
     Plan.

                    (b) Tejon shall have the right and responsibility to develop
     an improvement plan for the Property and all related off-site improvements
     that are to be constructed by Company ( the "Improvement Plan"), which,
     once Approved by the Members, shall become a part of the Business Plan. The
     Improvement Plan may be amended from time to time, with the Approval of the
     Members, and the Improvement Plan as so amended shall become a part of the
     Business Plan and replace all prior Improvement Plans on a prospective
     basis.

                    (c) Dermody shall have the right and responsibility to
     develop an improvement budget with respect to the improvements to be
     constructed by the Company on or with respect to the Property (the
     "Improvement Budget"), which, once Approved by the Members, shall become a
     part of the Business Plan. The Improvement Budget may be amended from time
     to time with the Approval of the Members, and the Improvement Budget as so
     amended shall become a part of the Business Plan and replace all prior
     Improvement Budgets on a prospective basis.

                    (d) The engagement of any professional on behalf of the
     Company, including architects, engineers, lawyers and accountants, shall
     require the Approval of the Members. The engagement of any general
     contractor on behalf of the Company shall also require the Approval of the
     Members. Dermody shall have the right and responsibility to supervise each
     architect, engineer and general contractor engaged by the Company, subject
     to the Business Plan and provided that Tejon shall have the right, but not
     the responsibility, to coordinate the construction of all off-site
     improvements to be constructed by the Company with the improvements to be
     constructed by the Community Facilities District and to ensure, in Tejon's
     sole and absolute discretion, that Tejon's other property holdings are not
     adversely affected.

                    (e) Tejon shall have the right and responsibility for
     developing a program for Marketing the Property and the Industrial Park
     (the "Marketing Program") and the related budget to implement the Marketing
<PAGE>

     Program with funds in the Marketing Fund (the "Marketing Budget"), which,
     once Approved by the Members, shall become a part of the Business Plan. The
     Marketing Program and the Marketing Budget may be amended from time to time
     with the Approval of the Members, and the Marketing Program or Marketing
     Budget (as the case may be) as so amended shall become a part of the
     Business Plan and replace all prior Marketing Programs or Marketing Budgets
     (as the case may be) on a prospective basis. Dermody shall assist in
     implementing the Marketing Program, as reasonably requested from time to
     time by Tejon.

                    (f) Dermody shall have the right and responsibility for
     developing a leasing program (the "Leasing Program") and a related budget
     for implementing the Leasing Program (the "Leasing Budget"), which, once
     Approved by the Members, shall become a part of the Business Plan. The
     Leasing Program and the Leasing Budget may be amended from time to time
     with the Approval of the Members, and the Leasing Program or Leasing Budget
     (as the case may be) as so amended shall become a part of the Business Plan
     and replace all prior Leasing Programs or Leasing Budgets (as the case may
     be) on a prospective basis. Dermody shall be responsible for supervising
     all leasing activity with respect to the Property, subject to the Business
     Plan. Tejon shall assist Dermody in the supervision of leasing activity, as
     reasonably requested from time to time by Dermody.

                    (g) Dermody shall have the right and responsibility for
     developing an annual program for operating the improvements on the Property
     once such improvements have been completed (the "Operating Program") and
     for developing a budget for implementing each such Operating Program (the
     "Operating Budget"). Once Approved by the Members, the Operating Program
     and Operating Budget shall become a part of the Business Plan. The
     Operating Program and the Operating Budget may be amended or revised from
     time to time with the Approval of the Members, and the Operating Program or
     Operating Budget (as the case may be) as so amended or revised shall become
     a part of the Business Plan and replace all prior Operating Programs or
     Operating Budgets (as the case may be) on a prospective basis. If an
     amended or revised Operating Budget is presented to but not Approved by the
     Members, the last Operating Budget Approved by the Members shall be revised
     by increasing each line item thereof by any increase to the CPI since such
     budget was approved, and such shall be deemed an approved amendment of the
     Business Plan. Dermody shall be responsible for implementing the Operating
     Program and Operating Budget.

                    (h) Dermody or another Person Approved by the Members shall
     be the property manager for the Company. The terms and conditions of the
     property management agreement (and any amendment thereto) must be Approved
     by the Members.

                    (i) Tejon shall have the right and authority to make all
     decisions, vote the Company's votes, and execute any and all consents,
     approvals, land use applications, annexations, encumbrances, and other
     documents respecting any matter presented by or relating to the Wheeler
     Ridge-Maricopa
<PAGE>

     Water Storage District or theTejon-Castac Water District (collectively, the
     "Water Districts"); provided, however, if Tejon grants any right and
                         --------  -------
     authority with respect to any matter presented by or relating to the Water
     Districts to a Person similarly situated to Dermody, Dermody shall have
     rights equal to such similarly situated Person with respect to the Water
     Districts. Without limiting the foregoing, Tejon's exclusive right and
     authority provided under this Section 6.1.2(i) shall extend to and include
                                   -------
     all matters relating to the assessment of liens, taxes and assessments in
     relation to the Water Districts, including, without limitation, the timing
     of commencement, amount, spreading and use of such assessments and special
     taxes.

               6.1.3 In addition to any other matters requiring the Approval of
the Members pursuant to provisions set forth elsewhere in this Agreement, each
of the following matters shall require the Approval of the Members:

                    (i) any amendment of the certificate of formation or, except
as otherwise provided herein, this Agreement;

                    (ii) agreement to merge the Company with any other entity or
entities;

                    (iii) incurring any cost or expense on behalf of the Company
other than in the ordinary course of business, except as required or permitted
elsewhere in this Agreement or as contemplated by the Business Plan;

                    (iv) possessing, assigning or using Company funds or other
assets of the Company for other than a Company purpose;

                    (v) obtaining equity or debt financing on behalf of the
Company or cause a refinancing of Company indebtedness, except as required or
permitted elsewhere in this Agreement or as contemplated by the Business Plan;

                    (vi) repaying any secured debt of the Company other than in
accordance with terms and conditions of the documents and instruments evidencing
the debt and the security therefor;

                    (vii) causing the Company to sell, exchange or otherwise
transfer the Property or a material interest or interests therein, or any other
material asset of the Company, except as required or permitted elsewhere in this
Agreement or as contemplated by the Business Plan;

                    (viii) taking any other action inconsistent in any material
respect with the Business Plan, the Builder Development Covenants or with this
Agreement, including without limitation entering into or terminating material
agreements;

                    (ix) confessing a judgment against the Company; and

                    (x) instituting or settling a lawsuit or other litigation
proceeding, other than pursuant to Section 10.20 hereof.
<PAGE>

          Notwithstanding the foregoing, Tejon shall have the right and power to
act pursuant to Section 6.1.2(i) without the consent or approval of any other
Person.

               6.1.4 Notwithstanding anything in Section 6.1.2 or Section 6.1.3
                                                 -------
to the contrary, Tejon and Dermody is each empowered to act alone on behalf of
the Company, without the approval or consent of any person, if the acting Member
believes in good faith that its actions are necessary to prevent material harm
or damage to the Property, the improvements thereon or the Company and, after
exerting commercially reasonable efforts to contact the other Members, the other
Members cannot be reached prior to the time such action is necessary. If Tejon
or Dermody has acted under authority of this Section, it shall provide written
                                             -------
notice to the other Members as soon as reasonably possible after such action,
which notice shall specify the action(s) taken and the total costs and expenses
incurred pursuant thereto. If Tejon or Dermody has acted permissibly pursuant to
this Section, it shall be immediately reimbursed for any costs and expenses
     -------
incurred by it in so doing.

               6.1.5 A voluntary case on behalf of, or an involuntary case
against, the Company under a chapter of Title 11 U.S.C. by the filing of a
"petition" (as defined in 11 U.S.C. 101(42)) with the United States Bankruptcy
Court may only be commenced with the Approval of the Members. Any such petition
filed by a Member without the Approval of the Members shall be deemed an
unauthorized and bad faith filing and all parties to this Agreement shall use
their best efforts to cause such petition to be dismissed.

          6.2 Compensation and Reimbursement of Members and Member Affiliates.

               6.2.1 Subject to the Business Plan, each Member shall be entitled
to reimbursement on a monthly basis from the Company for all out-of-pocket costs
and expenses incurred by it, in its reasonable discretion, for or on behalf of
the Company. Without limiting the forgoing, the Company shall be responsible for
paying directly (or reimbursing the Members) for all costs and expenses incurred
by them with respect to the Property through the time of the Property
Contribution, which are Approved by the Members (the "Pre-Contribution
Improvement Costs").

               6.2.2 The Members acknowledge and agree that, in exchange for
their respective responsibilities set forth herein, Tejon and Dermody shall
share equally (a) a development fee in the total amount of four percent (4%) of
the "Hard Costs of Construction" (as set forth in the Improvement Budget), to be
paid as such costs are incurred, and (b) the following leasing fees, paid upon
occupancy by the tenant(s): (i) if one or more outside brokers are involved, one
and a half percent (1.5%) of gross rents for years one (1) through ten (10)
inclusive; and if no outside broker is involved, five percent (5%) of gross rent
for years one (1) through five (5) inclusive, and two and a half percent (2.5%)
of gross rents for years six (6) through ten (10) inclusive. The development fee
shall be paid to Tejon and Dermody, as and when Approved by the Members.

          6.3 Officers. With the Approval of the Members, a Member may, from
time to time, designate officers of the Company and delegate to such officers
such authority
<PAGE>

and duties of such Member and may assign titles (including, without limitation,
chief executive officer, president, vice-president, secretary and/or treasurer)
to any such officer. Any number of titles may be held by the same officer. Any
officer to whom a delegation is made pursuant to the foregoing shall serve in
the capacity delegated unless and until such delegation is revoked by the Member
who appointed the officer, for any reason or no reason whatsoever, with or
without cause, or such officer resigns.

          6.4 Records and Reports.

               6.4.1 Dermody shall keep or cause to be kept, at the principal
place of business of the Company, full and proper ledgers, other books of
account, and records of all receipts and disbursements, other financial
activities, and the internal affairs of the Company for at least the current and
past four fiscal years.

               6.4.2 Dermody shall cause to be sent to each Member of the
Company, the following:

                    (a) within ninety (90) days following the end of each fiscal
     year of the Company, a report that shall include all necessary information
     required by each of the Members for preparation of its federal, state, and
     local income or franchise tax or information returns, including each
     Member's pro rata share of Net Profits, Net Losses, and any other items of
     income, gain, loss, and deduction for such fiscal year;

                    (b) a copy of the Company's federal, state, and local income
     tax or information returns for each fiscal year, concurrent with the filing
     of such returns;

                    (c) within ten (10) days after the end of each calendar
     month, a report in the form attached hereto as Exhibit "E"; and
                                                    -------

                    (d) as soon as reasonably possible after being requested to
     do so, information about the Company and its affairs requested by Tejon or
     its auditors.

               6.4.3 The Members (personally or through an authorized
representative) may, for purposes reasonably related to their Interests, examine
and copy (at their own cost and expense) the books and records of the Company at
all reasonable business hours.

               6.4.4 Tejon and Dermody shall cooperate in all reasonable
respects with the other and the other's auditors with respect to any audits of
the Company's financial statements, reports and books and records or the review
thereof in connection with an audit of the Member or as necessary or desirable
to comply with public or private reporting obligations of the Member or any of
its Affiliates. The cost of any audit of the Company, or the review of its
financial statements, reports and books and records, on behalf of a Member (as
opposed to the Company) shall be borne by such Member, unless otherwise Approved
by the Members.
<PAGE>

          6.5 Meetings of Members. At any time, and from time to time, Tejon or
Dermody or any other Member with greater than a ten percent (10%) Percentage
Interest may call a meeting of the Members. No other Member may call a meeting.
No meeting is required to be called or held. Written notice of a meeting,
stating the place, date and hour of the meeting and the purpose(s) for which the
meeting is called, shall be given by the Member calling the meeting to each
Member entitled to vote at such meeting not less than 7 nor more than 30 days in
advance. The presence of Tejon and Dermody and a Majority in Interest of any
other Members shall constitute a quorum at all meetings of the Members. No
minutes of the meetings shall be required to be taken, but a Member may, in its
sole and absolute discretion, take minutes of one or more meetings. Unless
otherwise provided in this Agreement, any action required or permitted to be
taken at a meeting of the Members may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action to
be so taken, shall be signed by the holders of Percentage Interests having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all Members entitled to vote thereon were
present and voted. Prompt notice of the taking of any such action without a
meeting by less than unanimous consent shall be given to those Members that have
not consented in writing.

          6.6 Standards of Conduct. To the extent that a Member, or any
Affiliate or subsidiary, or any officer, director, employee or agent of the
Company or any of the foregoing (each, a "Responsible Party") has, at law or in
equity, duties (including, without limitation, fiduciary duties) to the Company,
any Member or other Person bound by the terms of this Agreement, such
Responsible Parties acting in accordance with this Agreement shall not be liable
to the Company, any Member, or any such other Person for its good faith reliance
on the provisions of this Agreement. The provisions of this Agreement, to the
extent that they restrict the duties of a Responsible Party otherwise existing
at law or in equity, are agreed by all parties hereto to replace such other
duties to the greatest extent permitted under applicable law.

          6.7 Other Activities. The Members may engage or invest in, and devote
their time to, any other business venture or activity of any nature and
description (independently or with others), whether or not such other activity
may be deemed or construed to be in competition with the Company. Neither the
Company nor any other Member shall have any right by virtue of this Agreement or
the relationship created hereby in or to such other venture or activity of any
Member (or to the income or proceeds derived therefrom), and the pursuit
thereof, even if competitive with the business of the Company, shall not be
deemed wrongful or improper. Notwithstanding the foregoing, from the date of
this Agreement until Stabilization, each Member agrees that neither it nor any
of its Affiliates shall, whether directly or indirectly, solicit or seek to hire
or offer employment to any employee of any other Member or any employee of any
Affiliate of such other Member, unless such other Member gives its written
consent to such employment or offer of employment.

                                   ARTICLE 7
                      INTERESTS AND TRANSFERS OF INTERESTS

          7.1 Transfers of Membership Interests.

               7.1.1 A Member may make or permit a Transfer, directly or
indirectly, by operation of law or otherwise, voluntarily or involuntarily, of
all or any
<PAGE>

portion of its Membership Interest, including all or any portion of its Economic
Interest, only as follows:

                    (a) By Transfer to the Company or to any other Member during
     lifetime or at death;

                    (b) By Transfer to an Affiliate of the Member, provided (i)
     such Transfer and such Affiliate are approved in advance by a Majority in
     Interest of the other Members, or (ii) the Member executes a written
     instrument (in a form satisfactory to legal counsel to the Company) that
     (1) such Transfer shall not release the Member from its obligations
     hereunder and (2) in the event such Affiliate does not comply with any of
     the provisions of this Agreement, the Member shall comply with such
     provisions, and (3) the Member, either directly or indirectly through one
     or more intermediaries, has the exclusive right and power to control, is
     controlled by, or is under common control with, such Affiliate;

                    (c) By lifetime gift, subject to the provisions of Section
                                                                       -------
     7.6;

                    (d) At death by disposition by will, by trust or by the laws
     of succession, subject to the provisions of Section 7.6;
                                                 -------

                    (e) By Transfer other than at death to any Person other than
     a Member, subject to (i) the right of first refusal of certain of the other
     Members as set forth in Section 7.2 hereof and (ii) the provisions of
                             -------
     Section 7.6; or
     -------

                    (f) By Transfer to a revocable trust as provided below.

It is understood that no direct or indirect transfer of an interest in Tejon's
parent company or any company or companies directly or indirectly in control
thereof will be considered a violation of any transfer restrictions set forth in
this Agreement.

               7.1.2 Except as provided in Section 7.9, any other purported
                                           -------
Transfer of a Membership Interest or Economic Interest shall be null and void ab
initio. A Substitute Member may Transfer the transferred Membership Interest or
Economic Interest in the same manner as an original or the transferring Member.

               7.1.3 Notwithstanding the above or any contrary provision in this
Agreement, unless expressly Approved by the Members in writing, any otherwise
permitted Transfer shall be null and void ab initio if:

                    (a) such Transfer would cause a termination of the Company
     for federal, state, or local, if applicable, income tax purposes;

                    (b) such Transfer would, in the opinion of counsel to the
     Company, cause the Company to cease to be classified as a partnership for
     federal or state income tax purposes;
<PAGE>

                    (c) such Transfer requires the registration of such
     transferred Interest pursuant to any applicable federal or state securities
     laws;

                    (d) such Transfer causes the Company to become a "Publicly
     Traded Partnership," as such term is defined in Section 7704 of the Code;

                    (e) such Transfer subjects the Company to regulation under
     the Investment Company Act of 1940, the Investment Advisers Act of 1940 or
     the Employee Retirement Income Security Act of 1974, each as amended;

                    (f) such Transfer results in a violation of applicable laws;

                    (g) such Transfer is made to any Person who lacks the legal
     right, power, or capacity to own such Interest; or

                    (h) the Company does not receive written instruments
     (including, without limitation, copies of any instruments of Transfer and
     such Assignee's consent to be bound by this Agreement as an Assignee) that
     are in a form satisfactory to counsel to the Company.

          7.2 Sale or Transfer of a Member's Interest. Except as otherwise
provided herein and in Section 7.1 hereof, no Member nor such Member's heirs,
                       -------
personal representatives, successors or assigns (a "Selling Member") shall have
the right to Transfer all or any portion of his Membership Interest or Economic
Interest unless such Selling Member shall first deliver a notice in writing to
the other Members, stating the price, terms and conditions of such proposed
Transfer and the identity of the proposed transferee. For a period of thirty
(30) days after issuance of such notice, the other Members shall have the right
to elect via written notice to the other Members to purchase all of the interest
so proposed to be transferred upon the same terms and conditions. If the other
Members or a portion of them collectively elect to purchase more than the entire
interest, then each such Member shall be entitled to purchase its Proportionate
share of the interest plus its Proportionate share of the interest which remains
available for purchase pursuant to this Section 7.2. If the Members do not
                                        -------
timely elect pursuant hereto to the purchase the entire interest proposed to be
transferred by the Selling Member, the Selling Member may within ninety (90)
days thereafter complete the sale or Transfer upon the terms originally
proposed. In the event that the Selling Member does not complete the sale or
transfer of its Membership Interest or Economic Interest within such ninety (90)
day period, then the rights of the Members under this Section 7.2 shall be
                                                      -------
reinstated and apply to any subsequent sale or Transfer of such interest
proposed by the Selling Member.

          7.3 Rights of Assignees. Until such time, if any, as a transferee of
any permitted Transfer pursuant to this Article 7 is admitted to the Company as
                                        -------
a Substitute Member pursuant to Section 7.6: (i) such transferee shall be an
                                -------
Assignee only, and only shall receive, to the extent Transferred, the
distributions and allocations of income, gain, loss, deduction, credit, or
similar item to which the Member which Transferred its Interest would be
entitled; and (ii) such Assignee shall not be entitled or enabled to exercise
any other rights or powers of a Member, such other rights remaining with the
transferring Member. In such a case, subject to
<PAGE>

Section 7.9 hereof, the transferring Member shall remain a Member even if he has
-------
transferred his entire Economic Interest in the Company to one or more
Assignees. In the event any Assignee desires to make a further assignment of any
Economic Interest in the Company, such Assignee shall be subject to all of the
provisions of this Agreement to the same extent and in the same manner as any
Member desiring to make such an assignment.

          7.4 Admissions, Withdrawals, and Removals. No Person shall be admitted
to the Company as a Member except pursuant to Section 3.2.2 (in the case of
                                              -------
Persons obtaining an interest in the Company directly from the Company) or
Section 7.6 (in the case of transferees of a permitted Transfer of an interest
-------
in the Company from another Person). Except as otherwise specifically set forth
in Section 7.7, no Member shall be entitled to retire or withdraw from being a
   -------
Member of the Company without the written consent of the other Members. No
Member shall be subject to removal except for good cause, as determined by the
vote of Members holding at least seventy-five percent (75%) of the Percentage
Interests. No admission, withdrawal, or removal of a Member shall cause the
dissolution of the Company. Any purported admission, withdrawal, or removal that
is not in accordance with this Agreement shall be null and void.

          7.5 Payment Upon Withdrawal or Removal of Member. If any Member
withdraws from the Company with the consent of the other Members (other than
pursuant to Section 7.7), or if any Member is removed pursuant to Section 7.4,
            -------                                               -------
then such Member shall be entitled to receive from the Company a payment equal
to (a) the lesser of (i) the Member's Unreturned Capital as adjusted as of the
effective date of the written election of withdrawal or the date of removal or
(ii) the amount the Member would be paid assuming exercise of the Buy Out Option
pursuant to Section 7.10 with respect to such Member's Membership Interest (on
            -------
the date of the withdrawal or removal of the Member) and the subsequent closing
of the purchase and sale transaction contemplated therein, or (b) such other
amount as may be agreed upon by such Member and a Majority in Interest of the
other Members (in either event, the "Termination Payment"). The Termination
Payment shall be paid within six months after the effective date of the removal
or written election of withdrawal, or on such other date as may be agreed upon
by the removed or withdrawing Member and a Majority in Interest of the other
Members. If any Member attempts to withdraw from the Company (other than
pursuant to Section 7.7) without the consent of the other Members, then,
            -------
notwithstanding the last sentence of Section 7.4, the other Members may, by vote
                                     -------
of a Majority in Interest thereof, permit such withdrawal (without waiving, in
any manner, any other rights available to it or the Company at law or in equity
and in addition to, and not in lieu of, any other remedies to which it or the
Company may be entitled), provided that such withdrawing Member shall not be
entitled to any Termination Payment or any other compensation whatsoever in
consideration for its terminated Membership Interest.

          7.6 Admission of Assignees as Substitute Members.

               7.6.1 An Assignee shall become a Substitute Member only if and
when each of the following conditions are satisfied:

                    (a) the assignor of the Interest transferred sends written
     notice to the other Members requesting the admission of the Assignee as a
<PAGE>

     Substitute Member and setting forth the name and address of the Assignee,
     the Percentage Interest transferred, and the effective date of the
     Transfer;

                    (b) a Majority in Interest of the other Members consent in
     writing to such admission; and

                    (c) the Company receives from the Assignee (i) such
     information concerning the Assignee's financial capacities and investment
     experience as may be requested by legal counsel to the Company, and (ii)
     written instruments (including, without limitation, copies of any
     instruments of Transfer and such Assignee's consent to be bound by this
     Agreement as a Substitute Member) that are in a form satisfactory to legal
     counsel to the Company.

               7.6.2 Upon the admission of any Substitute Member, Exhibit "A"
                                                                  -------
shall be amended to reflect the name, address, and Percentage Interest of such
Substitute Member and to eliminate or adjust, if necessary, the name, address,
and Percentage Interest of the predecessor of such Substitute Member.

          7.7 Withdrawal of Members. If a Member has transferred all of its
Membership Interest to one or more Assignees, then such Member shall withdraw
from the Company if and when all such Assignees have been admitted as Substitute
Members in accordance with this Agreement.

          7.8 Conversion of Membership Interest. Upon the Incapacity of a
Member, such Incapacitated Member's Membership Interest shall automatically be
converted to an Economic Interest only, and such Incapacitated Member (or its
executor, administrator, trustee, or receiver, as applicable) shall thereafter
be deemed an Assignee for all purposes hereunder, with the same Economic
Interest as was held by such Incapacitated Member prior to its Incapacity, but
without any other rights of a Member unless the holder of such Economic Interest
is admitted as a Substitute Member pursuant to Section 7.6.
                                               -------

          7.9 Buy/Sell. Each Member (the "Offeror Member") shall have the right
at any time to purchase the entire Membership Interest of another Member (the
"Offeree Member") or to sell the entire Membership Interest of the Offeror
Member in the Company to the Offeree Member in the manner set forth in this
Section 7.9. The purchaser under this Section 7.9 shall indemnify in a
-------                               -------
commercially reasonable manner the selling Member and its Affiliates for any
exposure from all liabilities connected with the assets of the Company relating
to events and circumstances which occur or come into existence after the closing
of the purchase and sale transaction contemplated hereby. Additionally, the
purchaser shall obtain releases of any guaranty or guaranties issued by the
selling Member or any of its Affiliates, which releases shall be effective
contemporaneously with closing of the transaction contemplated hereby.

                    (a) The Offeror Member may serve upon the Offeree Member a
     notice (the "Offering Notice") which shall contain the following terms:

               (i) a statement of intent to rely on this Section 7.9;
                                                         -------
<PAGE>

               (ii) the aggregate dollar amount (the "Specified Amount") which
               the Offeror Member would be willing to pay for the assets of the
               Company as of a date certain.

                    (b) The Offeree Member shall have the election to either:

               (i) sell its full Membership Interest in the Company to the
               Offeror Member for an amount equal to the amount the Offeree
               Member would have been entitled to receive if the Company had
               sold its assets for the Specified Amount on a no-commissions
               basis on the date of closing and the Company had immediately paid
               all Company liabilities and distributed the net proceeds to each
               Member in accordance with Section 9.5.1; or
                                         -------

               (ii) purchase the full Membership Interest of the Offeror Member
               for an amount equal to the amount the Offeror Member would have
               been entitled to receive if the Company had sold its assets for
               the Specified Amount on a no-commissions basis on the date of
               closing and the Company had immediately paid all Company
               liabilities and distributed the net proceeds to each Member in
               accordance with Section 9.5.1.
                               -------

                    (c) The Offeree Member shall have thirty (30) days from the
     date of delivery of the Offering Notice to notify the Offeror Member of its
     unconditional and unqualified election to either sell its full Membership
     Interest, as provided under Section 7.9(b)(i), or to purchase the full
                                 -------
     interest of the Offeror Member, as provided under Section 7.9(b)(ii). If
                                                       -------
     the Offeree Member fails to notify the Offeror Member of its unconditional
     and unqualified election within said thirty (30) day period, the Offeree
     Member shall be conclusively deemed to have elected to sell its full
     Membership Interest in the Company to the Offeror Member at the price
     provided in Section 7.9(b)(i) and to have waived its exclusive right to
                 -------
     purchase hereunder.

                    (d) Closing of such sale or purchase between the Offeror
     Members and the Offeree Member shall occur within ninety (90) days from and
     after the date the Offeree Member delivers notice (or is deemed to deliver
     notice) of its election pursuant to subsection (c) above. The parties
     hereby acknowledge and agree that time is of the essence. The amount to be
     paid by the Purchasing Member pursuant to this Section 7.9 shall be paid in
                                                    -------
     cash.

     IF THE PURCHASER UNDER THIS SECTION FAILS TO CONSUMMATE THE PURCHASE
PURSUANT TO THE PROVISIONS OF THIS SECTION, THE SELLER UNDER THIS SECTION SHALL
HAVE THE RIGHT TO THE IMMEDIATE PAYMENT OF LIQUIDATED DAMAGES FROM SUCH
PURCHASER IN THE AMOUNT OF FIVE PERCENT (5%) OF THE AMOUNT WHICH THE SELLER
WOULD HAVE RECEIVED UNDER SUCH SALE. THE MEMBERS HEREBY ACKNOWLEDGE AND AGREE
THAT
<PAGE>

THE AMOUNT OF SELLER'S DAMAGES RESULTING FROM SUCH A BREACH OF THIS SECTION
                                                                    -------
7.9(d) BY PURCHASER WOULD BE DIFFICULT OR IMPOSSIBLE TO ACCURATELY ASCERTAIN AND
THAT SELLER'S DAMAGES WOULD, IN ANY EVENT, BE SUBSTANTIAL. THE MEMBERS HEREBY
AGREE, WHICH AGREEMENT IS CONFIRMED BY THEIR INITIALS AT THE END OF THIS
SECTION, THAT IN THE EVENT OF PURCHASER'S DEFAULT (AS DESCRIBED IN THE FIRST
SENTENCE ABOVE) (1) THE AMOUNT INDICATED ABOVE SHALL BE DEEMED TO CONSTITUTE A
REASONABLE ESTIMATE OF SELLER'S DAMAGES, (2) SUCH LIQUIDATED DAMAGES SHALL BE
SELLER'S SOLE AND EXCLUSIVE REMEDY FOR THAT PARTICULAR DEFAULT, WHETHER AT LAW
OR EQUITY, NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT (EXCEPT THAT
SELLER SHALL ALSO HAVE THE OPTION MENTIONED IN SECTION 7.9(e)) AND (3) UPON
             ----                              -------
PAYMENT OF SUCH LIQUIDATED DAMAGES TO SELLER, PURCHASER SHALL BE RELEASED FROM
ANY FURTHER LIABILITY TO SELLER PURSUANT TO THIS SECTION 7.9(d) FOR THAT
                                                 -------
PARTICULAR DEFAULT ONLY (EXCEPT THAT SELLER SHALL ALSO HAVE THE OPTION MENTIONED
                                                  ----
IN SECTION 7.9(e)). ATTORNEYS FEES AND COSTS PURSUANT TO THIS AGREEMENT SHALL BE
   -------
AVAILABLE IF INCURRED BECAUSE OF A FAILURE OF THE PURCHASER TO PAY OVER SUCH
LIQUIDATED DAMAGES WHEN REQUIRED BY THIS SECTION.

                   Initials                                             Initials
------------------                                    -----------------

                    (e) If, following an election by the Offeree Member to
     purchase under Section 7.9(b)(ii), the Offeree Member shall fail to
                    -------
     consummate the purchase of the Offeror Member's Membership Interest in
     accordance with this Section 7.9, then the Offeree Member shall, at the
                          -------
     Offeror Member's option (which option shall be in addition to the Offeror's
     remedy under Section 7.9(d)), to be exercised within ten (10) days after
                  -------
     the Offeree Member's failure to consummate such purchase in accordance with
     this Section 7.9, sell its Membership Interest to the Offeror Member within
          -------
     sixty (60) days as if the Offeree Member had initially elected to sell
     under Section 7.9(b)(i). In the event of such election, the failure of the
           -------
     Offeror Member to consummate the purchase shall trigger the same remedy set
     forth in Section 7.9(d).
              -------

                    (f) The provisions of this Section 7.9 shall control over
                                               -------
     and override all of the provisions relating to transfer restrictions and/or
     withdrawal rights set forth in this Agreement, except that, in the event
     the Buy Out Option is exercised, any exercise of the option provided for in
     this Section that has not previously resulted in a closed purchase and sale
     transaction pursuant to this Section, or any attempt to exercise the option
     provided for in this Section after the Buy Out Option has been exercised
     and prior to the closing of a purchase and sale transaction pursuant
     thereto or the lapse of the Buy Out Option pursuant to Section 7.10, shall
                                                            -------
     be null and void. If an Offering Notice has been given pursuant to this
     Section 7.9, no notice pursuant to Section 7.2 may be given until all of
     -------                            -------
     the time periods triggered by the Offering Notice have expired without
     consummation of the purchase and sale pursuant to this Section 7.9.
                                                            -------
<PAGE>

          7.10 Option to Purchase Defaulting Member's Interest. At any time
within one hundred twenty (120) days (the "Notice Period") after:

               (i) a Capital Call has been made; and

               (ii) Tejon or Dermody has timely made its entire Proportionate
               share of a loan pursuant to Section 3.2.2(b) and/or a Capital
                                           -------
               Contribution pursuant to Section 3.2.2(c) in response to the
               Capital Call ("Non-Defaulting Member") and the other Member
               ("Defaulting Member") has failed to do so:

an option ("Buy Out Option") shall arise in the Non-Defaulting Member to acquire
the Defaulting Member's entire Membership Interest (the "Option Interest"). The
Buy Out Option may be exercised by the Non-Defaulting Member by providing
written notice thereof ("Buy Out Notice") to the Defaulting Member within the
Notice Period.

          If the Buy Out Option is exercised, the purchase price for the Option
Interest shall be equal to the amount the Defaulting Member would have been
entitled to receive pursuant to Section 9.5.1 on the date of exercise of the Buy
                                -------
Out Option had all of the Company Assets been sold on such date for their fair
market value, net of presumed closing costs of seven and one-half percent (7.5%)
thereof, and the net proceeds thereof immediately distributed pursuant to
Section 9.5.1. The purchase price shall be paid in cash. If the Non-Defaulting
-------
Member elects to purchase the Option Interest, the closing shall occur (i)
within thirty (30) days after the lapse of the Notice Period and the purchase
price for the Option Interest is agreed upon or otherwise determined pursuant to
this Section or (ii) within a time period otherwise agreed to in writing by the
Non-Defaulting Member and the Defaulting Member. It being understood that the
Non-Defaulting Member shall be under no obligation to purchase the Option
Interest, and if it does not elect to do so by delivering a Buy Out Notice
within the Notice Period, the particular exercise of the Buy Out Option shall
lapse without obligation or liability of the Non-Defaulting Member and without
affecting a subsequent exercise of the Buy Out Option by a Member entitled
pursuant to this Section to do so.

          In the event the Non-Defaulting Member exercises its Buy Out Option
pursuant to this Section 7.10, all guarantees made by the Defaulting Member or
                 -------
any Affiliate of the Defaulting Member which guarantee any Company indebtedness
will not be released and will remain in full force and effect until the earlier
to occur of (i) the refinancing of such Company indebtedness on terms and
conditions not requiring the guarantee of any Member or the guarantee of any
Member's Affiliate, or (ii) the satisfaction by the Company of the indebtedness
guaranteed by the Defaulting Member or the Defaulting Member's Affiliate.
Notwithstanding the foregoing and in the event a Non-Defaulting Member has
exercised its Buy Out Option pursuant to this Section 7.10 and the Defaulting
                                              -------
Member or an Affiliate of the Defaulting Member has guaranteed any Company
indebtedness, the Members shall exercise reasonable efforts to secure substitute
financing not requiring the guarantee of the Defaulting Member or any Affiliate
of the Defaulting Member. In no event, however, will any guarantee of the
Defaulting Member or the Affiliate of the Defaulting Member be released if the
obligations of the Non-Defaulting Member or any of its Affiliates will, or
potentially will, be increased by such a release. If the subject guarantee is
part of an arrangement pursuant to which both the Non-Defaulting Member and the
Defaulting Member, or their respective Affiliates, have guaranteed Company
indebtedness on a joint and several basis, the
<PAGE>

Defaulting Member's or its Affiliate's guarantee shall not be released hereunder
unless the amount guaranteed by such joint and several guarantee of the Members
under the terms of the substitute financing is reduced to fifty percent (50%) or
less of the guaranteed amount prior to the release.

          For purposes of this Section 7.10, the fair market value of the
                               -------
Company Assets shall be determined via agreement by the Defaulting Member and
the Non-Defaulting Member or, if they cannot agree within thirty (30) days after
either of them provides written notice to the other of the need to do so, by an
appraiser agreed upon by the Defaulting Member and the Non-Defaulting Member. In
the event that the fair market value of the Company Assets is to be determined
by an appraiser, the Defaulting Member and the Non-Defaulting Member shall
attempt in good faith to agree on a single appraiser. If they are unable to
agree on a single appraiser within thirty (30) days after either requests the
other to do so, each shall select a qualified appraiser with experience in
valuing real estate comparable to the Property, and the two appraisers so
selected shall select a third similarly qualified appraiser. Such third
appraiser shall then determine the fair market value of the Company Assets
pursuant to this Section 7.10. If either the Defaulting Member or the
                 -------
Non-Defaulting Member fails for any reason to select an appraiser within fifteen
(15) days after being requested to do so by the other, the appraiser selected by
the other shall render the appraisal.

          The provisions of this Section 7.10 shall control over and override
                                 -------
all of the provisions relating to transfer restrictions and/or withdrawal rights
set forth in this Agreement If a Buy Out Notice has been given pursuant to this
Section 7.10, no notice pursuant to Section 7.2 or Section 7.9 may be given
-------                             -------        -------
until consummation of the purchase and sale pursuant to this Section 7.10 or the
                                                             -------
lapse of the particular exercise of the Buy Out Option as provided above.

                                   ARTICLE 8
                   LIABILITY, EXCULPATION, AND INDEMNIFICATION

          8.1 Liability. Except as otherwise provided by the Act, the debts,
obligations, and liabilities of the Company, whether arising in contract, tort,
or otherwise, shall be solely the debts, obligations and liabilities of the
Company, and no Member or any proper delegate shall be obligated personally for
any such debt, obligation or liability of the Company solely by reason of being
a Member or a delegate.

          8.2 Exculpation.

               (i) No Covered Person shall be liable to the Company or any other
               Covered Person for any loss, damage or claim incurred by reason
               of any act or omission performed or omitted by such Covered
               Person in good faith on behalf of the Company and in a manner
               reasonably believed to be within the scope of authority conferred
               on such Covered Person by this Agreement, except that a Covered
               Person shall be liable for any such loss, damage or claim
               incurred by reason of such Covered Person's gross negligence or
               willful misconduct.

               (ii) A Covered Person shall be fully protected in relying in good
               faith upon the records of the Company and upon such information,
               opinions, reports or statements presented to the
<PAGE>

               Company by any Person as to matters the Covered Person reasonably
               believes are within such other Person's professional or expert
               competence and who has been selected with reasonable care by or
               on behalf of the Company, including information, opinions,
               reports or statements as to the value and amount of the assets,
               liabilities, Profits, Losses or net cash flow or any other facts
               pertinent to the existence and amount of assets from which
               distributions to Members might properly be paid.

          8.3 Indemnification. To the fullest extent permitted by applicable
law, a Covered Person shall be entitled to indemnification from the Company for
any loss, damage, or claim incurred by such Covered Person by reason of any act
or omission performed or omitted by such Covered Person (including alleged
breaches of fiduciary duty) in good faith on behalf of the Company and in a
manner reasonably believed to be within the scope of authority conferred on such
Covered Person by this Agreement, except that no Covered Person shall be
entitled to be indemnified in respect of any loss, damage, or claim incurred by
such Covered Person by reason of gross negligence or willful misconduct with
respect to such acts or omissions; provided, however, that any indemnity under
this Section 8.3 shall be provided out of and to the extent of Company assets
     -------
only, and no Member shall have any personal liability with respect to such
indemnity.

          8.4 Expenses. To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by a Covered Person in defending any
claim, demand, action, suit, or proceeding shall, from time to time, be advanced
by the Company prior to the final disposition of such claim, demand, action,
suit, or proceeding upon receipt by the Company of an undertaking by or on
behalf of the Covered Person to repay such amount if it shall be determined that
the Covered Person is not entitled to be indemnified as authorized in Section
                                                                      -------
8.3 hereof.

          8.5 Insurance. The Company may purchase and maintain insurance, to the
extent and in such amounts Approved by the Members, on behalf of Covered Persons
and such other Persons Approved by the Members, against any liability that may
be asserted against or expenses that may be incurred by any such Person in
connection with the activities of the Company or such indemnities, regardless of
whether the Company would have the power to indemnify such Person against such
liability under the provisions of this Agreement. The Company may enter into
indemnity contracts with Covered Persons and such other Persons Approved by the
Members and adopt written procedures pursuant to which arrangements are made for
the advancement of expenses and the funding of obligations under Section 8.4
                                                                 -------
hereof and containing such other procedures regarding indemnification Approved
by the Members.

                                   ARTICLE 9
            DISSOLUTION, LIQUIDATION, AND TERMINATION OF THE COMPANY

          9.1 Limitations. The Company may be dissolved, liquidated, and
terminated only pursuant to the provisions of this Article 9, and the parties
                                                   -------
hereto do hereby irrevocably waive any and all other rights they may have to
cause a dissolution of the Company or a sale or partition of any or all of the
Company Assets.
<PAGE>

          9.2 Exclusive Causes. Notwithstanding the Act, the following and only
the following events shall cause the Company to be dissolved, liquidated, and
terminated:

                    (a) The occurrence of a Terminating Capital Transaction; or

                    (b) The Approval of the Members.

Any dissolution of the Company other than as provided in this Section 9.2 shall
                                                              -------
be a dissolution in contravention of this Agreement.

          9.3 Effect of Dissolution. The dissolution of the Company shall be
effective on the day on which the event occurs giving rise to the dissolution,
but the Company shall not terminate until it has been wound up and its assets
have been distributed as provided in Section 9.5 of this Agreement.
                                     -------
Notwithstanding the dissolution of the Company, prior to the termination of the
Company, the business of the Company and the affairs of the Members, as such,
shall continue to be governed by this Agreement.

          9.4 No Capital Contribution Upon Dissolution. Each Member shall look
solely to the assets of the Company for all distributions with respect to the
Company, its Capital Contribution thereto, its Capital Account, and its share of
Net Profits or Net Losses, and shall have no recourse therefor (upon dissolution
or otherwise) against any other Member. Accordingly, if any Member has a deficit
balance in its Capital Account (after giving effect to all contributions,
distributions, and allocations for all taxable years, including the year during
which the liquidation occurs), then such Member shall have no obligation to make
any Capital Contribution with respect to such deficit, and such deficit shall
not be considered a debt owed to the Company or to any other person for any
purpose whatsoever.

          9.5 Liquidation.

               9.5.1 Upon dissolution of the Company, the Person designated by a
Majority in Interest of the Members shall act as Liquidator. The Liquidator
shall liquidate the assets of the Company, and after allocating (pursuant to
Article 5 of this Agreement) all income, gain, loss and deductions resulting
therefrom, shall apply and distribute the proceeds thereof as follows:

                    (a) first, to the payment of the obligations of the Company,
     to the expenses of liquidation, and to the setting up of Reserves; and

                    (b) thereafter, to the Members in proportion to the positive
     balances in the Members' respective Capital Accounts, determined after
     taking into account all Capital Account adjustments for the Company taxable
     year during which such liquidation occurs (other than those made as a
     result of the distributions set forth in this Section 9.5.1(b) of this
                                                   -------
     Agreement), by the end of the taxable year in which such liquidation occurs
     or, if later, within 90 days after the date of the liquidation.

               9.5.2 Notwithstanding Section 9.5.1 of this Agreement, in the
                                     -------
event that the Liquidator reasonably determines that an immediate sale of all or
any
<PAGE>

portion of the Company Assets would cause undue loss to the Members, the
Liquidator, in order to avoid such loss to the extent not then prohibited by the
Act, may either defer liquidation of and withhold from distribution for a
reasonable time any Company Assets except those necessary to satisfy the
Company's debts and obligations, or distribute the Company Assets to the Members
in kind.

                                   ARTICLE 10
                                  MISCELLANEOUS

          10.1 Amendments.

               10.1.1 Each Additional Member and Substitute Member shall become
a signatory hereto by signing such number of counterpart signature pages to this
Agreement and such other instruments, in such manner, as legal counsel to the
Company shall determine. By so signing, each Additional Member and Substitute
Member, as the case may be, shall be deemed to have adopted and to have agreed
to be bound by all of the provisions of this Agreement.

               10.1.2 This Agreement may be amended at any time and from time to
time by execution of a written agreement executed by at least a Majority in
Interest of the Members.

               10.1.3 In making any amendments, the Members shall prepare and
file (or cause to be prepared and filed) such documents and certificates as may
be required under the Act and under the laws of any other jurisdiction
applicable to the Company.

          10.2 Accounting and Fiscal Year. Subject to Code Section 448, the
books of the Company shall be kept on such method of accounting for tax and
financial reporting purposes require by the Code or the Regulations or as
otherwise Approved by the Members. The fiscal year of the Company shall end on
December 31 of each year, or on such other date required by the Code or the
Regulations (or permitted under the Code or Regulations and Approved by the
Members).

          10.3 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof and fully
supersedes any and all prior or contemporaneous agreements or understandings
between the parties hereto pertaining to the subject matter hereof.

          10.4 Further Assurances. Each of the parties hereto does hereby
covenant and agree on behalf of itself, its successors, and its assigns, without
further consideration, to prepare, execute, acknowledge, file, record, publish,
and deliver such other instruments, documents and statements, and to take such
other action as may be required by law or reasonably necessary to effectively
carry out the purposes of this Agreement.

          10.5 Notices. Any notice, consent, payment, demand, or communication
required or permitted to be given by any provision of this Agreement shall be in
writing and shall be (a) delivered personally to the Person or to an officer of
the Person to whom the same is directed, or (b) sent by facsimile or registered
or certified mail, return receipt
<PAGE>

requested, postage prepaid, addressed as follows: if to the Company, to the
Company at the address set forth in Section 1.3 hereof, or to such other
                                    -------
address as the Company may from time to time specify by notice to the Members;
if to a Member, to such Member at the address set forth in Exhibit "A", or to
                                                           -------
such other address as such Member may from time to time specify by notice to the
Company. Any such notice shall be deemed to be delivered, given and received for
all purposes as of: (i) the date so delivered, if delivered personally, (ii)
upon receipt, if sent by facsimile, or (iii) on the date of receipt or refusal
indicated on the return receipt, if sent by registered or certified mail, return
receipt requested, postage and charges prepaid and properly addressed.

          10.6 Tax Matters.

               10.6.1 Tejon shall be designated and shall operate as "Tax
Matters Partner" (as defined in Code Section 6231), to oversee or handle matters
relating to the taxation of the Company.

               10.6.2 The Tax Matters Partner may make all elections for federal
income and all other tax purposes (including, without limitation, pursuant to
Section 754 of the Code), with the Approval of the Members.

               10.6.3 Income tax returns of the Company shall be prepared by
such certified public accountant(s) as the Members shall retain at the expense
of the Company.

          10.7 Governing Law; Certain Waivers. This Agreement, including its
existence, validity, construction, and operating effect, and the rights of each
of the parties hereto, shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to otherwise governing principles
of conflicts of law. The Members waive any and all rights they may have to a
jury trial, and any and all rights they may have to punitive, special,
exemplary, or consequential damages, in respect of any dispute based on this
Agreement.

          10.8 Construction. This Agreement shall be construed as if all parties
prepared this Agreement.

          10.9 Captions - Pronouns. Any titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the text of
this Agreement. All pronouns and any variations thereof shall be deemed to refer
to the masculine, feminine, neuter, singular, or plural as appropriate.

          10.10 Binding Effect. Except as otherwise expressly provided herein,
this Agreement shall be binding on and inure to the benefit of the Members,
their heirs, executors, administrators, successors, and all other Persons
hereafter holding, having, or receiving an interest in the Company, whether as
Assignees, Substitute Members, or otherwise.

          10.11 Confidentiality. Each party hereto agrees that the provisions of
this Agreement, all understandings, agreements, and other arrangements between
and among the parties, and all other non-public information received from or
otherwise relating to, the Company shall be confidential, and, except as
otherwise required by law, shall not be disclosed or
<PAGE>

otherwise released to any other Person (other than to such party's legal counsel
or another party hereto), without the written consent of the other Members
(which shall not be unreasonably withheld or delayed). The obligations of the
parties hereunder shall not apply to the extent that the disclosure of
information otherwise determined to be confidential is required by applicable
law, provided that, prior to disclosing such confidential information, a party
shall notify the Company thereof, which notice shall include the basis upon
which such party believes the information is required to be disclosed.

          10.12 Member Representations. Each Member acknowledges, agrees and
represents to the Company and each other Member that (a) it is an "accredited
investor," as that term is defined in Regulation D to the Securities Act of
1933, (b) it either (i) has a preexisting business relationship with the Company
or any of its partners, officers, directors or controlling persons or (ii) by
reason of its business or financial experience or the business or financial
experience of its professional advisors who are unaffiliated with and who are
not compensated by the Company or any affiliate or selling agent of the Company,
directly or indirectly, has the capacity to protect its own interests in
connection with an investment in the Company, (c) it has been furnished with all
documents and additional information requested by it for the purpose of
evaluating whether an investment in the Company is suitable for the Member, (d)
in evaluating an investment in the Company, the Member has consulted with its
own investment, legal and tax advisors and has independently concluded that an
investment by the Member in the Company is appropriate in light of its overall
investment objectives and financial situation, (e) the Member has adequate means
of providing for current needs and contingencies, has no need for liquidity with
respect to its investment in the Company and is able to bear the economic risk
of a loss of the Member's entire investment in the Company, (f) the Member is
purchasing its interest for the Member's own account for investment and not with
a view to or for resale in connection with any distribution of such security,
and (g) the Member understands there are no guarantees or assurances of any
economic or other benefits that may accrue by virtue of holding an interest in
the Company. Each Member further acknowledges, agrees and represents that it is
not relying on legal counsel of any other Member in reviewing this Agreement and
in deciding whether to invest as a Member. In this connection, the Members
acknowledge and agree that Latham & Watkins has represented solely Tejon in
putting together this Agreement and that, although Latham & Watkins will
continue to represent Tejon and certain of its Affiliates on various matters
from time to time, all Members consent to the representation by Latham & Watkins
of the Company from time to time. All Members further acknowledge and agree that
Latham & Watkins may rely upon the statements made to it, and the instructions
given it, by Tejon, Dermody or any of their respective agents or representatives
without any duty of inquiry as to the Person's authority to do. The Members
further acknowledge and agree that Lionel Sawyer & Collins has represented
solely Dermody in putting together this Agreement and that, although Lionel
Sawyer & Collins will continue to represent Dermody and certain of its
Affiliates on various matters from time to time, all Members consent to the
representation by Lionel Sawyer & Collins of the Company from time to time. All
Members further acknowledge and agree that Lionel Sawyer & Collins may rely upon
the statements made to it, and the instructions given it, by Tejon, Dermody or
any of their respective agents or representatives without any duty of inquiry as
to the Person's authority to do.

          10.13 Counterparts. This Agreement may be executed in any number of
multiple counterparts, each of which shall be deemed to be an original copy and
all of which shall constitute one agreement, binding on all parties hereto.
<PAGE>

          10.14 Attorney Fees. In case any proceeding, whether at law, in equity
or in arbitration, shall be brought by any Member or by or on behalf of the
Company to enforce the terms of this Agreement or with respect to any breach
hereof, the prevailing party in each such proceeding, as determined by the court
or arbitrator, shall be entitled to the payment of reasonable attorneys' fees
and costs from the non-prevailing party or parties (as determined by the court
or arbitrator).

          10.15 Titles. Article and Section titles are for descriptive purposes
                        -------     -------
only and shall not control or alter the meaning of this Agreement as set forth
in the text.

          10.16 Successors. This Agreement shall bind and inure to the benefit
of the Members' respective successors and assigns.

          10.17 Computation of Time Periods. All periods of time referred to in
this Agreement shall include Saturdays, Sundays and state or national holidays,
provided that if the date or last date to perform any act or give any notice or
approval shall fall on a Saturday, Sunday or state or national holiday, such act
or notice may be timely performed or given on the next succeeding day which is
not a Saturday, Sunday or state or national holiday.

          10.18 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be
determined to be illegal or unenforceable, then such illegal or unenforceable
provision shall be modified by the proper court or arbitrator to the minimum
extent necessary and possible to make such provision enforceable, and such
modified provision and all other provisions of this Agreement and of each other
agreement entered into pursuant to this Agreement shall be given effect
separately from the provision or portion thereof determined to be illegal or
unenforceable and shall not be affected thereby.

          10.19 Signatory Authority. By signing this Agreement, the individual
or individuals signing this Agreement on behalf of each Member represents to the
other Members that he or she has full authority to do so, has received all
required consents, and that his or her signature (together with the signature or
signatures of any other individual signing below on behalf of such Member) is
(are) the only signatures required to bind the Member on whose behalf he or she
is signing this Agreement.

          10.20 Arbitration. Any disputes which arise involving all or any of
the Members under this Agreement shall be subject to final, binding arbitration
upon written request by any Member involved in the dispute in accordance with
this Section. The dispute shall be submitted before JAMS/Endispute ("JAMS")
     -------
within thirty (30) days after the requesting notice in accordance with the then
existing JAMS Arbitration Rules as modified by this Section; a decision shall be
                                                    -------
issued within thirty (30) days after the close of the record; and judgment upon
the award may be entered in any court having jurisdiction over the judgment.
Within thirty (30) days after selection of the arbitrator as provided herein,
each party to the dispute shall submit to each other and the arbitrator their
respective proposals for resolution of the dispute, and the arbitration shall be
limited to the sole question of determining which written proposal is to be
accepted. The arbitrator shall have no authority to compromise between the
proposals. If a party to a dispute fails to appear at any properly noticed
arbitration proceeding, an award may be entered against such party
notwithstanding such failure to appear. If the parties disagree on the
<PAGE>

choice for an arbitrator, the parties shall jointly request JAMS to furnish a
list of five available arbitrators. After receipt of such list and an
opportunity to consider the names, each party may designate in writing to JAMS
not more than two names to be eliminated from the selection process. If more
than one name remains after such eliminations are made, the selection of the
arbitrator shall be made by lot from the remaining names. If either party makes
demand upon the other for arbitration, the arbitration shall be conducted in
Bakersfield, California at the location designated by the arbitrator. The
parties may mutually agree to another location. Subject to Section 10.14, the
                                                           -------
expenses, wages and other compensation of any witnesses called before the
arbitrator shall be borne by the party calling the witnesses. Subject to Section
                                                                         -------
10.14, other expenses incurred, including wages of participants and experts
shall be borne separately by the respective parties. Subject to Section 10.14,
                                                                -------
the fee for the arbitration, the arbitrator's fees and expenses, the cost of any
hearing room, and the cost of a shorthand or similar reporter and the original
transcript shall all be borne by the Company.

          10.21 Approvals. Except as otherwise explicitly provided herein to the
contrary, whenever a Member's approval or consent is required, such approval or
consent shall not be unreasonably withheld or delayed. If a Member provides
written notice to another Member requesting that such other Member approve or
consent to an action or proposal, which action or proposal is specified in the
written notice, the Member's approval or consent (as the case may be) shall be
deemed given unless the Member provides written notice to the Member giving the
notice within the time period specified to obtain such approval or, if no time
frame is specified, thirty (30) days thereafter that the Member does not approve
or consent to the action or proposal.

          10.22 Interpretations. Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against any party hereto,
whether under any rule of construction or otherwise. No party to this Agreement
shall be considered the draftsman. On the contrary, this Agreement has been
reviewed, negotiated and accepted by all parties and their attorneys and shall
be construed and interpreted according to the ordinary meaning of the words used
so as fairly to accomplish the purposes and intentions of all parties hereof.

          10.23 No Third-Party Beneficiaries. Nothing in this Agreement is
intended to confer any rights or remedies on any Person other than the parties
to this Agreement and their respective successors-in-interest and permitted
assigns.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

                              MEMBER SIGNATURE PAGE

THE MEMBER INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND QUALIFICATION ORDERS UNDER SUCH LAWS
OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
QUALIFICATION ORDERS UNDER SUCH LAWS, THE AVAILABILITY OF WHICH IS ESTABLISHED
TO THE SATISFACTION OF LEGAL COUNSEL TO THE COMPANY.

Tejon Industrial Corp.,
a California corporation,

By:  /s/ Robert A. Stine
     --------------------------------------
         Robert A. Stine, President

Dated:   March 20, 2001
       ------------------------------------
<PAGE>

                              MEMBER SIGNATURE PAGE

THE MEMBER INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR
SALE, SOLD OR OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND QUALIFICATION ORDERS UNDER SUCH LAWS
OR (B) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT AND
QUALIFICATION ORDERS UNDER SUCH LAWS, THE AVAILABILITY OF WHICH IS ESTABLISHED
TO THE SATISFACTION OF LEGAL COUNSEL TO THE COMPANY.

By:  /s/ Robert A. Stein
    ---------------------------------------
         Name:   Robert A. Stein
                ---------------------------
         Title:  President
                ---------------------------

By:  /s/ Aaron Paris
    ---------------------------------------
         Name:   Aaron Paris
                ---------------------------
         Title:  President
                ---------------------------

Dated:  March 20, 2001
       ------------------------------------
<PAGE>

                                   EXHIBIT "A"

                         MEMBERS, CAPITAL CONTRIBUTIONS,
                            AND PERCENTAGE INTERESTS

-----------------------------------------------------------------------------
 Name and Address of      Class of        Cash         Agreed      Percentage
      Members            Membership   Contribution    Value of     Interest
                          Interest                   Contributed
                                                      Property
-----------------------------------------------------------------------------
Tejon Industrial Corp.
4436 Lebec Road           Class A      $   50,000     $1,478,862      50%
Lebec, California
93243
-------------------------------------------------------------------------------
Dermody Properties
1200 Financial Blvd.      Class A      $1,528,862     $        0      50%
Reno, Nevada  89502
-----------------------------------------------------------------------------<PAGE>

                                  EXHIBIT 10.3

                             AMENDED AND RESTATED
                             ---------------------
              DISPOSITION AND DEVELOPMENT AGREEMENT, AGREEMENT OF
              ---------------------------------------------------
             PURCHASE AND SALE, AND LEASE WITH OPTION TO PURCHASE
             ----------------------------------------------------

between

           THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF COMPTON,
                     a public body, corporate and politic,

                                      and

                          COMPTON ENTERTAINMENT, INC.,
                            a California corporation

                  WALNUT INDUSTRIAL PARK REDEVELOPMENT PROJECT

                             AMENDED AND RESTATED
                             --------------------
              DISPOSITION AND DEVELOPMENT AGREEMENT, AGREEMENT OF
              ---------------------------------------------------
             PURCHASE AND SALE, AND LEASE WITH OPTION TO PURCHASE
             ----------------------------------------------------

THIS AMENDED AND RESTATED DISPOSITION AND DEVELOPMENT AGREEMENT (this "DDA" or
"Lease") is made as of this 4th day of April, 1995, by and between the COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF COMPTON, a public body corporate and politic
("Agency") and COMPTON ENTERTAINMENT, INC., a California corporation
("Redeveloper").
<PAGE>

                               TABLE OF CONTENTS

                                                                      Page
                                                                      ----
RECITALS

1.  Purchase and Sale of the Convention Center Parcel                   2

2.  Lease of the Hotel and Other Parcels                                4

3.  Title and Survey                                                    5

4.  Term                                                                7

5.  Rent                                                                9

6.  Rent Reduction/Credit                                               9

7.  Additional Consideration                                           11

8.  Taxes                                                              11

9.  Use and Compliance with Laws                                       12

10. Physical Condition of the Property                                 14

11. Construction by Redeveloper                                        17

12. Certificate of Completion                                          21

13. Utilities and Services                                             23

14. Maintenance                                                        23

15. Alterations                                                        24

16. Destruction                                                        24

17. Insurance and Indemnity                                            27

18. Condemnation                                                       33

19. Assignment, Subletting and Encumbering                             36

20. Default                                                            39

21. Agency's Entry on Property                                         47

22. Notices                                                            48

23. Interest on Past-due Obligations                                   48

24. Attorneys' Fees                                                    48
<PAGE>

                                                                     Page
                                                                     ----

25. Estoppel Certificates                                             50

26. Surrender of Property                                             50

27. Form of Nondiscrimination and Nonsegregation Clauses; Local
    Hiring and Affirmative Action                                     50

28. Local Contractors                                                 52

29. Expansion parcels                                                 52

30. Option to Purchase                                                54

31. Holding Over                                                      57

32. Force Majeure; Extension of Times of Performance                  57

33. Sale or Transfer by Agency                                        58

34. Limitation on Recourse Against Agency                             58

35. Redeveloper's Representations and Warranties                      58

36. Agency's Representations and Warranties                           60

37. Miscellaneous                                                     61
    (a)  Governing Law                                                61
    (b)  Time of Essence                                              61
    (c)  Additional Rent                                              61
    (d)  Quiet Enjoyment                                              61
    (e)  Transfer of Agency's Interest                                61
    (f)  Waiver                                                       61
    (g)  Brokers                                                      61
    (h)  Headings                                                     62
    (i)  Inspection Of Books and Records                              62
    (j)  Merger                                                       62
    (k)  Gender; Number                                               62
    (l)  No Joint Venture                                             62
    (m)  Exhibits                                                     62
    (n)  Entire Agreement; Modification                               62
    (o)  Joint and Several Obligations                                63
    (p)  Severability                                                 63
    (q)  Consents of Agency                                           63
    (r)  Records                                                      63
    (s)  Recordation of Memorandum of Lease With Option to Purchase   63
    (t)  Execution in Counterparts                                    63

                 EXHIBIT 1     LEGAL DESCRIPTIONS           1

                 EXHIBIT 2     SITE PLAN                    1

                 EXHIBIT 3     SCHEDULE OF PERFORMANCE      1

                 EXHIBIT 4     CONDITIONS OF CONSTRUCTION   1

                 EXHIBIT 5     SCOPE OF DEVELOPMENT         1

<PAGE>

RECITALS

                                      -1-

A. The purpose of this DDA is to effectuate the Agency's Redevelopment Plan, as
amended (the "Redevelopment Plan") for the Walnut Industrial Park Project Area
(the "Project Area") in the City of Compton (the "City") by facilitating the
development, rehabilitation and operation of all or some portion of an existing
hotel structure (the "Hotel") and entertainment center (the "Entertainment
Center") containing one or more restaurants and a card club (the "Card Club"),
and parking (and which may contain a nightclub/sports lounge, gift shop, meeting
facilities/theater, corporate business lounge, and assorted concession venues),
on a parcel of real property of approximately 24.45 acres (the "Property")
located within the Project Area. The Property is legally described in Exhibit 1
attached hereto, and is depicted on the Site Plan attached hereto as Exhibit 2.

B. Agency is the owner of the Property.

C. Redeveloper desires to purchase a portion of the Property and to lease the
remainder of the Property for the purpose of developing and operating the Hotel
and Entertainment Center thereon.

D. Agency desires to lease the Property to Redeveloper in accordance with the
terms and conditions set forth hereinbelow.

E. The Property contains four elements:

1. A portion of the Property (the "Convention Center Parcel") currently improved
with a convention center and parking structure, including the underlying land,
all of which is subject to easements for access to, support of and parking for
the Hotel Parcel.

2. A portion of the Property (the "Hotel Parcel") consisting of a parcel of air
space which includes a nine (9) story hotel containing 290 guest rooms and
ancillary areas such as lobbies, restaurant, kitchen, bars, commercial areas and
the like.

3. A portion of the Property (the "Parking Parcels") will be improved with
parking to support the Hotel and the Entertainment Center.

4. A portion of the Property consists of additional land (the "Expansion
Parcels") upon which Redeveloper shall have the right to expand by construction
of an additional casino or card club.

The Hotel Parcel, the Parking Parcels and the Expansion Parcels are referred to
herein collectively as the "Leasehold Parcels" or the "balance of the Property."

F. This DDA consists of an agreement of purchase and sale of a portion of the
Property, a lease of the balance of the Property to Redeveloper and, if
Redeveloper complies with the terms thereof, an option to purchase the balance
of the Property.
<PAGE>

                                      -2-

G. The parties hereto are parties to that certain Disposition and Development
Agreement dated as of December 10, 1992, concerning real property adjacent to
the Property (the "Prior DDA"). By this DDA, the parties shall amend and restate
such Disposition and Development Agreement on the terms provided herein.

H. Redeveloper has obtained a license (the "License") from the City of Compton
("City") to operate within the City of Compton a Card Club pursuant to
Section 9-10 of the Compton Municipal Code, on the terms and conditions set
forth in the City's Resolution No. 17,087. Such license has been extended and
amended by City Resolution Nos. 17,617 and 17,831. More or less concurrently
herewith, Redeveloper is applying for an amendment to the license to cover the
entire Property so as to permit expansion of the Card Club.

I. Redeveloper proposes to: (i) construct improvements to complete and
rehabilitate the Hotel so that it can be operated, in whole or in part, as a
full service hotel lodging facility, (ii) construct improvements to the Property
so that the Entertainment Center, including the Card Club, can be operated
therefrom, (iii) construct additional parking needed to support the Hotel and
Entertainment Center, and (iv) subject to Section 29 hereof, within fifteen (15)
years after the date hereof, construct, open and operate an expansion of the
Card Club facility on the Expansion Parcels and/or other portions of the
Property. Construction of such improvements and operation of the Hotel and
Entertainment Center from the Property, and construction of the expansion
facility on the Expansion Parcels are referred to herein as the "Project."

J. The Project will assist in the elimination of blight in the Project Area,
will provide additional jobs, and will substantially improve the economic and
physical conditions in the Project Area in accordance with the purposes and
goals of the Redevelopment Plan.

NOW THEREFORE, the parties agree as follows:

1. Purchase and Sale of the Convention Center Parcel.

(a) Redeveloper hereby agrees to purchase from Agency, and Agency agrees to sell
to Redeveloper, the Convention Center Parcel, including the underlying land and
parking structure, subject to easements of support and for parking for the
benefit of the Hotel Parcel, on the terms and conditions set forth hereinbelow.

(b) The purchase price shall be $2,000,000 cash, payable in full at closing.

(c) Closing shall occur at such time as the contingencies set forth in Section
2(b) hereof have been satisfied, but in no case later than July 31, 1995;
provided, however, if the closing has not occurred by July 31, 1995 due to the
fact that the bonds described in Section 5 have not theretofore been defeased,
then
<PAGE>

                                      -3-

the closing date may be extended for up to 90 additional days, and if the
closing has not occurred by October 31, 1995, then either party hereto may
terminate this DDA if the terminating party has not defaulted hereunder.
Notwithstanding the foregoing, if the sole reason that the closing has not
occurred is due to the fact that the lis pendens recorded on April 10, 1995, as
Instrument No. 95-496676, Official Records, Los Angeles County (the "Lis
Pendens") has not been expunged, then the closing date may be extended until
such time as the Lis Pendens has been expunged as an exception to title;
provided, however, if the Lis Pendens is not expunged as a title exception by
April 30, 1996, then either party may thereafter terminate this Agreement.

(d) In addition to other matters of title, as provided in Section 3 hereof,
title shall be subject to the following matters:

(i) Existing easements of access, support and for parking referred to
hereinabove.

(ii) The Grant Deed pursuant to which Redeveloper or its successor in interest
takes title shall contain a deed covenant in favor of Agency and City obligating
the grantee, its successors and assigns to continuously and uninterruptedly
operate the Hotel, Card Club and Entertainment Center (except for necessary
interruptions which shall not exceed six consecutive months). If any such use
becomes unfeasible or is rendered illegal (other than as the result of voluntary
action on the part of Redeveloper or a successor in interest), the parties shall
negotiate in good faith to substitute appropriate uses for the Property. Said
covenant shall become ineffective from and after the date that is fifty years
after the Rent Commencement Date (as defined below).

(iii) A deed of trust (the "deed of trust"), in favor of Agency securing
Redeveloper's performance under the Lease hereinafter provided for, shall be
recorded at closing; provided, however, that the foreclosure of such deed of
trust shall not extinguish the Agency's obligation to deliver the sum set forth
in Section 1(e) hereof upon the conditions set forth in Section 1(e).

(e) Anything in Section 1(d)(iii) hereinabove or in the Lease to the contrary
notwithstanding, if, for any reason other than the exercise by Redeveloper of
the option to purchase the Leasehold Parcels, as provided herein, the Lease is
terminated, including a voluntary termination under Section 4(c) hereof or a
termination for breach on the part of Redeveloper or any successor to
Redeveloper, Agency shall be obligated to pay to Redeveloper or to its successor
in interest, the original $2,000,000.00 purchase price of the Convention Center
Parcel, and Redeveloper shall be obligated to reconvey the Convention Center
Parcel to Agency. The failure of Redeveloper to reconvey the Convention Center
Parcel to Agency shall be deemed an event of default under the deed of trust
referred to in Section 1(d)(iii) hereof. Such repurchase price shall be paid
over such
<PAGE>

                                      -4-

period of time as shall be determined by binding negotiations of the parties
during the 90 day period following the termination of the Lease. Upon the
exercise of by Redeveloper of the option to purchase the Property which is
subject to the Lease and the payment of the purchase price thereof, the
provisions of this Section 1(e) shall be ineffective, and the deed of trust
referred to in Section 1(d)(iii) shall be reconveyed. The effect of the
covenants referred to in Section 1(d)(ii) and this Section 1(e) shall survive
the transfer of title to the optioned property to Redeveloper or its permitted
successor in interest.

(f) The purchase price shall be paid in all cash through the close of escrow.
Agency will pay the cost of a CLTA policy of title insurance, any documentary
transfer tax, and one half of the escrow fees. Redeveloper will pay the cost of
recording, the additional premium and any expenses (including survey costs) in
the event Redeveloper desires to obtain an extended coverage policy of title
insurance, and the other half of the escrow fees. In connection therewith, the
parties shall execute normal and necessary escrow instructions and all documents
reasonably called for thereunder, so long as such instructions and documents are
not inconsistent herewith.

2. Lease of the Hotel and Other Parcels.

(a) Agency hereby leases the Leasehold Parcels to Redeveloper, and Redeveloper
leases the Leasehold Parcels from Agency (the "Lease"), for the term set forth
in Section 8 hereof, subject to and on the terms and conditions set forth in
this Lease.

(b) Notwithstanding the foregoing, this Lease, including the parties'
obligations hereunder, is subject to the satisfaction or waiver of each of the
following conditions on or before the Effective Date (as hereinafter defined):

(i) Agency's receipt of an opinion from bond counsel to be selected and approved
by Agency that this transaction will not adversely affect the tax exempt status
of any bonds or other obligations issued to finance the acquisition and/or
construction of the Property or any part thereof (including any improvements
thereon) to be leased or conveyed to Redeveloper. This condition is inserted for
the sole benefit of Agency and may be waived or deferred by an instrument in
writing signed by Agency. The parties shall use their best efforts to resolve
any bond issues raised by such opinion letter;

(ii) Redeveloper's execution and delivery of the deed of trust and other
security instruments and a recordable Memorandum of Lease, in substantially the
form approved by Agency and Redeveloper's title insurance company;

(iii) The City of Compton's adoption of an amendment to the License providing
that Hollywood Park, Inc., may be a licensee upon a change in state law allowing
Hollywood Park, Inc., (or a joint
<PAGE>

                                      -5-

venture of Hollywood Park, Inc., and the Redeveloper) to hold such license, and
subject to Hollywood Park, Inc. (or such joint venture) qualifying as a licensee
pursuant to Subsections 9-10.1 through 9-10.10, and 9-10.13, of the Compton
Municipal Code, and any other applicable provisions of the Compton Municipal
Code;

(iv) Agency's delivery to Redeveloper of Redeveloper's Policies of Title
Insurance described in Section 6 hereof. This condition is inserted for the sole
benefit of Redeveloper and may be waived, in whole or in part, or deferred by
Redeveloper by an instrument in writing signed by Redeveloper.

If the foregoing conditions are not satisfied or waived by the time permitted
for closing under Section 1(c) hereof, then this Lease may be terminated by
either party on ten (10) days prior written notice to the other party, and this
Lease shall thereafter be of no further force or effect.

3. Title and Survey.

(a) Within ten (10) business days following execution hereof, Agency shall
deliver to Redeveloper a Preliminary Title Report issued by Old Republic Title
Company. Redeveloper's fee interest in the Convention Center Parcel shall be
insured by a standard form, CLTA Owners Policy of title insurance, and
Redeveloper's leasehold interest in the balance of the Property shall be insured
as of the Effective Date by a CLTA Policy of Leasehold Title Insurance (the
"Leasehold Policy") to be purchased and paid for by Agency. The Policy shall
insure Redeveloper's leasehold interest in the Leasehold Parcels free and clear
of all liens, encumbrances, restrictions, and rights-of-way of record, subject
only to the following permitted conditions of title ("Permitted Title
Exceptions"):

(i) Agency's fee interest in the Leasehold Parcels;
<PAGE>

                                      -6-

(ii) The applicable zoning, building and development regulations of any city,
county, state or federal jurisdiction affecting the Property; and

(iii) Those exceptions approved by Redeveloper by May 31, 1995. If Redeveloper
unconditionally disapproves any exceptions, this DDA shall thereupon terminate
and shall be of no further force or effect, unless the sole disapproved
exception is the Lis Pendens, in which case this DDA shall terminate if the Lis
Pendens is not expunged by April 30, 1996. If Redeveloper conditionally
disapproves any exceptions, then Agency shall have ten (10) business days after
receipt from Redeveloper of a written specification of the title exceptions to
which Redeveloper is taking objection within which to either agree to remove the
exceptions to which objection was taken or to notify Redeveloper that it is
unwilling or unable to do so. In the event that Agency gives notice that it is
unwilling or unable to remove any exception to which objection was taken, then
Redeveloper shall have ten (10) business days within which to give notice that
either (A) it will accept title subject to the exceptions as to which the Agency
is unwilling or unable to remove, or (B) to terminate this DDA forthwith, in
which instance each of the parties shall be relieved of all further liability
hereunder, provided that no such termination shall affect the License for the
Card Club or any liability of Redeveloper to City in connection therewith. The
failure of Agency to give notice as provided hereinabove within the ten (10) day
period shall be deemed to be a notice that it is unwilling or unable to cure the
title exceptions to which Redeveloper took exception, and the failure of
Redeveloper to give notice within the subsequent ten (10) day period that it
will either accept title subject to such matters or to terminate this DDA shall
be deemed an election on the part of Redeveloper to terminate this DDA. If
Agency gives notice that it intends to remove a title defect, it shall use its
best efforts to complete such action within thirty (30) days thereafter, but, in
any case, Agency shall proceed diligently to cause such title exceptions to be
removed.

(iv) With respect to the Convention Center Parcel, those matters set forth in
Section 1(d) hereof.

(v) Should a title exception which Agency is unwilling or unable to cure and
which Redeveloper is unwilling to accept apply only to one or more the Expansion
Parcels, then Redeveloper may elect to defer or sever the affected parcel by
giving written notice thereof to Agency. In the event that the affected parcel
is severed therefrom, there shall be an equitable reduction in the rental and
the option price pursuant to Section 30 hereof. In the event that the parcel is
merely deferred, no such adjustments shall be made until such time as
Redeveloper elects to sever the particular parcel or parcels and gives notice
thereof as provided herein.
<PAGE>

                                      -7-

(b) Redeveloper has elected to obtain an ALTA Extended Coverage Title Insurance
Policy for the Convention Center Parcel and the Leasehold Parcels. Redeveloper
shall cause a licensed surveyor or civil engineer to conduct a survey of the
Property, to prepare from the survey a legal description satisfactory to the
title company insuring Redeveloper's title, and to prepare a plot plan showing
the location of any streets, easements, and rights of way over or in favor of
the Property, by June 7, 1995. Redeveloper shall approve or disapprove any
survey by June 15, 1995. Any survey and any premiums for endorsements or
extended coverage shall be paid by Redeveloper.

4. Term.

(a) Effective Date of Agreement. This Lease shall become effective (the
"Effective Date") on the close of escrow on the purchase and sale of the
Convention Center Parcel. If escrow has not closed by July 31, 1995, then
(subject to the extensions of time for the reasons set forth in Subsection)
either party may terminate this Agreement. Redeveloper shall have the right, on
five (5) days prior notice in writing, to enter into the entire Property
(including both the Convention Center Parcel and the Leasehold Parcels) at any
time prior to the Effective Date for the purposes of undertaking preconstruction
inspection, testing and planning studies, and Redeveloper's obligation to
indemnify Agency, pursuant to Section 17 hereof, shall commence on the date
which is five (5) days after such notice is given (but the insurance obligations
set forth in Section 17 shall not commence until the Effective Date).
Redeveloper shall not commence any work of improvement or other construction
prior to the Effective Date.
<PAGE>

                                      -8-

(b) Term of Lease. The term of this Lease (the "Term") shall commence on the
Effective Date, and shall end on the date that is fifty (50) years after the
Rent Commencement Date; unless sooner terminated as provided for herein. The
Rent Commencement Date shall be the earlier of (i) the date that the Card Club
or Hotel open for business or (ii) the date that is two (2) years after the
Effective Date. Notwithstanding the foregoing, if the rehabilitation of the
Hotel and Entertainment Center has not been completed by the date set forth in
the Schedule of Performance, then the Agency shall have the right to terminate
this Lease upon giving Redeveloper thirty (30) days written notice, and all
rights of Redeveloper hereunder or in the Property (including the Initial
Improvements (as defined below)) shall thereupon cease and shall be of no
further force or effect,provided however, that within such thirty (30) day
notice period, Redeveloper shall have the right to exercise its option to
purchase the Property, as provided in Section 30 hereof. If the Card Club has
not opened for business within 5 years after the Effective Date, or if the
Redeveloper has not purchased the Property by the date that is 5 years after the
Effective Date, then the Agency shall have the right to bring forth a substitute
developer or operator for the Card Club, and in such event the Redeveloper shall
negotiate in good faith with such party for either an operating agreement or a
buy-out, on reasonable and fair terms, of the Redeveloper's interest in this
DDA. For the purposes hereof, a "Lease Year" shall be the period commencing on
the Rent Commencement Date or any anniversary thereof and ending on the day
prior to the next anniversary of the Rent Commencement Date.

(c) Redeveloper's Right to Terminate the Lease. Redeveloper shall have the
right, at any time either (i) prior to issuance of any building permits for the
Property, or (ii) after issuance of the Certificate of Completion as described
in Section 22 hereof, to terminate this DDA; provided, however, in the event of
such termination, Redeveloper shall remain liable for any accrued obligations
hereunder arising prior to the date of termination, and any rights of Agency
which are intended to survive the termination of this Lease shall continue in
full force and effect. Redeveloper shall provide 90 days prior written notice to
Agency of any election to terminate this DDA. Redeveloper shall not have the
right to terminate this DDA during the period (i) from and after issuance of any
building permit for the Property and (ii) prior to the issuance of the
Certificate of Completion. In the event of such termination, Redeveloper shall
be released of any further obligation to pay rent (other than rent accrued prior
to the date of termination).
<PAGE>

                                      -9-

(d) Personalty. Upon termination of the Lease for any reason other than the
exercise by Redeveloper or its permitted successor in interest of the option to
purchase the Property as provided herein, Redeveloper shall deliver possession
of the Property (including both the Convention Center Parcel (subject to Section
1(e)) and the Leasehold Parcels) to Agency in a good and workable state of
repair (ordinary wear and tear excepted), together with full inventories of
furniture, fixtures and equipment of the type for which Redeveloper was entitled
to Rent Reduction/Credit under Section 6 hereof, including all additions to or
replacements of such items installed after the initial rehabilitation of the
Property.

5. Rent. Redeveloper shall pay to Agency, without demand, prior notice,
deduction, or set-off (except as provided in Section 10 hereof) base rent ("Base
Rent"), in the following sums:

Lease Years 1 through 5        -    $  600,000 per year
Lease Years 6 through 10       -    $  850,000 per year
Lease Years 11 through 15      -    $1,100,000 per year
Lease Years 16 through 20      -    $1,350,000 per year
Lease Years 21 through 25      -    $1,600,000 per year
Lease Years 26 through 30      -    $1,850,000 per year
Lease Years 31 through 35      -    $2,100,000 per year
Lease Years 36 through 40      -    $2,350,000 per year
Lease Years 41 through 45      -    $2,600,000 per year
Lease Years 46 through
     the end of the Lease      -    $2,850,000 per year

Base Rent shall be payable in advance on the first day of each Lease Year, in
legal currency of the United States, commencing on the Rent Commencement Date.

6. Rent Reduction/Credit. Redeveloper shall receive a credit against any Base
Rent obligation of Redeveloper set forth in Section 10 in an amount equal to the
actual verified costs of the Initial Improvements constructed or installed by
Redeveloper for the Hotel and the Convention Center, including the actual
verified costs of furnishing and equipping the Hotel and Entertainment Center
pursuant to Section 18 hereof and Exhibit 4 hereto, such costs of construction,
furnishings and equipage including but not limited to inventories of china,
glassware and linens, ("Initial Improvement Costs") to be consistent with
budgets prepared by Redeveloper and submitted to and approved by Agency,
provided however that the cost of remedying defects, certified as latent defects
by the City Engineer, which existed at the Effective Date and which Redeveloper
would have included in the budgets had their existence been known at the
Effective Date, shall be eligible for reimbursement even if not included in the
approved budgets. For purposes hereof, the "Initial Improvements" are the
improvements to the Hotel and Convention Center approved by Agency and provided
pursuant to the Scope of Development, and the furniture, fixtures and equipment
having a useful life of one year or more reasonably required to open the Hotel
and Card Club for
<PAGE>

                                      -10-

business, where first approved by Agency and described in the Scope of
Development, constructed or acquired prior to the earlier of (i) the issuance of
the Certificate of Occupancy, or (ii) issuance of the Certificate of Completion,
or (iii) the opening of the Hotel or Card Club for business. Except as
specifically provided herein, no capital investment after the Initial
Improvement Costs shall be eligible for such credit. Expendables, and other
personalty having a useful life of one year or less, shall not be deemed to be
part of the furniture, fixtures and equipment the cost of which is eligible for
such credit, unless otherwise approved by Agency's Board of Directors.
Redeveloper's allowable credit shall be on a dollar for dollar basis and shall
be applied to the first Base Rent due hereunder. Any unused credit in any Lease
Year shall be carried forward to the next ensuing Lease Year. Redeveloper shall
not receive the credit against Base Rent unless and until (i) Redeveloper is
entitled to receive a Certificate of Completion, and (ii) the Hotel and
Entertainment Center (including the Card Club) are complete and free of
mechanics' and materialmen's liens which concern an amount, in the aggregate, of
$100,000.00 (or any such liens are released through counterbonding pursuant to
California Civil Code Section 3143). No credit shall be available for costs
incurred after the Hotel or Card Club receives a Certificate of Occupancy or
opens for business unless the Agency's Board of Directors agrees to provide such
additional credit.
<PAGE>

                                      -11-

7. Additional Consideration. Compton Entertainment, Inc. ("CEI"), shall, as
additional consideration, deliver to with Agency the sum of $1,000,000. Such
additional consideration shall be delivered by CEI to Agency in ten installments
as follows: The sum of $100,000 shall be paid on the first day of the third
Lease Year, and the sum of $100,000 shall be paid by CEI to Agency on the first
day of each subsequent Lease Year through the 12th Lease Year, for an aggregate
maximum of $1,000,000.00. The payments of additional consideration provided for
herein shall not be subject to the Rent Reduction/Credit provided for in Section
6 hereof, and shall remain the obligation of CEI and shall not become the
obligation of any assignee of this DDA.

8. Taxes.

(a) Covenant to Pay Taxes. As additional rent, Redeveloper shall pay directly to
the appropriate taxing authorities all Taxes (as defined in Section 8(b)). All
Taxes shall be paid at least 10 days before delinquency and before any fine,
interest or penalty shall become due or be imposed by operation of law for their
non-payment. Redeveloper shall furnish to Agency at least 10 days prior to the
date when any Taxes would become delinquent receipts or other appropriate
evidence establishing such payment. Notwithstanding the foregoing, so long as
Redeveloper is fully operating the Card Club and the Hotel, Redeveloper shall
not be obligated to pay or shall be entitled to receive a refund or rebate of
that portion of any possessory interest taxes, or real property taxes relating
to the Property, to the extent payable or allocable to Agency or City during the
first ten (10) Lease Years of the Term. Provided, however, that if Redeveloper
or Redeveloper's successor in interest has not obtained a State of California
Gaming License for the Card Club within one year after the Effective Date,
Redeveloper shall be obligated to pay the full possessory interest tax or real
property tax (or any prorated portion thereof), and shall not be entitled to any
rebate or refund thereof, until the date upon which the California Gaming
License is obtained.
<PAGE>

                                      -12-

(b) Definition of Taxes. The term "Taxes" shall include all real property taxes
(including increases in real property taxes caused by reappraisals that are the
result of changes in the ownership of Agency's interest), possessory interest
taxes, personal property taxes, charges and assessments, (including but not
limited to street improvement liens) which are levied, assessed upon or imposed
by any governmental authority or political subdivision thereof during or with
respect to any portion of the Term hereof with respect to the Property or any
improvements, fixtures, equipment or other property of Redeveloper or Agency,
real or personal, located on the Property or used in connection with the
operation of the Project, and any tax which shall be levied or assessed in
addition to or in lieu of such real or personal property taxes, and any license
fees, taxes measured by or imposed upon rents, or other taxes or charges upon
Agency's leasing of the Property or the receipt of rent hereunder. All
assessments, taxes, fees, levies and charges imposed by governmental agencies
for services such as fire protection, street, sidewalk and road maintenance,
refuse removal and other public services generally provided without charge to
owners or occupants prior to the adoption of Proposition 13 by the voters of the
State of California in the June 1978 election, also shall be deemed included
within the definition of "Taxes" for the purposes of this Lease. Provided,
however, that the definition of "Taxes" shall not include (i) any taxes imposed
by City (other than gaming tax) unless such taxes are of general application
over the City as a whole, or (ii) any special assessments or special taxes
hereafter adopted by City against the Property unless Redeveloper shall have
been granted the right of a property owner to protest the inclusion of the
Property in the Special District in question.

(c) Proration of Redeveloper's Tax Liability. Redeveloper's liability to pay
Taxes shall be prorated on the basis of a 365-day year to account for any
fractional portion of a fiscal tax year included in the Term at its commencement
or expiration.

9. Use and Compliance with Laws.

(a) Redeveloper or an operator under contract to Redeveloper shall use and
operate the Property solely for the following purposes:

(i) the construction and operation of the Hotel in whole or in part.

(ii) the construction and operation of the Card Club containing the maximum
number of gaming tables permitted, subject to health and safety codes and
marketing consideration, in order to maximize revenues.

(iii) operation of one or more restaurants (the "Restaurants").
<PAGE>

                                      -13-

(b) Redeveloper shall have the obligation to provide ancillary facilities which
may include but need not be limited to a night club, a sports bar and other
entertainment facilities. The parties recognize that public demand for such
matters may vary from time to time as public tastes and technology change, and
Redeveloper agrees to consult with Agency with respect to the installation,
commencement and termination of operation, substitution and other modification
or replacement of such ancillary facilities.

Redeveloper covenants to and for the benefit of Agency that, subject to Section
32 hereof, Redeveloper shall continuously and uninterruptedly, throughout the
Term of this Lease, operate the Hotel, in whole or in part, the Card Club and
one or more Restaurants on the Property, following completion of the Initial
Improvements constituting the Project, subject to temporary closures for repairs
or remodeling which are reasonable in frequency and duration. Redeveloper shall
diligently pursue obtaining the requisite permission from the State of
California for operation of the Card Club.

(c) At all times from and after opening for business, Redeveloper shall at all
times during the Term hereof obtain, keep and maintain all licenses and permits
required by state and local governmental authorities necessary to operate the
Hotel and the Entertainment Center from the Property. Redeveloper hereby agrees
to comply with all obligations under the Card Club License issued by the City of
Compton, and Redeveloper's breach thereof or the termination thereof shall be a
breach of this Lease.

(d) Redeveloper shall at all times provide such security for operation of the
Hotel and Entertainment Center as shall reasonably be required to provide all
necessary protection for the customers, employees, guests, contractors and other
invitees of the Entertainment Center. Redeveloper shall fully comply with the
security requirements of the City of Compton Card Club Ordinance and with the
Security Plan submitted to and approved by the City in connection with the
issuance of the Card Club License. Neither Agency nor Agency's Executive
Director shall have any duty or obligation to review, evaluate, or direct the
security of the Hotel and Entertainment Center operation, it being the intent
hereof that Redeveloper shall be solely responsible for providing all necessary
security. Redeveloper shall indemnify, hold harmless and defend Agency and City
against any and all loss, cost or obligation with respect to any claim that any
injury to person or property arising out of or in connection with the operation
of the Property was the result of or was aggravated by any lack of security or
defect in the security plan or the implementation thereof,except for matters
caused by the sole active negligence or to the extent of the wilful misconduct
of Agency or City.
<PAGE>

                                      -14-

(e) Redeveloper shall, at Redeveloper's expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders, covenants,
conditions, and restrictions of record, and requirements of any governmental
authority or the local Insurance Services Office in effect during the Term
hereof, regulating the Property, the improvements thereon, or Redeveloper's use
of the Property. Redeveloper shall keep and maintain in full force and effect,
and in good standing, all permits and licenses required from state and local
governmental authorities for operation of the Hotel and Entertainment Center
(including the Card Club), and termination of any permit or license shall be a
material breach hereof. If the Insurance Services Office or any other similar
body or any bureau, department or official of the state, county or city
government or any other governmental authority having jurisdiction requires that
any changes, modifications, replacements, alterations, or additional equipment
necessary to life safety be made or supplied in or to any portion of the
Property by reason of Redeveloper's use thereof, Redeveloper shall, at
Redeveloper's cost and expense, make and supply such changes, modifications,
replacements, alterations or additional equipment. Redeveloper shall not use nor
permit the use of the Property in any manner that will tend to create waste or a
nuisance.

(f) At present, the Property conforms to the Redevelopment Plan. This Lease is
conditioned upon, and Redeveloper shall at all times operate the Property, in
conformity with the Redevelopment Plan.

(g) Notwithstanding anything provided herein to the contrary, the parcels
identified as Parcels 2, 3 and 4 of Parcel Map 10784, recorded in Book 112,
Pages 96 and 97, of Parcel Maps, Official Records, Los Angeles County,
California, Parcels 1 and 2 of Parcel Map 8669, recorded in Book 87, Page 9, of
Parcel Maps, Official Records, Los Angeles County, California, and Parcels 2, 7,
and 11 of Parcel Map 7899, recorded in Book 79, Page 47-49, of Parcel Maps,
Official Records, shall be used by Redeveloper only for surface parking (unless
redesignated at the request of Redeveloper and approved by the Agency), and
Parcels 8 and 9 of Parcel Map No. 7899 shall be used by Redeveloper only for
purposes of expansion of the Card Club and/or for a Casino pursuant to an
approved plan of expansion, provided that such plan makes provision for, and
Redeveloper in fact provides, not less than 14 gross acres of surface parking on
the Property for the benefit of the Hotel and Entertainment Center and for no
other purpose whatsoever. The Agency shall not unreasonably withhold consent to
redesignation of the parcels for development of the expansion of the Card Club,
and no fee shall be charged for such redesignation except as may be necessary to
cover any of the Agency's reasonable expenses (including attorneys fees) in
effectuating such redesignation.

10. Physical Condition of the Property.
<PAGE>

                                      -15-

(a) "As-Is" Condition. Except as provided herein below to its contrary, Agency
disclaims any and all covenants or warranties respecting the condition of the
soil or subsoil or any other physical or environmental condition of the
Property. Redeveloper is purchasing and leasing the entire Property in their
"as-is" condition. Prior to the date set forth in the Schedule of Performance
attached hereto as Exhibit 3 (the "Schedule of Performance"), Redeveloper may,
at Redeveloper's expense, conduct examinations, soils tests or an environmental
site assessment on the Property (in connection with which Redeveloper shall
indemnify and hold Agency and the Property free and harmless from any and all
costs, expenses, liabilities and charges resulting from Redeveloper's entry onto
the Property). If the examination or soils tests reveal that the Property is not
suitable (or cannot be made suitable at reasonable cost) for construction of the
Initial Improvements thereon, Redeveloper may elect to cancel this DDA upon
written notice to Agency given within ten (10) days after Redeveloper's receipt
of the completed soils reports or environmental site assessments, but in any
event such notice shall be delivered to Agency no later than June 15, 1995.
Agency hereby assigns to Redeveloper any and all causes of action which it may
have against prior developers, builders, contractors, subcontractors or
suppliers of labor and/or materials to the Hotel Parcel and the Convention
Center Parcel for design and construction defects, negligent construction or
other causes of action of a similar nature resulting in damage to the Hotel
Parcel and/or the Convention Center Parcel, it being understood that (i) all
costs of any litigation (including attorneys' fees) shall be borne solely by
Redeveloper and (ii) the proceeds from any recovery with respect to such
litigation, after payment of the costs thereof (including attorneys' fees),
shall be credited against the cost of the Initial Improvement Costs, thus
reducing the Rent Reduction/Credit referred to in Section 6 hereof.

(b) Environmental Conditions of Property Prior to Commencement of
------------------------------------------------------------------
Lease. Agency shall be solely responsible for the costs of clean up or
remediation of any deposit or discharge of Hazardous Materials on or from the
Property which occurred prior to the Effective Date, and Agency shall indemnify,
hold harmless and defend Redeveloper against any and all loss, cost or
obligation with respect thereto (including attorneys fees and costs), provided,
however, that Agency shall not be liable to Redeveloper for any consequential
damages suffered by Redeveloper by reason of the existence of any Hazardous
Waste on the Property which existed prior to the Effective Date and which could
have reasonably been discovered by a competent environmental assessment of the
Property.
<PAGE>

                                      -16-

(c) Environmental Condition of the Property During Lease Term.
---------------------------------------------------------------
Redeveloper shall indemnify, protect, defend and hold harmless Agency from and
against any and all claims, liabilities, suits, losses, costs, expenses and
damages, including but not limited to attorneys' fees and costs, arising out of
any claim for loss or damage to any property, including the Property (including
both the Convention Center Parcel and the Leasehold Parcels), injuries to or
death of persons, or for the cost of cleaning up the Property, and removing
hazardous or toxic substances, materials and waste therefrom, by reason of
contamination or adverse effects on the environment, or by reason of any
statutes, ordinances, orders, rules or regulations of any governmental entity or
agency requiring the clean-up of the Property caused by or resulting from any
hazardous material, substance or waste introduced to the Property during the
Term of this Lease. The foregoing indemnity shall survive the expiration or
termination of this Lease, and the close of escrow in the event of Redeveloper's
exercise of the option to purchase the Leasehold Parcels set forth below.
However, Redeveloper shall not be liable on account of this indemnity if, prior
to the date set forth in the Schedule of Performance, Redeveloper elects to
terminate this Lease on account of Redeveloper's disapproval of the condition of
the Property as provided in Section 10(a) hereof. Moreover, upon the expiration
of this Lease, if Redeveloper has not purchased the Leasehold Parcels, then
Redeveloper shall not thereafter be liable on account of this indemnity as a
result of hazardous or toxic substances, materials, or waste that were located
on the Leasehold Parcels prior to the Effective Date, except to the extent such
hazardous or toxic substances, materials, or waste were deposited on the
Property prior to the Effective Date by Redeveloper or Redeveloper's agents,
officers, employees, contractors, sublessees, or assignees.

(d) Other Conditions of Property. Redeveloper, on behalf itself and its
successors, affiliates, partners, and assigns, hereby fully and entirely release
and discharge the City (as a third party beneficiary hereof) and Agency
(including the City's and Agency's servants, employees, agents, representatives,
successors, descendants, heirs, executors, administrators, assigns, and
attorneys), and of each of them alone, of and from any and all claims, causes of
action, or demands, liabilities, damages, and losses, of whatever nature,
anticipated or unanticipated, known or unknown, or in connection with, or in any
way related to, the Property, or for the physical condition of the Property or
any portion thereof, other than as provided hereinabove with respect to
Hazardous Wastes. This release constitutes an explicit waiver by Redeveloper of
each and all of the provisions of California Civil Code Section 1542, which
states as follows:

"A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor."
<PAGE>

                                      -17-

Redeveloper's Initials: _____________________________________________

Redeveloper hereby declares and represents that Redeveloper is effecting and
executing this release of the City and Agency after having read all of this
release and with full understanding of its meaning and effect and after having
received full legal advice as to Redeveloper's rights from an attorney.

11. Construction by Redeveloper.

(a) Approval of Financing. Within ninety (90) days after the Effective Date,
Redeveloper shall deliver to Agency, for Agency's approval, evidence of
Redeveloper's construction and take-out financing for the Initial Improvement
Costs for the Initial Improvements to be constructed or installed by Redeveloper
on the Property pursuant to this Section 11 including any plan of self
financing, which approval shall not be unreasonably withheld or delayed. In
order to enable Agency to evaluate Redeveloper's financing, Redeveloper shall
provide to Agency evidence of such financing including at a minimum
Redeveloper's proforma and line-item budget, a copy of a binding commitment
obtained by Redeveloper for a leasehold mortgage loan or loans financing, if
applicable, (together with any equity capital contribution of Redeveloper) the
hard and soft costs of constructing the Project, financial statements of
Redeveloper and the lender, and other evidence satisfactory to Agency of sources
of loans or capital, sufficient to demonstrate that Redeveloper has or will have
adequate funds to cover all development and construction costs of the entire
Project. The terms and conditions of such commitments, and the identity of the
construction lender itself, shall be subject to Agency's approval, which
approval shall not unreasonably be withheld, provided,however, that should the
lender be a bank, savings and loan association, insurance company or other
institutional lender, no approval of the identity of the lender or other source
of funds shall be required.

(b) Scope of Development. The Initial Improvements shall consist of the matters
described in the Scope of Development attached hereto as Exhibit 5. The Initial
Improvements shall include high quality landscaping as approved by Agency
pursuant to the terms hereof (including, but not limited to, the Conditions of
Construction set forth in Exhibit 4).
<PAGE>

                                      -18-

(c) Construction Schedule. Redeveloper shall diligently comply with all
performance dates, including dates for submitting and obtaining approvals for
plans and specifications, as set forth in the Schedule of Performance attached
hereto as Exhibit 3 and incorporated herein by this reference (the "Schedule of
Performance"). Redeveloper shall diligently seek approval of all plans and
specifications, and permits, required to construct the improvements described in
the Scope of Development.

(d) Anti-discrimination During Construction. Redeveloper, for itself and its
successors and assigns, agrees that it shall not discriminate against any
employee or applicant for employment because of age, sex, marital status, race,
handicap, color, religion, creed, ancestry, or national origin in the
construction of the improvements constituting the Property.

(e) Commencement of Construction.

(i) Redeveloper shall commence construction and installation of the Initial
Improvements, notwithstanding any other Section of this Lease to the contrary
(including but not limited to Section 32), within the time period set forth in
the Schedule of Performance.

(ii) When necessary for Redeveloper to commence construction of the Initial
Improvements, Redeveloper may use, sell, demolish, remove, or otherwise dispose
of any improvements existing on the Property at the commencement of the Term of
this Lease. Agency shall receive no compensation for such improvements other
than the performance of Redeveloper's covenants expressed in this Lease,
provided, however, that the proceeds from such disposition shall be credited
against the Initial Improvement Costs, for purposes of computing the Rent
Reduction/Credit under Section 6 hereof.

(iii) After commencement of construction, Redeveloper shall diligently prosecute
such construction to completion. Such construction shall comply with the
Conditions of Construction set forth in Exhibit 4 attached hereto and
incorporated herein by this reference. All work shall be performed in a good and
workmanlike manner, shall substantially comply with the plans and specifications
submitted to and approved by Agency and shall comply with all applicable
governmental licenses, permits, laws, ordinances and regulations.

(iv) No materials, equipment, fixtures, carpets, appliances, or any other part
of the Initial Improvements shall be purchased or installed under conditional
sales agreements, leases, or under other arrangements wherein the right is
reserved or accrues to anyone to remove or to repossess any such items. Agency
may, in the exercise of its good faith
<PAGE>

                                      -19-

business judgment, permit certain specialized equipment to be leased for the
Project but only with its prior written approval and, then, only upon
Redeveloper's execution and delivery of an assignment of the lease to Agency,
together with the original lease and the equipment lessor's written approval of
such assignment, in form satisfactory to Agency.

(f) Completion Of Construction. Construction of the Initial Improvements shall
be completed and the Hotel and Entertainment Center (including the Card Club)
ready for occupancy and open for business by the date set forth in the Schedule
of Performance; provided that the time for completion shall be extended for as
long as Redeveloper shall be prevented from completing the construction by
delays beyond Redeveloper's reasonable control, including but not limited to
flood, earthquake, fire, acts of God, war, epidemic and civil commotion;
provided, further, however, Redeveloper's failure to complete construction and
equipage of the Card Club and Hotel and to open the Hotel for business within
one year after Effective Date (subject to the term of any reasonable delay
caused by force majeure) shall, at Agency's election, trigger Agency's right to
terminate the Lease as provided herein; however, if this Lease is so terminated,
then Redeveloper shall be released from liability for rent under this Lease
accruing thereafter.

(g) Minor Field Changes. The parties acknowledge that it is common practice in
the construction industry to make minor changes during the course of
construction without substantially altering the plans and specifications
previously approved by Agency. On completion of the work, Redeveloper shall give
Agency notice of all changes in plans and specifications made during the course
of the work and shall, at the same time, supply Agency with "as built" drawings
accurately reflecting all such changes.
<PAGE>

                                      -20-

(h) Easements, Zoning and Other Restrictions.

(i) Easements and Dedications. In order to provide for the more orderly
development of the Property, it may be necessary that street, water, sewer,
drainage, gas, power line and other easements and dedications, and similar
rights be granted or dedicated over or within portions of the Property. Agency
shall, upon request of Redeveloper, join with Redeveloper in executing and
delivering such documents as may reasonably be necessary for the purpose of
granting such easements and dedications.

(ii) Zoning. If necessary or appropriate to the Project, Agency agrees, from
time to time upon request of Redeveloper, to execute such documents, petitions,
applications and authorizations as may reasonably be appropriate or required for
the purposes of obtaining conditional use permits, zoning and rezoning,
tentative and final map approval, precise plan approval, and similar government
approvals with respect to the Property or any part thereof. This paragraph shall
apply to Agency solely in its capacity as owner of the Property and shall not in
any way restrict or bind Agency acting in its governmental capacity.

(iii) Street Vacation. If requested by Redeveloper and if consistent with the
approved plan of development, Agency will apply for vacation of internal streets
within the Property, provided that such vacation does not result in the creation
of land locked parcels.

(iv) Expenses. In each of the foregoing instances, Agency shall be without
expense therefor. Redeveloper shall pay all costs and expenses thereof
(including reimbursement of normal application and processing fees and other
normal and necessary out-of-pocket costs) incurred by Agency.
<PAGE>

                                      -21-

(i) Ownership of Improvements. The Initial Improvements on the Property
constructed or installed by Redeveloper shall be owned by Redeveloper until the
expiration or sooner termination of the Term of this Lease; provided, however,
if Redeveloper exercises the option described in Section 30 hereof and purchases
the Property, then Redeveloper shall retain ownership of the Initial
Improvements (in addition to all other Improvements, furniture, fixtures, and
equipment) on the Property notwithstanding the termination of this Lease.
Redeveloper shall not, however, remove any improvements from the Property
(without Agency's prior written consent), nor waste, destroy or modify any
improvements on the Property, except as permitted by this Lease. Anything in
this Section 11(i) to the contrary notwithstanding, Redeveloper shall have the
right to demolish or remove existing improvements on the Property if necessary
or appropriate to permit development of the Property in accordance with the
approved plans. The parties covenant and agree for themselves and all persons
claiming under them that the improvements are real property. Upon expiration or
sooner termination of the Term of this Lease (other than by reason of
Redeveloper's exercise of its option to purchase under Section 30 hereof), all
improvements on the Property, and all furniture, fixtures and equipment used by
Redeveloper in operating the Property (including operation of the Hotel and
Entertainment Center) shall, without additional compensation to Redeveloper,
thereupon become Agency's property free and clear of all claims and encumbrances
to or against them by Redeveloper or any third person, unless within ninety (90)
days after such expiration or termination Agency requires that all or certain
improvements or property be removed by Redeveloper at Redeveloper's expense or
Redeveloper exercises the option described in Section 30 hereof and purchases
the Leasehold Parcels.

12. Certificate of Completion.
<PAGE>

                                      -22-

(a) After completion of construction, development, and installation by
Redeveloper of the Initial Improvements, Agency shall, promptly following
written request by Redeveloper therefor, furnish Redeveloper with a Certificate
of Completion, for such completed Initial Improvements. After issuance of a
Certificate of Completion for such completed Initial Improvements, any party
then owning or thereafter purchasing, leasing or otherwise acquiring any
interest in the Project shall not (because of such ownership, purchase, lease or
acquisition) incur any obligation or liability under this DDA as to such portion
of the Project, except that such party shall be bound by any covenants,
conditions or restrictions contained in this Lease, or other instruments
executed in accordance with the provisions of this Lease. Neither Agency nor any
other person, after recordation of a Certificate of Completion, shall have any
rights, remedies or controls that it would otherwise have or be entitled to
exercise as a result a breach of Redeveloper's construction obligations under
this Lease, except that said Certificate of Completion shall have no effect on
any other separate instrument signed by Redeveloper in favor of the City or
Agency, nor shall it have any effect on Redeveloper's obligations under the
environmental warranties and other indemnities provided herein, nor shall it
waive any obligations of Redeveloper included hereunder to survive issuance of a
Certificate of Completion.

(b) If Agency refuses or fails to furnish a Certificate of Completion after
written request from Redeveloper, Agency shall, within thirty (30) days after
the written request, provide Redeveloper with a written statement of the reasons
Agency refused or failed to furnish such Certificate of Completion. The
statement shall also contain Agency's opinion of the action Redeveloper must
take to obtain such Certificate of Completion. If the reason for such refusal is
confined to the immediate availability of specific items or material for
landscaping, and the estimated cost of completion does not exceed $250,000.00
and the particular item or matter is not essential to the operation of the
Property, then Agency will issue its Certificate of Completion upon the posting
by Redeveloper with Agency of a bond or other collateral satisfactory to Agency
in an amount equal to 125% of the reasonable cost of completing the work not yet
completed, but the posting of such bond shall not excuse Redeveloper from
obligation to complete the work, and Redeveloper shall not be entitled to any
Rental Credit for such work until it has, in fact, been completed.
<PAGE>

                                      -23-

(c) Such Certificate of Completion shall not constitute evidence of compliance
with or satisfaction of any obligation of Redeveloper to any holder of a
mortgage, trust other than with respect to Redeveloper's right to claim the Rent
Reduction/Credit for work actually completed. Such Certificate of Completion
shall not be construed as a notice of completion as described in California
Civil Code Section 3093.

13. Utilities and Services. Redeveloper shall make all arrangements for and pay
for all utilities and services furnished to or used by it or its licensees or
subtenants, including, without limitation, gas, electricity, water, telephone
service, communications, cable television, and trash collection, and for all
connection charges.

14. Maintenance.

(a) Throughout the Term, Redeveloper shall, at Redeveloper's sole cost and
expense, maintain the Property in safe and first class condition and repair
(ordinary wear and tear excepted) and in accordance with (i) all applicable
laws, rules, ordinances, orders and regulations of federal, state, county,
municipal, and other governmental agencies and bodies having or claiming
jurisdiction and all their respective departments, bureaus, and officials; (ii)
the insurance underwriting board or Insurance Services Office having
jurisdiction over the Property; and (iii) all insurance companies insuring all
or any part of the Property. Agency shall not have any responsibility to
maintain the Property whatsoever.

(b) Except as provided in Section 25 hereof, Redeveloper shall promptly and
diligently repair, restore, and replace as required to maintain or comply as
above, or to remedy all damage to or destruction of all or any part of the
Property. The completed work of maintenance, compliance, repair, restoration, or
replacement shall be equal in value, quality and use to the condition of the
Property before the event giving rise to the work. Agency's election to perform
any obligation of Redeveloper under this section on Redeveloper's failure or
refusal to do so shall not constitute a waiver of any right or remedy for
Redeveloper's default, and Redeveloper shall promptly reimburse, defend and
indemnify Agency against all liability, loss, cost and expense arising from such
election.

(c) Redeveloper waives the provisions of California Civil Code sections 1941 and
1942 with respect to Agency's obligations for tenantability of the Leasehold
Parcels and Redeveloper's right to make repairs and deduct the expenses of such
repairs from rent.
<PAGE>

                                      -24-

15. Alterations. Redeveloper shall not make any alterations or additions to the
Leasehold Parcels (other than interior, non-structural, non- systemic
alterations costing not more than $250,000 in any one instance) without the
prior written consent of Agency's executive director, which shall not be
unreasonably withheld. In constructing alterations or additions that exceed the
cost of $250,000, or which affect the exterior or structural portions or the
systems of the Leasehold Parcels, Redeveloper shall comply with (a) the
Conditions of Construction set forth in Exhibit 4 and (b) the provisions of
Section 11 hereof. If Redeveloper makes any alterations to the Leasehold Parcels
as provided in this Section, the alterations or additions shall not be commenced
until 20 days after Agency's executive director has received written notice from
Redeveloper stating the date the construction of the alterations or additions is
to commence so that Agency's executive director, on behalf of Agency, can post
and record an appropriate notice of nonresponsibility. The provisions of this
Section 15 shall not apply to the construction or installation of the Initial
Improvements.

16. Destruction.

(a) Partial Destruction; Restoration by Redeveloper. If less than fifty percent
(50%) of the floor area of the improvements on the Property are rendered
unusable by a casualty during the Term of this Lease and the proceeds of the
casualty insurance are sufficient to do so or, if Redeveloper has failed to
maintain the full amount of casualty insurance required by Section 17(c) hereof,
whether or not the proceeds of the insurance are sufficient, then Redeveloper
shall restore the Improvements on the Property to substantially the same
condition as they were in immediately before such damage or destruction, in
accordance with the original plans and specifications (except for changes as may
be required by changed building and safety codes). Such damage or destruction
shall not terminate this Lease. In reconstructing the improvements, Redeveloper
shall comply with (i) the Conditions of Construction set forth in Exhibit 4 and
(ii) the provisions of Section 11. In the event that, notwithstanding the fact
that Redeveloper has maintained the full amount of casualty insurance required,
the insurance proceeds are not adequate to fund the restoration of the Property,
then Redeveloper may terminate the Lease in the manner provided herein below
with respect to a destruction of more than 50% of the Property, as provided in
Section 16(b) hereinbelow.
<PAGE>

                                      -25-

(b) Major Damage or Destruction; Redeveloper's Right to Terminate.
------------------------------------------------------------------
If more than fifty percent (50%) of the floor area of the improvements on the
Property are rendered unusable by a casualty during the Term of this Lease, then
Redeveloper shall have the option of either repairing and reconstructing the
Property or of terminating this Lease. If Redeveloper elects to repair and
reconstruct, Redeveloper shall promptly do so and shall comply with (i) the
Conditions of Construction set forth in Exhibit 4 and (ii) the provisions of
Section 11. During the period of reconstruction, Redeveloper may continue to
conduct business from the Property from temporary facilities such as a tent or
temporary structures (subject to compliance with local building and safety codes
or other applicable municipal codes).

To exercise its right of termination, Redeveloper must comply with all of the
following conditions:

(i) Give Agency notice of termination within 30 days after the damage or
destruction, specifying the date of termination which shall be not less than 60
days nor more than 120 days after the date such notice of termination is given;

(ii) Prior to the termination date, cure any defaults on Redeveloper's part
under this Lease;

(iii) Continue to make all payments when due (including without limitation the
prorated portion of any annual Base Rent becoming due after Redeveloper has
given the notice of termination but prior to the date of termination), if any,
as required by the provisions of this Lease until the date of termination, if
Redeveloper continues to use the Property after the casualty but prior to the
date of termination;

(iv) Prior to the termination date, pay in full any outstanding indebtedness
incurred by Redeveloper and secured by an encumbrance or encumbrances on the
Property or any part thereof or an interest therein, or alternatively, deliver
to Agency the written consent of the holders of all such encumbrances to the
early termination of this Lease and extinguishment of their liens;

(v) Prior to the termination date, cause to be discharged all liens and
encumbrances encumbering the Property or Redeveloper's interest in the Leasehold
Parcels resulting from any act or omission of Redeveloper;

(vi) On or before the termination date, deliver possession of the Property to
Agency, quitclaim all right, title and interest in the Property to Agency and
cease to do business on the Property, and vacate the Property;
<PAGE>

                                      -26-

(vii) Prior to the termination date, effectively relinquish, assign, and deliver
to Agency Agency's share of insurance proceeds resulting from the casualty as
provided in subparagraph (d) below.

In the event of any such termination, any Base Rent paid in advance for such
Lease Year, if any, shall be pro-rated through the date the Lease is terminated.
If Redeveloper does not either (i) terminate the Lease as provided herein, or
(ii) restore the Property in a timely fashion, then the Redeveloper shall be in
breach hereof.

(c) No Abatement or Reduction of Rent. In case of any damage or destruction
where this Lease is not terminated, there shall be no abatement or reduction of
rent except to the extent such rent is paid through a rental continuation policy
or rider.

(d) Insurance Proceeds.

(i) If Redeveloper is obligated or elects to restore the Property pursuant to
this Section, the proceeds of any insurance maintained under this Lease or
pursuant to the deed of trust (other than rental continuation insurance) shall
be made available to Redeveloper for payment of costs and expenses of repair. If
the insurance proceeds are insufficient to cover the cost of repair, then
Redeveloper shall deposit the amount of the deficiency with Agency or shall
otherwise provide assurances to Agency's reasonable satisfaction that such funds
are and will be available, and such funds shall be disbursed by Redeveloper
first, and the balance of the construction costs shall be disbursed from the
insurance proceeds by Agency.

(ii) In the event that the Lease is terminated by reason of the destruction of
all or some part of the improvements on the Property, then the casualty
insurance proceeds shall be divided between Agency and Redeveloper as follows:

(A) Redeveloper shall receive the portion of the casualty insurance proceeds
which bears the same relationship to the total casualty insurance proceeds as
the value of the Initial Improvements not amortized through the Rent
Reduction/Credit bears to the value of all of the improvements on the Property,
both measured prior to the casualty loss.
<PAGE>

                                      -27-

(B) Any proceeds of fire and extended coverage insurance attributable to
improvements on the Expansion Parcel, or any improvements that were purchased by
Redeveloper, and that were constructed by Redeveloper at Redeveloper's cost and
expense shall be retained by Redeveloper, except and to the extent of the
credit, if any, given to Redeveloper by Agency on account of such improvements.

(C) Agency shall receive the balance of the casualty insurance proceeds.

Anything herein to the contrary notwithstanding, Agency alone shall be entitled
to any rent continuation insurance proceeds. In the event that Redeveloper
exercises its option to purchase under Section 30 hereof and, in fact,
consummates such purchase, Redeveloper shall be entitled to all of the casualty
insurance proceeds.

(e) Lease to Govern Redeveloper's Rights. Redeveloper waives the provisions of
Civil Code (S)1932(2) and Civil Code (S)1933(4), or any successor statutes, with
respect to any destruction of the Leasehold Parcels, and agrees that
Redeveloper's rights in case of destruction shall be governed solely by the
provisions of this Lease. The provisions of this Lease shall also govern the
Redeveloper's obligations with respect to insurance and restoration of casualty
losses under the deed of trust.

17. Insurance and Indemnity.

(a) Liability Insurance.
<PAGE>

                                      -28-

(i) Redeveloper shall procure at its sole cost and expense, and keep in effect
from the date of this Lease and at all times until the end of the Term,
Commercial General Public Liability Insurance applying to the use and occupancy
of the Property, or any part thereof, and the business operated by Redeveloper,
its sublessees, licensees, employees, agents, or any other occupant, on the
Property. Such insurance shall include Broad Form Contractual liability
insurance coverage insuring all of Redeveloper's indemnity obligations under
this Lease. Such coverage shall have a minimum combined single limit of
liability or the equivalent thereof of at least Five Million Dollars
($5,000,000). Redeveloper's public liability insurance shall include dram shop
liability insurance or liquor liability insurance. All of Redeveloper's public
liability insurance policies shall be written to apply to all bodily injury,
property damage, personal injury and other covered loss, however occasioned,
occurring during the policy term, shall be endorsed to provide that such
coverage shall be primary and that any insurance maintained by Agency shall be
excess insurance only. Such coverage shall also contain endorsements: (i)
deleting any employee exclusion on personal injury coverage; (ii) deleting any
liquor liability exclusion; and (iii) providing for coverage of employer's
automobile non-ownership liability. All such insurance shall provide for
severability of interests or a cross-liability endorsement; shall provide that
an act or omission of one of the named insureds shall not reduce or avoid
coverage to the other named insureds; and shall afford coverage for all claims
based on acts, omissions, injury and damage, which claims occurred or arose (or
the onset of which occurred or arose) in whole or in part during the policy
period. The policy shall be endorsed to waive the insurer's rights of
subrogation against Agency.

(b) Workers' Compensation Insurance. Redeveloper shall also maintain Workers'
Compensation insurance in accordance with California law, and an employer's
liability insurance endorsement with customary limits. The policy shall be
endorsed with a waiver of subrogation clause for Agency and the City and their
members, council members, officers, employees, and agents.

(c) Property Insurance.
<PAGE>

                                      -29-

(i) Redeveloper shall at Redeveloper's expense obtain and keep in force during
the Term of this Lease a policy of Broad Form (fire and extended coverage)
insurance covering loss or damage to the Property (including the Improvements),
and all furniture, fixtures, equipment, and other personal property of
Redeveloper, in the amount of the Full Replacement Cost Value thereof, as the
same may exist from time to time, against all perils included within the
classification of fire, extended coverage, builder's risk, vandalism, malicious
mischief, and special extended perils ("Special Form," as that term is known in
the insurance industry). Agency and Redeveloper shall be named as the loss
payees on such policy, and any such coverage for the Convention Center Parcel
shall include a Lender's Loss Payable endorsement in favor of Agency, but
Agency's rights shall be subject to the provisions of this Lease. If such
insurance coverage has a deductible clause, the deductible amount shall not
exceed $100,000 per occurrence, and Redeveloper shall be liable for such
deductible amount. Redeveloper shall, in addition, obtain and keep in force
during the Term of this Lease a policy of rental interruption insurance covering
a period of one year, with loss payable to Agency, which insurance shall also
cover all Base Rent, Taxes and insurance premiums for said period.

(ii) The "Full Replacement Cost Value" of the property to be insured under this
Section shall be determined by Redeveloper subject to Redeveloper's exercise of
its reasonable discretion. Not more frequently than once every three (3) years,
either party shall have the right to notify the other party that it elects to
have the Full Replacement Cost Value redetermined by an independent party. The
determination and redeterminations shall be made promptly and in accordance with
the rules and practices of the Insurance Services Office, or a like board
recognized and generally accepted in the industry, and each party shall be
promptly notified of the results by the party making the determination. The
insurance policy shall be adjusted according to the redetermination.

(d) Insurance Policies.

(i) Not more frequently than once every three (3) years, if in the reasonable
opinion of Agency the amount or type of any insurance at that time is not
adequate, Redeveloper shall either acquire or increase the insurance coverage as
reasonably required by Agency.
<PAGE>

                                      -30-

(ii) All insurance required under this Lease shall be issued by companies having
a Best's rating of B++vi or better and otherwise reasonably satisfactory to
Agency. Redeveloper shall deliver to Agency copies of policies of such insurance
or certificates evidencing the existence and amounts of such insurance with loss
payable clauses as required by this Section 28. No such policy shall be
cancelable or subject to reduction of coverage or other modification except
after thirty (30) days' prior written notice to Agency. Redeveloper shall, at
least thirty (30) days prior to the expiration of such policies, furnish Agency
with renewals or "binders" thereof. Redeveloper shall not do or permit to be
done anything which shall invalidate the insurance policies referred to in this
Section 28. All policies of insurance shall name Agency and the City and their
members, council members, officers, employees and agents, and any additional
parties designated by Agency, as additional insureds (except to the extent
Agency is the loss payee or a Lenders Loss Payable endorsee).

(iii) Redeveloper shall not use the Property in any manner, even if the use is
for the purposes permitted herein, that will result in the cancellation of any
insurance required under this Lease. Redeveloper further agrees not to keep on
the Property or permit to be kept, used, or sold thereon, anything prohibited by
any fire or other insurance policy covering the Property.

(iv) If Redeveloper shall fail to obtain any insurance required under this
Lease, Agency may, at its election, obtain such insurance and Redeveloper shall,
as additional rent, reimburse Agency for the cost thereof plus a handling charge
equal to Agency's costs in obtaining such insurance including but not limited to
staff salaries and overhead, within five (5) days following demand therefor. If
Redeveloper fails or refuses to maintain insurance as required hereunder, or
fails to provide the proof of insurance, or fails to reimburse Agency for all
costs of insurance including the handling charges, Agency shall have the right
to declare this Lease in default without further notice to Redeveloper, and
Agency shall be entitled to exercise all legal remedies for breach of this
Lease.

(v) All insurance required to be provided hereunder is in addition to, and not
in lieu of, the indemnity provisions of Sections 17(f) and 17(g) hereof. The
procuring of such required policies of insurance shall not be construed to limit
Redeveloper's liability hereunder, nor to fulfill the indemnification provisions
and requirements of this Lease.
<PAGE>

                                      -31-

(vi) Redeveloper shall maintain the insurance described herein from and after
the earlier of (A) the close of escrow for the Convention Center Parcel or (B)
the date Redeveloper accepts possession of any Parcel, through and until the
expiration or sooner termination hereof.

(e) Waiver of Subrogation. Redeveloper and Agency each hereby release and
relieve each other and the City, and waive their entire right of recovery
against the other and the City for loss or damage arising out of or incident to
the perils insured against under Section 17(c), which perils occur in, on or
about the Property, whether due to the negligence of Agency, the City or
Redeveloper or their agents, employees, contractors and/or invitees. Redeveloper
shall, upon obtaining the policies of insurance required hereunder, give notice
to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease and obtain the insurance carrier's
consent thereto.
<PAGE>

                                      -32-

(f) Indemnity. Redeveloper shall indemnify, defend, protect, and hold harmless
Agency and the City (and Agency's and the City's members, employees, agents and
contractors) from and against any and all claims, losses, proceedings, damages,
causes of action, liability, costs and expenses (including reasonable attorneys'
fees), arising from or in connection with, or caused by (i) any act, omission or
negligence of Redeveloper or any sublessee of Redeveloper, or their respective
contractors, licensees, invitees, agents, servants or employees, wheresoever on
or adjacent to the Property the same may occur; (ii) any use of the Property, or
any accident, injury, death or damage to any person or property occurring in, on
or about the Property, or any part thereof, or from the conduct of Redeveloper's
business or from any activity, work or thing done, permitted or suffered by
Redeveloper or its sublessees, contractors, employees, or invitees, in or about
the Property (other than to the extent arising as a result of Agency's or the
City's sole active negligence or to the extent of any wilful misconduct of the
Agency or the City, but excluding any matter with respect to which Agency or
City has or enjoys the benefit of sovereign immunity); and (iii) any breach or
default in the performance of any obligations on Redeveloper's part to be
performed under the terms of this Lease, or arising from any negligence of
Redeveloper, or any such claim or any action or proceeding brought thereon; and
in case any action or proceeding be brought against Agency or the City (or
Agency's or the City's agents, members, employees, agents and contractors) by
reason of any such claim, Redeveloper upon notice from Agency shall defend the
same at Redeveloper's expense by counsel satisfactory to Agency. Redeveloper, as
a material part of the consideration to Agency, hereby assumes all risk of
damage to property or injury to persons in, upon or about the Property arising
from any cause other than Agency's gross negligence or intentional acts, and
Redeveloper hereby waives all claims in respect thereof against Agency. These
provisions are in addition to, and not in lieu of, the insurance required under
this Section 17.

Agency shall indemnify, defend, protect, and hold harmless Redeveloper from and
against any and all claims, losses, proceedings, damages, causes of action,
liability, costs and expenses (including attorneys' fees), arising from or in
connection with, or caused by (i) any matter arising prior to the Effective Date
(except when arising as a result of any inspection, investigation, entry or
other activity of Redeveloper on the Property), or (ii) any litigation arising
as the result of or in connection with a purported prior sale of the Property.
<PAGE>

                                      -33-

(g) Exemption of Agency from Liability. Except as provided to the contrary in
Section 10(b) hereof, Redeveloper hereby assumes all risks and liabilities of a
landowner in the possession, use or operation of the Property. Redeveloper
hereby agrees that, Agency shall not be liable for injury to Redeveloper's
business or any loss of income therefrom or for damage to the goods, wares,
merchandise or other property of Redeveloper, Redeveloper's employees, invitees,
customers, contractors, workers, or any other person in or about the Property,
including any liability arising from the physical condition of the Property or
the presence of any hazardous or toxic materials or substances on the Property,
nor shall Agency be liable for injury to the person of Redeveloper,
Redeveloper's employees, agents or contractors, whether such damage or injury is
caused by or results from hazardous or toxic materials or substances, fire,
steam, electricity, gas, water, or rain, or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures, or from any other cause, whether the said
damage or injury results from conditions arising upon the Property or from other
sources or places and regardless of whether the cause of such damage or injury
or the means of repairing the same is inaccessible to Redeveloper.

18. Condemnation.

(a) Definitions.

(i) "Condemnation" means (A) the exercise of any governmental power, whether by
legal proceedings or otherwise, by a Condemnor and (B) a voluntary sale or
transfer by Agency to any Condemnor, either under threat of condemnation or
while legal proceedings for condemnation are pending.

(ii) "Date of Taking" means the date the Condemnor has the right to possession
of the property being condemned.

(iii) "Award" means all compensation, sums, or anything of value awarded, paid,
or received on a total or partial condemnation.

(iv) "Condemnor" means any public or quasi-public authority, or private
corporation or individual, having the power of condemnation or eminent domain.
<PAGE>

                                      -34-

(b) Rights and Obligations Governed by Lease. If during the Term there is any
taking of all or any part of the Property (including the Convention Center
Parcel) or any interest in this Lease by Condemnation, the rights and
obligations of the parties shall be determined pursuant to this Section. Each
party waives the provisions of California Code of Civil Procedure Section
1265.130 allowing either party to petition the Superior Court to terminate this
Lease in the event of a partial taking of the Property.

(c) Total Taking. If the Property is totally taken by Condemnation, this Lease
shall terminate on the Date of Taking. In the event of any such termination, any
Base Rent paid in advance shall be pro-rated through the date the Lease is
terminated.

(d) Partial Taking. If any portion less than all of the Property is taken by
Condemnation, this Lease shall remain in effect, except that Redeveloper can
elect to terminate this Lease if the portion of the Property not so taken cannot
be so repaired or reconstructed, taking into consideration the amount of the
award available for repair, so as to be suitable for Redeveloper's continued use
of the Property for the same use as the Property is being used immediately prior
to the taking and the remaining premises would not be economically feasibly
usable by Redeveloper. If Redeveloper elects to terminate this Lease,
Redeveloper must exercise its right to terminate by giving notice to Agency
within 90 days after the nature and the extent of the taking have been finally
determined. If Redeveloper elects to terminate this Lease, Redeveloper also
shall notify Agency of the date of termination, which date shall not be later
than 180 days after Redeveloper has notified Agency of its election to
terminate; except that this Lease shall terminate on the Date of Taking if the
Date of Taking falls on a date before the date of termination as designated by
Redeveloper. If Redeveloper does not terminate this Lease within the ninety-day
period, this Lease shall continue in full force and effect.

(e) Restoration of Property. If there is a partial taking of the Property and
this Lease remains in full force and effect and pursuant to Section 18(d),
Redeveloper shall accomplish all necessary restoration.
<PAGE>

                                      -35-

(f) Temporary Taking. On any taking of the temporary use of all or any part or
parts of the Property for a period, or of any estate less than a fee, ending on
or before the expiration date of the Term, the Term shall not be reduced,
extended, or affected in any way, and Redeveloper shall be entitled to any Award
for the use or estate taken. If a result of the taking is to necessitate
expenditures for changes, repairs, alterations, modifications, or reconstruction
of the improvements, Redeveloper shall accomplish all necessary changes,
repairs, alterations, modifications, or reconstruction of the improvements at
Redeveloper's sole cost and expense in accordance with Section 11 hereof. If any
such taking is for a period extending beyond the expiration date of the Term,
the taking shall be treated under the foregoing provisions for total and partial
takings, depending upon whether the temporary taking is of all or only a part of
the Property.

(g) Effect on Rent. If any portion of the Property is taken by Condemnation and
this Lease remains in full force and effect, there shall be no effect on or
reduction of the Base Rent or other rent payable hereunder unless such
Condemnation materially affects Redeveloper's ability to conduct business from
the Property, in which case Base Rent shall be adjusted in a reasonable
proportion reflecting the impact on Redeveloper's business by such Condemnation.
<PAGE>

                                      -36-

(h) Application of Award. Any award for any entire taking shall be apportioned
between Agency and Redeveloper as their interests may appear. In the event of a
partial taking, any part of the award attributable to improvements shall be
divided between the parties in the manner provided in Section 16(d)(ii) hereof,
and, in consideration of the abatement of rent, any part of the award
attributable to land shall be paid to Agency; provided, however, that nothing
contained herein shall be deemed to give Agency any interest in or require
Redeveloper to assign to Agency any award made to Redeveloper for the
unamortized value of any improvements or furniture, fixtures, or equipment or
other personal property on the Property constructed or provided by Redeveloper
at Redeveloper's sole cost and expense in accordance with this Lease (amortized
on a straight line basis over the period in which the cost of such improvements
or furniture, fixtures or equipment or personal property are credited to Base
Rent), taking of personal property and fixtures belonging to Redeveloper and
removable by Redeveloper at the expiration of the Term hereof (except to the
extent Redeveloper has received a rent credit therefor), as provided hereunder,
or for the interruption of, or damage to, Redeveloper's business or for
relocation expenses recoverable against the condemning authority, or in the
event of a partial taking, the cost of restoring the Property to a usable
condition. Anything herein to the contrary notwithstanding, in the event of a
termination of the Lease by reason of any such taking, Agency shall be relieved
of any obligation to repay to Redeveloper the initial purchase price of the
Convention Center Parcel, it being understood and agreed by the parties that
Redeveloper's rights shall be limited to the allocation of the award or
settlement in lieu thereof.

(i) Waiver of Right to Take By Eminent Domain. Agency hereby waives its right to
acquire the Property or any material part thereof by exercise of the power of
eminent domain, for the five year period from and after the Effective Date, and
any time after the opening of the Card Club for business.

19. Assignment, Subletting and Encumbering.
<PAGE>

                                      -37-

(a) Prohibition Against Voluntary Assignment, Subletting, and
--------------------------------------------------------------
Encumbering. Except as provided in this Section to the contrary, Redeveloper
shall not, without Agency's prior written consent, voluntarily assign or
encumber Redeveloper's interest in this Lease or in the Leasehold Parcels, or
sublease substantially all or any part of the Leasehold Parcels, or allow any
other person or entity (except Redeveloper's authorized representatives) to
occupy or use all or any part of the Property. For the purposes hereof, an
"encumbrance" shall mean mortgage, deed of trust, land sale contract, lease or
other financing device. Any attempted assignment, encumbrance, or sublease shall
be voidable by Agency and, at Agency's election, shall constitute a default
hereunder. No consent to any assignment, encumbrance, or sublease shall
constitute a further waiver of the provisions of this Section. Any sale or
transfer of the Convention Center Parcel other than as permitted hereunder shall
void the Agency's obligation to repurchase the Convention Center Parcel upon
termination of the Lease but not its right to do so at its option.

(b) Special Exceptions. Anything in Section 19(a) to the contrary
notwithstanding, Agency hereby acknowledges that:

(i) Redeveloper intends, immediately upon the commencement of the Term of the
Lease, to convey the Convention Center Parcel and assign this Lease to Hollywood
Park, Inc., and Hollywood Park, Inc., intends to let the operation of the Card
Club to Compton Entertainment Inc., or a third party. Subject to Hollywood Park,
Inc., assuming all obligations under this Lease, Agency hereby consents to said
conveyance and assignment of this Lease and agrees that the original Redeveloper
shall thereupon be relieved of all obligations hereunder other than those
obligations which accrued prior to the date of the assignment, and other than
those obligations specifically not assumed by Hollywood Park, Inc.

(ii) At such time as Hollywood Park, Inc. qualifies to hold a gaming license, it
intends to convey the Convention Center Parcel and assign this Lease to a joint
venture composed of itself and CEI, and CEI intends to assign its rights under
the lease of the Card Club and the City of Compton Gaming License to said joint
venture. Provided that Hollywood Park, Inc., then holds a majority in interest
in equity ownership and managerial control of the joint venture, Agency hereby
consents to said conveyance and assignments.

(iii) Nothing herein shall be deemed to waive Agency's rights under
Section 19(a) with respect to any other or additional assignments or
sublettings, whether of a similar or dissimilar nature.
<PAGE>

                                      -38-

(iv) The Agency shall not unreasonably withhold its consent to a sublease of the
Hotel. No consent by the Agency to any sublease or assignment shall operate to
release the Redeveloper or any assignee from any of obligations hereunder
undertaken by Redeveloper or assumed by such assignee, except as provided in
Section to the contrary.

(c) Right to Sublease Restaurant, Bar, Night Club, and Parking Area.
---------------------------------------------------------------------
Notwithstanding the provisions of Section 19(a) hereof, Redeveloper shall have
the right, without Agency's consent, to lease or sublease discrete portions of
the Property, such as a restaurant, bar, nightclub, and parking areas, to an
operator, provided that Redeveloper shall provide to Agency thirty (30) days
prior written notice of the name of the sublessee and the name of the operator
of the restaurant, bar or nightclub.

Redeveloper shall not sublease or otherwise assign this DDA or the right to
operate the Card Club area to any person or entity that has not qualified under
Municipal Code 9-10 with respect to obtaining a license to operate a card club.

(d) Corporate Reorganization. Any dissolution, merger, consolidation, or other
reorganization of Redeveloper, or the sale or other transfer of a controlling
percentage of the capital stock of Redeveloper, shall be deemed a voluntary
assignment hereof. The phase "controlling percentage" means the ownership of, or
the right to vote, stock possessing 50% or more of the total combined voting
power of all classes of Redeveloper's capital stock issued, outstanding, and
entitled to vote for the election of directors. As to any issuance or transfer
of shares whatsoever, Redeveloper shall promptly notify the Agency of (i) the
number of shares issued or transferred, (ii) the name of the recipient or
transferee of such shares, and (iii) the number of all shares of Redeveloper
then issued and outstanding, and the percentage of all shares so transferred or
changed. In the event a corporation whose stock is publicly traded shall become
a successor in interest to Redeveloper, then this preceding sentence shall apply
only to a transfer of 5% more of the voting securities of such corporation. If
Redeveloper changes to a partnership, the foregoing provisions shall similarly
apply to partnership interests so transferred or created.

(e) Encumbrance or Assignment as Security.
<PAGE>

                                      -39-

(i) Notwithstanding any other provision contained in this Lease, Redeveloper
shall have the right to encumber or assign Redeveloper's interest in the
Convention Center Parcel and in this Lease to any bank, savings and loan,
insurance company, or other institutional lender for the purpose of financing
the construction of the Initial Improvements or for purposes of expansion on the
Property and for the purpose of providing a take-out loan (in a principal amount
not to exceed the actual total cost of constructing such Initial Improvements or
of constructing the expansion facilities), provided only that upon execution of
such encumbrance (or any amendment, supplement or modification thereto) a true
copy of such instrument and the obligation secured thereby be promptly delivered
to Agency together with a written notice of the name and mailing address of the
lender, the date and place of recording or filing of record thereof and
recorder's instrument number, book and page reference or other recorder's index
reference. Until such true copies and notice are delivered to Agency any such
instrument shall have no force or effect whatsoever on the enforcement by Agency
of any provisions of this Lease or any rights or remedies hereunder. During the
existence of a permitted encumbrance and following delivery thereof there shall
be no cancellation, surrender, acceptance of surrender or modification of this
Lease except (i) by a written instrument executed by Agency, Redeveloper and the
lender, (ii) by reason of Redeveloper's exercise of the option provided for in
Section 30 hereof, or (iii) default under the Lease that is not timely cured by
Redeveloper or the lender. Lessor's interest in this Lease shall at all times
remain senior and superior to the lien of any deed of trust or mortgage securing
any such loan, and any such deed of trust or mortgage shall be subject to
Agency's right to reacquire the Convention Center Parcel upon termination of the
Lease, as hereinbefore provided.

(ii) All financing described in the preceding paragraph shall provide that
Agency shall have the right but not the obligation to assume Redeveloper's
financing for any improvement of the Property. Redeveloper shall cause the
lender to execute all documentation necessary to facilitate this right. Agency's
exercise of this right shall not constitute a waiver of any other right Agency
may have against Redeveloper.

20. Default.

(a) Redeveloper's Default. The occurrence of any of the following shall
constitute a default by Redeveloper:
<PAGE>

                                      -40-

(i) Failure to pay rent or any other payment required to be made by Redeveloper
hereunder as and when due and the continuation of such failure to pay rent for
ten (10) days after delivery by Agency to Redeveloper of written of such failure
(in which event a Notice to Pay Rent or Quit provided in accordance with Code of
Civil Procedure Section 1161 (or any successor statute) shall constitute the
notice required for this purpose).

(ii) Failure to pay any Taxes which Redeveloper is obligated to pay, other than
possessory interest taxes to be paid by Agency pursuant to Section 8(a) hereof,
on a timely basis, or the failure to provide any insurance required hereunder,
and the continuation of such failure for ten (10) days after delivery by Agency
of written of such failure to Redeveloper (in which event a notice provided in
accordance with Code of Civil Procedure Section 1161 (or any successor statute)
shall constitute the notice required for this purpose).

(iii) Abandonment or surrender of the Property or the leasehold estate by
Redeveloper.

(iv) Cessation in a material fashion of either the Hotel or Card Club business
for thirty (30) consecutive days. As used herein, cessation of operation of the
Hotel shall mean the failure to operate the main floor and at least one floor of
guest rooms, including service to said rooms. Said thirty (30) day period shall
be subject to Section 32 hereof and shall not include any reasonably necessary
periods of closure for repair or remodeling.

(v) Failure to comply timely with the obligations set forth in the Schedule of
Performance attached hereto as Exhibit 3, and the continuation of such failure
or the failure to commence performance and diligently pursue the same to
completion for thirty (30) days after receipt of written notice thereof from
Agency.

(vi) Failure to perform any other covenant or provision of this Lease, if the
failure to perform is not cured within thirty (30) days after written notice. If
the failure to perform cannot reasonably be cured within thirty (30) days,
Redeveloper shall not be in default of this Lease if Redeveloper commences to
cure the failure to perform within the thirty (30) day period and thereafter
diligently and in good faith prosecutes the cure to completion.

(vii) The subjection of any right or interest to attachment, execution, or other
levy, or to seizure under legal process, if not released within ninety (90) days
after such levy.
<PAGE>

                                      -41-

(viii) An assignment by Redeveloper for the benefit of creditors or the filing
of a voluntary or involuntary petition by or against Redeveloper under any law
for the purpose of adjudicating Redeveloper a bankrupt; or for extending time
for payment, adjustment, or satisfaction of Redeveloper's liabilities; or for
reorganization, dissolution, or arrangement on account of or to prevent
bankruptcy or insolvency; unless the assignment or proceeding, and all
consequent orders, adjudications, custodies, and supervisions are dismissed,
vacated, or otherwise permanently stayed or terminated within ninety (90) days
after the assignment, filing, or other initial event.

(ix) The appointment of a receiver, unless such receivership is terminated
within ninety (90) days after the appointment of the receiver, to take
possession of Redeveloper's interest in the Property or of Redeveloper's
interest in the leasehold estate or of Redeveloper's operations on the Property
for any reason, including but not limited to, assignment for benefit of
creditors or voluntary or involuntary bankruptcy proceedings, but not including
receivership (A) pursuant to a permitted first leasehold encumbrance, or (B)
instituted by Agency, the event of default being not the appointment of a
receiver at Agency's instance but the event justifying the receivership, or (C)
commenced pursuant to any license dispute.

(x) Failure to pay when due any license fee for the Card Club License as
required by Section 9-10 of the Compton Municipal Code, or any additional sums
set forth in the City's Resolution No. 17,087, as amended, and the continuation
of such failure to pay such fee or sums for ten (10) days after delivery by the
City of Compton or Agency to Redeveloper of written notice of such failure.
<PAGE>

                                      -42-

(xi) Termination, annulment, cancellation, revocation, repeal, or rescission of
any of Redeveloper's licenses or permits to operate a Card Club from the
Project, or any other failure of Redeveloper to keep in full force and effect
any license or permit required to operate the Card Club from the Project, and
the expiration of all appeals thereof or the expiration of the time period for
applying for an appeal or other procedure to reinstate the license or permit
pursuant to the terms of any applicable ordinances, statutes, or regulations and
the entry of a fraud judgment, supporting such termination, punishment,
cancellation, revocation, etc., of such licenses if judicially reviewed;
provided, however, notwithstanding the foregoing, if the reason for the
termination, annulment, cancellation, revocation, repeal, or rescission is
Redeveloper's failure to pay any fees to the City of Compton or the State of
California as and when due, then Redeveloper shall be in default hereunder if
such fees are not paid within sixty (60) days after their due date. Anything
herein to the contrary notwithstanding, in this event that the then Redeveloper
is not also the operator of the Card Club, the Redeveloper shall have ninety
(90) days within which to substitute an approved operator for the Card Club,
provided that the Agency shall extend such period for a reasonable time upon a
creditable showing that the reason for delay is a matter not within the control
of Redeveloper or its successor in interest.

(b) Security for Performance of Redeveloper's Duties. As additional collateral
security for Redeveloper's performance of its obligations under this Lease,
Redeveloper shall execute and deliver to Agency:

(i) As provided in Section 1(d)(iii) hereof, a first deed of trust and fixture
filing encumbering the Convention Center Parcel, all improvements thereon, and
all rights attendant thereto.

(ii) A security agreement and a Financing Statement (UCC 1) covering all
furniture, fixtures and equipment and other personal property installed on or
used in connection with the Convention Center Parcel and any and all
replacements therefor or additions thereto.

(iii) A security agreement and a Financing Statement (UCC 1) covering all
furniture, fixtures and equipment and other personal property installed on or
used in connection with the Leasehold Parcels and any and all replacements
therefor or additions thereto.
<PAGE>

                                      -43-

Redeveloper, or its successors in interest, shall, at the request of Agency,
execute any additional financing statements or continuation statements required
to perfect and maintain the lien of such security agreements on the personalty
so encumbered, including any replacements therefor or additions thereto, whether
or not the filing period for any such continuation statement may have expired.

(c) Remedies.

(i) Cumulative Nature of Remedies. If any default by Redeveloper shall continue
uncured, following notice of default as required by this Lease, for the period,
if any, applicable to the default under the applicable provision of this Lease,
Agency shall have the remedies described in this subsection (c) in addition to
all other rights and remedies provided by the security instruments referred to
in subsection (b) above or otherwise provided by law or equity, to which Agency
may resort cumulatively or in the alternative.

(ii) Termination for Breach. Agency may at Agency's election terminate this
Lease for breach by giving Redeveloper written notice of termination. In the
event Agency terminates this Lease, Agency may recover possession of the
Property (which Redeveloper shall surrender and vacate upon demand) and remove
all persons and property therefrom, and Agency shall be entitled to recover as
damages all of the following:

(A) The worth at the time of the award of any unpaid rent or other charges which
have been earned at the time of termination;

(B) The worth at the time of the award of the amount by which the unpaid rent
and other charges which would have been earned after termination until the time
of the award exceeds the amount of the loss of such rental or other charges that
Redeveloper proves could have been reasonably avoided;

(C) The worth at the time of the award of the amount by which the unpaid rent
and other charges for the balance of the term after the time of the award
exceeds the amount of the loss of such rental and other charges that Redeveloper
proves could have been reasonably avoided; and

(D) Any other amount necessary to compensate Agency for the detriment
proximately caused by Redeveloper's failure to perform its obligations under
this Lease or which in the ordinary course of things would be likely to result
therefrom.
<PAGE>

                                      -44-

As used in subsections (A) and (B) above, the "worth at the time of the award"
shall be computed by allowing interest at the rate of 10 percent per annum. As
used in subsection (C) above, the "worth at the time of the award" shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of the award, plus one percent.

(iii) Continuation of the Lease. Even though Redeveloper has breached this Lease
and abandoned the Property, at Agency's option this Lease shall continue in
effect for so long as Agency does not terminate Redeveloper's right to
possession, and Agency may enforce all of its rights and remedies hereunder,
including the right to recover rent as it comes due under this Lease, and in
such event Agency will permit Redeveloper to sublet the Property or to assign
its interest in the Lease, or both, with the consent of Agency,which consent
will not unreasonably be withheld provided the proposed assignee or sublessee is
reasonably satisfactory to Agency as to credit and reputation and will occupy
the Property for the same purposes specified herein. For purposes of this
subsection, the following shall not constitute a termination of Redeveloper's
right to possession: (i) acts of maintenance or preservation or efforts to relet
the Property; or (ii) the appointment of a receiver under the initiative of
Agency to protect Agency's interest under this Lease.

(iv) Use of Redeveloper's Personal Property. In the event of termination of the
Lease for breach, Agency may at Agency's election use Redeveloper's personal
property and trade fixtures located on, about or appurtenant to the Property or
any of such property and fixtures without compensation and without liability for
use or damage, or store them for the account and at the cost of Redeveloper. The
election of one remedy for any one item shall not foreclose an election of any
other remedy for another item or for the same item at a later time.
<PAGE>

                                      -45-

(v) Assignment of Subrents. Redeveloper assigns to Agency all subrents and other
sums falling due from tenants, subtenants, licensees, and concessionaires
(herein collectively called "subtenants") during any period in which Agency has
the right under this Lease, whether exercised or not, to reenter the Property
for Redeveloper's default, and Redeveloper shall not have any right to such sums
during that period. This assignment is subject and subordinate to any and all
assignments of the same subrents and other sums to the lender under a permitted
first leasehold encumbrance. Agency may at Agency's election upon the breach
hereof by Redeveloper reenter the Property with or without process of law,
without terminating this Lease, and either or both collect these sums or bring
action for the recovery of the sums directly from such obligors. Agency shall
receive and collect all subrents and proceeds from reletting, applying them:
first, to the payment of reasonable expenses (including attorneys' fees or
brokers' commissions or both) paid or incurred by or on behalf of Agency in
recovering possession, placing the Property in good condition, and preparing or
altering the Property for reletting; second, to the reasonable expense of
securing new tenants or subtenants; third, to the fulfillment of Redeveloper's
covenants to the end of the Term; and fourth, to Agency's uses and purposes.
Redeveloper shall nevertheless pay to Agency on the due dates specified in this
Lease the equivalent of all sums required of Redeveloper under this Lease, plus
Agency's expenses, less the proceeds of the sums assigned and actually collected
under this provision.

(d) Late Charge. Redeveloper hereby acknowledges that late payment by
Redeveloper to Agency of rent and other charges due under this Lease will cause
Agency to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but are not
limited to processing and accounting charges, and late charges which may be
imposed on Agency by the terms of any mortgage or trust deed covering the
Property, or bond issues of Agency. Accordingly, if any installment of rent or
any other charge due from Redeveloper is not received by Agency or Agency's
designee within ten (10) days after such amount shall be due, then, at Agency's
election and upon Agency's demand, Redeveloper shall pay to Agency a late charge
equal to five percent (5%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs Agency
will incur by reason of the late payment by Redeveloper. No late charge may be
imposed more than once for the same late rental payment. Acceptance of such late
charge by Agency shall in no event constitute a waiver of Redeveloper's default
with respect to such overdue amount, nor prevent Agency from exercising any
other rights and remedies granted to it hereunder.

(e) Lender's Right to Cure Defaults.
<PAGE>

                                      -46-

(i) Notice of Default. Concurrently with giving notice of default to Redeveloper
under Section 20(a), above, Agency shall deliver a copy of such notice of
default to the lender under a permitted encumbrance at its address as furnished
to Agency in accordance with Section 19(e).

(ii) Lender's Right to Cure. During the continuance in effect of a permitted
encumbrance, Agency will not terminate this Lease because of any default on the
part of Redeveloper if the lender, within 30 days after Agency has sent a
written notice pursuant to Section 20(a):

(A) Cures such default, if the default can be cured by the payment of money, or,
if the default is not curable by the payment of money, commences or causes the
trustee under the encumbrance to commence, and thereafter diligently pursues to
completion proceedings to foreclose the encumbrance; and

(B) Keeps and performs all of the covenants and conditions of this Lease
requiring the payment or expenditure of money by Redeveloper until such time as
Redeveloper's leasehold interest is sold upon foreclosure pursuant to the
encumbrance, or transferred by an assignment in lieu of foreclosure.

(iii) Transfer by Lender. Notwithstanding the provisions of Section 19(a) hereof
restricting assignment of this Lease, this Lease may be assigned to the lender
by judicial or non-judicial foreclosure or by assignment in lieu of foreclosure
(without, however, releasing Redeveloper from any of its obligations hereunder)
without further consent of Agency or any assumption agreement by the lender, the
liability of the lender being limited to the period of its possession or
ownership of this Lease. No other or further assignment shall be made except in
accordance with the provisions of Section 19(a) of this Lease.

(f) Waiver of Rights. Redeveloper hereby waives any right of redemption or
relief from forfeiture under California Code of Civil Procedure Sections 1174 or
1179, or under any other present or future law, in the event Redeveloper is
evicted or Agency takes possession of the Property by reason of any default by
Redeveloper hereunder.
<PAGE>

                                      -47-

(g) Agency's Default. Agency shall not be deemed to be in default in the
performance of any obligation required to be performed by it hereunder unless
and until it has failed to perform such obligation within ninety (90) days after
written notice by Redeveloper to Agency specifying wherein Agency has failed to
perform such obligation; provided, however, that if the nature of Agency's
obligation is such that more than ninety (90) days are required for its
performance, then Agency shall not be deemed to be in default if it shall
commence such performance within such ninety (90) day period and thereafter
diligently and in good faith prosecute the cure to completion.

21. Agency's Entry on Property. Agency and its authorized representatives shall
have the right to enter the Property at all reasonable times upon reasonable
notice to Redeveloper for any of the following purposes:

(a) To determine whether the Property is in good condition and whether
Redeveloper is complying with its obligations under this Lease;

(b) To do any necessary maintenance and to make any restoration to the Property
that Agency has the right to perform;

(c) To serve, post, or keep posted any legal notices required or allowed under
the provisions of this Lease;

(d) During the last two years of the Term hereof, to show the Property to
prospective brokers, agents, buyers, lenders, or persons interested in an
exchange, at any time during the Term.

Agency shall not be liable in any manner for any inconvenience, disturbance,
loss of business, nuisance, or other damage arising out of Agency's entry on the
Property as provided in this Section, except damage resulting from the acts or
omissions of Agency or its authorized representatives. Redeveloper shall not be
entitled to an abatement or reduction of rent if Agency exercises any rights
reserved in this Section. Agency shall conduct its activities on the Property as
allowed in this Section in a manner that reasonably attempts to minimize any
inconvenience, annoyance, or disturbance to Redeveloper's construction or
business operations.
<PAGE>

                                      -48-

22. Notices. Any notice, demand, request, consent, approval or communication
that either party desires or is required to give to the other party shall be in
writing and shall be given to the addresses set forth below, and shall be deemed
delivered three days after deposit into the United States mail, postage prepaid,
by registered or certified mail, return receipt requested. Unless notice of a
different address has been given in accordance with this Section, all such
notices shall be addressed as follows:

If to Agency, to:       Community Redevelopment Agency of the City of
                        Compton
                        205 South Willowbrook Avenue
                        Compton, California 90220
                        Attn:  Executive Director

With a copy to:         Richards, Watson & Gershon
                        333 South Hope Street, 38th Floor
                        Los Angeles, California  90071
                        Attn:  William L. Strausz

If to Redeveloper, to:  Compton Entertainment, Inc.
                        15045 Salt Lake Avenue
                        Industry, California  91746
                        Attn:  President

With a copy to:         Mitchell, Silberberg & Knupp
                        11377 West Olympic Boulevard
                        Los Angeles, California 90064
                        Attn:  Jerry Neuman

23. Interest on Past-due Obligations. Any amount due to Agency which not paid
when due shall bear interest at the maximum rate then allowable to be charged by
non-exempt lenders under the usury and other applicable laws of the State of
California from the date due until paid. Payment of such interest shall not
excuse or cure any default by Redeveloper under this Lease.

24. Attorneys' Fees.

(a) If either party becomes a party to any litigation concerning this Lease or
the Property, by reason of any act or omission of the other party or its
authorized representatives, the other party shall be liable to such party for
such party's actual attorney's fees and court costs incurred by it in the
litigation. In the event of any litigation is undertaken against Agency
concerning the validity of this DDA, Redeveloper shall indemnify, defend, and
hold harmless Agency for all costs and expenses incurred by Agency on account of
such litigation. Such defense shall be undertaken by legal counsel mutually
selected by Agency and Redeveloper. Provided, however,
<PAGE>

                                      -49-

if Agency shall become a defendant to any lawsuit concerning the validity of
this DDA, and Redeveloper informs Agency that it does not wish to indemnify,
hold harmless and defend Agency, then Agency may immediately cancel and
terminate this DDA without any liability to Redeveloper whatsoever, and
Redeveloper shall be relieved of all liability hereunder other than liability
for matters (other than the defense of such litigation) which arose prior to
such termination.
<PAGE>

                                      -50-

(b) If either party commences an action against the other party arising out of
or in connection with this Lease, the prevailing party shall be entitled to have
and recover from the losing party reasonable attorneys' fees and costs of suit.

25. Estoppel Certificates. At any time and from time to time, within thirty (30)
days after notice of request by either party, the other party shall execute,
acknowledge, and deliver to the requesting party, or to such other recipient as
the notice shall direct, a statement certifying that this Lease is unmodified
and in full force and effect; or, if there have been modifications, that it is
in full force and effect as modified in the manner specified in the statement
and acknowledging that there are no uncured defaults or failures to perform any
covenant or provision of this Lease on the part of the requesting party or
specifying any such defaults or failures which are claimed to exist. The
statement shall also state the dates to which the rent and any other charges
have been paid in advance. The statement shall be such that it can be relied on
by any auditor, creditor, commercial banker, and investment banker of either
party and by any prospective purchaser or the lender of the Property or all or
any part or parts of Redeveloper's or Agency's interests under this Lease.
Either party's failure to execute, acknowledge, and deliver, on request, the
certified statement described above within the specified time shall constitute a
breach of this Lease.

26. Surrender of Property. At the expiration or earlier termination of the Term
(other than by reason of the exercise of the option set forth in Section 30
hereof), Redeveloper shall surrender to Agency the possession of the Property.
Surrender or removal of improvements, fixtures and trade fixtures shall be as
directed in the provisions of this Lease on ownership of improvements, fixtures
and trade fixtures at expiration or termination. Except as provided in Section
25 hereof to the contrary, Redeveloper shall leave the surrendered property and
any other property in good and broom clean condition. All personal property that
Redeveloper is not required to surrender but that Redeveloper does abandon
shall, at Agency's election, become Agency's property at the expiration or the
sooner termination of this Lease.

27. Form of Nondiscrimination and Nonsegregation Clauses; Local
----------------------------------------------------------------
                        HIRING AND AFFIRMATIVE ACTION.
                        ------------------------------

(a) Redeveloper shall refrain from restricting the rental, sale or lease of the
Property, or any portion thereof, on the basis of sex, age, handicap, marital
status, race, color, religion, creed, ancestry or national origin of any person.
All deeds, leases or contracts of sale shall contain or be subject to
substantially the following nondiscrimination or nonsegregation clauses:
<PAGE>

                                      -51-

1. In deeds: "The grantee herein covenants by and for himself, his heirs,
executors, administrators and assigns, and all persons claiming under or through
them, that there shall be no discrimination against or segregation of, any
person or group of persons on account of sex, marital status, race, age,
handicaps color, religion, creed, national origin or ancestry in the sale,
lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land
herein conveyed, nor shall the grantee himself or any person claiming under or
through him, establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location, number,
use or occupancy of tenants, lessees, subtenants, sublessees or vendees in the
land herein conveyed. The foregoing covenants shall run with the land."

2. In leases: "The lessee herein covenants by and for himself, his heirs,
executors, administrators and assigns, and all persons claiming under or through
him, and this lease is made and accepted upon and subject to the following
conditions:

"That there shall be no discrimination against or segregation of any person or
group of persons on account of sex, marital status, race, age, handicap, color,
religion, creed, national origin or ancestry, in the leasing, subleasing,
transferring, use, or enjoyment of the land herein leased, nor shall the lessee
himself, or any person claiming under or through him, establish or permit any
such practice or practices of discrimination or segregation with reference to
the selection, location, number, use or occupancy, of tenants, lessees,
sublessees, subtenants or vendees in the land herein leased."

3. In contracts relating to the sale or transfer of the Property or any interest
therein: "There shall be no discrimination against or segregation of any person
or group of persons on account of sex, marital status, race, age, handicap,
color, religion, creed, national origin or ancestry in the sale, lease,
sublease, transfer, use, occupancy, tenure or enjoyment of the land, nor shall
the transferee himself or any person claiming under or through him, establish or
permit any such practice or practices of discrimination or segregation with
reference to the selection, location, number, use or occupancy, of tenants,
lessees, subtenants, sublessees or vendees of the land."
<PAGE>

                                      -52-

(b) Redeveloper further understands and agrees that in fulfillment of the
provisions of this DDA, including this Lease, and in complying with the request
of the Agency and the City Council of the City, that the creation of new jobs
from this Project shall be filled with residents of the City of Compton who have
lived in the City of Compton for more than one year, to the extent that it is
practical and reasonable. Redeveloper shall make every reasonable effort to
fulfill the provisions of this DDA, including the Lease, by complying with
Ordinance No. 1667 of the City of Compton, relating to an Affirmative Action
Program. Redeveloper shall work with local institutions to establish training
programs to assist in ensuring a qualified local applicant base is established
for all levels of employment at the Hotel, the Entertainment Center, and any
related enterprises. Further, preferences shall be given to local residents when
such residents demonstrate equal capability relative to other applicants for the
same job. The covenants and agreements set forth in this subsection (b) shall
survive the expiration or termination of this Lease after acquisition of title
to the Property by Redeveloper, whether by exercise of the Option to purchase or
otherwise.

28. Local Contractors. Redeveloper shall make commercially reasonable efforts to
allocate the work associated with the construction of the Initial Improvements
in a manner which provides local contractors with an opportunity to participate
in such work. Contracts for the Initial Improvements shall be let on the basis
of price, quality of service and reputation. Further, preferences shall be give
to local contractors and minority owned businesses when such contractors
demonstrate equal capability and bondability relative to other contractors for
the scope of work to be performed.

29. Expansion Parcels.
<PAGE>

                                      -53-

(a) Subject to the provisions of Section 29(b), during the first fifteen (15)
years Lease Years of the Term, Agency shall have the full right to use the
Expansion Parcels, without payment of consideration to Redeveloper. Any such use
shall be of a type which shall not disturb Redeveloper's quiet enjoyment of the
balance of the Property or otherwise adversely affect the use thereof. Agency
shall retain all rentals and other revenues payable on account of the Expansion
Parcels. Provided, however, that Redeveloper shall have the right, upon ninety
(90) days notice in writing to Agency, to terminate Agency's use of the
Expansion Parcels. Redeveloper shall terminate Agency's use of the Expansion
Parcels only upon delivery to Agency of plans and specifications and financing
commitments, as described in Section 11 hereof, for a new card club or casino or
other use permitted by the Agency on the Expansion Parcels, together with
reasonable evidence satisfactory to Agency that Redeveloper shall open the new
card club or casino or other use permitted by the Agency for business within
nine (9) months after the termination date of Agency's right to use the
Expansion Parcels.

(b) If Redeveloper does not open the new card club or casino or other use
permitted by the Agency for business on the Expansion Parcels or another portion
of the Property in compliance with Section 9(g) hereof prior to the expiration
of the 15th Lease Year, and Agency receives a bona fide proposal, from a
reputable third party developer with the capacity to perform, which proposal
Agency wishes to accept, Agency shall give notice in writing thereof to
Redeveloper. Unless, within said ninety (90) day notice period, Redeveloper
irrevocably commits to either (i) open a new casino or card club or other
permitted use on the Expansion Parcels within one year thereafter, or (ii)
undertake the same type of development as has been proposed by the offeror or
one meeting or exceeding the benefit to the Agency of that of the offeror,
Agency shall have the right to proceed with the other transaction, and, upon the
closing thereof, all Redeveloper's rights in the Expansion Parcels shall
terminate and shall be of no further force or effect. In such event, the
purchase price set forth in the Option (described below), shall be reduced as
provided in Section 30(e) hereof, and the Base Rent shall be equitably reduced
(based upon the values established in the Agency's original appraisal for the
parcels comprising the Property), effective upon the closing of the transaction
between Agency and the third party developer. Any attempt by Redeveloper to
wrongfully interfere with the other transaction or the closing thereof, other
than by committing to the expansion as provided hereinabove, may, at the option
of Agency, be deemed default hereunder.
<PAGE>

                                      -54-

30. Option to Purchase. Agency hereby grants to Redeveloper the option to
purchase the Leasehold Parcels, including all buildings, furniture, furnishings
and equipment and inventory of food, beverages and other supplies (the
"Option"), subject to the following terms and conditions:

(a) Subject to the provisions hereof, Redeveloper may deliver a written notice
of Redeveloper's election exercise the Option at any time during the Term
hereof. Escrow shall close on or before ninety (90) days after receipt by Agency
of Redeveloper's written notice of Redeveloper's election to exercise the
Option, and Agency shall deliver to Redeveloper marketable title to the
Leasehold Parcels free and clear of any encumbrances other than those (i) in
existence at the Effective Date, (ii) approved by Redeveloper pursuant to this
Lease, or (iii) created or incurred by Redeveloper; provided, however, the
Property shall be free and clear of all monetary liens in existence on the
Effective Date other than those created by Redeveloper (including, without
limitation, deeds of trust executed by the Redeveloper, its successors and
assigns, and mechanics liens resulting from work performed at the request of the
Redeveloper). Agency agrees that it will not voluntarily encumber title to the
Leasehold Parcels without Redeveloper's prior written consent. At the closing,
Agency shall deliver to Redeveloper a good and sufficient grant deed with
respect to the Leasehold Parcels.

(b) Redeveloper shall have no right to exercise the Option, notwithstanding any
provision in the grant of option to the contrary (i) at any time when
Redeveloper is in default hereunder and continuing until the default is cured,
or (ii) during the period of time commencing on the day after a monetary
obligation to Agency is due from Redeveloper and unpaid (without any necessity
for notice thereof to Redeveloper) and continuing until the obligation is paid,
or (iii) in the event that this Lease has been terminated for any reason, or
(iv) during any time Redeveloper's payment of license fees required by Section
9-10 of the Compton Municipal Code, or additional sums set forth in the City's
Resolution No. 17,087, as amended, is due and unpaid, or (v) during any time any
license or permit of Redeveloper or any subtenant or operator to operate a Card
Club from the Property is suspended and has not been reinstated, subject,
however, to the right of Redeveloper to replace an operator pursuant to Section
20(a)(xi) hereof.
<PAGE>

                                      -55-

(c) All rights of Redeveloper under this Section shall terminate and be of no
further force or effect, if this Lease is terminated for any reason, or if any
license or permit from the City of Compton or the State of California to operate
a Card Club from the Property is terminated, annulled, canceled, revoked,
repealed, or rescinded, or any other failure of Redeveloper or an operator
claiming under Redeveloper to keep in full force and effect any license or
permit required to operate the Card Club from the Project, and the expiration of
all appeals thereof or the expiration of the time period for applying for an
appeal or other procedure to reinstate the license or permit pursuant to the
terms of any applicable ordinances, statutes, or regulations; provided, however,
notwithstanding the foregoing, if the reason for the termination, annulment,
cancellation, revocation, repeal, or rescission is Redeveloper's failure to pay
any fees to the City of Compton or the State of California as and when due, then
Redeveloper's rights under this Option shall terminate if such fees are not paid
within 60 days after their due date.

(d) The Option granted to Redeveloper in this Lease is personal to Redeveloper,
and may not be assigned voluntarily or involuntarily, or be exercised by any
person or entity other than Redeveloper or a permitted assignee of Redeveloper.

(e) Redeveloper shall have the right to elect to purchase only the Hotel Parcel
and the Parking Parcels at the time Redeveloper exercises the Option. In such
case,at the time Redeveloper exercises the Option, Redeveloper may elect either
(i) to terminate this Lease as to the Expansion Parcels, or (ii) continue this
Lease with respect to the Expansion Parcels. If Redeveloper elects to continue
this Lease with respect to the Expansion Parcels, then upon the close of escrow
for the Hotel Parcel and Parking Parcels, the Base Rent for the Expansion
Parcels shall be fifty-nine percent (59%) of the Base Rent set forth in Section
10, and there shall be a termination of any remaining Rent Reduction/Credit
pursuant to Section 10. Thereafter, the Redeveloper shall continue to have the
option to purchase the Expansion Parcels, subject to the provisions hereof.
<PAGE>

                                      -56-

(f) (i) If Redeveloper purchases all the Leasehold Parcels at once, then the
purchase price of the Leasehold Parcels shall be the sum of $8,082,500.00,
increased at the rate of two percent (2%) per annum, simple interest, from the
Effective Date, and decreased in an amount equal to interest at the rate of five
percent (5%) per annum, simple interest, calculated on the purchase price of the
Convention Center Parcel from the Effective Date to the date of closing of the
purchase under the Option; provided, however, that the purchase price as so
adjusted shall not be greater than the fair market value of the Property but, in
no case, shall the ultimate purchase price be less than $8,082,500.00.

(ii) If Redeveloper purchases only the Hotel Parcel and the Parking Parcels
(whether due to the severing of the Expansion Parcel from this Lease due to the
provisions of Section , or Redeveloper's election to purchase only the Hotel
Parcel and Parking Parcels, as provided in Section ), then the purchase price of
the Hotel Parcel and the Parking Parcels shall be the sum of $3,350,000.00,
regardless of when purchased./1/

(iii) If upon acquisition of the Hotel Parcel and Parking Parcels Redeveloper
has elected to continue this Lease, and thereafter purchases the Expansion
Parcels, then the purchase price of the Expansion Parcels shall be calculated
pursuant to the following formula:

    EPPP = 4,732,500 + (8,082,500 X .01 X (HPPD - ED)) + (4,732,500 X .02 X
                                 (EPPD - HPPD))

utilizing the following definitions:

EPPP = Expansion Parcels Purchase Price HPPD = Hotel Parcel and Parking Parcels
       Date of Purchase ED = Effective Date
EPPD = Expansion Parcels Date of Purchase

utilizing the number of years, and any fraction thereof, between the HPPD, the
ED, and the EPPD for the purpose of calculating the resulting factors. /1/ This
is due to the fact that the parties had agreed to a base price of the Hotel
Parcels and Parking Parcels in the sum of $3,350,000, increased at the rate of
2% per annum from the Effective Date, and reduced by the sum of the credit of 5%
of the $2,000,000 purchase price for the Convention Center Parcel. However, due
to the fact that such amount would result in a purchase price of less than
$3,350,000, the parties have agreed to fix the purchase price of the Hotel
Parcels and the Parking Parcels at $3,350,000.
<PAGE>

                                      -57-

(g) The purchase price shall be paid in all cash through the close of escrow.
Agency will pay the cost of a CLTA policy of title insurance, any documentary
transfer tax, and one half of the escrow fees. Redeveloper will pay cost of
recording, the additional premium and any expenses (including survey costs) in
the event Redeveloper desires to obtain an extended coverage policy of title
insurance, and the other half of the escrow fees. In connection therewith, the
parties shall execute normal and necessary escrow instructions and all documents
reasonably called for thereunder, so long as such instructions and documents are
not inconsistent herewith.

31. Holding Over. If Redeveloper, with Agency's consent, remains in possession
of the Leasehold Parcels or any part thereof after the expiration or termination
of the Term of this Lease, such occupancy shall be a tenancy from month to month
upon all the provisions of this Lease pertaining to the obligations of
Redeveloper, except that the annual Base Rent shall be 150% of the annual Base
Rent set forth in Section 10, above (as, and if, adjusted pursuant hereto), and
shall be payable monthly, in advance, in installments equal to 1/12th of the
annual Base Rent so calculated.

32. Force Majeure; Extension of Times of Performance.

(a) Force Majeure. Except as otherwise provided in this Lease, delay in
performance by any party hereunder shall not be a default where delays or
defaults are due to war; insurrection; strikes; lock-outs; riots; floods;
earthquakes; fires; casualties; acts of God; acts of the public enemy;
epidemics; quarantine restrictions; freight embargoes; shortages of
transportation; unusually severe weather; or any other causes (other than
financial inability) beyond the reasonable control or without the fault of the
party claiming an extension of time to perform. An extension of time for any
such cause shall only be for the period of the delay, which period shall
commence to run from the time of the commencement of the cause, if written
notice by the party claiming such extension is delivered to the other party
within ten (10) days after commencement of the cause, and shall otherwise
commence to run from the date of delivery of such notice.

(b) Extension of Time. If prior to a date which is three months after the
Effective Date, any lawsuit is filed by a third party against Agency on account
of the California Environmental Quality Act ("CEQA") or otherwise challenging
Agency's ability to enter into this transaction to lease the Property for the
purposes hereof, or against the City of Compton on account of the card club
license in favor of Redeveloper, then, to the extent permitted by law, the time
periods provided herein shall be tolled until resolution of such lawsuits in
favor of Agency or City, as the case may be or until there has been
<PAGE>

                                      -58-

compliance with CEQA, and the parties shall cooperate in the defense of such
action, with the costs of such defense being borne as hereinabove provided,
and/or shall take all steps necessary to comply with the requirements of CEQA.

33. Sale or Transfer by Agency. In the event of any transfer or transfers of
Agency's interest in the Property, other than a transfer for security purposes
only, the transferor shall automatically be relieved of any and all obligations
and liabilities on the part of the Agency accruing from and after the date of
such transfer; provided, however, that any funds in the hands of Agency in which
Redeveloper has an interest, at the time of such transfer, shall be turned over
to the transferee and upon such transfer, Agency shall be discharged from any
further liability with reference to such funds. The covenants and obligations of
Agency contained in this Lease shall be binding upon Agency, its successors and
assigns only during their respective periods of ownership. Any transferee must,
however, comply with the requirements of the Gaming Laws of the State of
California to the extent applicable.

34. Limitation on Recourse Against Agency. Redeveloper agrees to look solely to
Agency's interest in the Property and the real property of which it is a part
(or the proceeds thereof) for the satisfaction of any remedy of Redeveloper, for
the collection of a judgment (or other judicial process) requiring the payment
of money by Agency in the event of any default by Agency hereunder (other than
with respect to Agency's obligations pursuant to Section 10(b) hereof), and no
other property or assets of Agency shall be subject to levy, execution, or other
enforcement procedure for the satisfaction of Redeveloper's remedies under or
with respect to this Lease, the relationship of Agency and Redeveloper
hereunder, or Redeveloper's use or occupancy of the Property. Under no
circumstances shall Redeveloper have any recourse against any tax increment
revenues of Agency. Any obligations of Agency hereunder to deliver any funds to
Redeveloper shall not be secured by any lien upon or pledge of the Agency's tax
increment, and such obligations shall be subordinate and inferior to any and all
rights, including but not limited to a pledge of any such moneys, created by (A)
any bonded indebtedness now or hereafter created by the Agency, and (B) any loan
agreement, lease agreement, or other obligation or agreement now or hereafter
entered into by the Agency, or otherwise from time to time outstanding that is
secured by a pledge of tax increment.

35. Redeveloper's Representations and Warranties. Redeveloper makes the
following representations and warranties as of the date of this Lease and agrees
that such representations and warranties shall survive and continue thereafter:
<PAGE>

                                      -59-

(a) Status. If Redeveloper is a corporation, it is duly organized, validly
existing, in good standing under the laws of the state of its incorporation, has
stock outstanding, which has been duly and validly issued, and is qualified to
do business and is in good standing in the State of California with full power
and authority to perform the obligations contemplated hereby. If Redeveloper is
a partnership, it is duly formed and validly existing and has all power and
authority to consummate the transactions contemplated hereby. If Redeveloper is
a limited liability company, it is duly formed and validly existing and has all
power and authority to perform the obligations contemplated hereby.

(b) Authority. Redeveloper has complied with all laws and regulations concerning
its organization, existence and transaction of business. Redeveloper has the
right and power to own and develop the Project and Initial Improvements thereon
as contemplated in this Lease.

(c) No Litigation. There is no litigation, action, suit, or other proceeding
pending or threatened against Redeveloper, the Property, or the Project which
may in any manner whatsoever substantially adversely affect the validity,
priority, or enforceability of this Lease or the construction, use, occupancy or
operation of the Project.

(d) Enforceability. Redeveloper has full right, power and authority to execute
and deliver this Lease and all instruments executed pursuant hereto, and to
perform the undertakings of Redeveloper contained in this Lease and all
agreements executed pursuant hereto. This Lease and all agreements executed
pursuant hereto constitute valid and binding obligations of Redeveloper which
are legally enforceable in accordance with their terms, subject to the laws of
bankruptcy, creditor's rights exceptions, and equity.

(e) No Breach. None of the undertakings of Redeveloper contained in this Lease
and all agreements executed pursuant hereto violates or any applicable statute,
law, regulation or ordinance or any order or ruling of any court or governmental
entity, or conflicts with, or constitutes a breach or default under, any
agreement by which Redeveloper is, or the Project and Improvements thereon are,
bound or regulated.

(f) Financial Information. All financial information delivered to Agency by
Redeveloper, including, without limit, information relating to Redeveloper, the
Property, the Project, and the Improvements thereon, fairly and accurately
represents such financial condition. No material adverse change in such
financial condition has occurred.

(g) Proceedings. To the best of Redeveloper's knowledge, Redeveloper is not in
violation of any statute, law,
<PAGE>

                                      -60-

regulation or ordinance, or of any order of any court or governmental entity.

(h) Accuracy. To the best of Redeveloper's knowledge, all documents, reports,
instruments, papers, data, information and forms of evidence delivered to Agency
by Redeveloper with respect to this Lease and all agreements executed pursuant
hereto are accurate and correct, are complete insofar as completeness may be
necessary to give Agency true and accurate knowledge of the subject matter
thereof, and do not contain any material misrepresentation or omission. Agency
may rely on such reports, documents, instruments, papers, data, information and
forms of evidence without any investigation or inquiry.

(i) Taxes. To the best of Redeveloper's knowledge, Redeveloper has filed all
federal, state, county and municipal tax returns required to have been filed by
Redeveloper, and has paid all taxes which have become due pursuant to such
returns or to any notice of assessment received by Redeveloper. Redeveloper has
no knowledge of any basis for additional assessment with respect to such taxes.

36. Agency's Representations and Warranties. Agency makes the following
representations and warranties as of the date of this Lease and agrees that such
representations and warranties shall survive and continue thereafter:

(a) No Litigation. There is no litigation, action, suit, or other proceeding
pending or threatened against Agency, the Property, or the Project which may in
any manner whatsoever substantially adversely affect the validity, priority, or
enforceability of this Lease or the construction, use, occupancy or operation of
the Project.

(b) Enforceability. Agency has full right, power and authority to execute and
deliver this Lease and all instruments executed pursuant hereto, and to perform
the undertakings of Agency contained in this Lease and all agreements executed
pursuant hereto. This Lease and all agreements executed pursuant hereto
constitute valid and binding obligations of Agency which are legally enforceable
in accordance with their terms, subject to the laws of bankruptcy, creditor's
rights exceptions, and equity.

(c) No Breach. None of the undertakings of Agency contained in this Lease and
all agreements executed pursuant hereto violates or any applicable order or
ruling of any court or governmental entity, or conflicts with, or constitutes a
breach or default under, any agreement by which Agency is, or the Project and
Improvements thereon are, bound or regulated.
<PAGE>

                                      -61-

(d) Entitlements. The proposed development and use of the Property is consistent
with City's General Plan and all applicable zoning and land use ordinances and
regulations.

37. Miscellaneous.

(a) Governing Law. This Lease shall be construed and interpreted in accordance
with the laws of the State of California.

(b) Time of Essence. Time is of the essence herein.

(c) Additional Rent. Any monetary obligations of Redeveloper to Agency under the
terms of this Lease shall be deemed to be rent.

(d) Quiet Enjoyment. Upon Redeveloper's paying the Base Rent and other sums
provided hereunder when due, and observing and performing all of the covenants,
conditions, and provisions on Redeveloper's part to be observed and performed
hereunder, Redeveloper shall enjoy the quiet possession of the Leasehold Parcels
for the entire term hereof, subject to all of the provisions of this Lease.

(e) Transfer of Agency's Interest. In the event of any transfer or transfers of
Agency's interest in the Property, the transferor shall be automatically
relieved of any and all obligations and liabilities on the part of Agency
accruing from and after the date of such transfer.

(f) Waiver. The waiver by Agency or Redeveloper of any breach by the other party
of any term, covenant, or condition herein contained shall not be deemed to be a
waiver of such term, covenant, or condition or any subsequent breach of the same
or any other term, covenant, or condition herein contained. The subsequent
acceptance of all or part of the rent due hereunder by Agency shall not be
deemed to be a waiver of any preceding breach by Redeveloper of any term,
covenant, or condition of this Lease, other than the failure to pay the
particular rent so accepted, regardless of Agency's knowledge of such preceding
breach at the time of acceptance of such rent. Acceptance by Agency of a part
payment of the rent due shall not be construed as a waiver by Agency of any
rights to collect the balance of the rent due.

(g) Brokers. Each party warrants to and for the benefit of the other that it has
had no dealings with any real estate broker or other agent (attorneys excepted)
in connection with the negotiation or making of this Lease. Agency shall
indemnify Redeveloper for breaches by Agency of this warranty,
<PAGE>

                                      -62-

and Redeveloper shall indemnify Agency for any breaches by Redeveloper of this
warranty.

(h) Headings. The captions of the various sections of this Lease are for
convenience and ease of reference only and do not define, limit, augment, or
describe the scope, content, or intent of this Lease or of any part or parts of
this Lease.

(i) Inspection Of Books and Records. Agency shall have the right at all
reasonable times to inspect the books and records of Redeveloper relevant to the
purposes of this Lease.

(j) Merger. The voluntary or other surrender of this Lease by Redeveloper, or a
mutual cancellation thereof, or a termination by Agency, shall not work a
merger, but instead, at the option of Agency, shall either terminate all or any
existing subtenancies, or at the option of Agency, operate as an assignment to
Agency of any or all of such subtenancies.

(k) Gender; Number. The neuter gender includes the feminine and masculine, the
masculine includes the feminine and neuter, and the feminine includes the
masculine and neuter, and each includes corporations, partnerships and other
legal entities whenever the context so requires. The singular number includes
the plural whenever the context so requires.

(l) No Joint Venture. Nothing contained herein shall be construed to render the
Agency in any way or for any purpose a partner, joint venturer, or associated
in any relationship with Redeveloper other than that of Agency and Redeveloper,
nor shall this Lease be construed to authorize either party to act as agent for
the other.

(m) Exhibits. All exhibits to which reference is made in this Lease are hereby
incorporated by reference. Any reference to "this Lease" includes matters
incorporated by reference.

(n) Entire Agreement; Modification. This Lease contains the entire agreement
between the parties. No verbal agreement or implied covenant shall be held to
vary the provisions hereof, any statements, law or custom to the contrary
notwithstanding. No promise, representation, warranty, or covenant not included
in this Lease has been or is relied on by either party. Each party has relied on
its own inspection of the Property and examination of this Lease, the counsel of
its own advisors, and the warranties, representations, and covenants in this
Lease itself. The failure or refusal of either party to inspect the Property, to
read this Lease or other documents, or to obtain legal or other advice relevant
to this transaction constitutes a waiver of any objection, contention, or claim
that
<PAGE>

                                      -63-

might have been based on such reading, inspection, or advice. No provision of
this Lease may be amended or varied except by an agreement in writing signed by
the parties hereto and the lender under a permitted first leasehold encumbrance
or their respective permitted successors.

(o) Joint and Several Obligations. "Party" shall mean Agency or Redeveloper; and
if more than one person is Agency or Redeveloper, the obligations imposed on
that party shall be joint and several.

(p) Severability. The invalidity or illegality of any provision shall not affect
the remainder of this Lease and all remaining provisions shall, notwithstanding
any such invalidity or illegality, continue in full force and effect.

(q) Consents of Agency. Neither Agency's execution of this Lease nor any consent
or approval given by Agency hereunder in its capacity as Agency shall waive,
abridge, impair or otherwise affect Agency's powers and duties as a governmental
body. Any requirements under this Lease that Redeveloper obtain consents or
approvals of Agency or the City are in addition to and not in lieu of any
requirements of law that Redeveloper obtain approvals, licenses, or permits.

(r) Records. Agency or any representative or designee thereof may at any time
during normal business hours, upon 48 hours' notice, examine the books and
records of Redeveloper, or any officer, employee, agent, contractor, affiliate,
related person, assignee or franchise, to the extent that such books and records
relate, directly or indirectly, to the operation and income of the Card Club
from the Property. Redeveloper shall keep all such records at the Property or at
another location in Los Angeles County approved by Agency.

(s) Recordation of Memorandum of Lease With Option to Purchase. This Lease shall
not be recorded. A memorandum of the Lease with Option to Purchase shall be
recorded. The parties shall execute the memorandum in form and substance
approved by Agency and as required by the title insurance company insuring
Redeveloper's leasehold estate, and sufficient to give constructive notice of
this Lease and the option to purchase set forth herein to subsequent purchasers
and lenders.

(t) Execution in Counterparts. This Lease, or the memorandum of this Lease, or
both, may be executed in two or more counterparts, each of which shall be an
original, but all of which shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned have executed this Agreement at Compton,
California, as of the date first written above.
<PAGE>

                                      -64-

                 COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF
                               COMPTON ("Agency")

                 By:__________________________________________
                                    Chairman
                                    ATTEST:

                                   SECRETARY

                   COMPTON ENTERTAINMENT, INC., a California
                          corporation ("Redeveloper")

                 By:__________________________________________
                          ROUBEN KANDILIAN, President
<PAGE>

                                      -65-

                                   EXHIBIT 1

LEGAL DESCRIPTIONS

ENTIRE PROPERTY
---------------

Parcels 2, 7, 8, 9, and 11, of Parcel Map No. 7899, in the City of Compton, per
map recorded in Book 79, Pages 47-49, of Parcel Maps, Official Records, Los
Angeles County, California.

Parcels 1 and 2 of Parcel Map No. 8669, in the City of Compton, per map recorded
in Book 87, Page 9, of Parcel Maps, Official Records, Los Angeles County,
California.

Parcels 1, 2, 3, and 4 Parcel Map No. 10784, in the City of Compton, per map
recorded in Book 112, Pages 96 and 97, of Parcel Maps, Official Records, Los
Angeles County, California.

CONVENTION CENTER PARCEL/2/
---------------------------

Parcel 1 of Parcel Map No. 10784, in the City of Compton, per map recorded in
Book 112, Pages 96 and 97, of Parcel Maps, Official Records, Los Angeles County,
California, reserving and excepting therefrom easements for access to, support
of and parking for the Hotel Parcel.

HOTEL PARCEL/1/
---------------

A parcel of air space which includes a nine (9) story hotel containing 290 guest
rooms and ancillary areas such as lobbies, restaurant, kitchen, bars, commercial
areas and the like, on Parcel 1 of Parcel Map No. 10784, in the City of Comptom,
per map recorded in Book 112, Pages 96 and 97, of Parcel Maps, Official Records,
Los Angeles County, California.

PARKING PARCELS
---------------

Parcels 2, 3, and 4 Parcel Map No. 10784, in the City of Compton, per map
recorded in Book 112, Pages 96 and 97, of Parcel Maps, Official Records, Los
Angeles County, California.

EXPANSION PARCELS
-----------------

/2/ The legal descriptions of the Hotel Parcel and the Convention Center Parcel
are subject to change based upon legal descriptions prepared by a licensed civil
engineer and approved by Agency and Redeveloper prior to the close of escrow for
the Convention Center Parcel.
<PAGE>

                                      -66-

Parcels 2, 7, 8, 9, and 11, of Parcel Map No. 7899, in the City of Compton, per
map recorded in Book 79, Pages 47-49, of Parcel Maps, Official Records, Los
Angeles County, California.

Parcels 1 and 2 of Parcel Map No. 8669, in the City of Compton, per map recorded
in Book 87, Page 9, of Parcel Maps, Official Records, Los Angeles County,
California.
<PAGE>

                                      -67-

                                   EXHIBIT 2

SITE PLAN

                                [to be inserted]
<PAGE>

                                      -68-

                                   EXHIBIT 3

                            SCHEDULE OF PERFORMANCE

<TABLE>
<S>                                              <C>
1.  Execution of the DDA by Agency and           Within 15 days of Agency
    Redeveloper                                  approval

2.  Amendment of Redeveloper's Card Club         Within 60 days of Agency
    License from the City of Compton and         approval
    the City's adoption of an ordinance
    to waive transient occupancy taxes and
    valet taxes until the valet parking
    operation at the Hotel is profitable

3.  Redeveloper's Approval of Preliminary        By May __, 1995
    Title Report

4.  Redeveloper's Approval of ALTA Survey        By June 15, 1995

5.  Redeveloper's approval of Physical           By June 15, 1995
    Condition of the Property

6.  Recordation of Memorandum of Lease for       On the close of escrow for the
    the Project and issuance of leasehold        Convention Center Parcel or
    policy of title insurance                    July 31, 1995, whichever first
                                                 occurs (the "Effective Date")

7.  Redeveloper's submission of Design           Within 45 days after Agency's
    Development Drawings                         execution of the DDA

8.  Agency's approval or disapproval of          Within 30 days after receipt of
    Design Development Drawings                  same from Redeveloper

9.  Redeveloper's delivery to Agency of          Within 90 days after the
    financing commitments for the Project        Effective Date

10. Agency's approval of Redeveloper's           Within 30 days from submittal
    financing for the Project

11. Redeveloper's Submission of the Final        Within 120 days after the
    Construction Plans for Development           Effective Date
    of the Project (including construction
    drawings) sufficient to obtain building
    permits for the Initial Improvements

12. Agency's Approval of Final Construction      60 days after delivery of same
    Plans (including construction drawings,      to City and Agency, provided
    and final grading and landscaping plans)     they are acceptable to City
                                                 and Agency

13. Payment of fees and issuance of permits      Within 30 days of approval of
    for grading and site work, and               plans
    commencement of grading and site work
</TABLE>
<PAGE>

                                      -69-

<TABLE>
<S>                                              <C>
14. Payment of fees and issuance of building     Within 10 days after issuance
    permits and commencement of construction     of grading permit
    of the Initial Improvements

15. Commencement of Construction of              Within 10 days from approval of
    remaining work                               any construction plans

16. Completion of Construction of the Initial    Within 12 months after the
    Improvements and rehabilitation of Hotel,    Effective Date, subject to the
    and opening of the Hotel for business        length of any delays by the
                                                 Agency or City in approving
                                                 plans or specifications from
                                                 the time periods set forth
                                                 herein, and subject to Force
                                                 Majeure

17. Opening of the Card Club for business        Within 30 days of issuance of
                                                 a state license

</TABLE>
<PAGE>

                                      -70-

                                   EXHIBIT 4

                           CONDITIONS OF CONSTRUCTION

1. Submittal of Design Development Drawings and Preliminary Construction
-------------------------------------------------------------------------
Budgets. Redeveloper shall prepare and deliver to Agency Design Development
Drawings and a Preliminary Construction Budget for the proposed Initial
Improvements to the Property. Upon Agency's reasonable approval of both the
Design Development Drawings and the Preliminary Budget, Redeveloper shall have
the right to partition the work represented by the Design Drawings in a manner
which will promote the most expeditious construction and completion of the
Initial Improvements. Notwithstanding the foregoing Redeveloper shall not
commence construction as to any portion of the work until such time as Agency
has approved complete Final Construction Plans, or if applicable, Final Interior
Design Documents, and the Budget relative to the portion of work for which
Redeveloper desires to commence construction.

"Design Development Drawings" shall be prepared by a licensed architect or
engineer, and shall include, but not be limited to, preliminary grading and
drainage plans, soil tests, utilities, sewer and service connections, locations
of ingress and egress to and from public thoroughfares, curbs, gutters,
parkways, street lighting, designs and locations for outdoor signs, storage
areas, and landscaping. The Design Development Drawings shall be based upon the
Scope of Development, and shall enable Agency to make an informed judgment about
the design and quality of construction. They shall also include delineation of
landscape and architectural features, floor plans, sections and elevations, site
treatment, proposed building materials and proposed colors, and other features.
The Design Development Drawings shall describe all major design features, as
well as the size, character and quality of the Project as to architectural and
structural systems. Key details of the Project will be provided and samples of
key materials to be used in public visible areas shall accompany the drawings.
With the Design Development Drawings, Redeveloper shall deliver to Agency the
certificate of the person who prepared the plans and specifications certifying
that Agency has fully paid for them or waiving payment and waiving any right to
a lien for preparing them and permitting Agency to use the Design Development
Drawings without payment for purposes relevant to and consistent with this DDA.
"Final Interior Design Documents" are those Final Construction Plans relating to
the interior design of the Initial Improvements.
<PAGE>

                                      -71-

2. Submittal of Final Construction Plans and Final Interior Design
-------------------------------------------------------------------
Documents. Prior to the commencement of construction of any portion of the
Initial Improvements, Redeveloper shall prepare complete Final Construction
Documents or, if applicable, Final Interior Design Documents, and submit such
documents to Agency for its approval. Upon receipt of approval from Agency,
Redeveloper may commence construction in a manner consistent with the approved
Final Construction Plans or Final Interior Design Documents.

3. Submittal of Construction Budgets. Upon obtaining bids relative to approved
Construction Documents or Interior Design Documents, Redeveloper shall submit to
Agency a "bid based" Construction Budget outlining specific costs associated
with the work to be performed pursuant to the approved Construction Documents or
Interior Design Documents. Agency shall have the right to review such bid based
budgets and request any additional information reasonably necessary to ascertain
the appropriateness and reasonableness of the items contained within such bid
based Construction Budget. Agency may, in the exercise of its reasonable, good
faith judgment, determine whether the proposed budget is unreasonable, and in
such case, then the unreasonable portion shall not be included in the Rent
Reduction/Credit, unless such cost is shown to be reasonable pursuant to the
arbitration provisions of this paragraph. If the parties cannot agree on a final
budget, the question of whether such charge is appropriate and reasonable shall
be submitted to binding arbitration in accordance with the Construction Industry
Rules of the American Arbitration Association. In no case shall payments be made
to affiliates of the Redeveloper without the Agency's prior written consent.

4. Final Construction Plan Documents. Redeveloper shall submit to Agency all
Final Construction Plans approved by the appropriate governmental agencies for
issuance of the necessary permits to complete the Initial Improvements. Changes
from the Final Construction Plans may be made without the prior written approval
by Agency only if: a) they are not substantial or are made to comply with
exceptions, requests or requirements of any governmental agency or official in
connection with the inspection or approval of the work undertaken; or b) if they
do not materially depart in size, utility or value from the Initial Improvements
described in the Construction Documents or, if applicable, the Interior Design
Documents previously submitted to Agency.
<PAGE>

                                      -72-

5. Final Cost Breakdowns. Upon completion of the Initial Improvements,
Redeveloper shall deliver to Agency a Final Cost Breakdown relative to the
Initial Improvements for which Redeveloper is requesting a rent credit pursuant
to Section 6 of the DDA. The form and content of the Final Cost Breakdown shall
be subject to Agency's reasonable approval and shall not deviate materially from
the Construction Budget absent good cause therefor (other than negligence or
mismanagement on the part of Redeveloper) being shown. Any dispute with respect
to such deviation shall be submitted to arbitration as provided herein above.

6. Procedure for Qualification of Rent Credits. As a condition precedent to
Agency's, application of the rent credit described in Section 6 of the DDA,
Redeveloper shall provide to Agency evidence verifying the expenditures
represented in the Final Cost Breakdown. Such evidence may include, but not be
limited to, original paid invoices, names and addresses of persons or firms who
have furnished any work, labor or materials in connection with items contained
in the Final Cost Breakdown and/or receipts indicating full payment of
particular items contained in the Final Cost Breakdown. Agency reserves the
right to refuse to provide a rent credit as to particular items for which Agency
has evidence that such item was either not expended or paid in full; provided,
however, that Redeveloper shall have the right to cure any alleged misallocation
by presenting any contrary evidence to Agency. Redeveloper shall pay for and may
include in the cost of the Initial Improvements any construction manager,
project manager, accountants, auditors or supervisors hired by Agency, at
Agency's reasonable discretion, for the purposes of reviewing and inspecting the
course of construction and determining or confirming the appropriate rent credit
to be applied. Agency's representatives shall have the right to attend regular
construction meetings held by Redeveloper and its superintendents, contractors
and subcontractors. Redeveloper shall not be entitled to receive any rent credit
for materials or labor not actually incorporated into or used for the Initial
Improvements. During the course of construction, Redeveloper shall provide
Agency's representative (or Agency's Executive Director if no representative has
been appointed) with copies of all periodic or special reports with respect to
the work received by Redeveloper from its contractors, subcontractors,
architects, engineers or other consultants and, at least monthly, with a
statement of expenditures made to date.

7. Performance Bonds. Redeveloper shall
<PAGE>

                                      -73-

provide a labor and material payment bond and a performance bond acceptable to
the Agency naming the Agency as co-obligee thereon; provided, however, if
Hollywood Park, Inc., shall guaranty to the Agency's satisfaction completion of
the Initial Improvements, then the Redeveloper shall not be required to provide
a labor and material payment bond or performance bond.

8. City and Other Governmental Agency Permits and Approvals. Before commencement
of construction, Redeveloper shall secure, or cause to be secured, any and all
permits which may be required by the City of Compton or any other governmental
agency having jurisdiction over the construction or development of the Project.
Redeveloper shall carry out the construction of the Initial Improvements in
conformity with all applicable laws, including all applicable Federal, State and
local occupation, safety and health laws, rules, regulations and standards.

9. Selection of Consultants. Redeveloper shall have the sole right to select
architects, landscape architects, consultants, engineers, interior designers,
and contractors for the Project, provided such selection does not in any way
violate or contradict any portion of the DDA. Agency shall select any
consultants to perform the services described in Section 6 hereof.

10. Cooperation of Agency. Agency shall cooperate with Redeveloper in providing
a "fast track" basis of construction to expedite the design, construction and
furnishing of the Initial Improvements. Additionally, Agency shall cooperate
with Redeveloper in expediting any necessary permits or approvals on the part of
the City of Compton for any portions of the work to be performed.

11. Plans and Data. If the DDA is terminated for any reason, Redeveloper shall
deliver to Agency, without a cost or expense to Agency, copies of any and all
maps, architectural designs, engineering plans, drawings, studies, reports,
surveys or data pertaining to the Project, provided Redeveloper has title to
such items and the right to transfer such items free of claims or interest of
any third party. Additionally, upon completion of the work, Redeveloper shall
provide Agency with a set of "as built" plans for the Project.

12. Notification of Commencement of Work. Redeveloper shall notify Agency of
Redeveloper's intention to commence a work of improvement at least twenty
(20) days before commencement of any such work or delivery of any materials in
connection therewith. The notice shall
<PAGE>

                                      -74-

specify the approximate location and nature of the intended improvements. Agency
shall have the right to post and maintain on the Property any notices of
nonresponsibility provided for under applicable law, and to inspect the property
in relation to the construction at all reasonable times.

13. Cost of Construction; Mechanics' Liens. Except to the extent of any credit
to Base Rent received by Redeveloper, the entire cost of constructing the
Initial Capital Improvements shall be borne by Redeveloper. Redeveloper shall
keep the Property free and clear of all mechanics' and materialmen's liens
resulting from construction done by or for Redeveloper. Redeveloper shall have
the right to contest the correctness or the validity of any such lien if,
immediately on demand by Agency, Redeveloper procures and records a lien release
bond issued by a corporation authorized to issue surety bonds in California in
an amount equal to one and one-half times the amount of the claim of lien. The
bond shall meet the requirements of Civil Code (S)(S)3143 and shall provide for
the payment of any sum that the claimant may recover on the claim (together with
costs of suit, if it recovers in the action). Redeveloper shall hold harmless,
defend and indemnify Agency and the Property and the property against all
liability and loss of any type arising out of work performed on the Property by
Redeveloper, together with reasonable attorneys' fees and all costs and expenses
reasonably incurred by Agency in negotiating, settling, defending or otherwise
protecting against such claims. If Redeveloper does not cause to be recorded the
bond described in California Civil Code Section 3142 or otherwise protect the
Property under any alternative or successor statue, and a final judgment has
been rendered against Redeveloper by a court of competent jurisdiction for the
foreclosure of a mechanics' materialman's, contractor's or subcontractor's lien
claim, and if Redeveloper fails to stay the execution of the judgment by lawful
means or to pay the judgment, Agency shall have the right, but not the duty, to
pay or otherwise discharge, stay or prevent the execution of any such judgment
or lien or both. Redeveloper shall reimburse Agency for all sums paid by Agency
under this section, together with all Agency's attorneys fees and costs, plus
interest on those sums, fees, and costs, at the maximum legal rate that may be
charged by non-exempt lenders under the usury laws of the State of California.
On completion of any substantial work of improvement during the term,
Redeveloper shall file or cause to be filed a notice of completion. Redeveloper
hereby appoints Agency as Redeveloper's attorney-in-fact to file the notice of
completion on Redeveloper's failure to do so after the work of improvement has
been substantially completed.
<PAGE>

                                      -75-

                                   EXHIBIT 5

                              SCOPE OF DEVELOPMENT

                                [To Be Inserted]

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00037-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00037-of-00352.parquet"}]]