Document:

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                                                                    Exhibit 10.5
                               STANDARD SUBLEASE

                  American Industrial Real Estate Association

1.   Parties. This Sublease, dated, for reference purposes only, May 15, 1996,
is made by and between United Parcel Service (UPS) (herein called "Sublessor")
and Central Coast Surfboard (CCS) (herein called "Sublessee").

2.   Premises. Sublessor hereby subleases to Sublessee and Sublessee hereby
subleases from Sublessor for the term, at the rental and upon all of the
conditions set forth herein, that certain real property situated in the County
of San Luis Obispo, State of California, commonly known as approximately 5,300
sq. ft. at 2705 McMillan Road and described as outlined in Exhibit A attached
hereto. Sublessee shall have access to and use of the restrooms, break area,
hallway and entrance cross-hatched on Exhibit "A" attached hereto. Said real
property, including the land and all improvements thereon, is hereinafter called
the "Premises".

3.   Term.

     3.1  Term. The term of this Sublease shall be for 27 1/2 Months commencing
on June 15, 1996 and ending on September 30, 1998 unless sooner terminated
pursuant to any provision hereof.

     3.2  [Deleted]

4.   Rent. Sublessee shall pay to Sublessor as rent for the Premises equal
monthly payments of $5250.00, in advance, on the 1st day of each month of the
term hereof. Sublessee shall pay Sublessor upon the execution hereof $5250.00 as
rent for July, 1996 and a security deposit of $4520. Sublessee paid Sublessor a
security deposit of $730.00 in September 1995 which shall be applied to the
security deposit to in paragraph 5 below. Rent for any period during the term
hereof which is for less than one month shall be a prorata portion of the
monthly installment. Rent shall be payable in lawful money of the United States
to Sublessor at the address stated herein or to such other person or at such
other places as Sublessor may designate in writing.

5.   Security Deposit. Sublessee shall deposit with Sublessor upon execution
hereof $5250.00 as security for Sublessee's faithful performance of Sublessee's
obligations hereunder. If Sublessee fails to pay rent or other charges due
hereunder, or otherwise defaults with respect to any provision of this Sublease.
Sublessor may use, apply or retain all or any portion of said deposit for the
payment of any rent or other charge in default or for the payment of any other
sum to which Sublessor may become obligated by reason of Sublessee's default, or
to compensate Sublessor for any loss or damage with Sublessor may suffer
thereby. If Sublessor so uses or applies all or any portion of said deposit.
Sublessee shall within ten (10) days after written demand therefore deposit cash
with Sublessor in an amount sufficient to restore said deposit to the full
amount hereinabove stated and Sublessee's failure to do so shall be a material
breach of this Sublease. Sublessor shall not be required to keep said deposit
separate from its general accounts. If Sublessee performs all of Sublessee's
obligations hereunder, said deposit, or
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so much thereof as has not theretofore been applied by Sublessor, shall be
returned, without payment of interest or other increment for its use to
Sublessee (or at Sublessor's option, to the last assignee, if any, of
Sublessee's interest hereunder) at the expiration of the term hereof, and after
Sublessee has vacated the Premises. No trust relationship is created herein
between Sublessor and Sublessee with respect to said Security Deposit.

6.   Use.

     6.1  Use. The Premises shall be used and occupied only for offices,
warehousing, storage and related operations of Central Coast Surfboard.

     6.2  Compliance with Law.

          (a)  Sublessor warrants to Sublessee that the Premises, in its
existing state, but without regard to the use for which Sublessee will use the
Premises, does not violate any applicable building code regulation or ordinance
at the time that this Subleases is executed. In the event that it is determined
that this warranty has been violated, then it shall be the obligation of the
Sublessor, after written notice from Sublessee, to promptly, at Sublessor's sole
cost and expense, rectify any such violation. In the event that Sublessee does
not give to Sublessor written notice of the violation of this warranty within 1
year from the commencement of the term of this Sublease, it shall be
conclusively deemed that such violation did not exist and the correction of the
same shall be the obligation of the Sublessee.

          (b)  Except as provided in paragraph 6.2(a), Sublessee shall, at
Sublessee's expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, restrictions of record, and requirements in effect
during the term or any part of the term hereof regulating the use by Sublessee
of the Premises. Sublessee shall not use or permit the use of the Premises in
any manner that will tend to create waste or a nuisance or, if there shall be
more than one tenant of the building containing the Premises, which shall tend
to disturb such other tenants.

     6.3  Condition of Premises. Except as provided in paragraph 6.2(a)
Sublessee hereby accepts the Premises in their condition existing as of the date
of the execution hereof, subject to all applicable zoning, municipal county and
state laws, ordinances, and regulations governing and regulating the use of the
Premises, and accepts this Sublease subject thereto and to all matters disclosed
thereby and by any exhibits attached hereto. Sublessee acknowledges that neither
Sublessor nor Sublessor's agents have made any representation or warranty as to
the suitability of the Premises for the conduct of Sublessee's business.

7.   Master Lease

     7.1  Sublessor is the lessee of the Premises by virtue of a lease,
hereinafter referred to as the "Master Lease", a copy of which is attached
hereto marked Exhibit 1, dated July 10, 1990 wherein Michaud, Moresco and
McGurty and Lease modification extension dated June 29, 1995 is the lessor,
hereinafter referred to as the "Master Lessor."

     7.2  This Sublease is and shall be at all times subject and subordinate to
the Master Lease.

                                       2
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     7.3  The terms, conditions and respective obligations of Sublessor and
Sublessee to each other under this Sublease shall be the terms and conditions of
the Master Lease except for those provisions of the Master Lease which are
directly contradicted by this Sublease in which event the terms of this Sublease
document shall control over the Master Lease. Therefore, for the purposes of
this Sublease, wherever in the Master Lease the word "Lessor" is used it shall
be deemed to mean the Sublessor herein and wherever in the Master Lease the word
"Lessee" is used it shall be deemed to mean the Sublessee herein.

     7.4  During the term of this Sublease and for all periods subsequent for
obligations which have arisen prior to the termination of this Sublease.
Sublessee does hereby expressly assume and agree to perform and comply with, for
the benefit of Sublessor and Master Lessor each and every obligation of
Sublessor under the Master Lease except for the following paragraphs which are
excluded therefrom Paragraph 12.a of the Master Lease. Lessee's utility costs
except telephone and trash collection are included in the Sublease payments to
Sublessor.

     7.5  The obligation that Sublessee has assumed under paragraph 7.4 hereof
are hereinafter referred to as the "Sublessee's Assumed Obligations". The
obligations that Sublessee has not assumed under paragraph 7.4 hereof are
hereinafter referred to as the "Sublessor's Remaining Obligations".

     7.6  Sublessee shall hold Sublessor free and harmless of and from all
liability, judgments, costs, damages, claims or demands, including reasonable
attorneys fees, arising out of Sublessee's failure to comply with or perform
Sublessee's Assumed obligations.

     7.7  Sublessor agrees to maintain the Master Lease during the entire term
of this Sublease, subject, however, to any earlier termination of the Master
Lease without the fault of the Sublessor, and to comply with or perform
Sublessor's Remaining Obligations and to hold Sublessee free and harmless of and
from all liability, judgments, costs, damages, claims or demands arising out of
Sublessor's failure to comply with or perform Sublessor's Remaining Obligations.

     7.8  Sublessor represents to Sublessee that the Master Lease is in full
force and effect and that no default exists on the part of any party to the
Master Lease.

8.   Assignment of Sublease and Default.

     8.1  Sublessor hereby assigns and transfers to Master Lessor the
Sublessor's interest in this Sublease and all rentals and income arising
therefrom, subject however to terms of Paragraph 8.2 hereof.

     8.2  Master Lessor, by executing this document, agrees that until a default
shall occur in the performance of Sublessor's Obligations under the Master
Lease, that Sublessor may receive, collect and enjoy the rents accruing under
this Sublease. However, if Sublessor shall default in the performance of its
obligations to Master Lessor then Master Lessor may, at its option, receive and
collect, directly from Sublessee, all rent owing and to be owed under this
Sublease, Master Lessor shall not, by reason of this assignment of the Sublease
nor by reason of the collection of the terms from the Sublessee, be deemed
liable to Sublessee for any failure of the Sublesosr to perform and comply with
Sublessor's Remaining Obligation.

                                       3
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     8.3  Sublessor hereby irrevocably authorizes and directs Sublessee, upon
receipt of any written notice from the Master Lessor stating that a default
exists in the performance of Sublessor's obligations under the Master Lease, to
pay to Master Lessor the rents due and to become due under the Sublease.
Sublessor agrees that Sublessee shall have the right to rely upon any such
statement and request from Master Lessor, and the Sublessee shall pay such rents
to Master Lessor without any obligation or right to inquire as to whether such
default exists and notwithstanding any notice from or claim from Sublessor to
the contrary and Sublessor shall have no right or claim against Sublessee for
any such rents so paid by Sublessee.

     8.4  No changes or modifications shall be made to this Sublease without the
consent of Master Lessor.

9.   Consent of Master Lessor.

     9.1  In the event that the Master Lease requires that Sublessor obtain the
consent of Master Lessor to any subletting by Sublessor then, this Sublease
shall not be effective unless, within 10 days of the date hereof, Master Lessor
signs this Sublease thereby giving its consent to this Subletting.

     9.2  In the event that the obligations of the Sublessor under the Master
Lease have been guaranteed by third parties then this Sublease, nor the Master
Lessor's consent, shall not be effective unless, within 10 days of the date
hereof, said guarantors sign this Sublease thereby giving guarantors consent to
this Sublease and the terms thereof.

     9.3  In the event that Master Lessor does give such consent then:

          (a)  Such consent will not release Sublessor of its obligations or
after the primary liability of Sublessor to pay the rent and perform and comply
with aft of the obligations of Sublessor to be performed under the Master Lease.

          (b)  The acceptance of rent by Master Lessor from Sublessee or any one
else Liable under the Master Lease shall not be deemed a waiver by Master Lessor
of any provisions of the Master Lease.

          (c)  The consent to this Sublease shall not constitute a consent to
any subsequent subletting or assignment.

          (d)  In the event of any default of Sublessor under the Master Lease,
Master Lessor may proceed directly against Sublessor, any guarantors or any one
else liable under the Master Lease or this Sublease without first exhausting
Master Lessor's remedies against any other person or entity liable thereon to
Master Lessor.

          (e)  Master Lessor may consent to subsequent sublettings and
assignments of the Master Lease or this Sublease or any amendments or
modifications thereto without notifying Sublessor nor any one else liable under
the Master Lease and without obtaining their consent and such action shall not
relieve such persons from liability.

                                       4
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          (f)  In the event that Sublessor shall default in its obligations
under the Master Lease, then Master Lessor, at its option and without being
obligated to do so, may require Sublessee to attorn to Master Lessor in which
event Master Lesser shall undertake the obligations of Sublessor under this
Sublease from the time of the exercise of said option to termination of this
Sublease but Master Lessor shall not be liable for any prepaid rents nor any
security deposit paid by Sublessee, nor shalt Master Lessor be liable for any
ether defaults of the Sublessor under the Sublease.

     9.4  The signatures of the Master Lessor and any Guarantors of Sublessor at
the end of this document shall constitute their consent to the terms of this
Sublease.

     9.5  Master Lessor acknowledges that, to the best of Master Lessor's
knowledge, no default presently exists under the Master Lease of obligations to
be performed by Sublessor and that the Master Lease is in full force and effect.

     9.6  In the event that Sublessor defaults wider its obligations to be
performed under the Master Lease by Sublessor, Master Lessor agrees to deliver
to Sublessee a copy of any such notice of default. Sublessee shall have the
right to cure any default of Sublessor described in any notice of default within
ten days after service of such notice of default en Sublessee. If such default
is cured by Sublessee then Sublessee shalt have the right of reimbursement and
offset from and against Sublessor.

10.   Brokers Fee.

     10.1  Upon execution hereof by all parties, Sublessor shall pay to
Patterson Realty, a licensed real estate broker (herein called "Broker"), a fee
as set forth in a separate agreement between Sublessor and Broker, the sum of
$5% of agreed for brokerage services rendered by Broker to Sublessor in this
transaction.

     10.2  Sublessor agrees that if Sublessee exercises any option or right of
first refusal granted by Sublessor herein, or any option or right substantially
similar thereto, either to extend the term of this Sublease, to renew this
Sublease, to purchase the Premises, or to lease or purchase adjacent property
which Sublessor may own or in which Sublessor has an interest, or if Broker is
the procuring cause of any lease, sublease, or sale pertaining to the Premises
or any adjacent property which Sublessor may own or in which Sublessor has an
interest, then as to any of said transactions Sublessor shall pay to Broker a
fee, in cash, in accordance with the schedule of Broker in effect at the time of
the execution of this Sublease. Notwithstanding the foregoing. Sublessor's
obligation under this Paragraph 10.2 is limited to a transaction in which
Sublessor is acting as a sublessor, lessor or seller.

     10.3  Master Lessor agrees, by its consent to this Sublease, that if
Sublessee shall exercise any option or right of first refusal granted to
Sublessee by Master Lessor in connection with this Sublease, or any option or
right substantially similar thereto, either to extend the Master Lease, to renew
the Master Lease, to purchase the Premises or any part thereof, or to lease or
purchase adjacent property which Master Lessor may own or in which Master Lessor
has an interest, or if Broker is the procuring cause of any other lease or sale
entered into between Sublessee and Master Lessor pertaining to the Premises, any
part thereof, or any adjacent

                                       5
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property which Master Lessor owns or in which it has an interest, then as to any
of said transactions Master Lessor shall pay to Broker a fee, in cash, in
accordance with the schedule of Broker in effect at the time of its consent to
this Sublease.

     10.4 Any fee due from Sublessor or Master Lessor hereunder shall be due and
payable upon the exercise of any option to extend or renew, as to any extension
or renewal; upon the execution of any new lease, as to a new lease transaction
or the exercise of a right of first refusal to lease; or at the close of escrow,
as to the exercise of any option to purchase or other sale transaction.

     10.5  Any transferee of Sublessor's interest in this Sublease, or of Master
Lessor's interest in the Master Lease, by accepting an assignment thereof, shall
be deemed to have assumed the respective obligations of Sublessor or Master
Lessor under this Paragraph 10. Broker shall be deemed to be a third-party
beneficiary of this paragraph 10.

11.  Attorney's fees. If any party or the Broker named herein brings and action
to enforce the terms hereof or to declare rights hereunder, the prevailing
partying any such action, on trial and appeal, shall be entitled to his
reasonable attorney's fees to be paid by the losing party as fixed by the Court.
The provisions of this paragraph shall inure to the benefit of the Broker named
herein who seeks to enforce a right hereunder.

12.  Additional Provisions.  [If there are no additional provisions draw a line
from this point to the next printed word after the space. If additional
provisions place the same here.]

13.  Sublessor agrees to install doors and partitions to adequately provide
security for Sublessor and Sublessee and Master Lessor consents to the
modifications.

14.  The above Sublease includes all utility usage by Sublessee.

15.  Sublessee shall be entitled to 35 on site parking spaces. Parking spaces to
be designated on Exhibit B attached hereto specifying specific parking spaces
for Sublessee.

16.  Sublessor agrees to have all articles removed from the warehouse area not
later than June 15, 1996.

Previous Sublease between the parties of approximately 1400 sq. ft. of 2705
McMillan Road and executed by Sublessee on September 21, 1995, is cancelled
effective June 15, 1996.

If this Sublease has been filled in it has been prepared for submission to your
attorney for his approval, representation or recommendation is made by the real
estate broker or its agents or employees as to the sufficiency, legal effect, or
tax consequences of this Sublease or the transaction relating thereto.

                                       6
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Executed at San Ramon, CA                 UNITED PARCEL SERVICE (UPS)
            --------------------------    --------------------------------------

on June 18, 1996                          By /s/  Michael W.   [          ]
   -----------------------------------      ------------------------------------

address 2000 Crow Canyon Pl.              By____________________________________
        ------------------------------

          San Ramon, CA 94583                       "Sublessor" (Corporate Seal)
--------------------------------------

Executed at San Luis Obispo, CA           CENTRAL COAST SURFBOARD (CCS)
            --------------------------    --------------------------------------

on June 13, 1996                          By /s/  James R. Hall, CFO
   -----------------------------------      ------------------------------------

address ______________________________    By ___________________________________

                                                    "Sublessee" (Corporate Seal)
______________________________________

Executed at __________________________     Arthur Segal Trust
                                           -------------------------------------

on ___________________________________    By /s/ Arthur Segal [        ]
                                            ------------------------------------

address ______________________________    By ___________________________________

                                                "Master Lessor" (Corporate Seal)
______________________________________

Executed at __________________________    ______________________________________

on ___________________________________    ______________________________________

address ______________________________    ______________________________________

                                                                    "Guarantors"
______________________________________

For these forms call the American Industrial Real Estate Association, (213) 687-
8777

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                                   Exhibit A
                              UPS - CCS SUBLEASE

                           [FLOOR PLAN APPEARS HERE]

                                   EXHIBIT B
                                    UPS/CCS

                           [FLOOR PLAN APPEARS HERE]

                                       8
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                      FIRST ADDENDUM TO STANDARD SUBLEASE

This is an amendment to the standard sublease dated May 15th, 1996 between
United Parcel Service (UPS), sublessor, and Central Coast Surfboard, (CCS)
sublessee.

The Sublease is hereby amended as follows:

PARAGRAH 3, TERM:
The term of the Sublease shall be for 3 years commencing October 1, 1998 and
expiring on September 30th, 2001.

RENT:
Rental shall be payable as follows:

          October 1998 through September 1999        $5250.00/mo.
          October 1999 through September 2000        $5400.00/mo.
          October 2000 through September 2001        $5550.00/mo.

PREMISES:
The Premises shall be the identical premises contained in the original sublease.

RIGHT OF CANCELLATION:
CCS to have the right to cancel the sublease with an effective cancellation date
any time after October 1, 2000 by providing USP 6 months or more advance notice
of intent to cancel the Sublease.

RECOVERY OF PREMISES BY LANDLORD.
In the event CCS elects to terminate it's sublease any time after October 1,
2000, UPS' leased premises shall be modified on the effective date of
termination to be only those premises currently occupied by UPS (approximately
5550 sq. ft. as identified on Exhibit "A" of the sublease.)

All other terms and conditions of the previously existing sublease remain in
effect.

UNITED PARCEL SERVICE

By /s/ Robert W. [             ]
  ------------------------------

CENTRAL COAST SURFBOARD

By /s/ Michael Chaney          .
  ------------------------------

THE ARTHUR SEGAL TRUST

By /s/ Arthur Segal, Trustee   .
  ------------------------------

                                       9<PAGE>

  California Chapters of the Society of Industrial and Office Realtors, Inc.
             Industrial Real Estate Lease (Multi-Tenant Facility)

ARTICLE ONE.    BASIC TERMS

     This Article One contains the Basic Terms of this Lease between the
Landlord and Tenant named below.  Other Articles, Sections and Paragraphs of the
Lease referred to in this.  Article One explain and define the Basic Terms and
are to be read in conjunction with the Basic Terms.

     Section 1.01.  DATE OF LEASE:  January 27, 1992
     Section 1.02.  LANDLORD (INCLUDE LEGAL ENTITY): Arthur Segal Trust,
                    do Patterson Realty,
     Address of Landlord:  1319 Marsh Street, San Luis Obispo, CA  93401
     Section 1.03.  TENANT (INCLUDE LEGAL ENTITY):  Central Coast
                    Surfboards, Inc.
     Address of Tenant:  4035 South Higuera, San Luis Obispo, CA  93401

     Section 1.04. PROPERTY: The Property is part of, Landlord's multi-tenant
real property development known as 2701-2705 McMillan Road, San Luis Obispo, CA
93401 and described or depicted in Exhibit "A" (the "Project"). The Project
includes the land, the buildings and all other improvements located on the land,
and the common areas described in Paragraph 4.05(a). The Property is (include
street address, approximate square footage and description) 8320 square feet
located on the East side of the parcel. The property does not include any on
site parking and any rights to parking must be obtained from UPS who controls
the parking lot. The calculation includes a proportionate share of the
meter/utility room used in common with other building tenants.

     Section 1.05. LEASE TERM: 5 years 0 months beginning on May 1, 1992 or such
other date as is specified in this Lease, and ending on April 30, 1997. See
Exhibit B

     Section 1.06. PERMITTED USES:  (See Article Five) Off ices, warehouse and
mail order operations of Central Coast Surfboards, Inc.

     Section 1.07. TENANT'S GUARANTOR:  (If none, so state) None

     Section 1.08.  BROKERS:  (See Article Fourteen) (If none, so state)

     Landlord's Broker:  Thomas R. Patterson, Inc.

     Tenant's Broker:  None

     Section 1.09.  COMMISSION PAYABLE TO LANDLORD'S BROKER:  (See Article
Fourteen) $
<PAGE>

     Section 1.10.  INITIAL SECURITY DEPOSIT:  (See Section 3.03) $ None

     Section 1.11.  VEHICLE PARKING SPACES ALLOCATED TO TENANT:  (See Section
4.05) None-See Exhibit B

     Section 1.12.    RENT AND OTHER CHARGES PAYABLE BY TENANT:

     (a) BASE RENT: Three Thousand Seven Hundred Forty-Four and No/100 Dollars
($3,744.00)) per month for the first Twelve months, as provided in Section 3.01,
and shall be increased on the first day of the thirteenth month after the
Commencement Date, (i) as provided in Section 3.02, but there will he a maximum
annual increase of 6%.

     (b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02);
(ii) Utilities (See Section 4.03); (iii) Insurance Premiums (See Section 4,04);
(iv) Tenant's Initial Pro Rata Share of Common Area Expenses 34 % (See Section
4.05); (v) Impounds for Insurance Premiums and Property Taxes (See Section
4.08); (vi) Maintenance, Repairs and Alterations (See Article Six).

     Section 1.13.  LANDLORD'S SHARE OF PROFIT ON ASSIGNMENT OR SUBLEASE:  (See
Section 9.05) N/A N/A percent (___%) of the Profit (the "Landlord's Share").

     Section 1.14. RIDERS: The following Riders are attached to and made a part
of this Lease: (If none, so state)

     Exhibit A - Building

     Exhibit B - Additional Terms

     Exhibit C - Improvements (To be attached when revised architectural
drawings are, completed)

ARTICLE TWO.  LEASE TERM

     Section 2.01. LEASE OF PROPERTY FOR LEASE TERM. Landlord leases the
Property to Tenant and Tenant leases the Property from Landlord for the Lease
Term. The Lease Term is' for the period stated in Section 1 .05 `above. and
shall begin and end on the dates specified in Section 1.05 above, unless the
beginning or end of the Lease Term is changed under any provision of this Lease.
The "Commencement Date" shall be the date specified in Section 1.05 above for
the beginning of the Lease Term, unless advanced or delayed under any provision
of this Lease.

     Section 2.02. DELAY IN COMMENCEMENT. Landlord shall not be liable to Tenant
if Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord's non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay in delivery of possession of the Property to Tenant,
plus the number of days necessary to end the Lease Term on the last day of a
month. If Landlord does not deliver possession of the Property to Tenant within
sixty (60) days after the Commencement Date, Tenant may elect to cancel this
Lease by giving written notice to Landlord within ten (10) days after the sixty
(60) -day period ends. If Tenant gives such notice, the Lease shall be cancelled
and neither Landlord nor Tenant shah have any further obligations to the other

                                       2
<PAGE>

If Tenant does not give such notice, Tenant's right to cancel the Lease shall
expire and the Lease Term shall commence upon the delivery of possession of the
Property to Tenant. If delivery of possession of the Property to Tenant is
delayed, Landlord and Tenant shall, upon such delivery, execute an amendment to
this Lease setting forth the actual Commencement Date and expiration date of the
Lease. Failure to execute such amendment shall not affect the actual
Commencement Date and expiration date of the Lease

     Section 2.03. EARLY OCCUPANCY. If Tenant occupies, the Property prior to
the Commencement Date, Tenant's occupancy of the Property shall be, subject to
all of the provisions of this Lease. Early occupancy of the Property shall not
advance the expiration date of this Lease. Tenant shall pay Base Rent and all
other charges specified in this Lease for the early occupancy period.

     Section 2.04.  HOLDING OVER.  Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease.  Tenant shall reimburse
Landlord for and indemnify Landlord against all damages which Landlord incurs
from Tenant's delay in vacating the Property.  If Tenant does not vacate the
Property upon the expiration or earlier termination of the Lease and Landlord
thereafter accepts rent from Tenant, Tenant's occupancy of the Property shall be
a "month-to-month" tenancy, subject to all of the terms of this Lease applicable
to a month-to-month tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).

ARTICLE THREE.  BASE RENT

     Section 3.01.  TIME AND MANNER OF PAYMENT.  Upon execution of `this Lease,
Tenant shall pay Landlord, the Base Rent in the amount stated in Paragraph
1.12(a) above for the first month of the Lease Term.  On the first day of the
second month of the Lease Term and each month thereafter, Tenant shall pay
Landlord the Base Rent, in advance, without offset, deduction or prior demand.
The Base Rant shall be payable at Landlord's address or at such other place as
Landlord may designate in writing.

     Section 3.02. COST OF LIVING INCREASES. The Base Rent shall be increased on
each date (the "Rental Adjustment Date") stated in Paragraph 1.12(a) above in
accordance with the increase in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for All Urban, Consumers (all items for
the geographical Statistical Area In which the Property is located on the basis
of 1982-1984 = 100) (the "Index") as follows:

          (a) The Base Rent (the "Comparison Base Rent") in effect immediately
before each Rental Adjustment Date shall be increased by the percentage that the
Index has increased from the date (the "Comparison Date") on which payment of
the Comparison Base Rent began through the month in which the applicable Rental
Adjustment Date occurs. The Base Rent shall not be reduced by reason of such
computation. Landlord shall notify Tenant of each increase by a written
statement which shall include the Index for the applicable Comparison Date, the
Index for the applicable Rental Adjustment Date, the percentage increase between
those two Indices, and the new Base Rent. Any increase in the Base Rent provided
for in this Section 3.02 shall be subject to any minimum pr maximum increase, if
provided for in Paragraph 1.12(a).

                                       3
<PAGE>

          (b) Tenant shall pay the new Base Rent from the applicable Rental
Adjustment Date until the next Rental Adjustment Date. Landlord's notice may be
given after. the applicable. Rental Adjustment Date of the increase, and Tenant
shall pay Landlord the accrued rental adjustment for the months elapsed between
the effective date of the increase and Landlord's notice of such increase within
ten (10) days' after Landlord's' notice. If the `format or components of the
Index are materially changed after the Commencement Date, Landlord shall
substitute an index which is published by the Bureau of Labor Statistics or
similar agency and which is most nearly equivalent to the Index in effect on the
Commencement. Date. The substitute index shall be used to calculate the increase
in the Base' Rent unless Tenant objects to such index in writing within fifteen
(15) days after receipt of Landlord's notice. If Tenant objects, Landlord and
Tenant shall submit the selection of the substitute index for binding
arbitration in accordance with the rules and regulations of the American
Arbitration Association at its office closest to the Property. The costs of
arbitration shall be borne equally by Landlord and Tenant.

     Section 3.03.  SECURITY DEPOSIT; INCREASES.

          (a) Upon the execution of this Lease, Tenant shall deposit with
Landlord a cash Security Deposit in the amount set forth in Section 1.10 above.
Landlord may apply all or part of the Security Deposit to any unpaid rent or
other charges due from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the Security Deposit, Tenant shall restore the
Security Deposit to its full amount within ten (10) days after Landlord's
written request. Tenant's failure to do so shall be a material default under
this Lease. No interest shall be paid on the Security Deposit. Landlord shall
not be required to keep the Security Deposit separate from its other accounts
and no trust relationship is created with respect to the Security Deposit.

          (b) Each time the Base Rent Is increased, Tenant shall deposit
additional funds with Landlord sufficient to increase the Security Deposit to an
amount which bears the same relationship to the adjusted Base Rent as the
initial Security Deposit bore to the Initial Base Rent.

     Section 3.04. TERMINATION; ADVANCE PAYMENTS. Upon termination of this
Lease. under Article Seven (Damage or Destruction), Article Eight (Condemnation)
or any other termination not resulting from Tenant's default, and after Tenant
has vacated the Property in the manner required by this Lease, Landlord shall
refund or credit to Tenant (or Tenant's successor) the unused portion of the
Security Deposit, any advance rent or other advance payments made by Tenant to
Landlord, and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.

ARTICLE FOUR.  OTHER CHARGES PAYABLE BY TENANT

     Section 4.01. ADDITIONAL RENT. All charges payable by Tenant other than
Base Rent are called "Additional Rent." Unless this Lease provides otherwise,
Tenant shall pay all Additional Rent then due with the next monthly installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.

                                       4
<PAGE>

     Section 4.02.  PROPERTY TAXES.

          (a) REAL PROPERTY TAXES. Tenant shall pay all real property taxes on
the Property (including any fees, taxes or assessments against, or as a result
of, any tenant Improvements installed on the Property by or for the benefit of
Tenant) during the Lease Term. Subject to Paragraph 4.02(c) and Section 4.08
below, such payment shall be made at least ten (10) days prior to the
delinquency date of the taxes. Within such ten (10) -day period, Tenant shall
furnish Landlord with satisfactory evidence that the real property taxes have
been paid. Landlord shall reimburse Tenant for any real property taxes paid by
Tenant covering any period of time prior to or after the Lease Term. If Tenant
fails to pay the real property taxes when due, Landlord may pay the taxes and
Tenant shall reimburse Landlord for the amount of such tax payment as Additional
Rent.

          (b) DEFINITION OF "REAL PROPERTY TAX." "Real property tax" means: (i)
any fee, license fee, license tax, business license fee, commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority against
the Property; (ii) any tax on the Landlord's right to receive, or the receipt
of, rent or income from the Property or against Landlord's business of leasing
the Property; (iii) any tax or charge for fire protection, streets, sidewalks,
road maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax Imposed upon this transaction or based upon a
re-assessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord's interest in the
Property; and (v) any charge or fee replacing any tax previously Included within
the definition of real property tax. "Real property tax" does not, however,
include Landlord's federal or state income, franchise, inheritance or estate
taxes.

          (c) JOINT ASSESSMENT. If the Property is not separately assessed,
Landlord shall reasonably determine Tenant's share of the real property tax
payable by Tenant `under Paragraph 4.02(a) from the assessor's worksheets or
other reasonably available information. Tenant shall pay such share to Landlord
within fifteen (15) days after receipt of Landlord's written statement.

          (d)  PERSONAL PROPERTY TAXES.

               (i) Tenant shall pay all taxes charged against trade fixtures,
     furnishings, equipment or any other personal property belonging to Tenant.
     Tenant shall try to have personal property taxed separately from the
     Property.

               (ii) If any of Tenant's personal property is taxed with the
     Property, Tenant shall pay Landlord the taxes for the personal property
     within fifteen (15) days after Tenant receives a written statement from
     Landlord for such personal property taxes.

     Section 4.03.  UTILITIES.  Tenant shall pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer service,
telephone, water, refuse disposal and other utilities, and services supplied to
the Property.  However, if any services or utilities are jointly metered with
other property, Landlord shall make a reasonable determination of Tenant's
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord `within fifteen (15) days after receipt of Landlord's
written statement.

                                       5
<PAGE>

     Section 4.04.  INSURANCE POLICIES.

          (a) LIABILITY INSURANCE. During the Lease Term, Tenant shall maintain
a policy of commercial general liability insurance (sometimes known as broad
form comprehensive general liability insurance) insuring Tenant against
liability for bodily injury, property damage (including loss of use of property)
and personal injury arising out of the operation, use or occupancy of the
Property. Tenant shall name Landlord as an additional insured under such policy.
The initial amount of such insurance shall be One Million Dollars ($1,000,000)
per occurrence and shall be subject to periodic increase based upon Inflation,
increased liability awards, recommendation of Landlord's professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance shall not limit Tenant's liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord
insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The policy obtained by Landlord shall not be
contributory and shall not provide primary insurance.

          (b) PROPERTY AND RENTAL INCOME INSURANCE. During the Lease Term,
Landlord shall maintain policies of insurance covering loss of or damage to the
Property in the full amount of its replacement value. Such policy shall contain
an Inflation Guard Endorsement and shall provide protection against all perils
included within the classification of fire, extended coverage, vandalism,
malicious mischief, special extended perils (all risk), sprinkler leakage and
any other perils which Landlord deems reasonably necessary. Landlord shall have
the right to obtain flood and earthquake insurance if required by any lender
holding a security interest in the Property. Landlord shall not obtain insurance
for Tenant's fixtures or equipment or building improvements installed by Tenant
on the Property. During the Lease Term, Landlord shall also maintain a rental
income insurance policy, with loss payable to Landlord, in an amount equal to
one year's Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord's
or Tenant's insurance policies maintained pursuant to this Section 4.04, in an
amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or
permit anything to be done which invalidates any such insurance policies.

          (c) PAYMENT OF PREMIUMS. Subject to Section 4.08, Tenant shall pay all
premiums for the insurance policies described in Paragraphs 4.04(a) and (b)
(whether obtained by Landlord or Tenant) within fifteen (15) days after Tenant's
receipt of a copy of the premium statement or other evidence of the amount due,
except Landlord shall pay all premiums for non-primary comprehensive public
liability insurance which Landlord elects to obtain as provided in Paragraph
4.04(a). For insurance policies maintained by Landlord which cover improvements
on the entire Project, Tenant shall pay Tenant's prorated share of the premiums,
in accordance with the formula in Paragraph 4,05(e) for determining Tenant's
share of Common Area costs. If insurance policies maintained by Landlord cover
improvements on real property other than the Project, Landlord shall deliver to
Tenant a statement of the premium applicable to the Property showing in
reasonable detail how Tenant's share of the premium was computed. If the Lease

                                       6
<PAGE>

Term expires before the expiration of an insurance policy maintained by
Landlord, Tenant shall be liable for Tenant's prorated share of the insurance
premiums. Before the Commencement Date, Tenant shall deliver to Landlord a copy
of any policy of insurance which Tenant Is required to maintain under this
Section 4.04. At least thirty (30) days prior to the expiration of any such
policy, Tenant shall deliver to Landlord a renewal of such policy. As an
alternative to providing a policy of insurance, Tenant shall have the right to
provide Landlord a certificate of insurance, executed by an authorized officer
of the insurance company, showing that the insurance which Tenant is required to
maintain under this Section 4.04 Is in full f9rce and effect and containing such
other information which Landlord reasonably requires.

          (d) GENERAL INSURANCE PROVISIONS.

              (i) Any Insurance which Tenant is required to maintain under this
     Lease shall include a provision which requires the insurance carrier to
     give Landlord not less than thirty (30) days' written notice prior to any
     cancellation or modification of such coverage.

              (ii) If Tenant fails to deliver any policy, certificate or renewal
     to Landlord required under this Lease within the prescribed time period or
     if any such policy is cancelled or modified during the Lease Term without
     Landlord's consent, Landlord may obtain such insurance, in which case
     Tenant shall reimburse Landlord for the cost of such insurance within
     fifteen (15) days after receipt of a statement that `indicates the cost of
     such insurance.

              (iii) Tenant shall maintain all insurance required under this
     Lease with companies holding a "General Policy Rating" of A-12 or better,
     as set forth in the most current issue of "Best Key Rating Guide". Landlord
     and Tenant acknowledge the insurance markets are rapidly changing and that
     insurance in the form and amounts described in this Section 4.04 may not be
     available in the future. Tenant acknowledges that the insurance described
     in this Section 4.04 is for the primary benefit of Landlord. If at any time
     during the Lease Term, Tenant is unable to maintain the insurance required
     under the Lease, Tenant shall nevertheless maintain insurance coverage
     which is customary and commercially reasonable in the insurance industry
     for Tenant's type of business, as that coverage may change from time to
     time. Landlord makes no representation as to the adequacy of such insurance
     to protect Landlord's or Tenant's interests. Therefore, Tenant shall obtain
     any such additional property, or liability insurance which Tenant deems
     necessary to protect Landlord and Tenant.

              (iv) Unless prohibited under any applicable insurance policies
     maintained, Landlord and Tenant each hereby waive any and all rights of
     recovery against the other, or against the officers, employees, agents or
     representatives of the other, for loss of or damage to its property or the
     property of others under its control, if such loss or damage is covered by
     any insurance policy in force (whether or not described in this Lease) at
     the Lime of such loss or damage. Upon obtaining the required policies of
     insurance, Landlord and Tenant shall give notice to the insurance carriers
     of this mutual waiver of subrogation.

                                       7
<PAGE>

     Section 4.05.  COMMON AREAS; USE, MAINTENANCE AND COSTS.

          (a) COMMON AREAS. As used in this Lease, "Common Areas" shall mean all
areas within the Project which are available for the common use of tenants of'
the Project and which are not leased or held for the exclusive use of Tenant or
other tenants, including, but not limited to driveways sidewalks, loading areas,
access roads, corridors, landscaping and planted areas. Landlord, from time to
time, may change the size, location, nature and use of any of the Common Areas,
convert Common Areas into leaseable areas, construct additional parking
facilities (including parking structures) in the Common Areas, and increase or
decrease Common Area land and/or facilities. Tenant acknowledges that such
activities may result in inconvenience to Tenant. Such activities and changes
are permitted if they do not materially affect Tenant's use of the Property.

          (b) USE OF COMMON AREAS. Tenant shall have the nonexclusive right (in
common with other tenants and all others to whom Landlord has granted or may
grant such rights) to use the Common Areas for the purposes intended. subject to
such reasonable rules and regulations as Landlord may establish from time to
time. Tenant shall abide by such rules and regulations and shall use its best
effort to cause others who use the Common Areas with Tenant's express or implied
permission to abide by Landlord's rules and regulations. At any time, Landlord
may close any Common Areas to perform any acts in the Common Areas as, in
Landlord's judgment, are desirable to improve the Project. Tenant shall not
interfere with the rights of Landlord, other tenants or any other person
entitled to use the' Common Areas. Tenant or its employees may not use the
parking lot without permission of UPS.

          (c) SPECIFIC PROVISION RE: VEHICLE PARKING. Tenant shall be entitled
to use the number of vehicle parking spaces in the Project allocated to Tenant
in Section 1.11 of the Lease without paying any additional rent. Tenant's
parking shall not be reserved and shall be limited to vehicles no larger than
standard size automobiles or pickup utility vehicles. Tenant shall not cause
large trucks or other large vehicles to be parked within the Project or on the
adjacent public streets. Temporary parking of large delivery vehicles in the
Project may be permitted by the rules and regulations established by Landlord.
Vehicles shall be parked only in striped parking spaces and not in driveways,
loading areas or other locations not specifically designated for parking.
Handicapped spaces shall only be used by those legally permitted to use them. If
Tenant parks more vehicles in the parking area than the number set forth in
Section 1.11 of this Lease, such conduct shall be a material breach of this
Lease. In addition to Landlord's other remedies under the Lease, Tenant shall
pay a daily charge determined by Landlord for each such additional vehicle.

          (d) MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common
Areas in good order, condition and repair and shall operate the Project, in
Landlord's sole discretion, as a first-class industrial/commercial real property
development. Tenant shall pay Tenant's pro rata share (as determined below) of
all costs incurred by Landlord for the operation and maintenance of the Common
Areas. Common Area costs include, but are not limited to, costs and expenses for
the following: gardening and landscaping; utilities, water and sewage charges;
maintenance of signs (other than tenants' signs); premiums for liability,
property damage, fire and other types of casualty insurance on the Common Areas
and worker's compensation insurance; all property taxes and assessments levied
on or attributable to the

                                       8
<PAGE>

Common Areas and all Common Area improvements; all. personal property taxes
levied on or attributable to personal property used in connection with the
Common Areas; straight-line depreciation on personal property owned by Landlord
which is consumed in the operation or maintenance of the Common Areas; rental or
lease payments paid by Landlord for rented or leased personal property used in
the operation or maintenance of the Common Areas; fees for required licenses and
permits; repairing, resurfacing, repaving, maintaining, painting, lighting,
cleaning, refuse removal, security and similar items; reserves for roof
replacement and exterior painting and other appropriate reserves; and a
reasonable allowance to Landlord for Landlord's supervision of the Common Areas
(not to exceed five percent (5%) of the gross rents of the Project for the
calendar year). Landlord may cause any or all of such services to be provided by
third parties and the cost of such services shall be included in Common Area
costs. Common Area costs shall not include depreciation of real property which
forms part of the Common Areas.

          (e) TENANT'S SHARE AND PAYMENT. Tenant shall pay Tenant's annual pro
rata share of all Common Area costs (prorated for any fractional month) upon
written notice from Landlord that such costs are due and payable, and in any
event prior to delinquency. Tenant's pro rata share shall be calculated by
dividing the square foot area of the Property, as set forth In Section 1.04 of
the Lease, by the aggregate square foot area of the Project which is leased or'
held for lease by tenants, as of the date on which the computation is made.
Tenant's initial pro rata share is set out in Paragraph 1.13(b). Any changes in
the Common Area costs and/or the aggregate area of the Project leased or held
for lease during the Lease Term shall be effective on the first day of the month
after such change occurs. Landlord may, at Landlord's election, estimate in
advance and charge to Tenant's Common Area costs, all real property taxes for
which Tenant is liable under Section 4.02 of the Lease, all insurance premiums
for which Tenant is liable under Section 4.04 of the Lease, all maintenance and
repair costs for which Tenant is liable under Section 6.04 of the Lease, and all
other Common Area costs payable by Tenant hereunder. At Landlord's election,
such statements of estimated Common Area costs shall be delivered monthly,
quarterly or at any other periodic intervals to be designated by Landlord.
Landlord may adjust such estimates at any time based upon Landlord's experience
and reasonable anticipation of costs. Such adjustments shall be effective as of
the next rent payment date after notice !o Tenant. Within sixty (60) days after
the end of each calendar year of the Lease Term, Landlord shall deliver to
Tenant a statement prepared in accordance with generally accepted accounting
principles setting forth, in reasonable detail, the Common Area costs paid or
incurred by Landlord during the preceding calendar year and Tenant's pro rata
share. Upon receipt of such statement, there shall be an adjustment between
Landlord and Tenant, with payment to or credit given by Landlord (as the case
may be) so that Landlord shall receive the entire amount of Tenant's share of
such costs and expenses for such period.

     Section 4.06. LATE CHARGES. Tenant's failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain, Such costs may include, but are
nOt limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.

                                       9
<PAGE>

     Section 4.07. INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant
to Landlord which is not paid when due shall bear interest at the rate of
fifteen percent (15%) per annum from the due date of such amount. However,
interest shall not be payable on late charges to be paid by Tenant under this
Lease. The payment of interest on such amounts shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby decreased
to the maximum legal interest rate Permitted by law.

     Section 4.08.  Impounds for Insurance Premiums and Real Property Taxes.  if
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12) -month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable by Tenant under this Lease,
together with each payment of Base Rent.  Landlord shall hold such payments in a
non-interest bearing impound account, If unknown, Landlord shall reasonably
estimate the amount of real property taxes and insurance premiums when due.
Tenant shall pay any deficiency of funds in the impound account to Landlord upon
written request.  lf Tenant defaults under this Lease, Landlord may apply any
funds in the impound account to any obligation then due under this Lease.

ARTICLE FIVE.  USE OF PROPERTY

     Section 5.01.  PERMITTED USES.  Tenant may use the Property only for the
Permitted Uses set forth in Section 1.00 above.

     Section 5.02. MANNER OF USE. Tenant shall not cause pr permit the Property
to be used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
tenants of the Project, or which constitutes a nuisance or waste, Tenant shall
obtain and pay for all permits, including a Certificate of Occupancy, required
for Tenant's occupancy of the Property and shall promptly take all actions
necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.

     Section 5.03. HAZARDOUS MATERIALS. As used in this Lease, the term
"Hazardous Material" means any flammable items, explosives, radioactive
materials, hazardous or toxic substances, material or waste or related
materials, including any substances defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local laws or regulations, including without limitation petroleum-based
products, paints, solvents, lead, cyanide, DDT, printing inks, acids,
pesticides, ammonia compounds and other chemical products, asbestos, PCBs and
similar compounds, and including any different products and materials which are
subsequently found to have' adverse effects on the environment or the health and
safety of persons. Tenant shall not cause or permit any Hazardous Material to be
generated, produced, brought upon, used,, stored, treated or disposed of in or
about the Property by Tenant,

                                       10
<PAGE>

its agents, employees, contractors, sublessees or invitees without the prior
written consent of Landlord, Landlord `shall be entitled to take into account
such other factors or facts as Landlord may reasonably determine to be relevant
in determining whether to grant or withhold consent to Tenant's proposed
activity with respect to Hazardous Material. In no event, however, shall
Landlord be required to consent to the installation or use of any storage tanks
on the Property.

     Section 5.04.  SIGNS AND AUCTIONS.  Tenant shall not place any signs on the
Property without Landlord's prior written consent.  Tenant shall not conduct or
permit any auctions or sheriff's sales at the Property.

     Section 5.05. INDEMNITY.  Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from:  (a)
Tenant's use of the Property; (b) the conduct of Tenant's business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default In the performance of Tenant's obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant.  Tenant shall defend Landlord against any
such cost, claim or liability at Tenant's expense with counsel reasonably
acceptable to Landlord or, at Landlord's election, Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim.  As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord's gross
negligence or willful misconduct.  As used in this Section, the term "Tenant"
shall include Tenant's employees, agents, contractors and invitees, if
applicable.

     Section 5.06.  LANDLORD'S ACCESS.  Landlord or its agents may enter the
Property at all reasonable times to show the Property to potential buyers,
investors or tenants or other parties; to do any other act or to inspect and
conduct tests in order to monitor Tenant's compliance with all applicable
environmental laws and all laws governing the presence and use of Hazardous
Material; or for any other purpose Landlord deems necessary.  Landlord shall
give Tenant prior notice of such entry, except in the case of an emergency.
Landlord may place customary "For Sale" or "For Lease" signs on the Property.

     Section 5.07.  QUIET POSSESSION.  If Tenant pays the rent and complies with
all other terms of this Lease, Tenant may occupy and enjoy the Property for the
full Lease Term, subject to the provisions of this Lease.

ARTICLE SIX.  CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS

     Section 6.01.  EXISTING CONDITIONS.  Tenant accepts the Property in its
condition as of the execution of the Lease, subject to all recorded matters,
laws, ordinances, and governmental regulations and orders.  Except as provided
herein, Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the condition of the Property or the suitability
of the Property for Tenant's intended use.  Tenant represents and warrants that
Tenant has made its own inspection of and inquiry regarding the condition of the
Property and is not

                                       11
<PAGE>

relying on any representations of Landlord or any Broker with respect thereto.
If Landlord or Landlord's Broker has provided a Property Information Sheet or
other Disclosure Statement regarding the Property, a copy is attached as an
exhibit to the Lease. See Exhibit B.

     Section 6.02.  EXEMPTION OF LANDLORD FROM LIABILITY.  Landlord shall not be
liable for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from:  (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of the Project, or from other sources or places;
or (d) any act or omission of any other tenant of the Project.  Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant.  The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord's gross negligence or willful misconduct.

     Section 6.03.  LANDLORD'S OBLIGATIONS.

          (a) Except as provided in Article Seven (Damage or Destruction) and
Article Eight (Condemnation), Landlord shall keep the following in good order,
condition and repair: the foundations, exterior walls and roof of the Property
(including painting the exterior surface of the exterior walls of the Property
not. more often than once every five (5) years, if necessary) and all components
of electrical, mechanical, plumbing, heating and air conditioning systems and
facilities located in the Property which are concealed or used in common by
tenants of the Project. However, Landlord shall not be obligated to maintain or
repair windows, doors, plate glass or the interior surfaces of exterior walls.
Landlord shall make repairs under this Section 6.03 within a reasonable time
after receipt of written notice from Tenant of the need for such repairs.

          (b) Tenant shall pay or reimburse Landlord for all costs Landlord
incurs under Paragraph 6.03(a) above as Common Area costs as provided for in
Section 4.05 of the Lease. Tenant waives the benefit of any statute in effect
now or in the future which might give Tenant the right to make repairs at
Landlord's expense or to terminate this Lease due to Landlord's failure to keep
the Property in good order, condition and repair.

     Section 6.04.  TENANT'S OBLIGATIONS.

          (a) Except as provided in Section 6.03, Article Seven (Damage or
Destruction) and Article Eight (Condemnation), Tenant shall keep all portions of
the Property (including structural, nonstructural, interior, systems and
equipment) in good order, condition and repair (including interior repainting
and refinishing, as needed). If any portion of the Property or any system or
equipment in the Property which Tenant is obligated to repair cannot be fully
repaired or restored, Tenant shall promptly replace such portion of the Property
or system or equipment in the Property, regardless of whether the benefit of
such replacement extends beyond the Lease Term; but if the benefit or useful
life of such replacement extends beyond the Lease Term (as such term may be
extended by exercise of any options), the useful

                                       12
<PAGE>

life of such replacement shall be prorated over the remaining portion of the
Lease Term (as extended), and Tenant shall be liable only for that portion of
the cost which is applicable to the Lease Term (as extended). Tenant shall
maintain a preventive maintenance contract providing for the regular Inspection
and maintenance of the heating and air conditioning system by a licensed heating
and air conditioning contractor, unless Landlord maintains such equipment under
Section 6.03 above. If any part of the Property or the Project is damaged by any
act or omission of Tenant, Tenant shall pay Landlord the cost of repairing or
replacing such damaged property, whether or not Landlord would otherwise be
obligated to pay the cost of maintaining or repairing such property. It is the
intention of Landlord and Tenant that at all times Tenant shall maintain the
portions of the Property which Tenant is obligated to maintain in an attractive,
first-class and fully operative condition,

          (b) Tenant shall fulfill all of Tenant's obligations under this
Section 6.04 at Tenant's sole expense, If Tenant fails to maintain, repair or
replace the Property as required by this Section 6.04, Landlord may, upon ten
(10) days' prior notice to Tenant (except that no notice shall be required in
the case of an emergency), enter the Property and perform such maintenance or
repair (including replacement, as needed) on behalf of Tenant. In such case,
Tenant shall reimburse Landlord for all costs incurred in performing such
maintenance or repair immediately upon demand.

     Section 6.05.  ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.

          (a) Tenant shall not make any alterations, additions, or improvements
to the Property without Landlord's prior written consent, except for non-
structural alterations which do not exceed Ten Thousand Dollars ($10,000) in
cost cumulatively over the Lease Term and which are not visible from the outside
of any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord's written request. All alterations, additions, and Improvements
shall be done in `a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with "as built"
plans, copies of all construction contracts, and proof of payment for all labor
and materials.

          (b) Tenant shall pay when due all claims for labor and material
furnished to the Property. Tenant shall give Landlord at least twenty (20) days'
prior written notice of the commencement of any work on the Property, regardless
of whether Landlord's consent to such work is required. Landlord may elect to
record and post notices of non-responsibility on the Property.

     Section 6.06. CONDITION UPON TERMINATION. Upon the termination of the
Lease, Tenant shall surrender the Property to Landlord, broom clean and in the
same condition as received except for ordinary wear and tear which Tenant was
not otherwise obligated to remedy under any provision of this Lease. However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or Destruction). In addition, Landlord may
require Tenant to remove any alterations, additions or improvements (whether or
not made with Landlord's consent) prior to the expiration of the Lease and to
restore the Property

                                       13
<PAGE>

to its prior condition, all at Tenant's expense. All alterations, additions and
improvements which Landlord has not required Tenant to remove shall become
Landlord's property and shall be surrendered to Landlord upon the expiration or
earlier termination of the Lease, except that Tenant may remove any of Tenant's
machinery or equipment which can be removed without material damage to the
Property. Tenant shall repair, at Tenant's expense, any damage to the Property
caused by the removal of any such machinery or equipment. In no event, however,
shall Tenant remove any of the following materials or equipment (which shall be
deemed Landlord's property) without Landlord's prior written consent: any power
wiring or power panels; lighting or lighting fixtures; wall coverings; drapes,
blinds or other window coverings; carpets or other floor coverings; heaters, air
conditioners or any other heating or air conditioning equipment; fencing or
security gates; or other similar building operating equipment and decorations.

ARTICLE SEVEN.  DAMAGE OR DESTRUCTION

     Section 7.01.  PARTIAL DAMAGE TO PROPERTY.

          (a) Tenant shall notify Landlord In writing immediately upon the
occurrence of any damage to the Property. If the Property is only partially
damaged (i.e., less than fifty percent (50%) of the Property is untenantable as
a result of such damage or less than fifty percent (50%) of Tenant's operations
are materially impaired) and if the proceeds received by Landlord from the
insurance policies described in Paragraph 4.04(b) are sufficient to pay for the
necessary repairs, `this Lease shall remain in effect and Landlord shall repair
the damage as soon as reasonably possible. Landlord may elect (but Is not
required) to repair any damage to Tenant's fixtures, equipment, or improvements.

          (b) If the insurance proceeds received by Landlord are not sufficient
to pay the entire cost of repair, or if the cause of the damage is not covered
by the insurance policies which Landlord maintains under Paragraph 4.04(b),
Landlord may elect either to (i) repair the damage as soon as reasonably
possible, in which case this Lease shall remain in full force and effect, or
(ii) terminate this Lease as of the date the damage occurred. Landlord shall
notify Tenant within thirty (30) days after receipt of notice of the occurrence
of the damage whether Landlord elects to repair the damage or terminate the
Lease. If Landlord elects to repair the damage, Tenant shall pay Landlord the
"deductible amount" (if any) under Landlord's insurance policies and, if the
damage was due to an act or omission of Tenant, or Tenant's employees, agents,
contractors or invitees, the difference between the actual cost of repair and
any insurance proceeds received by Landlord. If Landlord elects to terminate
this Lease, Tenant may elect to continue this Lease in full force and effect, in
which case Tenant shall repair any damage to the Property and any building in
which the Property is located. Tenant shall pay the cost of such repairs, except
that upon satisfactory completion of such repairs, Landlord shall deliver to
Tenant any insurance proceeds received by Landlord for the damage repaired by
Tenant. Tenant shall give Landlord written notice of such election within ten
(10) days after receiving Landlord `s termination notice.

          (c) If the damage to the Property occurs during the last six (6)
months of the Lease Term and such damage will require more than thirty (30) days
to repair, either Landlord or Tenant may elect to terminate this Lease as of the
date the damage occurred, regardless of the

                                       14
<PAGE>

sufficiency of any insurance proceeds. The party electing to terminate this
Lease shall give written notification to the other party of such election within
thirty (30) days after Tenant's notice to Landlord of the occurrence of the
damage.

     Section 7.02.  SUBSTANTIAL OR TOTAL DESTRUCTION.  If the Property is
substantially or totally destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section 7.01), and
regardless of whether Landlord receives any insurance proceeds, this Lease
,shall terminate as of the date the destruction occurred.  Notwithstanding the
preceding sentence, if the Property can be rebuilt within six (6) months after
the date of destruction, Landlord may elect to rebuild the Property at
Landlord's own expense, in which case this Lease shall remain in full force and
effect.  Landlord shall notify Tenant of such election within thirty (30) days
after Tenant's notice of the occurrence of total or substantial destruction.  If
Landlord so elects, Landlord shall rebuild the Property at Landlord's sole
expense, except that if the destruction was caused by an act or omission of
Tenant, Tenant shall pay Landlord the difference between the actual cost of
rebuilding and any insurance proceeds received by Landlord.

     Section 7.03. TEMPORARY REDUCTION OF RENT. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired. However, the reduction
shall not exceed the sum of one year's payment of Base Rent, insurance premiums
and real property taxes, Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Property.

     Section 7.04. WAIVER. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease In the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.

ARTICLE EIGHT.  CONDEMNATION

     If all or any portion of the Property is taken under the power of eminent
domain or sold under the threat of that power (all of which are called
"Condemnation"), this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the

                                       15
<PAGE>

Property, the amount of its interest in the Property; (b) second, `to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant's trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to' either terminate this Lease or make
such repair at Landlord's expense.

ARTICLE NINE.  ASSIGNMENT AND SUBLEASING

     Section 9.01. LANDLORD'S CONSENT REQUIRED. No portion of the Property or of
Tenant's interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord's prior written consent, except as provided in
Section 9.02 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.05 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. if Tenant is a
partnership, any cumulative transfer of more than twenty percent (20%) of the
partnership interests shall require Landlord's consent. If Tenant Is a
corporation, any change in the ownership of a controlling interest of the voting
stock of the corporation shall require Landlord's consent.

     Section 9.02. TENANT AFFILIATE. Tenant may assign this Lease or sublease
the Property, without Landlord's consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant ("Tenant's
Affiliate"). In such case, any Tenant's Affiliate shall assume in writing all of
Tenant's obligations under this Lease.

     Section 9.03.  NO RELEASE OF TENANT.  No transfer permitted by this Article
Nine, whether with or without Landlord's consent, shall release Tenant or change
Tenant's primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease.  Landlord's acceptance of rent from any other person
is not a waiver of any provision of this Article Nine.  Consent to one transfer
is not a consent to any subsequent transfer.  If Tenant's transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee.  Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant's transferee, without notifying Tenant
or obtaining its consent.  Such action shall not relieve Tenant's liability
under this Lease.

     Section 9.04. OFFER TO TERMINATE. If Tenant desires to assign the Lease or
sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.

                                       16
<PAGE>

     Section 9.05.  LANDLORD'S CONSENT.

          (a) Tenant's request for consent to any transfer described in Section
9.01 shall set forth In writing the details of the proposed transfer, including
the name, business and financial condition of the prospective transferee,
financial details of the proposed transfer (e.g., the term of and the rent and
security deposit payable under any proposed assignment or sublease), and any
other information Landlord deems relevant. Landlord shall have the right to
withhold consent, if reasonable, or to grant consent, based on the following
factors: (i) the business of the proposed assignee or subtenant and the proposed
use of the Property; (ii) the net worth and financial reputation of the proposed
assignee or subtenant; (iii) Tenant's compliance with all of its obligations
under the Lease; and (iv) such other factors as Landlord may reasonably deem
relevant. If Landlord objects to a proposed assignment solely because of the net
worth and/or financial reputation of the proposed assignee, Tenant may
nonetheless sublease (but not assign), all or a portion of the Property to the
proposed transferee, but only on the other terms of the proposed transfer.

          (b) [Deleted]

     Section 9.06.  NO MERGER.  No merger shall result from Tenant's sublease of
the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease In any$ other manner.  In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.

ARTICLE TEN.  DEFAULTS; REMEDIES

     Section 10.01.  COVENANTS AND CONDITIONS.  Tenant's performance of each of
Tenant's obligations under this Lease is a condition as well as a covenant.
Tenant's right to continue in possession of the Property is conditioned upon
such performance.  Time is of the essence in the performance of.  all covenants
and conditions.

     Section 10.02.  DEFAULTS.  Tenant shall be in material default under this
Lease:

          (a) If Tenant abandons the Property or if Tenant's vacation of the
Property results in the cancellation of any insurance described in Section 4.04;

          (b) If Tenant fails to pay rent or any other charge when due;

          (c) If Tenant fails to perform any of Tenant's non-monetary
obligations under this Lease for a period of thirty (30) days after written
notice from Landlord; provided that if more than thirty (30) days are required
to complete such performance, Tenant shall not be in default if Tenant commences
such performance within the thirty (30) -day period and thereafter diligently
pursues its completion. However, Landlord shall not be required to give such
notice if Tenant's failure to perform constitutes a non-curable breach of this
Lease. The notice required by this Paragraph is intended to satisfy any and all
notice requirements imposed by law on Landlord and is not in addition to any
such requirement.

          (d) (i) If Tenant makes a general assignment or general arrangement
for the benefit of creditors; (ii) If a petition for adjudication of bankruptcy
or for reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant's assets located at

                                       17
<PAGE>

the Property or of Tenant's interest in this Lease and possession is not
restored to Tenant within thirty (30) days; or (iv) if substantially all of
Tenant's assets located at the Property or of Tenant's interest in this Lease is
subjected to attachment, execution or other judicial seizure which is not
discharged within thirty (30) days. If a court of competent jurisdiction
determines that any of the acts described in this subparagraph (d) is not a
default under this Lease, and a trustee is appointed to take possession (or if
Tenant remains a debtor in possession) and such trustee or Tenant transfers
Tenant's interest hereunder, then Landlord shall receive, as Additional Rent,
the excess, if any, of the rent (or any other consideration) paid in connection
with such assignment or sublease over the rent payable by Tenant under this
Lease.

          (e) If any guarantor of the Lease revokes or otherwise terminates, or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's obligations under the Lease. Unless otherwise expressly provided, no
guaranty of the Lease is revocable.

     Section 10.03.  REMEDIES.  On the occurrence of any material default by
Tenant, Landlord may, at any time thereafter, with or without notice or demand
and without limiting Landlord in the exercise of any right or remedy which
Landlord may have:

          (a) Terminate Tenant's right to possession of the Property by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Property to Landlord. In such event,
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default, including (i) the worth at the time of
the award of the unpaid Base Rent, Additional Rent and other charges which
Landlord had earned at the time of the termination; (ii) the worth at the time
of the award of the amount by which the unpaid Base Rent, Additional Rent and
other charges which Landlord would have earned after termination until the time
of the award exceeds the amount of such rental loss that Tenant proves Landlord
could have reasonably avoided; (iii) the worth at the time of the award of the
amount by which the unpaid Base Rent, Additional Rent and other charges which
Tenant would have paid for the balance of the Lease term after the time of award
exceeds the amount of such rental loss that Tenant proves Landlord could have
reasonably avoided; and (iv) any other amount necessary to compensate Landlord
for all the detriment proximately caused by Tenant's failure to perform its
obligations under the Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to, any costs or expenses
Landlord incurs in maintaining or preserving the Property after such default,
the cost of recovering possession of the Property, expenses of reletting,
including necessary renovation or alteration of the Property, Landlord's
reasonable attorneys' fees incurred in connection therewith, and any real estate
commission paid or payable. As used In subparts (I) and (ii) above, the "worth
at the time of the award" is computed by allowing interest on unpaid amounts at
the rate of fifteen percent (15%) per annum, or such lesser amount as may then
be the maximum lawful rate. As used in subpart (iii) above, the "worth at the
time of the award" is 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 (1%). If Tenant has abandoned the Property, Landlord shall have the
option of (i) retaking possession of the Property and recovering from Tenant the
amount specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);

                                       18
<PAGE>

          (b) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant has abandoned the Property. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;

          (c) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state in which the Property is
located.

     Section 10.04. REPAYMENT OF "FREE" RENT. If this Lease provides for a
postponement of any monthly rental payments, a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant's obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease, Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case Abated Rent shall
be calculated based on the full initial rent payable under this Lease.

     Section 10.05.  AUTOMATIC TERMINATION.  Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord's intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant, On such termination, Landlord's damages for default shall
include all costs and fees, including reasonable attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the' pursuing of any action with respect to Landlord's right to
possession of the Property.  All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.

     Section 10.06.  CUMULATIVE REMEDIES.  Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.

ARTICLE ELEVEN.  PROTECTION OF LENDERS

     Section 11.01. SUBORDINATION. Landlord shall have the right to subordinate
this Lease to any ground lease, deed of trust or mortgage encumbering the
Property, any advances made on the security thereof and any renewals,
modifications, consolidations, replacements or extensions thereof, whenever made
or recorded. Tenant shall cooperate with Landlord and any lender which is
acquiring a security interest in the Property or the Lease. Tenant shall execute
such further documents and assurances as such lender may require, provided that
Tenant's obligations under this Lease shall not be increased in any material way
(the performance of ministerial acts shall not be deemed material), and Tenant
shall not be deprived of its rights under this Lease, Tenant's right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the rent and performs all of Tenant's obligations under this Lease

                                       19
<PAGE>

and is not otherwise in default. If any ground lessor, beneficiary or mortgagee
elects to this Lease prior to the lien of its ground lease, deed of trust or
mortgage and gives written notice thereof to Tenant, this Lease shall be deemed
prior to such ground lease, deed of trust or mortgage whether this Lease is
dated prior or subsequent to the date of said ground lease, deed `of trust or
mortgage or the date of recording thereof.

     Section 11.02.  ATTORNMENT.  If Landlord's interest in the Property is
acquired by any ground lessor, beneficiary under a deed of trust, mortgagee, or
purchaser at a foreclosure sale, Tenant shall attorn to the transferee of or
successor to Landlord's interest in the Property and recognize such transferee
or successor as Landlord under this Lease.  Tenant waives the protection of any
statute or rule of law which gives or purports to give Tenant any right to
terminate this Lease or surrender possession of the Property upon the transfer
of Landlord's interest.

     Section 11.03.  SIGNING OF DOCUMENTS.  Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so.  If Tenant fails to do so within ten
(10) days after written request, Tenant hereby makes, constitutes and
irrevocably appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.

     Section 11.04.  ESTOPPEL CERTIFICATES.

          (a) Upon Landlord's written request, Tenant shall execute, acknowledge
and deliver, to Landlord a written statement certifying: (i) that none of the
terms or provisions of this Lease have been changed (or if they have been
changed, stating how they have been changed); (ii) that this Lease has not been
cancelled or terminated; (iii) the last date of payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord is
not in default under this Lease (or, if Landlord is claimed to be in default,
stating why); and (v) such other representations or information with respect to
Tenant or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord's request. Landlord
may give any such statement by Tenant to any prospective purchaser or
encumbrancer of the Property. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.

          (b) If Tenant does not deliver such statement to Landlord within such
ten (10)-day period, Landlord, and any prospective purchaser or encumbrancer,
may conclusively presume and rely upon the following facts: (i) that the terms
and provisions of this Lease have not been changed except as otherwise
represented by Landlord; (ii) that this Lease has not been cancelled or
terminated except as otherwise represented by Landlord; (iii) that not more than
one month's Base Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event, Tenant shall be
estopped from denying the truth of such facts.

                                       20
<PAGE>

     Section 11.05. TENANT'S FINANCIAL CONDITION. Within ten (10) days after
written request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial statements required
by such lender to facilitate the financing or refinancing of the Property.
Tenant represents and warrants to Landlord that each such financial statement is
a true and accurate statement as of the date of such statement, All financial
statements shall be confidential and shall be used only for the purposes set
forth In this Lease.

ARTICLE TWELVE.  LEGAL COSTS

     Section 12.01. LEGAL PROCEEDINGS. If Tenant or Landlord shall be in breach
or default under this Lease, such party (the "Defaulting Party") shall reimburse
the other party (the "Nondefaulting Party") upon demand for any costs or
expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys' fees and
costs. The losing party in such action shall pay such attorneys' fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) Instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord's interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant's expense with
counsel reasonably acceptable to Landlord or, at Landlord's election, Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.

     Section 12.02.  LANDLORD'S CONSENT.  Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection with Tenant's request for Landlord's
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord's consent.

ARTICLE THIRTEEN.  MISCELLANEOUS PROVISIONS

     Section 13.01. NON-DISCRIMINATION. Tenant promises, and it is a condition
to the continuance of this Lease, that there will be no discrimination against,
or segregation of, any person or group of persons on the basis of race, color,
sex, creed, national origin or ancestry in the leasing, subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.

                                       21
<PAGE>

     Section 13.02.  LANDLORD'S LIABILITY; CERTAIN DUTIES

          (a) As used in this Lease, the term "Landlord" means only the current
owner or owners of the fee title to the Property or Project or the leasehold
estate under a ground lease of the Property or Project at the time in question.
Each Landlord is obligated to perform the obligations of Landlord under this
Lease only during the time such Landlord owns such interest or title. Any
Landlord who transfers its title or interest is relieved of all liability with
respect to the obligations of Landlord under this Lease to be performed on or
after the date of transfer. However, each Landlord shall deliver to its
transferee all funds that Tenant previously paid If such funds have not yet been
applied under the terms of this Lease.

          (b) Tenant shall give written notice of any failure by Landlord to
perform any of its obligations under this Lease to Landlord and to any ground
lessor, mortgagee or beneficiary under any deed of trust encumbering the
Property whose name and address have been furnished to Tenant in writing.
Landlord shall not be in default under this Lease unless Landlord (or such
ground lessor, mortgagee or beneficiary) fails to cure such non-performance
within thirty (30) days after receipt of Tenant's notice. However, If such non-
performance reasonably requires more than thirty (30) days to cure, Landlord
shall not be in default if such cure Is commenced within such thirty (30) -day
period and thereafter diligently pursued to completion.

          (c) Notwithstanding any term or provision herein to the contrary, the
liability of Landlord for the performance of Its duties and obligations under
this Lease is limited to Landlord's interest in the Property and the Project,
and neither, the Landlord nor its partners, shareholders, officers or other
principals shall have any personal liability under this Lease.

     Section 13.03.  SEVERABILITY.  A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.

     Section 13.04. INTERPRETATION. The captions of the Articles or Sections of
this Lease are to assist the parties in reading this Lease and are not a part of
the terms or provisions of this Lease, Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other, In any provision, relating to the conduct, acts or omissions of Tenant,
the term "Tenant" shall include Tenant's agents, employees, contractors,
Invitees, successors or others using the Property with Tenant's expressed or
implied permission.

     Section 13.05. INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This Lease
is the only agreement between the parties pertaining to the lease of die
Property and no other agreements are effective, All amendments to this Lease
shall be in writing and signed by all parties. Any other attempted amendment
shall be void.

     Section 13.06. NOTICES. All notices required or permitted under this Lease
shall be in writing and shall be personally delivered or sent by certified mall,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Section 1.03

                                       22
<PAGE>

above, except that upon Tenant's taking possession of the Property, the Property
shall be Tenant's address for notice purposes, Notices to Landlord shall be
delivered to the address specified in Section 1.02 above. All notices shall be
effective upon delivery. Either party may change its notice address upon written
notice to the other party.

     Section 13.07.  WAIVERS  All waivers must be in writing and signed by the
waiving party.  Landlord's failure to enforce' any provision of this Lease or
its acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future.  No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord.  Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.

     Section 13.08. NO RECORDATION. Tenant shall ,not record this Lease without
prior written consent from Landlord. However, either Landlord or Tenant may
require that a "Short Form" memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.

     Section 13.09. BINDING EFFECT; CHOICE OF LAW. This Lease binds any party
who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However, Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's successor are acquired in accordance with
the terms of this Lease. The laws of the state in. which the Property is located
shall govern this Lease.

     Section 13.10.  CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY.  If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation.  Within thirty (30) days after this Lease is signed, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord.  If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or It is a general partner of the partnership, that he or It has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership.  Tenant shall give written notice to
Landlord of any general partner's withdrawal or addition.  Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant's recorded statement of partnership or certificate of limited
partnership.

     Section 13.11. JOINT AND SEVERAL LIABILITY. All parties signing this Lease
as Tenant shall be jointly and severally liable for all obligations of Tenant.

     Section 13.12. FORCE MAJEURE. If Landlord cannot perform any of its
obligations due to events beyond Landlord's control, the time provided for
performing such obligations shall be extended by a period of time equal to the
duration of such events. Events beyond Landlord's control include, but are not
limited to, acts of Cod, war, civil commotion, labor disputes, strikes, fire,
flood or other casualty, shortages of labor or material, government regulation
or restriction and weather conditions.

                                       23
<PAGE>

     Section 13.13. EXECUTION OF LEASE. This Lease may be executed in
counterparts and, when all counterpart documents are executed, the counterparts
shall constitute a single binding instrument. Landlord's delivery of this Lease
to Tenant shall not be deemed to be an offer to lease and shall not be binding
upon either party until executed and delivered by both parties.

     Section 13.14. SURVIVAL. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.

ARTICLE FOURTEEN.  BROKERS

     Section 14.01. BROKER'S FEE. When this Lease is signed by and delivered to
both Landlord and Tenant, Landlord shall pay a real estate commission to
Landlord's Broker named in Section 1.08 above, If any, as provided in the
written agreement between Landlord and Landlord's Broker, or the sum stated In
Section 1.09 above for services rendered to Landlord by Landlord's Broker in
this transaction. Landlord shall pay Landlord's Broker a commission if Tenant
exercises any option to extend the Lease Term or to buy the Property, or any
similar option or right which Landlord may grant to Tenant, or if Landlord's
Broker is the procuring cause of any other lease or sale entered into between
Landlord and Tenant covering the Property. Such commission shall be the amount
set forth in Landlord's Broker's commission schedule in effect as of the
execution of this Lease. If a Tenant's Broker is named in Section 1.08 above,
Landlord's Broker shall pay an appropriate portion of its commission to Tenant's
Broker if so provided in any agreement between Landlord's Broker and Tenant's
Broker. Nothing contained in this Lease shall impose any obligation on Landlord
to pay a commission or fee to any party other than Landlord's Broker.

     Section 14.02.  PROTECTION OF BROKERS.  If Landlord sells the Property, or
assigns Landlord's Interest in this Lease, the buyer or assignee shall, by
accepting such conveyance of the Property or assignment of the Lease, be
conclusively deemed to have agreed to make all payments to Landlord's Broker
thereafter required of Landlord under this Article Fourteen.  Landlord's Broker
shall have the right to bring a legal action to enforce or declare rights under
this provision.  The prevailing party in such action shall be entitled to
reasonable attorneys' fees to be paid by the losing party.  Such attorneys' fees
shall be fixed by the court in such action.  This Paragraph is Included in this
Lease for the benefit of Landlord's Broker.

     Section 14.03.  BROKER'S DISCLOSURE OF AGENCY.  Landlord's Broker hereby
discloses to Landlord and Tenant and Landlord and Tenant hereby consent to
Landlord's Broker acting in this transaction as the agent of (check one):

     {X} Landlord exclusively; or

     {_} both Landlord and Tenant.

     Section 14.04. NO OTHER BROKERS. Tenant represents and warrants to Landlord
that the brokers named in Section 1.08 above are the only agents, brokers,
finders or other parties with whom Tenant has dealt who are or may be entitled
to any commission or fee with respect to this Lease or the Property.

                                       24
<PAGE>

     ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED HERETO
OR IN THE BLANK SPACE BELOW.  IF NO ADDITIONAL PROVISONS ARE INSERTED, PLEASE
DRAW A LINE THROUGH THE SPACE BELOW.

     Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialed all Riders which
are attached to or incorporated by reference in this Lease.

Signed on January 31        , 1992         Arthur "LANDLORD" Segal Trust
          ----------                      -------------------------------------
                                           /s/ [__] Arthur Segal MD Trust
                                          -------------------------------------

at
   ---------------------------------

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

Signed on January 29        , 1992        Central "TENANT" Coast Surfboards,
          ----------                      -------------------------------------
                                          Inc.
                                          ---
at
   ----------------------------------     -------------------------------------

                                      By:  /s/ James R. Hall
                                          -------------------------------------
                                      Its: President
                                          -------------------------------------
                                      By:
                                          -------------------------------------
                                      Its:
                                          -------------------------------------

     IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A
PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN $ EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.

                                       25
<PAGE>

     THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION
OF THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE
REALTORS, INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN
CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS, INC., ITS
LECAL COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR
AGENTS, AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES QF THIS
LEASE OR OF THIS TRANSACTION.  LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL
TO ADVISE THEM ON SUCH' MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL
COUNSEL.

                                       26
<PAGE>

                           [INSERT FLOOR PLANS HERE]

                                       27
<PAGE>

                                                                       EXHIBIT B

1.   Paragraph 1.05 Tenant shall have two three-year options to review its lease
     and must provide Landlord 180 days advance notice of intention to renew,
     The rental rate for the first option shall be on the same terms and
     conditions as the initial lease, The rental rate for the second renewal
     option shall be negotiated to reflect fair market value.  In the event a
     satisfactory rate can't be negotiated the rate will be set by an appraisal
     by Schenberger, Taylor, McCormick & Jecker or its successor firm.  The cost
     of appraisal shall be paid equally by both parties.

2.   Paragraph 1.11 In the event UPS does `not renew its lease and is no longer
     a tenant at the conclusion of the original lease term or first option
     period the parties agree to negotiate a rental rate, for each $ renewal
     period which reflects the additional value to tenant for on site parking.
     In the event a fair market rental can not be negotiated between the parties
     the rate will be set by an appraisal by Schenberger, Taylor, McCormick and
     Jecker or its successor firm, The cost of appraisal shall be paid equally
     by both parties.

3.   Paragraph 1.12 The parties agree Tenant is leasing 34% of the entire
     project, Tenant's rent for the first year is $3,744 but Landlord agrees to
     defer $903 per month rent for the initial year to assist Tenant in reducing
     monthly expenses.  The total deferred amount will be $10,836.  Tenant
     agrees to repay the deferred amount as soon as practicable.  The amount
     deferred and unpaid as of May 1, 1994 shall bear annual interest at 10%
     from that date, The entire deferred amount plus interest shall be due and
     payable not later than April 30, 1997.  Tenant shall pay as consideration
     for Tenant improvements to be installed by Landlord additional monthly rent
     of $834 which will not be increased under the provisions of paragraph 3.02.
     The $834 `is to amortize 75% of the $50,000 improvements referenced to in
     paragraph 6.01 below at 12% interest on a five year payment schedule,
     Tenant may pay the unamortized amount in full any time during the original
     lease term,

4.   Paragraph 6.01 - Landlord will provide an allowance of $50,000 to improve
     the subject premises in accordance with the plans and specifications
     attached as Exhibit C but to be revised and modified by the parties, In the
     event the cost of improvements is less than $50,000 there will be an
     appropriate rental adjustment. If the cost of improvements exceeds $50,000
     Tenant shall pay the costs exceeding $50,000, Tenant acknowledges that
     $3,315.45 has been paid to Studio Design Group for architectural services
     and this is a portion of the money to be advanced by Landlord and all
     further architectural costs are to be paid by Tenant, Tenant acknowledges
     that funds from the $50,000 will be used to construct necessary lighting,
     electrical outlets, metering, demising wall and restroom for the area
     designated #3 on Exhibit A and $5,000 of the $50,000 allowance shall be
     used for the above expenses. This is an accommodation to the parties
     resulting from agreement to cancel a lease between the parties for the
     entire building.

5.   In the event UPS exercises its option to expand into the subject building
     and said expansion results in Tenant having 7,000 or less square feet,
     Tenant may cancel its lease by providing Landlord 120 days advance notice
     of cancellation.  In the event of-

                                       28
<PAGE>

     cancellation, Landlord shall pay Tenant's cost of moving, relocating
     computer and telephone lines and other related moving costs. In no event
     will Landlord's obligation exceed $20,000.00.

6.   In the event UPS expands into.  Tenants area, Tenant's rent shall be
     reduced by the amount of rent paid UPS.  Tenant acknowledges UPS has the
     right to lease the subject space by providing Landlord notice of intent to
     lease.  Tenant shall have the first right to expand into the area
     designated "3" on Exhibit A in the event the subject space is available,
     The rental rate shall be $1411 per month plus other building costs and
     appropriate CPI increases applied to the $1411 from May 1, 1992.  This
     applies during the original lease term only.

                                       29
<PAGE>

                             FIRST LEASE AMENDMENT

The lease dated January 27, 1992 between the Arthur Segal Trust and Central
Coast Surfboards, Inc. is hereby modified as follows:

SECTION 1.04 Lease now includes the entire building which totals approximately
13,870 square feet, Tenant accepts the additional space in "as is" condition.

SECTION 1.12(a) Rent for the increased area shall be as follows:

          May 1994 thru April 1995   $1,000 per month

          May 1995 to April 1996     $1,484 per month plus CPI adjustment from
                                     May 1994 to April 1995.

          May 1996 to April 1997     Previous year rental plus CPI adjustment as
                                     provided in paragraph 1 12 (a)

SECTION 1.12(b) - Tenants proportionate share of operating expenses to become
55.8% effective June 1, 1994.

Tenant agrees that air conditioning being installed in the existing office area
and additional lighting to be installed in the expansion area will remain with
the building at such time as tenant vacates, Above improvements will comply with
building codes and tenant will obtain appropriate permits,

All other terms and conditions to remain the same.

CENTRAL COAST SURFBOARDS, INC.

By: /s/ James R. Hall, 4/29/94

ARTHUR SEGAL TRUST

By /s/ Arthur Segal, 5/2/94

                                       30
<PAGE>

                            SECOND LEASE AMENDMENT

The Lease dated January 27, 1992 between The Arthur Segal Trust and Central
Coast Surfboard, Inc. is hereby amended as follo4zs:

Section 1.05 - The term of the Lease shall now expire on September 30, 1998)

Section 1.12 (a) - Rent shall be adjusted May 1997 and May 1998 per the Consumer
Price Index as provided in the Lease.

All other terms and conditions to remain the same.

CENTRAL COAST SURFBOARDS, INC.

By: /s/ James R. Hall
   ----------------------------

ARTHUR SEGAL TRUST

By: /s/ Arthur Segal, MD
   ----------------------------

                                       31
<PAGE>

                             THIRD LEASE AMENDMENT

The lease dated September 27th, 1992 between The Arthur Segal Trust and Central
Coast Surfboards, Inc.  for premises at 2701 McMillan Road is hereby modified as
follows:

SECTION 1.05           The term of the lease shall expire on September 30th,
                       2001.

SECTION 1.12 A)        Rent shall continue to be adjusted per the CPI as
                       provided in the lease.

RIGHT OF CANCELLATION: Central Coast Surfboards shall have the right to cancel
                       its lease with an effective cancellation date any time
                       after October 1, 2000 by providing landlord 6 months or
                       more advance notice of cancellation. This right to cancel
                       requires CCS simultaneously exercising its right to
                       cancel the sublease on the premises at 2705 McMillan
                       Road. CCS' Lease at the subject premises and Sublease of
                       the premises at 2705 McMillan Road must terminate at the
                       same time.

                       In the event Central Coast Surfboard wishes to continue
                       to occupy either facility after September 30th, 2001 an
                       extension must be negotiated between the parties.

CENTRAL COAST SURFBOARDS, INC.

By: /s/ Michael Chaney
   -------------------------------

ARTHUR SEGAL TRUST

By  /s/ Arthur Segal MD, Trustee
   -------------------------------

                                       32
<PAGE>

                       longer exists, the appraiser shall be an MAI appraiser
                       appointed by the presiding judge of San Luis Obispo
                       County, and the appraiser's primary place of business
                       shall be in San Luis Obispo, California. The cost of the
                       appraisal shall be paid equally by both parties, and the
                       rate set by the appraiser shall be binding on both
                       parties. Thereafter, for the remainder of the term, the
                       rent shall be adjusted annually per the Consumer Price
                       Index as provided earlier in this memorandum.

IMPROVEMENT CONCESSION: Tenant shall be entitled to deduct $10,000 from its
                       rental obligation for the month of October, 2001, as a
                       credit for necessary cosmetic modifications to the
                       premises.

EXISTING TENANT:       In the event that United Parcel Service remains a tenant
                       after September 30th, 2000 it shall be deemed a subtenant
                       of Phase Three, Inc. and Phase Three, Inc. shall be
                       entitled to any rents received from United Parcel
                       Service.

All other terms and conditions of the original Lease shall remain the same.

TENANT

By:                             DATE:
   ----------------------------       ----------------------------

ARTHUR SEGAL TRUST

By:                             DATE:
   ----------------------------       ----------------------------

                                       33

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