Document:

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                                  Exhibit 10.36

                                 LEASE AGREEMENT

      THIS LEASE AGREEMENT (this "Lease") is dated as of the ____ day of June,
1999, by and between CAR LIT L.L.C., a Delaware limited liability company
("Landlord"), and LITHIA REAL ESTATE, INC., an Oregon corporation ("Tenant").

                                    ARTICLE I
                                   DEFINITIONS

      1.1 Premises: that certain piece or parcel of land located in Medford,
Jackson County, Oregon, as more fully described on Exhibit A attached hereto and
made a part hereof, together with all improvements, fixtures and other items of
real property now or hereafter located thereupon and all appurtenances, rights,
privileges, easements and other property interests existing thereon and
benefiting, belonging or pertaining thereto, subject, however, to all liens,
encumbrances, restrictions, agreements, and other title matters of record.

      1.2 Lease Term: one hundred forty-four (144) months.

      1.3 Renewal Options: eight (8) options for five (5) years each, as more
particularly described in Article XXII below.

      1.4 Lease Commencement Date: The date on which Landlord funds the purchase
price for the Premises at the closing, pursuant to that certain Purchase
Agreement (the "Purchase Agreement") dated as of December 17, 1998, by and
between Landlord (as assignee of Capital Automotive L.P.), as purchaser, and
Tenant or its Affiliate (as hereinafter defined) as seller).

      1.5 Base Rent: as set forth below.

     Lease Year                                           Base Rent Per annum

lst-3rd Lease Years                                           $521,463.00
4th and 5th Lease Years                                       $534,500.00
6th-l2th Lease Years                                          $542,322.00
13th-l7th Lease Years                                         $568,395.00
18th-22nd Lease Years                                         $599,683.00
23rd-27th Lease Years                                         $636,185.00
28th-32nd Lease Years                                         $677,902.00
33rd-37th Lease Years                                         $724,834.00
38th-42nd Lease Years                                         $776,980.00
43rd-47th Lease Years                                         $834,341.00
48th-52nd Lease Years                                         $896.917.00

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      1.6 [Intentionally omitted].

      1.7 [Intentionally omitted].

      1.8 Security Deposit Amount: Twenty-Eight Thousand Five Hundred Five
Dollars ($28,505.00).

      1.9 Tenant Notice Address: c/o Lithia Motors, Inc., 360 East Jackson
Street, Medford, Oregon 97501, Attn: Brian R. Neill.

      1.10 Landlord Notice Address: 1420 Spring Hill Road, Suite 525, McLean,
Virginia 22102, Attention: Portfolio Manager.

      1.11 Guarantor(s): Lithia Motors, Inc.

                                   ARTICLE II
                                    PREMISES

      2.1 Lease of Premises. Tenant leases the Premises from Landlord for the
term and upon the conditions and covenants set forth in this Lease.

      2.2 Contingency. Notwithstanding anything to the contrary contained in
this Lease, in the event this Lease is executed prior to the conveyance of the
Premises to Landlord, the parties acknowledge that the effectiveness of this
Lease is contingent upon such conveyance and, in the event such conveyance fails
to occur, this Lease shall be void and without force and effect.

                                   ARTICLE III
                                   LEASE TERM

      3.1 Lease Term. All of the provisions of this Lease shall be in full force
and effect from and after the date first above written, subject to Section 2.2
above. The Lease Term shall commence on the Lease Commencement Date specified in
Section 1.4 above. If the Lease Commencement Date is not the first day of a
month, then the Lease Term shall be the period set forth in Section 1 2 less the
portion of the month prior to the date on which the Lease Commencement Date
occurs. Landlord may provide Tenant with a certificate in the form of Exhibit B
attached hereto confirming the Lease Commencement Date. The Lease Term shall
also include any properly exercised renewal or extension of the term of this
Lease.

      3.2 Lease Year. "Lease Year" shall mean a period of twelve (12)
consecutive months commencing on the Lease Commencement Date, and each
successive twelve (12) month period thereafter; provided, however, that if the
Lease Commencement Date is not the first day of a month, then the second Lease
Year shall commence on the first day of the month in which the first anniversary
of the Lease Commencement Date occurs.

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                                   ARTICLE IV
                                    BASE RENT

      4.1 Base Rent. From and after the Lease Commencement Date, Tenant shall
pay the Base Rent in equal monthly installments in advance on the first day of
each month during each Lease Year. If the Lease Commencement Date is not the
first day of a month, then the Base Rent from the Lease Commencement Date until
the first day of the following month shall be prorated on a per diem basis at
the rate of one-thirtieth (1/30th) of the monthly installment of the Base Rent
payable during the first Lease Year, and Tenant shall pay such prorated
installment of the Base Rent on the Lease Commencement Date.

      4.2 Base Rent Escalation. During the Lease Term, the Base Rent shall be
increased from time to time as set forth in Section 1.5.

      4.3 Payment of Base Rent. All sums payable by Tenant under this Lease,
whether or not stated to be Base Rent, additional rent or otherwise, shall be
paid to Landlord in legal tender of the United States, without setoff, deduction
or demand, by direct deposit wire transfer of immediately available funds to the
following bank account, or to such other party or address as Landlord may
designate in writing:

             NationsBank, Richmond, Virginia
             ABA# 051000017
             For credit to Capital Automotive L.P.,
             Operating Account # 004112955706

Landlord's acceptance of rent after it shall have become due and payable shall
not excuse a delay upon any subsequent occasion or constitute a waiver of any of
Landlord's rights hereunder.

                                    ARTICLE V
                 NET LEASE; IMPOSITIONS; UTILITIES AND SERVICES

      5.1 Net Lease. Notwithstanding anything to the contrary contained herein,
this Lease shall be an absolute net lease, so that this Lease shall yield all
Base Rent payable hereunder as an absolutely net return to Landlord.
Accordingly, with the sole exception of Landlord's Income Taxes (as hereinafter
defined), Tenant shall pay all taxes, insurance and other costs, expenses and
obligations of every kind and nature whatsoever relating to the Premises,
including without limitation, costs with respect to the ownership and operation
thereof (including without limitation, the costs of performing obligations
imposed on the owner from time to time of the Premises pursuant to any deferred
improvement agreements or any easement containing a covenant to bear the
maintenance and repair costs incurred in connection with a drainage easement),
which accrue prior to the expiration of the Lease Term. Tenant's obligation to
pay all amounts described in this Section 5.1 shall survive the expiration or
earlier termination of the Lease Term.

      5.2 Payment of Impositions. On or before the Lease Commencement Date,
Tenant shall notify the appropriate taxing authorities to deliver directly to
Tenant all statements and invoices for the Impositions, effective as of the
Lease Commencement Date. Tenant shall pay all Impositions (as hereinafter
defined) at least thirty (30) days prior to the date they become due;

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provided, however, that with respect to Impositions that are payable only after
the applicable governmental or quasi-governmental authority notifies Tenant of
the amount assessed, if Tenant is not notified of the amount of any such
Imposition on or before the date that is thirty-five (35) days prior to the date
on which such Impositions become due, then Tenant shall pay such Impositions
prior to the earlier of (a) five (5) days after the date on which Tenant
receives notice of the amount of the applicable Imposition and (b) the date on
which such Imposition is due. As soon as practicable after the payment thereof
but in no event more than ten (10) days after the date thereof, Tenant shall
deliver to Landlord evidence of each such payment. To the extent that any such
Impositions are imposed upon Landlord, at Landlord's option, Tenant shall either
pay such Impositions directly to the taxing authority or reimburse Landlord for
such Impositions. If the Lease Term expires on a day other than the first day or
the last day of a calendar year, then Tenant's liability for Impositions for
such calendar year shall be apportioned by multiplying the amount of the
Impositions for the full calendar year by a fraction, the numerator of which is
the number of days during such calendar year falling within the Lease Term, and
the denominator of which is three hundred sixty-five (365).

      5.3 Definition of Impositions. The term "Impositions" shall mean all
present and future real estate taxes (and all taxes or other impositions that
are in the nature of or in substitution for real estate taxes), vault and/or
public space rentals, business district or arena taxes, special user fees,
governmental charges, rates, and assessments (including general and special
assessments, if any), ordinary and extraordinary, foreseen and unforeseen, which
are imposed upon Landlord or Tenant or assessed against the Premises, the
fixtures, machinery, equipment or systems used in connection with the Premises
or the business being operated on the Premises, including without limitation,
taxes in the nature of a sales, use, gross receipts or other tax or levy on the
rents payable by Tenant. Impositions shall not include any federal, state, or
local income tax imposed on Landlord ("Landlord's Income Taxes"), except to the
extent levied expressly in lieu of an imposition described in the first sentence
of this Section 5.3.

      5.4 Contest of Impositions. Tenant, upon at least ten (10) days prior
written notice to Landlord but without Landlord's consent, may in good faith and
using counsel reasonably acceptable to Landlord, contest or review the
existence, amount or applicability of any Impositions by appropriate legal or
administrative proceedings, at Tenant's sole cost and expense; provided,
however, that such contests are accomplished in the manner expressly permitted
therefor in the jurisdiction in which the Premises is located, such that in no
event whatsoever shall the failure to pay the Imposition being contested impair
in any manner the Premises. Landlord, at no cost or expense to Landlord, shall
execute such documents as are necessary, in Landlord's reasonable discretion, in
connection with any such contest. Tenant shall be entitled to any refund
received with respect to Impositions paid by Tenant.

      5.5 Utilities and Services. Tenant, at its own expense, shall arrange with
the appropriate utility companies and service providers for the provision to the
Premises of water, sewer, trash collection, electricity, gas, telephone, window
washing, landscaping, snow removal, and all other utilities and services desired
by Tenant ("Utilities and Services"). On or before the Lease Commencement Date,
Tenant shall notify the appropriate utility and service providers to deliver
directly to Tenant all statements and invoices for the amounts for which Tenant
is responsible pursuant to this Section 5.5, effective as of the Lease
Commencement Date. Tenant

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shall pay directly to the appropriate utility companies and service providers
all charges for all Utilities consumed in and Services performed for the
Premises, as and when such charges become due and payable. To the extent the
invoices for any such Utilities and Services are received by Landlord, at
Landlord's option, Tenant shall either pay the charge for such Utilities and
Services directly to the utility or service provider or reimburse Landlord for
such charges.

                                   ARTICLE VI
                                 USE OF PREMISES

      6.1 Use of Premises. Tenant shall use and occupy the Premises only for the
purposes for which the Premises is being used as of the Lease Commencement Date
and for any other motor vehicle retail or related purposes, and for no other
purpose. Notwithstanding the foregoing, Tenant shall not use or occupy the
Premises for any unlawful purpose, or in any manner that will violate the
certificate of occupancy for the Premises or that will constitute waste or
nuisance. Tenant shall comply with all present and future laws (including,
without limitation, the Americans with Disabilities Act (the "ADA") and the
regulations promulgated thereunder, as the same may be amended from time to
time), ordinances (including without limitation, zoning ordinances and land use
requirements), regulations, orders and recommendations (including, without
limitation, those made by any public or private agency having authority over
insurance rates) (collectively, "Laws") concerning the use, occupancy and
condition of the Premises and the business being conducted thereon, and all
machinery, equipment, furnishings, fixtures and improvements on or used in
connection with the Premises, all of which shall be complied with in a timely
manner at Tenant's sole expense. If any such Law requires an occupancy or use
permit or license for the Premises or the operation of the business conducted
therein, then Tenant shall obtain and keep current such permit or license at
Tenant's expense. Tenant shall deliver to Landlord, promptly upon request, all
licenses, permits and other certificates evidencing compliance of Tenant and the
Premises with Laws. If any such Law requires any modification to the Premises.
Tenant shall perform such alterations, at its sole cost and expense, in
accordance with the terms and conditions of Article IX below. Use of the
Premises is subject to all covenants, conditions and restrictions of record.
Tenant shall continuously, diligently and actively conduct its business in the
Premises in a first-class and reputable manner.

      6.2 Assessments on Tenant's Business and Personalty. Tenant shall pay
before delinquency any business, rent, sales, franchise or other taxes or fees
that are now or hereafter levied, assessed or imposed upon Tenant's use or
occupancy of the Premises, the conduct of Tenant's business at the Premises, or
Tenant's equipment, fixtures, furnishings, inventory or personal property. If
any such tax or fee is enacted or altered so that such tax or fee is levied
against Landlord or so that Landlord is responsible for collection or payment
thereof, then Tenant shall pay to Landlord as additional rent the amount of such
tax or fee.

      6.3 Hazardous Materials.

            (a) Tenant shall not cause or permit any Hazardous Materials (as
hereinafter defined) to be generated, used, released, stored or disposed of in
or about the Premises, provided that Tenant may use, store and dispose of
reasonable quantities of Hazardous Materials commonly used in motor vehicle
retail or related business operations as may be reasonably

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necessary for Tenant to conduct such operations, provided such Hazardous
Materials are used, stored and disposed of in accordance with all Environmental
Laws (as hereinafter defined) and commercially reasonable standards prevailing
in the motor vehicle retail and related industries. Tenant acknowledges that
Tenant or its Affiliate owned or leased the Premises immediately prior to the
Lease Commencement Date. Accordingly, at the expiration or earlier termination
of this Lease, Tenant shall surrender the Premises to Landlord in compliance
with all Environmental Laws, without regard to whether any violations of
Environmental Laws existed at the Premises as of the Lease Commencement Date.
"Hazardous Materials" means (i) asbestos and any asbestos containing material,
(ii) any substance that is then defined or listed in, or otherwise classified
pursuant to, any Environmental Law or any other applicable Law as a "hazardous
substance," "hazardous material," "hazardous waste," "infectious waste," "toxic
substance," "toxic pollutant" or any other formulation intended to define, list,
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or
Toxicity Characteristic Leaching Procedure (TCLP) toxicity, (iii) any petroleum
and drilling fluids, produced waters, and other wastes associated with the
exploration, development or production of crude oil, natural gas, or geothermal
resources, and (iv) any petroleum product, polychlorinated biphenyls, urea
formaldehyde, radon gas, radioactive material (including any source, special
nuclear, or byproduct material), medical waste, chlorofluorocarbon, lead or
lead-based product, and any other substance whose presence could be detrimental
to the Premises or hazardous to health or the environment. "Environmental Law"
means any present and future Law and any amendments (whether common law,
statute, rule, order, regulation or otherwise), permits and other requirements
or guidelines of governmental authorities applicable to the Premises and
relating to the environment and environmental conditions or to any Hazardous
Material (including, without limitation, CERCLA, 42 U.S C. ss. 9601 et seq., the
Resource Conservation and Recovery Act of 1976,42 U.S.C. ss. 6901 et seq., the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq., the Federal
Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq., the Clean Air Act, 33
U.S.C. ss. 7401 et seq., the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et
seq., the Safe Drinking Water Act, 42 U.S.C. ss. 300fet seq., the Emergency
Planning and Community Right-To-Know Act, 42 U.S.C. ss. 1101 et seq., the
Occupational Safety and Health Act, 29 U.S.C. ss. 651 et seq., and any so-called
"Super Fund" or "Super Lien" law, any Law requiring the filing of reports and
notices relating to Hazardous Materials, environmental laws administered by the
Environmental Protection Agency, and any similar state and local Laws, all
amendments thereto and all regulations, orders, decisions, and decrees now or
hereafter promulgated thereunder concerning the environment, industrial hygiene
or public health or safety).

            (b) Tenant shall give Landlord immediate verbal and follow-up
(within seventy-two (72) hours) written notice of any actual or threatened
Environmental Default (as hereinafter defined). Tenant shall cure such
Environmental Default in accordance with all Environmental Laws. An
"Environmental Default" means any of the following: a violation of an
Environmental Law; a release, spill or discharge of a Hazardous Material on or
from the Premises (regardless of whether or not a reporting requirement exists),
which release, spill or discharge is not permitted under this Section 6.3; an
environmental condition requiring responsive action, including without
limitation, an environmental condition at the Premises caused by a third party;
or an emergency environmental condition. Upon any Environmental Default, in
addition to all other rights available to Landlord under this Lease, at law or
in equity.

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Landlord shall have the right to require Tenant, at its sole cost and expense,
to address such Environmental Default, in which event Landlord shall have the
right to supervise and approve any actions taken by Tenant to address the
Environmental Default. In the event that Tenant falls promptly to commence and
thereafter diligently to pursue the compliance with such Environmental Laws,
then Landlord shall have the right, but not the obligation, to perform, at
Tenant's sole cost and expense, any lawful action necessary to address the same,
in which event Tenant shall pay the costs thereof to Landlord as additional
rent, within ten (10) days after written evidence thereof.

            (c) Landlord shall have the right, but not the obligation, to
conduct, at its expense, periodic audits of the Premises (including without
limitation, the air, soil, surface water and groundwater at or near the
Premises) and Tenant's compliance with Environmental Laws with respect thereto.
If Landlord reasonably determines that alterations or improvements or
replacements of equipment on the Premises are necessary in connection with any
such Environmental Laws, Landlord shall have the right to require Tenant, at its
expense, to perform the same. In the event that Tenant fails promptly to
commence and thereafter diligently to pursue the compliance with such
Environmental Laws, then Landlord shall have the right, but not the obligation,
to perform the same, at Tenant's sole cost and expense, in which event Tenant
shall pay the costs thereof to Landlord as additional rent, within ten (10) days
after written evidence thereof. If any lender or governmental agency having
jurisdiction over Landlord, Tenant or the Premises shall require testing at or
near the Premises and Landlord incurs expenses in complying with such
requirement, then Tenant shall pay to Landlord the reasonable costs therefor as
additional rent, within ten (10) days after written evidence thereof.

            (d) Tenant acknowledges that it or its Affiliate owned or leased and
operated the Premises immediately prior to the Lease Commencement Date.
Accordingly, as a material consideration for Landlord's willingness to enter
into this Lease. Tenant hereby waives, and releases Landlord and its Affiliates
from, any and all claims for damage, injury or loss (including without
limitation, claims for the interruption of or loss to business) which relate to
any Environmental Default, whether occurring prior or subsequent to the Lease
Commencement Date. Promptly upon request, Tenant shall execute from time to time
affidavits, representations and similar documents concerning Tenant's best
knowledge and belief regarding the presence of Hazardous Materials at the
Premises.

            (e) Tenant's obligations pursuant to this Section 6.3 shall survive
the expiration or earlier termination of this Lease, but shall relate only to
violations of Environmental Laws occurring prior to the expiration or earlier
termination of this Lease, except to the extent caused by Tenant or anyone
acting through or under Tenant following such expiration or earlier termination.
If any required actions by Tenant pursuant to this Section 6.3 continue beyond
the expiration or earlier termination of this Lease and hinder Landlord's
ability to re-lease the same for the uses contemplated under this Lease, Tenant
shall pay to Landlord an amount equal to the Base Rent that would have been
payable under this Lease for the period of such required actions in the absence
of the expiration or earlier termination of this Lease.

                                   ARTICLE VII
                            ASSIGNMENT AND SUBLEYFING

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      7.1 Consent Required for Assignment or Subletting. Tenant shall not
assign, transfer or otherwise encumber (collectively, "assign") this Lease or
all or any of Tenant's rights hereunder or interest herein, or sublet or permit
anyone to use or occupy (collectively, "sublet") the Premises or any part
thereof, without obtaining the prior written consent of Landlord, which consent
may be withheld or granted in Landlord's sole and absolute discretion.
Notwithstanding the foregoing, provided that there has occurred no Event of
Default hereunder, Landlord shall not unreasonably withhold its consent to any
proposed assignment of this Lease or subletting of the Premises to a franchisee
under any franchise agreement approved by Landlord and in effect with respect to
the business being conducted at the Premises, provided that Landlord determines,
in its sole and absolute discretion, that (a) the use of the Premises pursuant
to such assignment or sublease is in compliance with Article VI hereof; (b)
Landlord is satisfied with the financial condition of the assignee under any
such assignment or the sublessee under any such sublease; (c) the initial Tenant
remains fully liable as a primary obligor for the payment of all rent and other
charges hereunder and for the performance of all its other obligations
hereunder; (d) such assignment or sublease does not violate the terms of any
Mortgage; and (e) such assignment or sublease is effected on a form approved by
Landlord. Notwithstanding the foregoing, provided that there has occurred no
Event of Default hereunder, Tenant may, upon thirty (30) days prior written
notice to Landlord, but without Landlord's consent, sublet the Premises to an
Affiliate of Tenant as described in clause (a) of Section 7.5 below, provided
that the initial Tenant remains fully liable as a primary obligor for the
payment of all rent and other charges hereunder and for the performance of all
its other obligations hereunder and the Guarantor executes and delivers to
Landlord an affirmation of its Guaranty in form satisfactory to Landlord. No
assignment or right of occupancy hereunder may be effectuated by operation of
law or otherwise without the prior written consent of Landlord. Any attempted
assignment, transfer or other encumbrance of this Lease or all or any of
Tenant's rights hereunder or interest herein, and any sublet or permission to
use or occupy the Premises or any part thereof not in accordance with this
Article VII shall be void and of no force or effect. Any assignment or
subletting, Landlord's consent thereto, or Landlord's collection or acceptance
of rent from any assignee or subtenant shall not be construed either as waiving
or releasing Tenant from any of its liabilities or obligations under this Lease
as a principal and not as a guarantor or surety, or as relieving Tenant or any
assignee or subtenant from the obligation of obtaining Landlord's prior written
consent to any subsequent assignment or subletting. As security for this Lease,
Tenant hereby assigns to Landlord the rent due from any assignee or subtenant of
Tenant. For any period during which there exists an Event of Default hereunder,
Tenant hereby authorizes each such assignee or subtenant to pay said rent
directly to Landlord upon receipt of notice from Landlord specifying same.
Landlord's collection of such rent shall not be construed as an acceptance of
such assignee or subtenant as a tenant. Notwithstanding anything to the contrary
contained herein, Tenant shall not mortgage. pledge, hypothecate or encumber
(collectively "mortgage") this Lease without Landlord's prior written consent,
which consent shall not be unreasonably withheld. Without limiting the
generality of the immediately preceding sentence, it is specifically agreed that
it shall be reasonable for Landlord to withhold its consent if such mortgage (I)
would (x) expand Landlord's obligations or liability under this Lease, or (y)
reduce Tenant's obligations or liability under this Lease, or (z) require the
consent of the holder of such mortgage to any cancellation, surrender, or
modification of this Lease or (II) would violate the terms of any Mortgage.
Tenant shall pay to Landlord as additional rent all reasonable expenses
(including attorneys' fees and accounting costs) incurred by

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Landlord in connection with Tenant's request for Landlord to give its consent to
any assignment, subletting or mortgage. Tenant shall notify Landlord prior to
engaging a real estate broker in connection with any proposed assignment or
sublease. Tenant shall deliver to Landlord a fully-executed copy of each
agreement evidencing a sublease or assignment or mortgage within ten (10) days
after Tenant's execution thereof.

      7.2 Change in Control. If Tenant is a partnership, then any event (whether
voluntary, concurrent or related) resulting in a dissolution of Tenant, any
withdrawal or change (whether voluntary, involuntary or by operation of law) of
partners owning a controlling interest in Tenant (including each general
partner), or any structural or other change having the effect of limiting the
liability of the partners shall be deemed a voluntary assignment of this Lease
subject to the provisions of this Article. If Tenant is a corporation (or a
partnership with a corporate general partner), then any event (whether
voluntary, concurrent or related) resulting in a dissolution, merger,
consolidation or other reorganization of Tenant (or such corporate general
partner), or the sale or transfer or relinquishment of the interest of
shareholders who, as of the date of this Lease, own a controlling interest of
the capital stock of Tenant (or such corporate general partner), shall be deemed
a voluntary assignment of this Lease subject to the provisions of this Article;
provided, however, that the foregoing portion of this sentence shall not apply
to (a) the trading of stock in a corporation in the ordinary course through a
national or regional exchange or over-the-counter market, or (b) the transfer of
stock between or among any of the following: Sidney deBoer, his wife, his
brothers and sisters, his brothers- and sisters-in-law, his children, his nieces
and nephews. his grandchildren, his grand-nieces and -nephews (collectively, the
"deBoer Family"), and charitable trusts, corporations, partnerships, trusts, and
other entities, the equitable ownership of which is entirely owned by members of
the deBoer Family. If Tenant is a limited liability company, then any
dissolution of Tenant or a withdrawal or change, whether voluntary, involuntary
or by operation of law, of members owning a controlling interest in Tenant shall
be deemed a voluntary assignment of this Lease. In addition, a transfer of all
or substantially all of the assets of Tenant, either by merger, consolidation,
or otherwise shall be deemed to be an assignment under this Article VII.

      7.3 Notice to Landlord. If at any time during the Lease Term Tenant
desires to assign, sublet or mortgage all or part of this Lease or the Premises,
then in connection with Tenant's request to Landlord for Landlord's consent
thereto, Tenant shall give notice to Landlord in writing containing: the
identity of the proposed assignee, subtenant or other party and a description of
its business; the terms of the proposed assignment, subletting or other
transaction; the commencement date of the proposed assignment, subletting or
other transaction; the area proposed to be assigned, sublet or otherwise
encumbered; the most recent financial statement or other evidence of financial
responsibility of such proposed assignee, subtenant or other party; and a
certification executed by Tenant and such party stating whether or not any
premium or other consideration is being paid for the assignment, sublease or
other transaction.

      7.4 Restrictions and Obligations Extend to Transferees. All restrictions
and obligations imposed pursuant to this Lease on Tenant shall be deemed to
extend to any subtenant, assignee, licensee, concessionaire or other occupant or
transferee, and Tenant shall cause such person or entity to comply with such
restrictions and obligations. Any assignee shall be deemed to have assumed
obligations as if such assignee had originally executed this Lease

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and at Landlord's request shall execute promptly a document confirming such
assumption. Each sublease is subject to the condition that if the Lease Term is
terminated or Landlord succeeds to Tenant's interest in the Premises by
voluntary surrender or otherwise, at Landlord's option, the sublease shall not
terminate as a matter of law and the subtenant shall be bound to Landlord for
the balance of the term of such sublease and shall attorn to and recognize
Landlord as its landlord under the then executory terms of such sublease.

      7.5 Affiliate. For purposes of this Lease, the term "control" shall mean
the ownership of fifty percent (50%) or more of the stock or other voting
interest of the controlled entity. For purposes of this Lease, the term
"Affiliate" shall mean any person or entity that (a) directly or indirectly
controls, is controlled by, or is under common control with, Landlord or Tenant,
as applicable or (b) holds direct or indirect beneficial ownership (as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of voting
securities or other voting interests representing at least five percent (5%) of
the outstanding voting power of an entity or equity securities or other equity
interests representing at least five percent (5%) of the outstanding equity
securities or interests in any entity.

                                  ARTICLE VIII
                             MAINTENANCE AND REPAIRS

      8.1 Tenant to Maintain and Repair. Tenant, at Tenant's sole cost and
expense, shall promptly make all repairs, perform all maintenance, and make all
replacements in and to the Premises (including without limitation, all interior
and exterior, structural, non-structural and systems maintenance, repairs and
replacements) that are necessary or desirable to keep the Premises in at least
as good a condition and repair as they were in on the Lease Commencement Date,
in a clean, safe and tenantable condition, and otherwise in accordance with all
Laws and the requirements of this Lease, including without limitation, repairs
required as a result of any act or omission of any invitee, agent, employee,
Affiliate, subtenant, assignee, contractor, client, family member, licensee,
customer or guest of Tenant (collectively, "Invitees"). Tenant shall maintain
all fixtures and personal property (including all equipment) located in, or
serving, the Premises in clean, safe and sanitary condition, shall take good
care thereof and make all required repairs and replacements thereto. Tenant
shall give Landlord prompt written notice of any defects or damage to the
structure of, or equipment or fixtures in, any improvements located in the
Premises. Tenant shall maintain all drives, sidewalks, parking areas and lawns
on the Premises in a clean condition, free of accumulations of dirt, trash, snow
and ice. Tenant shall suffer no waste or injury to any part of the Premises, and
shall, at the expiration or earlier termination of the Lease Term, surrender the
Premises in at least as good a condition and repair as they were in on the Lease
Commencement Date, ordinary wear and tear excepted. Notwithstanding anything to
the contrary contained herein, after the expiration of any applicable notice and
cure period set forth in Section 17.1(b), Landlord shall have the right, but not
the obligation, to make any repair and to charge Tenant as additional rent for
all costs and expenses incurred in connection therewith.

      8.2 Fixtures. Tenant shall not remove from the Premises any fixtures
unless replaced with similar fixtures of equal or greater quality and value.
Each such fixture shall become the property of Landlord upon installing the same
at the Premises. Tenant may not grant any lien or

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<PAGE>

security interest in and to such fixture replacements without the prior written
consent of Landlord, subject to the terms of Section 17.9 below with respect to
Tenant's equipment, machinery and other personalty.

                                   ARTICLE IX
                                   ALTERATIONS

      9.1 As-Is Condition. TENANT ACKNOWLEDGES THAT IT OR ITS AFFILIATE OWNED OR
LEASED AND OPERATED THE PREMISES IMMEDIATELY PRIOR TO THE LEASE COMMENCEMENT
DATE. ACCORDINGLY, TENANT SHALL ACCEPT POSSESSION OF THE PREMISES IN ITS "AS IS"
CONDITION AS OF THE LEASE COMMENCEMENT DATE. LANDLORD MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES, EITHER AS TO
ITS FITNESS FOR USE, ITS DESIGN OR CONDITION, OR ANY PARTICULAR USE OR PURPOSE
TO WHICH THE PREMISES MAY BE FIT, OR OTHERWISE, OR AS TO QUALITY OF THE MATERIAL
OR WORKMANSHIP THEREIN, OR THE EXISTENCE OF ANY DEFECTS, LATENT OR PATENT, IT
BEING AGREED THAT ALL SUCH RISKS ARE TO BE BORNE BY TENANT. Landlord is under no
obligation to make any alterations, decorations, additions, improvements or
other changes (collectively, "Alterations") in or to the Premises.

      9.2 Consent Required for Alterations. Tenant shall not make or permit
anyone to make any Alterations in or to the Premises, without the prior written
consent of Landlord, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, Tenant shall have the right, upon at least ten
(10) days prior written notice to Landlord but without Landlord's consent, to
perform any Alteration other than (a) Alterations that are capital in nature,
irrespective of the cost thereof (including without limitation, Alterations to
construct new buildings or structures on the Premises, or to repair, restore or
replace the improvements existing on the Premises as of the date of this Lease
in a manner other than that which constitutes ordinary and recurring
maintenance) and (b) Alterations that cost more than One Hundred Thousand
Dollars ($100,000.00). All Alterations in or to the Premises shall be made in a
good, workmanlike and first-class manner, in accordance with such commercially
reasonable terms and conditions as Landlord may impose. If any lien (or a
petition to establish such lien) is filed in connection with any Alteration,
such lien (or petition) shall be discharged by Tenant within ten (10) days
thereafter, at Tenant's sole cost and expense, by the payment thereof or by the
filing of a bond acceptable to Landlord. If Landlord gives its consent to the
making of any Alteration, such consent shall not be deemed to be an agreement or
consent by Landlord to subject its interest in the Premises to any liens which
may be filed in connection therewith. Promptly after the completion of an
Alteration, Tenant at its expense shall deliver to Landlord one (1) set of
accurate as-built drawings showing such Alteration in place.

      9 3 Removal of Alterations. Except as otherwise expressly provided
pursuant to Section 9.2 above, if any Alterations are made without the prior
written consent of Landlord, then, after the expiration of any notice and cure
period applicable pursuant to Section 17.1(b), Landlord shall have the right, in
addition to all other remedies, at Tenants expense to remove and correct such
Alterations and restore the Premises to its condition immediately prior thereto,
or to

                                                                              11
<PAGE>

require Tenant to do the same. All Alterations to the Premises during the Lease
Term shall be the property of Landlord and shall remain upon and be surrendered
with the Premises as a part thereof at the expiration or earlier termination of
the Lease Term; provided, however, that (a) if there exists no Event of Default
under this Lease, then Tenant shall have the right to remove, prior to the
expiration or earlier termination of the Lease Term, all movable furniture,
furnishings and equipment installed in the Premises solely at the expense of
Tenant, and (b) Tenant shall remove all Alterations and other items in the
Premises that Landlord designates in writing for removal. Notwithstanding
anything to the contrary contained herein, Tenant shall have the right to claim,
during the Lease Term, all federal and state income tax benefits associated with
Alterations to the Premises performed at Tenant's sole cost and expense during
the Lease Term, if and to the extent permitted under applicable Laws; provided,
however, that in no event shall Landlord have any liability to Tenant whatsoever
in connection with any inability by Tenant to obtain any such benefits. Landlord
shall have the right at Tenant's expense to repair all damage and injury to the
Premises caused by any removal of such furniture, furnishings, equipment and
Alterations or to require Tenant to do the same; provided, however, that
Landlord shall not perform any such repair until after notice and the expiration
of the applicable cure period pursuant to Section 17.1(b), if and to the extent
that such cure period occurs prior to the expiration or earlier termination of
the Lease Term. If such furniture, furnishings and equipment are not removed by
Tenant prior to the expiration or earlier termination of the Lease Term, the
same shall at Landlord's option become the property of Landlord and shall be
surrendered with the Premises as a part thereof; provided, however, that
Landlord shall have the right at Tenant's expense to remove from the Premises
such furniture, furnishings and equipment and any Alteration which Landlord
designates in writing for removal or to require Tenant to do the same. If Tenant
fails to return the Premises to Landlord as required by this Section, then
Tenant shall pay to Landlord, as additional rent, all costs incurred by Landlord
in effecting such return.

                                    ARTICLE X
               REPRESENTATIONS, WARRANTIES AND COVENANTS OF TENANT

      10.1 Representations, Warranties and Covenants of Tenant. Tenant hereby
represents, warrants and covenants to Landlord as follows:

            (a) Operating Agreements. Tenant shall provide to Landlord, within
ten (10) days after execution or receipt thereof, as applicable, copies of all
franchise and other operating agreements (including without limitation, any
buy-sell agreements or similar agreements affecting the control of the business
being operated at or from the Premises) pursuant to which the business is being
operated at or from the Premises which are not in effect as of the date of this
Lease, and all modifications, supplements or other amendments to, and notices of
breach or default under, all such agreements, whether now existing, or hereafter
entered into. Tenant further covenants at all times during the Lease Term to
operate the business being conducted at or from the Premises in compliance with
such franchise or other operating agreements.

            (b) Change in Financial Condition. No material adverse change has
occurred with respect to the financial condition of Tenant, any Affiliate of
Tenant operating the business being conducted at or from the Premises, or such
business since the date of the most recent Quarterly Statement or Annual
Statement (as hereinafter defined), as applicable, delivered to

                                                                              12
<PAGE>

Landlord, and Tenant and any such Affiliate each has not entered into any
material transaction outside the ordinary course of its business operations
being conducted at the Premises.

            (c) Proceedings. No proceeding at law or in equity or before any
administrative agency or arbitrator or similar forum is pending or, to the
knowledge of Tenant, threatened which could reasonably be expected to result in
a material adverse change in the financial condition of Tenant, any Affiliate of
Tenant operating the business being conducted at or from the Premises, or either
such party's ability to conduct its business at the Premises.

            (d) Compliance with Financial Covenants of Operating Agreements.
Tenant and any Affiliate operating the business being conducted at or from the
Premises are in compliance in all material respects with all financial covenants
required to be maintained pursuant to all franchise and other agreements
pursuant to which Tenant or such Affiliate operates the business being conducted
at or from the Premises.

            (e) Tenant and Guarantor Financial Statements. Tenant and each
Guarantor, if any, shall provide Landlord and any Mortgagee, at the times set
forth herein (or more often as may be reasonably requested by Landlord), the
following financial information during the Lease Term: (i) within forty-five
(45) days after the end of each fiscal quarter, Tenant- or Guarantor-prepared
year-to-date financial statements of Tenant and of each Guarantor, prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied (the "Quarterly Statements"); (ii) within ninety (90) days after the end
of each fiscal year of Tenant and each Guarantor, annual financial statements
prepared in accordance with GAAP, consistently applied, audited or reviewed by
an independent certified public accountant (the "Annual Statements"); and (iii)
such additional financial information as Landlord shall reasonably request.
Notwithstanding the foregoing provisions of this Section 10.1(e) to the
contrary, during any period that (I) Tenant is a wholly-owned subsidiary of
Guarantor, (II) financial statements and tax returns of Tenant, Guarantor, and
other wholly-owned subsidiaries of Guarantor are prepared on a consolidated
basis, and (III) such consolidated financial statements and tax returns do not
also aggregate financial data for any entities that are not wholly-owned by
Guarantor, then such financial statements and tax returns may be provided on
such a consolidated basis. Further notwithstanding anything to the contrary
contained herein, with respect to any period during the Lease Term in which
Tenant is, or is wholly owned by, a public company, Tenant shall be permitted to
satisfy the conditions contained in this Section 10.1(e) by delivering to
Landlord, at the times required herein, all such financial information as Tenant
(or such public company that wholly owns Tenant, as applicable) is required to
file with the United States Securities and Exchange Commission, and such
additional financial information as may be required by Landlord to obtain or
comply with the terms of any Mortgage; provided, however, that to the extent any
such financial information is of a confidential nature, Landlord agrees to enter
into confidentiality agreements with Tenant in forms reasonably acceptable to
Landlord.

            (f) Cash Flow Coverage Ratio Certification. Tenant shall provide to
Landlord, within forty-five (45) days after the end of each fiscal quarter, a
written calculation, prepared by Tenant or a Guarantor and certified by Tenant's
and each Guarantor's chief financial officer, evidencing that Tenant, taken
together as a whole with all Guarantors, shall have

                                                                              13
<PAGE>

maintained a Cash Flow Coverage Ratio, during the past four (4) calendar
quarters taken as a whole, of no less than 1.5 to 1.0, based on the Quarterly
Statements and Annual Statements delivered to Landlord pursuant to Section
10.1(e) above. For purposes of this Lease, "Cash Flow Coverage Ratio" shall mean
the quotient of (i) the sum of (with respect to Tenant and all Guarantors) all
net income (computed in accordance with GAAP, consistently applied) plus (A)
income taxes, (B) all rent payable under all leases for real property and
improvements to which Tenant or any Guarantor is a party ("Aggregate Rent
Obligations"), (C) depreciation and amortization, (D) owners' compensation and
bonuses in excess of the lesser of Five Hundred Thousand Dollars ($500,000) or
twenty-five one-hundredths of one percent (0.25%) of the revenue of Tenant and
all Guarantors, taken as a whole; (E) the annual LIFO adjustment; and (F) other
non-cash expenses, less recurring capital expenditures and principal payments
under long-term debt divided by (ii) the Aggregate Rent Obligations. Tenant and
each Guarantor shall provide to Landlord, within ten (10) days after request,
all evidence reasonably requested supporting the Cash Flow Coverage Ratio
calculations delivered to Landlord.

            (g) Disclosure. This Lease does not contain any untrue statement of
a material fact or omit to state a material fact necessary in order to make any
statement contained herein not misleading in light of the circumstances in which
it was made. To Tenant's knowledge, there is no event, fact or occurrence that
has resulted, or in the future (so far as Tenant can reasonably foresee) could
result, in any material adverse change in the financial condition of Tenant or
its Affiliate operating the business being conducted at or from the Premises
from the most recent Quarterly Statements or Annual Statements, as applicable,
provided to Landlord.

            (h) [Intentionally omitted].

            (i) Material Litigation. Within ten (10) days after Tenant has
knowledge of any litigation or other proceeding related to or arising out of
this Lease or the Premises in which claims are asserted in an amount in excess
of Fifty Thousand Dollars ($50,000), that (a) may be instituted against Tenant
or its Affiliate or (b) may affect the title to or the interest of Landlord in
the Premises, Tenant shall give written notice thereof to Landlord. If and to
the extent Landlord reasonably determines that such proceeding may adversely
affect the Premises or this Lease, Landlord may, after notice to Tenant,
undertake such investigation or proceeding and Tenant shall pay all reasonable
costs and expenses related thereto that are incurred by Landlord, as additional
rent, within ten (10) days after delivery of written evidence thereof, whether
or not Landlord has received notice from Tenant of such investigation or
proceeding, and whether or not an Event of Default has occurred or has been
cured. Notwithstanding anything to the contrary contained herein, in the event
that Tenant provides written notice to Landlord requesting the right to
undertake such investigation and/or proceeding and specifying, in such detail as
Landlord shall reasonably require, the manner in which it will perform the same,
Landlord shall approve such request if Landlord determines, in its sole and
absolute discretion, that (I) the same will not adversely affect the Premises
and (II) the same will not violate the terms of any Mortgage and shall be in
accordance with all policies and procedures that Landlord and/or the holder of
any Mortgage may require; provided, however, that such approval may be revoked
by Landlord at any time if Landlord determines, in its sole and absolute
discretion, that Tenant is not proceeding with such investigation and/or
proceeding in accordance with the terms outlined to Landlord in its request for
approval or is not prosecuting the same to completion with due

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<PAGE>

diligence.

                                   ARTICLE XI
                           SECURITY DEPOSIT; GUARANTY

      11.1 Security Deposit. Simultaneously with Tenant's execution of this
Lease, Tenant shall deposit with Landlord the Security Deposit Amount (as
defined in Section 1.6) as a security deposit which shall be security for the
performance by Tenant of all of Tenant's obligations, covenants, conditions and
agreements under this Lease. Landlord shall not be required to maintain such
security deposit in a separate account. Except as may be required by law, Tenant
shall not be entitled to interest on the security deposit. Within approximately
sixty (60) days after the later of the expiration or earlier termination of the
Lease Term or Tenant's vacating the Premises, Landlord shall return such
security deposit to Tenant, less such portion thereof as Landlord shall have
appropriated to satisfy any of Tenant's obligations, or any default by Tenant,
under this Lease. If there shall be any default under this Lease by Tenant, then
Landlord shall have the right, but shall not be obligated, to use, apply or
retain all or any portion of the security deposit for the payment of any (a)
Base Rent, additional rent or any other sum as to which Tenant is in default, or
(b) amount Landlord may spend or become obligated to spend, or for the
compensation of Landlord for any losses incurred, by reason of Tenant's default
(including, but not limited to, any damage or deficiency arising in connection
with the reletting of the Premises). If any portion of the security deposit is
so used or applied, then within three (3) business days after Landlord gives
written notice to Tenant of such use or application, Tenant shall deposit with
Landlord cash in an amount sufficient to restore the security deposit to the
original Security Deposit Amount, and Tenant's failure to do so shall constitute
an Event of Default under this Lease.

      11.2 Guaranty. As additional security for the faithful performance by
Tenant of all covenants, conditions and agreements of this Lease, each Guarantor
(as defined in Section 1.11 above) has executed and delivered to Landlord a
guaranty of lease (the "Guaranty") in the form attached to the Purchase
Agreement.

                                   ARTICLE XII
                                   INSPECTION

      12.1 Inspection of Premises. At all times (after reasonable notice, except
in the event of emergency) Tenant shall permit Landlord, its agents and
representatives, and the holder of any Mortgage, to enter the Premises without
charge therefor and without diminution of the rent payable by Tenant in order to
examine, inspect or protect the Premises, or to exhibit the same to brokers,
prospective tenants (but only (a) after an Event of Default or (b) during the
last twelve (12) months of the then-current Lease Term), lenders, purchasers and
others. Landlord shall endeavor to minimize disruption to Tenant's normal
business operations in the Premises in connection with any such entry.

                                  ARTICLE XIII
                                    INSURANCE

                                                                              15
<PAGE>

      13.1 Insurance.

            (a) Types and Amounts of Required Insurance Coverage. Throughout the
Lease Term, Tenant shall obtain and maintain (I) commercial general liability
insurance (written on an occurrence basis) including contractual liability
coverage insuring the obligations assumed by Tenant under this Lease (including
the indemnity obligations set forth in this Lease), premises and operations
coverage, broad form property damage coverage and independent contractors
coverage, and containing an endorsement for personal injury, (2) business
interruption insurance, (3) all-risk property insurance, including coverage for
flood and, upon Landlord's request, earthquake, (4) comprehensive automobile
liability insurance (covering automobiles owned or operated by Tenant), (5)
worker's compensation insurance, and (6) employer's liability insurance. Such
commercial general liability insurance shall be in minimum amounts typically
carried by prudent tenants engaged in similar operations, but in no event shall
be in an amount less than the greater of (x) Three Million Dollars ($3,000,000)
combined single limit per occurrence with a Five Million Dollar ($5,000,000)
annual aggregate and (y) the minimum amounts required under the franchise
agreement or other license pursuant to which Tenant or its Affiliate operates
the business at or from the Premises. Such business interruption insurance shall
be in minimum amounts typically carried by prudent tenants engaged in similar
operations, but in no event shall be in an amount less than the Base Rent,
Impositions and all other additional rent payable under this Lease during any
Lease Year. Such property insurance shall be in an amount not less than that
required to replace all of the improvements installed on or about the Premises
as of the Lease Commencement Date, all Alterations and all other contents of the
Premises (including, without limitation, Tenant's trade fixtures, decorations,
furnishings, equipment and personal property). Such automobile liability
insurance shall be in an amount not less than One Million Dollars ($1,000,000)
for each accident. Such worker's compensation insurance shall carry minimum
limits as defined by the law of the jurisdiction in which the Premises is
located (as the same may be amended from time to time). Such employer's
liability insurance shall be in an amount not less than One Million Dollars
($1,000,000) for each accident. Tenant shall have the right to maintain the
insurance coverages set forth in this Article under a blanket insurance policy
covering other premises owned or operated by Tenant, provided that (i) the
Premises is covered independently by such blanket insurance policy to the full
extent required by this Article, and (ii) such coverage for the Premises shall
not be diminished for any reason whatsoever (including without limitation a
claim made with respect to any other premises) during the Lease Term.

            (b) Conditions of Insurance Coverage. All such insurance shall: (1)
be issued by a company that is licensed to do business in the jurisdiction in
which the Premises is located, that has been approved in advance by Landlord and
that has a rating equal to or exceeding A-:XII from Best's Insurance Guide; (2)
name Landlord and the holder of any Mortgage as additional insureds and/or loss
payees (as applicable), and all loss adjustment shall require the written
consent of Landlord and Tenant, and such Mortgagee, if applicable; (3) contain
an endorsement that such policy shall remain in full force and effect
notwithstanding that the insured may have waived its right of action against any
party prior to the occurrence of a loss (Tenant hereby waiving its right of
action and recovery against and releasing Landlord and its employees and agents
from any and all liabilities, claims and losses for which they may otherwise be
liable to the extent Tenant is covered by insurance carried or required to be

                                       16
<PAGE>

carried under this Lease); (4) provide that the insurer thereunder waives all
right of recovery by way of subrogation against Landlord, its partners, agents,
employees, and representatives, in connection with any loss or damage covered by
such policy; (5) be acceptable in form and content to Landlord; (6) be primary
and non-contributory; (7) contains an endorsement for cross liability and
severability of interests; and (8) contain an endorsement prohibiting
cancellation, failure to renew, reduction of amount of insurance or change in
coverage without the insurer first giving Landlord thirty (30) days' prior
written notice (by certified or registered mall, return receipt requested) of
such proposed action. No such policy shall contain any deductible provision
except as otherwise approved in writing by Landlord, which approval shall not be
unreasonably withheld. Landlord reserves the right from time to time to require
Tenant to obtain higher minimum amounts or different types of insurance if it
becomes customary for owners or tenants of comparable properties in the vicinity
of the Premises to carry insurance of such higher minimum amounts or of such
different types. Tenant shall deliver to Landlord, concurrently with Tenant's
execution of this Lease and at least annually thereafter, (A) a certificate of
all such insurance, (B) receipts evidencing payment therefor (and, upon request,
copies of all required insurance policies, including endorsements and
declarations), and (C) a certification from Tenant's insurance agent for the
benefit of Landlord confirming that Tenant is carrying all of the insurance
required pursuant to this Article, and that such coverage is in full force and
effect. Tenant shall give Landlord immediate notice in case of fire, theft or
accident in the Premises. Neither the issuance of any insurance policy required
under this Lease nor the minimum limits specified herein shall be deemed to
limit or restrict in any way Tenant's liability arising under or out of this
Lease.

                                   ARTICLE XIV
                              LIABILITY OF LANDLORD

      14.1 Release of Landlord. Landlord, its Affiliates, employees and agents
shall not be liable to Tenant, its Affiliates and Invitees or any other person
or entity for any damage (including indirect and consequential damage), injury,
loss or claim (including claims for the interruption of or loss to business)
based on or arising out of any cause whatsoever, including without limitation
the following: the violation of any Environmental Law or the use, storage or
disposal of any Hazardous Materials at, on or under the Premises (whether prior
or subsequent to the Lease Commencement Date); repair to any portion of the
Premises; interruption in the use of the Premises or any equipment therein; any
accident or damage resulting from any use or operation (by Landlord, Tenant or
any other person or entity) of elevators or heating, cooling, electrical,
sewerage or plumbing equipment or apparatus; termination of this Lease by reason
of damage to the Premises; any fire, robbery, theft, vandalism, mysterious
disappearance or any other casualty; actions of any other person or entity;
leakage in any part of the Premises from water, rain, ice or snow that may leak
into, or flow from, any part of the Premises, or from drains, pipes or plumbing
fixtures in the Premises; and, notwithstanding anything to the contrary
contained in Section 21.1 below, (a) the encroachment of improvements over,
under, into, or across the boundaries of the Premises, easements, setback
requirements, or utilities (including, without limitation, storm drains and
overhead power lines), or (b) the extinguishment of any easement benefiting (or
constituting a portion of) the Premises in connection with the foreclosure of
any mortgage or deed of trust superior to such easement. Any property placed by
Tenant, its Affiliates or Invitees in or about the Premises shall be at the sole
risk of Tenant, and Landlord

                                                                              17
<PAGE>

shall not in any manner be held responsible therefor. Notwithstanding the
foregoing provisions of this Section, Landlord shall not be released from
liability to Tenant for any physical injury to any natural person caused by
Landlord's willful misconduct or gross negligence; provided, however, that in no
event shall Landlord have any liability for any loss to Tenant's business or any
other indirect losses or consequential damages.

      14.2 Indemnification of Landlord. Tenant shall reimburse Landlord, its
Affiliates, partners, officers, directors, members, trustees, employees, agents
and mortgagees (as additional rent) for, and shall indemnify, defend upon
request and hold them harmless from and against, all costs, damages (including
punitive and consequential damages), claims, liabilities, reasonable,
out-of-pocket expenses (including attorneys' fees, disbursements and actual
costs), losses, penalties and court costs suffered by or claimed against any of
them, directly or indirectly, based on or arising out of, in whole or in part,
(a) the use and occupancy of the Premises or the business conducted therein, (b)
any act or omission of Tenant or its Affiliates or Invitees, (c) any
Environmental Law (irrespective of whether there has occurred a violation
thereof) relating to the Premises, including without limitation, any loss of
value to the Premises in connection therewith, and (d) any breach of Tenant's
obligations under this Lease, including without limitation, the failure to
comply with Laws.

      14.3 Liability Accruing Subsequent to Transfer. No landlord hereunder
shall be liable for any obligation or liability based on or arising out of any
event or condition occurring during the period that such landlord was not the
owner of the Premises or a landlord's interest therein. Within five (5) business
days after request, Tenant shall attorn to such transferee and execute,
acknowledge and deliver any document submitted to Tenant confirming such
attornment.

      14.4 Tenant's Remedies. Tenant shall not have the right to set off,
recoup, abate or deduct any amount allegedly owed to Tenant pursuant to any
claim against Landlord from any rent or other sum payable to Landlord. Tenant's
sole remedy for recovering upon such claim shall be to institute an independent
action against Landlord, which action shall not be consolidated with any action
of Landlord.

      14.5 Landlord's Liability. If Tenant or its Affiliates or Invitees are
awarded a money judgment against Landlord, then recourse for satisfaction of
such judgment shall be limited to execution against Landlord's estate and
interest in the Premises. No other asset of Landlord, any partner, director,
member, officer or trustee of Landlord (each, an "officer") or any other person
or entity shall be available to satisfy or be subject to such judgment, nor
shall any officer or other person or entity be held to have personal liability
for satisfaction of any claim or judgment against Landlord or any officer.

                                   ARTICLE XV
                              DAMAGE OR DESTRUCTION

      15.1 Tenant's Restoration Obligations. If the improvements located on the
Premises are totally or partially damaged or destroyed, then promptly after such
damage or destruction, Tenant shall promptly repair, rebuild, or restore all
damaged improvements on or about the Premises, in accordance with the following,
so as to make the Premises at least equal in value to

                                                                              18
<PAGE>

the Premises existing immediately prior to such damage or destruction. All such
restoration shall be at Tenant's expense; provided, however, that Landlord will
make available to Tenant the net proceeds of any fire or other casualty
insurance paid to Landlord after deduction of any costs incurred in connection
with the collection thereof, including reasonable attorneys' fees. Payment to
Tenant of such net proceeds shall be made in accordance with reasonable
procedures customarily required in connection with construction loans. Tenant
shall deliver to Landlord for Landlord's approval (which shall be granted or
withheld in accordance with the standards set forth in Section 9.2 for
Landlord's consent to Alterations) the plans and specifications for such
restoration. Promptly after receiving Landlord's approval of such plans and
specifications, Tenant shall deliver to Landlord for Landlord's approval a
schedule setting forth the estimated monthly draws for such work. Upon
Landlord's approval thereof, Tenant will begin such repairs or restoration and
will prosecute the repairs and restoration to completion with diligence and in
accordance with the terms and conditions contained in Article IX of this Lease.
Landlord and its architects and engineers shall have the right to inspect the
Premises from time to time during such repair and restoration. In no event,
however, shall Landlord have any liability whatsoever for any defects in the
design or construction of the repairs and restoration, or the compliance of the
plans and specifications with Laws. In no event shall any damage or destruction
cause an abatement of any rent required to be paid by Tenant under this Lease,
nor permit any termination of this Lease.

                                   ARTICLE XVI
                                  CONDEMNATION

      16.1 Permanent Taking. If the entire Premises, or the use or occupancy
thereof, shall be permanently taken or condemned by any governmental or
quasi-governmental authority for any public or quasi-public use or purpose or
sold under threat of such a taking or condemnation (collectively, "condemned")
so as to render Tenant unable to operate the business being conducted at or from
the Premises as of the Lease Commencement Date, as reasonably determined by
Landlord, then this Lease shall terminate on the day prior to the date title
thereto vests in such authority, and rent shall be apportioned as of such date.
If less than the entire Premises or occupancy thereof is permanently condemned,
but such partial condemnation renders Tenant unable to operate the business
being conducted at or from the Premises as of the Lease Commencement Date, as
reasonably determined by Landlord, then Tenant shall have the right to terminate
this Lease upon written notice thereof to Landlord within ten (10) business days
after Tenant receives notice of such taking, this Lease shall terminate on the
day prior to the date title thereto vests in the applicable authority, and rent
shall be apportioned as of such date. If less than the entire Premises or
occupancy thereof is permanently condemned and such partial condemnation does
not render Tenant unable to operate the business being conducted at or from the
Premises as of the Lease Commencement Date, as reasonably determined by
Landlord, then this Lease shall remain in full force and effect. Notwithstanding
anything to the contrary contained in this Article, if the condemnation is the
result of the failure of Tenant to maintain the Premises in the condition
required under this Lease, then upon such termination, Tenant shall pay to
Landlord as liquidated damages, an amount equal to the sum of all Base Rent,
additional rent and other sums which would have been payable under this Lease
through the remainder of the Lease Term in the absence of such termination. For
purposes of this Section, the Premises or portion thereof, as applicable, shall
be deemed to be permanently condemned if condemned for a

                                                                              19
<PAGE>

period in excess of twenty-four (24) consecutive calendar months.

      16.2 Temporary Taking. If all or any portion of the Premises is condemned
for a period of twenty-four (24) consecutive calendar months or less, all of the
terms and conditions of this Lease shall remain in full force and effect,
notwithstanding such condemnation. In such event, there shall be no abatement of
rent or other amounts payable under this Lease.

      16.3 Awards. All awards, damages and other compensation paid on account of
condemnation shall belong to Landlord, and Tenant assigns to Landlord all rights
to such awards, damages and compensation. Tenant shall not make any claim
against Landlord or such authority for any portion of such award, damages or
compensation attributable to damage to the Premises, value of the unexpired
portion of the Lease Term, loss of profits or goodwill, leasehold improvements
or severance damages. Nothing contained herein, however, shall prevent Tenant
from pursuing a separate claim against the authority for relocation expenses and
for the value of furnishings, equipment and trade fixtures (a)(i) which were
installed in the Premises at Tenant's expense following the Lease Commencement
Date or (ii) that Tenant retained title to as of the Lease Commencement Date,
and (b) which Tenant is entitled pursuant to this Lease to remove at the
expiration or earlier termination of the Lease Term, provided that such claim
shall in no way diminish the award, damages or compensation payable to or
recoverable by Landlord in connection with such condemnation.

                                  ARTICLE XVII
                                     DEFAULT

      17.1 Events of Default. Each of the following shall constitute an "Event
of Default": (a) Tenant's failure to make when due any payment of the Base Rent,
additional rent or other sum; provided, however, that with respect to the first
(1st) such failure in any twelve (12) month period only, no Event of Default
shall be deemed to have occurred unless such failure continues for a period of
five (5) business days after Landlord delivers written notice thereof to Tenant;
(b) Tenant's failure to perform or observe any covenant or condition of this
Lease not otherwise specifically described in this Section, which failure
continues for twenty (20) days after Landlord delivers written notice thereof to
Tenant, or, provided that if such failure cannot be cured within such twenty
(20) day period, and Tenant begins such cure promptly within such twenty (20)
day period and thereafter diligently pursues the same to completion, then Tenant
shall have such additional time, up to an additional forty (40) days, as is
necessary to effect such cure; provided, however, that no cure period whatsoever
shall be applicable if, in Landlord's sole and absolute discretion, (i) such
failure raises a life/safety issue with respect to the Premises or its occupants
or visitors, including but not limited to, a threat of personal injury or
continuing physical injury to the Premises, and/or (ii) with respect solely to
an Environmental Default (as specified in Section 6.3), such failure would
materially adversely affect Landlord and/or the Premises; (c) Tenant's
abandonment of or failure to occupy continuously the Premises; (d) an Event of
Bankruptcy as specified in Article XVIII; (e) Tenant's dissolution or
liquidation; (f) [intentionally omitted]; (g) any subletting, assignment,
transfer, mortgage or other encumbrance of the Premises or this Lease not
permitted by Article VII; (h) any representation, warranty or covenant made by
Tenant for itself or an Affiliate is incorrect in any material respect when
made; (i) any termination or relinquishment of any franchise or license pursuant
to which Tenant

                                       20
<PAGE>

or an Affiliate conducts business at or from the Premises as of the date of this
Lease, unless Tenant or its Affiliate conducting business at or from the
Premises has entered into a new written franchise or license, as applicable, for
the operation of motor vehicle retail or related businesses at the Premises
within thirty (30) days after the termination or relinquishment of the previous
franchise or license, as applicable, which new franchise or license, as
applicable, shall have been approved in writing by Landlord in the exercise of
its commercially reasonable discretion; (j) a final, non-appealable judgment for
the payment of money not fully covered by insurance is rendered against Tenant
or any Affiliate conducting business at or from the Premises, and the same has
not been discharged, vacated, bonded, appealed or stayed within thirty (30) days
after rendering of the same; (k) any failure to maintain the insurance required
pursuant to Article XIII above, which failure continues for three (3) days after
Landlord delivers written notice thereof to Tenant; (1) any default by Tenant,
any Guarantor or any of Tenant's Affiliates under any other instrument entered
into with or for the benefit of Landlord or any of Landlord's Affiliates, which
default continues following any applicable notice and cure period provided in
such instrument; and (m) any breach of Tenant's covenant regarding the Case Flow
Coverage Ratio requirement described in Section 10.1(f) above; provided,
however, that no Event of Default shall be deemed to have occurred pursuant to
this Section 17.1(m) if, upon such breach, Tenant promptly commences and
thereafter diligently pursues the cure of the breach of the covenant.

      17.2 Landlord's Remedies. If there shall be an Event of Default (even if
prior to the Lease Commencement Date), then the provisions of this Section shall
apply. Landlord shall have the right, at its sole option, to terminate this
Lease. In addition, with or without terminating this Lease, Landlord may
re-enter, terminate Tenant's right of possession and take possession of the
Premises. The provisions of this Article shall operate as a notice to quit, and
Tenant hereby waives any other notice to quit or notice of Landlord's intention
to re-enter the Premises or terminate this Lease. If necessary, Landlord may
proceed to recover possession of the Premises under applicable Laws, or by such
other proceedings, including re-entry and possession, as may be applicable. If
Landlord elects to terminate this Lease and/or elects to terminate Tenant's
right of possession, everything contained in this Lease on the part of Landlord
to be done and performed shall cease without prejudice, however, to Tenant's
liability for all Base Rent. additional rent and other sums specified herein.
Whether or not this Lease and/or Tenant's right of possession is terminated,
Landlord shall have the right, at its sole option, to terminate any right of
renewal, expansion, first offer or refusal and any right to purchase the
Premises contained in this Lease and to grant or withhold any consent or
approval pursuant to this Lease in its sole and absolute discretion. If there
exists an Event of Default under this Lease and Tenant has vacated the Premises,
then Landlord shall thereafter use reasonable efforts to relet the Premises;
provided, however, that Tenant hereby acknowledges the special use of the
Premises for the conduct of business by a franchised dealer of motor vehicles
and agrees that the ability of Landlord to relet the same to another dealer of
motor vehicles under a franchise agreement satisfactory to Landlord is extremely
uncertain and would be likely to require a substantial amount of time. Whether
or not this Lease and/or Tenant's right of possession is terminated or any suit
is instituted. Tenant shall be liable for any Base Rent, additional rent,
damages or other sum which may be due or sustained prior to such default, and
for all costs, fees and reasonable, out-of-pocket expenses (including, but not
limited to, attorneys' fees and costs, brokerage fees, expenses incurred in
enforcing any of Tenant's obligations under the Lease or in placing the Premises
in first-class rentable condition, advertising expenses, and any concessions or

                                                                              21
<PAGE>

allowances granted by Landlord) incurred by Landlord in pursuit of its remedies
hereunder and/or in recovering possession of the Premises and renting the
Premises to others from time to time plus other actual or consequential damages
suffered or incurred by Landlord on account of Tenant's default (including, but
not limited to, late fees or other charges incurred by Landlord under any
Mortgage). Tenant also shall be liable for additional damages which at
Landlord's election shall be either one or a combination of the following: (a)
an amount equal to the Base Rent and additional rent due or which would have
become due from the date of Tenant's default through the remainder of the Lease
Term, less the amount of rental, if any, which Landlord receives during such
period from others to whom the Premises may be rented (other than any additional
rent received by Landlord as a result of any failure of such other person to
perform any of its obligations to Landlord), which amount shall be computed and
payable in monthly installments, in advance, on the first day of each calendar
month following Tenant's default and continuing until the date on which the
Lease Term would have expired but for Tenant's default, it being understood that
separate suits may be brought from time to time to collect any such damages for
any month(s) (and any such separate suit shall not in any manner prejudice the
right of Landlord to collect any damages for any subsequent month(s)), or
Landlord may defer initiating any such suit until after the expiration of the
Lease Term (in which event such deferral shall not be construed as a waiver of
Landlord's rights as set forth herein and Landlord's cause of action shall be
deemed not to have accrued until the expiration of the Lease Term), and it being
further understood that if Landlord elects to bring suits from time to time
prior to reletting the Premises, Landlord shall be entitled to its full damages
through the date of the award of damages without regard to any Base Rent,
additional rent or other sums that are or may be projected to be received by
Landlord upon reletting of the Premises; or (b) an amount equal to the sum of
(i) all Base Rent, additional rent and other sums due or which would be due and
payable under this Lease as of the date of Tenant's default through the end of
the scheduled Lease Term, plus (ii) all reasonable, out-of-pocket expenses
(including broker and attorneys' fees) and value of all vacancy periods
projected by Landlord to be incurred in connection with the reletting of the
Premises. Such amount shall be discounted using a discount factor equal to the
yield of the Treasury Note or Bill, as appropriate, having a maturity period
approximately commensurate to the remainder of the Term, and such resulting
amount shall be payable to Landlord in a lump sum on demand, it being understood
that upon payment of such liquidated and agreed final damages, Tenant shall be
released from further liability under this Lease with respect to the period
after the date of such payment. Landlord may bring suit to collect any such
damages at any time after an Event of Default shall have occurred. In the event
Landlord relets the Premises for a term extending beyond the scheduled
expiration of the Lease Term, it is understood that Tenant will not be entitled
to apply any base rent, additional rent or other sums generated or projected to
be generated in the period extending beyond the scheduled expiration of the
Lease Term (collectively, the "Extra Rent') against Landlord's damages.
Similarly in proving the amount that would be received by Landlord upon a
reletting of the Premises as set forth in clause (iii) above, Tenant shall not
take into account the Extra Rent. The provisions contained in this Section shall
be in addition to, and shall not prevent the enforcement of, any claim Landlord
may have against Tenant for anticipatory breach of this Lease. Nothing herein
shall be construed to affect or prejudice Landlord's right to prove, and claim
in full, unpaid rent accrued prior to termination of this Lease. If Landlord is
entitled, or Tenant is required, pursuant to any provision hereof to take any
action upon the termination of the Lease Term, then Landlord shall be entitled,
and Tenant shall be required, to take such action also upon the termination of

                                                                              22
<PAGE>

Tenant's right of possession.

      17.3 Tenant Waiver. Tenant hereby expressly waives, for itself and all
persons claiming by, through or under it, any right of redemption, re-entry or
restoration of the operation of this Lease under any present or future Law,
including without limitation any such right which Tenant would otherwise have in
case Tenant shall be dispossessed for any cause, or in case Landlord shall
obtain possession of the Premises as herein provided.

      17.4 Landlord's Rights Cumulative. All rights and remedies of Landlord set
forth in this Lease are cumulative and in addition to all other rights and
remedies available to Landlord at law or in equity, including those available as
a result of any anticipatory breach of this Lease. The exercise by Landlord of
any such right or remedy shall not prevent the concurrent or subsequent exercise
of any other right or remedy. No delay or failure by Landlord to exercise or
enforce any of Landlord's rights or remedies or Tenant's obligations shall
constitute a waiver of any such rights, remedies or obligations. Landlord shall
not be deemed to have waived any default by Tenant unless such waiver expressly
is set forth in a written instrument signed by Landlord. If Landlord waives in
writing any default by Tenant, such waiver shall not be construed as a waiver of
any covenant, condition or agreement set forth in this Lease except as to the
specific circumstances described in such written waiver.

      17.5 Accord and Satisfaction. If Landlord shall institute proceedings
against Tenant and a compromise or settlement thereof shall be made, then the
same shall not constitute a waiver of the same or of any other covenant,
condition or agreement set forth herein, nor of any of Landlord's rights
hereunder. Neither the payment by Tenant of a lesser amount than the monthly
installment of Base Rent, additional rent or of any sums due hereunder nor any
endorsement or statement on any check or letter accompanying a check for payment
of rent or other sums payable hereunder shall be deemed an accord and
satisfaction. Landlord may accept the same without prejudice to Landlord's right
to recover the balance of such rent or other sums or to pursue any other remedy.
Notwithstanding any request or designation by Tenant, Landlord may apply any
payment received from Tenant to any payment then due. No re-entry by Landlord,
and no acceptance by Landlord of keys from Tenant, shall be considered an
acceptance of a surrender of this Lease.

      17.6 Default Rate. If Tenant fails to make any payment to any third party
or to do any act herein required to be made or done by Tenant, then, after the
expiration of the applicable notice and cure period (if any) set forth in
Section 17.1, Landlord may, but shall not be required to, make such payment or
do such act. The taking of such action by Landlord shall not be considered a
cure of such default by Tenant or prevent Landlord from pursuing any remedy it
is otherwise entitled to in connection with such default. If Landlord elects to
make such payment or do such act, then all reasonable, out-of-pocket expenses
incurred by Landlord, plus interest thereon at a rate (the "Default Rate") equal
to the lesser of (a) the greater of (i) eighteen percent (18%) per annum or (ii)
the rate per annum which is five (5) whole percentage points higher than the
prime rate published in the Money Rates section of the Wall Street Journal, or
(b) the highest lawful rate per annum, from the date incurred by Landlord to the
date of payment thereof by Tenant, shall constitute additional rent due
hereunder.

                                       23
<PAGE>

      17.7 Late Fee. If Tenant fails to make any payment of Base Rent,
additional rent or any other sum on or before the date that is five (5) days
after the date on which such payment is due and payable (without regard to any
grace period specified in Section 17.1), then Tenant shall pay to Landlord a
late charge of five percent (5%) of the amount of such payment. In addition,
such payment and such late fee shall bear interest at the Default Rate from the
date such payment or late fee, respectively, became due to the date of payment
thereof by Tenant; provided, however, that nothing contained herein shall be
construed as permitting Landlord to charge or receive interest in excess of the
maximum rate then allowed by law. Such late charge and interest shall constitute
additional rent due hereunder without any notice or demand.

      17.8 Joint and Several Liability. If more than one natural person or
entity shall constitute Tenant, then the liability of each such person or entity
shall be joint and several. If Tenant is a general partnership or other entity
the partners or members of which are subject to personal liability, then the
liability of each such partner or member shall be joint and several. No waiver,
release or modification of the obligations of any such person or entity shall
affect the obligations of any other such person or entity.

      17.9 Subordination of Landlord's Interest. Landlord will agree to
subordinate its interest in any of Tenant's equipment, machinery, or other
personalty to any lien or security interest then being granted to a bona fide
third party financial institution by Tenant in or to any of Tenant's equipment,
machinery, or other personalty as security for indebtedness secured for the sole
purpose of financing the purchase or leasing of such equipment, machinery, or
other personalty; provided that the secured party agrees in writing to provide
written notice of any defaults under such financing to Landlord, to provide
reasonable advance notice to Landlord prior to removing such collateral, and to
promptly repair any damage to the Premises that occurs if the secured party
removes its collateral.

                                  ARTICLE XVIII
                                   BANKRUPTCY

      18.1 Events of Bankruptcy. An "Event of Bankruptcy" is the occurrence with
respect to any of Tenant, a Guarantor or any other person liable for Tenant's
obligations hereunder (including, without limitation, any general partner (or,
if Tenant is a limited liability company, any member of Tenant) of Tenant (a
"General Partner")) of any of the following: (a) such entity or person becoming
insolvent, as that term is defined in Title 11 of the United States Code (the
"Bankruptcy Code") or under the insolvency laws of any state (the "Insolvency
Laws"); (b) appointment of a receiver or custodian for any property of such
entity or person, or the institution of a foreclosure or attachment action upon
any property of such entity or person; (c) filing by such entity or person of a
voluntary petition under the provisions of the Bankruptcy Code or Insolvency
Laws; (d) filing of an involuntary petition against such entity or person as the
subject debtor under the Bankruptcy Code or Insolvency Laws, which either (1) is
not dismissed within thirty (30) days after filing, or (2)results in the
issuance of an order for relief against the debtor; or (e) such entity or person
making or consenting to an assignment for the benefit of creditors or a
composition of creditors; (f) such entity or person submitting (either before or
after execution hereof) to Landlord any financial statement containing any
material inaccuracy or omission; or (g) a decrease by fifty percent (50%) or
more of such entity's or person's net worth below the net

                                       24
<PAGE>

worth of such entity or person as of the date hereof.

      18.2 Remedies. Upon occurrence of an Event of Bankruptcy, Landlord shall
have all rights and remedies available pursuant to Article XVII; provided,
however, that while a case (the "Case") in which Tenant is the subject debtor
under the Bankruptcy Code is pending, Landlord's right to terminate this Lease
shall be subject, to the extent required by the Bankruptcy Code, to any rights
of Tenant or its trustee in bankruptcy (collectively, "Trustee") to assume or
assume and assign this Lease pursuant to the Bankruptcy Code. After the
commencement of a Case: (i) Trustee shall perform all post-petition obligations
of Tenant under this Lease; and (ii) if Landlord is entitled to damages
(including, without limitation, unpaid rent) pursuant to the terms of this
Lease, then all such damages shall be entitled to administrative expense
priority pursuant to the Bankruptcy Code. Any person or entity to which this
Lease is assigned pursuant to the Bankruptcy Code shall be deemed without
further act or deed to have assumed all of the obligations arising under this
Lease on and after the date of assignment, and any such assignee shall upon
request execute and deliver to Landlord an instrument confirming such
assumption. Trustee shall not have the right to assume or assume and assign this
Lease unless Trustee promptly (a) cures all defaults under this Lease, (b)
compensates Landlord for damages incurred as a result of such defaults, (c)
provides adequate assurance of future performance on the part of Trustee as
debtor in possession or Trustee's assignee, and (d) complies with all other
requirements of the Bankruptcy Code. If Trustee fails to assume or assume and
assign this Lease in accordance with the requirements of the Bankruptcy Code
within sixty (60) days after the initiation of the Case, then Trustee shall be
deemed to have rejected this Lease. If this Lease is rejected or deemed
rejected, then Landlord shall have all rights and remedies available to it
pursuant to Article XVII. Adequate assurance of future performance shall
require, among other things, that the following minimum criteria be met: (1)
Tenant's gross receipts in the ordinary course of business during the thirty
(30) days preceding the Case must be greater than ten (10) times the next
monthly installment of Base Rent and additional rent due; (2) both the average
and median of Tenant's monthly gross receipts in the ordinary course of business
during the seven (7) months preceding the Case must be greater than the next
monthly installment of Base Rent and additional rent due; (3) Trustee must pay
its estimated pro-rata share of the cost of all services performed or provided
by Landlord (whether directly or through agents or contractors and whether or
not previously included as part of Base Rent) in advance of the performance or
provision of such services; (4) Trustee must agree that Tenant's business shall
be conducted in a first-class manner, and that no liquidating sale, auction or
other non-first-class business operation shall be conducted in the Premises: (5)
Trustee must agree that the use of the Premises as stated in this Lease shall
remain unchanged and that no prohibited use shall be permitted; (6) Trustee must
pay at the time the next monthly installment of Base Rent is due, in addition to
such installment, an amount equal to the monthly installments of Base Rent, and
additional rent due for the next six (6) months thereafter, such amount to be
held as a security deposit; (7) Trustee must agree to pay, at any time Landlord
draws on such security deposit, the amount necessary to restore such security
deposit to its original amount; (8) Trustee must comply with all duties and
obligations of Tenant under this Lease; (9) financial condition and operating
performance of the proposed assignee and its guarantors, if any, shall be
similar to the financial condition and operating performance of the Tenant and
Guarantors as of the date of this Lease; and (10) all assurances of future
performance specified in the Bankruptcy Code must be provided.

                                       25
<PAGE>

                                   ARTICLE XIX
                                  SUBORDINATION

      19.1 Subordination. This Lease shall be subject and subordinate to the
lien, provisions. operation and effect of all mortgages, deeds of trust, ground
leases or other security instruments which may now or hereafter encumber the
Premises (collectively, "Mortgages"), to all funds and indebtedness intended to
be secured thereby, and to all renewals, extensions, modifications, recastings
or refinancings thereof, provided that Landlord obtains for Tenant a
non-disturbance agreement providing for the continuation of this Lease in the
event of any transfer of the Premises (subject to the terms and conditions
contained therein), on the standard form of the holder of any then-applicable
Mortgage. The holder of any Mortgage to which this Lease is subordinate shall
have the right (subject to any required approval of the holders of any superior
Mortgage) at any time to declare this Lease to be superior to the lien,
provisions, operation and effect of such Mortgage and Tenant shall execute,
acknowledge and deliver all documents required by such holder in confirmation
thereof. Tenant shall, within five (5) business days after Landlord's request,
execute any requisite or appropriate document confirming the foregoing
subordination.

      19.2 Attornment and Non-Disturbance. Tenant waives the provisions of any
statute or rule of law now or hereafter in effect which may give or purport to
give Tenant any right to terminate or otherwise adversely affect this Lease and
Tenant's obligations hereunder in the event any foreclosure proceeding is
prosecuted or completed or in the event the Premises or Landlord's interest
therein is transferred by foreclosure, by deed in lieu of foreclosure or
otherwise. If this Lease is not extinguished upon any such transfer or by the
transferee following such transfer, then, at the request of such transferee,
Tenant shall attorn to such transferee and shall recognize such transferee as
the landlord under this Lease. Tenant agrees that upon any such attornment, such
transferee shall not be (a) bound by any payment of the Base Rent or additional
rent more than one (1) month in advance, except prepayments in the nature of
security for the performance by Tenant of its obligations under this Lease, but
only to the extent such prepayments have been delivered to such transferee, (b)
bound by any amendment of this Lease made without the written consent of the
holder of each Mortgage existing as of the date of such amendment, (c) liable
for damages for any breach, act or omission of any prior landlord, or (d)
subject to any offsets or defenses which Tenant might have against any prior
landlord; provided, however, that after succeeding to Landlord's interest under
this Lease, such transferee shall agree to perform in accordance with the terms
of this Lease all obligations of Landlord arising after the date of transfer.
Within five (5) days after the request of such transferee, Tenant shall execute,
acknowledge and deliver any requisite or appropriate document submitted to
Tenant confirming such attornment.

      19.3 Lender Required Modifications. If any prospective or current holder
of a Mortgage requires that modifications to this Lease be obtained, and
provided that such modifications (a) are reasonable, (b) do not adversely affect
in a material manner Tenant's use of the Premises as herein permitted, and (c)
do not increase the rent and other sums to be paid by Tenant, then Landlord may
submit to Tenant an amendment to this Lease incorporating such required
modifications, and Tenant shall execute, acknowledge and deliver such amendment
to Landlord within five (5) days after Tenant's receipt thereof.

                                       26
<PAGE>

      19.4 Lender Cure Rights. If (a) the Premises are at any time subject to a
Mortgage, (b) this Lease and rent payable hereunder is assigned to the holder of
the Mortgage, and (c) the Tenant is given notice of such assignment, including
the name and address of the assignee, then, in that event, Tenant shall not
terminate this Lease or make any abatement in the rent payable hereunder for any
default on the part of the Landlord without first giving notice, in the manner
provided elsewhere in this Lease for the giving of notices, to the holder of
such Mortgage, specifying the default in reasonable detail, and affording such
holder a reasonable opportunity to make performance, at its election, for and on
behalf of the Landlord, except that (i) such holder shall have at least thirty
(30) days to cure the default; (ii) if such default cannot be cured with
reasonable diligence and continuity within thirty (30) days, such holder shall
have any additional time as may be reasonably necessary to cure the default with
reasonable diligence and continuity; and (iii) if the default cannot reasonably
be cured without such holder having obtained possession of the Premises, such
holder shall have such additional time as may be reasonably necessary under the
circumstances to obtain possession of the Premises and thereafter to cure the
default with reasonable diligence and continuity. If more than one such holder
makes a written request to Landlord to cure the default, the holder making the
request whose lien is the most senior shall have such right.

                                   ARTICLE XX
                                  HOLDING OVER

      20.1 Hold Over. If Tenant (or anyone claiming through Tenant) does not
immediately surrender the Premises or any portion thereof upon the expiration or
earlier termination of the Lease Term, then Tenant shall automatically forfeit
all rights to the security deposit then being held by Landlord pursuant to this
Lease and the Base Rent payable by Tenant hereunder shall be increased to equal
two hundred percent (200%) of the Base Rent, additional rent and other sums that
would have been payable pursuant to the provisions of this Lease if the Lease
Term had continued during such holdover period. Such rent shall be computed by
Landlord and paid by Tenant on a monthly basis and shall be payable on the first
day of such holdover period and the first day of each calendar month thereafter
during such holdover period until the Premises have been vacated.
Notwithstanding any other provision of this Lease, Landlord's acceptance of such
rent shall not in any manner adversely affect Landlord's other rights and
remedies, including Landlord's right to evict Tenant and to recover all damages.
Any such holdover shall be deemed to be a tenancy-at-sufferance and not a
tenancy-at-will or tenancy from month-to-month. In no event shall any holdover
be deemed a permitted extension or renewal of the Lease Term, and nothing
contained herein shall be construed to constitute Landlord's consent to any
holdover or to give Tenant any right with respect thereto.

                                   ARTICLE XXI
                                 QUIET ENJOYMENT

      21.1 Quiet Enjoyment. Landlord covenants that it has the right to enter
into this Lease, and that if Tenant shall perform timely all of its obligations
hereunder, then, subject to the provisions of this Lease, Tenant shall during
the Lease Term peaceably and quietly occupy and enjoy the full possession of the
Premises without hindrance by Landlord or any party claiming

                                       27
<PAGE>

through or under Landlord.

                                  ARTICLE XXII
                          OPTIONS TO EXTEND LEASE TERM

      22.1 Renewal Rights. Landlord hereby grants to Tenant the conditional
right, exercisable at Tenant's option. to renew the term of this Lease for eight
(8) successive terms of five (5) years each. If exercised, and if the conditions
applicable thereto have been satisfied, the first such renewal term shall
commence immediately following the end of the initial Lease Term provided in
Sections 1.2 and 3.1 of this Lease and the second renewal term, and each renewal
term thereafter, shall commence immediately following the end of the previous
renewal term. The rights of renewal herein granted to Tenant shall be subject
to, and shall be exercised in accordance with, the following terms and
conditions:

            (a) Tenant shall exercise its right of renewal with respect to a
renewal term by giving Landlord written notice thereof not earlier than fifteen
(15) months nor later than twelve (12) months prior to the expiration of the
then-current term of this Lease. Notwithstanding the foregoing sentence to the
contrary, Tenant's failure to give Landlord, on or before the date that is
twelve (12) months prior to the expiration of the then-current term of this
Lease, written notice of Tenant's election not to exercise such right of renewal
shall conclusively be deemed to constitute timely and irrevocable exercise of
Tenant's right of renewal with respect to the applicable renewal period, without
any necessity for a written notice of Tenant's exercise of such right of
renewal. Notwithstanding the foregoing provisions of this Section 22.1(a) to the
contrary, if (i) during any such period Tenant gives Landlord actual (and not
deemed) written notice of Tenant's election to renew, and (ii) on or before the
date that is twelve (12) months prior to the expiration of the then-current term
of this Lease Tenant gives Landlord written notice of Tenant's election not to
renew, then the first notice received by Landlord shall govern, and any others
with respect to such renewal term shall be disregarded by Landlord.

            (b) The Base Rent during each Renewal Term shall be the amounts set
forth therefor in Section 1.5 above for the applicable Lease Years within each
such Renewal Term. If there exists an Event of Default under this Lease on the
date Tenant sends a renewal notice or any time thereafter until a Renewal Term
is to commence, at Landlord's election, such Renewal Term shall not commence.

            (c) If Tenant's right of renewal with respect to a Renewal Term
lapses for any reason (including without limitation, Tenant's failure to timely
provide a renewal notice), then Tenant's right of renewal with respect to any
subsequent Renewal Term shall similarly lapse and be of no further force or
effect.

            (d) Tenant's rights of renewal under this Section may be exercised
only by Tenant and may not be exercised by any transferee, sublessee or assignee
of Tenant.

                                  ARTICLE XXIII
                               GENERAL PROVISIONS

                                       28
<PAGE>

      23.1 Relationship Between Landlord and Tenant. Nothing contained in this
Lease shall be construed as creating any relationship between Landlord and
Tenant other than that of landlord and tenant. Tenant shall not do or permit to
be done anything in connection with Tenant's business or advertising which in
the reasonable judgment of Landlord may reflect unfavorably on Landlord or the
Premises or confuse or mislead the public as to any apparent connection or
relationship between Landlord, the Premises and Tenant.

      23.2 Brokers. Landlord and Tenant each warrants to the other that in
connection with this Lease it has not employed or dealt with any third party
broker, agent or finder. Landlord shall indemnify and hold Tenant harmless from
and against any claim for brokerage or other commissions asserted by any broker,
agent or finder employed by Landlord or with whom Landlord has dealt. Tenant
shall indemnify and hold Landlord harmless from and against any claim for
brokerage or other commissions asserted by any broker, agent or finder employed
by Tenant or with whom Tenant has dealt.

      23.3 Estoppel.

            (a) At any time and from time to time, upon not less than five (5)
days' prior written notice, Tenant and each subtenant, assignee, licensee or
concessionaire or occupant of Tenant shall execute, acknowledge and deliver to
Landlord and/or any other person or entity designated by Landlord, a written
statement certifying: (a) that this Lease and that certain franchise agreement
by and between Lithia Dodge, L.L.C. (d/b/a Lithia Mazda), and Mazda Motor of
America, Inc., that certain franchise agreement by and between Lithia TLM, LLC
(d/b/a Lithia Lincoln Mercury), and Ford Motor Company dated June 1, 1997, and
that certain franchise agreement by and between Lithia TLM, LLC, successor in
interest to Lithia Motors, Inc. (d/b/a Lithia Toyota), and Toyota Motor Sales,
USA, Inc., dated as of February 15, 1996 (each, a "Franchise Agreement") each
are unmodified and in full force and effect (or if there have been
modifications, that this Lease or each Franchise Agreement, as applicable, is in
full force and effect as modified and stating the modifications); (b) the dates
to which the rent and any other charges have been paid; (c) whether or not
Landlord is in default in the performance of any obligation, and if so,
specifying the nature of such default; (d) the address to which notices to
Tenant are to be sent; (e) that this Lease is subject and subordinate to all
Mortgages encumbering the Premises; (f) that Tenant has accepted the Premises;
and (g) such other matters as Landlord may reasonably request. Any such
statement may be relied upon by any owner of the Premises, any prospective
purchaser of the Premises, any holder or prospective holder of a Mortgage or any
other person or entity. Tenant acknowledges that time is of the essence to the
delivery of such statements and that Tenant's failure to deliver timely such
statements may cause substantial damages resulting from, for example, delays in
obtaining financing secured by the Premises. Tenant shall be liable for all such
damages. If any such statement is not delivered timely by Tenant, then all
matters contained in such statement shall be deemed true and accurate.

            (b) From time to time (but not more often then once in any twelve
(12) month period), upon not less than five (5) business days' prior written
notice, Landlord shall execute, acknowledge and deliver to Tenant a written
statement certifying, to the best of Landlord's actual knowledge: (a) whether or
not Tenant is in default in the performance of any obligation under this Lease,
and if so, specifying the nature of such default; (b) the address to which
notices

                                       29
<PAGE>

to Landlord are to be sent; and (c) such other matters as Tenant may reasonably
request. Any such statement may be relied upon by Tenant and any lender
providing financing to Tenant.

      23.4 Arbitration.

            (a) Notwithstanding anything to the contrary contained in this
Lease, except with respect to the payment of Base Rent and additional rent
hereunder, in the event a controversy arises between the parties as to any of
the requirements of this Lease, which the parties are unable to resolve, the
parties agree to waive the remedy of litigation (except for extraordinary relief
in an emergency situation) and agree that such controversy shall be determined
by arbitration as hereafter provided in this Section 23.5.

            (b) The party or parties requesting arbitration shall serve upon the
other a demand therefor, in writing, specifying in detail the controversy and
matter(s) to be submitted to arbitration before the American Arbitration
Association. The selection of arbitrators shall be conducted pursuant to the
rules for resolution of commercial disputes promulgated by the American
Arbitration Association. The party or parties giving notice shall request a
listing of available arbitrators from the American Arbitration Association, and
each party shall respond in the selection process within fifteen (15) days after
each receipt of such listings until a panel of three (3) arbitrators has been
designated. If either party fails to respond within fifteen (15) days, it is
agreed that the American Arbitration Association may make such selections as are
necessary to complete the panel of three (3) arbitrators.

            (c) Within five (5) business days after the selection of the
arbitration panel, the arbitrators shall give written notice to each party as to
the time and the place of each meeting, which shall be held in Washington, D C.,
at which the parties may appear and be heard, which shall be no later than
fifteen (15) days after certification of the arbitration panel. The applicable
rules shall be those in effect at the time for the resolution of commercial
disputes promulgated by the American Arbitration Association. The decision of
the arbitrators shall be in writing signed by a majority of the panel which
decision shall be final and binding upon the parties to the controversy.
Provided, however, in rendering their decisions and making awards, the
arbitrators shall not add to, subtract from or otherwise modify the provisions
of this Lease.

      23.5 Notices. All notices or other communications required under this
Lease shall be in writing and shall be deemed duly given and received when
delivered in person (with receipt therefor), on the next business day after
deposit with a recognized overnight delivery service, or on the second day after
being sent by certified or registered mail, return receipt requested, postage
prepaid, to the following addresses: (a) if to Landlord, at the Landlord Notice
Address specified in Article I, with a copy to Shaw Pittman, 2300 N Street,
N.W., Washington, D.C. 20037, Attn: Richard F. Williamson; (b) if to Tenant, at
the Tenant Notice Address specified in Article I. Either party may change its
address for the giving of notices by notice given in accordance with this
Section. If Landlord or the holder of any Mortgage notifies Tenant that a copy
of any notice to Landlord shall be sent to such holder at a specified address,
then Tenant shall send (in the manner specified in this Section and at the same
time such notice is sent to Landlord) a copy of each such notice to such holder,
and no such notice shall be considered duly sent unless such copy is so sent to
such holder. Any cure of Landlord's default by such holder

                                                                              30
<PAGE>

shall be treated as performance by Landlord. If Tenant or the holder of any
Leasehold Financing notifies Landlord that a copy of any notice to Tenant shall
be sent to such holder at a specified address, then Landlord shall send (in the
manner specified in this Section and at the same time such notice is sent to
Tenant) a copy of each such notice to such holder, and no such notice shall be
considered duly sent unless such copy is so sent to such holder. Any cure of
Tenant's default by such holder prior to the expiration of the applicable notice
and cure period (if any) set forth in Section 17.1 shall be treated as
performance by Tenant.

      23.6 Validity. Each provision of this Lease shall be valid and enforceable
to the fullest extent permitted by law. If any provision of this Lease or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, then such provision shall be deemed to be replaced by the
valid and enforceable provision most substantively similar to such invalid or
unenforceable provision, and the remainder of this Lease and the application of
such provision to persons or circumstances other than those as to which it is
invalid or unenforceable shall not be affected thereby. Nothing contained in
this Lease shall be construed as permitting Landlord to charge or receive
interest in excess of the maximum rate allowed by law.

      23.7 Pronouns. Feminine, masculine or neuter pronouns shall be substituted
for those of another form, and the plural or singular shall be substituted for
the other number, in any place in which the context may require such
substitution.

      23.8 Successors and Assigns. The provisions of this Lease shall be binding
upon and inure to the benefit of the parties and each of their respective
representatives, successors and assigns, subject to the provisions herein
restricting assignment or subletting.

      23.9 Entire Agreement. This Lease and the Purchase Agreement (to the
extent surviving the transfer of the Premises to Landlord) together contain and
embody the entire agreement of the parties hereto with regard to the subject
matter hereof and supersede all prior agreements, negotiations, letters of
intent, proposals, representations, warranties, understandings, suggestions and
discussions, whether written or oral, between the parties hereto. Any
representation, inducement, warranty, understanding or agreement that is not
expressly set forth in this Lease or the Purchase Agreement (to the extent
surviving) shall be of no force or effect. This Lease may be modified or changed
in any manner only by an instrument signed by both parties. This Lease includes
and incorporates all Exhibits attached hereto.

      23.10 Governing Law. This Lease shall be governed by the Laws of the
jurisdiction in which the Premises are located. There shall be no presumption
that this Lease be construed more strictly against the party who itself or
though its agent prepared it, it being agreed that all parties hereto have
participated in the preparation of this Lease and that each party had the
opportunity to consult legal counsel before the execution of this Lease.

      23.11 Headings. Headings are used for convenience and shall not be
considered when construing this Lease.

      23.12 Execution and Delivery. The submission of an unsigned copy of this
document to Tenant shall not constitute an offer or option to lease the
Premises. This Lease shall become

                                                                              31
<PAGE>

effective and binding only upon execution and delivery by both Landlord and
Tenant.

      23.13 Time of Essence. Time is of the essence with respect to each of
Landlord's and Tenants obligations hereunder.

      23.14 Counterparts. This Lease may be executed in multiple counterparts,
each of which shall be deemed an original and all of which together constitute
one and the same document. Faxed signatures shall have the same binding effect
as original signatures.

      23.15 Waiver of Jury Trial. LANDLORD, TENANT, ALL GUARANTORS AND ALL
GENERAL PARTNERS OF TENANT EACH WAIVES TRIAL BY JURY IN ANY ACTION, PROCEEDING,
CLAIM OR COUNTERCLAIM BROUGHT IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN
ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT
HEREUNDER, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM OF INJURY
OR DAMAGE. TENANT CONSENTS TO SERVICE OF PROCESS AND ANY PLEADING RELATING TO
ANY SUCH ACTION AT THE PREMISES; PROVIDED, HOWEVER, THAT NOTHING HEREIN SHALL BE
CONSTRUED AS REQUIRING SUCH SERVICE AT THE PREMISES. LANDLORD, TENANT, ALL
GUARAUNTORS AND ALL GENERAL PARTNERS OF TENANT EACH WAIVES ANY OBJECTION TO THE
VENUE OF ANY ACTION FILED IN ANY COURT SITUATED IN THE COMMONWEALTH OF VIRGINIA
OR IN THE JURISDICTION IN WHICH THE PREMISES IS LOCATED. AND WAIVES ANY RIGHT,
CLAIM OR POWER, UNDER THE DOCTRINE OF FORUM NON CON VENIENS OR OTHERWISE, TO
TRANSFER ANY SUCH ACTION TO ANY OTHER COURT.

      23.16 Additional Rent. Except as otherwise provided in this Lease, any
additional rent or other sum owed by Tenant to Landlord (other than Base Rent),
and any cost, expense, damage or liability incurred by Landlord for which Tenant
is liable, shall be considered additional rent payable pursuant to this Lease to
be paid by Tenant no later than ten (10) days after the date Landlord notifies
Tenant of the amount thereof.

      23.17 Survival of Obligations. Tenant's liabilities and obligations with
respect to the period prior to the expiration or earlier termination of the
Lease Term shall survive such expiration or earlier termination.

      23.18 Force Majeure. For purposes of this Lease, the term "Force Majeure"
shall mean fire, act of God, governmental act or failure to act, strike, labor
dispute. inability to procure materials, or any cause beyond Landlord's
reasonable control (whether similar or dissimilar to the foregoing events).

      23.19 No Representations. Landlord's review, approval and consent powers
(including the right to review plans and specifications) are for its benefit
only. Such review, approval or consent (or conditions imposed in connection
therewith) shall be deemed not to constitute a representation concerning
legality, safety or any other matter.

      23.20 Delivery of Keys. At the expiration or earlier termination of the
Lease Term,

                                       32
<PAGE>

Tenant shall deliver to Landlord all keys and security cards to the Premises and
the improvements thereon, whether such keys were furnished by Landlord or
otherwise procured by Tenant, and shall inform Landlord of the combination of
each lock, safe and vault, if any, in the Premises.

      23.21 Representations Regarding Organization and Authorization.

            (a) Landlord and the person executing and delivering this Lease on
Landlord's behalf each represents and warrants that such person is duly
authorized to so act; that Landlord is duly organized, is qualified to do
business in the jurisdiction in which the Premises are located, is in good
standing under the Laws of the state of its organization and the Laws of the
jurisdiction in which the Premises are located, and has the power and authority
to enter into this Lease; and that all action required to authorize Landlord and
such person to enter into this Lease has been duly taken.

            (b) Tenant and the person executing and delivering this Lease on
Tenant's behalf each represents and warrants that such person is duly authorized
to so act; that Tenant is duly organized, is qualified to do business in the
jurisdiction in which the Premises are located, is in good standing under the
Laws of the state of its organization and the Laws of the jurisdiction in which
the Premises are located, and has the power and authority to enter into this
Lease and to conduct its business in the manner being conducted; and that all
action required to authorize Tenant and such person to enter into this Lease and
to conduct its business in the manner being conducted has been duly taken.

            (c) Tenant and the person executing and delivering this Lease on
Tenant's behalf each represents, warrants and covenants that any Affiliate that
conducts any business on or from the Premises, whether now or hereafter, shall
be duly organized, qualified to do business in the jurisdiction in which the
Premises are located, is in good standing under the Laws of the state of its
organization and the Laws of the jurisdiction in which the Premises are located,
and shall have the power and authority to conduct its business in the manner
being conducted; and that all action required to authorize such Affiliate to so
conduct such business on or from the Premises shall have been duly taken.

      23.22 Prevailing Party. In the event of any legal proceeding brought by
either party against the other under this Lease, the prevailing party. shall be
entitled to recover all reasonable costs and expenses incurred in connection
with such proceeding. including reasonable attorneys fees, disbursements and
actual costs.

      23.23 Attorney-In-Fact. Tenant hereby irrevocably and unconditionally
appoints Landlord, or Landlord's authorized officer, agent, employee or
designee, as Tenant's true and lawful attorney-in-fact, to act, after an Event
of Default, for Tenant in Tenant's name, place, and stead, and for Tenant's and
Landlord's use and benefit, to execute, deliver and file all necessary
documents, to effect a transfer, reinstatement, renewal and/or extension of any
and all licenses and other governmental authorizations issued to Tenant in
connection with Tenant's operation of the Premises, and to do any and all other
acts incidental to any of the foregoing, as fully as Tenant might or could do if
personally present or acting, with frill power of substitution. Tenant

                                                                              33
<PAGE>

hereby ratifies and confirms all that said attorney shall lawfully do or cause
to be done by virtue hereof This power of attorney is coupled with an interest
and is irrevocable prior to the full performance of Tenant's obligations
hereunder.

                                  ARTICLE XXIV
                 REIT REPRESENTATIONS, WARRANTIES AND COVENANTS

      24.1 REIT Status. Tenant acknowledges that Capital Automotive REIT, a
Maryland real estate investment trust and the general partner of Landlord (the
"Company"), intends to elect to be taxed as a real estate investment trust (a
"REIT") under the Code. Tenant shall not take or omit to take any action, or
permit any status to exist at the Premises, which would adversely affect the
Company's status as a REIT. Tenant hereby agrees to modifications of this Lease
which do not materially adversely affect Tenant's rights and liabilities
hereunder if such modifications are required to retain or clarify the Company's
status as a REIT.

      24.2 Sublease and Assignment Restrictions. Notwithstanding anything
contained herein to the contrary and without limiting the generality of Section
24.1 above, Tenant shall not: (a) sublet all or part of the Premises or assign
this Lease on any basis such that the rental or other amounts to be paid by the
sublessee or assignee thereunder would be based, in whole or in part, on the
income or profits derived by the business activities of the sublessee or
assignee; (b) sublet all or part of the Premises or assign this Lease to any
person or entity in which, under Section 856(d)(2)(B) of the Internal Revenue
Code of 1986, as amended (the "Code"), Landlord or its general partner owns,
directly or indirectly (by applying constructive ownership rules set forth in
Section 856(d) (5) of the Code), a ten percent (10%) or greater interest; or (c)
sublet all or part of the Premises or assign this Lease in any other manner or
otherwise derive any income which could cause any portion of the amounts
received by Landlord pursuant hereto or any sublease to fail to qualify as
"rents from real property" within the meaning of Section 856(d) of the Code, or
which could cause any other income received by Landlord to fail to qualify as
income described in Section 856(c) (2) of the Code. The requirements of this
Section 24.2 shall likewise apply to any further subleasing by any subtenant.
All references herein to Section 856 of the Code also shall refer to any
amendments thereof or successor provisions thereto.

      24.3 Personal Property. Anything contained in this Lease to the contrary
notwithstanding and without limiting the generality of Section 24.1 above, the
average of the adjusted tax bases of the items of personal property that are
leased to Tenant under this Lease, if any, at the beginning and at the end of
any calendar year shall not exceed fifteen percent (15%) of the average of the
aggregate adjusted tax bases of the Premises at the beginning and at the end of
each such calendar year. This Section 24.3 is intended to insure that the rent
payable hereunder qualifies as "rents from real property," within the meaning of
Section 856(d) of the Code, or any similar or successor provisions thereto, and
shall be interpreted in a manner consistent with such intent.

      24.4 Interests in REIT. Without limiting the generality of Section 24.1
above, Tenant covenants and agrees that, during the Lease Term, Tenant and its
controlling

                                                                              34
<PAGE>

shareholders and its or their Affiliates will not acquire, directly or
indirectly, more than a nine and nine-tenths percent (9.90%) interest in Capital
Automotive REIT, within the meaning of Section 856(d)(2)(B) of the Code, and any
amendments thereof or successor provisions thereto. Tenant covenants and agrees
that it will divest itself or cause such others to divest themselves of such
shares of Capital Automotive REIT as may be necessary to satisfy the limitations
of this Section.

                                   ARTICLE XXV
                            FIRST RIGHT TO NEGOTIATE

      25.1 In the event that Lithia Properties, LLC, or any entity controlled by
Lithia Properties, LLC (collectively, the "Selling Entity"), elects to market
any real property owned by it (each such parcel, an "Additional Property) during
the Lease Term (as the same may be extended or renewed), then Landlord shall
have a first right to negotiate for the purchase of such Additional Property on
the following terms and conditions. Prior to so marketing such Additional
Property, the Selling Entity shall notify Landlord in writing (the
"Pre-Marketing Notice") of the price at which the Selling Entity intends to
market such Additional Property (the "List Price"). If Landlord desires to
purchase such Additional Property at the List Price. then Landlord shall provide
the Selling Entity with written notice thereof within thirty (30) days after the
date of the Pre-Marketing Notice. If Landlord delivers such notice within such
thirty (30) day period, then, for a period of thirty (30) days, Landlord and the
Selling Entity shall negotiate in good faith regarding the terms and conditions
of such sale. If, during such thirty (30) day period, the parties are unable to
agree on such terms and conditions (or if Landlord did not timely respond to the
Pre-Marketing Notice), then Landlord's right to purchase the Additional Property
at the List Price shall lapse and be of no further force or effect, and
thereafter the Selling Entity may offer or sell the Additional Property at any
price equal to or greater than ninety-five percent (95%) of the List Price (or
the lowest List Price, to the extent Landlord has been offered the Additional
Property more than once) applicable to such Additional Property without
triggering Landlord's rights under this Section. However, the Selling Entity may
not offer or sell such Additional Property for less than ninety-five percent
(95%) of the List Price (or the lowest List Price applicable to such Additional
Property, to the extent Landlord has been offered such Additional Property more
than once) without again triggering Landlord's rights under this Section.

      IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease under
seal as of the day and year first above written.

                                        LANDLORD:

WITNESS/ATTEST:                         CAR LIT L.L.C.,
                                        a Delaware limited liability company

                                        Capital Automotive L.P.,
                                        A Delaware limited partnership,
                                        managing member

                                        By: Capital Automotive REIT,

                                                                              35
<PAGE>

                                        General partner

___________________________________     By:_______________________________[SEAL]
                                        Name:___________________________________
                                        Title:__________________________________

                                        TENANT:

WITNESS/ATTEST:                         LITHIA REAL ESTATE,
                                        an Oregon corporation

___________________________________     By:_______________________________[SEAL]
                                        Name:___________________________________
                                        Title:__________________________________

                                                                              36
<PAGE>

                                    EXHIBIT B

             FORM OF CERTIFICATE CONFIRMING LEASE COMMENCEMENT DATE

      This Certificate is being provided to Tenant pursuant to the terms of that
certain Lease Agreement dated as of June ___, 1999, by and between CAR LIT
L.L.C., as Landlord, and Lithia Real Estate, Inc., as Tenant (the "Lease"). This
Certificate shall confirm that the Lease Commencement Date is June ___, 1999,
and accordingly, the initial term of the Lease shall expire on May 31, 2011,
unless earlier terminated or extended pursuant to the terms of the Lease.

                                   CAR LIT L.L.C.

                                   By: Capital Automotive L.P., managing member

                                   By: Capital Automotive REIT, general partner

                                   By:____________________________________[SEAL]
                                   Name:________________________________________
                                   Title:_______________________________________

                                                                              37
<PAGE>

                                    EXHIBIT C

                            GLOSSARY OF DEFINED TERMS

TERM                                            SECTION
----                                            -------

ADA                                                 5
Additional Property                                37
Affiliate                                          11
Aggregate Rent Obligations                         15
Alterations                                        12
Annual Statements                                  14
Assign                                              8
Bankruptcy Code                                    25
Base Rent                                           1
Case                                               26
Cash Flow Coverage Ratio                           15
Code                                               36
Company                                            36
Condemned                                          20
Control                                            11
Default Rate                                       25
Environmental Default                               7
Environmental Law                                   6
Event of Bankruptcy                                25
Event of Default                                   21
Extra Rent                                         23
Force Majeure                                      34
Franchise Agreement                                31
GAAP                                               14
General Partner                                    25
Guarantor(s)                                        2
Guaranty                                           16
Hazardous Materials                                 6
Impositions                                         4
Insolvency Laws                                    25
Invitees                                           11
Landlord                                        Recitals
Landlord's Income Taxes                             4

                                                                              38
<PAGE>

Landlord Notice Address                             2
Laws                                                5
Lease                                           Recitals
Lease Commencement Date                             1
<PAGE>

TERM                                            SECTION
----                                            -------

Lease Term                                         1
Lease Year                                         3
List Price                                        37
Mortgage                                           9
Mortgages                                         27
Officer                                           19
Pre-Marketing Notice                              37
Premises                                           1
Quarterly Statements                              14
REIT                                              36
Renewal Options                                    1
Rents from real property                          36
Security Deposit Amount                            2
Selling Entity                                    37
Sublet                                             8
Tenant                                         Recitals
Tenant Notice Address                              2
Trustee                                           26
Utilities and Services                             5<PAGE>

                                  Exhibit 10.38

                                    LEASE AND
                    SUBLEASE BETWEEN CAMP INVESTMENTS, L.L.C.
                                       AND
                            LITHIA REAL ESTATE, INC.

      THIS LEASE and SUBLEASE ("Lease") made and entered into this _____ day of
October, 1998, by and between CAMP INVESTMENTS, L.L.C. (hereinafter sometimes
referred to as "Landlord" and sometimes referred to as "Camp") with its
principal business address at 4123 South Regal, Spokane, Washington, 99223, and
LITHIA REAL ESTATE, INC., (hereinafter sometimes referred to as "Tenant" and
sometimes referred to as "Lithia"), with its principal business address at 360
E. Jackson St., Medford, Oregon 97501

                                   WITNESSETH:

      WHEREAS, Landlord is the Owner and Lessee of certain real property
hereinafter described;

      WHEREAS, Tenant desires to sublease said real property from Landlord; and

      WHEREAS, Landlord is willing to lease and sublease such property, and the
improvements thereon, to Tenant, upon the terms and conditions set forth herein,
so long as Tenant's obligations under this Lease and Sublease are absolutely and
unconditionally guaranteed by Tenant's parent corporation, Lithia Motors, Inc.
(hereinafter referred to as "Guarantor").

      NOW, THEREFORE, in consideration of the rent, covenants and agreements
hereinafter set forth to be paid, observed and performed by Tenant, the
observation, payment and performance of which is hereby unconditionally
guaranteed by Guarantor, Landlord hereby leases, subleases and sublets to
Tenant, and Tenant hereby takes, accepts and leases from Landlord, the leased
premises hereinbelow mentioned, and the improvements situated thereon, for the
term, at the rental, and upon the covenants and conditions hereinbelow set
forth.

I. PREMISES

      A. Leased Premises

      The premises leased hereunder and covered by this Lease and Sublease are
described as follows:

                                     - 1 -
<PAGE>

      (i)   The property which is owned by Landlord, together with the
            improvements thereon, (including the improvements on the McKay
            Parcel, as hereinafter described), which property is legally
            described in Exhibit "A" attached hereto (hereinafter referred to as
            the "Owned Parcels");

      (ii)  The property which is subject to a lease dated as of October 15,
            1998, between Landlord, as lessee, and Julie A. McKay, as lessor. A
            true and correct copy of said lease, and the description of the
            property covered thereby, are attached hereto as Exhibits "B" and
            "B-1", respectively (hereinafter referred to as the "McKay Lease"
            and the "McKay Parcel", respectively);

      (iii) The property which is subject to a lease dated as of October 15,
            1998, between Landlord, as lessee, and JPC Partnership, a Washington
            general partnership, as lessor, with respect to two parcels of
            property located on Division Street and also Jackson Street Spokane,
            Washington, respectively. A true and correct copy of the JPC Lease,
            and the property covered thereby, are attached hereto as Exhibits
            "C" and "C-1", respectively (hereinafter referred to as the "JPC
            Lease and "JPC Parcels", respectively);

      (iv)  The property which is subject to a lease dated February 1, 1988,
            between Landlord, as lessee, and the James S. Black Marital Trust
            and Lloyd L. Dan and Margaret E. Day, as lessors. (hereinafter
            referred to as the "Black Parcel" and the "Black Lease",
            respectively). A true and correct copy of the Black Lease, and the
            property covered thereby, are attached hereto as Exhibits "D" and
            "D-1", respectively;

      (v)   The property which is subject to a lease dated June 1, 1991, between
            Landlord, as lessee, and Greta M. Toll, and Rena E. Wagner and
            Howard C. Wagner, Co-Trustees of the Ernst H. Toll Disclaimer Trust
            (hereinafter referred to as the "First Toll Parcel" and the "First
            Toll Lease", respectively). A true and correct copy of the First
            Toll Lease, and the property covered thereby, are attached hereto as
            Exhibits "E" and "E-1", respectively;

      (vi)  The property which is subject to a lease dated June 1, 1988, as
            subsequently amended on May 29, 1998, between Landlord, as lessee,
            and Greta M. Toll, and Rena E. Wagner and Howard C. Wagner,
            Co-Trustees of the Ernst H. Toll Disclaimer Trust, as lessor
            (hereinafter referred to as the "Second Toll Parcel" and the "Second
            Toll Lease", respectively). A true and correct copy of the Second
            Toll Lease, including the amendment thereto, and the description of
            the property covered thereby, are attached hereto as Exhibits "F",
            "F-1", and "F-2", respectively; and

      (vii) The property which is subject to a lease dated October 1, 1995,
            between Landlord, as lessee, and Bruce Barany and William Barany, as
            lessors (hereinafter referred to

                                     - 2 -
<PAGE>

            as the "Barany Parcel" and the "Barany Lease", respectively). A true
            and correct copy of the Barany Lease, and the property covered
            thereby, are attached hereto as Exhibit "G" and "G-1", respectively.

      The Owned Parcels, the McKay Parcel and the JPC Parcels may hereinafter be
      collectively referred to as the "Camp Family Parcels", and the leases
      relating to such parcels may hereinafter be referred to as the "Camp
      Family Leases".

      The Black Parcel, the First Toll Parcel, the Second Toll Parcel and the
      Barany Parcel may hereinafter be collectively referred to as the "Third
      Party Parcels", and the leases relating to such parcels may hereinafter be
      referred to as the "Third Party Leases".

      Landlord represents and warrants to Tenant that, as of the date hereof,
      there are no defaults, by either the respective lessors or lessee, under
      the Camp Family Leases or the Third Party Leases. Further, Landlord
      covenants and agrees with Tenant that it shall comply with and faithfully
      perform its obligations under the Camp Family Leases and Third Party
      Leases.

      The Camp Family Parcels and the Third Party Parcels may hereinafter be
      referred to as the "Leased Premises".

      Tenant will take the Leased Premises after thoroughly having examined the
same, in their existing "as is" condition and state of repair and without any
representation by or on behalf of Landlord or agent representing or purporting
to represent Landlord, without any warranties, expressed or implied; provided,
however, to the extent Landlord has received warranties from contractors,
suppliers or manufacturers, or under any of the Camp Family Leases or Third
Party Leases, relating to the improvements to the Leased Premises, Landlord
shall give Tenant an assignment of the benefit of such warranties, to the extent
assignment is permitted; provided, further, notwithstanding anything to the
contrary herein, to the best of Landlord's actual knowledge, the Leased Premises
are in compliance with all Federal, State, Regional, County, City, Municipal and
other governmental statutes, laws, rules, order, regulations and ordinances
affecting any part of the Leased Premises, or the use thereof as the same are in
effect on the date hereof.

      B. Delivery of Premises

      The Leased Premises shall be delivered to Tenant, for Tenant's use,
enjoyment, and occupancy, on the date first set forth above.

      C. Absolute Net Lease

      In addition to the payment of rent, as provided herein, Tenant shall be
responsible for payment of all insurance, repair and maintenance, janitorial,
taxes and other costs related or incidental to Tenant's use of the Leased
Premises.

                                     - 3 -
<PAGE>

II. TERM

      A. Camp Family Parcels Term

      The lease term for the Camp Family Parcels shall be a period of ten (10)
years beginning on the later of the delivery of the premises to Tenant, or
September 1, 1998, ( the "Commencement Date"), and expiring ten (10) years from
the Commencement Date, ( the "Expiration Date"), unless extended or sooner
terminated as hereinafter provided.

      B. Third Party Parcels Term

            (1) Black Parcel. The lease term for the Black Parcel shall be the
      same as the term set forth in the Black Lease.

            (2) First Toll Parcel. The lease term for the First Toll Parcel
      shall be the same as the term set forth in the First Toll Lease.

            (3) Second Toll Parcel. The lease term for the Second Toll Parcel
      shall be the same as the term set forth in the Second Toll Lease.

            (4) Barany Parcel. The lease term for the Barany Parcel shall be the
      same as the term set forth in the Barany Lease.

      C. Option To Extend Term for Camp Family Parcels

      Landlord agrees that Tenant shall have and is hereby granted eight (8)
successive options to extend the term of the Lease, with respect to the Camp
Family Parcels only, each for a period of five (5) years, each such extended
term to begin respectively upon the expiration of the then current term of this
Lease or any extension thereof, as the case may be, and all of the covenants and
conditions of this Lease shall apply to each extended term, provided on the
express condition that at the time of the exercise of the option, and at all
times after the exercise of the option and prior to the commencement of any such
extension, Tenant shall not be in default under the Lease for a default which it
has failed to cure within the applicable cure period; this condition may be
waived by Landlord at his sole discretion and may not be used by Tenant as a
means to negate the effectiveness of Tenant's exercise of any option. Tenant
agrees to give written notice to Landlord at least six (6) months, but not more
than one (l) year before expiration of the then current term of this Lease as to
whether Tenant desires to extend this Lease, with respect to the Camp Family
Parcels only, for the next five (5) year period, and in the event Tenant fails
to give such written notice, the right, privilege and option to extend this
Lease shall become null and void. Landlord, at its sole discretion may agree to
shorten the notice period for exercising any such option to extend the term of
the Lease,

                                     - 4 -
<PAGE>

with respect to the Camp Family Parcels. Upon receipt of notice from Tenant of
its intention to exercise any option to renew, Landlord will give notice to the
Landlord under the Camp Family Leases.

      Tenant shall have no other right to extend the term of this Lease, with
respect to the Camp Family Parcels, beyond the eighth (8th) successive extended
five (5) year term.

      D. Option To Extend Term for Third Party Parcels

            (1) Black Parcel. Tenant shall have no option to extend the lease
      term for the Black Parcel, except to the extent extension is permitted as
      set forth in the Black Lease.

            (2) First Toll Parcel. Tenant shall have no option to extend the
      lease term for the First Toll Parcel , except to the extent extension is
      permitted as set forth in the First Toll Lease.

            (3) Second Toll Parcel. Tenant shall have no option to extend the
      lease term for the Second Toll Parcel, except to the extent extension is
      permitted as set forth in the Second Toll Lease.

            (4) Barany Parcel. Tenant shall have no option to extend the lease
      term for the Barany Parcel, except to the extent extension is permitted as
      set forth in the Barany Lease.

Tenant shall give Landlord notice of its intent to extend the term of any Third
Party Lease within thirty (30) days of the time required for notice of intent to
extend under any such Third Party Lease. Upon receipt of Tenant's notice to
Landlord of its intention to extend the term of any Third Party Lease, Landlord
will direct a corresponding notice of intention to extend to the pertinent third
party landlord.

In the event Tenant elects not to extend the term of any Third Party Lease, or
Tenant is unable to extend the term of any Third Party Lease, then, with respect
to any such Third Party Lease, this Lease and Sublease shall terminate upon the
termination of such Third Party Lease.

III. RENT

      A. Initial Rent. Tenant shall pay Rent for the Leased Premises in equal
monthly installments, as follows:

            (1) Camp Family Parcels

                                     - 5 -
<PAGE>

      Rent for the Camp Family Parcels, during the initial term of this Lease,
shall be Fifty Thousand Dollars ($50,000) per month, in advance on the first
(1st) day of each calendar month included in the Term, as the same may be
extended.

      (2) Third Party Parcels

            (a) Black Parcel. Rent for the Black Parcel shall be the same as is
      set forth in the Black Lease.

            (b) First Toll Parcel. Rent for the First Toll Parcel shall be the
      same as is set forth in the First Toll Lease.

            (c) Second Toll Parcel. Rent for the Second Toll Parcel shall be the
      same as is set forth in the Second Toll Lease.

            (d) Barany Parcel. Rent for the Barany Parcel shall be the same as
      is set forth in the Barany Lease.

      All Rent shall be paid in lawful money of the United States at the address
of Landlord set forth in this Lease or at such other place as Landlord in
writing may designate. For any portion of a calendar month included at the
beginning or end of the Term, Tenant shall pay the prorata portion of the Rent
installment for each day of such portion, payable in advance at the beginning of
such portion. Upon receipt of Rent from Tenant, Landlord covenants and agrees to
pass through, to its lessor, that portion of the rent attributable to the Camp
Family Leases, excluding the Owned Parcels, and the Third Party Leases.

      B. Rent Adjustment

      (1) Camp Family Parcels

      During the initial term of this Lease, commencing on the second
anniversary of the Commencement Date and thereafter annually on each subsequent
anniversary of the Commencement Date during the original term of this Lease,
monthly Rent payable hereunder, with respect to the Camp Family Parcels only,
shall be increased from that payable in the immediately preceding lease year by
the lesser of (i) two percent (2%), or (ii) the same percentage as the increase,
if any, that the Consumer Price Index "U.S. City Average, All Items, All Urban
Consumers, 1967 = 100" published by the United States Department of Labor,
Bureau of Labor Statistics (the "CPI"), has increased during the immediately
preceding lease year, by comparing the CPI published at the commencement date of
the immediately preceding lease year and that published at the end of said
preceding lease year. In no event shall Rent increase by more than two percent
(2%) during any single year. In the event the CPI shall hereafter be converted
to a different standard reference base or otherwise revised, the determination
of the percentage increase shall be made with the use of such conversion factor,
formula, or table for converting such index as may be published by the Bureau of
Labor Statistics.

                                     - 6 -
<PAGE>

If publication of the index is discontinued, the parties hereto shall select
another index which best measures inflation in the Spokane, Washington area for
purposes of making these calculations

      On the first day of a renewal term (if any), and annually thereafter, and
any subsequent renewal term (if any), and annually thereafter, monthly Rent
payable hereunder shall be increased from that payable in the immediately
preceding year by the the same percentage as the increase, if any, that the CPI
has increased during the immediately preceding term, by comparing the CPI
published at the commencement date of the immediately preceding year and that
published at the end of said preceding year; provided, however, notwithstanding
the foregoing, the maximum rental adjustment in any lease year shall not exceed
six (6.00%) percent.

      (2) Third Party Leases

            (a) Black Parcel. Rent for any extension period for the Black Parcel
            shall be the same as is set forth in the Black Lease.

            (b) First Toll Parcel. Rent for any extension period for the First
            Toll Parcel shall be the same as is set forth in the First Toll
            Lease.

            (c) Second Toll Parcel. Rent for any extension period for the Second
            Toll Parcel shall be the same as is set forth in the Second Toll
            Lease.

            (d) Barany Parcel. Rent any extension period for the Barany Parcel
            shall be the same as is set forth in the Barany Lease.

      To the extent rent during any extension period of any Third Party Lease is
subject to further negotiation, Landlord shall include Tenant in any such
negotiation, and Landlord shall not agree to any adjustment of the rent under
any such Third Party Lease without obtaining Tenant's prior consent.

      C. Surcharge

      Tenant acknowledges that late payment by Tenant to Landlord of the Rent
and any other sums required to be paid by Tenant to Landlord will cause Landlord
to incur costs not contemplated by this Lease, the exact amount of such costs
being extremely difficult and impracticable to fix. Such costs include, without
limitation, costs incurred by Landlord under the Third Party Leases, processing
and accounting charges, and-late charges that may be imposed on Landlord by the
terms of any encumbrance and note secured by any encumbrance covering the Leased
Premises.

      Therefore, if any installment of rent due from Tenant is not received by
Landlord when due, or any other sum required to be paid by Tenant to Landlord or
others as provided for in this Lease, is not received when due, Tenant shall pay
to Landlord an additional sum of five percent (5%) of the overdue rent or such
other delinquent obligation as a surcharge. Failure to pay "any other sums" due
hereunder shall mean the failure to pay such sums after ten (10) days notice
from Landlord. Failure

                                     - 7 -
<PAGE>

to pay the rent when due shall be construed to mean the failure to mail the
monthly rent to Landlord on or before the first (1st) business day of the month
with postmark affixed thereto or to deliver the rent to the Landlord by the
tenth (10th) calendar day of the month. In addition, if any installment of real
property taxes, or other such sums required to be paid to Landlord by Tenant, as
the case may be, is not received by Landlord thirty (30) days prior to said real
property taxes becoming delinquent, or ten (10) days after Landlord renders a
statement, whichever is later, Tenant shall pay to Landlord an additional sum of
five percent (5%) of the overdue real property taxes, or other such sums
required to be paid to Landlord by Tenant, as a surcharge. Failure to pay real
property taxes, or other such sums required to be paid to Landlord by Tenant, on
time shall be construed to mean the later of the failure to mail with postmark
affixed thereto, or deliver to the Landlord, the real property taxes to Landlord
on or before thirty (30) days prior to the real property taxes becoming
delinquent, or ten (10) days after Landlord renders a statement for other such
sums required to be paid to Landlord by Tenant.

      The parties agree that this surcharge represents a fair and reasonable
estimate of the costs that Landlord will incur by reason of late payment by
Tenant. Acceptance of any surcharge shall not constitute a waiver of Tenant's
default with respect to the overdue amount or prevent Landlord from exercising
any of the other rights and remedies available to Landlord.

      D. Negation of Partnership

            Landlord shall not become or be deemed a partner or joint venturer
with Tenant by reason of the provisions of this Lease.

      IV. USE; LIMITATIONS ON USE

      A. Use

      Subject to the absolute use restrictions and rights of termination in
Section IV.B.I. of this Lease, Tenant shall use the Leased Premises for the
conduct of an automotive sales, service and repair business, and for other
purposes so long as such purposes are incidental and complimentary to the
primary use, and for no other use without first obtaining the written consent of
Landlord, which consent shall not be unreasonably withheld.

      Tenant acknowledges that its identity, skill, experience and reputation,
and its present business and intended use of the Leased Premises are material
considerations to Landlord's entry into this Lease.

                                     - 8 -
<PAGE>

      B. Limitation on Use

      1. Compliance with Laws

      Tenant shall, at its sole cost and expense, comply and shall cause the
Leased Premises to comply with a) all Federal, State, Regional, County, City,
Municipal and other governmental statutes, laws, rules, order, regulations and
ordinances affecting any part of the Leased Premises, or the use thereof as the
same are in effect on the date hereof and may be hereafter modified, amended, or
supplemented; provided, however, to the extent such compliance requires making
any structural, unforeseen or extraordinary changes to the Leased Premises, and
such changes were not caused directly or indirectly by Tenant's impermissible
uses of the Leased Premises, and Landlord and Tenant are unwilling to make such
required changes, then this Lease, with respect to that portion of the Property
so effected, may be terminated by either party, with the rent to abate pro rata
for the the Camp Family Parcels, and the rent to abate as provided in the Third
Party Leases; provided, however, Tenant may, subject to Landlord's prior written
approval of required changes, which approval shall not be unreasonably withheld,
make such changes at its sole cost and expense and, in the event of such an
election, this Lease shall not terminate, but shall continue in full force and
effect.

      Tenant shall not do or permit to be done in or about the Leased Premises,
not bring to, keep, or permit to be brought or kept in the Leased Premises,
anything which directly or indirectly is forbidden by law, ordinance or
governmental or municipal regulation or order, or by any rules, orders or
regulations of the applicable Board of Fire Underwriters; all rules and
regulations of the National Board of Fire Underwriters, Landlord's casualty
insurer(s) and other applicable insurance rating organizations, or other bodies
exercising similar functions in connection with the prevention of fire or the
correction of hazardous conditions which apply to the Leased Premises, or which
may be dangerous to life, limb or property. Tenant shall, at its own expense,
make any such improvements, repairs, or installations as may be necessary to
satisfy this covenant and shall at all times during the term of this Lease,
promptly comply with all such requirements, whether now or hereafter in effect.

      Within ten (10) days after receipt, Landlord and Tenant shall advise the
other party in writing, and provide the other party with copies of (as
applicable), any notices alleging violation of any statute, ordinance, law,
rule, or regulation relating to any portion of the Leased Premises; and claims
made or threatened in writing regarding such noncompliance and relating to any
portion of the Leased Premises; or any governmental or regulatory actions or
investigations instituted or threatened regarding noncompliance with such laws
and relating to any portion of the Leased Premises.

                                     - 9 -
<PAGE>

      2. Cancellation of Insurance; Increase in Insurance Rates

      Tenant shall not do, bring or keep anything in or about the Leased
Premises that will cause a cancellation of any insurance covering the Leased
Premises. If the rate of any insurance carried by Landlord is increased as a
result of Tenant's use, Tenant shall pay to Landlord within ten (10) days before
the date Landlord is obligated to pay a premium on the insurance, or within ten
(10) days after Landlord delivers to Tenant a certified statement from
Landlord's insurance carrier stating that the rate increase was caused solely by
an activity of Tenant in the Leased Premises as permitted in this Lease,
whichever date is later, a sum equal to the difference between the original
premium and the increased premium.

      3. Waste; Nuisance

      Tenant shall use, maintain and occupy the Leased Premises in a careful,
safe and proper manner.

      Tenant shall not use the Leased Premises in any manner that will
constitute a waste, nuisance, or unreasonable annoyance (including, without
limitation; a) the use of loudspeakers or sound or light apparatus in violation
of any law, rule, regulation or ordinance); b) cause or permit objectionable
odors to emanate or to be dispelled from the Leased Premises, to owners or
occupants of adjacent properties, or Landlord, in violation of any emission
standards established by federal, state or local law, ordinance, statute, rule
or regulation.

      Any and all exterior trash and garbage facilities of Tenant shall be in
compliance with all local laws, rules, regulations, or ordinances.

      4. Hazardous Waste

                  4.1 Tenant's Environmental Compliance. Tenant will not cause
nor permit any activities in the Leased Premises which directly or indirectly
could result in the Leased Premises, or any other property becoming contaminated
with dangerous, hazardous or toxic waste or substances. For purposes of this
Lease, the terms "hazardous materials" or "dangerous, hazardous or toxic waste
or substances" means any substance or material defined or designated as
dangerous, hazardous or toxic waste, dangerous, hazardous or toxic material, a
dangerous, hazardous, toxic or radioactive substance, or other similar term by
any applicable federal, state or local statute, regulation or ordinance now or
hereafter in effect, including, without limitation, a dangerous, hazardous or
toxic substance or waste, as defined under Federal Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq.; Superfund Amendments and Reauthorization Act, 42 U.S.C. Section
9601 et seq.; Hazardous Materials Transportation Act, 49 U.S.C. Section 1802;
Resource Conservation and Recovery Act, 42 U.S.C. Section 9601 et seq.; and the
Model Toxics Control Act, RCW 70.105A, B, C, and D, et seq.; and the regulations
promulgated thereunder. To eliminate any possibility for dispute between
Landlord and Tenant with respect to the extent of Tenant's obligations to
Landlord under the terms of this Article, Tenant shall, among other things, from
and after the Commencement Date, be

                                     - 10 -
<PAGE>

exclusively responsible for the integrity of all facilities at the Leased
Premises which handle, treat, store, recycle or dispose of Hazardous Materials.

            4.2 Indemnity.

                  a. By Tenant. Tenant will indemnify, defend and hold Landlord
harmless from and against any and all Claims, demands, Expenses, damages, costs,
losses, liens, liabilities, penalties, fines and lawsuits and other proceedings
(including attorneys' fees) arising directly or indirectly from or out of, or in
any way connected with any Environmental Condition or Environmental
Noncompliance on the Leased Premises arising during the term of this Lease and
as a result of Tenant's use of the Leased Premises (but specifically excluding
Environmental Conditions that existed on the Leased Premises as of the date of
this Lease), and as a result of any activities by Tenant, its agents, customers,
purveyors, contractors, subcontractors, or concessionaires in the Leased
Premises during Tenant's possession or control of the Leased Premises, which
result directly or indirectly in the Leased Premises or any other property
becoming contaminated with dangerous, hazardous or toxic waste or substances or
the clean-up of dangerous, hazardous or toxic waste or substances from the
Leased Premises and arising out of Tenant's use of the Leased Premises. Tenant
shall be solely responsible for all costs and expenses relating to the clean-up
of dangerous, hazardous or toxic waste or substances from the Leased Premises
which become contaminated with dangerous, hazardous or toxic waste or substances
during the term of this Lease and as a result of Tenant's activities on the
Leased Premises or Tenant's personal property on the Leased Premises.

                  b. By Landlord. Landlord will indemnify, defend, and hold
Tenant harmless from and against any and all Claims, demands, Expenses, damages,
costs, losses, liens, liabilities, penalties, fines and lawsuits and other
proceedings (including attorneys' fees) arising directly or indirectly from or
out of, or in any way connected with, the existence of any Environmental
Condition or Environmental Noncompliance on the Leased Premises prior to
Tenant's occupancy and the date hereof, which resulted directly or indirectly in
the Leased Premises or any other property becoming contaminated with dangerous,
hazardous or toxic waste or substances or the clean-up of dangerous, hazardous
or toxic waste or substances from the Leased Premises. Landlord shall be solely
responsible for all costs and expenses relating to the clean-up of dangerous,
hazardous or toxic waste or substances from the Leased Premises which is
contaminated with dangerous, hazardous or toxic waste or substances prior to the
term of this Lease. Landlord and Tenant both acknowledge receipt of a Level I
Environmental Site Assessment, dated October 9, 1998, and prepared by Budinger &
Associates, Inc., which identifies certain potential Environmental Conditions
which may exist on the Camp Family Parcels as of the date hereof.

            4.3 Environmental Investigation. In the event that Environmental
Conditions or Environmental Noncompliance are discovered at the Leased Premises
subsequent to the date hereof, Tenant shall promptly notify Landlord of the
condition(s), whether or not such Environmental Conditions or Environmental
Noncompliance are thought to be attributable to the activities of Landlord or
its predecessors in interest, or of Tenant. Landlord shall have the right,
subject to

                                     - 11 -
<PAGE>

Tenant's right to participate should it so desire, to manage and control all
investigations to determine the location, type, extent, and source of the
Environmental Condition or Environmental Noncompliance. Except to the extent
required by any Governmental Entity or applicable law, Tenant shall have no
right to conduct environmental testing or audits of the Camp Family Parcels,
without first obtaining Landlord's consent, which consent shall not be
unreasonably withheld. Both parties shall maintain the confidentiality of, and
not disclose to others, any information determined by such investigations,
except as required by a Governmental Entity or applicable law.

            4.4 Remedial Action Responsibility.

                  a. By Tenant. With respect to any Environmental Noncompliance
or Environmental Condition applicable to the Leased Premises, attributable to
Tenant's use or occupancy of the Leased Premises for which Tenant is responsible
in accordance with this Seciton 4, and without in any way limiting the scope of
Tenant's obligations under the indemnification provisions in Section 4.2(a)
above, as between Tenant and Landlord, Tenant will be responsible for the
initiation of all investigations, studies, cleanup, corrective action or
response or remedial action required by any local, state or federal government
agency now or hereafter authorized to regulate environmental matters
(hereinafter "Governmental Entities"), or by any consent decree, or court or
administrative order now or hereafter applicable to the Leased Premises, or by
any federal, state or local law, regulation, rule or ordinance now or hereafter
in effect resulting during Tenant's use and occupancy of the Leased Premises and
resulting from Tenant's activities on the Leased Premises. Tenant will pay all
costs in connection with such actions, including, without limitation,
installation, operation, maintenance, testing, monitoring costs, preparation of
plans, designs, applications, studies and reports by or for Governmental
Entities or other regulating agencies, the preparation of closure or other
required plans, the retention of legal counsel, engineers, and other expert
consultants. Subject to the limitations set forth herein, Tenant shall have the
responsibility and right to manage and control all investigations and any
environmental cleanup, remediation, or related activities relating to matters
for which Tenant is responsible in accordance with this section. Tenant,
however, may not negotiate with, fulfill any requirements or claims made by a
Governmental Entity or third party, settle or contest such requirement or
third-party claim without the express approval of Landlord, such approval shall
not be unreasonably withheld, and Landlord shall have the right to participate
fully in any and all meetings, negotiations or decisions relevant to the
investigation or remediation of Environmental Conditions at the Leased Premises

            b. By Landlord. With respect to any Environmental Noncompliance or
Environmental Condition applicable to the Leased Premises existing prior to the
date of this Lease, for which Landlord is responsible in accordance with this
Section 4, and without in any way limiting the scope of Landlord's obligations
under the indemnification provisions in Section 4.2(b) above, as between
Landlord and Tenant, Landlord will be responsible for the initiation of all
investigations, studies, cleanup, corrective action or response or remedial
action required by any local, state or federal government agency now or
hereafter authorized to regulate environmental matters (hereinafter
"Governmental Entities"), or by any consent decree, or court or administrative
order now or hereafter applicable to the Leased Premises, or by any federal,
state or local law, regulation,

                                     - 12 -
<PAGE>

rule or ordinance now or hereafter in effect relating to an Environmental
Condition or Environmental Noncompliance existing on the Leased Premises as of
the date of this Lease. Landlord will pay all costs in connection with such
actions, including, without limitation, installation, operation, maintenance,
testing, monitoring costs, preparation of plans, designs, applications, studies
and reports by or for Governmental Entities or other regulating agencies, the
preparation of closure or other required plans, the retention of legal counsel,
engineers, and other expert consultants. Subject to the limitations set forth
herein, Landlord shall have the responsibility and right to manage and control
all investigations and any environmental cleanup, remediation, or related
activities relating to matters for which is Landlord is responsible in
accordance with this section. Landlord, however, may not negotiate with, fulfill
any requirements or claims made by a Governmental Entity or third party, settle
or contest such requirement or third-party claim without the express approval of
Tenant., such approval shall not be unreasonably withheld, and Tenant. shall
have the right to participate fully in any and all meetings, negotiations or
decisions relevant to the investigation or remediation of Environmental
Conditions at the Leased Premises

            4.5 Definitions.

                  a. As used herein, "Environmental Conditions" means conditions
of the environment, including natural resources (including flora and fauna),
soil, surface water, groundwater, any present or potential drinking water
supply, subsurface strata or the ambient air, relating to or arising out of the
use, handling, storage, treatment, recycling, generation, transportation,
release, spilling, leaking, pumping, pouring, emptying, discharging, injecting,
escaping, leaching, disposal, dumping or threatened release of Hazardous
Materials by Tenant, or Landlord as the case may be, or their respective agents,
representatives, employees, business guests or invitees, or independent
contractors.

                  b. As used herein, "Environmental Noncompliance" means, but is
not limited to: (1) the release of any Hazardous Materials into the environment,
any storm drain, sewer, septic system or publicly owned treatment works, in
violation of any effluent or emission limitations, standards or other criteria
or guidelines established by any federal, state or local law, regulation, rule,
ordinance, plan or other; (2) any noncompliance with federal, state or local
requirements governing occupational safety and health; (3) any facility
operations, procedures, designs, etc. which do not conform to the statutory or
regulatory requirements of any other Environmental Law intended to protect
public health, welfare and the environment; and (4) the operation of any
facility or equipment in violation of any permit condition, schedule of
compliance, administrative or court order which have resulted from, directly or
indirectly, Tenant's or Landlord's activities on the Leased Premises.

                  c. As used herein "Claims" shall include, without limitation;
claims, demands, suits, causes of action for personal injury or property damage
(including any depreciation of property values, lost use of property,
consequential damages arising directly or indirectly out of Environmental
Conditions; actual damages to natural resources; claims for the recovery of
response costs, or administrative or judicial orders directing the performance
of investigations, response or remedial actions under state, federal , or local
or other Environmental Law, a requirement to

                                     - 13 -
<PAGE>

implement "corrective action" pursuant to any order or permit issued pursuant to
RCRA; claims for restitution, contribution or equitable indemnity from third
parties or any governmental agency; fines, penalties, liens against property;
claims for injunctive relief or other orders or notices of violation from
federal, state or local agencies or courts; and, with regard to any present or
former employees, exposure to or injury from Environmental Conditions.

                  d. As used herein, "Expenses" shall include any liability,
loss, cost or expense including, without limitation, costs of investigation,
cleanup, remedial or response action, the costs associated with posting
financial assurances for the completion of response, remedial or corrective
actions, the preparation of any closure or other necessary or required plans or
analyses, or other reports or analyses submitted to or prepared by regulating
agencies, including the cost of health assessments, epidemiological studies and
the like, retention of engineers and other expert consultants, legal counsel,
capital improvements, operation and maintenance testing and monitoring costs,
power and utility costs and pumping taxes or fees, and administrative costs
incurred by governmental agencies.

            4.6 Inspection Rights. Notwithstanding any other provision of this
lease to the contrary, Landlord shall have the right to enter and inspect the
Premises, including but not limited to all structures thereon and the business
operations of Tenant, upon reasonable notice and in a manner so as not to
interfere unreasonably with the conduct of tenant's business, to investigate the
possibility of any Environmental Condition or Environmental Noncompliance at,
upon, about or under the Premises. Landlord may exercise this right in its
reasonable discretion. During such inspection, Landlord shall have the right to
take such samples and conduct such tests as it or its environmental consultants
may determine in its or their discretion to be necessary or advisable. Tenant
shall have the right to split samples of any samples so taken. The incurrence by
Landlord of any expense under the provisions of this Section D shall not impair
any claim for indemnification Landlord may have under the provisions of this
Article.

            4.7 Survival of Article. The provisions of this Article shall
survive, and remain in full force and effect after, the date hereof and
termination of the lease term.

      5. Overloading

      Tenant shall not do anything on the Leased Premises that will cause damage
to the Leased Premises.

      The Leased Premises shall not be overloaded with heavy articles which
would exceed the floor load or roof load which the floor or roof was designed to
carry. No machinery, apparatus, or other appliance shall be used or operated in
or on the Leased Premises that will in any manner injure, vibrate or shake the
Leased Premises.

      6. Compliance with Third Party Leases

                                     - 14 -
<PAGE>

      Tenant shall not conduct any activity on the Third Party Parcels which
would constitute or cause an event of default under any of the Third Party
Leases. Except as may expressly provided herein, Tenant shall comply with the
terms, conditions and covenants applicable to the tenant or lessee under the
Third Party Leases.

      V. TENANT'S MAINTENANCE AND REPAIR OF LEASED PREMISES

      Except as provided in Section XI and I.A., Tenant, at its sole cost and
expense, Tenant shall make any and all repairs and replacements to the Leased
Premises and shall maintain the Leased Premises in good order and condition; and
except as provided in Section XI.

      Tenant shall also be liable for any injury sustained by any person or any
damage to the Leased Premises.

      If Tenant refuses or neglects to maintain, repair, or replace property as
required hereunder to the reasonable satisfaction of Landlord as soon as
reasonably possible after written demand giving thirty (30) days notice,
Landlord may make such maintenance, repairs, or replacement without liability to
Tenant's merchandise, fixtures, or other property or to Tenant's business by
reason thereof, and upon completion thereof, Tenant shall pay Landlord's
reasonable cost for making such maintenance, repair, or replacement upon
presentation of bill therefor, as additional rent.

      VI. IMPROVEMENTS

      Tenant shall not make any alteration, additions or improvements to the
Leased Premises without Landlord's written consent first had and obtained except
for nonstructural exterior and interior changes not exceeding $35,000 per
project and $100,000 in the aggregate. Landlord hereby consents to the
installation by Tenant of a phone system, and computer system with any necessary
cabling, and the installation of any specialized equipment or machinery required
for the operation of Tenant's business, to the extent the same can be installed
without damage to the Leased Premises. Any and all alteration, additions and
improvements shall be constructed: (i) at Tenant's sole cost and expense by
licensed and bonded contractors reasonably acceptable to Landlord; (2) in
conformity with applicable building codes and all other necessary or advisable
permits and licenses; copies of which shall be furnished to Landlord before work
commences; and (3) in a good and workmanlike manner and diligently prosecuted to
completion. Any work not acceptable to any governmental authority or agency
having or exercising jurisdiction over such work, shall be promptly replaced and
corrected at Tenant's expense.

      Any and all alterations, additions and improvements to the Leased
Premises, not including Tenant's machinery and equipment, shall be deemed to
have attached to the freehold and to inure to the benefit of Landlord and shall
remain on and be surrendered with the Leased Premises on expiration or
termination of the lease term including any extension thereof without
compensation to Tenant; provided, however, if not less than ninety (90) days
after the expiration or sooner termination of this Lease or any extension
thereof, Landlord so elects ("Election Right") by written notice to Tenant,
Tenant shall promptly remove all such alterations, additions or improvements

                                     - 15 -
<PAGE>

(unless such alterations, additions or improvements have been approved by
Landlord) which were so made during the term of this Lease or any extension
thereof to the Leased Premises and which are designated in said notice and shall
repair any damage occasioned by the original installation or removal and shall
restore the Leased Premises to new condition substantially the same as existed
prior to the alterations, additions or improvements ("Restoration Work"); and,
in default thereof, Landlord may at its option effect said removals and repairs
at Tenant's expense. Such Election Right by Landlord shall survive the
expiration or sooner termination of the lease term notwithstanding anything to
the contrary contained in this Section VI. In the event Tenant fails or refuses
to perform such Restoration Work within thirty (30) days after Tenant's receipt
of Landlord's Election Right Notice, Landlord may perform same without notice to
Tenant and charge Tenant all reasonable costs and expenses associated with such
Restoration Work.

      VII. LIENS

      No work performed by Tenant pursuant to this Lease, whether in the nature
of erection, construction, alteration or repair, shall be deemed to be for the
immediate use and benefit of Landlord so that no mechanic's or other lien shall
be allowed against the estate of Landlord by reason of any consent given by
Landlord to Tenant to improve the Leased Premises. Tenant will indemnify and
save Landlord harmless from any and all costs and expenses, including reasonable
attorneys' fees, suffered or incurred as a result of any such lien against
Landlord's interest that may be filed or claimed in connection with or arising
out of work undertaken by the Contractors. Tenant shall pay promptly all persons
furnishing labor or materials with respect to any work performed by Tenant or
its Contractors on or about the Leased Premises.

      If any mechanic's or other liens shall at any time be filed against the
Leased Premises by reason of work, labor, services or materials performed or
furnished, or alleged to have been performed or furnished, to Tenant or to
anyone holding the Leased Premises through or under Tenant, and regardless of
whether any such lien is asserted against the interest of Landlord or Tenant,
Tenant shall forthwith cause the same to be discharged of record or bonded to
the reasonable satisfaction of Landlord. If Tenant shall fail to cause such lien
forthwith to be so discharged or bonded after being notified of the filing
thereof, then, in addition to any other right or remedy of Landlord, Landlord
may bond or discharge the same by paying the amount claimed to be due, and the
amount so paid by Landlord, including reasonable attorney's fees incurred by
Landlord either in defending against such lien or in procuring the bonding or
discharge of such lien, together with interest thereon at the Prime Rate as
published in the Wall Street Journal, plus five percent (5%), shall be due and
payable by Tenant to Landlord.

                                     - 16 -
<PAGE>

      VIII. TAXES: ASSESSMENTS

      A. Personal Properly Taxes

      Tenant shall pay before delinquency all taxes, assessments, license fees,
and other charges that are levied and assessed against Tenant's personal
property installed or located in, on, or about the Leased Premises during the
term of this Lease.

      B. Real Property Taxes

      1. Tenant To Pay All Taxes

      Tenant shall pay to the appropriate taxing authority, as additional rent,
its prorata share of any and all real estate taxes, ad valorem taxes and
assessments, assessments, surcharges and municipal or government charges,
general and special, ordinary and extraordinary, of every kind and nature
whatsoever attributable to the Leased Premises (excluding any transfer or excise
tax imposed as a consequence of Landlord's transfer or assignment of its
interest in this Sublease) which may be levied, imposed or assessed during any
fiscal tax year which occurs wholly or partially during the term of this Lease
against all of the land, buildings and other real property improvements of the
Leased Premises.

      If any general or special assessment is levied and assessed, Landlord can
elect to either pay the assessment in full or use the installment payment method
as authorized by the appropriate levying authority. If Landlord pays the
assessment in full, Tenant shall pay to Landlord each time a payment of real
property taxes is made a sum equal to that which would have been payable, had
Landlord elected to pay such assessment under the installment payment method (as
both principal and interest, at the rate of interest utilized by the taxing
authority), had Landlord used the optional installment payment method; provided,
however, Tenant shall be entitled to pay such assessment in full at the time
Landlord pays it in full.

      At any time during the lease term, if Tenant has not paid when due any tax
payment required hereunder or under the Third Party Leases, Landlord may elect
to require the real property taxes be paid by Tenant in equal monthly
installments in such amounts as are estimated and billed for each tax year by
Landlord at the commencement of the lease term and at the beginning of each
successive tax year during the lease term, each such installment being due on
the first day of each calendar month. At any time during a tax year, Landlord
may re-estimate the real properly taxes and thereafter adjust Tenant's monthly
installments payable during the tax year to reflect more accurately Tenant's
real property taxes. Within thirty (30) days after Landlord's receipt of tax
bills for each tax year, or such reasonable time thereafter, Landlord will
notify Tenant of the amount of real property taxes for the tax year in question.
Any overpayment or deficiency in Tenant's payment of the real property taxes for
each tax year shall be adjusted between Landlord and Tenant, and Landlord and
Tenant hereby agree that Tenant shall pay Landlord or Landlord shall credit to
Tenant's account (or, if such adjustment is at the end of the Term, Landlord
shall pay Tenant), as the case may be, within fifteen (15) days of the aforesaid
notice to Tenant, such amount necessary to effect such adjustment. The

                                     - 17 -
<PAGE>

failure of Landlord to provide such notice within the time prescribed above
shall not relive Tenant of any of its obligations hereunder. Notwithstanding the
foregoing, if Landlord is required under law to pay real property taxes in
advance, Tenant agrees to pay Landlord, upon commencement of the term of this
Lease, an amount equal to the real property taxes for the entire tax year in
which the term of this Lease commences, and in such event, at the termination of
this Lease, Tenant shall be entitled to a refund of real property taxes paid
which are attributable to a period after this Lease expires.

      2. Proration of Tenant Tax Liability

      Tenant's liability to pay the real property taxes shall be prorated on the
basis of a 365-day year to account for any fractional portion of a fiscal tax
year included in the term at its commencement and expiration. The term "tax
year" shall mean calendar year.

      IX. UTILITIES AND SERVICES

      Tenant shall make all arrangements for and pay before delinquency all
utilities and services including, without limitation, gas, electricity, water,
sewer, transit, telephone service, trash collection.

      If any utility lines which serve the Leased Premises are not maintained by
a utility supplier or another party, Tenant shall cause such utility lines to be
maintained in good order, repair and condition. that Landlord shall not be
responsible for any utility failure.

      X. INSURANCE AND INDEMNITY; TENANT'S POSSESSION AT OWN RISK

      A. Tenant's Possession at Own Risk

      Tenant covenants and agrees that neither the Landlord nor his agents shall
be liable in any way for personal injuries or property damages sustained by
Tenant, or by any occupant of the Leased Premises, or by any other persons or
organizations claiming through Tenant, resulting from the condition, state of
repair, or use of the Leased Premises, or any part thereof, or of any equipment
therein or appurtenances thereto, or resulting directly or indirectly from any
act or neglect of any tenant or occupant therein or of any other person or
persons, except for Landlord or its agents. All personal property of every kind
and description which may at any time be in, upon or about the Leased Premises
shall be there at Tenant's sole risk, or at the risk of those claiming through
Tenant, and neither Landlord nor its agents shall be liable for damage to said
property or for any loss suffered by Tenant's business or occupation caused by
water or other liquid from any source whatever, or by the bursting, overflowing,
or leaking of sewer pipes, or by the plumbing, heating or air conditioning
equipment, or by electric wires, gas or odors.

                                     - 18 -
<PAGE>

      B. Indemnities

      Tenant covenants, agrees and warrants that it will indemnify and hold
Landlord and their employees, agents and contractors free and harmless of and
from any and all loss, damage, liability or expense (including attorneys' fees
and other costs incurred in connection with litigation or the defense of claims,
whether or not claims involves litigation) resulting from any actual or alleged
injury to any person, or from any actual or alleged loss of or damage to any
property arising from any occurrence in, upon or about the Leased Premises or
arising from Tenant's use or occupancy of the Leased Premises or the conduct of
its business or from any activity, work or thing done, permitted or suffered by
Tenant in, upon or about the Leased Premises, or arising from breach of any
obligation on Tenant's part to be performed under the terms of this Lease, or
arising wholly or in part from any tortious act, neglect, fault or omission of
Tenant, or any person claiming under Tenant or its contractors, agents,
employees, visitors, invitees, licensees or concessionaires in, upon or about
the Leased Premises; provided, however, Tenant or its agents shall not be
required to indemnify Landlord from or against claims or losses resulting from
Landlord's own negligence or willful misconduct. The indemnification provided
for in this paragraph with respect to any tortious acts or omissions during the
term of this Lease shall survive any termination or expiration of this Lease.

      C. Fire Insurance on Building and Other improvements

      Tenant shall maintain on the Leased Premises a policy of fire insurance to
the extent of full replacement value (without deduction for depreciation),
including, at Landlord's option, endorsements for extended coverage, vandalism
and malicious mischief, special extended perils (all risk), earthquake (if
available at commercially reasonable rates) , operation of building laws;
provided however if Landlord elects not to require Tenant to maintain earthquake
insurance, Tenant shall repair or replace any damage caused by an earthquake
within 120 days of such occurrence.

      The insurance policy shall be issued in the names of Tenant, Landlord and
Landlord's lender, as their interests appear, and the loss, if any, under such
policy shall be payable to Tenant, Landlord and Landlord's lender, as their
interests may appear, providing that the proceeds of insurance are made
available for restoration of the premises as required herein, and providing that
said insurance policy may not be canceled or otherwise terminated without the
insurance company first giving Landlord and its lender at least thirty (30) days
written notice of cancellation; provided further, nothing herein shall be
construed to give Landlord or its Lender rights in the proceeds of any insurance
policy insuring Tenant's equipment and other personalty, and the proceeds of
insurance for any loss to Tenant's equipment and other personalty shall be the
property of Tenant.

                                     - 19 -
<PAGE>

      D. Public Liability and Property Damage Insurance

      Tenant, at its cost, shall procure and maintain commercial general
liability insurance and property damage insurance with a single combined
liability limit of no less than $2,000,000.00 insuring and indemnifying both
Tenant and Landlord and their authorized representatives and employees against
any and all claims, demands, losses, damages, liabilities and expenses
(including, but not limited to, reasonable attorneys' fees, reasonable
investigative and discovery costs, and court costs) for any injury to any
person, or for any loss of or damage to any property from any cause whatsoever
arising from or related to the ownership, use, occupancy or maintenance of the
Leased Premises and all areas appurtenant thereto.

      This public liability and property damage insurance shall carry a
contractual coverage endorsement specifically insuring the performance by Tenant
of its indemnity agreement contained in Section X.B.

      Tenant shall name Landlord and Landlord's lender as additional insured,
and the policy shall contain cross liability endorsements.

      Not more frequently than each two (2) years, if, in the reasonable opinion
of Landlord or of Landlord's lender, the amount of public liability and property
damage insurance coverage at that time is not adequate due to inflation,
Tenant's activity, substantial increase in recovered liability claims, or any
combination thereof, Tenant shall increase the insurance coverage as may be
reasonably required by either Landlord or Landlord's lender, or in accordance
with the industry standards.

      This comprehensive public liability insurance policy shall (i) provide for
contractual liability coverage with respect to the indemnity obligation set
forth above, (ii) provide for severability of interests, and (iii) provide that
an act or omission of one of the insureds or additional insureds which would
void or otherwise reduce coverage shall not reduce or void the coverage as to
the other additional insureds or the insured, respectively.

      Landlord makes no representations that the limits of liability specified
to be carried by Tenant pursuant to this Section are adequate to protect Tenant.
If Tenant believes that any of such insurance coverage is inadequate, Tenant
will obtain, at Tenant's sole cost and expense, such additional insurance
coverage as Tenant deems adequate.

      Tenant, at its cost, shall further procure and maintain Worker's
Compensation Insurance and Employer's Liability Insurance with a limit of no
less than the amount and in form required by law.

      E. Tenant's Fire Insurance

      Tenant, at its sole cost and expense, shall maintain all-risk fire and
casualty insurance with standard extended coverage endorsement, including theft,
vandalism, and malicious mischief, for

                                     - 20 -
<PAGE>

100% of the replacement value of all furnishings, trade fixtures, leasehold
improvements, equipment, merchandise, inventory, records and personal property
from time to time in the Leased Premises.

      F. Waiver of Subrogation

      Landlord and Tenant mutually release the other from any and all liability
or responsibility (to the other or anyone claiming through or under them by way
of subrogation or otherwise) for any loss or damage to property arising by
reason of fire and such items as are included under the normal extended coverage
clauses of fire insurance policies as required to be carried by the parties
under this Lease or any other insurance actually carried by such party, and do
hereby mutually waive all rights of subrogation in favor of any insurance
carrier against the other arising out of any such loss or damage.

      G. Tenant's Contractor's Insurance

      Tenant shall require any contractor of Tenant performing work on the
Leased Premises to carry and maintain, at no expense to Landlord: a)
comprehensive general liability insurance, including contractor's liability
coverage, contractual liability coverage, completed operations coverage, broad
form property damage endorsement and contractor's protective liability coverage,
to afford protection, with respect to personal injury, death or property damage
of not less than One Million Dollars ($1,000,000.00) per occurrence, Combined
Single Limit/Two Million Dollars ($2,000,000.00) aggregate; b) comprehensive
automobile liability insurance with limits for each occurrence of not less than
One Million Dollars ($1,000,000.00) with respect to personal injury or death and
Five Hundred Thousand Dollars ($500,000.00) with respect to property damage; and
c) Worker's Compensation or similar insurance in form and amounts required by
law.

      H. Other Insurance Matters

      All the insurance required of Tenant under this Lease shall:

      1. Be issued by insurance companies authorized to do business in the State
of Washington with a financial rating of at least AA or better as rated in the
most recent edition of Best's Insurance Reports.

      2. Contain an endorsement requiring thirty (30) days written notice from
the insurance company to both parties and Landlord's lender before cancellation,
non-renewal or change in the coverage, scope or amount of any policy.

      3. Be written as primary policies, not contributing with and not
supplemental to the coverage that Landlord may carry.

      Tenant shall furnish the insurance carriers with a copy of this Lease to
insure proper coverage.

                                     - 21 -
<PAGE>

      Each policy, or a certificate of the policy, together with evidence of
payment of premiums, shall be deposited with the Landlord at the commencement of
the term, and on renewal of the policy not less than twenty (20) days before
expiration of the term of the policy.

      If Tenant shall fail to perform any of its obligations under this Section
X, Landlord may perform the same and the cost of the same shall be deemed
additional rent and payable upon Landlord's demand.

      Tenant's obligation to insure may be provided by appropriate amendment,
rider, or endorsement on any blanket policy or policies carried by Tenant.

      XI. DESTRUCTION

      If the Leased Premises should be damaged or destroyed by fire or other
casualty, Tenant shall give immediate written notice thereof to Landlord.

      In case the Leased Premises shall be partially or totally damaged or
destroyed by fire or other casualty insurable under standard extended risk
insurance as to become partially or totally untenable, after date of
notification by Tenant to Landlord of the happening of the damage, Tenant, at
its sole cost, provided insurance proceeds are made available by Landlord and by
its lender in an amount to fully pay for such repairs, shall proceed forthwith
to repair or restore such damage as nearly as practicable to the condition and
character prior to such damage or destruction within a reasonable time (subject
to reasonable time allowance for the purpose of adjusting the insurance loss and
for unavoidable delay), unless Landlord or Tenant elects to terminate this Lease
as hereinafter provided.

      In the event more than forty percent (40%) of any building on the Leased
Premises shall be destroyed by fire or other casualty insurable under standard
risk insurance, or in the event any building on the Leased Premises shall be
damaged or destroyed to any extent by a casualty other than those covered by
fire and standard extended coverage risk insurance, then and in such event,
Tenant may, if it so elects, rebuild or put said building in good condition and
fit for occupancy within a reasonable time after date of notification of the
destruction or damage, or may, upon thirty (30) days written notice given within
forty-five (45) days of the date of notification of the destruction or damage,
terminate this Lease as to the portion of the premises so destroyed, with the
rent to abate pro rata for the Camp Family Parcels of by the amount of rent
payable under the Third Party Leases, to the extent permitted in the Third Party
Leases; provided, however, Tenant may not partially terminate this Lease with
respect to that portion of the property so damaged if such terminated portion is
of such a size or configuration that it has little or no economic value to
Landlord, in which event Tenant shall have the right to terminate this Lease and
Sublease with respect to the entire Leased Premises unless, in lieu of such
total termination, Landlord elects to allow the partial termination with respect
to that portion of the premises so partially damaged. Unless Tenant elects to
terminate this Lease, this Lease shall remain in full force and effect. In the
event tenant elects to rebuild, rent shall abate ratably, providing that Tenant
diligently pursues completion of any required restoration.

                                     - 22 -
<PAGE>

      If the Lease is canceled or partially terminated by reason of such damage
or destruction, any insurance proceeds for damage to the Leased Premises, not
including Tenant's fixtures, machinery, equipment, and other personal property,
whether obtained by Tenant or Landlord, shall belong to Landlord, free and clear
of any claims by Tenant. Any insurance proceeds for damage to Tenant's fixtures,
equipment, machinery, and other personal property, shall belong to Tenant, free
and clear of any claims by Landlord.

      In the event the parking area shall be materially and substantially
damaged by reason of any casualty to such an extent as to render the same
untenable in whole or in a substantial part thereof, then Tenant, at its option,
may terminate this Lease, as to the portion of the parking area so damaged, by
giving written notice to the other not later than ninety (90) days after the
date of such damage.

      XII. ASSIGNMENT AND SUBLETTING

            A. Tenant's Assignment or Sublease

      Tenant may assign this Lease or sublet all or any portion of the Premises
to any entity, including trusts, corporations, partnerships and limited
liability companies, that is owned or controlled in majority part by Sidney
DeBoer or any member of his Immediate Family, or any other entity owned or
controlled in majority party by Sidney DeBoer or any member of his Immediate
Family ("Permitted Assignee"), without the prior consent of Landlord; provided,
however, such assignment or transfer must be consented to by Guarantor, which
must ratify and reaffirm its unconditional guaranty of the payment and
performance by the tenant's obligations under this Lease and Sublease . As used
herein, Immediate Family shall mean the spouse, sons or daughters of Sidney
DeBoer , the Estate of Sidney DeBoer, any entity owned or controlled in majority
part by any of them. Tenant and Permitted Assignee's may assign or sublet to any
other party only with the prior consent of Landlord, which consent may be given
or with held in the exercise of Landlord's sole and unqualified discretion. In
the event Landlord refuses its consent to a proposed assignment, Tenant shall
thereafter have the right to terminate this Lease upon thirty (30) days notice
to Landlord, upon payment to Landlord of the remaining rent reserved under the
Lease for the remaining term then in effect. Alternatively, Tenant shall have
the right to assign this Lease to the assignee rejected by Landlord for a period
of eighteen (18) months from the date of such assignment, during which period
Landlord and the assignee shall attempt in good faith to negotiate the terms and
conditions of a new lease for the Premises; provided, however, notwithstanding
such limited assignment, Tenant shall not be relieved from performance of its
obligations under this Lease. In the event Landlord and the assignee shall fail
to agree on such terms of a new lease during such eighteen (18) month period,
either party may terminate this Lease upon thirty (30) days notice to the other
party, and upon payment, by Tenant, of the remaining rent reserved under the
Lease for the remaining term then in effect. Notwithstanding the foregoing, if
Landlord's consent to a proposed assignment is unreasonably withheld, Tenant
shall be relieved of its obligations under this Lease, excluding its obligations
under Article IV arising prior to such date. Landlord's consent to a proposed
assignment shall be deemed to have been unreasonably withheld if the proposed
assignee

                                     - 23 -
<PAGE>

is at least as credit worthy as Tenant and Guarantor, its financial condition is
at least as good as that of Tenant and Guarantor, and the proposed assignee has
sufficient business experience in, and a good business reputation in, the
automobile sales and leasing business.

      Notwithstanding anything to the contrary contained in the next preceding
paragraph Landlord hereby consents to the assignment of the Lease: (i) as
security for the Tenant's performances of obligations incurred in order to
finance Tenant's business; or (ii) to any corporation, partnership, joint
venture, or other entity controlling, controlled by or under common control with
Tenant.

      If Tenant is a corporation, then any transfer of this Lease from Tenant by
merger, consolidation or liquidation and any change in the ownership of Tenant,
the result of which is that the power to vote the majority of Lithia Motors,
Inc. outstanding voting stock, however accomplished, and whether in a single
transaction or in a series of transactions, is not held by Sidney DeBoer or a
Permitted Assignee, shall constitute an assignment for the purpose of this
Section requiring Landlord's prior written consent in each instance.

      Tenant's request for consent to a transfer shall include a written
statement of the details of the proposed transfer, including the name, address,
business, intended use of the Leased Premises, financial condition of the
prospective transferee, financial details of the proposed transfer, a copy of
the proposed transfer documents and any other information Landlord deems,
relevant. At any time within thirty (30) days after Landlords receipt of the
foregoing information, Landlord shall have the right (1) to withhold consent, to
the extent permitted in this Section; or (2) to grant consent, subject to the
terms and provisions of this Lease.

      Landlord shall have no obligation but shall have the right to accept such
rent and other charges from any assignee or subtenant.

      Notwithstanding any transfer permitted herein, Tenant hereof shall not be
released from the payment and performance of its obligations under this Lease
and shall at all times remain directly, primarily and fully responsible and
liable for all payments owed by Tenant under this Lease and for compliance with
all obligations under the terms, provisions and covenants of this Lease.

      Any attempted transfer without Landlord's prior written consent shall be
void and of no force or effect.

      Notwithstanding anything contained in this Lease to the contrary, Landlord
shall not be obligated to entertain or consider any request by Tenant to consent
to any proposed transfer of this Lease or sublet of all or any part of the
Leased Premises unless each request by Tenant is accompanied by a nonrefundable
fee payable to Landlord in the amount of Twenty-Five Hundred Dollars ($2,500.00)
to cover Landlord's administrative, legal, other costs and expenses incurred in
processing each of Tenant's requests, including but not limited to the cost of
investigating the credit,

                                     - 24 -
<PAGE>

experience, skill, character, reputation, and ability of the proposed
transferee. The foregoing fee shall only be payable upon Landlord's consent to
Tenant's request. All transfers shall be by instruments in form satisfactory to
Landlord executed by the transferor and the transferee, whereby any transferee
assumes and agrees to be bound by and perform all of Tenant's obligations under
this Lease. One original copy of such instrument shall be delivered to Landlord
within five (5) days of its signing.

      Any transfer shall be subject in all respects to the terms and conditions
of this Lease and Tenant shall not be in default in any provision hereunder
beyond any applicable notice and grace period at the time of such transfer,
assignment or subletting.

      Landlord's consent to one assignment, sublease or, transfer, if given,
will not waive the requirement of obtaining the Landlord's consent to any
subsequent assignment, sublease, or transfer.

      B. Landlord's Assignment

      Landlord shall have the right to transfer and assign, in full or in part,
all its rights and obligations hereunder, and in such event and upon its
transferee's assumption of Landlord's obligations hereunder (any such transferee
to have the benefit of the provisions hereof), no further liability or
obligation shall thereafter accrue against Landlord hereunder.

      XIII. DEFAULT AND REMEDIES

      A. Failure to Pay Rent

      Tenants failure to pay rent, or any other sum required to be paid by
Tenant hereunder, when due, and after expiration of any applicable cure period,
shall constitute a default by Tenant under this Lease.

      B. Performance of Covenants

                                     - 25 -
<PAGE>

      Other than Tenant's failure to pay any rental payment when due, if Tenant
shall fail to make any other payment within thirty (30) days after Tenant's
receipt of a written notice from Landlord specifying such default or perform any
of Tenant's obligations under this Lease, or if such default is of a nature to
require more than thirty (30) days for to cure and Tenant has initiated
procedures to cure the default within such thirty (30) day period and diligently
pursues such efforts to cure to completion, Tenant shall be allowed such
additional time, not to exceed sixty (60) days, to cure any such default;
notwithstanding the foregoing, Tenant shall not be allowed any grace period to
cure a default which creates an imminent danger to the public or to the safety
and integrity of the Leased Premises. Landlord may, after expiration of any
applicable cure period provided herein, without waiving or releasing Tenant from
any obligations of Tenant under this Lease, cure the default, in such a manner
and to such extent as Landlord deems reasonable. All sums so paid by Landlord
and all necessary costs and expenses in connection with the performance of any
such obligation by Landlord, shall be deemed additional rent hereunder and shall
be payable to Landlord within ten (10) days after Tenant's receipt of Landlord's
statement of account thereon.

      C. Remedies Cumulative

      All rights and remedies of the Landlord hereunder shall be cumulative, and
none shall exclude any other rights or remedies herein specified or otherwise
allowed at law or in equity or by statute or otherwise, and the exercise or
beginning of the exercise by Landlord of any one or more of the rights or
remedies provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise will not preclude the simultaneous or later
exercise by Landlord of any or all other rights or remedies provided for in this
Lease or now or hereafter existing at law or in equity or by statute or
otherwise.

                                     - 26 -
<PAGE>

      D. Reentry by Landlord

      If Tenant should neglect or refuse to timely pay any installment of rent,
or additional rent, as herein provided, or to timely pay any other sums required
by Tenant to be paid for a period of ten (10) days after written notice hereof
by Landlord to Tenant (provided, however, Landlord shall only be required to
give Tenant notice, written or otherwise, of its failure to pay rent only twice
in any twelve (12) calendar month period), or if Tenant should abandon the
Leased Premises, or vacate the Leased Premises (which shall be construed to mean
Tenant shall not have conducted its business in the Leased Premises for a period
of time exceeding thirty [30] days), or fail to keep said Leased Premises in
good repair and condition, or should fail or refuse to timely observe, keep or
perform any of the other terms, covenants, agreements or conditions contained
herein, and if such default should continue for a period of at least forty-five
(45) days after written demand to cure the same has been given, (or, unless the
nature of the default cannot be cured within forty-five (45) days, then Tenant
shall be granted a reasonable amount of additional time to cure said default so
long as Tenant shall commence the curing of the default within such forty-five
(45) day period and shall thereafter diligently prosecute the curing of same),
then the Landlord may, at his option, terminate this Lease and upon such
termination Tenant shall immediately quit and surrender the Leased Premises to
Landlord, but Tenant shall remain liable as hereinafter provided.

      Notwithstanding anything to the contrary in this Section XIV, if Tenant
shall default in the performance of any covenant or agreement of this Lease two
(2) or more times in any twelve (12) month period for which Landlord has given
Tenant notice, then notwithstanding that such defaults have been cured by
Tenant, any further similar default during the next succeeding twelve (12) month
period shall be deemed a default without further notice.

      If this Lease shall be terminated as herein provided, Landlord shall have
the following rights:

            (1) To reenter the Leased Premises then or at any time thereafter
and remove all persons and property and possess the Leased Premises, if the same
can be done without a breach of the peace, without prejudice to any other
remedies Landlord may have by reason of Tenant's default or of such termination,
and Tenant shall have no further claim hereunder;

            (2) To remove, at Tenant's sole risk, any and all personal property
in the Leased Premises and place such personal property in a public or private
warehouse or elsewhere at the sole cost and expense and in the name of Tenant.
Any such warehouser shall have all of the rights and remedies provided by law
against Tenant as owner of such property. If Tenant shall not immediately pay
the cost of such storage within thirty (30) days, Landlord may sell any or all
such property at a public or private sale in such manner and at such times and
places as Landlord deems proper, with ten (10) days notice to or demand upon
Tenant, with the proceeds of such sale to be applied to the cost of such sale
and to the payment of charges for storage and to the payment of any other sums
of money which may then be due from Tenant to Landlord under any of the terms
hereof.

                                     - 27 -
<PAGE>

            (3) To recover all damages incurred by Landlord by reason of the
default. Tenant will remain liable to Landlord for rent and all other payments
owed by Tenant to Landlord under the Lease that were earned but unpaid at the
time of termination and for damages equal to the loss of net rental and other
amounts that would have been owing by Tenant for the balance of the term, had
the Lease not been terminated. Landlord shall apply the proceeds of any
reletting first to the payment of such reasonable expenses as Landlord may have
incurred in recovering possession of the Leased Premises, and removing persons
and property therefrom, and in putting the same into good order and condition or
preparing or altering the same for reletting, all costs, including without
limitation brokerage commissions, advertising costs and restoration and
remodeling costs in reletting the Leased Premises plus any other expense,
including without limitation attorneys' fees, court costs and accounting and
auditing expenses, necessary to compensate Landlord for all detriment
proximately caused by Tenant's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom; and then to Tenant's obligation to pay rental and/or damages for loss
of rental. Any such reletting may be for the remainder of the term of this Lease
or for a longer or shorter period. If, in connection with any reletting, the new
lease term extends beyond the existing term, or the Leased Premises covered by
such new lease include other premises not part of the Leased Premises, a fair
apportionment of the rent received from such reletting and the expenses incurred
in connection with such reletting as provided in this Section XIV will be made
in determining the net proceeds from such reletting, and any reasonable rent
concessions will be equally apportioned over the term of the new lease. In any
case, whether or not the Leased Premises, or any part thereof, be relet, Tenant
shall pay to Landlord the rent and all other charges required to be paid by
Tenant up to the time of such termination of this Lease and thereafter, Tenant
agrees to pay the equivalent of the amount of all rent reserved herein and all
other charges required to be paid by Tenant, less the net proceeds of reletting,
if any. Such damages shall be due and payable by Tenant monthly as the amount
thereof is ascertained by Landlord, and Landlord, from time to time, may bring
an action therefor as such monthly deficiencies arise. Tenant shall have no
right to any rental which Landlord may receive after reletting which exceeds the
rental reserved under this Lease.

      Landlord alternatively, at its option, will be entitled forthwith to
recover from Tenant, as damages for loss of the bargain and not as a penalty, an
aggregate sum, which at the time of such termination, represents:

                  (a) the rent and all other payments owed by Tenant to Landlord
under the Lease that were earned but unpaid at the time of termination;

                  (b) all costs incurred by Landlord in retaking possession of
the Leased Premises and restoring them to good order and condition;

                  (c) all costs, including without limitation, brokerage
commissions, advertising costs and reasonable restoration and remodeling costs,
incurred by Landlord in reletting the Leased Premises; plus,

                                     - 28 -
<PAGE>

                  (d) any other amount, including without limitation reasonable
attorneys' fees, court costs and accounting and audit expenses, necessary to
compensate Landlord for all detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.

            No re-entry or taking possession of the Leased Premises shall be
construed as an election to terminate this Lease unless such election is
affirmatively made in writing by Landlord or is decreed by a court of competent
jurisdiction.

            D. Injunctive Relief

      Upon default by Tenant, Landlord may, at their option, restrain by
injunction or other equitable means any breach of this Lease.

      E. Interest on Unpaid Rent

      The rent, insurance, real property taxes, assessments, and other similar
charges, and any other charges as provided for herein, payable by Tenant to
Landlord or others shall be deemed to be "rent" or "additional rent". Any such
sums not paid when due shall bear interest at the then Prime Rate for all banks,
as published in the Wall Street Journal, plus 5.00%, also known as "Default
Rate", from the due date until paid. Interest shall accrue from the date funds
are first due or, if the payment is for funds expended by Landlord on Tenant's
behalf, from the date ten (10) days after Landlord's date of billing to Tenant.
Interest shall not be payable on surcharges. Payment of interest shall not
excuse or cure any default by Tenant under this Lease.

      F. Costs and Attorney Fees

      Should any action be brought under this Lease Agreement or should any
action be brought to recover any rent due hereunder, or for breach of any
provision of this Lease, the substantially prevailing party shall be awarded its
reasonable attorneys' fees against the losing party. Landlord and Tenant hereby
agree that jurisdiction and venue for any suit shall properly lie in Spokane
County, State of Washington.

      In the event either Landlord or Tenant is required to employ an attorney
or seek legal advice for any reason because of the filing of a voluntary or
involuntary bankruptcy petition under any bankruptcy chapter by the other, all
such reasonable legal fees and costs so incurred shall be deemed an additional
expense under this Lease, and shall be payable in full the month following
billing by their respective attorneys. Such legal fees shall include, without
limitation, review of any and all notices, schedules, or petitions concerning
the case; attendance at creditors meetings; negotiations with debtor or debtor's
counsel; preparation and filing of any and all notices, motions, objections, or
any other pleadings in connection with the cause on behalf of either Landlord or
Tenant, as the

                                     - 29 -
<PAGE>

case may be, including, without limitation, motions to assume or reject this
Lease, to seek relief from stay, to recover administrative expenses; or review
any Disclosure Statements and Plans of Reorganization.

      G. Non-Waiver

      No failure of Landlord or Tenant to insist upon the strict performance of
any provision of this Lease shall be construed as depriving either of the right
to insist on strict performance of such provision or any other provision in the
future. No custom or practice which may develop between the parties in the
administration of the terms hereof shall be construed to waive or lessen
Landlord's right to insist upon performance by Tenant in strict accordance with
such terms. No waiver by Landlord of any provision of this Lease shall be deemed
to have been made unless expressed in writing and signed by Landlord.

      No acceptance of partial rent or of any other partial payment by Landlord
from Tenant after any default by Tenant shall constitute a waiver of any such
default or any other default. No payment by Tenant or receipt by Landlord or its
agents of a lesser amount than the rent stipulated shall be deemed to be other
than on account of the rent stipulated nor shall an endorsement or statement on
any check or any letter accompanying any check or payment of rent be deemed an
accord and satisfaction. Landlord or its agents may accept such check or payment
without prejudice to Landlord's right to recover the balance of such rent or
pursue any other remedy hereunder.

      Consent by Landlord in any one instance shall not dispense with necessity
of consent by Landlord in any other instance.

      H. Remedies In The Event Of Bankruptcy Or Other Proceeding

            1. Anything contained herein to the contrary notwithstanding, if
termination of this Lease shall be stayed by order of any court having
jurisdiction over any proceeding described in Section XIII, or by federal or
state statute, then, following the expiration of any such stay, or if Tenant or
Tenant as debtor-in possession or the trustee appointed in any such proceeding
(being collectively referred to as "Tenant" only for the purposes of this
Section XIV.J.) shall fail to assume Tenant's obligations under this Lease
within the period prescribed therefor by law or within fifteen (15) days after
entry of the order for relief or as may be allowed by the court, or if Tenant
shall fail to provide adequate protection of Landlord's right, title and
interest in and to the Leased Premises or adequate assurance of the complete and
continuous future performance of Tenant's obligations under this Lease,
Landlord, to the extent permitted by law or by leave of court having
jurisdiction over such proceeding, shall have the right, at its election, to
terminate this Lease on fifteen (15) days notice to Tenant and upon the
expiration of said fifteen (15) day period of this Lease shall cease and expire
as aforesaid and Tenant shall immediately quit and surrender the Leased Premises
as aforesaid. Upon the termination of this Lease as provided above, Landlord,
without notice, may reenter and repossess the Leased Premises using such force
for that purpose as may be necessary

                                     - 30 -
<PAGE>

without being liable to indictment, prosecution or damages therefor and may
dispossess Tenant by summary proceedings or otherwise.

            2. For the purposes of the preceding Subsection 1. adequate
protection of Landlord's right, title and interest in and to the Leased
Premises, and adequate assurance of the complete and continuous future
performance of Tenant's obligations under this Lease, shall include, without
limitation, the following requirements: a) that Tenant comply with all of its
obligations under this Lease; b) that Tenant pay to Landlord, on the first day
of each month occurring subsequent to the entry of such order, or the effective
date of such stay, a sum equal to the amount by which the Leased Premises
diminished in value during the immediately preceding monthly period, but, in no
event, an amount which is less than the aggregate rent payable for such monthly
period; c) that Tenant continue to use the Leased Premises in the manner
originally required by this Lease; d) that Landlord be permitted to supervise
the performance of Tenant's obligations under this Lease: e) that Tenant pay to
Landlord within fifteen (15) days after entry of such order or the effective
date of such stay, as partial adequate protection against future diminution in
value of the Leased Premises and adequate assurances of the complete and
continuous future performance of Tenant's obligations under this Lease, an
additional security deposit in a reasonable amount acceptable to Landlord; f)
that Tenant has and will continue to have unencumbered assets after the payment
of all secured obligations and administrative expenses to assure Landlord that
sufficient funds will be available to fulfill the obligations of Tenant under
this Lease; g) that if Tenant assumes this Lease and proposes to assign the same
(pursuant to Title 11 U.S.C. ss.365, or as the same may be amended) to any
person who shall have made a bona fide offer to accept an assignment of this
Lease on terms acceptable to such court having competent jurisdiction over
Tenant's estate, then notice of such proposed assignment, setting forth (x) the
name and address of such person, (y) all of the terms and conditions of such
offer, and (z) the adequate assurance to be provided Landlord to assure such
person's future performance under this Lease, including, without limitation, the
assurances referred to in Title 11 U.S.C. ss.365(b)(3), as it may be amended,
shall be given to Landlord by Tenant no later than fifteen (15) days after
receipt by Tenant of such offer, but in any event no later than thirty (30) days
prior to the date that Tenant shall make application to such court for authority
and approval to enter into such assignment and assumption, and Landlord shall
thereupon have the prior right and option, to be exercised by notice to Tenant
given at any time prior to the effective date of such proposed assignment, to
accept, or to cause Landlord's designee to accept, an assignment of this Lease
upon the same terms and conditions and for the same consideration, if any, as
the bona fide offer made by such person less any brokerage commissions which may
be payable out of this consideration to be paid by such person for the
assignment of this Lease; and b) that if Tenant assumes this Lease and proposes
to assign the same, and Landlord does not exercise its option pursuant to
Subsection XIV.J.2.g., Tenant hereby agrees that: I) such assignee shall have a
net worth of not less than the net worth of Tenant as of the Commencement Date,
or such Tenant's obligations under this Lease shall be unconditionally
guaranteed by a person having a net worth equal to Tenant's net worth as of the
Commencement Date; ii) such assignee shall not use the Leased Premises except
subject to all the restrictions contained in this Lease; iii) such assignee
shall assume in writing all of the terms, covenants and conditions of this Lease
including,

                                     - 31 -
<PAGE>

without limitation, all of such terms, covenants and conditions respecting the
permitted use and payment of base rent and all additional rent and such assignee
shall provide Landlord with assurances satisfactory to Landlord that it has the
experience in operating businesses having the same or substantially similar uses
as the permitted use, sufficient to enable it so to comply with the terms,
covenants and conditions of this Lease and successfully operate the Leased
Premises for the permitted use; (iv) such assignee shall indemnify Landlord
against, and pay to Landlord that amount of, any payments which Landlord may be
obligated to make to any Mortgagee by virtue of such assignment; and (v) such
assignee shall pay to Landlord an amount equal to the unamortized portion of any
construction allowance made to Tenant.

      XIV. EMINENT DOMAIN

      If the whole of the Leased Premises shall be taken by any public authority
under the power of eminent domain, or conveyed under a threat of condemnation,
the lease term shall cease as of the day possession shall be taken by such
public authority, and Tenant shall pay rent up to that date with an appropriate
refund by Landlord of such rent as shall have been paid in advance for a period
subsequent to the date of taking.

      If more than forty percent (40%) of the total square footage of all
buildings on the Leased Premises shall be taken under the power of eminent
domain, or conveyed under the threat of condemnation, or more than forty percent
(40%) of the paved area on the Leased Premises is taken under the power of
eminent domain, or conveyed under the threat of condemnation, Tenant may, by
notice in writing to Landlord on or before the day of surrendering possession to
the public authority, terminate this Lease, and rent shall be paid or refunded
as of the date of termination. In the event the Lease is not so terminated, then
the Lease shall continue in full force and effect except that the base rent
shall be equitably abated for the taking of the Leased Premises and Landlord
shall make all necessary repairs or alterations, to the extent of available
condemnation proceeds, to the basic building and exterior work so as to
constitute the remaining Leased Premises a complete architectural unit.

      All compensation awarded for any taking under the power of eminent domain,
whether for the whole or part of the Leased Premises, shall be property of the
Landlord, whether such damages shall be awarded as compensation for the
diminution in the value of or loss of the leasehold or for diminution in the
value of or loss of the fee of the Leased Premises, or otherwise. Nothing
contained herein shall prevent Tenant from applying for reimbursement from the
condemning authority (if permitted by law) for moving expenses, or the expense
of removal of Tenant's trade fixtures, or loss of Tenant's good will.

      XV. LANDLORD'S ENTRY ON LEASED PREMISES

                                     - 32 -
<PAGE>

      Landlord, its agents, employees, contractors and authorized
representatives shall have the right to enter the Leased Premises at any time in
an emergency and otherwise at reasonable times during normal business hours for
any of the following purposes:

            (1) To determine whether the Leased Premises are in good condition
and whether Tenant is complying with its obligations under this Lease.

            (2) To serve, post, or keep posted any notices required or allowed
under the provisions of this Lease.

            (3) To show the Leased Premises Landlords lenders, and to
prospective brokers, agents, or buyers.

            (4) To do any necessary maintenance, repair or replacement to the
Leased Premises, the utility services, that Landlord has the right or obligation
to perform.

      XVI. SUBORDINATION: OFFSET STATEMENT; TENANT FINANCING

      A. SUBORDINATION BY TENANT

      This Lease and all rights of the Tenant shall be subordinate to the lien
of any existing or and future encumbrance, including any deed of trust,
mortgage, or other written security device or agreement now or hereafter
affecting the Leased Premises and the note or other obligation secured by it,
placed by Landlord on the Leased Premises, and to any encumbrance thereafter
placed by Landlord on the Leased Premises. The Tenant shall, upon written
demand, execute, acknowledge and deliver to the Landlord, any and all
instruments that may be necessary or proper to subordinate this Lease and all
rights of the Tenant hereunder, to the lien of any such encumbrance or
encumbrances.

      Notwithstanding the foregoing subordination, Tenant's rights under this
Lease shall not be disturbed by the holder of any encumbrance heretofore or
hereafter placed by Landlord upon the Leased Premises, as evidenced by a
commercially reasonable nondisburbance agreement, unless Tenant shall breach any
of the provisions hereof and this Lease or Tenant's rights to possession
hereunder shall have been terminated in accordance with the provisions of this
Lease.

      From time to time, Tenant will execute, acknowledge and deliver in
recordable form to Landlord, within twenty (20) days of receipt, (and which
twenty (20) [or thirty (30) days in the event Tenant is out of town or ill] day
period is not subject to any notice and cure periods otherwise provided for
under this Lease) an estoppel certificate in Landlord's form stating (1) that
this Lease is in full force and effect and whether there have been any
modifications; (2) the date to which rental and other sums are paid in advance;
(3) that no notice of default has been received which has not been cured, except
as specified; and (4) such other reasonably requested matters. Such certificate

                                     - 33 -
<PAGE>

may be conclusively relied upon by any prospective purchaser, mortgagee or trust
deed beneficiary. Tenant's failure to deliver such certificate within the
specified time shall constitute a material default under this Lease.

      If any mortgage, insurance, or other institutional lender requires, as a
condition to the financing or refinancing, any reasonable modification of the
terms or conditions of this Lease, Tenant shall execute such modification or
amendment, provided such modification shall not (1) increase the rent or
Tenant's share of any costs, (2) reduce or lengthen the term of the Lease, (3)
interfere with Tenant's use or occupancy of the Leased Premises, or (4)
adversely change any of Tenant's obligations. It is hereby agreed that the
following modifications shall be deemed reasonable modifications: (I)
Subordination--any change(s) to the subordination and attornment provisions of
this Lease, (ii) Notice--any change(s) to the notice provisions of this Lease
which require Tenant to give notice of any default by Landlord to the lender, or
(iii) Default--any changes to the default provisions of this Lease which permit
the lender to cure any defaults by Landlord together with the granting of such
additional time to cure as may be required for Lender to get possession of the
building of which the Leased Premises are a part. If Tenant refuses to execute
any modifications which are stated by Landlord to be necessary in connection
with approval of this Lease for the purposes of such financing within ten (10)
days after receipt, it shall constitute an Event of Default hereunder and
Landlord, at his sole option, shall have the right by fifteen (15) days written
notice, to terminate this Lease and may thereafter pursue its remedies for
default as provided herein.

      Nothing herein shall restrict the ability of Tenant to encumber its
leasehold estate, but Tenant shall have no right or ability to encumber
Landlord's interest in the Leased Premises.

      B. TENANT FINANCING

      (1) Tenant shall have the right to mortgage or otherwise encumber its
interests under this Lease and Sublease. Tenant shall notify Landlord of the
existence, identity, and address of any Leasehold Mortgagee, and shall provide
Landlord with a copy of all recorded instruments constituting the Leasehold
Mortgage; Landlord acknowledges that Tenant has or may enter into a Leasehold
Mortgage with U.S. Bank National Association. So long as any such Leasehold
Mortgage shall remain unsatisfied of record, the following provisions shall
apply:

            (a) Landlord and Tenant shall not cancel, surrender, or modify this
      Lease and Sublease without first obtaining the consent of any Leasehold
      Mortgagee, which consent shall not be unreasonably withheld; provided,
      however, nothing herein shall prevent the termination of this Lease upon
      Tenant's uncured default, subject to Leasehold Mortgagee's right to cure
      such default as set forth herein.

            (b) Landlord, upon providing Tenant any notice of default, or of a
      matter upon which Landlord may predicate or claim a default, or any notice
      of termination of this Lease and Sublease, shall at the same time provide
      a copy of such notice to

                                     - 34 -
<PAGE>

      every Leasehold Mortgagee of which Landlord has been provided notice in
      accordance with this section. No such notice by Landlord to Tenant shall
      be deemed to have been duly given unless and until a copy thereof has been
      so provided to every Leasehold Mortgagee of which Landlord has been
      provided notice in accordance with this section. From and after the date
      such notice has been given to Leasehold Mortgagee, such Leasehold
      Mortgagee shall have the same period, after the giving of such notice upon
      it, for remedying any default or acts or omissions which are the subject
      matter of such notice which can be remedied by such Leasehold Mortgagee,
      or causing the same to be remedied, as is given to Tenant in such Notice.

            (c) If Tenant shall acquire trade fixtures, equipment, machinery,
      inventory, or other goods and effects ("Personal Property") subject to a
      purchase money security interest, or if any lender provides Tenant with
      financing, the proceeds of which are intended to enable Tenant to use and
      occupy the Leased Premises or to operate Tenant's business thereon, and
      such financing is secured in whole or in part by the Personal Property,
      Landlord shall, upon request from Tenant, execute a waiver, in favor of
      any such secured party, waiving its statutory landlord's lien against the
      Personal Property, and shall allow the holder of any such perfected
      security interest to remove such personal property from the Premises, so
      long as the same can be promptly accomplished without material damage to
      the Premises, and so long as holder of any such perfected security
      interest provides Landlord with such assurances as Landlord may reasonably
      require that any damage which may be caused to the premises in such
      removal will be promptly repaired at the sole cost and expense of such
      secured party.

            (d) If any Leasehold Mortgagee, requires, as a condition to the
      financing or refinancing of Tenant's leasehold estate, any reasonable
      modification of the terms or conditions of this Lease, Landlord shall
      execute such modification or amendment, provided such modification shall
      not (1) decrease the rent or Tenant's share of any costs, (2) reduce or
      lengthen the term of the Lease, (3) materially alter the respective rights
      and obligations of either Tenant or Landlord under this Lease or Sublease.
      It is hereby agreed that the following modifications shall be deemed
      reasonable modifications: (i) Notice--any change(s) to the notice
      provisions of this Lease which require Landlord to give notice of any
      default by Tenant to the lender, or (ii) Default--any changes to the
      default provisions of this Lease which permit the lender to cure any
      defaults by Tenant together with the granting of such additional time to
      cure as may be required for Lender to get possession of the building of
      which the Leased Premises are a part; provided, however, nothing herein
      shall excuse the payment of rent during such period.

                                     - 35 -
<PAGE>

      XVII. SURRENDER OF LEASED PREMISES; HOLDING OVER

      A. Surrender of Premises

      Tenant covenants and agrees to deliver up and surrender possession of the
Leased Premises, not including Tenant's machinery and equipment hereunder (other
than [those] that Landlord has demanded Tenant to remove in accordance with
paragraph VI) to the Landlord forthwith upon expiration of the term of this
Lease, or upon its earlier termination as herein provided, broom clean and in
good condition and repair, reasonable wear and tear excepted (except for
destruction to the Leased Premises covered by paragraph XI where Tenant elects
to terminate). Tenant hereby agrees that if it fails to surrender the Leased
Premises at the end of the Term, or any renewal thereof, Tenant will be liable
to Landlord for any and all damages including consequential damages which
Landlord shall suffer by reason thereof. In addition, Tenant shall pay to
Landlord, during any period that it shall refuse to surrender possession of the
Leased Premises to Landlord a rental equal to one hundred fifteen percent (115%)
of the base rent payable by Tenant to Landlord during the last rental year of
the term. This Section shall survive expiration of the Lease.

      Any personal property left in, on or about the Leased Premises after the
expiration of this Lease will be deemed conclusively to have been abandoned and
may be appropriated, sold, stored, destroyed or otherwise disposed of by
Landlord upon ten (10) days notice to Tenant or any other person and without
obligation to account for them; and Tenant will pay Landlord for all expenses
incurred in connection with such property, including, but not limited to, the
cost of repairing any damage to the Leased Premises caused by the removal of
such property.

      B. Holding Over

      If Tenant does not vacate the Leased Premises upon the expiration or
earlier termination of this Lease and Landlord thereafter accepts rent from
Tenant, such possession by Tenant shall be deemed to be a month-to-month tenancy
terminable on thirty (30) days notice given at any time by either party.

      All provisions of this Lease except those pertaining to term shall apply
to the month-to-month tenancy.

      XVIII. Right of First Refusal

      During the Term hereof, should Landlord receive a bona fide offer from any
third party to purchase the Leased Premises, or any portion thereof, which
Landlord desires to accept, Landlord shall, before accepting such offer, notify
Tenant in writing of all of the terms and conditions thereof and shall first
offer in writing to sell the Premises to Tenant upon the same terms and
conditions. Upon receipt of any such notice and offer from Landlord, Tenant
shall have twenty (20) days thereafter within which to accept the same. Should
Tenant fail to accept any such offer within said

                                     - 36 -
<PAGE>

twenty (20) day period, Landlord shall be free to sell the Premises to the
original offeror upon the same terms and conditions offered to Tenant without
further notice to Tenant, which sale shall be subject to this Lease, including
Tenant's right of first refusal contained herein. Should Landlord, after having
made such offer to Tenant as above-described, fail to sell the Premises upon the
same terms and conditions offered to Tenant, Landlord shall give Tenant notice
in the manner set forth above of any further or different offers received by
Landlord for the purchase of the Premises and shall first offer to sell the same
to Tenant upon the same terms and conditions before accepting any such further
or different offer. It is expressly understood and agreed by and between the
parties hereto that Tenant shall have the right of first refusal with respect to
each and every offer to sell or purchase made or received by Landlord or by any
successor Landlord, and that Landlord at the time of the making or receipt of
such offer to sell or purchase shall in each and every instance notify Tenant of
such offer in the manner set forth above, and Tenant shall have the right to
purchase the Premises under the terms and conditions of such offer in accordance
with the terms and provisions set forth above.

      XIX. MISCELLANEOUS PROVISIONS

      A. General Provisions

            1. Delivery of Notices

            All notices, demands, statements, and requests (collectively the
"notice") required or permitted to be given under this Lease must be in writing
and shall be deemed to have been properly given or served as of the date
hereinafter specified: (I) on the date of personal service upon the party to
whom the notice is addressed, (ii) three (3) days after the date the notice is
postmarked by the United States Post Office, provided it is sent prepaid,
registered or certified mail, return receipt requested, or (iii) on the date the
notice is delivered by a reputable professional courier service (including
Federal Express, Express Mail, Emery Airborne, DHL or similar operation) to the
address of the party to whom it is directed, provided it is sent prepaid, return
receipt requested.

            Notice to the party to whom such service is to be given shall be at
the following addresses:

            Landlord:  CAMP INVESTMENTS, L.L.C.

                       Spokane, WA 992____

            Lender:  WASHINGTON TRUST BANK
                     717 West Sprague
                     Spokane, WA 99201

            Tenant or  Lithia Real Estate, Inc.

                                     - 37 -
<PAGE>

            Guarantor: Lithia Motors, Inc.
                       360 East Jackson
                       Medford, OR 97501

            Leasehold  U.S. Bank, National Association
            Mortgagee: 111 SW 5th Avenue, Suite 400
                       Portland, OR 97204

      Each party shall have the right from time to time and at any time, upon at
least ten (10) days prior written notice thereof in accordance with the
provisions hereof, to change its respective address and to reasonably specify
any other addresses within the United States of America; provided, however,
notwithstanding anything herein contained to the contrary, in order for the
notice of address change to be effective it must actually be delivered. Refusal
to accept delivery of a notice or the inability to deliver a notice because of
an address change which was not properly communicated shall not defeat or delay
the giving of a notice.

      Written notices of changes of any of the foregoing addresses may be
delivered or mailed from time to time in the same manner as any other written
notice hereunder.

            2. Exhibits - Incorporation of Lease

            All exhibits referred to are attached to this Lease and incorporated
by reference.

            3. Short Form Lease

            The Parties agree to record a mutually acceptable short form
memorandum of this lease.

            4. Where to Pay Rent

            All rent hereunder shall be paid to Landlord at his foregoing
address or at such other addresses as Landlord may, from time-to-time designate
in writing.

            5. Time of Essence

            Time is of the essence of each provision of this Lease.

                                     - 38 -
<PAGE>

            6. Signature

            This Lease is submitted to Tenant on the understanding that it will
not be considered an offer and will not bind Landlord in any way until (a)
Tenant has duly executed and delivered triplicate originals to Landlord and (b)
Landlord has executed and delivered one (1) of such originals to Tenant.

            7. Parties Bound by Lease

            This Lease shall be binding upon and inure to the benefit of the
parties hereto, and their heirs, executors, administrators, successors and
lawful assigns.

            8. Corporate 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. Upon execution of this Lease, Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing such execution or other reasonably acceptable evidence of
such authority. Each person signing on behalf of Landlord represents that he or
she has the authority to do so and, upon its execution, binds Landlord.

            9. Brokers

            Landlord and Tenant respectively represent and warrant to each other
that neither of them has consulted or negotiated with any broker or finder with
regard to the Leased Premises. Each of them will indemnify the other against and
hold the other harmless from any claims for fees or commission from anyone with
whom either of them has consulted or negotiated with regard to the Leased
Premises.

            10. Attachments

            The following documents are attached hereto, and such documents, as
well as all drawings and documents prepared thereto, shall be deemed to be part
hereof:

            The Third Party Leases

      B. Interpretation of Lease

            1. Section Headings for Convenience Only

            The headings of the Sections and Subsections herein contained are
for convenience only and do not necessarily define, limit, describe or construe
the contents thereof.

                                     - 39 -
<PAGE>

            2. Genders and Plurals

            As used in this Lease, the singular includes the plural and vice
versa, and words of any gender used in this Lease shall be held and construed to
include any other gender.

            3. Partial Invalidity

            If any term or provision of this Lease or the application thereof to
any person or circumstance shall to any extent be invalid or unenforceable, the
remainder of this Lease, or the application of such term or provision to persons
or circumstances other than those as to which it is invalid or unenforceable,
shall not affected thereby, and each term and provision of this Lease shall be
valid and be enforced as written to the fullest extent permitted by law.

            4. Cannon of Construction

            This Lease was freely and voluntarily negotiated between the
parties. Although the printed provisions of this Lease were initially drawn by
Landlord or Landlord's agent, Landlord and Tenant agree that this circumstance
shall not create any presumption, canon of construction, or implication favoring
the position of either Landlord or Tenant. This Lease has been submitted to the
scrutiny of all parties and their counsel if desired or required and the parties
agree to hold the author harmless from any liability. Landlord and Tenant agree
that the interlineation, obliteration, or deletion of language from this Lease
prior to its mutual execution by Landlord and Tenant shall not be construed to
have any particular meaning or to raise any presumption, canon of construction,
or implication, including, without limitation, any implication that Landlord or
Tenant intended to state the converse, obverse, or opposite of the deleted
language. This Lease shall be read as if obliterated or deleted language had
never existed and interlineated language had always existed and shall be given a
fair and reasonable interpretation in accordance with the words hereof, without
consideration of weight being given to its having been drafted by any party
hereto or its counsel.

            5. Entire Agreement

            This Lease and the exhibits attached hereto and forming a part
hereof, set forth all the final covenants, promises, agreements, conditions and
understandings between Landlord and Tenant concerning the Leased Premises, and
there are no covenants, promises, agreements, conditions or understandings
heretofore made, either oral or written, between them other than as herein set
forth. No modification, amendment, change or addition to this Lease shall be
binding upon Landlord or Tenant unless reduced to writing and signed by each
party.

            6. Governing Law

            This Lease shall be governed by the laws of the State of Washington.

                                     - 40 -
<PAGE>

            7. Underlying Leases

                  a. Landlord's Title. Landlord covenants that it holds valid
leasehold estates for the Third Party Leases and the Camp Family Parcels, except
for the Owned Parcels, which Landlord owns in fee, and that it has the full
right to make this Sublease, and that with full compliance with all of its
obligations hereunder, Tenant shall have quiet and peaceful enjoyment of the
Leased Premises during the term of this Sublease. Landlord further warrants to
Tenant that the Camp Family Leases and the Third Party Leases are in full force
and effect, that Landlord is not in default thereunder, and that there have been
no amendments thereto other than have been provided to Tenant. Landlord further
covenants that Landlord will not enter into any modification of the Underlying
Leases without first obtaining Tenant's prior written consent, which consent
shall not be withheld if such modification does not adversely affect Tenant's
rights under this Sublease.

                  b. Underlying Lease Payments. Landlord hereby covenants that
it will comply with all of its obligations as tenant under the Underlying
Leases. Landlord will pay to the lessors under the Camp Family Leases and the
Third Party Leases, as and when due, all rents and other amounts required to be
paid pursuant to the terms of the Camp Family Leases and Third Party Leases to
become in default. Landlord hereby agrees to indemnify, protect, defend, and
hold harmless Tenant from and against any loss, liability, or claim arising out
of Landlord's breach of the Camp Family Leases and Third Party Leases; provided,
however, notwithstanding the foregoing, Landlord shall have no duty to so
indemnify Tenant from any action, loss or damage caused by Tenant's failure to
make rent payments provided herein, including any failure to pay the rent
attributable to the Camp Family Leases and Third Party Leases.

                  c. Underlying Lease Default. Landlord agrees to immediately
forward to Tenant a copy of any notices received by Landlord under the
Underlying Leases. In the event Landlord fails to make any payment when due
under the Underlying Leases (and such failure is not caused or attributable to
Tenant's failure to make rent payments as provided herein, including any failure
to pay rent attributable to the Third Party Leases), or is otherwise in default
thereunder, Tenant may, but is not obligated to, make such payments on behalf of
Landlord, or take such other action as may be necessary, in Tenant's estimation,
to cure such default, or to prevent the Underlying Leases from being terminated.
All amounts so paid by Tenant, and all costs of taking such actions on behalf of
Landlord, together with any interest or penalty required to be paid in
connection therewith, shall be payable on demand by Landlord to Tenant, and if
not so paid by Landlord, may be applied by Tenant to reduce subsequent rent
payments owed to Landlord under this Sublease.

      XX. GUARANTY

      In consideration of Landlord's agreement to accept Tenant as the tenant of
the Leased Premises, Guarantor hereby agrees to absolutely and unconditionally
guaranty the full payment and

                                     - 41 -
<PAGE>

performance of all of Tenant's obligations and covenants under this Lease and
Sublease. Landlord and Tenant may amend, modify, and otherwise alter the terms
and conditions of this Lease and Sublease without in any manner effecting or
reducing Guarantor's obligation to guaranty the payment and performance of
Tenant's obligations under this Lease and Sublease, as so amended, modified or
otherwise altered.

      EXECUTED ON THE DATE FIRST SET FORTH ABOVE.

                                        LANDLORD:

                                        CAMP INVESTMENTS, L.L.C.

                                        By:_____________________________________
                                           Authorized Managing Member

                                        TENANT:

                                        LITHIA REAL ESTATE, INC.

                                        By:_____________________________________

                                        Its:____________________________________

                                        GUARANTOR:

                                        LITHIA MOTORS, INC.

                                        By ________________________________

                                        Its ________________________________

                                     - 42 -

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