Document:

<PAGE>
                                                                   EXHIBIT 10.24

                                                                    Bank One, NA
                                                                ARBN 065 752 918
                                                              ABN 31 065 752 918
                                                    Level 32, 60 Margaret Street
                                                    Sydney, New South Wales 2000
                                                       Telephone: 61 2 9250 2100
                                                       Facsimile: 61 2 9223 1823

13 December, 2001

Mr. Paul Sultana
Financial Controller
Daisytek Australia Pty Ltd
Unit 3, 196 Bourke Road
ALEXANDRIA NSW 2015

Dear Paul,

                 CREDIT AGREEMENT FOR A$20,000,000 AVAILABLE TO
  DAISYTEK AUSTRALIA PTY LTD (THE "BORROWER") GUARANTEED BY DAISYTEK, INC. AND
              DAISYTEK INTERNATIONAL CORPORATION (THE "GUARANTOR")

We are pleased to advise the following amendments be made to your Credit
Agreement (the "Agreement") available to the Borrower with Bank One, NA (the
"Bank") as originally documented 18 DECEMBER 2000 and subsequently amended from
time to time:

1.       CLAUSE 1.1 DEFINITIONS

         "TERMINATION DATE" means January 1, 2003.

2.       APPENDIX A has been amended to read:

                                   APPENDIX A

FACILITY PRICING:          Facility pricing to be determined by the following
                           grid of Total Debt to EBITDA with Total Debt to
                           EBITDA definition to match leverage covenant included
                           in the Term Sheet. Current pricing is set at Level 5.
                           The calculation of ratios is based on the accounts of
                           Daisytek, Inc. as stipulated in the Credited
                           Agreement between Daisytek, Inc. and various banks
                           dated December 18, 2000 as amended.

                                  PRICING GRID

<Table>
<Caption>
                            LEVEL 1            LEVEL 2              LEVEL 3           LEVEL 4            LEVEL 5
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
<S>                   <C>                <C>                 <C>                <C>                 <C>
TOTAL                       < 1.0           >=1.0 < 1.50       >=1.50 < 2.0        >=2.0 < 2.5        >=2.5 < 3.00
DEBT/EBITDA
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
FACILITY FEE              32.5 bps            37.5 bps           42.5 bps            50.0 bps           50.0 bps
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
ADVANCE MARGIN            142.5 bps          150.0 bps           170.0 bps          187.5 bps           212.5 bps
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
ALL-IN COST               175.0 bps          187.5 bps           212.5 bps          237.5 bps           262.5 bps
--------------------- ------------------ ------------------- ------------------ ------------------- ------------------
</Table>

bps= basis points

<PAGE>
                                                                    Bank One, NA
                                                                ARBN 065 752 918
                                                              ABN 31 065 752 918
                                                    Level 32, 60 Margaret Street
                                                    Sydney, New South Wales 2000
                                                       Telephone: 61 2 9250 2100
                                                       Facsimile: 61 2 9223 1823

ACCEPTANCE

If the terms and conditions of this letter are acceptable to you, please arrange
for the duplicate of this letter to be executed and returned to the Bank by 1
January 2002. Any request by the Borrower for funds under the Agreement will
constitute acceptance of the amendments.

For and on behalf of
BANK ONE, NA

WILLIAM H. GIFFEN
First Vice President
General Manager - Corporate Banking

THE BORROWER AGREES AND ACCEPTS THE AMENDMENTS TO THE FACILITY ON THE TERMS AND
CONDITIONS DESCRIBED IN THE CREDIT AGREEMENT LETTER DATED 13 DECEMBER 2001.

THE COMMON SEAL OF DAISYTEK AUSTRALIA PTY LTD
Was hereunto affixed in the presence of:

Ralph Mitchell           /s/ RALPH MITCHELL               Dec. 15, 2001
--------------------     ---------------------------      ---------------------
Name (Director)          Signature                        Date

Jeff Malanga             /s/ JEFF MALANGA
--------------------     ---------------------------
Name (Director)          Signature

CC:      Ralph Mitchell, CFO, Daisytek International Jeff Malanga, Treasurer,
         Daisytek International

<PAGE>

                                    GUARANTY

GUARANTY: To induce Bank One, NA, a national banking association having its
principal office in Chicago, Illinois, directly or through any of its branches,
offices, subsidiaries or affiliates (collectively, the "Lender"), in its sole
discretion, to make loans or extend or continue credit, including letters of
credit and Rate Management Transactions (as defined below), to DAISYTEK
AUSTRALIA PTY LTD, a CORPORATION, and existing under the laws of AUSTRALIA (the
"Borrower"), whether to Borrower alone or to the Borrower and others, and
because the undersigned (the "Guarantor") has determined that executing this
Guaranty is in its interest and to its financial benefit, the Guarantor, as
primary obligor and not merely as surety, absolutely and unconditionally
guarantees to the Lender the prompt payment when due, whether at stated
maturity, upon acceleration or otherwise, and at all times thereafter, of any
and all existing and future indebtedness, obligation and liability of every
kind, nature and character, direct or indirect, absolute or contingent
(including, without limitation, all renewals, extensions and modifications
thereof, and all interest, fees and other monetary obligations incurred or
accrued during the pendency of any bankruptcy, insolvency, receivership or other
similar proceeding, regardless of whether allowed or allowable in such
proceeding), of the Borrower to the Lender howsoever and whensover created,
arising, evidenced or acquired (the "Obligations"). The Guarantor further agrees
to pay all costs and expenses including, without limitation, all court costs and
attorneys' and paralegal's fees (including allocated costs of in-house counsel
and paralegals) and expenses paid or incurred by the Lender in endeavoring to
collect all or any part of the Obligations from, or in prosecuting any action
against, the Borrower, the Guarantor or any other guarantor of all or any part
of the Obligations (such costs and expenses, together with the Obligations,
collectively the "Guaranteed Debt"). The Guarantor further agrees that the
Guaranteed Debt may be extended or renewed in whole or in part without notice to
or further assent from it, and that it remains bound upon its guarantee
notwithstanding any such extension or renewal. The term "Rate Management
Transaction", as used herein, means any transaction (including an agreement with
respect thereto) now existing or hereafter entered into between Borrower and
Lender which is a rate swap, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to one or more
interest rates, foreign currencies, commodity prices, equity prices or other
financial measures.

NATURE OF GUARANTY: This Guaranty is a guaranty of payment and not of
collection. The Guarantor waives any right to require the Lender to sue the
Borrower, any other guarantor, or any other person obligated for all or any part
of the Guaranteed Debt, or otherwise to enforce its payment against any
collateral securing all or any part of the Guaranteed Debt.

NO DISCHARGE OR DIMINISHMENT OF GUARANTY: Except as otherwise provided herein
and to the extent provided herein, the obligations of the Guarantor hereunder
are unconditional and absolute and not subject to any reduction, limitation,
impairment or termination for any reason (other than the indefeasible payment in
full in cash of the Guaranteed Debt), including: any claim of waiver, release,
extension, renewal, settlement, surrender, alteration, or compromise of any of
the Guaranteed Debt, by operation of law or otherwise; any change in the
corporate existence, structure or ownership of the Borrower or any other
guarantor of or other person liable for any of the Guaranteed Debt, or any
insolvency, bankruptcy, reorganization or other similar proceeding affecting the
Borrower, or any other guarantor of or other person liable for any of the
Guaranteed Debt, or their assets or any resulting release or discharge of any
obligation of the Borrower, or any other guarantor of or other person liable for
any of the Guaranteed Debt; or the existence of any claim, setoff or other
rights which the Guarantor may have at any time against the Borrower, any other
guarantor of the Guaranteed Debt, the Lender, or any other person, whether in
connection herewith or in any unrelated transactions. The obligations of the
Guarantor hereunder are not subject to any defense or setoff, counterclaim,
recoupment, or termination whatsoever by reason of the invalidity, illegality,
or unenforceability of any of the Guaranteed Debt or otherwise, or any provision
of applicable law or regulation purporting to prohibit payment by Borrower or
any other guarantor of or other person liable for any of the Guaranteed Debt of
the Guaranteed Debt or any part thereof. Further, the obligations of the
Guarantor hereunder are not discharged or impaired or otherwise affected by the
failure of the Lender to assert any claim or demand or to enforce any remedy
with respect to all or any part of the Guaranteed Debt; any waiver or
modification of or supplement to any provision or any agreement relating to the
Guaranteed Debt; any release, non-perfection, or invalidity of any indirect or
direct security for the obligations of the Borrower for all or any part of the
Guaranteed

<PAGE>

Debt or any obligations of any other guarantor of or other person liable for any
of the Guaranteed Debt, or any action or failure to act by Lender with respect
to any collateral securing any part of the Guaranteed Debt; any default, failure
or delay, willful or otherwise, in the payment or performance of any of the
Guaranteed Debt; or any other circumstance, act, omission or delay that might in
any manner or to any extent vary the risk of the Guarantor or that would
otherwise operate as a discharge of the Guarantor as a matter of law or equity
(other than the indefeasible payment in full in cash of the Guaranteed Debt).

DEFENSES WAIVED: To the fullest extent permitted by applicable law, the
Guarantor waives any defense based on or arising out of any defense of the
Borrower or the unenforceability of all or any part of the Guaranteed Debt from
any cause, or the cessation from any cause of the liability of the Borrower,
other than the indefeasible payment in full in cash of the Guaranteed Debt.
Without limiting the generality of the foregoing, the Guarantor irrevocably
waives acceptance hereof, presentment, demand, protest and, to the fullest
extent permitted by law, any notice not provided for herein, as well as any
requirement that at any time any action be taken by any person against the
Borrower, any other guarantor of any of the Guaranteed Debt, or any other
person. The Lender may, at its election, foreclose on any security held by it by
one or more judicial or nonjudicial sales, accept an assignment of any such
security in lieu of foreclosure or otherwise act or fail to act with respect to
any collateral securing all or a part of the Guaranteed Debt, compromise or
adjust any part of the Guaranteed Debt, make any other accommodation with the
Borrower, any other guarantor or any other person liable on any of the
Guaranteed Debt or exercise any other right or remedy available to it against
the Borrower, any other guarantor or any other person liable on any of the
Guaranteed Debt, without affecting or impairing in any way the liability of the
Guarantor under this Guaranty except to the extent the Guaranteed Debt has been
fully and indefeasibly paid in cash. To the fullest extent permitted by
applicable law, the Guarantor waives any defense arising out of any such
election even though that election may operate, pursuant to applicable law, to
impair or extinguish any right of reimbursement or subrogation or other right or
remedy of the Guarantor against the Borrower, any other guarantor or any other
person liable on any of the Guaranteed Debt, as the case may be, or any
security.

FOREIGN CURRENCY: The specification of payment in a specific currency at a
specific place and time pursuant to the documentation relating to the Guaranteed
Debt is essential. That currency or those currencies are also the currency of
account and payment under this Guaranty. If the Guarantor is unable for any
reason to effect payment of a specific currency (other than United States
currency) as required by the preceding sentence or if the Guarantor defaults in
the payment when due of any amount of a specific currency (other than United
States currency) under this Guaranty, the Lender may, at its option, require
such payment to be made to the Head Office of the Lender in the equivalent
amount in United States currency at the Lender's then current selling rate for
electronic transfers of that currency to the place or places where the
Guaranteed Debt was payable. In the event that any payment, whether pursuant to
a judgment or otherwise, does not result in payment of the amount of currency
due under this Guaranty, upon conversion to the currency of account and transfer
to the place specified for payment, the Lender has an independent cause of
action against the Guarantor for the deficiency.

RIGHTS OF SUBROGATION: The Guarantor will not assert any right, claim or cause
of action, including, without limitation, a claim of subrogation, contribution
or indemnification that it has against the Borrower, any person liable on the
Guaranteed Debt, or any collateral, until the Borrower and the Guarantor have
fully performed all their obligations to the Lender.

REINSTATMENT; STAY OF ACCELERATION: If at any time any payment of any portion of
the Guaranteed Debt is rescinded or must otherwise be restored or returned upon
the insolvency, bankruptcy, or reorganization of the Borrower or otherwise, the
Guarantor's obligations under this Guaranty with respect to that payment shall
be reinstated at such time as though the payment had not been made and whether
or not the Lender is in possession of this Guaranty. If acceleration of the time
for payment of any of the Guaranteed Debt is stayed upon the insolvency,
bankruptcy or reorganization of the Borrower, all such amounts otherwise subject
to acceleration under the terms of any agreement relating to the Guaranteed Debt
shall nonetheless be payable by the Guarantor forthwith on demand by the Lender.

INFORMATION: The Guarantor assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed Debt
and the nature, scope and extent of the risks that the Guarantor assumes and
incurs under this

                                       2
<PAGE>

Guaranty, and agrees that the Lender does not have any duty to advise the
Guarantor of information known to it regarding those circumstances or risks.

TERMINATION: The Lender may continue to make loans or extend credit to the
Borrower based on this Guaranty until five days after it receives written notice
of termination from the Guarantor. Notwithstanding receipt of any such notice,
the Guarantor will continue to be liable to the Lender for any Guaranteed Debt
created, assumed or committed to prior to the fifth day after receipt of the
notice, and all subsequent renewals, extensions, modifications and amendments
with respect to, or substitutions for, all or any part of that Guaranteed Debt.

TAXES: All payments of the Guaranteed Debt will be made by the Guarantor free
and clear of and without deduction for or on account of any and all present or
future taxes, levies, imposts, duties, charges, deductions or withholdings of
whatever nature imposed by any governmental authority with respect to such
payments, and any and all liabilities with respect to the foregoing, but
excluding franchise taxes and taxes imposed on overall net income of the Lender
by the United States of America or the jurisdiction in which Lender's applicable
Lending Installation is located (collectively, "Taxes"). If the Guarantor is
required by law to deduct any Taxes from or in respect of any sum payable to the
Lender under this Guaranty, (a) the sum payable must be increased as necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this provision) the Lender receives an amount
equal to the sum it would have received had no such deductions been made, (b)
the Guarantor must then make such deductions, and must pay the full amount
deducted to the relevant authority in accordance with applicable law, and (c)
the Guarantor must furnish to the Lender within 45 days after their due date
certified copies of all official receipts evidencing payment thereof.

LIMITATION: Regardless of the amount of Guaranteed Debt outstanding at any time,
the Guarantor's obligations under this Guaranty to the Lender shall not exceed
the principal sum of A$20,000,000 (AUSTRALIAN TWENTY MILLION DOLLARS) FOR THE
REVOLVING CREDIT FACILITY AND US$1,000,000 (US ONE MILLION DOLLARS) FOR THE
FOREIGN EXCHANGE FACILITY plus accrued interest and all costs, fees and expenses
(including attorneys' fees) incurred in collecting or enforcing the Guarantor's
obligations under this Guaranty.

SEVERABIILITY: The provisions of this Guaranty are severable, and in any action
or proceeding involving any state corporate law, or any state, federal or
foreign bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors generally, if the obligations of the Guarantor under this Guaranty
would otherwise be held or determined to be avoidable, invalid or unenforceable
on account of the amount of the Guarantor's liability under this Guaranty, then,
notwithstanding any other provision of this Guaranty to the contrary, the amount
of such liability shall, without any further action by the Guarantor or the
Lender, be automatically limited and reduced to the highest amount that is valid
and enforceable as determined in such action or proceeding. This Section with
respect to the maximum liability of the Guarantor is intended solely to preserve
the rights of the Lender to the maximum extent not subject to avoidance under
the applicable law, and neither the Guarantor nor any other person or entity
shall have any right or claim under this Section with respect to such maximum
liability of Guarantor, except to the extent necessary so that the obligations
of the Guarantor hereunder shall not be rendered voidable under applicable law.
The Guarantor agrees that the Guaranteed Debt may at any time and from time to
time exceed the maximum liability of the Guarantor without impairing this
Guaranty or affecting the rights and remedies of the Lender hereunder, provided
that, nothing in this sentence shall be construed to increase the Guarantor's
obligations hereunder beyond its maximum liability.

REPRESENTATIONS BY GUARANTOR: The Guarantor represents that: (a) it is duly
organized, validly existing and in good standing (to the extent such concept
applies to the Guarantor) under the laws where it is organized, and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted; (b) the execution and delivery of this Guaranty and the
performance of the obligations it imposes (i) are within its powers; (ii) have
been duly authorized by all necessary action of its governing body; and (iii) do
not violate any law, conflict with the terms of its articles of incorporation or
organization, its by-laws or any agreement by which it is bound or require the
consent of approval of any governmental authority or any third party; (c) this
Guaranty is a valid and binding agreement, enforceable according to its terms,
except as such enforceability may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditor's rights generally; and (d)
all balance sheets, income statements, and other financial statements furnished
to the Lender are accurate and fairly reflect the financial condition of the
organizations and persons to which they apply on their effective dates,

                                       3
<PAGE>

including contingent liabilities of every type, which financial condition has
not changed materially and adversely since those dates.

INCORPORATION: The Guarantor agrees that so long as all or any portion of the
Guaranteed Debt remains outstanding, it will observe, for the benefit of the
Lender, the covenants and events of default set forth in the Credit Agreement
dated December 18, 2000 and subsequent Amendment Lettered dated May 17, 2001 and
December 13, 2001 between BANK ONE AUSTRALIA and the Guarantor, as amended (the
"Credit Agreement"), which provisions and related definitions are incorporated
by reference, mutatis mutandis. Those provisions and definitions remain in
effect until this Guaranty is no longer in force, notwithstanding any amendment,
modification, or termination of the Credit Agreement. An event of default under
and as define in the Credit Agreement constitutes an event of default under this
Guaranty, which entitles the Lender to accelerate the Guarantor's obligations
under this Guaranty and to exercise any and all of the remedies set forth in
this Guaranty.

LENDING INSTALLATIONS; SETOFF: The Guaranteed Debt may be booked at any office,
branch, subsidiary or affiliate of the Lender, as selected by the Lender (each a
"Lending Installation"). All terms of this Guaranty apply to and may be enforced
by or on behalf of any Lending Installation. Without limiting the rights of the
Lender under applicable law, if either (i) the Guaranteed Debt is then due,
whether pursuant to any agreement evidencing the Guaranteed Debt, an event of
default under this Guaranty, or otherwise, or (ii) the Guarantor is insolvent
(whether or not all or any part of the Guaranteed Debt is then due), then the
Guarantor authorizes the Lender to apply any sums standing to the credit of the
Guarantor with the Lender or any of its Lending Installations toward the payment
of the Guaranteed Debt by the Guarantor under this Guaranty.

NOTICES: All notices, requests and other communications to any party under this
Guaranty must be in writing (including bank wire, facsimile transmission or
similar writing) and must be given to that party, in the case of the Guarantor,
at its address or facsimile number set forth on the signature page hereof and,
in the case of the Lender, at its Head Office or as otherwise specified in a
notice by one party to the other. Each notice, request or other communication is
effective (i) if given by facsimile transmission, when transmitted to the
facsimile number specified below and confirmation of receipt is received, (ii)
if given by mail, 72 hours after the communication is deposited in the mails
with first class postage prepaid, addressed as specified above, or (iii) if
given by any other means, when delivered at the address specified above.

MISCELLANEOUS: No provision of this Guaranty may be amended, supplemented or
modified, or any of its terms and provisions waived, except by a written
instrument executed by the Lender and the Guarantor. No failure on the part of
the Lender to exercise, and no delay in exercising, any right under this
Guaranty waives that right; not does any single or partial exercise of any right
under this Guaranty preclude any other or further exercise of that or any other
right. The remedies provided in this Guaranty are cumulative and not exclusive
of any remedies provided by law. This Guaranty binds the Guarantor and its
successors and assigns, and benefits the Lender and its successors and assigns.
The use of headings does not limit the provisions of this Guaranty.

GOVERNING LAW: THIS GUARANTY IS TO BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT
TO FEDERAL LAWS APPLICABLE TO THE LENDER.

CONSENT TO JURISDICTION: THE GUARANTOR IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN
CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY
AND THE GUARANTOR IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES ANY OBJECTION IT MAY NOW OR LATER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH A COURT IS AN
INCONVENIENT FORUM. THIS PROVISION DOES NOT LIMIT THE RIGHT OF THE LENDER TO
BRING PROCEEDINGS AGAINST THE GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
ANY JUDICIAL PROCEEDING BY THE GUARANTOR AGAINST THE LENDER INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS GUARANTY SHALL BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.

                                       4
<PAGE>

WAIVER OF JURY TRIAL: THE GUARANTOR AND THE LENDER EACH WAIVE TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS GUARANTY OR THE RELATIONSHIP IT ESTABLISHES.

Dated:                    , 2001              GUARANTOR:
      --------------------                    DAISYTEK, INC

Address for Notices:.

                                          By: /s/ RALPH MITCHELL
                                             -----------------------------------
Facsimile No.:                            Title:  EVP & CFO
              ------------------------          --------------------------------

                                              GUARANTOR:
                                              DAISYTEK INTERNATIONAL CORPORATION
Address for Notices:

                                          By: /s/ RALPH MITCHELL
                                             -----------------------------------
Facsimile No.:                            Title:  EVP & CFO
              ------------------------          --------------------------------

                                       5
<PAGE>

                             BANK ONE                           tel 214 290 2000
                             INTERNATIONAL CORPORATION          fax 214-290-2276
                             Mail Code TX1-2478                 www.bankone.com
                             PO Box 655415
                             Dallas, TX  75265-5415

AGREEMENT made the 18th day of December 2000,

BETWEEN: BANK ONE, NA (ARBN 064 474 102) of Level 32, 60 Margaret Street, Sydney
NSW (the "Bank")

AND: DAISYTEK AUSTRALIA PTY LTD (ACN 075 675 795) (the "Borrower")

WHEREBY IT IS AGREED as follows:

A.       The Borrower has requested that the Bank provide or continue to provide
         certain financial accommodation to the Borrower.

B.       The Bank desires to provide or to continue to provide such financial
         accommodation to the Borrower upon and subject to the terms and
         conditions of this Agreement.

C.       The obligations of the Borrower under this Agreement ("Guaranteed
         Amount") are unconditionally guaranteed by the DAISYTEK, INC. and
         DAISYTEK INTERNATIONAL CORPORATION (the "Guarantor").

1.       INTERPRETATION

         1.1      Definitions

                  In this Agreement unless the context otherwise requires:

                  "ACCOMMODATION LIMIT" means $15,000,000 or such other amount
                  (Australian Fifteen Million Dollars) which both parties may
                  agree upon in writing from time to time.

                  "ADVANCE" means any cash advance drawn under this Facility.

                  "THIS AGREEMENT" means this Agreement and any other agreement
                  expressed to be supplemental to this Agreement to which the
                  parties to this Agreement are parties and any amendments to
                  any such document.

                  "APPROVED PURPOSES" means the working capital needs,
                  acquisitions and other general corporate purposes of the
                  Borrower.

                  "AUTHORIZED OFFICER" means:

                  (a)      in relation to the Borrower, all persons designated
                           by the Borrower as an Authorized Officer from time to
                           time, and notified in writing by the Borrower to the
                           Bank; and

                  (b)      in relation to the Bank, persons designated by the
                           Bank as Authorized Officers.

                  "BANK" means it successors and permitted assigns.

                  "BBSY" means in respect of any day and in respect of any
                  Interest Period the rate per centum per annum quoted on the
                  page numbered 'BBSY' of the Reuters Monitor System under the
                  heading 'Average Bid Rate' for such Interest Period at or
                  about 10.00 am (Sydney time) on such day or on the first day
                  if such Interest Period (rounded up if necessary, to the
                  nearest four decimal places) PROVIDED THAT if in respect of
                  any Interest Period BBSY cannot be determined in accordance
                  with the foregoing procedures then BBSY for that Interest
                  Period shall mean such rate as is agreed between the Bank and
                  the Borrower

1
<PAGE>

                  having regard to comparable indices then available and in the
                  absence of any such agreement shall be the rate stipulated by
                  the Bank having regard to such comparable indices.

                  "BILL" has the same meaning as in the Bills of Exchange Act
                  1909 (but does not include a cheque).

                  "THE BORROWER" includes its successors and permitted assigns.

                  "BUSINESS DAY" means a day on which Australian trading banks
                  are open for a full range of banking business in the
                  metropolitan area of Adelaide, South Australia, Melbourne,
                  Victoria and Sydney, New South Wales.

                  "DRAWDOWN" means an Advance made by the Bank to the Borrower
                  pursuant to this Agreement.

                  "DRAWDOWN DATE" means a date upon which an Advance is made by
                  the Bank to the Borrower pursuant to this Agreement.

                  "DRAWDOWN NOTICE" means a notice of intention of the Borrower
                  to borrow or redraw hereunder in the form or the effect of the
                  form in Schedule I, signed by an Authorized Officer of the
                  Borrower and received no later than 2.00 pm (Eastern Standard
                  Time) one (1) Business Day before the proposed date of such
                  borrowing, redrawing by the Bank.

                  "EVENT OF DEFAULT" means any of the events designated as such
                  in this Agreement.

                  "FACILITY" means the commitment to provide Advances under this
                  Agreement.

                  "FINANCIAL YEAR" means the period from 1 July to the next
                  following 30 June or such other period of one (1) year as the
                  parties may agree in writing from time to time.

                  "FIXED RATE LOAN" means a Cash Advance made under the Facility
                  for a term of more than 180 days with an interest rate fixed
                  for the whole of the term of such advance.

                  "GUARANTEED AMOUNT" means the aggregate of the Accommodation
                  Limit and the Overdraft Limit specified in Schedule VII and
                  any other agreed amount.

                  "GUARANTOR" means its successors and permitted assigns.

                  "INTEREST PERIOD" means each period of each Advance being a
                  period of not less than 1 day nor more than 180 days or such
                  other period as the Bank and the Borrower may agree provided
                  that such period shall not extend beyond the Repayment Date.

                  "LOANS" means the aggregate of all Principal Moneys which are
                  from time to time owing (including contingently owing) or
                  unpaid to the Bank and all other monies from time to time
                  owing (including contingently owing) and unpaid to the Bank
                  under this Agreement.

                  "PRINCIPAL MONEYS" means the aggregate of the Advances
                  outstanding.

                  "QUARTER" means each quarter period ending on the last days of
                  March, June, September and December in each year.

                  "REFERENCE BANKS" means such banks as may from time to time be
                  determined by the Bank to be "Reference Banks."

                  "REPAYMENT DATE" means with respect to Advances the
                  Termination Date.

                  "SECURITY INTEREST" means any security or preferential
                  interest or arrangement of any kind in any asset or other
                  right of or arrangement of any kind with any creditor to have
                  its claim satisfied before other creditors with or from the
                  proceeds of any asset, any deposit of money by way of security
                  and any retention of title other than in the ordinary course
                  of day to day trading conducted at arms length not including a
                  charge or

2
<PAGE>

                  lien arising in favor of a governmental agency by operation or
                  statute unless there is a default in payment of money secured
                  by that charge or lien.

                  "SUBSIDIARY" means:

                  (a)      a subsidiary as defined in the Corporations Law; or

                  (b)      In respect of a person any entity of which that
                           person owns or controls, or is in a position to own
                           or control whether directly or indirectly, more than
                           fifty percent (50%) of the capital or voting rights;
                           and includes any subsidiary formed or acquired after
                           the date of this Agreement.

                  "TERMINATION DATE" means January 1, 2002.

         1.2      Construction

                  In this Agreement unless the context otherwise requires:

                  (a)      A reference to any Act of Parliament or to any
                           section or provision thereof shall be read as if the
                           words "or any statutory modification or re-enactment
                           thereof or any statutory provision substituted
                           therefore" were added to such reference.

                  (b)      A reference to winding up shall when applied to
                           individuals be deemed to refer to bankruptcy.

                  (c)      A reference to an accounting term or "Australian
                           Accounting Standards" is to be interpreted in
                           accordance with approved accounting standards and
                           practices under the Corporations Law, and, where not
                           inconsistent with those accounting standards and
                           practices generally accepted principles and practices
                           in Australia consistently applied to a body corporate
                           or as between bodies corporate and over time. A
                           reference to "consolidated" in relation to accounts
                           or other financial information, data or statistics
                           with respect to a person means treated for accounting
                           purposes as if accounting standards and generally
                           accepted accounting principles for the creation of
                           consolidated accounts applicable to a holding company
                           and its subsidiaries applied to the person.

                  (d)      References to sub-clauses, clauses and schedules are
                           references to sub-clauses, clauses and schedules of
                           this Agreement.

                  (e)      References to any agreement, license or other
                           instrument shall be deemed to include references to
                           such agreement, license or other instrument as varied
                           or replaced from time to time.

                  (f)      Words importing any gender shall include all other
                           genders; words importing individuals shall include
                           partnerships and corporations and vice versa; words
                           importing the singular number shall include the
                           plural and vice versa; the index (if any) any
                           headings are for convenience and shall not affect the
                           interpretation of this Agreement.

                  (g)      Where under or pursuant to this Agreement or anything
                           done under this Agreement the day on or by which any
                           act, matter or thing is to be done is not a Business
                           Day such act, matter or thing may be done on the next
                           succeeding day which is a Business Day (except with
                           respect to the payment of monies payable under this
                           Agreement which shall be made on the immediately
                           preceding day which is a Business Day).

2.       THE FACILITY

         2.1      The Bank agrees to furnish to the Borrower upon and subject to
                  the terms and conditions of this Agreement Advances up to the
                  Accommodation Limit in aggregate.

         2.2      The Facility may be made available in Australian currency.

3
<PAGE>

         2.3      The Borrower may request that any part of the Facility be made
                  available either in Australian currency or in a currency other
                  than Australian currency.

                  In the event that the Borrower shall request that any part of
                  the Facility be made available in a currency other than
                  Australian currency then the Bank shall not be required to so
                  make that part of the Facility available in a currency other
                  than Australian currency if:

                  2.3.1    the aggregate amount borrowed in Australian currency
                           and the then Australian dollar countervalue of any
                           currency other than Australian currency (calculated
                           as provided in Clause 2.7) borrowed or to be borrowed
                           shall be greater than the Accommodation Limited; or

                  2.3.2    the Bank is not satisfied with any designated period
                           of borrowing or risk exposure; or

                  2.3.3    for any reason whatsoever it is impractical for the
                           Bank to make available any accommodation under the
                           Facility in a currency other than Australian
                           currency.

         2.4      Where any accommodation under the Facility is denominated in a
                  currency other than Australian currency, repayment or payment
                  in respect of such accommodation and payments of Interest
                  thereon and fees in respect thereof shall be made by the
                  Borrower in the currency of such accommodation.

         2.5      The Borrower agrees that currency fluctuations are to the
                  account of the Borrower and that the Borrower bears the risk
                  for the same.

         2.6      All sums falling due hereunder by way of interest or fees on a
                  per annum percentage basis shall be calculated on the basis of
                  a 365 day year for Advances or fees payable in Australian
                  currency and a 360 day year for all other currencies for the
                  actual number of days elapsed.

         2.7      The Australian dollar countervalue of any amount of any
                  currency other than Australian currency to be determined for
                  any purpose shall, as between the Bank and the Borrower, be
                  calculated at the Bank's spot selling rate of exchange in
                  respect of the same on the day any such calculation is
                  required to be made at the particular time of the day
                  determined by the Bank. A certificate signed by the Bank
                  stating any such rate of exchange shall be conclusive evidence
                  of such rate of exchange.

         2.8      Subject to any specific provision to the contrary and to
                  Clause 2.9, where the Borrower comprises two or more persons
                  they are bound jointly, each of them severally and any two or
                  more of them jointly and severally.

         2.9      The only party liable as a principal debtor under this
                  Agreement in relation to any Advances is the party that draws
                  the Advance.

3.       ACCOMMODATION LIMIT

         3.1      At any one time the aggregate amount of Advances outstanding
                  shall not exceed the Accommodation Limit.

         3.2      The Bank shall not be obliged to make any Advance to the
                  Borrower if to so do would result in a breach of Clause 3.1.

         3.3      The Bank may act upon the oral instruction of any of the
                  following persons in the position of: Chief Financial Officer,
                  Treasurer, Controller, Director of Cash Management of the
                  Guarantor or Financial Controller of the Borrower.

4.       PURPOSE OF THE FACILITY

         Utilisation of this Facility by the Borrower under this Agreement shall
         be used solely for the Approved Purposes and no other purpose except
         with the prior written approval of the Bank to do otherwise. The Bank
         shall not have any responsibility to ensure that it is so utilised.

4
<PAGE>

5.       ADVANCES

         5.1      Each Advance shall be repayable at the stated maturity date
                  established by the Bank (from an overnight basis to a period
                  not to exceed 180 days nor the Repayment Date) at or about the
                  time of Advance or, if no such stated maturity is established,
                  upon demand. All Advances must be repaid by the Repayment
                  Date.

         5.2      Interest for each Advance shall be calculated to be a margin
                  as determined by the Pricing Grid in Appendix A plus BBSY as
                  agreed to between the Bank and the Borrower.

         5.3      Interest shall be calculated daily and be paid monthly in
                  arrears, save that the last interest payment shall be made on
                  the Repayment Date.

         5.4      The Borrower may repay an Advance in whole (but not in part)
                  before the maturity date if, but only if:

                  5.4.1    The Borrower gives the Bank at least 5 business days
                           irrevocable notice in writing of the Borrower's
                           intention to repay;

                  5.4.2    The Borrower makes payment to the Bank of all monies
                           payable pursuant to subparagraph 5.5;

                  5.4.3    The Borrower makes payment on the day of payment
                           specified in the notice.

         5.5      In the event that the Borrower wishes to make early repayment
                  of an Advance or if for any reason early repayment of an
                  Advance is demanded by the Bank as a result of an Event of
                  Default, the Borrower shall pay to the Bank in addition to all
                  other monies then payable an amount sufficient to compensate
                  and to indemnify the Bank for and against all losses
                  (including loss of profits), costs, damages and expenses which
                  the Bank determines that the Bank will or is likely to suffer
                  or incur as a result of such early repayment. The Borrower
                  acknowledges that the Bank may endeavor to arrange or enter
                  into an interest rate swap agreement or other commitment and
                  may as a consequence of this (whether directly or indirectly)
                  suffer or incur losses, costs, damages or expenses in the
                  event that all or part of the relevant advance is repaid prior
                  to the due date of payment.

         5.6      All notices of drawdown (whether verbal or written) shall be
                  irrevocable. The obligations of the Borrower shall be absolute
                  and unconditional and shall not be subject to any reduction,
                  termination, or other impairment by any set-off, deduction,
                  counterclaim, agreement, defense, suspension, deferment, or
                  otherwise, and the Borrower shall not be released from any
                  obligations under the Facility, nor shall such obligations be
                  prejudiced or affected for any reason including without
                  limitation:

                  5.6.1    by any falsity, inaccuracy, insufficiency or forgery
                           which on its face purports to be signed or authorized
                           pursuant to a Notice of Drawdown;

                  5.6.2    by any failure by the Bank to inquire whether any
                           cable, fax or telex has been inaccurately transmitted
                           or received, or has been sent by an unauthorized
                           person.

         5.7      Any Advance may, at the discretion of the Bank, be made by a
                  nominated subsidiary of the Bank. In such event the Bank shall
                  be agent of the nominated subsidiary in all matters dealing
                  with payment and recovery.

         5.8      Whenever the Borrower intends to borrow or redraw any of
                  Advance amount under the Facility, it shall give the Bank a
                  Drawdown Notice of such intent no later than 2:00 p.m.
                  (Eastern Standard Time) one (1) business day before the
                  proposed date of such borrowing or redrawing. A Drawdown
                  Notice for an Advance shall be in the form or the effect of
                  the form in Schedule 1. The Bank's acceptance of such Drawdown
                  notice is subject to Clause 3.

5
<PAGE>

6.       LETTERS OF CREDIT - SECTION DELIBERATELY LEFT BLANK

7.       SBLC - SECTION DELIBERATELY LEFT BLANK

8.       INTEREST

         The Borrower shall pay to the Bank interest on all further monies
         (other than interest) due and unpaid by the Borrower to the Bank under
         or pursuant to this Agreement at the rate of five (5%) percent above
         the rate of the Bank's Overdraft Reference Rate which applies as at the
         date such monies become due and payable. All interest which accrues
         under this sub-clause during any calendar month shall become due and
         payable by the Borrower to the Bank on the last Business Day of that
         calendar month and if not then paid shall be compounded and bear
         interest accordingly.

9.       FEES

         9.1      Establishment Fee: N/A.

         9.2      Line Fee: The Borrower shall pay to the Bank a line fee as
                  determined by the Pricing Grid in Appendix A, per annum
                  calculated in respect of each Quarter on the Accommodation
                  Limit and be payable Quarterly in arrears. The Line Fee shall
                  accrue from the date of signing this Agreement.

         9.3      Expenses: Whether or not the Borrower shall draw down under
                  this Agreement the Borrower shall forthwith reimburse the Bank
                  for the charges and expenses incurred by the Bank.

                  9.3.1    in contemplation of or in carrying out its duties
                           under this Agreement;

                  9.3.2    in connection with the negotiation, preparation or
                           execution of this Agreement or the administration of
                           this Agreement; and

                  9.3.3    in connection with the enforcement of, or the
                           exercise or purported or attempted exercise of any
                           right, authority or remedy conferred on the Bank
                           under or by virtue of this Agreement;

                  including in each case the fees and expenses of legal advisors
                  on a solicitor and own client basis and all stamp duty
                  (including financial institutions duty and duty passed on to
                  the Bank by any bank or financial institution) levied on or in
                  connection with this Agreement or any payment or the receipt
                  of any payment under this Agreement.

         9.4      The Borrower shall forthwith pay any and all stamp duty
                  (including any financial institutions or other receipts duty),
                  registration and similar taxes or charges imposed by
                  governmental authorities which may have been paid or may be
                  payable or determined to be payable in connection with:

                  9.4.1    the execution, delivery, performance or enforcement
                           of this Agreement;

                  9.4.2    on or in respect of any transaction contemplated by
                           this Agreement;

                  9.4.3    any other matter or thing done or arising out of or
                           in connection with this Agreement; or

                  9.4.4    any transaction related to this Agreement;

                  and shall indemnify the Bank against any and all liabilities
                  with respect to or resulting from delay or omission to pay
                  such taxes or charges including any fines or penalties (save
                  those due to delay or negligence on the part of the Bank).

         9.5      Increase in Costs by Government Action

                  If any law, regulation or regulatory requirement or judgment,
                  order or direction of any court, tribunal or authority binding
                  on the Bank in any jurisdiction taking effect after the date
                  of this Agreement, or if

6
<PAGE>

                  compliance by the Bank with any direction, request or
                  requirement (whether or not having the force of law) or any
                  competent governmental or other authority, shall:

                  9.5.1    subject the Bank to taxes or change the basis of
                           taxation of the Bank with respect to any payment
                           under this Agreement; or

                  9.5.2    impose, modify or deem applicable any reserve or
                           prudential or capital adequacy requirement or require
                           the making or the varying of terms of any special
                           deposits against or in respect of any assets or
                           liabilities (whether contingent or otherwise) of,
                           deposits with or for the account of, or loans by, the
                           Bank; or

                  9.5.3    impose on the Bank any other conditions with respect
                           to this Agreement or its obligations under this
                           Agreement;

                  and if, as a result of any of the foregoing:

                  9.5.4    the cost to the Bank of making or keeping the
                           Facility available or otherwise performing its
                           obligations under this Agreement or allocating its
                           capital resources is increased; or

                  9.5.5    the amount payable or the effective rate of return on
                           its overall capital to the Bank under this Agreement
                           is reduced; or

                  9.5.6    The Bank makes a payment or foregoes or suffers a
                           reduction in a return on or calculated by reference
                           to any amount payable to it under this Agreement;

                  then, and in each such case, the Bank shall notify the
                  Borrower and give the Borrower the option exercisable by
                  notice in writing to the Bank within ten (10) Business Days of
                  receipt of notice of the Bank of:

                  9.5.7    paying an amount or amounts to the Bank from time to
                           time on demand to compensate the Bank in full for any
                           cost or reduction of the kind referred to effective
                           from the date on which the cost or reduction is
                           actually incurred by the Bank; or

                  9.5.8    terminating this Agreement on the first to occur of
                           the end of the then current Interest Period and the
                           Repayment Date by paying to the Bank the debt owing
                           to it on that date with accrued interest and all
                           other monies payable under this Agreement, together
                           with an amount determined by the Bank to compensate
                           it up to that date for actual cost or reduction of
                           the type referred to.

                  If the Borrower fails to make an election the Borrower shall
                  be deemed to have made the election in sub-clause 5.7 of this
                  Clause. The Bank's certificate in respect of any cost or
                  reduction of the kind referred to shall be prima facie
                  evidence of the incurring of any such cost or reduction,
                  except in the case of manifest error.

         9.6      Gross Up

                  9.6.1    If at any time any applicable law, regulation or
                           regulatory requirement of any government authority,
                           monetary agency of central bank requires the Borrower
                           to make any deduction or withholding in respect of
                           taxes from any payment due under this Agreement:

                           (a)      the sum due from the Borrower in respect of
                                    the payment shall be increased to the extent
                                    necessary to ensure that, after the making
                                    of the deduction or withholding, the Bank
                                    receives a net sum equal to the sum which it
                                    would have received had no such deduction or
                                    withholding been required to be made; and

                           (b)      the Borrower shall indemnify the Bank
                                    against any losses or costs incurred by the
                                    Bank by reason of any failure of the
                                    Borrower to make any such deduction or
                                    withholding.

7
<PAGE>

                           The Borrower shall promptly deliver to the Bank any
                           receipts, certificates or other proof evidencing the
                           amounts (if any) paid or payable in respect of any
                           such deduction nor withholding, together with any
                           other information which the Bank may reasonably
                           require.

                  9.6.2    If the Bank or any person on its behalf is required
                           by any applicable law, regulation or regulatory
                           requirement of any government authority, monetary
                           agency or central bank to make any deduction or
                           withholding from, or any payment on or calculated by
                           reference to, any amount received or receivable under
                           this Agreement (other than taxes payable on the
                           overall net income of the Bank) then (without
                           prejudice to sub-clause 6.1) the Borrower shall upon
                           demand indemnify and hold harmless the Bank against
                           any such deduction, withholding or payment together
                           with any related cost, loss, expense, interest,
                           penalties or other liability by payment to each such
                           person of such amounts and in such currencies as the
                           person concerned may certify are required to
                           compensate it for any such deduction, withholding or
                           payment together with any related cost, loss,
                           expense, interest, penalties or other liability.

         9.7      GST Gross Up

                  In this clause 9.7, GST means a goods and services or similar
                  tax imposed in Australia, together with any related interest,
                  penalties, fines or other charges.

                  9.7.1    Notwithstanding any other provision of this
                           Agreement:

                           (a)      in the event that GST has application to any
                                    supply made under or in connection with this
                                    agreement by a party, that party may, in
                                    addition to any amount or consideration
                                    payable under this Agreement, recover from
                                    the Borrower an additional amount on account
                                    of GST, such amount to be calculated by
                                    multiplying the relevant amount or
                                    consideration payable by the Borrower for
                                    the relevant supply by the prevailing GST
                                    rate; and/or

                           (b)      without limiting the generality of the
                                    foregoing, in the event that a party (other
                                    than the Borrower) is not entitled to an
                                    input tax credit in respect of the amount of
                                    any GST charged to or recovered from that
                                    party by any person, or payable by that
                                    party, or in respect of any amount which is
                                    recovered from that party by way of
                                    reimbursement of GST reforable directly or
                                    indirectly to any supply made under or in
                                    connection with this Agreement, that party
                                    shall be entitled to increase any amount or
                                    consideration payable by the Borrower on
                                    account of such input tax and recover from
                                    the Borrower the amount of any such
                                    increase.

                  9.7.2    Any additional amount on account of GST, or on
                           account of an amount for which a party is not
                           entitled to an input tax credit, recoverable from the
                           Borrower pursuant to sub-paragraph 9.7.1(a) or (b) of
                           this clause shall be calculated without any deduction
                           or set-off of any other amount and is payable by the
                           Borrower upon demand by the party whether such demand
                           is by means of an invoice or otherwise.

                  9.7.3    Each party will use its best endeavors to determine
                           reasonably the extent (if any) to which any amount
                           payable by the Borrower to that party for any supply
                           made under this Agreement may be reduced as a direct
                           consequence of the abolition of or reduction in any
                           taxes, duties, or statutory charges paid or payable
                           by that party (as part of the imposition of GST)
                           which directly relate to the supply by that party,
                           and the amount payable by the Borrower to that party
                           shall be reduced only to the extent of the reduction
                           (if any) so determined by the Bank.

                  9.7.4    Without limiting sub-paragraph 9.7.1(a), if requested
                           by the Borrower in writing the relevant party will
                           provide an invoice in relation to any supply to which
                           sub-paragraph 9.7.1(a) has been applied no later than
                           28 days after the request is made.

10.      TERMINATION OF FACILITY

         Subject to any agreement in writing to the contrary entered into the
         Bank and the Borrower the Facility shall terminate on the Termination
         Date and the Borrower shall pay to the Bank the Advances forthwith.

8
<PAGE>

11.      CONDITIONS PRECEDENT

         11.1     To the Facility

                  The granting of this Facility is subject to the Bank receiving
                  prior to any requests of the Borrower, all of the following in
                  the form and substance satisfactory to the Bank;

                  11.1.1   There exists no Event of Default

                  11.1.2   A copy of the Board resolution of the Borrower
                           authorizing the Borrower to enter into this Agreement
                           and appointing authorized persons to sign all
                           applications notices and documents to be delivered
                           hereunder and for the operation of the Facility; and
                           specimen signatures of the authorized persons
                           appointed under the Board resolution referred to
                           herein.

                  11.1.3   A copy of this Agreement duly executed by the
                           Borrower.

                  11.1.4   A Guarantee duly executed by the Guarantors in a form
                           and substance acceptable to the Bank.

                  11.1.5   A copy of the Board resolution of the Guarantor
                           authorizing the issuance of the guarantee referred to
                           in sub-clause 11.1.5, and appointing authorized
                           persons to sign all applications notices and
                           documents to be delivered hereunder; and specimen
                           signatures of the authorized persons appointed under
                           the Board resolution referred to herein.

         11.2     To a Drawdown

                  The obligation of the Bank to make any Advance is subject to
                  the fulfillment (to the reasonable satisfaction of the Bank)
                  of the following conditions precedent:

                  11.2.1   The Bank has duly received from the Borrower a
                           request for a Drawdown in the form of a Drawdown
                           notice.

                  11.2.2   All representations given to the Bank herein are true
                           and correct as at the date of such Advance.

                  11.2.3   No Event of Default exists.

                  11.2.4   The Bank is satisfied that there has been no material
                           or adverse change in the financial condition of the
                           Borrower.

                  11.2.5   This Agreement is valid and binding on the Borrower
                           and is enforceable in accordance with its terms.

                  11.2.6   The Bank has received the items outlined in
                           sub-clause 11.1 and such other things as it may
                           reasonably require before drawdown.

12.      REPRESENTATIONS AND WARRANTIES

         The Borrower represents and warrants to the Bank as follows:

         12.1     The Borrower is a limited liability corporation duly
                  incorporated and validly existing under the laws of Australia
                  and has the corporate power to own property and assets and to
                  carry on business as it is now being conducted.

         12.2     This Agreement constitutes a legal valid and immediately
                  binding obligation on the Borrower and is enforceable in
                  accordance with its express terms.

         12.3     Third Party Rights. The execution, delivery and performance of
                  this Agreement by the Borrower shall not violate in any
                  respect any provision of:

9
<PAGE>

                  12.3.1   any law or regulation or any order or decree or any
                           government authority, agency or court of the
                           Commonwealth of Australia or of a State or Territory
                           thereof;

                  12.3.2   the Memorandum or Articles of Association of the
                           Borrower; nor

                  12.3.3   any mortgage, contract or other undertaking or
                           instruments to which the Borrower is party or which
                           is binding upon the Borrower or any of its assets.

         12.4     All authorizations, approvals, consents, licenses, filings,
                  registrations, notarizations and other requirements or any
                  governmental judicial or public body, authority, bureau or
                  agency in the Commonwealth of Australia or in a State or
                  Territory thereof now obtainable and required in connection
                  with the execution, delivery, performance, validity or
                  enforceability of this Agreement have been obtained or
                  effected and are in full force and effect and true copies
                  thereof (where applicable) have been delivered to the Bank and
                  all fees payable in connection therewith have been paid and
                  there has been no default in the performance of any of the
                  terms or conditions of any of the same.

         12.5     The Borrower is not in default under any agreement undertaking
                  or instrument to which it is a party or by which it is bound,
                  such default being material in the context of this Agreement
                  and no event has occurred which with the giving of notice of
                  lapse of time or both would constitute such a default.

         12.6     No litigation or governmental proceeding is pending or, to the
                  knowledge of the Borrower, threatened against the Borrower or
                  any of its Subsidiaries which could have a material adverse
                  effect on the condition, financial or otherwise, of the
                  Borrower and its Subsidiaries on a consolidated basis.

         12.7     The Borrower and each of its Subsidiaries have duly filed all
                  taxation returns required to be filed (none of which are so
                  far as the Borrower is aware likely to be the subject of any
                  dispute) and have paid all taxation levied or assessed upon it
                  has complied with all assessments and notices in respect
                  thereof or have established adequate reserves for payment
                  thereof.

         12.8     The obligations of the Borrower under this Agreement rank at
                  least equally with all other unsecured and unsubordinated
                  indebtedness of the Borrower except any liabilities mandatory
                  preferred by law.

         12.9     In entering into this Agreement the Borrower is not acting as
                  a trustee of any trust or settlement.

         12.10    The Borrower holds all necessary licenses, permits, consents,
                  approvals or authorities for its business and property and use
                  of premises and such are valid in full force and effect in all
                  respects and are in good standing and all fees due in respect
                  thereof have been paid and all conditions relating thereto
                  have been duly complied with and no notice of breach or
                  termination thereof has been given or has been or is
                  threatened and no circumstances have arisen or are in
                  existence to the knowledge of the Borrower which would with
                  the giving of notice or lapse of time or both entitle any
                  competent authority to call into question, suspend, cancel or
                  terminate the same nor are there any circumstances to indicate
                  that equivalent licenses, permits, consents, approvals or
                  authorizations would not be granted to the Borrower upon
                  renewal on no less favorable terms than exist now.

         12.11    All risks usually insured against according to sound
                  commercial practice by persons carrying on activities similar
                  to the Borrower's are fully insured against in amounts
                  representing the present full replacement or reinstallation
                  values or market values and in the name of and for the benefit
                  of the Borrower absolutely.

         12.12    The Borrower is not aware of any fact or circumstance which
                  might reasonably be expected to affect in any material adverse
                  way the financial position, operations, aspects,
                  profitability, or prospects of the Borrower or the business of
                  the Borrower or the value of the property of the Borrower
                  other than those expressly disclosed in writing to the Bank or
                  affecting as a whole the industry in which the Borrower
                  participates.

         12.13    All information provided by or on behalf of the Borrower
                  whether prior to or after the date of this Agreement to the
                  Bank is true and correct and is not, by the omission of
                  information or otherwise, misleading and all projections
                  contained therein were arrived at after the due and careful
                  consideration and were based on the best information available
                  and on fair assumptions.

10
<PAGE>

         The representations and warranties in this clause shall be deemed to be
         repeated by the Borrower on and as of the date of each Advance or issue
         of Letter of Credit or Guarantee (as the case may be) as if made with
         reference to the facts and circumstances existing at such date.

         The Borrower acknowledges that the Bank relies on the representations
         and warranties made or given in this Agreement by the Borrower and that
         the Bank is induced by each such representation and warranty to enter
         into this Agreement and the rights of the Bank in respect of a breach
         of any representation or warranty shall not be affected by
         investigation (if any) made by the Bank into the affairs of the
         Borrower.

13.      GENERAL OBLIGATIONS

         The Borrower hereby so far as the following shall apply to the Borrower
         agrees that on and from the date of this Agreement and so long as any
         amount payable under this Agreement is outstanding:

         13.1     The Borrower shall take all action necessary to obtain and
                  promptly review from time to time all authorizations,
                  approvals, consents, licenses and exemptions as may be
                  required under any applicable law or regulation to enable the
                  Borrower to perform its obligations under this Agreement or
                  required for the validity or enforceability of this Agreement
                  or any transaction contemplated by this Agreement.

         13.2     The Borrower shall prepare and maintain in accordance with
                  Australian Accounting Standards proper and adequate books and
                  records reflecting fully all transactions entered into by the
                  Borrower and all its Subsidiaries.

         13.3     The Borrower shall promptly notify the Bank in writing of the
                  occurrence or pending or threatened occurrence of any event
                  which may cause or constitute a breach of any of the
                  representations or warranties or agreements of the Borrower in
                  this Agreement including any event which may result in a
                  material change in the business of the Borrower and any other
                  event which constitutes or which may with the giving of notice
                  or lapse of time or both or other conditions constitute an
                  Event of Default.

         13.4     The Borrower shall comply with all requirements of the
                  Corporations Law or of the corresponding legislation of any
                  other place applicable to the Borrower.

         13.5     The Borrower shall permit representatives of the Bank (or any
                  accountants or other experts designated by it) during normal
                  business hours and upon reasonable notice to visit and inspect
                  and examine the books of account records (excluding company
                  minute books), reports and other papers (and to make copies
                  and to take extracts therefrom) of the Borrower and to discuss
                  its affairs, finances and accounts with its officers,
                  accountants and auditors, all at such times and as often as
                  may be reasonably requested by the Bank but only in so far as
                  such matters relate to information as may reasonably be
                  required by the Bank for any purpose connected with this
                  Agreement.

         13.6     Neither the Borrower nor any of its Subsidiaries shall, except
                  as permitted in this Agreement, without the prior written
                  consent of the Bank create or assume or permit to exist or
                  arise any Security Interest whatsoever over any part of its
                  present or future undertakings, property, assets uncalled
                  capital or revenues. The Borrower and its Subsidiaries
                  represent and warrant to the Bank that there is no such
                  Security Interest over any part of their present or future
                  undertakings, property, assets, uncalled capital or revenues
                  in existence as at the date of this Agreement.

         13.7     The Borrower shall permit the Bank upon written request of the
                  Bank to from time to time inspect the register of the members
                  of the Borrower at the Borrower's registered office or other
                  place or places where the register or any branch register is
                  so kept at any time during regular business hours and the
                  Borrower shall furnish the Bank with any information which the
                  Bank may consider reasonably necessary to enable it to
                  determine whether or not there has been at any time after the
                  date of this Agreement a transfer of the effective management
                  and control of the Borrower.

         13.8     The Borrower shall furnish to the Bank copies of all such
                  accounts, documents, reports, notices, circulars, particulars
                  and certificates which are required to be furnished by the
                  Borrower to any stock exchange, corporate affairs office (or
                  analogue office) or shareholder at the same time as they are
                  furnished to that stock exchange, corporate affairs (or
                  analogous office) or shareholder and when requested by the
                  Bank copies of such documents, reports, notices, circulars,
                  particulars or certificates which are required under

11
<PAGE>

                  the provision of any trust deed to which the Borrower is a
                  party to be furnished to the trustee thereunder from time to
                  time.

         13.9     The Borrower shall comply in all material respects with all
                  applicable laws, rules, regulations and orders including,
                  without limitation, paying when due all taxation, assessments
                  and governmental charges imposed upon it or its assets and all
                  other claims which may become a lien upon any of its property
                  except to the extent contested in good faith and by
                  appropriate procedure unless the loss of such contested
                  proceedings would have a material adverse effect on the
                  ability of the Borrower to meet its obligations under this
                  Agreement.

         13.10    The Borrower shall provide updated signatory lists and
                  specimen signatures from time to time of persons authorized to
                  sign documents and operate the Facility.

14.      FINANCIAL INFORMATION

         The Borrower shall supply the Bank with all financial or other
         information as the Bank may reasonably request in writing always
         including the following without request:

         14.1     As soon as possible but in any event within 120 days of the
                  end of each Financial Year copies of the audited annual profit
                  and loss statement and balance sheet of the Guarantor and
                  unaudited annual profit and loss statement and balance sheet
                  of the Borrower along with corresponding accounting workpapers
                  prepared in accordance with Guarantor audit.

         14.2     As soon as possible but in any event within 60 days of the end
                  of each quarterly period a copy of the management accounts and
                  of the unaudited balance sheet and profit and loss statement
                  of the Borrower and the Guarantor.

         14.3     Quarterly certificate of compliance from the Guarantors that
                  they are not in breach of any obligations or covenants under
                  any of their debt.

         All of the financial information referred to above shall be prepared in
         accordance with applicable accounting standards.

15.      FINANCIAL COVENANTS - SECTION DELIBERATELY LEFT BLANK

16.      EVENTS OF DEFAULT

         If any of the following events occur ("Events of Default") the Loans
         shall at the option of the Bank and notwithstanding any delay or
         previous waiver of the right to exercise such option become immediately
         due and payable upon written demand by the Bank to the Borrower and the
         obligations to the Bank under this Agreement shall be cancelled on the
         occurrence of any of the following events:

         16.1     If the Borrower fails to pay the Loans or any part thereof or
                  any interest thereon or any other monies payable to the Bank
                  at or before the due time on the due date in the manner
                  specified in this Agreement and such default continues for
                  more than three (3) days.

         16.2     If the Borrower fails to observe or perform any obligations to
                  be observed or performed by it under this Agreement or in
                  connection with any transaction contemplated by this Agreement
                  and if such default shall in the opinion of the Bank be
                  capable of prompt remedy, the Borrower shall not have remedied
                  such default within five (5) days after notification by the
                  Bank to the Borrower requiring remedy of such default.

         16.3     Any representation or statement made or deemed to be made by
                  the Borrower in this Agreement or in writing pursuant to this
                  Agreement shall not be complied with or shall prove to be
                  untrue in any respect which materially adversely affects the
                  interests of the Bank on any date as of which it was made or
                  deemed made.

         16.4     The Borrower fails to duly pay any debt constituting principal
                  and interest owed by it to any other persons other than the
                  Bank with respect to borrowed money or money otherwise owed
                  under any note, bond, or

12
<PAGE>

                  similar instrument or fails to pay when the same becomes due
                  and payable in excess of A$35,000 and which breach or default
                  has not been waived and, with notice or the passage of time,
                  or both, allows the maturity of such debt to be accelerated.

         16.5     If all or any part of this Agreement becomes void, illegal,
                  invalid, unenforceable, or of limited or reduced force or
                  effect.

         16.6     Any other present or future indebtedness of the Borrower, or
                  any Subsidiary of the Borrower for borrowed money shall become
                  due and payable prior to the stated maturity thereof as a
                  result of a default or any such indebtedness shall not be paid
                  on the due date thereof or upon the expiration of any
                  applicable grace period therefor, or the Borrower, or any
                  Subsidiary of the Borrower shall fail to pay when due or upon
                  the expiration of any applicable grace period therefor any
                  amount payable by it under any present or future guarantee for
                  borrowed money or for the purchase of fixed assets on deferred
                  terms or any encumbrance over any assets of the Borrower, or
                  any Subsidiary of the Borrower shall be or become enforceable.

         16.7     A distress or other execution is levied or enforced upon or
                  against any part of the property of the Borrower for an amount
                  exceeding A$500,000.00 and is not withdrawn or satisfied
                  within fourteen (14) days of having been so levied or enforced
                  and the Bank considers that such event is prejudicial to the
                  interests of the Bank under this Agreement.

         16.8     If the Borrower fails (as defined in Section 459F of the
                  Corporations Law) to comply with a statutory demand (as
                  defined in Section 9 of the Corporations Law) or is presumed
                  to be insolvent pursuant to Section 459C(2)(a) of the
                  Corporations Law or admits such fact in writing.

         16.9     If the Borrower is wound up or if a petition is presented or
                  an order is made for the winding up of the Borrower and is not
                  withdrawn within fourteen (14) days or if a resolution is
                  passed for the winding up of the Borrower otherwise than for
                  the purpose of reconstruction of amalgamation the terms of
                  which have previously been approved in writing by the Bank
                  such approval not to be unreasonably withheld.

         16.10    If a receiver or receiver and manager is appointed in respect
                  of any part of the assets of the Borrower or an encumbrancer
                  takes possession of the undertaking or the property of the
                  Borrower or any part thereof.

         16.11    If the Borrower makes default under any charge or security in
                  favor or any person other than the Bank.

         16.12    If an inspector of all or any part of the affairs of the
                  Borrower is appointed pursuant to the Corporations Law (or the
                  corresponding legislation of any place applicable to the
                  Borrower).

         16.13    If the Borrower suspends payment of its debts, which
                  expression shall have the meaning that it has for the purposes
                  of Section 40 of the Bankruptcy Act 1996 of Australia.

         16.14    If a compromise or arrangement is proposed between the
                  Borrower and its creditors or any class of them or if an
                  application is made to a court for an order summoning of
                  creditors or any class of them of the Borrower.

         16.15    If without the prior written consent of the Bank the Borrower
                  reduces or attempts to reduce its capital or buy back any of
                  its shares.

         16.16    If the Borrower stops payment generally.

         16.17    If the Borrower is placed under voluntary administration
                  pursuant to Part 5.3A of the Corporations Law or causes or
                  propose to cause a meeting of its creditors to be summoned for
                  the purposes of placing it under administration pursuant to
                  Part 5.3A of the Corporations Law.

         16.18    If any of the property of the Borrower or the ownership of
                  which is in the opinion of the Bank material to the ability of
                  the Borrower to perform its obligations under this Agreement
                  is seized or otherwise expropriated, nationalized, confiscated
                  or acquired through any governmental action or intervention or
                  if custody or control of such property shall be assumed by any
                  government or government agency.

13
<PAGE>

         16.19    If any governmental or semi-governmental authorization
                  approval license consent or agreement which the Bank deems
                  essential to the Borrower's performance of its obligations
                  under this Agreement is revoked, terminated, cancelled or
                  withheld.

         16.20    If without the prior written consent of the Bank the
                  Memorandum or Articles of Association of the Borrower is
                  altered in a manner which in the reasonable opinion of the
                  Bank is material to the performance by the Borrower of its
                  obligations under this Agreement.

         16.21    If a meeting of the Borrower is called for the purpose of
                  considering and if thought fit passing any resolution the
                  passing of which would constitute or give rise to an Event of
                  Default.

         16.22    If in the opinion of the Bank there is a material change in
                  the ownership, control or management of the Borrower which is
                  likely to adversely affect the ability of the Borrower to
                  conduct its business in a proper manner and to carry out its
                  obligations under this Agreement.

         16.23    If the Borrower defaults in the performance or observance of
                  any provision of any other indebtedness to or security of the
                  Bank and the Borrower whether the indebtedness or security is
                  collateral to this Agreement or whether it is a separate
                  Agreement between the Bank and the Borrower and such default
                  continues for more than seven (7) days after the due date.

         16.24    If the Borrower shall do any act, deed, matter or thing or
                  knowingly or willingly permit or suffer any act, deed, matter
                  or thing to be done whereby directly or indirectly the
                  security of the Bank shall in the opinion of the Bank become
                  deteriorated or lessened in value.

         16.25    If the Borrower shall at any time not have an auditor
                  appointed pursuant to the provision of the Corporations Law.

         16.26    If the Borrower makes any material change to the business it
                  carries on without the prior written consent of the Bank or if
                  the Borrower ceases or threatens to cease to carry on its
                  business.

         16.27    If the Borrower suffers any material adverse change in its
                  financial condition which may materially affect the interest
                  of the Bank unless such change is agreed to in writing by the
                  Bank.

         16.28    The Guarantor shall cease, directly or indirectly, to own free
                  and clear of all liens or other encumbrances, 75% of the
                  issued share capital of the Borrower.

         16.29    If any of the above events of default occur in respect of the
                  Guarantor.

         16.30    If the Guarantor withdraws its Guarantee.

         16.31    If either Guarantor defaults under any of its credit
                  agreements.

17.      INDEMNITIES

         The Borrower indemnifies the Bank from and against all actions, suits,
         claims, demands, losses, liabilities, damages, costs and expenses which
         may be made or brought against or suffered or incurred by the Bank
         arising out of or in connection with:

         17.1     any Event of Default or any event which with the giving of
                  notice, the passage of time or the fulfillment of any other
                  condition would become an Event of Default; or

         17.2     any failure by the Borrower to take an Advance in accordance
                  with any request for a Drawdown.

18.      CERTIFICATIONS

         18.1     Any document or thing required to be certified by the Borrower
                  shall be certified by a director or secretary of the Borrower
                  or in such other manner as the Bank may approve.

14
<PAGE>

         18.2     A certificate signed by an Authorized Officer of the Bank
                  stating any amount or rate for the purpose of this Agreement
                  shall in the absence of manifest error be conclusive and
                  binding on the Borrower.

19.      POWER OF ATTORNEY

         If any Event of Default occurs, the Borrower hereby irrevocably
         appoints the Bank and each Authorized Officer severally its attorney to
         do all acts and things which may or ought to be done by the Borrower
         under this Agreement and without limiting the generality of the
         foregoing the attorney shall have power in the name of the Borrower to
         sign, draw, endorse, accept or negotiate any draft, order, cheque,
         promissory note or other instrument of a like nature or not as the
         attorney shall think fit.

20.      UNLAWFULNESS

         If:

         20.1     any law, regulation or regulatory requirement or judgment,
                  order in direction of any court, tribunal or authority binding
                  upon the Bank in the jurisdiction in which the Bank is formed
                  or has its principal or lending office(s) or in which action
                  is required to be performed by it for the purposes of this
                  Agreement; or

         20.2     any change in the interpretation of any such law, regulation
                  or regulatory requirement or judgment, order or direction of
                  any court, tribunal or authority by any government or
                  governmental agency charged with the administration thereof or
                  by a court of competent jurisdiction or compliance by the Bank
                  with any respect or direction (whether or not having this
                  force of law) of the Reserve Bank of Australia or any
                  government or other governmental agency in accordance with
                  whose requests or directions the Bank is accustomed to act;

         renders it unlawful for the Bank to meet any of its obligations under
         the Facility, the Bank shall promptly notify the Borrower and the
         following provisions shall apply:

         20.3     the Borrower and the Bank shall negotiate for a period not
                  exceeding thirty (30) days with a view to the Bank making
                  arrangements to be able to meet the relevant obligations under
                  the Facility in whole or in part in a manner which is not
                  unlawful; and

         20.4     if no such arrangements have been made by the end of such
                  period, thereupon the Bank shall be released from its
                  obligations under this Agreement, the Facility shall be
                  cancelled and the Borrower shall pay to the Bank the Loans
                  under this Agreement.

21.      AUTHORITY TO DEBIT ACCOUNTS

         The Borrower irrevocably authorizes and directs the Bank to debit any
         account or accounts of the Borrower with the Bank in respect of any
         amounts that are from time to time due and payable under this
         Agreement.

22.      NO WAIVER

         No failure to exercise and no delay in exercising on the part of the
         Bank any right, power or privilege under this Agreement shall operate
         as a waiver thereof, nor shall any single or partial exercise of any
         right, power or privilege preclude any other or further exercise
         thereof, or the exercise of any other right, power or privilege. The
         rights and remedies of the Bank provided in this Agreement are
         cumulative and not exclusive of any rights or remedies provided by law
         or equity or legislation or regulation.

23.      MERGER

         23.1     The representations and warranties of the Borrower in this
                  Agreement shall survive the execution of this Agreement and
                  the making of any Advance or issue of Letter of Credit or
                  Guarantee under this Agreement and shall inure for the benefit
                  of the Bank until the Loans have been paid in full by the
                  Borrower to the Bank.

15
<PAGE>

         23.2     If the liability of the Borrower to pay the Bank any monies
                  payable under this Agreement becomes merged in any deed,
                  judgment, order or other thing the Borrower shall pay interest
                  on the amount owing from time to time under this Agreement and
                  that fixed by or payable under that deed, judgment, order or
                  other thing.

24.      TIME OF THE ESSENCE

         Time shall be of the essence as regards any date or period determined
         under this Agreement save only to the extent that any such date or
         period may be altered by mutual agreement between the parties whereupon
         time shall be of the essence as regards such altered date or period.

25.      SET OFF

         25.1     the Borrower and the Bank do expressly acknowledge and agree
                  that:

                  25.1.1   Where the Bank now or at any time in the future is
                           indebted on any account to the Borrower pursuant to
                           the arrangements made between them such arrangements
                           are hereinafter referred to as the "Arrangements."

                  25.1.2   Notwithstanding the Arrangements and any other
                           provision of this Agreement (and without prejudice to
                           the Bank's other rights and remedies) any monies
                           (whether by way of principal interest or otherwise
                           and whether present future actual or contingent)
                           which the Bank may now or may hereafter owe to the
                           Borrower under the Arrangements may be applied to and
                           set off by the Bank as and when the same may become
                           due and payable pro rata against the Loans as and
                           when they become due and payable to the intent and
                           effect:

                           (i)      first that the Bank may at any time and from
                                    time to time deduct from and retain out of
                                    the monies otherwise payable by the Bank to
                                    the Borrower pursuant to the Arrangements
                                    such amounts as the Bank may think fit and
                                    apply or set off such amounts in or toward
                                    or against satisfaction of the Loans; and

                           (ii)     secondly that upon default by the Borrower
                                    hereunder the Bank shall not be obliged to
                                    pay any monies to the Borrower under the
                                    Arrangements until the obligations of the
                                    Borrower to the Bank to pay any monies to
                                    the Bank hereunder are paid and satisfied in
                                    full.

         25.2     The contractual rights of set off conferred on the Bank under
                  sub-clause 25.1 of this clause are in addition to, and not in
                  substitution for, any rights of set off otherwise conferred on
                  or available to the Bank at law or in equity including
                  (without limitation) any banker's rights of set off or right
                  of combination of accounts or banker's lien.

         25.3     For the avoidance of doubt the Bank and the Borrower further
                  declare and acknowledge that the debts and liabilities arising
                  or created hereunder and pursuant hereto and under and
                  pursuant to the Arrangements are mutual debts within the
                  meaning of Section 85(1) of the Bankruptcy Act 1966 of the
                  Commonwealth of Australia (as incorporated in the Corporations
                  Law) and that upon the liquidation or bankruptcy of the
                  Borrower the provisions of Section 86 of the said Bankruptcy
                  Act shall apply so that any sum due from the Borrower to the
                  Bank hereunder shall be set off against any sum due from the
                  Bank to the Borrower under the Arrangements.

         25.4     The Borrower acknowledges and agrees that it will not and will
                  not attempt to prevent the Bank from exercising its rights of
                  set off as aforesaid in the circumstances contemplated in
                  respect thereof.

26.      APPROPRIATION

         The Bank may appropriate any payment towards the satisfaction of any
         monies due by the Borrower in any way that the Bank thinks fit and
         notwithstanding any purported appropriation by the Borrower.

16
<PAGE>

27.      SUCCESSORS

         This Agreement shall bind the parties and their respective heirs,
         executors, administrators, successors and assigns.

28.      ASSIGNMENT

         The Bank may at any time assign the benefits and obligations on its
         part to be enjoyed or performed under this Agreement. The Borrower
         shall not assign or purport to assign any of the benefits or
         obligations on its part to be enjoyed or performed under this Agreement
         without the consent in writing of the Bank.

29.      NOTICES

         Any notice, demand, consent or other communication to be given under or
         in connection with this Agreement shall be in writing or if it is to be
         given by the Bank may be signed by any Authorized Officer of the Bank
         or any solicitor for the time being acting for the Bank and if it is to
         be given by the Borrower shall be under the common seal of the Borrower
         or the hand of an Authorized Officer of the Borrower and may be served
         either:

         29.1     personally; or

         29.2     by posing the same by registered or certified mail to the
                  party to whom the notice is directed at its address appearing
                  in this Agreement or at any other address of which prior
                  notification shall have been given by post shall be deemed to
                  have been received by the party to whom it is addressed at the
                  expiration of forty eight (48) hours after the same has been
                  properly posted; or

         29.3     by facsimile transmission;

                  To the Bank: Bank One, N.A., Level 32, 60 Margaret Street,
                               Sydney  NSW  2000
                  Attention:   Mr. W. H. Giffen
                  Facsimile:   (02) 9223 1823

                  or by other facsimile number of which prior to notification
                  shall have been given to the sender prior to the transmission
                  of the facsimile and any facsimile transmission shall be
                  deemed to have been served on the date of transmission by the
                  sender if the sender shall receive confirmation of receipt
                  from the recipient. The original of any facsimile transmission
                  shall be posted in accordance with sub-clause 29.2 of this
                  clause on the date of transmission or if transmitted after
                  usual posting hours the next Business Day.

         If the date of dispatch is not a Business Day in the place to which
         such notice, request, demand or other communication is sent it shall be
         deemed to have been received at the commencement of business on the
         next following Business Day in such place. Notice given to any one or
         more of the persons (if more than one) comprised in the expressions
         "the Borrower" shall be deemed notice to all such persons. Signatures
         may be manuscript or may be printed or reproduced by other mechanical
         means.

30.      OTHER DOCUMENTS

         The Borrower shall either before or after the making of any Advance
         under this Agreement do all such acts, matters and things and shall
         sign or execute and deliver all such documents or writing or assurances
         as may in the reasonable opinion of the Bank be necessary or expedient
         to further and more effectually carry into full effect the provisions
         of this Agreement and for conferring the full benefit thereof upon the
         Bank.

31.      AMENDMENT

         No amendment of this Agreement shall bind the parties unless made in
         writing expressed to be supplemental to or in substitution for the
         whole or part of this Agreement.

17
<PAGE>

32.      GOVERNING LAW AND JURISDICTION

         This Agreement and the rights and obligations of the parties shall be
         governed by and construed in accordance with the laws in force in the
         state of New South Wales and the parties agree by the execution of this
         Agreement to irrevocably submit to the non-exclusive jurisdiction of
         the Courts in the state of New South Wales in respect of all matters
         arising under or in connection with this Agreement provided always that
         the Bank may proceed in the Courts of any Territory State or country
         having or claiming jurisdiction in respect of the matter which is the
         subject of the proceedings.

33.      SEVERANCE

         Any provision of this Agreement which is or becomes prohibited,
         invalid, unlawful, void or unenforceable in any jurisdiction shall, as
         to such jurisdiction, be ineffective and capable of severance without
         affecting the remaining provisions of this Agreement or affecting the
         validity or enforceability of such provision in any other jurisdiction.

34.      COUNTERPARTS

         This Agreement may be executed in any number of counterparts and all of
         such counterparts taken together shall be deemed to constitute one and
         the same instrument.

35.      ENTIRE AGREEMENT

         This Agreement contains all of the terms and conditions upon which the
         Bank will provide financial accommodation to the Borrower and
         supersedes any previous or extant arrangements with respect to the
         same.

IN WITNESS WHEREOF the parties have signed this Agreement on the day and year
hereinabove first mentioned.

SIGNED for and on behalf of
BANK ONE, NA

         /s/ WILLIAM H. GIFFEN                          /s/ RALPH MITCHELL
---------------------------------------         --------------------------------
Authorized Signature (Name/Title)               Signature
First Vice President

THE COMMON SEAL OF
Daisytek Australia Pty Ltd
was hereunto affixed in the presence of:

                                                        /s/ KATHRYN SEMON
---------------------------------------         --------------------------------
Authorized Signatory (Name/Title)               Signature

---------------------------------------         --------------------------------
Authorized Signatory (Name/Title)               Signature

18
<PAGE>

                                   APPENDIX A

FACILITY PRICING:          Facility pricing to be determined by the following
                           grid of Total Debt to EBITDA with Total Debt to
                           EBITDA definition to match leverage covenant included
                           in the Term Sheet. Initial pricing shall be set at
                           Level 3. The calculation of ratios is based on the
                           accounts of Daisytek, Inc. as stipulated in the
                           Credit Agreement between Daisytek, Inc. and various
                           banks dated 12/18 2000.

                                  PRICING GRID

<Table>
<Caption>
                                  LEVEL 1             LEVEL 2              LEVEL 3            LEVEL 4             LEVEL 5
--------------------------- -------------------- ------------------- -------------------- ------------------ -------------------
<S>                         <C>                  <C>                 <C>                  <C>                <C>
Total Debt/EBITDA                  < 1.0            >=1.0 <1.50         >= 1.50 <2.0        >= 2.0 <2.5         >= 2.5 <3.0
--------------------------- -------------------- ------------------- -------------------- ------------------ -------------------
Facility Fee                     20.0 bps            25.0 bps             30.0 bps           37.5 bps             37.5 bps
--------------------------- -------------------- ------------------- -------------------- ------------------ -------------------
Advance Margin                   130.0 bps           137.5 bps            157.5 bps          175.0 bps           200.0 bps
--------------------------- -------------------- ------------------- -------------------- ------------------ -------------------
All-In Cost                      150.0 bps           162.5 bps            187.5 bps          212.5 bps           237.5 bps
--------------------------- -------------------- ------------------- -------------------- ------------------ -------------------
</Table>

bps= basis points

19
<PAGE>

                                   SCHEDULE I

                             ADVANCE DRAWDOWN NOTICE

TO:      Money Market Desk
         BANK ONE, N.A. (A.R.B.N. 065 752 918)
         Level 4
         70 Hindmarsh Square
         ADELAIDE SA 5000

FAX:     08 8223 2948

In accordance with Facility Agreement dated _______ day of ____________ ("the
Agreement") DAISYTEK AUSTRALIA PTY LTD (A.C.N. 075 675 795) irrevocably gives
you notice of drawdown under the Facility as follows:

                                     ADVANCE

1.       Date of Drawdown:
                                                  -----------------------------

2.       Amount of Drawdown:                      $
                                                  -----------------------------
         (currency and amount)

3.       Tenor Required:
                                                  -----------------------------

4.       Other requests/special conditions (if any)

The Borrower by its execution of this Notice reaffirms and reconstitutes all
representations and warranties or agreements of the Borrower in the Agreement as
if made at the date of this Notice and certifies that no Event of Default (as
defined in the Agreement) has occurred or is continuing or is likely to result
from this transaction.

DATED this                  day of

SIGNED for and on behalf
Daisytek Australia Pty Ltd

---------------------------------------         --------------------------------
Authorized Signatory:  Name/Title               Signature

---------------------------------------         --------------------------------
Authorized Signatory:  Name/Title               Signature

20<PAGE>

                                                                   EXHIBIT 10.25

                          TEJON DERMODY INDUSTRIAL LLC

                            STANDARD INDUSTRIAL LEASE

                                  (NET-NET-NET)

Date of Lease for Reference Purposes: March 25, 2002

Landlord:  Tejon Dermody Industrial LLC, a Delaware limited liability company

Tenant:  Daisytek, Incorporated, a Delaware corporation.

Trade Name (dba): Daisytek

1.       LEASE TERMS

         1.01     PREMISES: The Premises referred to in this Lease contain an
approximately three hundred twenty-five thousand nine hundred fifty-four
(325,954) rentable square foot portion of the building (the "Building")
containing approximately six hundred fifty-one thousand nine hundred nine
(651,909) rentable square feet as shown on EXHIBIT A attached to this Lease,
which is located on the legal parcel of land (the "LAND") described on EXHIBIT
A-1 attached to this Lease. The parties hereby stipulate to the rentable square
footage of the Premises and Building as set forth above. The address of the
Premises is: 4049 Industrial Parkway, Unit 103 Wheeler Ridge, California. The
base building specifications for the Building and Premises are set forth on
EXHIBIT B-2 attached to this Lease.

         1.02     FACILITY: The Land, Building and all other improvements on the
Land.

         1.03     PROJECT: Tejon Industrial Complex, which currently consists of
approximately three hundred fifty (350) acres of land and improvements including
the Building located thereon as shown on EXHIBIT A-2.

         1.04     TENANT'S NOTICE ADDRESS: After the Commencement Date, Tenant's
Notice Address is the address of the Premises as defined in Section 1.01 unless
otherwise specified here. Prior to the Commencement Date, Tenant's Notice
Address shall be: 1025 Central Expressway, South, Allen, Texas 75013, Attn:
Michael Bishoff.

         1.05     LANDLORD'S NOTICE ADDRESS: Landlord's Notice Address is 4436
Lebec Road, Lebec, California 93243, Attention: Director of Real Estate
Marketing and General Counsel; with a concurrent copy to: c/o DP Partners,
Regional Leasing Manager, 1200 Financial Boulevard, Reno, Nevada 89502.

         1.06     TENANT'S PERMITTED USE: warehousing and distribution of
computer and pre-packaged, "consumer-ready" office supplies, including but not
limited to toner and ink jet cartridges, fax supplies and diskettes, and related
office uses, in full compliance with the terms of this Lease.

         1.07     LEASE TERM: The Lease Term shall be for a period of fifteen
(15) years and four (4) months, commencing on March 1, 2002 (the "LEASE
COMMENCEMENT DATE") and expiring fifteen (15) years thereafter on June 30, 2017
(the "LEASE EXPIRATION DATE"), unless terminated sooner in accordance with the
terms of this Lease.

         1.08     BASE MONTHLY RENT: The monthly rental payments to be made in
lawful money of the United States of America in the monthly amounts reflected
below. The "RENT COMMENCEMENT DATE" shall mean the first day of the fifth (5th)
month of the Lease Term (i.e., July 1, 2002).

<TABLE>
<CAPTION>
                Months of Lease Term               Monthly Base Rent Per Rentable Square Foot
                --------------------               ------------------------------------------
<S>                                                <C>
                1 -- 4                             $0.00

                5 -- 12                            $71,985.51        (based upon $2.65 per
                                                                     Rentable Square Foot per year)

                13 -- 24                           $74,697.79        (based upon $2.75 per
                                                                     Rentable Square Foot per year)

                25 -- 36                           $77,414.08        (based upon $2.85 per
                                                                     Rentable Square Foot per year)
</TABLE>
<PAGE>
<TABLE>
<S>                                                <C>
                37 -- 48                           $79,315.47        (based upon $2.92 per
                                                                     Rentable Square Foot per year)

                49 -- 60                           $80,901.78        (based upon $2.9784 per
                                                                     Rentable Square Foot per year)

                61 -- 72                           $82,520.69        (based upon $3.038 per
                                                                     Rentable Square Foot per year)

                73 -- 84                           $84,170.29        (based upon $3.09873 per
                                                                     Rentable Square Foot per year)

                85 -- 96                           $85,853.57        (based upon $3.1607 per
                                                                     Rentable Square Foot per year)

                97 -- 108                          $87,570.80        (based upon $3.22392 per
                                                                     Rentable Square Foot per year)

                109 -- 120                         $89,322.26        (based upon $3.28840 per
                                                                     Rentable Square Foot per year)

                121 -- 132                         $91,108.49        (based upon $3.35416 per
                                                                     Rentable Square Foot per year)

                133 -- 144                         $92,930.84        (based upon $3.42125 per
                                                                     Rentable Square Foot per year)

                145 -- 156                         $94,789.32        (based upon $3.48967 per
                                                                     Rentable Square Foot per year)

                157 -- 168                         $96,685.02        (based upon $3.55946 per
                                                                     Rentable Square Foot per year)

                169 -- 184                         $98,618.74        (based upon $3.63065 per
                                                                     Rentable Square Foot per year)
</TABLE>

         1.09     SECURITY DEPOSIT:  None.

         1.10     PROPORTIONATE SHARE: Tenant's Proportionate Share is fifty
percent (50%) based upon the total Rentable Square Footage of the Building and
the Rentable Square Footage of the Premises. If there is a change in the square
footage of either the Building or the Premises during the Lease Term, Tenant's
Proportionate Share shall be adjusted accordingly.

         1.11     PARKING: Tenant is entitled to two hundred (200) passenger
vehicle parking spaces within that portion of the Common Areas on the Land
designated for vehicle parking, subject to the provisions of Article 8 of this
Lease. Tenant is also entitled to (i) temporarily park its trailers immediately
in front of the truck doors serving the Premises and (ii) fifty (50) trailer
parking spaces within that portion of the Common Areas identified on EXHIBIT A
attached hereto and identified as "Tenant's Trailer Parking", subject to the
provisions of Article 8 of this Lease.

         1.12     GUARANTOR: Daisytek International Corporation, a Delaware
corporation

2.       DEMISE AND POSSESSION

         2.01     Landlord leases to Tenant and Tenant leases from Landlord the
Premises. Tenant shall be entitled to possession of the Premises as of the
Commencement Date. By entering the Premises, Tenant acknowledges that it has
examined the Premises and accepts the Premises in their present, "AS-IS"
condition, provided that Landlord shall be and remain responsible (i) for the
construction of the Tenant Improvements, as defined in and pursuant to the terms
and conditions set forth in EXHIBIT B-1 attached hereto, (ii) for Landlord's
maintenance and repair obligations set forth in Section 13.04 below at all times
during the Lease Term, (iii) to correct any defects in any of the base building
systems in the Premises (which systems are described on EXHIBIT B-2 attached
hereto i.e., excluding any defect directly resulting from any tenant
improvements Tenant may install in the Premises) during the first year of the
Lease Term, and (iv) to repair any latent defect in the construction of the
Building (excluding any defect directly resulting from any tenant improvements
Tenant may install in the Premises) at all times during the Lease Term. Except
as provided above, nothing contained in this Lease, including any Exhibits
hereto, shall be interpreted or is intended in any way as a representation or
warranty by Landlord as to the quantity, quality, or fitness of the Premises,
including, without limitation, a fitness for any particular

                                      -2-
<PAGE>
purpose, each of which is expressly disclaimed by Landlord hereunder. Tenant
acknowledges and agrees that, except as provided above, (i) Landlord is not
making and has not made at any time any warranties or representations of any
kind or character, express or implied, with respect to the Premises or the
Project, including, but not limited to, any warranties or representations as to
habitability, merchantability, or fitness for a particular purpose, and (ii)
except for Landlord's repair and maintenance obligations set forth in this
Lease, Tenant is occupying the Premises "as is, where is, with all faults" and
Tenant has not relied on and will not rely on, and Landlord is not liable for or
bound by, any express or implied warranties, guarantees, statements,
representations, or information pertaining to the Project or Premises or
relating thereto made or furnished by Landlord or any of its representatives, or
any real estate broker or agent representing or purporting to represent
Landlord, to whomever made or given, directly or indirectly, verbally or in
writing, unless specifically set forth in this Lease.

3.       BASE MONTHLY RENT

         3.01     On the first day of every calendar month of the Lease Term
commencing on the Lease Commencement Date, Tenant will pay, without deduction or
offset, prior notice or demand, Base Monthly Rent at the place designated by
Landlord. However, the fifth month's Base Monthly Rent (Section 1.08) and
estimated Additional Rent (Section 5.05) are each due and payable upon execution
of this Lease by Tenant. In the event that the Lease Term commences or ends on a
day other than the first day of a calendar month, a prorated amount of Base
Monthly Rent and estimated Additional Rent shall be due on the first day of the
first month immediately following the Lease Commencement Date and/or on the
first day of the final month of the Lease Term, as applicable, and will be
calculated using a thirty (30) day month.

         3.02     Any installment of Base Monthly Rent, Additional Rent or any
other charge payable which is not paid within five (5) business days after it
becomes due will be considered past due and Tenant will pay to Landlord as
Additional Rent a late charge equal to five percent (5%) of the delinquent
amount. If Tenant shall be served with a demand for the payment of past due
rent, any payments tendered thereafter to cure any default by Tenant shall be
made only by cashier's check. All past due amounts of Base Monthly Rent and
Additional Rent, including, without limitation, late charges and all other
amounts payable by Tenant under the terms of this Lease, shall bear interest
from the due date thereof until paid at per annum interest rate (the "DEFAULT
RATE") equal to the lesser of (i) the maximum amount permitted under applicable
laws, or (ii) the rate publicly announced by Bank of America, N.A. (or if Bank
of America, N.A. ceases to exist, the largest bank then headquartered in the
State of California) as its "Prime Rate" (also known as its "Reference Rate").
If the use of the announced Prime/Reference Rate is discontinued by Bank of
American, then the term Prime or Reference Rate shall mean the announced rate
charged by the bank that is, from time to time, substituted for the
Prime/Reference Rate. All such interest shall constitute Additional Rent due
under this Lease.

4.       COMMON AREAS

         4.01     The term, "COMMON AREA" or "COMMON AREAS," is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Land that are provided and designated by Landlord for the nonexclusive
use of Landlord, Tenant and other tenants of the Building and their respective
employees, agents, customers, representatives and invitees. Common Areas
include, but are not limited to, all parking areas, loading and unloading areas,
trash areas, sidewalks, walkways, parkways, driveways, corridors, pump house
facility, landscaped areas and any restrooms used in common by tenants of the
Building. The term, "PROJECT COMMON AREA" or "PROJECT COMMON AREAS," is defined
as all areas and facilities designated as "Maintenance Property" from time to
time under and pursuant to that certain Declaration of Covenants, Conditions,
Restrictions and Reservation of Easements for Tejon Industrial Complex executed
by Tejon Industrial Corp., a California corporation, as Declarant, and Petro
Travel Plaza LLC, as Other Owner, recorded in the official records of Kern
County, California on September 19, 2000, as Instrument No. 0200116816 (the
"CC&RS").

         4.02     Subject to the terms of this Lease, Tenant, its employees,
agents, representatives, customers and invitees have the nonexclusive right (in
common with other tenants, Landlord, and any other person or entity granted use
by Landlord) to use of the Common Areas and any roadways that constitute a part
of the Project Common Areas. Tenant agrees to abide by and conform to, and to
cause its employees, agents, customers, representatives and invitees to abide by
and conform to all Rules and Regulations established by Landlord subject to the
provisions of Article 24.

         4.03     Tenant acknowledges and agrees that Landlord has the right, in
its sole discretion, from time to time, to undertake any of the following so
long as it does not unreasonably interfere with Tenant's use or enjoyment of the
Premises and provided that the number of passenger vehicle and trailer spaces
remains unchanged and that neither the proximity of such spaces to the Premises
nor the flow of traffic in and out of the Building is materially and adversely
affected: (i) make changes to the Common Areas and/or the Project Common Areas,
including without limitation, changes in the location, size, shape and number of
driveways, entrances, parking spaces, parking areas, ingress, egress, direction
of driveways,

                                      -3-
<PAGE>
entrances, corridors parking areas and walkways; (ii) close temporarily any of
the Common Areas for maintenance purposes so long as reasonable access to the
Premises remains available; (iii) add additional buildings and improvements to
the Building and/or Common Areas; (iv) use the Common Areas while engaged in
making additional improvements, repairs or alterations to the Project or any
portion thereof; and (v) do and perform any other acts or make any other changes
in, to or with respect to the Common Areas and Project as Landlord may, in the
exercise of sound business judgment, deem to be necessary or appropriate.

5.       ADDITIONAL RENT

         5.01     All charges and all other amounts payable by Tenant under this
Lease other than Base Monthly Rent are defined herein as "ADDITIONAL RENT."
Unless this Lease provides otherwise, Additional Rent is to be paid with the
next monthly installment of Base Monthly Rent. The term "RENT" whenever used in
this Lease includes both Base Monthly Rent and Additional Rent.

         5.02     A. The term, "OPERATING COSTS," means all costs and expenses
of ownership, operation, maintenance, management, repair and insurance incurred
by Landlord for or with respect to the Facility, including, but not limited to,
the following: all supplies, materials, labor and equipment, used in or related
to the operation and maintenance of the Facility, all utilities related to the
Common Areas, including but not limited to the following (if and to the extent
applicable): water, electricity, gas, telecommunications, heating, lighting,
sewer, cable, and waste disposal related to the maintenance or operation of the
Common Areas of the Facility; a property management fee, whether paid to a
third-party management company or managed by Landlord or an affiliate thereof,
equal to two and one-half percent (2.5%) of monthly Rent to reimburse Landlord
for the costs and fees incurred by Landlord in connection with the management of
this Lease and the Premises and Facility; all maintenance and service
agreements, including but not limited to, fire life safety, security (if and to
the extent Landlord elects, in its sole discretion, to maintain security
services for the Building) and trash removal, related to the maintenance or
operation of the Facility; all sums due under the CC&Rs that are assessed
against the Facility from time to time; all insurance premiums, deductibles and
retentions, and other costs of fire, casualty, and liability coverage, rent
abatement and earthquake insurance and any other type of insurance related to
the Facility; all operation, maintenance and repair costs to the Common Areas
(excluding capital costs associated with the expansion or creation of new Common
Areas), including but not limited to, sidewalks, walkways, parkways, parking
areas, loading and unloading areas, trash areas, driveways, corridors, and
landscaped area, including for example, costs of resurfacing (but not more
frequently than once each five years) and restriping parking areas; all
maintenance and repair costs of the Facility, including, without limitation,
building exteriors, restrooms used in common by tenants, signs and directories
of the Facility, painting, asphalt repair and replacement, and roof maintenance
and repair; and amortization (along with reasonable financing charges) of
capital replacements and/or improvements made to the Project which may be
required by any government authority, law, rule, code, or regulation, or which
will improve the operating efficiency of the Facility, not to exceed the amount
of such savings. Landlord shall use commercially reasonable efforts to minimize
Operating Costs in accordance with industry practices of similarly situated
institutional landlords with projects similar to the Facility and Project.

                  B.       Tenant shall pay to Landlord as Additional Rent
Tenant's Proportionate Share of the Operating Costs as provided in this Article
5. Tenant's payment of Tenant's Proportionate Share of the Operating Costs shall
be paid by Tenant with and in addition to the monthly payment of Base Monthly
Rent, provided that Tenant's obligation to pay shall not commence until the Rent
Commencement Date. Tenant shall, if Landlord so elects, pay to Landlord on a
monthly basis, in advance, the amount which Landlord reasonably estimates to be
Tenant's Proportionate Share of the Operating Costs, as set forth in Section
5.05 below. In the event of such election by Landlord, then on or before April 1
of each calendar year (commencing as of April 1, 2003), Landlord shall deliver
to Tenant a statement of Tenant's Proportionate Share of the Operating Costs for
the prior calendar year. In the event that the amount which Tenant has paid to
Landlord on account of the estimated Operating Costs is less than its
Proportionate Share of such actual Operating Costs for the applicable calendar
year, Tenant shall pay such difference to Landlord on the next Base Monthly Rent
payment date. In the event that Tenant has paid to Landlord more than its share
of such actual Operating Costs, the amount of such difference shall be credited
against Tenant's payments of Operating Costs next due or if such period is at
the end of the Lease Term the amount of any such overpayment shall be promptly
refunded to Tenant.

                  C.       Failure by Landlord to provide Tenant with a
statement by April 1st of each year shall not constitute a waiver by Landlord of
its right to collect Tenant's Proportionate Share of Operating Costs or
estimates for any period, as Landlord's right to charge Tenant for such expenses
as Additional Rent in subsequent periods is not waived.

                  D.       Subject to the provisions of this Paragraph 5.02D,
Tenant shall have the right to inspect Landlord's records with respect to
Operating Costs during normal business hours at Landlord's business premises
upon reasonable notice and in a reasonable manner, at Tenant's sole cost and
expense,

                                      -4-
<PAGE>
but not more frequently than annually. Tenant shall conduct such audit, if at
all, within 6 months following receipt of any statement of Operating Costs
provided in subsection 5.02 above. Tenant shall provide Landlord not less that
ten (10) business days written notice upon Tenant's exercise of the audit right
provided herein. In the event an audit reflects an overcharge by Landlord of
five percent (5%) or more, Landlord will reimburse Tenant for all reasonable,
third-party costs incurred by Tenant in connection with such audit.

         5.03     A. The term, "REAL PROPERTY TAXES," means (i) any fee, license
fee, license tax, business license fee, commercial rental tax, levy, charge,
assessment, penalty or tax imposed by any taxing authority against the Facility;
(ii) any tax or fee on Landlord's right to receive, or the receipt of, rent or
income from the Facility or against Landlord's business of leasing the Facility,
(iii) any tax or charge for fire protection, streets, sidewalks, road
maintenance, refuse or other services provided to the Facility by any
governmental agency; (iv) any tax imposed upon this transaction, or based upon a
re-assessment of the Facility due to a change in ownership or transfer of all of
part or Landlord's interest in the Facility; (v) any charge or fee replacing,
substituting for, or in addition to any tax previously included within this
definition of Real Property Taxes; (vii) special taxes and/or other assessments
due under the Tejon Ranch Public Facilities Financing Authority Community
Facilities District No. 2000-1 (Tejon Industrial Complex Public Improvements)
(the "TEJON DISTRICT"); and (vii) Landlord's cost of any tax protest relating to
any of the above. Real Property Taxes do not, however, include Landlord's
federal, state, or local income, franchise, inheritance or estate taxes.

                  B.       Tenant shall pay to Landlord as Additional Rent
Tenant's Proportionate Share of the Real Property Taxes as provided in this
Article 5, commencing as of the Rent Commencement Date. Such payment shall be
paid by Tenant semi-annually prior to the date on which the Real Property Taxes
are due, upon being invoiced for such taxes in addition to the monthly payment
of Base Monthly Rent or, alternatively, Tenant shall, if Landlord so elects, pay
to Landlord on a monthly basis, in advance, the amount which Landlord reasonably
estimates to be Tenant's Proportionate Share of the Real Property Taxes, as
provided in Section 5.05 below. In the event of such election by Landlord,
Landlord shall periodically determine Tenant's share of the actual Real Property
Taxes, and in the event that the amount which Tenant has paid to Landlord on
account of the Real Property Taxes is less than its share of such actual Real
Property Taxes, Tenant shall pay such difference to Landlord on the next Base
Monthly Rent payment date. In the event that Tenant has paid to Landlord more
than its share of such actual Real Property Taxes, the amount of such difference
shall be credited against Tenant's payment of Real Property Taxes next due. If
the Lease Term is expired then Landlord shall promptly refund any such
overpayment to Tenant.

                  C.       Tenant will pay prior to delinquency all taxes and
assessments charged against trade fixtures, furnishings, equipment or any other
personal property belonging to Tenant. Tenant will have personal property taxes
billed separately from the Facility. If any of Tenant's personal property is
taxed with the Facility, Tenant will pay Landlord the taxes for the personal
property upon demand by Landlord.

         5.04     Based on Tenant's Proportionate Share specified in Section
1.10, Tenant agrees to pay as Additional Rent to Landlord its share of any
utility surcharges or any other costs resulting from the statutes or
regulations, or interpretations thereof, enacted by any governmental authority
in connection with the use or occupancy of the Project or any part thereof by
Tenant.

         5.05     Landlord, by completing this Section 5.05 has elected to have
Tenant pay a monthly estimate of the Additional Rent due from Tenant in amount
equal to $0.0554 per rentable square foot of the Premises, i.e, Eighteen
Thousand Fifty-Seven and 85/100 Dollars ($18,057.85). Landlord shall make
adjustments to this estimate based upon actual costs incurred and projected
future costs, but not more frequently than two (2) times per calendar year.
Landlord shall periodically determine the balance between Additional Rent
payable by Tenant and Additional Rent actually paid by Tenant and make
adjustments in accordance with Sections 5.02 and 5.03 above. Until such time
that Landlord delivers an adjustment statement to Tenant, Tenant shall continue
to make monthly payments of Additional Rent based upon the estimate above or, in
the future, on the last statement so delivered to Tenant.

6.       INTENTIONALLY OMITTED

7.       USE OF PREMISES; QUIET CONDUCT

         7.01     The Premises may be used and occupied only for Tenant's
Permitted Use as set forth in Section 1.06 and for no other use or purpose,
without obtaining Landlord's prior written consent, which may given or withheld
in Landlord's reasonable discretion. Tenant will comply, at Tenant's sole cost
and expense, with the CC&Rs, the water quality regulations and management
practices of the Tejon-Castac Water District, to the extent applicable to
Tenant's use of the Premises) and all laws, codes, ordinances, orders, rules and
regulations affecting the Premises. Tenant will not perform any act or carry on
any practices that may injure the Project, the Building or the Premises or be a
nuisance or menace, or disturb

                                      -5-
<PAGE>
the quiet enjoyment of other tenants in the Project or Building including, but
not limited to, equipment which causes vibration, use or storage of chemicals
(other than pre-packaged, "consumer-ready" office supplies stored in compliance
with all applicable laws, or heat or noise which is not properly insulated.
Tenant will not cause, maintain or permit any outside storage on or about the
Premises other than trailers parked in Tenant's trailer parking spaces. The
keeping of a dog or other animal other than seeing-eye dogs on or about the
Premises is expressly prohibited.

         7.02     As used in this Article 7., the following terms shall have the
following meanings:

                  A.       The term, "ENVIRONMENTAL LAWS," means all federal,
state, and local statutes, laws, rules, regulations, and ordinances relating to
the protection of human health or environmental matters, including, without
limitation, those relating to fines, orders, injunctions, penalties, damages,
contribution, cost recovery compensation, losses or injuries resulting from the
release or threatened release of Hazardous Substances (as hereinafter defined)
and the generation, use, storage, transportation, or disposal of Hazardous
Substances, in any manner applicable to Tenant or the Project, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (42 U.S.C. 9601 et seq.); the Hazardous Material
Transportation Act (49 U.S.C. 1801 et seq.); the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. 6901 et seq.); the Federal Water Pollution
Control Act (33 U.S.C 1251 et seq.); the Clean Air Act (42 U.S.C. 7401 et seq.);
the United States Environmental Protection Agency's Rules Concerning Underground
Storage Tanks; the Toxic Substances Control Act of 1976 (15 U.S.C. 2601 et
seq.); the Safe Drinking Water Act (42 U.S.C. 300 et seq.); the Occupational
Safety and Health Act of 1970 (29 U.S.C. 651 et seq.); the Federal Hazardous
Substances Act (15 U.S.C. 1261 et seq.); the Emergency Planning and Community
Right-to-Know Act (42 U.S.C. 11001 et seq.); the Porter-Cologne Water Quality
Control Act (Cal. Wat. CodeSection 13020 et seq.); the Safe Drinking Water and
Toxic Enforcement Act of 1986 (Cal. Health & Safety CodeSection 25249.5 et
seq.); the Hazardous Waste Control Act (Cal. Health & Safe Code Section 25100 et
seq.); the Hazardous Materials Release Response Plans & Inventory Act (Cal.
Health & Safety CodeSection 25500 et seq.); and the Carpenter-Presley-Tanner
Hazardous Substances Account Act (California Health and Safety Code, Section
25300 et seq.); each as heretofore and hereafter amended, modified, replaced or
supplemented, and any future or present local, state or federal laws, statutes,
rules and regulations promulgated thereunder or pursuant thereto, and any other
present or future law, ordinance, rule, regulation, permit or permit condition,
order or directive addressing environmental, health or safety issues of or by
the federal government, any state or any political subdivision thereof, or any
agency, court or body of the federal government, or any state or any political
subdivision thereof, exercising executive, legislative, judicial, regulatory or
administrative functions which are applicable to the Project or Tenant.

                  B.       The term, "HAZARDOUS SUBSTANCES," means (i) any
chemical, material, substance, mixture, waste, or item defined as or included in
the definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous waste," "regulated substances," "restricted
hazardous waste," "toxic pollutants," "pollutants," "toxic substances" or words
of similar import under any applicable local, state or federal law or under the
regulations adopted or publications promulgated pursuant thereto, including,
without limitation, Environmental Laws, or which is or becomes listed,
regulated, or addressed by any federal, state, regional or local governmental
authority because it is any way hazardous, toxic, polluting carcinogenic,
otherwise adversely affects any part of the environment or creates risks of any
such hazards or effects; (ii) any oil, petroleum or petroleum derived substance,
any drilling fluids, produced waters or other wastes associated with the
exploration, development or production of crude oil, any flammable substances or
explosives, any radioactive materials, any hazardous wastes or substances, any
toxic wastes or substances or any other materials or pollutants which (I) pose a
hazard to the Project or the Facility or to persons on or about the Project or
Facility, or (II) cause the Project or Facility to be in violation of any
Environmental Laws; (iii) asbestos in any form which is or could become friable,
radon gas, urea formaldehyde foam insulation, polychlorinated biphenyls; (iv)
infectious or medical waste; and (v) any other chemical, material or substance,
exposure to which is prohibited, limited or regulated under any Environmental
Law.

         7.03     Landlord represents and warrants to Tenant that, to Landlord's
actual knowledge (without any duty of investigation or inquiry), there are no
Hazardous Substances located in, under or on the Facility in violation of
Environmental Laws as of the date of this Lease. Tenant represents, warrants,
covenants, and agrees that (i) Tenant does not intend to and Tenant will not,
nor will Tenant allow any other person or entity (including partnerships,
corporations, joint ventures, limited liability companies, and other entities),
during the Lease Term to manufacture, process, store, distribute, use, discharge
or dispose of any Hazardous Substances in, under or on the Project, the Common
Areas (other than Tenant's use of janitorial supplies and those Hazardous
Substances used to operate Tenant's forklifts, all of which shall be stored in
normal and customary quantities for Tenant's Permitted Use and shall be used,
stored, discharged and disposed of in accordance with due care and in strict
compliance with applicable Environmental Laws and pre-packaged, "consumer-ready"
office supplies used and stored in accordance with all applicable laws
(including all Environmental Laws); (ii) Tenant shall notify Landlord promptly
in the event of any spill or release of Hazardous Substances into, on, or onto
the Facility regardless of the source of spill or release, whenever Tenant knows
or reasonably suspects that such a release occurred;

                                      -6-
<PAGE>
(iii) Tenant will not engage in operations at or from the Facility which could
lead to the imposition on the Tenant or the Landlord of liability or the
creation of a lien on the Facility under the Environmental Laws; and (iv) Tenant
shall, upon twenty-four (24) hour prior notice by Landlord or such shorter
period as may be required in the case of emergency, permit Landlord or
Landlord's agent access to the Premises to conduct an environmental site
assessment with respect to the Facility.

         7.04     Tenant for and on behalf of itself, its successors and
assigns, undertakes to and hereby does protect, indemnify, save and defend
Landlord, its agents, employees, directors, officers, shareholders, partners,
members, affiliates, consultants, independent contractors, representatives,
successors and assigns (collectively, "INDEMNITEES") harmless from and against
any and all liability, loss, loss of value, damage, cost, claims, penalties,
fines, assessments, suits, judgments, and expense, including, without
limitation, attorneys' fees and costs and all other costs and expenses of any
kind or nature, that Landlord or any other Indemnitee, whether as Landlord or
otherwise, may suffer as a result of, with respect to, or in any way related to:

                  A.       The violation by Tenant or Tenant's agents,
employees, invitees, licensees, representatives, or contractors (individually, a
"TENANT PARTY" and collectively, the "TENANT PARTIES") of any Environmental Law,
including the assertion of any lien thereunder and any suit brought or judgment
rendered regardless of whether the action was commenced by a citizen (as
authorized under the Environmental Laws) or by a government agency;

                  B.       To the extent caused directly or indirectly by Tenant
or any Tenant Party, any spill or release of or the presence of any Hazardous
Substances affecting the Facility and/or the Project, including any loss of
value of the Facility and Project as a result of a spill or release of or the
presence of any Hazardous Substances;

                  C.       To the extent caused directly or indirectly by Tenant
or any Tenant Party, liability for clean-up, response and all other remediation
costs, fines, damages or penalties incurred pursuant to the provisions of any
applicable Environmental Laws; and

                  D.       To the extent caused directly or indirectly by Tenant
or any Tenant Party, liability for personal injury or property damage arising
under any statutory or common-law tort theory, including, without limitation,
damages assessed for the maintenance of a public or private nuisance, or for the
carrying of an abnormally dangerous activity, and response costs.

         7.05     In the event of any spill or release of or the presence of any
Hazardous Substances affecting the Facility or other portions of the Project,
caused by Tenant or any Tenant Party, and/or if Tenant, or any Tenant Party
shall fail to comply with any of the requirements of any Environmental Law,
Landlord may, without notice to Tenant, at its election, but without obligation
so to do, give such notices and/or cause such work to be performed at the
Facility and/or the Project and/or take any and all other actions as Landlord
shall reasonably deem necessary or advisable in order to remedy said spill or
release of Hazardous Substances or cure said failure of compliance and any
amounts paid as a result thereof, together with interest thereon at the Default
Rate, shall be paid by Tenant to Landlord as Additional Rent upon demand.

         7.06     Landlord, upon giving Tenant ten (10) business days prior
written notice, shall have the right in good faith to pay, settle or compromise,
or litigate any claim, demand, loss, liability, cost, charge, suit, order,
judgment or adjudication under the belief that Tenant is liable therefor,
whether liable or not, without the consent or approval of Tenant unless Tenant
within said ten (10) business day period shall protest in writing and
simultaneously with such protest deposit with Landlord collateral satisfactory
to Landlord (in its reasonable discretion) sufficient to pay and satisfy any
penalty and/or interest which may accrue as a result of such protest and any
judgment or judgments as may result, together with attorney's and environmental
consultants' fees and expenses.

8.       PARKING

         8.01     Tenant and Tenant's customers, suppliers, employees, and
invitees have the nonexclusive right to park in common with other tenants in the
parking facilities located on the Land as designated by Landlord. Tenant agrees
not to use more than the number of passenger vehicle parking spaces described in
Section 1.12 above. Tenant also agrees to park its trailers only in the Tenant's
Trailer Parking area or at its docks, as designated on EXHIBIT A attached
hereto. Tenant agrees to cooperate with Landlord and other tenants in the use of
the parking facilities. Landlord reserves the right to assign specific passenger
vehicle spaces and/or specific truck and/or trailer spaces, without charge to
Tenant or other tenants of the Building, make changes in the parking layout from
time to time, and to establish reasonable time limits and restrictions on
parking.

                                      -7-
<PAGE>
9.       UTILITIES

         9.01     Tenant will be responsible for arranging and shall pay for all
water, gas, heat, light, power, sewer, electricity, janitorial, trash removal,
or other services metered, chargeable to or provided to the Premises separate,
commencing as of the Commencement Date, in addition to the costs set forth in
Section 5.02 dealing with the utility costs for Common Areas. Landlord reserves
the right to install separate meters for any such utility, if and to the extent
the same are not separately metered as part of Landlord's Work (as described in
EXHIBIT B-1) or cannot be separately metered. To the extent any such utility
service is not or cannot be separately metered to the Premises, Tenant shall
reimburse Landlord for Tenant's pro rata share of each such utility as
reasonably determined by Landlord, commencing as of the Commencement Date.

         9.02     Landlord will not be liable or deemed in default to Tenant nor
will there be any abatement of Rent for any interruption or reduction of
utilities or services, nor shall any such interruption or reduction constitute a
constructive eviction of Tenant. However, if the Premises, or a material portion
of the Premises, is made untenantable for a period in excess of three (3)
consecutive business days after Landlord's receipt of written notice from Tenant
of the failure of utilities or services to the Premises (a "SERVICE FAILURE")
and the failure is a direct result of Landlord's negligence, then Tenant, as its
sole remedy, shall be entitled to receive an abatement of Base Rent payable
hereunder during the period beginning on the fourth (4th) consecutive business
day after Landlord's receipt of the notice of the Service Failure and ending on
the day the service has been restored. If the entire Premises has not been
rendered untenantable by the Service Failure, the amount of abatement that
Tenant is entitled to receive shall be prorated based upon the percentage of the
Premises rendered untenantable and not used by Tenant. In no event, however,
shall Landlord be liable to Tenant for any loss or damage, direct or indirect,
special or consequential, including loss of business arising out of or in
connection with the failure. Tenant agrees to comply with energy conservation
programs implemented by Landlord by reason of enacted laws or ordinances.

         9.03     Without limiting the provisions of Section 9.01 above, Tenant
will contract and pay for all telephone and such other services for the Premises
subject to the provisions of Section 10.03.

10.      ALTERATIONS AND MECHANIC'S LIENS

         10.01    Tenant will not make any improvements, additions or
alterations to the Premises without Landlord's prior written consent not to be
unreasonably withheld, conditioned or delayed. Landlord's consent shall be
contingent upon Tenant providing Landlord with such items and information as may
be required by Landlord in Landlord's reasonable discretion, including, without
limitation, the following items or information, all subject to Landlord's
reasonable approval: (i) Tenant's contractor, (ii) certificates of insurance by
Tenant's contractor for the same insurance coverage and limits as identified in
Sections 11.02B. through 11.02D. below, (iii) detailed plans and specifications
for such work, which shall be consistent with the Standard Tenant Improvement
Specifications attached hereto as EXHIBIT G, and (iv) in the event any such
improvement, alteration or addition costs or is expected to cost in excess of
One Hundred Thousand Dollars ($100,000), a payment and performance bond or
letter of credit in form acceptable to Landlord, in a principal amount not less
than one and one-half (1.5) times the estimated costs of such improvements,
additions and/or alterations. The types and amounts of insurance coverage
specified above shall be subject to revision by Landlord from time to time in
Landlord's reasonable discretion by delivery of written notice by Landlord to
Tenant. Tenant agrees that it will have its contractor execute a waiver of
mechanic's lien and that Tenant will remove any mechanic's lien placed against
the Project within ten (10) business days of receipt of notice of lien or Tenant
at its option may bond around such lien. In addition, before alterations may
begin, valid building permits and other required permits, approvals, and
licenses required must be furnished to Landlord, and, once the alterations
begin, Tenant will diligently and continuously pursue their completion. At
Landlord's option, any alterations may become part of the realty and belong to
Landlord. Tenant, at Landlord's option, shall at Tenant's expense, remove all
alterations and repair all damage to the Premises, reasonable wear and tear
excepted, at the expiration or earlier termination of this Lease. In the event
Tenant desires to construct any alterations without the obligation to remove
same upon the expiration or earlier termination of this Lease, then Tenant must
request and obtain Landlord's written approval (which may be given or withheld
in Landlord's sole discretion) prior to the construction of such alterations to
permit Tenant do so. Landlord shall respond to Tenant's request for a
determination as to whether or not Tenant must remove any particular alteration
promptly after Tenant's request for such a determination, provided Tenant has
delivered full and complete information and details to Landlord concerning the
proposed alteration.

         10.02    Notwithstanding anything set forth in Section 10.01, Tenant
may, with the prior written consent of Landlord, install trade fixtures,
equipment, and machinery in conformance with the ordinances of Kern County,
provided that they are removed upon termination of its Lease and any damage to
the Premises caused by their removal repaired by Tenant at Tenant's sole cost
and expense.

                                      -8-
<PAGE>
         10.03    Any private telephone systems and/or other related
telecommunications equipment and lines must be installed within the Premises
and, at Landlord's option, upon termination of this Lease removed and the
Premises restored to the same condition as before such installation, reasonable
wear and tear excepted, at Tenant's sole cost and expense. In the event Tenant
desires to install any such systems or equipment without the obligation to
remove same upon the expiration or earlier termination of this Lease, then
Tenant must request and obtain Landlord's written approval (which may be given
or withheld in Landlord's sole discretion) prior to the installation of such
systems or equipment to permit Tenant do so. Landlord shall respond to Tenant's
request for a determination as to whether or not Tenant must remove any
particular systems or equipment promptly after Tenant's request for such a
determination, provided Tenant has delivered full and complete information and
details to Landlord concerning the proposed systems and equipment.

         10.04    Tenant will pay all costs for alterations and will keep the
Premises and the Project free from any liens arising out of work performed for,
materials furnished to or obligation incurred by Tenant.

11.      INSURANCE

         11.01    Except as expressly provided as Tenant's Permitted Use, or as
otherwise consented to by Landlord in writing in Landlord's sole and absolute
discretion, Tenant shall not do or permit anything to be done within or about
the Premises which will increase the existing rate of insurance on the Facility
and shall, at its sole cost and expense, comply with any requirements,
pertaining to the Premises, of any insurance organization insuring the Facility
or any portion or component thereof. Tenant agrees to pay to Landlord, as
Additional Rent, one hundred percent (not just Tenant's Proportionate Share) of
any increases in premiums on policies resulting from Tenant's Permitted Use or
other use consented to by Landlord which increases Landlord's premiums or
requires extended coverage by Landlord to insure the Premises. Landlord
represents to Tenant that, as of the date of this Lease, Tenant's Permitted Use
does not cause an increase in premiums associated with Landlord's insurance
covering the Facility, provided Landlord does not warrant that such an increase
will not occur in the future.

         11.02    Tenant, at all times during the Lease Term and at Tenant's
sole cost and expense, will maintain:

                  A.       A policy of standard fire and extended coverage
insurance with "all risk" coverage on all Tenant's improvements and alterations
in or about the Premises (including the Tenant Improvements, as defined in
EXHIBIT B-1) and on all personal property and equipment to the extent of at
least ninety percent (90%) of their full replacement value, including business
interruption of Tenant, together with, if the property of Tenant's invitees is
to be kept in the Premises, warehouser's legal liability or bailee customers
insurance for the full replacement cost of the property belonging to invitee's
and located in the Premises. The proceeds from this policy will be used by
Tenant for the replacement of personal property and equipment and the
restoration of Tenant's improvements and/or alterations.

                  B.       A policy of commercial general liability coverage
(occurrence form only) with limits of not less than Two Million Dollars
($2,000,000) (or such higher amount as Landlord shall reasonably determine from
time to time) combined single limit for bodily injury and property damage per
location if Tenant has multiple locations, insuring against all liability of
Tenant and its authorized representatives arising out of or in connection with
Tenant's use or occupancy of the Premises. The commercial general liability
insurance policy shall not contain any intra-insured exclusions as between
insured persons or organizations, but shall include coverage for liability
assumed under this Lease as an "insured contract" for the performance of
Tenant's indemnity obligations under this Lease.

                  C.       A policy of business automobile liability insurance
having a combined single limit of not less than Two Million Dollars ($2,000,000)
per occurrence and insuring Tenant against liability for claims arising out of
ownership, maintenance, or use of any owned, hired or non-owned automobiles.

                  D.       A policy of workers' compensation insurance having
limits not less than those required by state statute and federal statute, if
applicable, and covering all persons employed by Tenant in the conduct of its
operations on the Premises (including the all states endorsement and, if
applicable, the volunteers endorsement), together with employer's liability
insurance coverage in the amount of at least One Million Dollars ($1,000,000).

                  E.       An umbrella liability policy or excess liability
policy having a limit of not less than Ten Million Dollars ($10,000,000.00),
which policy shall be in "following form" and shall provide that if the
underlying aggregate is exhausted, the excess coverage will drop down as primary
insurance. Such umbrella liability policy or excess liability policy shall
include coverage for additional insureds.

         11.03    All insurance required to be provided by Tenant will: (i) name
Landlord and/or Landlord's designated partners, members, and affiliates and
property managers as an additional insured,

                                      -9-
<PAGE>
but only with respect to the insurance required under Subsections 11.04.B.,C.
and D.; (ii) include an express waiver of any right of subrogation by the
insurer in favor of Landlord; (iii) have a deductible or self-insured retention
of not more than Ten Thousand Dollars ($10,000.00) per occurrence; (iv) be
issued by an insurance company authorized to do business in the state in which
the Premises are located and which has and maintains a rating of A/VIII in the
Best's Insurance Reports or the equivalent; (v) be primary and noncontributing
with any insurance carried by Landlord; and (vi) contain an endorsement
requiring at least thirty (30) days prior written notice of cancellation to
Landlord before cancellation or change in coverage, scope or limit of any
policy. Tenant will deliver to Landlord a certificate of insurance and, if
requested by Landlord, a copy of the insurance policies required to be
maintained by Tenant hereunder, concurrently with the execution of this Lease
and will provide evidence of renewed insurance coverages at each anniversary,
and prior to the expiration of any current policies; however, in no event will
Tenant be allowed to occupy the Premises before providing adequate and
acceptable proof of insurance as stated above. Tenant's failure to provide
evidence of this coverage to Landlord will constitute a default under this
Lease.

         11.04    Landlord agrees to purchase and keep in full force and effect
during the Lease Term, insurance through individual or blanket policies insuring
the Building against fire and extended coverage (including, if Landlord elects,
"all risk" or "Special Form," earthquake and/or flood coverage) under policies
issued by insurers authorized to do business in the state in which the Premises
are located and which maintain a rating of A/VIII in the Best's Insurance
Reports or the equivalent, with deductibles and the form and endorsements of
such coverage as selected by Landlord. Landlord may also carry such other
insurance as Landlord may deem prudent or advisable, in such amounts, with such
deductibles and upon such terms as Landlord shall determine. The cost of all
such insurance maintained by Landlord shall be considered an Operating Cost of
the Project pursuant to Paragraph 5.02A above.

         11.05    Notwithstanding any other provision in this Lease to the
contrary, Tenant and Landlord each waive any and all rights against the other,
or against the officers, employees, agents, partners, owners, and
representatives of the other, for the loss of or damage to such waiving party's
property or property of others under its control, where such loss or damage is
insured against either (i) under an insurance policy required to be in force
under this Lease at the time of such loss or damage or (ii) under an insurance
policy actually carried by the party with the damaged property regardless of
whether or not such policy is required to be carried by such party under this
Lease. Tenant and Landlord shall upon obtaining the policies of insurance
required hereunder, give notice to the insurance carriers that the foregoing
mutual waiver of subrogation is contained in this Lease. Further, all insurance
which is carried by either party to insure against damage or loss to property
shall include provisions denying to each respective insurer rights of
subrogation and recovery against the other party.

12.      INDEMNIFICATION AND WAIVER OF CLAIMS

         12.01    Except as provided below, Tenant waives all claims against
Landlord for damage to any property in or about the Premises and for injury to
any persons, including death resulting therefrom, regardless of cause or time of
occurrence. Without limiting the foregoing, Landlord shall not be liable for
injury or damage to persons or goods, wares, merchandise or other property of
Tenant, Tenant's employees, contractors, invitees, customers, or any other
person in or about the Project, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water, or rain, or from the
breakage, leakage, obstruction, or other defects or pipes, fire sprinklers,
wares, appliances, plumbing, HVAC, or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Project, or from other sources or places.
Tenant undertakes and hereby does defend, indemnify and hold Landlord harmless
from and against any and all claims, actions, proceedings, demands, damages,
liabilities, costs, and expenses, including, without limitation, attorney's
fees, arising out of, connected with, or resulting from any use of the Premises
by Tenant, its employees, agents, visitors, invitees, contractors, or licensees,
except to the extent any damage or injury is ultimately determined to be caused
by the negligence or willful misconduct of Landlord. Notwithstanding the
foregoing, Tenant shall in all cases accept any tender of defense of any action
or proceeding in which Landlord is named or made a party (other than suit
brought by Tenant as a result of Landlord's breach of this Lease) and shall,
notwithstanding any allegations of negligence or misconduct on the part of
Landlord, defend Landlord as provided herein, but Landlord shall, subject to
Section 11.05, indemnify Tenant for such damage or injury to the extent and in
proportion that the same is ultimately determined to be attributable to the
negligence or willful misconduct of Landlord. In the event Tenant does not
undertake the duty to defend Landlord as provided herein, Landlord may do so on
its own and charge Tenant monthly for all attorney's fees and costs incurred by
Landlord in connection with such defense, which charges shall be due and payable
hereunder as Additional Rent upon demand. The obligations of Tenant under this
Section 12.01 shall survive the expiration or earlier termination of this Lease.

                                      -10-
<PAGE>
13.      MAINTENANCE AND REPAIRS OF PREMISES

         13.01    Tenant shall, at its sole cost and expense, (i) keep,
maintain, repair and replace the non-structural portions of the Premises and
every part thereof (excepting Common Area equipment, which Landlord agrees to
repair or replace pursuant to Section 5.02 unless damages are due to the
negligence or intentional misconduct of Tenant or its agents, employees,
invitees, contractors, visitors, or licensees), including, without limitation,
all windows, doors, plate glass, any store fronts and the interior of the
Premises, in good and sanitary order, condition and repair, reasonable wear and
tear excepted, (ii) keep, maintain, repair and replace all utilities, fixtures,
plumbing and mechanical equipment located in the Premises in good order and
repair, reasonable wear and tear excepted, and (iii) furnish all expendables
(light bulbs, paper goods, soaps, etc.) used in the Premises. The standard for
comparison and need of repair will be the condition of the Premises at the time
of commencement, reasonable wear and tear excepted, of this Lease and all
repairs will be made by a licensed and bonded contractor reasonably approved by
Landlord.

         13.02    Tenant will not make repairs to the Premises or Project at the
cost of Landlord whether by deductions of Rent or otherwise, or vacate the
Premises or terminate the Lease if repairs are not made. If during the Lease
Term, either (a) any alteration, addition or change to the Premises is required
by legal authorities due to Tenant's specific Permitted Use of the Premises or
(b) any non-structural, interior alteration, addition or change to the Premises
is required by legal authorities for any other reason, then, Tenant, at its sole
expense, shall promptly make the same. Landlord reserves the right to make any
such repairs not made or maintained in good condition by Tenant and Tenant shall
reimburse Landlord for all such costs upon demand. All such costs shall bear
interest at the Default Rate until paid.

         13.03    Tenant shall, at its sole cost and expense, within thirty (30)
days of the Lease Commencement Date, enter into regularly scheduled preventive
maintenance/service contracts ("SERVICE CONTRACTS") with maintenance contractors
reasonably acceptable to Landlord for servicing the HVAC systems and equipment
that serve the Premises, which Service Contracts will be furnished to the
Landlord upon request. If Tenant fails to obtain and maintain such a maintenance
service contract Landlord shall have the right to obtain such a maintenance
service contract at the expense of Tenant.

         13.04    Landlord shall, at its sole cost (subject to the limitations
provided below), maintain and repair damage to the structural portions or
components of the Premises, including, without limitation, the structural
portion of the roof (including the roof membrane and skylights), foundation,
structural integrity of the floor (excluding structural failures or undulations
caused by the overloading of the floor by Tenant), and exterior walls and
interior load bearing portions of walls (excluding wall coverings, painting,
glass and doors) of the Premises; provided, however, if such damage is caused by
the negligence or willful misconduct of Tenant, Tenant's employees, agents,
invitees, subtenants or contractors, then such repairs shall be at Tenant's sole
expense. Landlord shall also maintain and repair and shall enter into regularly
scheduled preventive maintenance/service contracts ("Service Contracts") with
maintenance contractors for servicing the following, all of which shall be
included as an Operating Cost: landscaping, the fire/life safety system, roof
(provided that the Operating Costs associated with the roof shall not be
included in Operating Costs during the initial Lease Term), and the parking lot
(provided that capital repairs of or replacements to the parking lot shall not
be included as an Operating Cost during the initial Lease Term). Landlord shall
not be required to make any repair (and Landlord, at its option, shall either
elect to make any repair at Tenant's cost or advise Tenant that Tenant is
obligated to make any repair) resulting from (i) any alteration or modification
to the Premises or to mechanical equipment within the Premises performed by, for
or because of Tenant or to special equipment or systems installed by, for or
because of Tenant, (ii) the installation, use or operation of Tenant's property,
fixtures and equipment, (iii) the moving of Tenant's property in or out of the
Premises or in and about the Premises, (iv) Tenant's use or occupancy of the
Premises in violation of Section 7 of this Lease, (v) the negligent acts or
omissions or willful misconduct of Tenant and Tenant's employees, agents,
invitees, subtenants, licensees or contractors, (vi) fire and other casualty,
except as provided by Section 17 of this Lease or (vii) condemnation, except as
provided in Section 23 of this Lease. Landlord shall commence repairs under this
Section 13.04 within a reasonable time after receipt of written notice from
Tenant of the need for such repairs, taking into account the type of repair
needed and the affect (if any) on Tenant's business operations at the Premises;
and in the event of an imminent risk of harm to persons or damage to property,
Landlord shall commence to make such repairs immediately after receipt of notice
(written or oral) from Tenant. Tenant waives any right to repair the Premises at
the expense of Landlord under any Applicable Laws (as defined in Section 9),
including, without limitation, Sections 1941 and 1942 of the California Civil
Code.

14.      AUCTIONS, SIGNS, AND LANDSCAPING

         14.01    Tenant will not conduct or permit to be conducted any sale by
auction on the Premises. Landlord will have the right to control landscaping and
approve the placement, size, and quality of signs pursuant to EXHIBIT E attached
hereto entitled, "Sign Criteria". Tenant will not make alterations or additions
to the landscaping and will not place any signs nor allow the placement of any
signs, which are

                                      -11-
<PAGE>
visible from the outside, on or about the Building, nor in any landscape area,
without the prior written consent of Landlord. Landlord will have the right in
its reasonable discretion to withhold its consent. Any signs not in conformity
with this Lease or in accordance with the provisions of EXHIBIT E may be removed
by Landlord at Tenant's expense and without notice. Landlord hereby approves
Tenant's sign and sign specifications, as shown on EXHIBIT E-1.

15.      ENTRY BY LANDLORD

         15.01    Tenant will permit Landlord and Landlord's agents to enter the
Premises at all reasonable times and on at least twenty-four (24) hours prior
notice (except in the case of emergency, in which event no notice shall be
necessary) for the purpose of inspecting the same, or for the purpose of making
repairs, alterations or additions to any portion of the Building, including the
erection and maintenance of such scaffolding, canopies, fences and props as may
be required, or for the purpose of posting notices of nonresponsibility for
alterations, additions or repairs, or for the purpose of showing the Premises to
prospective tenants during the last six (6) months of the Lease Term, or placing
upon the Facility any usual or ordinary "for sale" or "for lease" of similar
signs, without any rebate of Rents and without any liability to Tenant for any
loss of occupation or quiet enjoyment of the Premises thereby occasioned.
Landlord will use commercially reasonable efforts to minimize interference with
Tenant's business at the Premises.

16.      ABANDONMENT

         16.01    Tenant will not abandon the Premises. If Tenant abandons the
Premises, or is dispossessed by process of law, or otherwise, any personal
property belonging to Tenant left in or about the Premises will, at the option
of Landlord be deemed abandoned and may be disposed of by Landlord in the manner
provided for by the laws of the state in which the Premises are located.

17.      DESTRUCTION

         17.01    In the case of total destruction of the Premises or any
portion of the Premises substantially interfering with Tenant's use thereof,
whether by fire or other casualty, this Lease shall terminate except as herein
provided. If Landlord notifies Tenant in writing within sixty (60) days of such
damage or destruction of Landlord's election to repair said damage, and if
Landlord proceeds to and does repair such damage with reasonable dispatch, this
Lease shall not terminate, but shall continue in full force and effect, except
that Tenant shall be entitled to a reduction in the Base Monthly Rent and
Additional Rent payable pursuant to Sections 5.02 through 5.05 above, in an
amount equal to that proportion of such Rent which the number of square feet of
floor space in the unusable portion bears to the total number of square feet of
floor space in the Premises. Said reduction shall be prorated so that such Rent
shall only be reduced for those days any given area is actually unusable. In
determining what constitutes reasonable dispatch, consideration shall be given
to delays described in Section 39.11 below. If this Lease is terminated pursuant
to this Section 17.01 and if Tenant is not in default hereunder, Rent shall be
prorated as of the date of termination. Landlord will use commercially
reasonable efforts to minimize interference with Tenant's business in the
Premises during such repair work.

         17.02    Notwithstanding the foregoing provisions of Section 17.01, in
the event the Premises, or any portion thereof shall be damaged by fire or other
casualty due to the negligence or intentional misconduct or omission of Tenant,
its agents, employees, servants, contractors, subtenants, licensees,
representatives, customers or invitees, then, without prejudice to any other
rights and remedies of Landlord, this Lease shall not terminate, the damage
shall be repaired at Tenant's sole cost and expense but only to the extent such
costs and expenses are not covered by insurance proceeds to which Landlord is
entitled if Landlord carries the insurance required under this Lease, and there
shall be no apportionment or abatement of any Rent except to the extent of any
rental abatement insurance proceeds received by Landlord.

         17.03    In the event of any damage not limited to, or not including,
the Premises, such that the Building is damaged to the extent of twenty-five
(25%) percent or more of the cost of replacement, as reasonably determined by
Landlord's contractor Landlord may elect to terminate this Lease upon giving
notice of such election in writing to Tenant within sixty (60) days after the
occurrence of the event causing the damage. In the event any material portion of
the Premises is damaged such that it substantially interferes with Tenant's use
thereof and such damage will take more than two hundred seventy (270) days from
the occurrence of such damage to repair or restore, as reasonably determined by
Landlord's architect, either Landlord or Tenant may elect to terminate this
Lease upon giving notice to the other of such election in writing. Landlord
shall advise Tenant within sixty (60) days after the occurrence of the event
causing the damage of the time period that Landlord's contractor believes it
will take to restore the damaged portion of the Premises. If Landlord elects to
terminate this Lease, Landlord shall give its termination notice concurrently
with the delivery of notice to Tenant of the time period it will take to restore
the damage to the Premises. If Landlord does not elect to terminate this Lease,
Tenant shall make its election to terminate this Lease within ten (10) business
days after Tenant's receipt of Landlord's

                                      -12-
<PAGE>
notice, wherein Landlord advises Tenant of the time period it will take to
restore the damage to the Premises. If neither Landlord nor Tenant elects to
terminate this Lease pursuant to this Section 17.03, Landlord will proceed to
repair such damage with reasonable dispatch and this Lease shall remain in full
force and effect, except that Tenant shall be entitled to a reduction in the
Base Monthly Rent and Additional Rent payable pursuant to Sections 5.02 through
5.05 above, in an amount equal to that proportion of such Rent which the number
of square feet of floor space in the unusable portion bears to the total number
of square feet of floor space in the Premises. Said reduction shall be prorated
and such Rent shall only be reduced by those days any given area is actually
unusable. In determining what constitutes reasonable dispatch, consideration
shall be given to delays described in Section 39.11 below. If this Lease is
terminated pursuant to this Section 17.03 and if Tenant is not in default
hereunder, Rent shall be prorated as of the date of termination. Landlord will
use commercially reasonable efforts to minimize interference with Tenant's
business in the Premises during such repair work.

         17.04    The provisions of this Article 17. with respect to Landlord's
repair of damage caused by casualty shall be limited to such repair as is
necessary to place the Premises in the condition existing on the Lease
Commencement Date (excluding, however, the restoration of the Tenant
Improvements, as defined in EXHIBIT B-1), reasonable wear and tear excepted, and
when placed in such condition the Premises shall be deemed restored and rendered
tenantable promptly following which time Tenant, at Tenant's expense, shall
perform the restoration of the Tenant Improvements work described in EXHIBIT B-1
and Tenant shall also repair or replace its stock in trade, fixtures, furniture,
furnishings, floor coverings and equipment.

         17.05    All insurance proceeds payable under any fire, casualty, or
other property insurance and/or rental insurance shall be payable solely to
Landlord and Tenant shall have no interest therein. Tenant shall in no case be
entitled to compensation for damages on account of any annoyance or
inconvenience in making repairs under any provision of this Lease. Landlord will
use commercially reasonable efforts to minimize interference with Tenant's
business in the Premises during such repair work. Except to the extent provided
for in this Article 17., neither the Rent payable by Tenant nor any of Tenant's
other obligations under any provision of this Lease shall be affected by any
damage to or destruction of the Premises or any portion thereof by any cause
whatsoever. Without limiting the generality of the foregoing, with respect to
any damage or destruction which Landlord is obligated to repair or may elect to
repair, Tenant waives all rights to terminate this Lease pursuant to rights
otherwise presently or hereafter accorded by law, including without limitation
any rights granted under Section 1932, subdivision 2, and Section 1933 of the
California Civil Code.

18.      ASSIGNMENT, SUBLETTING AND TRANSFERS OF OWNERSHIP

         18.01    Tenant will not assign, sell, mortgage, encumber, convey or
otherwise transfer all or any part of Tenant's leasehold estate or interest in
this Lease, permit the Premises to be occupied by anyone other than Tenant and
Tenant's employees, or sublease the Premises or any portion thereof
(collectively, "TRANSFER"), without the prior written consent of Landlord.
Tenant hereby covenants and agrees to supply Landlord with any and all documents
deemed necessary by Landlord to evaluate any proposed Transfer at least thirty
(30) days in advance of Tenant's proposed Transfer date. Landlord shall have a
period of fifteen (15) days after receipt of Tenant's notice and all related
documents and agreements to notify Tenant in writing of Landlord's approval or
disapproval of the proposed assignment or sublease. If Landlord fails to notify
Tenant in writing of such election, then Tenant may deliver an additional
written notice to Landlord specifying in all capital letters and boldface type
on page one of such notice the following: "YOUR FAILURE TO APPROVE OR DISAPPROVE
OF THE ASSIGNMENT OR SUBLEASE SET FORTH IN THIS NOTICE WITHIN FIVE (5) BUSINESS
DAYS SHALL ENTITLE THE UNDERSIGNED TO ENTER INTO SUCH ASSIGNMENT OR SUBLEASE
WITHOUT YOUR CONSENT." If Landlord thereafter fails to respond with five (5)
business days after receipt of such additional written notice from Tenant,
Landlord shall be deemed to have approved such assignment or subletting. Any
voluntary or involuntary Transfer without Landlord's prior written consent shall
be voidable and, at Landlord's election, shall constitute a default under this
Lease.

         18.02    Landlord's consent to any assignment of this Lease or sublease
of the Premises will not be unreasonably withheld, provided that Tenant
acknowledges and agrees that it will be reasonable for Landlord to disapprove of
a particular assignment of this Lease or sublease of the Premises in the
following instances: (i) the transferee intends to use the Premises for a use
other than the Permitted Use; (ii) the proposed transferee is a governmental
agency; (iii) the portion of the Premises subject to the Transfer is not regular
in shape with appropriate means of entering and exiting, including adherence to
any local, county or other governmental codes; (iv) Tenant is in default under
this Lease beyond applicable cure periods; or (v) the proposed transferee is of
a financial condition or capability which is not commensurate with Tenant's or
otherwise reasonably acceptable to Landlord for the leasing of space such as the
Premises. Tenant may not assign this Lease in part, rather Tenant may only
assign its interests in this Lease in whole or sublease parts of the Premises,
all subject to the provisions of this Article 18.

                                      -13-
<PAGE>
         18.03    In the event of a Transfer, Tenant will pay Landlord fifty
percent (50%) of the excess, if any, of the rent and other charges reserved in
the Transfer over the allocable portion of the Rent and other charges hereunder
for that portion of the Premises subject to the Transfer. For the purpose of
this Section 18.03, the rent reserved in the Transfer will be deemed to include
any lump sum payment or other consideration given to Tenant in consideration for
the Transfer. Tenant will pay or cause the transferee to pay to Landlord this
additional rent together with the monthly installments of Rent due under this
Lease. In furtherance thereof, Tenant hereby assigns and transfers to Landlord
all of Tenant's interest in all rentals and income arising from any sublease of
all or a portion of the Premises or from any assignment of Tenant's interests in
this Lease heretofore or hereafter made by Tenant, and Landlord may collect such
rent and income and apply same toward Tenant's obligations under the Lease;
provided, however, that until a default (as defined in Section 19.01) shall
occur in the performance of Tenant's obligations under this Lease, Tenant may,
except as otherwise may be provided in this Lease, receive, collect and enjoy
the rents accruing under such sublease or assignment. Landlord shall not, by
reason of the collection of the rents from a subtenant, be deemed liable to the
subtenant for any failure of Tenant to perform and comply with any of Tenant's
obligations to such sublessee under such sublease.

         18.04    Any Transfer, any consent to any Transfer which may be given
by Landlord, or the acceptance of any rent, charges or other consideration by
Landlord from Tenant or any third party, will not constitute a waiver by
Landlord of the provisions of this Lease or a release of Tenant or any guarantor
of Tenant from the full performance by it of the covenants stated herein or in
any guaranty; and any consent given by Landlord to any Transfer will not relieve
Tenant (or any transferee of Tenant) from the above requirements for obtaining
the written consent of Landlord to any subsequent Transfer.

         18.05    If a default under this Lease should occur while the Premises
or any part of the Premises are Transferred, Landlord, in addition to any other
remedies provided for within this Lease or by law, may at its option collect
directly from the transferee all rent or other consideration becoming due to
Tenant under the Transfer and apply these monies against any sums due to
Landlord by Tenant, and Tenant authorizes and directs any transferee to make
payments of rent or other consideration directly to Landlord upon receipt of
notice from Landlord. No direct collection by Landlord from any transferee shall
be construed to constitute a novation or a release of Tenant or any guarantor of
Tenant from the further performance of its obligations in connection with this
Lease.

         18.06    If Tenant is a corporation, partnership, limited liability
company, or other entity, the issuance of any additional stock, partnership
interest, membership interest, or other equity interest and/or the transfer,
assignment or hypothecation of any stock, partnership interest, membership
interest, or other interest in such corporation, partnership, limited liability
company, or other entity, in the aggregate in excess of forty-nine percent (49%)
of such interests, as the same may be constituted as of the date of this Lease,
whether directly or indirectly, shall be deemed to be a Transfer within the
meaning of this Article 18. Notwithstanding the foregoing, Tenant may, without
Landlord's consent but subject to the requirements and limitations set forth
below, sublease all or a part of the Premises to a Permitted Transferee (as
defined below), or assign all (but not less than all) of its rights, title and
interests in and to this Lease to a Permitted Transferee so long as the
financial condition or capability which is commensurate with Tenant's (as of the
date of this Lease), as demonstrated by an audited financial statement showing
the tangible net worth of such Permitted Transferee as of the date of the
subject assignment. For purposes of this Lease, the following entities shall
each be deemed a "PERMITTED TRANSFEREE": (i) any entity which has the power to
direct Tenant's management and operation, or any entity whose management and
operation is controlled by Tenant; or (ii) any entity a majority of whose voting
stock (or other form of ownership interest, as the case may be) is owned by
Tenant; or (iii) any entity in which or with which Tenant, or its successors or
assigns, is merged or consolidated, in accordance with applicable statutory
provisions for merger or consolidation of entities, so long as the liabilities
of the entities participating in such merger or consolidation are assumed by the
entity surviving such merger or created by such consolidation; or (iv) any
entity acquiring all or substantially all of Tenant's assets; or (v) any
successor entity to a successor entity becoming such by either of the methods
described in subsections (iii) or (iv). For purposes of this definition, the
term "CONTROL" (including the terms "controlled by" and "under common control
with") means (a) the beneficial ownership, directly or indirectly, of fifty
percent (50%) or more of any class of equity securities of such entity, (b) the
possession, direct or indirect, of the power to vote fifty percent (50%) or more
of the outstanding voting securities or interest of such entity, or (c) the
statutory or contractual right to otherwise direct the management and policies
of such entity. In the event of any sublease or assignment to any Permitted
Transferee, Tenant shall notify Landlord in writing of such transaction and the
assignment or subletting shall not become effective until Tenant has provided
Landlord with a copy of the fully executed sublease or assignment agreement, and
in the case of an assignment, resolutions and documentation evidencing the
existence of, the authority of and the assumption of lease obligations by such
assignee.

         18.07    In the event of any proposed Transfer, Tenant agrees to pay to
Landlord as Additional Rent all reasonable attorney's fees incurred by Landlord
(whether using in-house or outside counsel) for review, preparation, and/or
approval of any and all documents deemed necessary by Landlord and Tenant to
Transfer Tenant's interest in the Premises.

                                      -14-
<PAGE>
19.      DEFAULT BY TENANT

         19.01    Tenant will be in default under this Lease if at any time
during the Lease Term:

                  A.       Tenant fails to make payment of any installment of
Base Monthly Rent, Additional Rent, or of any other sum herein specified to be
paid by Tenant, within three (3) business days after written notice from
Landlord that the same is past due (which notice shall be in lieu of and not in
addition to any notice required by California Code of Civil Procedure Section
1161, et seq. or any other law, rule, or regulation now or hereafter in effect
requiring that notice of default be given prior to the commencement of an
unlawful detainer or other legal proceeding);

                  B.       Tenant fails to observe or perform any of its other
covenants, agreements or obligations or otherwise breaches any of its
representations and warranties under this Lease, including, without limitation,
the Rules and Regulations, and such failure is not cured within thirty (30) days
after Landlord's written notice to Tenant of such failure; provided, however,
that if the nature of Tenant's obligation is such that more than thirty (30)
days are required for performance, then Tenant will not be in breach if Tenant
commences performance within such 30-day period and thereafter diligently
prosecutes the same to completion. The 30-day notice described herein shall be
in lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161, et seq. or any other law, rule, or regulation now
or hereafter in effect requiring that notice of default be given prior to the
commencement of an unlawful detainer or other legal proceeding;

                  C.       Tenant or its successor becomes insolvent, makes a
transfer in fraud of its creditors, makes a transfer for the benefit of its
creditors, is the subject of a bankruptcy petition, is adjudged bankrupt or
insolvent in proceedings filed against Tenant, or its successor, a receiver,
trustee, or custodian is appointed for all or substantially all of Tenant's or
its successor's assets, or such entity or person fails to pay its debts as they
become due, convenes a meeting of all or a portion of its creditors, or performs
any acts of bankruptcy or insolvency, including the selling of its assets to pay
creditors;

                  D.       Tenant has abandoned the Premises as defined in
Section 16.01 above.; or

                  E.       If the performance of Tenant's obligations under this
Lease is guaranteed: (i) the death of a guarantor, (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance with
the terms of such guaranty, (iii) the guarantor's refusal to honor the guaranty,
(iv) the guarantor's becoming insolvent or the subject of a bankruptcy filing,
(v) any default by guarantor of its obligations under the guaranty, including,
without limitation, the failure to provide evidence of execution of the
guaranty, current financial statements, an estoppel certificate, written
confirmation that the guaranty is still in effect.

20.      REMEDIES OF LANDLORD

         20.01    Nothing contained herein shall constitute a waiver of
Landlord's right to recover damages by reason of Landlord's efforts to mitigate
the damage to it by Tenant's default; nor shall anything in this Section
adversely affect Landlord's right, as in this Lease elsewhere provided, to
indemnification against liability for injury or damages to persons or property
occurring prior to a termination of this Lease.

         20.02    All cure periods provided herein shall run concurrently with
any periods provided by law.

         20.03    In the event of default, as designated herein above, in
addition to any other rights or remedies provided for herein or at law or in
equity, Landlord, at its sole option, shall have the following rights:

                  A.       The right to give a written termination notice to
Tenant (which notice may be the notice given under any Subsection of 19.01
above, if applicable, and which notice shall be in lieu of any notice required
by California Code of Civil Procedure Section 1161, et seq. or any other law,
rule, or regulation now or hereafter in effect requiring that notice of default
be given prior to the commencement of an unlawful detainer or other legal
proceeding) and, on the date specified in such notice, this Lease shall
terminate unless on or before such date all arrears of Rent and all other sums
payable by Tenant under this Lease and all costs and expenses incurred by or on
behalf of Landlord hereunder shall have been paid by Tenant and all other events
of default at the time existing shall have been fully remedied. Following
termination, without prejudice to other remedies Landlord may have, Landlord may
(i) peaceably re-enter the Premises upon voluntary surrender by Tenant or remove
Tenant therefrom and any other persons occupying the Premises, using such legal
proceedings as may be available; (ii) repossess the Premises or relet the
Premises or any part thereof for such term (which may be for a term extending
beyond the Term), at such rental and upon such other terms and conditions as
Landlord in Landlord's sole discretion shall determine, with the right to make
alterations and repairs to the Premises; and (iii) remove all personal property
therefrom.

                                      -15-
<PAGE>
                  B.       The remedy described in California Civil Code Section
1951.4 ("lessor" may continue Lease in effect after "lessee's" breach and
abandonment and recover Rent as it becomes due, if "lessee" has the right to
sublet or assign, subject only to reasonable limitations) to recover Rent as it
becomes due. Landlord, without terminating Tenant's right to possession, may,
during the period Tenant is in default, enter the Premises and relet the same,
or any portion thereof, to third parties for Tenant's account and Tenant shall
be liable to Landlord for all reasonable costs Landlord incurs in reletting the
Premises, including, without limitation, brokers' commissions, expenses of
restoring the Premises to their original condition, reasonable wear and tear
excepted, and like costs. Reletting may be for a period shorter or longer than
the remaining Term. Tenant shall continue to pay the Rent on the date the same
is due. No act by Landlord hereunder, including acts of maintenance,
preservation or efforts to lease the Premises or the appointment of a receiver
upon application of Landlord to protect Landlord's interest under this Lease,
shall terminate Tenant's right to possession unless Landlord notifies Tenant
that Landlord elects to terminate this Lease. So long as Tenant's right to
possession is not terminated, Landlord shall have the right to remedy any
default of Tenant, to maintain the Premises, to cause a receiver to be appointed
to administer the Premises and administer new or existing subleases and to add
to the Rent payable hereunder all of Landlord's reasonable costs in so doing,
with interest at the Applicable Interest Rate from the date of such
expenditure.; or

                  C.       Landlord may, without waiving or releasing Tenant
from any of Tenant's obligations, make any payment or perform any act on behalf
of Tenant that Tenant has failed to pay or perform, as applicable beyond
expiration of applicable cure periods. All sums so paid by Landlord and all
necessary incidental costs incurred by Landlord in performing such other acts
shall be payable by Tenant to Landlord within ten (10) business days after
written demand therefor as additional rent.

         20.04    Pursuant to the rights of re-entry provided above, Landlord
may remove all persons from the Premises and may, but shall not be obligated to,
remove all property therefrom, and may, but shall not be obligated to, enforce
any rights Landlord may have against said property or store the same in any
public or private warehouse or elsewhere at the cost and for the account of
Tenant or the owner or owners thereof. Tenant agrees to hold Landlord free and
harmless from any liability whatsoever for the removal and/or storage of any
such property, whether of Tenant or any third party whomsoever. Such action by
the Landlord shall not be deemed to have terminated this Lease.

         20.05 Upon any termination of this Lease by Landlord, Landlord may
recover from Tenant as damages, in addition to the remedies permitted at law:

                  A.       The worth, at the time of the award, of the unpaid
Base Monthly Rents and Additional Rents which had been earned at the time this
Lease is terminated;

                  B.       The worth, at the time of the award, of the amount by
which the unpaid Base Monthly Rents and Additional Rents which would have been
earned after the date of termination of this Lease until the time of award
exceeds the amount of the loss of Rents that Tenant proves could be reasonably
avoided;

                  C.       The worth, at the time of the award, of the amount by
which the unpaid Base Monthly Rent and Additional Rents for the balance of the
Lease Term after the time of award exceeds the amount of such rental loss for
such period as the Tenant proves could have been reasonably avoided; and

                  D.       Any other amount, and court costs, necessary to
compensate Landlord for all detriment proximately caused by Tenant's breach of
its obligations under this Lease, or which in the ordinary course of events
would be likely to result therefrom. The detriment proximately caused by
Tenant's breach will include, without limitation, (i) expenses for cleaning,
repairing or restoring the Premises to their original condition, reasonable wear
and tear excepted, (ii) reasonable brokers' fees and commissions, advertising
costs and other expenses of reletting the Premises, (iii) costs of carrying the
Premises such as taxes, insurance premiums, utilities and security precautions,
(iv) reasonable expenses of retaking possession of the Premises, (iv) reasonable
attorney's fees and court costs, (vi) any unearned brokerage commissions paid in
connection with this Lease, (vii) reimbursement of any previously waived Base
Monthly Rent, Additional Rent, free Rent or reduced Rent, and (viii) any
concession made or paid by Landlord to the benefit of Tenant in consideration of
this Lease including, but not limited to, any moving allowances, contributions
or payments by Landlord for tenant improvements or build-out allowances or
assumptions by Landlord of any of the Tenant's previous lease obligations. As
used in Paragraphs 20.05A. and 20.05B. above, the "worth at the time of the
award" shall be computed by allowing interest at the Default Rate. As used in
Paragraph 20.05C. above, the "worth at the time of the award" shall be computed
by discounting such amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award, plus one percent (1%).

         20.06    The waiver by Landlord of any breach or default of Tenant
hereunder shall not be a waiver of any preceding or subsequent breach of the
same or any other term. Acceptance of any Rent payment shall not be construed to
be a waiver of the Landlord of any preceding breach of the Tenant. No

                                      -16-
<PAGE>
acceptance by Landlord of a lesser sum than the Rent then due shall be deemed to
be other than on account of the earliest installment of such Rent due, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment as Rent be deemed an accord and satisfaction, and Landlord may accept
such check or payment without prejudice to Landlord's right to recover the
balance of such installment or pursue any other remedy provided in the Lease or
otherwise available at law or in equity. The delivery of keys to any employee of
Landlord or to Landlord's agent or any employee thereof shall not operate as a
termination of this Lease or a surrender of the Premises.

         20.07    The specific remedies to which Landlord may resort under the
terms of this Lease are cumulative and are not intended to be exclusive of any
other rights, remedies, or means of redress to which it may lawfully be entitled
in case of any breach or threatened breach by Tenant of any provisions of the
Lease. In addition to the other remedies provided in the Lease, Landlord shall
be entitled to damages and all other legal and equitable remedies, including,
but not limited to, a restraint by injunction of the violation or attempted or
threatened violation of any of the covenants, conditions, or provisions of the
Lease or to a decree compelling specific performance of any such covenants,
conditions, or provisions.

         20.08    The failure of Landlord to insist in any one (1) or more cases
upon the strict performance of any term, covenant or condition of the Lease will
not be construed as a waiver of a subsequent breach of the same or any other
covenant, term or condition, nor shall any delay or omission by Landlord to seek
a remedy for any breach of this Lease be deemed a waiver by Landlord of its
remedies or rights with respect to such a breach.

21.      SURRENDER OF LEASE NOT MERGER

         21.01    The voluntary or other surrender of this Lease by Tenant, or
mutual cancellation thereof, will not work a merger and will, at the option of
Landlord, terminate all or any existing subleases, or may, at the option of
Landlord, operate as an assignment to it of any or all of such subleases.

22.      ATTORNEYS FEES AND COLLECTION CHARGES

         22.01    In the event of any legal action or proceeding between the
parties hereto, reasonable attorneys' fees and expenses of the prevailing party
in any such action or proceeding will be added to the judgment therein. Any
judgment or order entered in any final judgment shall contain a specific
provision providing for the recovery of all such costs and expenses of suit
(collectively "COSTS") incurred in enforcing, perfecting and executing such
judgment. For the purposes of this Paragraph, Costs shall include, without
limitation, attorneys' and experts' fees, costs and expenses incurred in the
following: (i) post judgment motions; (ii) contempt proceeding; (iii)
garnishment, levy, and debtor and third party examination; (iv) discovery; and
(v) bankruptcy litigation. Should Landlord be named as defendant in any suit
brought against Tenant in connection with or arising out of Tenant's occupancy
hereunder, Tenant will pay to Landlord its reasonable costs and expenses
incurred in such suit, including reasonable attorney's fees.

         22.02    If Landlord utilizes the services of any attorney for the
purpose of collecting any Rent due and unpaid by Tenant after five (5) business
days written notice to Tenant of such nonpayment of Rent or in connection with
any other default under this Lease by Tenant, Tenant agrees to pay Landlord
reasonable attorneys' fees as determined by Landlord for such services,
regardless of the fact that no legal action may be commenced or filed by
Landlord.

23.      CONDEMNATION

         23.01    If twenty-five percent (25%) or more of the square footage of
the Premises is taken for any public or quasi-public purpose by any lawful
government power or authority, by exercise of the right of appropriation,
reverse condemnation, condemnation or eminent domain, or sold to prevent such
taking, and if the remaining portion of the Premises will not be reasonably
adequate for the operation of Tenant's business after Landlord completes such
repairs or alterations as Landlord elects to make, either Tenant or the Landlord
may at its option terminate this Lease by notifying the other party hereto of
such election in writing within thirty (30) days after such taking. Tenant will
not because of such taking assert any claim against the Landlord or the taking
authority for any compensation because of such taking, and Landlord will be
entitled to receive the entire amount of any award without deduction for any
estate of interest of Tenant; provided, however, Tenant shall have the right to
recover from the condemning authority such compensation as may be separately
awarded to Tenant for the costs to remove Tenant's merchandise, furniture,
fixtures and equipment to a new location. If less than twenty-five percent (25%)
of the Premises is taken, or if other portions of the Facility are taken such
that Landlord or any other tenant of Landlord cannot reasonably operate their
business from the remaining portions of the Facility not so taken, Landlord at
its option may terminate this Lease. If Landlord does not so elect, Landlord
will promptly proceed to restore the Premises to substantially its same
condition prior to such partial taking, allowing for any reasonable effects of
such taking, provided that Landlord shall not be obligated to incur

                                      -17-
<PAGE>
any cost of restoration to the extent the same exceeds the amount of any
condemnation award actually received by Landlord (after deducting Landlord's
cost of recovery of such award including attorneys' fees). Further, if this
Lease is not terminated, a proportionate reduction in the Base Monthly Rent and
Tenant's Proportionate Share shall be made based on the loss of square footage
to the Premises and/or Building corresponding to the time during which Tenant is
deprived on account of such taking and restoration.

24.      RULES AND REGULATIONS

         24.01    The rules and regulations presently applicable to the Project
(the "RULES AND REGULATIONS") are attached hereto as EXHIBIT D. Tenant will
faithfully observe and comply with the Rules and Regulations promulgated by
Landlord for the Project and Landlord reserves the right to modify and amend
them as it deems necessary. Landlord will enforce the Rules and Regulations
equitable as to all tenants in the Building, provided that Landlord will not be
responsible to Tenant for the nonperformance by any other tenant or occupant of
the Project of any of the Rules and Regulations.

         24.02    In the event that Tenant fails to cure any violations of such
Rules and Regulations following ten (10) days written notice by Landlord, such
failure to cure shall be deemed a breach of this Lease by Tenant.

25.      ESTOPPEL CERTIFICATE

         25.01    Tenant will execute and deliver to Landlord, within ten (10)
business days of Landlord's written demand, a statement in writing certifying
that this Lease is in full force and effect, and that the Base Monthly Rent and
Additional Rent payable hereunder are unmodified and in full force and effect
(or, if modified, stating the nature of such modification) and the date to which
Rent and other charges are paid, if any, and acknowledging that there are no
uncured defaults on the part of Tenant hereunder and that, to Tenant's
knowledge, there are no uncured defaults on the part of Landlord hereunder or
specifying such defaults if they are claimed, and such other matters as Landlord
may reasonably request. Any such statement may be conclusively relied upon by
any prospective purchaser or encumbrancer of the Premises. Tenant's failure to
deliver such statement within such time shall be conclusive upon Tenant that (i)
this Lease is in full force and effect, without modification except as may be
represented by Landlord; (ii) there are no uncured defaults in Landlord's
performance and (iii) not more than one (1) month's Rent has been paid in
advance. If Tenant desires to assign its interests under this Lease as permitted
under Section 18 above, Landlord will execute and deliver to Tenant's proposed
assignee, within ten (10) business days of Tenant's written demand, a statement
in writing certifying to such proposed assignee that, to Landlord's actual
knowledge, this Lease is in full force and effect, and that the Base Monthly
Rent and Additional Rent payable hereunder are unmodified and in full force and
effect (or, if modified, stating the nature of such modification) and the date
to which Rent and other charges are paid, if any, and acknowledging that there
are no uncured defaults on the part of Tenant hereunder and that there are no
uncured defaults on the part of Tenant hereunder or specifying such defaults if
they are claimed.

26.      SALE BY LANDLORD

         26.01    In the event of a sale, conveyance or other transfer by
Landlord of the Facility and the written assumption of Landlord's obligations
under this Lease arising after the date of such transfer, the same shall operate
to release Landlord from any liability upon any of the covenants, agreements,
obligations, representations, warranties, or conditions, expressed or implied,
herein contained in favor of Tenant, and in such event Tenant agrees to look
solely to the responsibility of the successor in interest of Landlord in and to
this Lease. This Lease will not be affected by any such sale, and Tenant agrees
to attorn to the purchaser or assignee.

27.      NOTICES

         27.01    All notices, statements, demands, requests, consents,
approvals, authorizations, offers, agreements, appointments, or designations
under this Lease by either party to the other will be in writing and will be
considered given (i) upon personal service of a copy on the party to be served,
(ii) three (3) days after mailing such notice by certified or registered mail,
postage prepaid, receipt for delivery requested, addressed to the party to be
served and properly deposited in the United States mail, or (iii) one (1)
business day after proper deposit with a nationally recognized courier service
under a delivery option which guarantees delivery within the foregoing period.
Notices shall be given to the parties at the addresses set forth in Sections
1.04 and 1.05 above, as applicable. Any change in the address of any party shall
be given by the party having such change to the other party in the manner
provided above. Thereafter, all notices shall be given in accordance with the
notice of change of address. Notices given before actual receipt of the notice
of change of address shall not be invalidated by the change of address.

                                      -18-
<PAGE>
28.      SURRENDER OF PREMISES

         28.01    Upon expiration or termination of this Lease, Tenant agrees to
surrender possession of the Premises and leave the same in broom clean
condition, reasonable wear and tear excepted, and in accordance with Landlord's
Move Out Standards attached hereto as EXHIBIT F. Tenant shall remove all of its
personal property before the expiration or earlier termination of the Lease Term
and perform all restoration made necessary by the removal of any alterations
required pursuant to Section 10.01 or elsewhere in this Lease. Landlord may
elect to retain or dispose of in any manner any alterations or Tenant's personal
property that Tenant does not remove from the Premises on expiration or
termination of the Lease Term. Title to any such alterations or Tenant's
personal property that Landlord elects to retain or dispose of on expiration of
the Lease Term shall vest in Landlord. Tenant waives all claims against Landlord
for any damage to Tenant resulting from Landlord's cost for restoring, removing,
or disposing of any unapproved alterations or alterations which are required to
be removed, or Tenant's personal property. Landlord retains the right to charge
Tenant for restoring any altered doors to their condition prior to the
installation of the new or additional locks. If Tenant fails to surrender the
Premises to Landlord on expiration or termination of the Lease Term, Tenant
shall indemnify, defend, and hold Landlord harmless from all damages resulting
from Tenant's failure to surrender the Premises, including, without limitation,
claims made by a succeeding tenant resulting from Tenant's failure to surrender
the Premises.

29.      HOLDOVER

         29.01    Tenant has no right to retain possession of the Premises or
any part thereof beyond the expiration or termination of this Lease. If Tenant
remains in the Premises after the Lease expiration date or the termination of
the Lease, such continuance of possession by Tenant will be deemed to be a
month-to-month tenancy at the sufferance of Landlord terminable on thirty (30)
days notice at any time by either party. All provisions of this Lease, except
those pertaining to the Lease Term and Base Monthly Rent, will apply to the
month-to-month tenancy. Tenant will pay a new Base Monthly Rent in an amount
equal to one hundred fifty percent (150%) of the Base Monthly Rent payable for
the last full calendar month during the Lease Term.

30.      DEFAULT OF LANDLORD; LIMITATION OF LIABILITY

         30.01    In the event of any default by Landlord hereunder, Tenant
shall give notice of such default to Landlord at Landlord's Notice Address as
provided in Section 1.05 and Landlord shall have thirty (30) days in which to
cure the default after receipt of such notice; provided, however, that if the
nature of Landlord's obligation is such that more than thirty (30) days are
required for performance, then Landlord will not be in breach if Landlord
commences performance within such thirty (30) day period and thereafter
diligently prosecutes the same to completion.

         30.02    In the event of any actual or alleged failure, breach or
default hereunder by Landlord, Tenant's sole and exclusive remedy will be
against Landlord's interest in the Facility, and Landlord's directors, officers,
employees, shareholders, partners, members, owners and representatives will not
be sued, be subject to service or process, or have a judgment obtained against
them in connection with any alleged breach or default, and no writ of execution
will be levied against the assets of any director, officer, employee,
shareholder, partner, member, owner, or representative of Landlord.
Notwithstanding Landlord's negligence, intentional misconduct, or breach of this
Lease, under no circumstances shall Landlord be liable for injury to Tenant's
business or for any loss of income or profit therefrom. Landlord shall not be
liable for any damages arising from any act or neglect of any other tenant of
Landlord nor from the failure of Landlord to enforce the provisions of any other
lease in the Building or the Project. The covenants and agreements set forth in
this Section 30.02 are enforceable by Landlord and by any director, officer,
employee, shareholder, partner, member, owner or representative of Landlord.

31.      PRIORITY

         31.01    Without the necessity of any additional document being
executed by Tenant for the purpose of effecting a subordination, and at the
election of Landlord or any mortgagee with a lien on the Facility or any ground
lessor with respect to the Facility, this Lease will be subject and subordinate
at all times to (i) all ground leases or underlying leases which may now exist
or hereafter be executed affecting the Facility, and (ii) the lien of any
mortgage or deed of trust which may now exist or hereafter be executed in any
amount for which the Project, ground leases or underlying leases, or Landlord's
interest or estate in any of said items is specified as security. In the event
that any ground lease or underlying lease terminates for any reason or any
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure
is made for any reason, Tenant will, notwithstanding any subordination, attorn
to and become the Tenant of the successor in interest to Landlord, at the option
of such successor in interest. Tenant covenants and agrees to execute and
deliver to Landlord any document or instrument reasonably requested by Landlord
or its ground lessor, mortgagee or beneficiary under a deed of trust evidencing
such subordination of this Lease with respect to any such ground lease or
underlying leases or the lien of

                                      -19-
<PAGE>
any such mortgage or deed of trust. Tenant hereby irrevocably appoints Landlord
as attorney-in-fact of Tenant to execute, deliver and record any such document
in the name and on behalf of Tenant.

32.      INTENTIONALLY OMITTED

33.      GOVERNING LAW

         33.01    This Lease and all of the rights and obligations hereunder
shall be governed by and construed in accordance with the laws of the State of
California in effect from time to time. The parties hereby agree that all
litigation resulting under this Lease shall be under the sole and exclusive
jurisdiction and venue of the appropriate state or federal court in and for the
county in which the Premises are located.

34.      NEGOTIATED TERMS

         34.01    This Lease is the result of the negotiations of the parties
and has been agreed to by both Landlord and Tenant after prolonged discussion.
This Lease has been drafted on the basis of mutual contribution of language and
is not to be construed against any parties hereto as being the drafter or
causing the same to be drafted.

35.      SEVERABILITY

         35.01    The unenforceability, invalidity, or illegality of any
provision of this Lease shall not render any other provision unenforceable,
invalid or illegal.

36.      BROKERS

         36.01    Tenant warrants that it has had no dealings with any broker or
agent in connection with this Lease, except Colliers Tingey ("TENANT'S BROKER")
and Cushman & Wakefield, as Daisytek's real estate advisor ("C&W"). Tenant
covenants to pay, hold harmless and indemnify Landlord from and against any and
all cost, expense or liability for any compensation, commissions and charges
claimed by any broker or agent with whom Tenant has or purportedly dealt,
including C&W but excluding Tenant's Broker, with respect to this Lease or its
negotiation. Landlord agrees to pay a commission to Tenant's Broker (but not
C&W) in an amount and upon the terms and conditions more particularly set forth
in the separate written agreement between Landlord and Tenant's Broker.

37.      QUIET POSSESSION

         37.01    Tenant, upon paying the rentals and other payments herein
required from Tenant, and upon Tenant's performance of all of the terms,
covenants and conditions of this Lease on its part to be kept and performed, and
subject to the CC&Rs and all other matters of record as of the date hereof, may
quietly have, hold and enjoy the Premises during the Lease Term without
disturbance from Landlord or from any other person claiming through Landlord.

38.      DEVELOPMENT OF THE PROJECT

         38.01    If portions of the Project are owned by an entity other than
Landlord, Landlord, at its option, may enter into an agreement with the owner or
owners of such other portions of the Project to provide (i) for reciprocal
rights of access, use and/or enjoyment of the Project, (ii) for the common
management, operation, maintenance, improvement and/or repair of all or any
portion of the Project, (iii) for the allocation of Operating Expenses for
Common Area facilities, and (iv) for any other matter which Landlord deems
necessary.

         38.02    Tenant acknowledges that portions of the Building and/or the
Project may be under construction following Tenant's occupancy of the Premises,
and that such construction may result in levels of noise, dust, and obstruction
of access, which are in excess of that present in a fully constructed project.
Tenant hereby waives any and all Rent offsets or claims of constructive eviction
which may arise in connection with such construction. Landlord agrees to take
commercially reasonable measures to minimize any interference or disruption to
Tenant's use of the Premises.

         38.03    Tenant acknowledges that the purpose of the site plan set
forth on EXHIBIT A-2 is to show the general location of the Building and other
proposed improvements within the Project, and is not meant to constitute an
agreement, representation or warranty as to the precise location, size or
configuration of any of the improvements shown thereon, nor shall it constitute
an agreement, representation or warranty that any such improvements will be
constructed.

                                      -20-
<PAGE>
         38.04    Tenant acknowledges that Landlord may from time to time
                  include within the Project additional land by annexing the
same into the CC&Rs, whereupon such annexed land will constitute a portion of
the Project.

39.      MISCELLANEOUS PROVISIONS

         39.01    Whenever the singular number is used in this Lease and when
required by the context, the same will include the plural, and the masculine
gender will include the feminine and neuter genders, and the word "person" will
include corporation, firm, partnership, limited liability company, association
or other entity. If there is more than one (1) person or entity as Tenant, the
obligations imposed upon each such person or entity as Tenant under this Lease
will be joint and several.

         39.02    The headings and titles to articles, sections, and paragraphs
of this Lease are not a part of this Lease and will have no effect upon the
construction or interpretation of any part of this Lease.

         39.03    This Lease contains all of the agreements and understandings
relating to the leasing of the Premises and the obligations of Landlord and
Tenant in connection with such leasing. Landlord has not made and Tenant is not
relying upon, any warranties, representations, promises or statements made by
Landlord or any agent of Landlord, except as expressly set forth herein. This
Lease supersedes any and all prior agreements and understandings between
Landlord and Tenant and alone expresses the agreement of the parties.

         39.04    Time is of the essence of each term and provision of this
Lease.

         39.05    Except as otherwise expressly stated, each payment required to
be made by Tenant is in addition to and not in substitution for other payments
to be made by Tenant.

         39.06    Subject to the provisions of Article 18., the terms and
provisions of this Lease are binding upon and inure to the benefit of the heirs,
executors, administrators, successors and assigns of Landlord and Tenant.

         39.07    All covenants and agreements to be performed by Tenant under
any of the terms of this Lease are separate and independent covenants of Tenant
will be performed by Tenant at Tenant's sole cost and expense and without any
abatement of Rent or setoff rights.

         39.08    In consideration of Landlord's covenants and agreements
hereunder, Tenant hereby covenants and agrees not to disclose any terms,
covenants or conditions of this Lease to any other person or entity without the
prior written consent of Landlord, except Tenant's Broker, C&W and Tenant's
attorneys, consultants, lenders and financial advisors.

         39.09    Tenant agrees it will provide to Landlord such financial
information as Landlord may reasonably request for the purpose of obtaining
construction or permanent financing or refinancing for or in connection with a
sale of the Premises, including a current, accurate, audited financial statement
for Tenant and Tenant's business and financial statements for Tenant and
Tenant's business for each of the three (3) years prior to the current financial
statement year prepared under generally accepted accounting principles
consistently applied.

         39.10    If Tenant shall request Landlord's consent and Landlord shall
fail or refuse to give such consent, Tenant shall not be entitled to any damages
for any withholding by Landlord of its consent; Tenant's sole remedy shall be an
action for specific performance or injunction, and such remedy shall be
available only in those cases where Landlord has expressly agreed in writing not
to unreasonably withhold its consent or where as a matter of law Landlord may
not unreasonably withhold its consent.

         39.11    Whenever a day is appointed herein on which, or a period of
time is appointed in which, either party is required to do or complete any act,
matter or thing, the time for the doing or completion thereof shall be extended
by a period of time equal to the number of days on or during which such party is
prevented from, or is reasonably interfered with, the doing or completion of
such act, matter or thing because of labor disputes, civil commotion, war,
warlike operation, sabotage, governmental regulations or control, fire or other
casualty, inability to obtain materials, or to obtain fuel or energy, weather or
other acts of God, or other causes beyond such party's reasonable control
(financial inability excepted); provided, however, that nothing contained herein
shall excuse Tenant from the prompt payment of any Rent or charge required of
Tenant hereunder.

         39.12    Unless otherwise specifically provided in this Lease, the
representations, warranties, covenants and obligations of the parties contained
in this Lease shall survive the expiration or earlier termination of this Lease
without limitation as to scope or duration. This Lease shall be binding upon the

                                      -21-
<PAGE>
parties, their personal representatives, successors and assigns, provided,
however, that nothing contained in this Section 39.12 shall affect any other
provisions of this Lease.

         39.13    This Lease may not be amended, changed or modified in any way
except in a writing executed by Landlord and Tenant.

         39.14    Landlord specifically reserves the right: (i) to grant,
without the consent or joinder of Tenant, such easements, rights, and
dedications that Landlord deems necessary, (ii) to cause the recordation of
parcel maps and restrictions, and (iii) to create or install new utilities, so
long as such easements, rights, dedications, maps, restrictions and other items
do not unreasonably interfere with the Permitted Use of the Premises by Tenant.
Tenant hereby agrees to sign any documents and any instruments reasonably
requested by Landlord to effectuate the foregoing.

         39.15    Landlord and Tenant hereby waive their respective rights to
trial by jury in any action or proceeding involving the Facility or otherwise
arising out of this Lease.

         39.16    Guarantor shall execute a guaranty in a form provided by
Landlord. It shall constitute an Event of Default of the Tenant if Guarantor
fails or refuses, upon ten (10) days' written request to provide: (a) evidence
of the execution and continued enforceability of the guaranty, including the
authority of the party signing on Guarantor's behalf to obligate Guarantor, and
in the case of a corporate Guarantor, a certified copy of a resolution of its
board of directors authorizing the making of such guaranty, (b) current
financial statements, (c) an estoppel certificate, or (d) written confirmation
that the guaranty is still in effect as a valid, binding obligation.

         The following Exhibits are attached hereto and made a part hereof:

         Exhibit A (Site Plan Showing the Building, the Premises and Tenant's
         Trailer Parking Area)

         Exhibit A-1 (Legal Description for the Land)

         Exhibit A-2 (Conceptual Site Plan Depicting the Project)

         Exhibit B-1 (Tenant Improvement Agreement)

         Exhibit B-2 (Base Building Specifications)

         Exhibit C (Tenant Questionnaire)

         Exhibit D (Rules and Regulations)

         Exhibit E (Sign Criteria)

         Exhibit E-1 (Tenant's Sign and Sign Specifications)

         Exhibit F (Move Out Standards)

         Exhibit G (Standard Tenant Improvement Specifications)

                        [signatures follow on next page]

                                      -22-
<PAGE>
         IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year indicated by Landlord's execution date as written below.

         Individuals signing on behalf of Tenant warrant that they have the
authority to bind their principals. In the event that Tenant is a corporation,
partnership, limited liability company, or other entity Tenant shall deliver to
Landlord, concurrently with the execution and delivery of this Lease, a
certified copy of authoritative resolutions adopted by Tenant authorizing said
corporation to enter into and perform the Lease and authorizing the execution
and delivery of the Lease on behalf of the corporation by the parties executing
and delivering this Lease. THIS LEASE, WHETHER OR NOT EXECUTED BY TENANT, IS
SUBJECT TO ACCEPTANCE AND EXECUTION BY LANDLORD, ACTING ITSELF OR BY ITS AGENT
ACTING THROUGH ITS PRESIDENT, VICE PRESIDENT, OR ITS DIRECTOR OF LEASING AND
MARKETING.

<TABLE>
<CAPTION>
LANDLORD:                                                   TENANT:
<S>                                                         <C>
TEJON DERMODY INDUSTRIAL LLC,                               DAISYTEK, INCORPORATED, a Delaware
a Delaware limited liability company                        corporation

By:     Tejon Industrial Corp.,                              By: ______________________________
        a California corporation,
        its Member                                           Its:______________________________
                                                                         (Name, Title)

        By:___________________________________              Date:______________________________

        Its:__________________________________
        (Name, Title)                                        By:_______________________________

By:     Dermody Properties,                                  Its:______________________________
        a Nevada corporation,                                            (Name, Title)
        its Member
                                                             Date:_____________________________
                                                                         (Execution Date)
        By:__________________________________
              Michael C. Dermody, its President

        Date:________________________________
        (Execution Date)
</TABLE>

*NOTE:

IF TENANT IS A CALIFORNIA CORPORATION, then one of the following alternative
requirements must be satisfied:

(A)      This Lease must be signed by two (2) officers of such corporation: one
         being the chairman of the board, the president or a vice president, and
         the other being the secretary, an assistant secretary, the chief
         financial officer or an assistant treasurer. If one (1) individual is
         signing in two (2) of the foregoing capacities, that individual must
         sign twice; once as one officer and again as the other officer.

(B)      If there is only one (1) individual signing in two (2) capacities, or
         if the two (2) signatories do not satisfy the requirements of (A)
         above, then Tenant shall deliver to Landlord a certified copy of a
         corporate resolution in a form reasonably acceptable to Landlord
         authorizing the signatory(ies) to execute this Lease.

IF TENANT IS A CORPORATION INCORPORATED IN A STATE OTHER THAN CALIFORNIA, then
Tenant shall deliver to Landlord a certified copy of a corporate resolution in a
form reasonably acceptable to Landlord authorizing the signatory(ies) to execute
this Lease.

                                      -23-
<PAGE>
                                ADDENDUM TO LEASE

THIS ADDENDUM TO LEASE ("ADDENDUM") is attached to and constitutes an integral
part of the Standard Industrial Lease (Net-Net-Net) between Tejon Dermody
Industrial, LLC, as Landlord, and Daisytek, Incorporated, as Tenant. The terms
of this Addendum shall be incorporated in the Lease for all purposes. All words
and phrases not specifically defined in this Addendum, shall have the same
meaning as defined the Lease. In the event of a conflict between the provisions
of the Lease and the provisions of this Addendum, this Addendum shall control.

The following new Sections are hereby added to the Lease which state in their
entirety as follows:

40.      OPTIONS TO EXTEND LEASE TERM. Provided (i) Tenant is not in default
under the terms of this Lease at the time each renewal option is exercised
beyond applicable cure periods, and (ii) Tenant or a Permitted Transferee (as
defined in Section 18.06 above) is occupying the entire Premises, including any
expansion space, Tenant shall have two (2) options to renew this Lease for an
additional period of sixty (60) months each (individually, the "FIRST EXTENSION
TERM" and "SECOND EXTENSION TERM"; or an "EXTENSION TERM"; and collectively, the
"EXTENSION TERMS"). The Extension Terms shall be on all the terms and conditions
of this Lease, except that Landlord shall have no additional obligation for free
rent, leasehold improvements or for any other tenant inducements for the
Extension Terms and, effective as of the first day of each Extension Term, the
Base Rent in effect immediately before each such extension period shall be
increased (but not decreased) to an amount equal to ninety-five percent (95%) of
the fair market rental rate as (hereinafter defined) for each Extension Term.
There shall be no additional extension terms beyond the Extension Terms set
forth herein. Tenant must exercise its options to extend this Lease by giving
Landlord written notice of its election to do so no later than one hundred
eighty (180) days nor earlier than three hundred sixty (360) days prior to the
end of the initial Term, or the First Extension Term, as applicable. Any notice
not given in a timely manner shall be void, and Tenant shall be deemed to have
waived its extension rights. The Extension Options set forth herein are personal
to the original Tenant executing this Lease ("ORIGINAL TENANT") and shall not be
included in any assignment of this Lease (other than an assignment to a
Permitted Transferee).

         40.1     Determination of Base Rent During Each Extension Term.
Landlord and Tenant shall have thirty (30) days after Landlord receives the
exercise notice in which to agree on the determination of the fair market rental
rate for the Base Rent for the applicable Extension Term. Notwithstanding
anything in this Section 40 to the contrary, in no event shall the Base Rent for
the applicable Extension Term be less than the Base Rent in effect immediately
prior to the applicable Extension Term.

         40.2     Appraisal. If Landlord and Tenant are unable to agree upon the
fair market rental rate for Base Rent for the applicable Extension Term within
such thirty (30) day period, then within fifteen (15) days after the expiration
of the thirty (30) day period, each party, by giving notice to the other party,
shall appoint a real estate appraiser who is a current member of the American
Institute of Real Estate Appraisers, with at least ten (10) years of experience
appraising building space comparable to the Premises in the county where the
Premises is located to determine the fair market rent. "FAIR MARKET RENT" shall
mean the monthly amount per rentable square foot in the Premises that a willing,
non-equity new tenant would pay and a willing landlord would accept at arm's
length for space in a comparable building or buildings, with comparable tenant
improvements, in a comparable location in the Project and/or in comparable
markets in California, giving appropriate consideration to then-current monthly
rental rates per rentable square foot, the presence or absence of rent
escalation clauses such as operating expense and tax pass-throughs, length of
lease term, size and location of premises being leased and other generally
applicable terms and conditions of tenancy for a similar building or buildings.
If the two (2) appraisers are unable to agree on the Fair Market Rent for the
Applicable Extension Term within twenty (20) days, they shall select a third
appraiser meeting the qualifications stated in this Section within five (5) days
after the last day the two (2) appraisers are given to set the Fair Market Rent
for the Applicable Extension Term. The third appraiser, however selected, shall
be a person who has not previously acted in any capacity for either party.
Within twenty (20) days after the selection of the third appraiser, a majority
of the appraisers shall set the Fair Market Rent for the Applicable Extension
Term. If a majority of the appraisers is unable to set the Fair Market Rent
within the twenty (20) day period, the two (2) closest appraisals shall be added
together and their total divided by two (2). The resulting quotient shall be the
Fair Market Rent for the Applicable Extension Term. Each party shall be
responsible for the costs, charges and fees of the appraiser appointed by that
party plus one-half of the cost of the third appraiser.

         40.3     Amendment of Lease. Immediately after the Base Rent is
determined pursuant to this Section 40, Landlord and Tenant shall execute an
amendment to this Lease stating the new Base Rent in effect for the applicable
Extension Term.

41.      RIGHT OF FIRST OFFER TO LEASE ADDITIONAL SPACE. Landlord hereby grants
to the Original Tenant a continuing time right of first offer to lease the
remainder of the space located in the Building (the "FIRST OFFER SPACE"),
subject to the terms and upon the conditions contained in this Section 41.
<PAGE>
         41.1     Procedure for Offer. Tenant acknowledges that Landlord has not
yet leased the First Offer Space. Prior to leasing all or any portion of the
First Offer Space for the first time, or all or any portion of the First Offer
Space once the same becomes Available for Lease (defined below) to third parties
after Landlord leases the First Offer Space for the first time, Landlord shall
first deliver to Tenant a written notice (the "FIRST OFFER NOTICE") setting
forth Landlord's proposed general business and economic terms and conditions
upon which Landlord is willing to lease such space to Tenant, including, without
limitation, base rent, term, and tenant improvement allowances (if any)
(collectively, the "ECONOMIC TERMS"). Pursuant to such First Offer Notice,
Landlord shall offer to lease to Tenant the First Offer Space described in the
First Offer Notice upon the Economic Terms. For purposes hereof, the First Offer
Space shall be deemed to be "AVAILABLE FOR LEASE" after: (i) the expiration or
earlier termination of the initial lease (or leases) and all subsequent leases
for such space (and after the expiration of any renewal of such initial
lease(s), whether or not such renewal is pursuant to an express written
provision in such lease(s), and regardless of whether any such renewal is
consummated pursuant to a lease amendment or a new lease(s), Tenant
acknowledging and agreeing that once Tenant has elected not to exercise its
first offer right and Landlord has leased all or any portion of the First Offer
Space to a tenant, Tenant's first offer right shall be subordinate to all rights
of the subject tenant(s) of the First Offer Space who lease the First Offer
Space); and (ii) the vacation of such space by the applicable tenant(s).

         41.2     Procedure for Acceptance. If Tenant wishes to exercise
Tenant's right of first offer with respect to the space described in the First
Offer Notice, then within five (5) business days of delivery of the First Offer
Notice to Tenant, Tenant shall deliver notice to Landlord of Tenant's intention
to exercise its right of first offer with respect to the entire space described
in the First Offer Notice on the Economic Terms. If Tenant does not so notify
Landlord within the five (5) business day period, then Landlord shall be free to
lease the space described in the First Offer Notice (as well as the balance of
the First Offer Space, if the space described in the First Offer Notice is less
than the entirety of the First Offer Space) from time to time to anyone to whom
Landlord desires on any terms Landlord desires, and Tenant shall no longer have
any right to lease the First Offer Space; provided, however, in the event
Landlord has not entered into a lease for the applicable First Offer Space
within one hundred eighty (180) days after the date of a First Offer Notice,
then prior to offering such space to a third party after the expiration of such
180-day period, Landlord shall re-offer the First Offer Space to Tenant pursuant
to a new First Offer Notice and the procedures set forth in Section 41.1 and
this Section 41.2 shall apply once again. Notwithstanding anything to the
contrary contained herein, Tenant must elect to exercise its right of first
offer, if at all, with respect to all of the space offered by Landlord to Tenant
in the First Offer Notice and upon the precise terms set forth in the First
Offer Notice, and Tenant may not elect to lease only a portion thereof or modify
any terms set forth in the First Offer Notice. Any modification by Tenant of the
Economic Terms shall constitute Tenant's election not to exercise the first
offer right.

         41.3     Construction In First Offer Space. Except as otherwise
described in the First Offer Notice, (e.g., if the First Offer Notice includes a
tenant improvement allowance, Tenant would be entitled to the same allowance)
Tenant shall take the First Offer Space in its "as is" condition, and the
construction of improvements in the First Offer Space shall comply with the
terms of Section 10 of this Lease.

         41.4     Amendment to Lease. If Tenant timely exercises Tenant's right
to lease the First Offer Space as set forth herein, Landlord and Tenant shall
within fifteen (15) days thereafter execute an amendment to this Lease for such
First Offer Space upon the terms and conditions as set forth in the First Offer
Notice and this Section 41. Except as otherwise provided in the Economic Terms
in the First Offer Notice, Tenant shall commence payment of Rent for the First
Offer Space, and the term of the First Offer Space shall commence upon the date
of delivery of the First Offer Space to Tenant (the "FIRST OFFER COMMENCEMENT
DATE") and terminate on the date set forth in the First Offer Notice.

         41.5     Termination of Right of First Offer. The rights contained in
this Section 41 shall be personal to the Original Tenant, and may only be
exercised by the Original Tenant (and not any assignee, sublessee or other
transferee of the Original Tenant's interest in this Lease other than a
Permitted Transferee) if the Original Tenant occupies the entire Premises.
Tenant shall not have the right to lease First Offer Space, as provided in this
Section 41, if, as of the date of the attempted exercise of any right of first
offer by Tenant, Tenant is in default under this Lease beyond applicable cure
periods.

42.     ROOF TOP ANTENNAE. Notwithstanding anything to the contrary contained in
this Lease, Landlord hereby grants to Tenant, at no additional cost or charge,
the right to install, maintain, and operate one satellite dish antenna or other
telecommunication device (the "Device") on the roof of the Building and related
cabling in the riser or other vertical shaft space in the Building (if any) to
points of connection to equipment inside the Premises (collectively, the
"Satellite System"), at Tenant's sole cost and expense, on the terms and
conditions provided herein.

         42.1     The Satellite System is to be for Tenant's use only and is not
to serve or benefit third-parties. The Device shall be located on the roof of
the Building in a location reasonably acceptable to Landlord, and Landlord shall
designate the riser or other vertical shaft space in the Building in which

                                      -2-
<PAGE>
Tenant shall be permitted to locate any cabling that makes up a part of the
Satellite System. Further, the size, height and general specifications of the
Device shall be subject to Landlord's reasonable approval. Landlord will permit
Tenant reasonable access to the roof and/or vertical riser space (if any), as
needed, to install, maintain, and/or remove the Satellite System.
Notwithstanding anything to the contrary contained in this Lease, including,
without limitation, Section 13 hereof, Tenant shall be responsible for repairing
and replacing, at its sole cost and expense, any damage to the Premises or the
Building caused by the installation, maintenance, operation or repair of the
Satellite System, including, without limitation, any damage caused to the
structural components of the Building (including, without limitation, the roof
or roof membrane).

         42.2 Tenant will ensure that the Satellite System, and each part of it,
will be installed by a licensed contractor in accordance with all local and
building rules of construction and codes. Tenant will obtain all FCC and other
licenses or approvals required to install and operate the Satellite System.

         42.3 The Satellite System is and shall remain the property of Tenant;
provided, however, Landlord may require that Tenant leave the cabling for the
Satellite System in place upon the expiration of the Lease Term in which case
such cabling shall be and become Landlord's property at such time. Tenant agrees
to remove all components of the Satellite System (unless so designated by
Landlord) upon the expiration or earlier termination of this Lease and to
repair, to Landlord's reasonable satisfaction, all portions of the Premises or
Building damaged by the removal of the Satellite System at the expiration or
earlier termination of the Lease.

43.     BACK-UP GENERATOR. Provided Tenant obtains all required installation
permits and all operational permits and provides Landlord with true, correct and
complete copies thereof, Tenant may, at Tenant's sole cost and expense, install
in a location reasonably approved by Landlord, a fully enclosed generator
("Generator"), together with a fuel tank and any other associated improvements,
to provide auxiliary power for the Premises. The installation, maintenance,
operation, use and removal of the Generator and associated systems and equipment
shall be upon the terms and conditions set forth below:

         43.1     The Generator, fuel tank and other associated improvements
shall comply with any and all applicable code requirements, the cost of which
compliance shall be entirely borne by Tenant. In no event may Tenant's
maintenance and operation of the Generator involve the installation of an
underground storage tank. The above-ground storage tank associated with the
Generator (the "AST") shall not exceed one hundred (100) gallons in capacity,
shall be double-walled, shall contain diesel fuel only (to only power the
Generator), and shall employ at a minimum a double containment system whereby if
the first containment system fails, a second containment system shall be present
to prevent releases of Hazardous Materials. The AST shall be installed by a
contractor engaged by Tenant and reasonably approved by Landlord, at Tenant's
sole cost and expense. For these purposes, a sealed, uncracked concrete basement
slab containment area without drains shall be sufficient to constitute the
second containment system, provided it is large enough to completely contain a
release of the maximum volume of Hazardous Materials which could be present in
the first containment system. All handling, use, storage and disposal of
Hazardous Materials relating to the AST and/or the Generator shall be
accomplished by Tenant at its sole cost and expense. Upon the expiration or
earlier termination of the Term of this Lease, Tenant agrees to (i) promptly
remove from the Facility, at its sole cost and expense, the AST (including the
basement slab) and the Generator and all Hazardous Materials which are brought
upon, stored, used, generated or released upon, in, under or about the Facility
or any portion thereof by Tenant or its agents, employees or contractors, and
(ii) return the location to substantially the condition in which it existed
prior to Tenant's installation. Tenant shall be solely responsible for complying
with any and all Environmental Laws relating to the AST, the Generator and/or
Hazardous Materials associated with either of the same, including, without
limitation, all permitting obligations. For purposes of the Environmental Laws,
Tenant shall be the owner and operator of the AST. Tenant shall be responsible
for ensuring compliance by all of Tenant's agents, employees and contractors
with all Environmental Laws relating to the AST and/or the Generator. Any
acknowledgment, consent or approval by Landlord of Tenant's use or handling of
Hazardous Materials in connection with the AST and the Generator shall not
constitute an assumption of risk respecting the same nor a warranty or
certification by Landlord that Tenant's proposed use and handling of Hazardous
Materials is safe or reasonable or in compliance with Environmental Laws.

         43.2     From time to time during the Term and for up to sixty (60)
days thereafter, Landlord may, and upon Landlord's request, Tenant shall, retain
a registered environmental consultant (the "CONSULTANT") reasonably acceptable
to Landlord to conduct an investigation of the Facility (the "ENVIRONMENTAL
ASSESSMENT") (i) for petroleum or diesel fuel contamination in, about or beneath
the Facility arising from the AST and/or the Generator, and (ii) to assess the
activities of Tenant and all of Tenant's Parties for compliance with
Environmental Laws relative to the AST and/or the Generator and to recommend the
use of procedures intended to reasonably reduce the risk of a release of
petroleum or diesel fuel. The cost of the Environmental Assessment shall be the
sole responsibility of Landlord; provided, however, if there is a release or if
a third-party consultant's report or assessment indicates that there has been a
release of petroleum or diesel fuel on, at or from the AST or the Generator,
which

                                      -3-
<PAGE>
violates or may be deemed to or may ultimately result in a violation of any
Environmental Laws, Tenant shall reimburse Landlord for the cost of the
Environmental Assessment within ten (10) days after Tenant's receipt of written
demand therefor which is accompanied by a copy of the invoice from the
Consultant and a copy of the Environmental Assessment. If Landlord so requires,
Tenant shall comply, at its sole cost and expense, with all recommendations
contained in the Environmental Assessment, including any reasonable
recommendations with respect to precautions which should be taken with respect
to Tenant's or Tenant's Parties' activities at the Project relative to the AST
and/or the Generator or any recommendations for additional testing and studies
to detect the presence of petroleum or diesel fuel relative to the AST and/or
the Generator. Tenant covenants to reasonably cooperate with the Consultant and
to allow entry and reasonable access to the AST and the Generator for the
purpose of Consultant's investigation.

         43.3     In the event the Generator, AST or any associated equipment or
system is located in any parking area, the spaces so taken or used for such
purpose shall count toward the number of parking spaces afforded to Tenant under
the Lease.

         43.4     The provisions of this Article 43 will survive the expiration
or earlier termination of the Term of this Lease.

                                      -4-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00040-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00040-of-00352.parquet"}]]