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Oregon-Seaside-Seaside Factory Outlet Center - Seaside LLC and Coldwater Creek Inc.

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                     =====================================
                         SEASIDE FACTORY OUTLET CENTER
                     =====================================


                                By and Between


                                 SEASIDE, LLC,
                     an Oregon limited liability Company,
                                   Landlord


                                      and


                             COLDWATER CREEK, INC.
                             an Idaho corporation,
                                    TENANT


                                March 25, 1997
<PAGE>
 
SEASIDE FACTORY OUTLET CENTER

                                     LEASE

                               TABLE OF CONTENTS




                                                                     
ARTICLE 1. BASIC PROVISIONS................................................ 1
     1.1    Name and Location of Factory Outlet Center..................... 1
     1.2    Landlord's Address............................................. 1
     1.3    Tenant's Address............................................... 1
     1.4    Description of Premises........................................ 1
     1.5    Notice Period.................................................. 1
     1.6    Length of Term................................................. 1
     1.7    Opening Date................................................... 1
     1.8    Term Commencement.............................................. 1
     1.9    Term Expiration................................................ 1
     1.10   Prepaid Rent................................................... 1
     1.11   Security Deposit............................................... 1
     1.12   Monthly Minimum Rent........................................... 1
     1.13   Tenant's Percentage Rent Rate.................................. 1
     1.14   Tenant's Expense Percentage.................................... 2
     1.15   Use of Premises................................................ 2
     1.16   Tenant's Trade Name............................................ 2
     1.17   Hours of Operation............................................. 2
     1.18   Advertising and Promotion Fund................................. 2
     1.19   Tenant's Address for Notices................................... 2
     1.20   Tenant's Address for Billing................................... 2
     1.21   Landlord's Address for Notices................................. 2
     1.22   Brokers........................................................ 2
     1.23   Exhibits....................................................... 2

ARTICLE 2. PREMISES........................................................ 3

ARTICLE 3. DEFINITIONS..................................................... 3
     3.1    Accounting Period.............................................. 3
     3.2    Common Area Operating Cost..................................... 3
     3.3    Common Areas................................................... 3
     3.4    Expiration..................................................... 3
     3.5    Gross Sales.................................................... 3
     3.6    Hazardous Material............................................. 3
     3.7    Lease Year..................................................... 4
     3.8    Mortgage....................................................... 4
     3.9    Mortgagee...................................................... 4
     3.10   Substantial Completion......................................... 4
     3.11   Tenant......................................................... 4
     3.12   Term........................................................... 4
     3.13   Termination.................................................... 4

ARTICLE 4. CONSTRUCTION.................................................... 4
     4.1    Construction................................................... 4
     4.2    Substantial Completion......................................... 4
     4.3    Possession..................................................... 4
     4.4    Defects and Variances.......................................... 4
     4.5    Failure to Take Possession..................................... 4

<PAGE>
 



                                                                     
     4.6    Landlord's Failure to Deliver.................................  5

ARTICLE 5. TERM...........................................................  5
     5.1    Commencement of Term..........................................  5
     5.2    Commencement Date Agreement...................................  5
     5.3    Holdover Tenancy..............................................  5
     5.4    Early Termination.............................................  5

ARTICLE 6. PREPAID RENT AND SECURITY DEPOSIT..............................  5
     6.1    Prepaid Rent..................................................  5
     6.2    Security Deposit..............................................  5

ARTICLE 7. RENT...........................................................  6
     7.1    Initial Monthly Minimum Rent..................................  6
     7.2    Payment of Percentage Rent....................................  6
     7.3    Percentage Rent Computation...................................  6
     7.4    Adjustment of Percentage Rent Payments........................  6
     7.5    Interest, Late Payment, and Check Charges.....................  6
     7.6    Payment.......................................................  6
     7.7    Place of Payment..............................................  6

ARTICLE 8. RECORDING AND REPORTING GROSS RECEIPTS.........................  6
     8.1    Tenant's Records..............................................  6
     8.2    Statement of Gross Receipts...................................  7
     8.3    Monthly Reports...............................................  7
     8.4    Right to Examine Books........................................  7
     8.5    Audit.........................................................  7

ARTICLE 9. TAXES AND LANDLORD'S INSURANCE.................................  7
     9.1    Real Property Taxes and Insurance Defined.....................  7
     9.2    Payment.......................................................  8
     9.3    Annual Adjustment.............................................  8
     9.4    Additional and Substitute Taxes...............................  8

ARTICLE 10. TAXES ON LEASEHOLD............................................  8
     10.1   Responsibility for Taxes......................................  8
     10.2   Inclusion With Real Property Taxes............................  8

ARTICLE 11. CHANGES AND ADDITIONS TO THE CENTER...........................  8

ARTICLE 12. USE OF PREMISES...............................................  8
     12.1   Use of Premises...............................................  8
     12.2   Change of Name................................................  8
     12.3   Storage and Office Space......................................  9

ARTICLE 13. BUSINESS OPERATION............................................  9
     13.1   Discount Merchandise..........................................  9
     13.2   Operation of Business and Obligation to Operate...............  9
     13.3   Failure to Open or Operate....................................  9

ARTICLE 14. COMPETITION RADIUS............................................  9

ARTICLE 15. HAZARDOUS MATERIALS...........................................  9
     15.1   Hazardous Use.................................................  9
     15.2   Compliance.................................................... 10
     15.4   Tenant's Liability............................................ 10
     15.5   Inspection.................................................... 10

ARTICLE 16. COMMON AREAS.................................................. 11

<PAGE>
 



                                                                     
     16.1   Use of Common Areas........................................... 11
     16.2   Solicitation of Business...................................... 11

ARTICLE 17. COMMON AREA OPERATING COST.................................... 11
     17.1   Tenant's Obligation........................................... 11
     17.2   Payment....................................................... 11
     17.3   Annual Adjustment............................................. 11

ARTICLE 18. FIXTURES AND ALTERATIONS...................................... 11
     18.1   Tenant's Fixtures and Improvements............................ 11
     18.2   Surrender of Improvements and Fixtures........................ 11

ARTICLE 19. SIGNS, AWNINGS, AND CANOPIES.................................. 12

ARTICLE 20. CONSTRUCTION LIENS............................................ 12
     20.1   Covenant Against Liens........................................ 12
     20.2   Right to Contest Liens........................................ 12

ARTICLE 21. MAINTENANCE AND UTILITIES..................................... 12
     21.1   Tenant's Maintenance.......................................... 12
     21.2   HVAC Maintenance.............................................. 12
     21.3   Landlord's Remedies........................................... 12
     21.4   Tenant's Liability for Damage................................. 12
     21.5   Utilities and Garbage......................................... 13

ARTICLE 22. SURRENDER OF PREMISES......................................... 13
     22.1   Surrender of Premises......................................... 13
     22.2   Property Left on Premises..................................... 13
     22.3   Failure to Surrender.......................................... 13

ARTICLE 23. INDEMNIFICATION AND INSURANCE................................. 13
     23.1   Indemnity..................................................... 13
     23.2   Tenant's Liability Insurance.................................. 14
     23.3   Tenant's Hazard Insurance..................................... 14
     23.4   Plate Glass/Storefront Insurance.............................. 14
     23.5   Worker's Compensation and Employer's Liability Insurance...... 14
     23.6   General Provisions............................................ 14
     23.7   Landlord's Hazard Insurance................................... 14
     23.8   Waiver of Subrogation......................................... 14
     23.9   Hazardous Use................................................. 14

ARTICLE 24. LOSS AND DAMAGES.............................................. 14

ARTICLE 25. FIRE AND OTHER CASUALTY....................................... 15
     25.1   Insured Loss.................................................. 15
     25.1.1 Commencement of Restoration................................... 15
     25.1.2 Termination................................................... 15
     25.1.3 Loss Near End of Term......................................... 15
     25.2   Uninsured Loss................................................ 15
     25.3   Loss to the Center............................................ 15
     25.4   Restoration................................................... 15
     25.5   Rent Adjustment............................................... 15
     25.6   Effect of Termination......................................... 16
     25.7   Continuous Operations......................................... 16

ARTICLE 26. EMINENT DOMAIN................................................ 16
     26.1   Definitions................................................... 16
     26.2   Total Condemnation of Premises................................ 16
     26.3   Partial Condemnation.......................................... 16

<PAGE>
 



                                                                     
     26.4   Total Condemnation of Center.................................. 16
     26.5   Damages....................................................... 16

ARTICLE 27. SUBORDINATION, ATTORNMENT, AND ESTOPPEL CERTIFICATES.......... 16
     27.1   Subordination and Nondisturbance.............................. 16
     27.2   Attornment.................................................... 16
     27.3   Estoppel Certificates......................................... 16

ARTICLE 28. INVOLUNTARY ASSIGNMENT........................................ 17
     28.1   Involuntary Assignment........................................ 17
     28.1.1 Insolvency or Creditors Proceedings........................... 17
     28.1.2 Attachment or Execution....................................... 17
     28.1.3 Appointment of Receiver....................................... 17
     28.2   Effect of Involuntary Assignment.............................. 17

ARTICLE 29. VOLUNTARY ASSIGNMENT.......................................... 17
     29.1   Consent Required.............................................. 17
     29.2   Effect of Change in Partnership............................... 17
     29.3   Effect of Individual Transfer................................. 17
     29.4   Effect of Change in Corporation or Limited Liability Company.. 17
     29.5   Assignment of Rent............................................ 17
     29.6   Increase in Rent.............................................. 18
     29.7   Assignment Fee................................................ 18
     29.8   Continuing Liability.......................................... 18

ARTICLE 30. WASTE, NUISANCE, AND ENVIRONMENTAL............................ 18
     30.1   Waste or Nuisance............................................. 18
     30.2   Compliance with Law........................................... 18
     30.3   Permits....................................................... 18
     30.4   Use of Hazardous Material..................................... 18

ARTICLE 31. ADVERTISING AND PROMOTION..................................... 18
     31.1   Promotional Program........................................... 18
     31.2   Merchants' Association........................................ 18
     31.3   Tenant's Contribution......................................... 18
     31.4   Grand Opening................................................. 19
     31.5   Joint Advertisements.......................................... 19
     31.6   Advertising................................................... 19
     31.7   Accounting.................................................... 19
     31.8   Collection.................................................... 19

ARTICLE 32. RIGHT OF ENTRY................................................ 19
     32.1   Right of Entry................................................ 19
     32.2   Entry in Tenant's Absence..................................... 20
     32.3   Leasing Sign.................................................. 20

ARTICLE 33. DEFAULT....................................................... 20
     33.1   Tenant's Default.............................................. 20
     33.1.1 Failure to Pay Rent and Other Charges......................... 20
     33.1.2 Abandonment................................................... 20
     33.1.3 Involuntary Assignment or Insolvency.......................... 20
     33.1.4 Failure to Perform Covenants, Conditions, and Obligations..... 20
     33.2   Landlord's Remedies........................................... 20
     33.2.1 Termination................................................... 20
     33.2.2 Reentry....................................................... 20
     33.2.3 Termination Following Reentry................................. 20
     33.2.4 Compulsory and Binding Arbitration............................ 20
     33.3   Rights Upon Reentry........................................... 20
     33.4   No Termination by Reentry..................................... 21

<PAGE>
 



                                                                     
     33.5   Notice of Termination; Damages................................ 21
     33.5.1 Unpaid Earned Rental.......................................... 21
     33.5.2 Rental Between Termination and Award.......................... 21
     33.5.3 Rental Following Award........................................ 21
     33.5.4 Other Damages................................................. 21
     33.6   Worth at Time of Award Defined................................ 21
     33.7   Rent Defined.................................................. 21
     33.8   Right to Cure Tenant's Default................................ 21
     33.9   Restoration................................................... 21
     33.10  Landlord's Default............................................ 22

ARTICLE 34. RULES AND REGULATIONS......................................... 22

ARTICLE 35. NOTICES....................................................... 22
     35.1   Notice and Consents........................................... 22

ARTICLE 36. BROKERS....................................................... 22

ARTICLE 37. MISCELLANEOUS................................................. 22
     37.1   Quiet Enjoyment............................................... 22
     37.2   Waiver and Consent............................................ 22
     37.3   Accord and Satisfaction....................................... 23
     37.4   Severability.................................................. 23
     37.5   Excuse for Performance........................................ 23
     37.6   Successors.................................................... 23
     37.7   No Partnership................................................ 23
     37.8   Relocation.................................................... 23
     37.8.1 Prior to Commencement......................................... 23
     37.8.2 During Term................................................... 23
     37.9   Transfer of Ownership......................................... 23
     37.10  Corporate Authority; Partnership Authority.................... 23
     37.11  Attorney Fees................................................. 24
     37.12  No Option..................................................... 24
     37.13  Captions...................................................... 24
     37.14  Gender........................................................ 24
     37.15  Covenants and Conditions...................................... 24
     37.16  Reservation................................................... 24
     37.17  Recordation................................................... 24
     37.18  Entire Agreement.............................................. 24
     37.19  Time is of the Essence........................................ 24
     37.20  Venue......................................................... 24
     37.21  Survival...................................................... 24
     37.22  Compulsory and Binding Arbitration............................ 24

<PAGE>
 
SEASIDE FACTORY OUTLET CENTER

                                     LEASE


     THIS Lease is made February 24, 1997, between Seaside, LLC, an Oregon
limited liability company ("Landlord"), and Coldwater Creek, Inc., an Idaho
corporation ("Tenant").

     In consideration of the rents, covenants, and conditions herein set forth,
Landlord and Tenant agree
as follows:


                                                    ARTICLE 1. BASIC PROVISIONS
                                                                                    
 
   1.1                                     Name and Location of Factory Outlet Center.    Seaside Factory Outlet Center (the
                                                                           (Article 2)    "Center"), located in the City of
                                                                                          Seaside, County of Clatsop, Oregon, 
                                                                                          and described on the map attached  
                                                                                          hereto as Exhibit B.                
 
   1.2                                                             Landlord's Address.    Seaside, LLC
                                                                                          1111 Main Street, Suite #700
                                                                                          Vancouver, Washington  98660 
 
   1.3                                                               Tenant's Address.    Coldwater Creek
                                                                                          1111 North Roosevelt, Suite 100 
                                                                                          Seaside, Oregon  97138           
 
   1.4                                                        Description of Premises.    Approximately 4,280 square feet of
                                                              (Article 2)                 building space in Building A of the
                                                                                          Center, outlined on the map of the       
                                                                                          Center attached hereto as Exhibit B Site 
                                                                                          Plan ("Premises").                        

 
   1.4.1                                          Approximate Leasable Square Footage.    101,952 square feet
                                                                                      
   1.5                                                                  Notice Period.    Sixty (60) days following Landlord's
                                                                (Sections 4.3 and 5.1)    notice to Tenant that the Premises are
                                                                                          substantially complete. 
                                                                                      
   1.6                                                                 Length of Term.    Five (5) years.
                                                                         (Section 5.1) 
                                                                                      
   1.7                                                                   Opening Date.    Estimated to be June 1, 1997
                                                                                      
   1.8                                                              Term Commencement.    Estimated to be June 1, 1997
                                                                         (Section 5.1) 
                                                                                      
   1.9                                                                Term Expiration.    May 31, 2002
                                                                                      
   1.10                                                                  Prepaid Rent.    *
                                                                         (Section 6.1)    Dollars ($*           ) for the first
                                                                                          month of the Term (as hereinafter       
                                                                                          defined) payable on or before Tenant    
                                                                                          executes the Lease.                      
                                                                                      
   1.11                                                              Security Deposit.    *
 
<PAGE>
 
 
 

                                                                                    
                                                                         (Section 6.2)    Dollars ($*           ) payable on or
                                                                                          before Tenant executes the Lease. 
                                                                                      
   1.12                                                          Monthly Minimum Rent.    Years 1-3 at $64,200 annually,
                                                                (Sections 7.1 and 7.2)    Payable at $5,350 per month
                                                                                          Years 4 & 5 at $68,480 annually,
                                                                                          Payable at $5,706.67 per month   
                                                                                      
   1.13                                                 Tenant's Percentage Rent Rate.    Years 1-3: 4% of Gross Sales
                                                                (Sections 7.3 and 7.4)    over $1,284,000. No percentage rent
                                                                                          shall be paid on gross sales in excess of
                                                                                           $500 per square foot per year. Years 4 &
                                                                                           5: 4% of Gross Sales over $1,369,600. No
                                                                                           percentage rent shall be paid on gross
                                                                                           sales in excess of $520 per square foot
                                                                                           per year.
                                                                                      
   1.14                                                   Tenant's Expense Percentage.     4.2%                                    
                                                                     (4,280 / 101,952) 
                                                                                      
   1.15                                                               Use of Premises.    Coldwater Creek outlet store selling
                                                                          (Article 12)    Coldwater Creek branded men's,
                                                                                          women's, and children's clothing, as      

                                                                                          well as jewelry, home accessories, and    

                                                                                          gift items which are offered for sale in  

                                                                                          Coldwater Creek catalogs.  
                                                                                      
   1.16                                                           Tenant's Trade Name.    Coldwater Creek
                                                                          (Article 12) 
                                                                                      
   1.17                                                            Hours of Operation.    Monday through Saturday,
                                                                        (Section 13.1)    10:00 a.m. to 9:00 p.m.,
                                                                                          Sunday, 10:00 a.m. to 6:00 p.m.,  
                                                                                          except Christmas.                  
                                                                                      
   1.18                                                Advertising and Promotion Fund.    Initial annual contribution of $1.75
                                                                          (Article 31)    per square foot, subject to annual C.P.I.
                                                                                          adjustment, and a one-time grand   
                                                                                          opening assessment of $1.50 per    
                                                                                          square foot.                        
                                                                                      
   1.19                                                  Tenant's Address for Notices.    Coldwater Creek
                                                                                          One Coldwater Creek Drive
                                                                                          Sandpoint, Idaho  83864   
                                                                                      
   1.20                                                  Tenant's Address for Billing.    Coldwater Creek
                                                                                          One Coldwater Creek Drive 
                                                                                          Sandpoint, Idaho  83864    
                                                                                      
   1.21                                                Landlord's Address for Notices.    Seaside, LLC
                                                                                          1111 Main Street, Suite #700
                                                                                          Vancouver, Washington  98660 
                                                                                      
   1.22                                                                       Brokers.    Hanacek & Co.
                                                                                      
   1.23                                                                      Exhibits.    The following Exhibits are attached
                                                                                          hereto and made a part of this Lease. 


     EXHIBIT A - Legal Description of the Premises.
<PAGE>
 
     EXHIBIT B - Site Plan of the Center, showing the location of the Premises.

     EXHIBIT C - Construction Exhibit.

     EXHIBIT D - Center Rules and Regulations.

     EXHIBIT E - Sign Regulations.

     EXHIBIT F - Conditions Precedent to Liability of Landlord and Tenant.

     EXHIBIT G - Option to Renew.

     The foregoing Basic Provisions are an integral part of this Lease. The
references to exhibits and to other Sections designate locations in the Lease
that refer to the Basic Provisions and are for convenience only. In the event of
conflict between the Basic Provisions and other provisions of the Lease, the
Basic Provisions shall control.
<PAGE>
 
ARTICLE 2. PREMISES

     Landlord leases to Tenant and Tenant leases from Landlord the Premises
described in Section 1.4 above. Reference to the "Center" includes all of the
land identified as such on Exhibit B and the improvements thereon.

                            ARTICLE 3. DEFINITIONS

     As used in this Lease, the following words and phrases shall have the
following meanings:

     3.1       Accounting Period. For purposes of this Lease, Accounting Period
shall be defined as the calendar year commencing January 1 and terminating at
midnight on December 31.

     3.2       Common Area Operating Cost. The actual and reasonable net cost
and expense incurred by Landlord for the operation and maintenance of the
Center. Common Area Operating Cost includes, without limitation, a management
fee not to exceed five percent (5%) of the gross rental income from all tenants;
cleaning, planting, replanting, and replacing flowers and landscaping; water and
sewerage charges; maintenance, repair, and replacement of utility systems, roof,
and parking lots; line painting; periodic painting, repair and replacement of
exterior finishes; lighting exterior of the stores, monument, directional,
pylon, and other Common Area sign maintenance; wages, premiums for worker's
compensation insurance, unemployment taxes and social security taxes of
employees who directly perform services in connection with operation and
maintenance; personal property taxes, sales and use taxes on material,
equipment, supplies, and services purchased for maintenance; fees for required
licenses and permits; security fees; removal of ice, snow, rubbish, debris and
other refuse (but not including removal of tenants' garbage); seasonal
decorations, supplies and operation of loudspeakers and any other equipment
supplying music to the Common Areas; operation of public toilets; policing the
Common Areas and affording protection thereof against fire; reasonable straight-
line depreciation or rental of movable equipment used in the maintenance of the
Common Areas; and other similar direct costs properly chargeable to such
operation. There shall be excluded all capital and depreciation costs except as
provided above, interest, amortization, compensation of executives, all as
determined in accordance with generally accepted accounting principles.

     3.3       Common Areas. All areas and facilities within the Center that are
designated by Landlord from time to time for the general use and convenience of
Tenant and other tenants and landlords of the Center and their authorized
representatives and invitees. Common Areas may include any areas within the
Center outside of leased premises.

     3.4       Expiration. The coming to the end of the time specified in
Section 1.6 of this Lease as its duration.

     3.5       Gross Sales. The term "Gross Sales" as used in this Lease means
receipts from Gross Sales of Tenant and of all licensees, concessionaires, and
tenants of Tenant, from all business conducted upon or from the Premises by
Tenant and by all licensees, concessionaires, and tenants of Tenant, and whether
such sales be evidenced by check, credit, charge account, exchange, or
otherwise, and shall include, but not be limited to, the amounts received from
the sale of goods, wares, and merchandise and for services performed on or at
the Premises, together with the amount of all orders taken or received at the
Premises, whether such orders be filled from the Premises or elsewhere, and
whether such sales be made by means of merchandise or other vending devices on
the Premises. Gross Sales shall not include sales of merchandise for which cash
has been refunded, and allowances made on merchandise claimed to be defective or
unsatisfactory may be deducted from Gross Sales to the extent they have been
included in Gross Sales; and there shall be deducted from Gross Sales the sales
price of merchandise returned by customers for exchange, provided that the sales
price of merchandise delivered to the customer in exchange shall be included in
Gross Sales. Gross Sales shall not include the amount of any sales, use, or
excise tax imposed by any federal, state, municipal, or governmental authority
directly on Gross Sales and collected from customers provided that the amount
thereof is added to the selling price or absorbed therein, and paid by the
Tenant to such governmental authority. No franchise or capital stock tax and no
income or similar tax based upon income or profits as such shall be deducted
from Gross Sales in any event whatever for purposes of this computation. Each
charge or sale upon installment or credit shall be treated as a sale for the
full price in the month 
<PAGE>
 
during which such charge or sale shall be made, irrespective of the time when
Tenant shall receive payment (whether full or partial) therefor. Gross Sales
shall include any discount paid or payable to any firm or person for the use of
any credit system.

     3.6       Hazardous Material. As used herein, the term "Hazardous Material"
means any hazardous or toxic substance, material, or waste which is or becomes
regulated by any federal, state, or local governmental authority including, but
not limited to, those substances, materials, and wastes listed in the United
States Department Transportation Hazardous Materials Table (49 CFR 172.101) or
by the United States Environmental Protection Agency as hazardous substances (40
CFR Part 302) and any amendments thereto, any material or substance which is
defined as a "hazardous waste" pursuant to Section 1004 of the Federal Resource
Conservation and Recovery Act, 42 USC (S) 6903), or defined as a hazardous
substance pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 US (S) 9601 et seq. (42 USC (S) 9601)
together with petroleum products.

     3.7       Lease Year. A consecutive twelve (12) months period. The first
Lease Year shall commence on the Commencement Date (as hereinafter defined)
unless such date is not the first day of a month in which case the first Lease
Year shall commence on the first day of the month immediately following the
month in which the Term commences. Succeeding Lease Years shall commence on the
anniversary of the first day of the first Lease Year. The last Lease Year shall
end on the Termination of this Lease.

     3.8       Mortgage. Any deed of trust, mortgage, or other written security
device or agreement affecting the Premises and the note or other obligation
secured by it.

     3.9       Mortgagee. The beneficiary, mortgagee, secured party, or other
holder of a mortgage as defined herein.

     3.10      Substantial Completion. Completion of those items which are
Landlord's responsibility, except those minor items which do not materially
impair the useability of the Premises by Tenant.

     3.11      Tenant. Each and every person or party mentioned as a Tenant
herein, be the same one or more; and if there shall be more than one Tenant, any
notice required or permitted by the terms of this Lease may be given by or to
any one thereof, and shall have the same force and effect as if given by or to
all thereof. The licensees, concessionaires, and tenants of Tenant shall be
bound by the covenants and restrictions imposed upon Tenant notwithstanding the
absence of specific reference to such persons.

     3.12      Term. The period of time during which Tenant has a right to
occupy the Premises.

     3.13      Termination. The ending of the Term for any reason before
expiration.

                            ARTICLE 4. CONSTRUCTION

     4.1       Construction. Construction of the Premises shall be accomplished
in the manner described in Exhibit C. If the Premises have not already been
constructed, the same shall be constructed in accordance with the provisions of
Exhibit C. The Premises shall be deemed completed and possession delivered when
Landlord has substantially completed the improvements to be installed by
Landlord pursuant to Exhibit C. It is agreed that by occupying the Premises,
Tenant formally accepts the same and acknowledges that the Premises are in the
condition called for hereunder. In the event that any disagreement or dispute
arises between Landlord and Tenant with reference to the work to be performed or
whether or not the Premises is substantially complete, the certification of
Landlord's architect shall be conclusive and binding upon the parties.

     4.2       Substantial Completion. Landlord shall give Tenant written notice
of the expected date for "Substantial Completion" of Landlord's construction
obligations at least ten (10) days before that date. After Landlord notifies
Tenant of the date, Tenant may have the right to enter the Premises to commence
equipping and fixturing as long as such entry does not interfere with Landlord
or Landlord's
<PAGE>
 
contractor. The Premises shall be deemed ready for occupancy upon the expiration
of ten (10) days from the date of said notice and when Landlord has
Substantially Completed Landlord's work.

     4.3       Possession. When Tenant enters the Premises or takes possession
as provided in this Article, all the provisions of this Lease shall be in full
force and effect except for those provisions that expressly take effect on Term
commencement.

     4.4       Defects and Variances. Within ten (10) sixty (60) days after
Landlord has notified Tenant that Landlord's construction obligations have been
substantially completed, Tenant shall give Landlord a list of any contended
defects or variances from Landlord's construction obligations. Landlord will
immediately commence to complete or correct the items that it believes are
justified. If Tenant does not deliver the list within the ten (10) sixty (60)
day period, Tenant shall be deemed to have accepted the Premises. If Tenant
gives Landlord a list within the ten (10) sixty (60) day period, Tenant shall be
deemed to have accepted the Premises subject to such defects or variances.

     4.5       Failure to Take Possession. In the event that Landlord notifies
Tenant that the Premises are ready for delivery and Tenant fails to take
possession and to open the Premises for business fully fixtured, stocked, and
staffed prior to the date set forth in the Basic Provisions and prior to the
expiration of any grace period provided for in Exhibit C for the construction of
tenant improvements, then Landlord shall have the right, at its option, in
addition to any other remedy provided in this Lease to collect not only the
Monthly Minimum Rent but rental in an amount equal to twenty-five percent (25%)
of the per diem Monthly Minimum Rent, calculated on the basis of a thirty (30)
day month, per day for each business day that Tenant fails to commence to do
business. Such additional rental shall be deemed to be in lieu of any Percentage
Rent that might have been earned during the period in which Tenant fails to
open.

     4.6       Landlord's Failure to Deliver. If Landlord, for any reason
whatsoever (including but not limited to the causes described in Section 37.5
below), cannot deliver possession of the Premises to Tenant within sixty (60)
days of Lease execution, this Lease shall not be void or voidable and the
expiration date and Tenant's obligations hereunder (except the obligation to
commence paying Rental) shall not be affected nor shall Landlord be liable to
Tenant for any loss or damage, directly or indirectly, attributable to such
delay.

                                ARTICLE 5. TERM

     5.1       Commencement of Term. The Term shall commence upon completion of
the Notice Period provided in Section 1.5 above (the "Commencement Date"), or
upon opening of the Premises for business, whichever first occurs, and shall
continue for the period specified in Section 1.6 above. If the Commencement Date
is not the first day of a month, then the Term shall be deemed to commence on
the first day of the succeeding month; however, rent shall be due for any such
partial month.

     5.2       Commencement Date Agreement. Following commencement of the Term,
the parties shall immediately execute a supplement to this Lease stating the
Commencement Date.

     5.3       Holdover Tenancy. If Tenant remains in the Leased Premises after
the expiration or termination of this Lease, and has not given such prior
written notice to Landlord or obtained Landlord's consent, such continuance of
possession by Tenant will be deemed to be a month-to-month tenancy at the
sufferance of the Landlord terminable on thirty (30) day's notice at any time by
either party. All provisions of this Lease, except those pertaining to Term and
rent, will apply to the month-to-month tenancy. Tenant will pay Monthly Minimum
Rent in the amount equal to 150 percent (150%) of the Base Monthly Rent for the
last full calendar month during the Term and Percentage Rent shall be paid
within twenty (20) days after the end of each month. If Tenant intends to vacate
the Leased Premises on the lease expiration date, Tenant will give Landlord
ninety (90) days prior written notice of such intent to vacate.

     5.4       Early Termination. In the event Coldwater Creek's sales for
months 13 through 24 do not exceed $200 per square foot, Coldwater Creek will
have the one-time right to terminate this Lease with one hundred twenty (120)
days' written notice. In the event this Lease is terminated prior to the
<PAGE>
 
term expiration, Tenant shall reimburse Landlord the pro-rata share of the
additional tenant improvement cash allowance.

                 ARTICLE 6. PREPAID RENT AND SECURITY DEPOSIT

     6.1       Prepaid Rent. On or before execution of this Lease, Tenant has
deposited with Landlord the amount specified in Section 1.10 above as prepaid
rent for the period specified therein.

     6.2       Security Deposit. On or before execution of this Lease, Tenant
has deposited with Landlord the amount specified in Section 1.11 above, which is
a security deposit for the performance by Tenant of the provisions of this
Lease. If Tenant is in default, Landlord may, at its option without prejudice to
any other right or remedy, apply the security deposit, or any portion of it, to
cure the default or to compensate Landlord for all damage sustained by Landlord
resulting from Tenant's default. The security deposit is not an advance rental
deposit or a measure of Landlord's damages in case of Tenant's default. Tenant
shall immediately, on demand, pay to Landlord a sum equal to the portion of the
security deposit applied by Landlord as provided in this Article so as to
maintain the security deposit in the sum provided above. If Tenant is not in
default at the expiration or termination of the Term and when all rent and other
sums due to Landlord following expiration or termination are paid by Tenant,
Landlord shall return the security deposit to Tenant. Landlord's obligations,
with respect to the security deposit, are those of a debtor and not a trustee.
Landlord may maintain the security deposit separate and apart from Landlord's
general funds or can commingle the security deposit with Landlord's other funds.
Landlord shall not be required to pay Tenant interest on the security deposit.
<PAGE>
 
                                ARTICLE 7. RENT

     7.1       Initial Monthly Minimum Rent. Tenant shall pay to Landlord as
Monthly Minimum Rent the sum specified in Section 1.12 above per month in
advance on or before the first day of each month during the first year of this
Lease. Monthly Minimum Rent for the first month or portion of it shall be paid
on or before execution of this Lease and shall be prorated for a partial month.

     7.2       Payment of Percentage Rent. Tenant shall pay to Landlord the
Percentage Rent computed pursuant to the terms of this Lease. Percentage Rent
shall be paid quarter annually commencing on the fifteenth (15th) day after the
last day of the first three (3) months of the first Lease Year and on the
fifteenth (15th) day of each third (3rd) month thereafter. The last payment of
Percentage Rent shall be made on the fifteenth (15th) day after the expiration
or termination of the Term and shall be for a rent period ending on the last day
of the Term.

     7.3       Percentage Rent Computation. The amount of each quarterly payment
of Percentage Rent shall be equal to Tenant's Percentage Rent Rate specified in
Section 1.13 of the Gross Receipts for the immediately preceding Percentage Rent
Period in excess of one-quarter (1/4) of the annual Gross Receipts as specified
in Section 1.13. Percentage Rent Periods are successive three (3) month periods
in each Lease Year, the first such Period commencing on the first day of the
first full month of the Lease Year. For the purpose of computing the amounts
payable as Percentage Rent for the first Percentage Rent Period and the first
Lease Year, the Gross Receipts received during the first partial month, if any,
shall be added to the Gross Receipts for the first Percentage Rent Period. The
amount of the last payment of Percentage Rent, if for less than a full
Percentage Rent Period, shall be a sum equivalent to the amount, if any, by
which the percentage designated above of the Gross Receipts for the remaining
Term following the last full Percentage Rent Period exceeds the Monthly Minimum
Rent payable for the same remainder of the Term.

     7.4       Adjustment of Percentage Rent Payments. If at the end of any
Lease Year the total amount of Percentage Rent paid by Tenant exceeds the total
amount of Percentage Rent required to be paid for such Lease Year, Tenant shall
receive a credit equivalent to such excess which shall be deducted from
subsequent Percentage Rent payments. If, at the end of any Lease Year or at the
time of the last payment of Percentage Rent following expiration or Termination,
the total amount of the Percentage Rent paid by Tenant for such Lease Year or
partial Lease Year is less than the total amount of Percentage Rent required to
be paid for such Lease Year or partial Lease Year, Tenant shall pay such deficit
to Landlord at the time the annual or final report is submitted by Tenant to
Landlord as required by Section 8.2. Any excess payment of Percentage Rent which
has not been returned due to the amount of subsequent Percentage Rent payments
available for credit, shall be paid to Tenant at the time the last payment of
Percentage Rent would be due.

     7.5       Interest, Late Payment, and Check Charges. All rent, additional
rent, and other sums payable by Tenant to Landlord under this Lease shall bear
interest at the rate of fifteen percent (15%) per annum from ten (10) days from
the date due until paid. In addition to interest and because of administrative
expenses incident to delinquent payments, Tenant shall pay to Landlord a late
charge equal to five percent (5%) of the amount not paid when within ten (10)
days from the date due. The payment of such late charge shall not excuse or cure
any default by Tenant under this Lease. Tenant shall pay to Landlord the sum of
fifty ($50) dollars for each check given by Tenant to Landlord that is not
honored for payment (NSF check). Interest, late charges, and NSF check charges
shall be due from Tenant to Landlord without notice or demand.

     7.6       Payment. All rental and other amounts payable by Tenant hereunder
shall be paid without offset, deduction, notice or demand.

     7.7       Place of Payment. All rent, additional rent, and other sums
required by this Lease to be paid by Tenant to Landlord shall be paid to
Landlord, without deduction or setoff, at its address stated in Section 1.21
above or at such other place as the Landlord may designate from time to time in
writing.

               ARTICLE 8. RECORDING AND REPORTING GROSS RECEIPTS
<PAGE>
 
     8.1       Tenant's Records. For the purpose of ascertaining the amount
payable as rent: Tenant agrees to prepare and keep on the Premises or at its
head office for a period of not less than two years following the end of each
Lease Year adequate records which shall include a record of inventories and
receipts of merchandise at the Premises, and daily detailed tabulations of all
Gross Receipts and other transactions on or from the Premises by Tenant and any
licensees, concessionaires, and tenants of Tenant conducting any business upon
or from the Premises. Tenant shall record at the time of sale, in the presence
of the customer, all receipts from sales or other transactions whether for cash
or credit in a cash register or in cash registers having a cumulative total
which shall be sealed in a manner approved by Landlord, and having such other
features as shall be reasonably required by Landlord to effectuate the accurate
tabulation of Gross Receipts. Tenant further agrees to keep on the Premises or
at its head office for at least two years following the end of each calendar
year the gross income, sales, and occupation tax returns with respect to said
Lease Years and all pertinent original sales records. Pertinent original sales
records shall include: (a) cash register tapes, including tapes from temporary
registers; (b) serially numbered sales slips; (c) the originals of all mail
orders at and to the Premises; (d) the original records of all telephone orders
at and to the Premises; (e) settlement report sheets of transactions with
tenants, concessionaires, and licensees of Tenant; (f) the original records
showing that merchandise returned by customers was purchased at the Premises by
such customers; (g) memorandum receipts or other records of merchandise taken
out on approval; (h) such other sales records, if any, which would normally be
examined by an independent accountant pursuant to accepted auditing standards in
performing an audit of Tenant's sales; and (i) the records specified in (a) and
(h) above of tenants, concessionaires, or licensees of Tenant. Landlord and
Landlord's authorized representative shall have the right to examine Tenant's
records aforesaid at any reasonable time.

     8.2       Statement of Gross Receipts. Tenant shall submit to Landlord on
or before the day specified in Section 7.2 for payment of Percentage Rent at the
place then fixed for the payment of rent, a written statement signed by Tenant
and certified by Tenant to be true and correct showing in reasonably accurate
detail, the amount of Gross Receipts for the preceding Percentage Rent Period.
Tenant shall submit to the Landlord on or before the sixtieth day following the
end of each Lease Year and on or before the thirtieth day following the
expiration or termination of the Term, at the place then fixed for the payment
of rent a written statement signed by Tenant, and certified by Tenant to be true
and correct, showing in reasonable detail, satisfactory in scope and substance
to Landlord, the amount of Gross Receipts during the preceding Lease Year or
partial Lease Year. The statements referred to herein shall be in such form and
style and contain such details and breakdown as the Landlord may reasonably
request. If the statement is not received in the time manner specified, it is
automatically assumed that Tenant's Gross Sales are twice the gross receipts as
set forth in Section 1.10 and will be calculated by the Landlord as such.

     8.3       Monthly Reports. In addition to the written statements required
by Section 8.2, Tenant shall provide to Landlord in the form and at the times
requested by Landlord, uncertified monthly reports of Gross Receipts. The
information may be used, among other purposes, to provide monthly statistical
reporting to tenants concerning sales activity in the Premises but the
information and any reports will be treated in such a manner as to retain the
confidentiality of the information, provided, however, Landlord shall be
permitted to divulge the contents of any such statements in connection with any
contemplated sales, transfers, assignments, encumbrances, or financing
arrangements of Landlord's interest in the Center or in connection with any
administrative or judicial proceedings in which Landlord is involved where
Landlord may be required to divulge such information.

     8.4       Right to Examine Books. The acceptance by the Landlord of
payments of Percentage Rent shall be without prejudice to the Landlord's right
to an examination of the books and records required to be kept by Tenant
hereunder in order to verify the amount of Gross Receipts reported by Tenant.

     8.5       Audit. At its option, Landlord may cause, at any reasonable time,
an audit to be made of Tenant's entire business affairs and records relating to
the Premises for the period covered by any reporting period of the Tenant as
above described. If such audit shall disclose a liability for rent to the extent
of two percent (2%) or more in excess of the rentals theretofore reported and
paid by Tenant for the period or periods in question, or if such audit shows
that Tenant has failed to maintain the books of account and records required by
this Article 8 so that Landlord is unable to verify the accuracy of Tenant's
statement, Tenant shall promptly pay to Landlord the cost of said audit in
addition to the
<PAGE>
 
deficiency, which deficiency shall be payable in any event, and, in addition,
Landlord, at Landlord's option, may terminate this Lease at any time during the
following six (6) month period upon thirty (30) days prior written notice to
Tenant of such termination.

     If at any time Tenant causes an audit of Tenant's business to be made by a
certified public accountant or a public accountant, Tenant shall, without cost
or expense to Landlord, cause such accountant to furnish Landlord, within thirty
(30) days after completion of such audit, with a copy of such audit and with a
certificate of Gross Sales for the period covered by such audit.

                   ARTICLE 9. TAXES AND LANDLORD'S INSURANCE

     9.1       Real Property Taxes and Insurance Defined. Beginning on the
Commencement Date and continuing during the Term, Tenant shall pay to Landlord
as additional rent an amount equal to Tenant's Expense Percentage of the real
property taxes and general and special assessments or installments thereof which
are now or hereafter may be assessed against the Center ("Real Property Taxes")
and the cost to Landlord of the insurance maintained by Landlord in connection
with the Center ("Insurance"). Such insurance includes, but is not limited to,
public liability, insurance, casualty insurance on the buildings and other
improvements in the Center, and such additional insurance as may be reasonably
determined by Landlord. If Landlord self insures with respect to part or all of
its liability insurance, the cost to Landlord shall be deemed to include the
reasonable cost of premiums for such insurance as would otherwise have been
purchased by Landlord.

     9.2       Payment. Tenant shall pay to Landlord on or before the first day
of each month during the Term a sum estimated by Landlord to be the monthly
amount of Real Property Taxes and Insurance payable by Tenant. Landlord may
adjust the estimated sum not more frequently than once every three months and
upon written notice to Tenant at least ten (10) days prior to the date that
Tenant's payment is due.

     9.3       Annual Adjustment. Landlord shall furnish to tenant following the
end of each Accounting Period a statement of the actual Real Property Taxes and
Insurance payable by Tenant for the Accounting Period and the payments made by
Tenant during the Period. If the sum payable exceeds the payments made by
Tenant, Tenant shall pay Landlord the deficiency within twenty (20) days after
receipt of the statement. If Tenant's payments exceed the sum payable, the
excess shall be a credit that may be offset against subsequent monthly payments
of Real Property Taxes and Insurance until the sum of such payments so offset
equals the sum of the credit. The Real Property Taxes and Insurance payable by
Tenant for Accounting Periods at the commencement and expiration or termination
of the Lease shall be prorated.

     9.4       Additional and Substitute Taxes. If at any time during the Term a
state or any political subdivision of a state, including any county, city,
public corporation, district, or any other political entity or public
corporation of a state levies or assesses against Landlord a tax, fee, or excise
on rents, on the square footage of the Premises, on the act of entering into
this Lease, or on the occupancy of Tenant, or any other tax, fee, or excise,
however described, as a direct substitution in whole or in part for, or in
addition to, any real property taxes, Tenant shall pay before delinquency that
tax, fee, or excise. Tenant's share of any such tax, fee, or excise shall be
substantially the same as Tenant's Expense Percentage of Real Property Taxes as
provided in this Lease.

                        ARTICLE 10. TAXES ON LEASEHOLD

     10.1      Responsibility for Taxes. Tenant shall be responsible for and
shall pay before delinquency all municipal, county, or state taxes assessed
during the Term against any leasehold interest, moveable trade fixture, and
personal property of any kind, owned by or placed in, upon, or about the
Premises by the Tenant, whether or not such assessment is made against Tenant or
against Landlord, and shall provide Landlord with proof of payment, if
requested.

     10.2      Inclusion With Real Property Taxes. If any taxes described in
Section 10.1 are levied against Landlord or the Center, or if the assessed value
of the Center is increased by the inclusion of a value placed on Tenant's
property, and if Landlord pays the taxes on any of these items or the taxes
based on the increased assessment of these items, Tenant, on demand, shall
immediately reimburse
<PAGE>
 
Landlord for the sum of the taxes levied against Landlord or the proportion of
such taxes resulting from the increase in Landlord's assessment.

                ARTICLE 11. CHANGES AND ADDITIONS TO THE CENTER

     Landlord reserves the right to make alterations to, to make additions to,
to build additional stories on or to build adjoining the Center, provided that
such construction shall not materially interfere with the physical use to be
made of the Premises by Tenant. Landlord also reserves the right to construct
other buildings or improvements in the Center from time to time and to make
alterations or additions to the buildings and improvements and to build
additional stories on any such building or buildings and to build adjoining same
and to construct double deck or elevated parking facilities.

                          ARTICLE 12. USE OF PREMISES

     12.1      Use of Premises. Tenant shall use the Premises solely for the
purpose of conducting the business described in Section 1.15 above. Landlord has
entered into this Lease with Tenant in order to obtain for the benefit of the
entire Center the unique attraction of Tenant's trade name and the unique
merchandising mix and product line associated with Tenant's business described
above and in consideration of any restrictions in mortgages and other leases.
Tenant will not therefore use, or permit the use of, the Premises for any other
business or purpose. The foregoing restriction on use of the Premises, the
restriction on change of name in Section 12.2, and the restriction on
assignment, sublease, and other transfers in Articles 28 and 29 are expressly
agreed to by Tenant as an inducement to Landlord to lease to Tenant.

     12.2      Change of Name. Tenant agrees not to change the trade name of the
business operated in the Premises without the prior written permission of
Landlord.

     12.3      Storage and Office Space. Tenant shall warehouse, store, or stock
in the Premises only such goods, wares, and merchandise as Tenant intends to
offer for retail sale at, in, from, or upon the Premises. This shall not
preclude occasional emergency temporary transfer of merchandise from the other
stores of Tenant, if any, not located in the Center. Tenant shall use for
office, clerical, or other non-selling purposes only such space in the Premises
as is from time to time reasonably required for Tenant's business in the
Premises. No auction, fire, bankruptcy, or going out of business sales may be
conducted in the Premises without the prior written consent of Landlord.

                        ARTICLE 13. BUSINESS OPERATION

     13.1      Discount Merchandise. At all times during the Term, predominantly
all of Tenant's merchandise shall be for sale at prices which are at least
twenty-five (25%) percent less than the normal retail price of such merchandise.

     13.2      Operation of Business and Obligation to Operate. Tenant shall
maintain and operate the business during the entire Term with due diligence and
in a first-class manner, so as to produce the maximum rent to Landlord under the
Percentage Rent provisions hereof from Tenant's operation and the operations of
other tenants of Landlord in the Center. Subject to inability by reason of
strikes or labor disputes, Tenant shall carry at all times on the Premises a
stock of merchandise of such size, character, and quality and shall provide
staffing as is customary for a factory outlet store. Tenant shall conduct its
business in the Premises during the hours and days specified in Section 1.17
above. Tenant may maintain longer hours or days upon prior written approval of
the Landlord, but in no event shall the hours or days be less than provided in
this Lease. Landlord's written approval of longer hours or days may be
conditioned upon Tenant paying for all additional expenses thereby incurred by
Landlord and upon any other reasonable conditions requested by Landlord. Tenant
shall install and maintain at all times displays of merchandise in the Premises
display windows. Display windows and signs, if any, shall be well lighted during
the hours from sundown to eleven (11) o'clock p.m. unless prevented by cause
beyond the control of Tenant. Lights adequate for security purposes shall be
illuminated on the Premises at all times between sundown and sunrise.

     13.3      Failure to Open or Operate. Because of the difficulty or
impossibility of determining Landlord's damages by way of loss of the
anticipated Percentage Rent from Tenant or other tenants or 
<PAGE>
 
occupants in or adjoining the Center, or by way of loss of value in the property
because of diminished salability or mortgageability or adverse publicity or
appearance by Tenant's actions, should Tenant fail to open for business, vacate,
abandon, or desert the Premises, or cease operating or conducting Tenant's
business therein (except where the Premises are rendered untenantable by reason
of fire, casualty, permitted repairs or alterations, or other causes beyond
Tenant's control), or fail or refuse to maintain business hours on such days or
nights or any part thereof as provided herein, then and in any of such events
Landlord shall have the right, at its option, to collect not only Monthly
Minimum Rent and other rents and charges herein reserved, but also additional
rent equal to one-quarter (1/4) of the Monthly Minimum Rent reserved for the
period; and such additional rent shall be deemed to be liquidated damages in
lieu of any Percentage Rent that might have been earned by Landlord during such
period and in addition at Landlord's option to treat such failure to do business
as an event of default.

                        ARTICLE 14. COMPETITION RADIUS

     During the Term neither Tenant, its agents, guarantor, or affiliated or
subsidiary companies, directly or indirectly, will own, lease, or operate a
similar or competing business within a twenty-five (25) mile radius. Twenty-five
(25) mile radius means a straight line distance of twenty-five (25) miles
measured from any point in the Center. If Tenant violates the foregoing
restriction, Landlord may elect without limitation on other remedies to include
the Gross Receipts from such other business with the Gross Receipts derived from
or upon the Premises for the purpose of computing Percentage Rent payable under
this Lease and the provisions of Article 9 shall be applicable to such other
business.

                       ARTICLE 15.  HAZARDOUS MATERIALS

     15.1      Hazardous Use. Tenant shall not generate, store, use, or permit
the generation, storage, or usage of any Hazardous Material upon the Premises by
Tenant, its agents, employees, contractors, or invitees without the prior
written consent of Landlord, which consent may be withheld if Tenant does not
demonstrate to Landlord's reasonable satisfaction that such Hazardous Material
is necessary or useful to Tenant's business and will be used, kept, and stored
in a manner that complies with all laws regulating any such Hazardous Material
so brought upon or used or kept in or about the Premises. Tenant shall not cause
or permit to be discharged into the plumbing or sewage of the Premises or the
Building any Hazardous Material.

     15.2      Compliance. Without limiting or otherwise qualifying any
provision hereof, Tenant shall, at its sole cost and expense, comply with any
and all rules, regulations, codes, ordinances, statutes, and other requirements
of any lawful governmental authority respecting Hazardous Material, pollution,
harmful chemicals, and other materials in connection with Tenant's activities on
or about the Premises and those of its agents, employees, contractors, or
invitees. Tenant specifically agrees to comply with such requirements relating
to the handling, use, storage, and disposal of Hazardous Material and other
materials which are considered by any governmental authority as harmful,
dangerous, toxic, flammable, or otherwise deserving special care. In the
furtherance of, and not in limitation of, Tenant's obligations hereunder,
throughout the Term, Tenant shall do or cause to be done all things necessary to
preserve and keep in full force and effect permits required for the conduct of
its business and operations from the time of commencement of this Lease until
its expiration or termination.

     15.3      Cost of Cleanup. Tenant shall pay the full cost of any cleanup,
remedial, removal, or restoration work performed on or about the Premises as
required by any governmental authority in order to remove, neutralize, or
otherwise treat Hazardous Material of any type whatsoever directly or indirectly
placed by Tenant or its agents, employees, or contractors on or about the
Premises.

     15.4      Tenant's Liability. Tenant shall be solely responsible for and
shall indemnify, defend, and hold Landlord harmless from any and all claims,
judgments, damages, fines, liabilities, demands, causes of action, proceedings,
hearings, losses, including without limitation, diminution in value of the
Premises or Building, damages for the loss or restriction on use of rentable or
usable space or of any amenity of the Premises or Building, damages arising from
any adverse impact on marketing of space, and sums paid in settlement of claims,
attorney's fees, consultant fees, and expert fees, which arise during or after
the Term as a result of contamination by Hazardous Material from Tenant's Use or
activities, or the use or activities of Tenant's agents or contractors relating
to the storage, placement or
<PAGE>
 
use of Hazardous Material (hereinafter collectively referred to as "Claims").
This indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal, or restoration work required by any federal, state, or local
governmental agency or political subdivision because of Hazardous Material
present in the soil or ground water on or under the Building or Premises.
Without limiting the foregoing, if the presence of any Hazardous Material on the
Building or Premises caused or permitted by Tenant or its agents or contractors
results in any contamination of the Building or Premises, Tenant shall promptly
take all actions at its sole expense as are necessary to return the Building or
Premises to the condition existing prior to the release of any such Hazardous
Material to the Building or Premises, provided that Landlord's approval of such
actions shall first be obtained. The foregoing indemnity shall survive the
expiration or earlier termination of this Lease. Tenant agrees to defend all
such Claims on behalf of Landlord with counsel reasonably acceptable to
Landlord. Landlord hereby represents and warrants that, as of the day Landlord
delivers possession of the Premises to Tenant, there are no Hazardous Materials
in, on, or about the Premises. If the presence of any Hazardous Materials in the
Premises, which were placed in the Premises or the Center by Landlord, its
agents, employees, or contractors, or by any previous occupant of the Premises,
should result in contamination of the Premises or the Center or if contamination
of the Premises or of the Center by any Hazardous Material otherwise occurs for
which Landlord is otherwise legally liable to Tenant or damage resulting
therefrom, Landlord shall indemnify and save Tenant harmless, and, at Tenant's
option, defend Tenant and its agents, employees, officers, and directors, if
any, from any and all claims, demands, damages, expenses, fees, costs, fines,
penalties, proceedings, actions, causes of action, and losses of any and every
kind and nature, including without limitation, diminution in value of the
Premises, damages for the loss of restriction on use of the rentable or usable
space, or of any amenity of the Premises or any amenity of the Center, and
reasonable attorneys' fees, which may arise during or within two (2) years after
the Lease Term or any extension thereof as a result of such contamination. This
includes, without limitation, costs and expenses incurred in connection with any
investigation of site conditions or any cleanup, remediation, removal, or
restoration work required by any federal, state, or local governmental agency or
political subdivision because of Hazardous Materials present on or about the
Premises (excluding those Hazardous Materials that were caused or permitted,
knowingly or unknowingly, by Tenant to be brought or remain upon or kept or used
in or about the Premises). Without limiting the foregoing, if the presence of
any Hazardous Material on or about the Premises or the Center, caused or
permitted by Landlord, results in any contamination of the Premises, Landlord
shall, at its sole expense, promptly take all action as required by law to
return the Premises or the Center to the condition existing prior to the
introduction of any such Hazardous Materials to the Premises or the Center.

     15.5      Inspection. In addition to any other right of inspection
contained herein, Landlord and its agents shall have the right, but not the
duty, to inspect the Premises at any time to determine whether Tenant is
complying with the terms of this Lease. If Tenant is not in compliance with this
Lease, Landlord shall have the right to immediately enter upon the Premises to
remedy any contamination caused by Tenant's failure to comply notwithstanding
any other provision of this Lease. Landlord shall use its best efforts to
minimize interference with Tenant's business but shall not be liable for any
interference caused thereby.

                           ARTICLE 16. COMMON AREAS

     16.1      Use of Common Areas. The Common Areas shall at all times be
subject to the exclusive control and management of Landlord. Landlord shall have
the right from time to time to establish, modify, and enforce reasonable rules
and regulations with respect to all such facilities and areas. All rules and
regulations and other matters affecting the customers and patrons of Tenant
shall apply equally and without discrimination to all persons entitled to the
use of the common area. Landlord shall have the right to change the area, level,
location, and arrangement of such facilities and areas; to close temporarily all
or any portion of such areas or facilities; to discourage non-customer parking;
and to do and perform such other acts in and to said areas and facilities as the
Landlord shall determine to be advisable with a view to the improvement of the
convenience and use thereof by Tenants and their authorized representatives and
invitees.

     16.2      Solicitation of Business. Neither Tenant nor the employees,
agents, concessionaires, licensees, or tenants of Tenant shall solicit business
in the parking or other Common Areas, nor shall
<PAGE>
 
Tenant distribute any hand bills or other advertising matter on automobiles
parked in the parking areas or in the other Common Areas.

                    ARTICLE 17. COMMON AREA OPERATING COST

     17.1      Tenant's Obligation. Beginning on the Commencement Date and
continuing during the Term, Tenant shall pay to Landlord as additional rent
Tenant's Expense Percentage of the Common Area Operating Cost, hereinafter
defined.

     17.2      Payment. Tenant shall pay to Landlord on or before the first day
of each month during the Term a sum determined as follows: Landlord shall
estimate the Common Area Operating Cost for the current Accounting Period based
upon the Common Area Operating Cost for the preceding Accounting Period and the
Landlord's reasonable estimate of anticipated increase or decrease in the Common
Area Operating Cost; Landlord shall divide the estimate by twelve (12) and apply
the percentage described in Section 17.1 above. Landlord may adjust the
estimated Common Area Operating Cost not more frequently than once every three
months and upon written notice to Tenant at least ten (10) days prior to the
date that Tenant's payment is due. For the first Accounting Period that the
Center is in operation, the sum used for the purpose of computing Tenant's
monthly payment shall be based on Landlord's estimate of the actual cost for the
period.

     17.3      Annual Adjustment. Landlord shall furnish to Tenant following the
end of each Accounting Period a statement of the actual Common Area Operating
Cost for the Accounting Period and a statement of the sum paid by Tenant
attributable in the Accounting Period. If Tenant's share of the Common Area
Operating Cost for the Accounting Period exceeds payments therefor made by
Tenant, Tenant shall pay Landlord the deficiency within twenty (20) days after
receipt of the statement. If Tenant's payments for the Common Area Operating
Cost exceed Tenant's share of the Common Area Operating Cost, the excess shall
be a credit that may be offset against subsequent monthly payments therefor
until the sum of such payments so offset equals Tenant's credit.

                     ARTICLE 18. FIXTURES AND ALTERATIONS

     18.1      Tenant's Fixtures and Improvements. All fixtures, trade or
otherwise, installed by Tenant shall be new or completely reconditioned. Tenant
shall not make nor cause to be made any alterations or additions to the
Premises, nor install nor cause to be installed on the Premises any trade
fixtures, exterior signs, floor covering, interior or exterior lighting,
plumbing fixtures, shades, or awnings or other fixtures without the prior
written consent of Landlord. Any alterations or improvements made by Tenant
shall be at Tenant's sole expense. Tenant shall present to Landlord plans and
specifications for such work at the time approval is sought. Landlord may
require Tenant to provide Landlord with a performance and payment bond prior to
commencing any work.

     18.2      Surrender of Improvements and Fixtures. All alterations and
additions made by Tenant, or made by the Landlord on the Tenant's behalf by
agreement under this Lease, and all fixtures, of whatever kind or type (except
moveable trade fixtures) shall remain on and be surrendered with the Premises
upon the expiration or termination of this Lease, except that Landlord may elect
within thirty (30) days before expiration of the Term, or within five (5) days
after Termination to require Tenant to remove any part or all of such
alterations, additions, or fixtures. Removal by Tenant and restoration required
pursuant to the terms of this Lease shall be completed within fifteen (15) days
of notice from Landlord or upon expiration or Termination, whichever occurs
last.
                   ARTICLE 19. SIGNS, AWNINGS, AND CANOPIES

     Tenant will neither place nor suffer to be placed or maintained on any
exterior door, wall, or window of the Premises any sign, decoration, awning, or
canopy, or advertising matter or other thing of any kind without Landlord's
prior written approval and consent. All signs of Tenant shall conform to the
sign regulations in Exhibit E to the extent applicable. Landlord may remove any
item placed in violation of this Article without liability to Tenant and without
affecting any other remedies provided in this Lease. Tenant further agrees to
maintain such sign, awning, canopy, decoration, lettering, advertising matter,
or other thing as may be approved in good condition and repair at all times.
<PAGE>
 
                        ARTICLE 20. CONSTRUCTION LIENS

     20.1      Covenant Against Liens. Tenant shall pay all costs for
construction done by it or caused to be done by it on the Premises as permitted
by this Lease. Tenant shall keep the building, other improvements, and land, of
which the Premises are a part, free and clear of all construction liens
resulting from construction done by or for Tenant.

     20.2      Right to Contest Liens. Tenant shall have the right to contest
the correctness or the validity of any lien if, within five (5) days of receipt
of written demand by Landlord, Tenant procures and records a lien release bond
in the manner required by the law of the state in which the Premises are located
sufficient to remove such lien from the Center. The bond shall provide for the
payment of any sum that the claimant may recover on the claim including costs
and attorney fees.

                     ARTICLE 21. MAINTENANCE AND UTILITIES

     21.1      Tenant's Maintenance. Tenant shall replace, repair, and maintain
in good order and condition (including periodic painting as reasonably
determined by Landlord) the Premises including, without limitation, storefronts,
window cases and window frames, doors and door frames, security grilles or
similar enclosures, all partitions, fixtures, equipment and appurtenances
thereof (including lighting, heating, air conditioning system, and plumbing
fixtures, utility pipes and conduits to a point of common connection) and all
items of repair, maintenance and improvement or reconstruction as may at any
time be required by a governmental agency having jurisdiction thereof. Tenant
shall also repair any damage in connection with burglary or forcible entry into
the Premises. All glass, both exterior and interior, is at the sole risk of
Tenant, and any glass broken shall be promptly replaced by Tenant with glass of
the same kind, size, and quality. Tenant's obligations under this Section 21.1
shall not include repair and replacement of the structural portions of the
building in which the Premises are situated including foundations, structural
floors, structural integrity of walls and structural columns, the roof, and
utility pipes and conduits beyond a common point of connection. Tenant shall
purchase and maintain equipment maintenance contracts with licensed and bonded
contractors, in form and with contractors satisfactory to Landlord, covering all
of the mechanical systems including heating and ventilating equipment. Tenant
shall deliver copies of such contracts to Landlord within twenty (20) days after
commencement of this Lease and thereafter shall deliver copies of renewal or
replacement contracts within twenty (20) days of expiration of any such
contract. If Tenant fails to comply with this requirement, Landlord may obtain
such contract or contracts and charge the cost to Tenant, together with twenty
percent (20%) overhead, as additional rent.

     21.2      HVAC Maintenance. Landlord reserves the right to negotiate a
competitively priced quarterly HVAC maintenance contract for the Center. Tenant
to pay its pro rata for units serviced, which cost shall be included as part of
Tenant's monthly share of the Common Area Operating Cost.

     21.3      Landlord's Remedies. If Tenant refuses or neglects to repair the
Premises as required by Section 21.1 to the reasonable satisfaction of Landlord
within twenty (20) days after written demand, Landlord may make such repairs
without liability to Tenant for any loss or damage that may accrue to Tenant's
merchandise, fixtures, or other property or to Tenant's business by reason
thereof, and upon completion thereof, Tenant shall pay Landlord's costs for
making such repairs, plus twenty percent (20%) overhead, upon presentation of a
bill therefor. Tenant's obligation to repair is absolute and not conditioned
upon Landlord's notice as above provided.

     21.4      Tenant's Liability for Damage. Tenant shall be liable for any
damage to the buildings and other improvements comprising the Center, including
without limitation structural portions, resulting from the acts or omissions of
Tenant, Tenant's representatives or invitees or in any manner, directly or
indirectly, from Tenant's business conducted on the Premises. If Landlord is
required to make repairs to such property because of such damage, Tenant shall
pay Landlord's costs of making the repairs, plus twenty percent (20%) overhead,
upon presentation of a bill therefor.

     21.5      Utilities and Garbage. Tenant shall be solely responsible for and
promptly pay all charges for garbage collection services, heat, water, sewer,
gas, electricity, or any other utility used or consumed in the Premises.
Landlord has the right to supply garbage collection services, heat, water,
sewer, gas, electricity, or any other utility used or consumed in the Premises.
Tenant agrees to
<PAGE>
 
purchase and pay for the same at the rates charged other users in the
Center. In no event shall Landlord be liable for an interruption or failure in
the supply or any such utilities to the Premises.

                       ARTICLE 22. SURRENDER OF PREMISES

     22.1      Surrender of Premises. At the expiration or Termination of this
Lease, Tenant shall surrender to Landlord the Premises and all of Tenant's
alterations, additions, improvements, and fixtures (except moveable trade
fixtures) and such alterations, additions, improvements, and fixtures that
Tenant is obligated to remove under the provisions of Section 18.2, broom clean
and in good condition, except for ordinary wear and tear occurring after the
last necessary maintenance made by Tenant and destruction of the Premises
covered by Article 25. At the same time, Tenant shall remove all of its personal
property and moveable trade fixtures, shall surrender all keys for the Premises
to Landlord at the place then fixed for the payment of rent and shall inform
Landlord of all combinations on locks, safes, and vaults, if any, in the
Premises. Tenant shall perform all restoration made necessary by the permitted
or required removal of property by the date of expiration or Termination or any
later date allowed under Section 18.2.

     22.2      Property Left on Premises. Landlord may elect to retain or
dispose of in any manner any property that Tenant is allowed or required by this
Lease to remove from the Premises that Tenant does not remove within the time
provided in this Article and Section 18.2 by giving ten (10) days notice to
Tenant. Title to any such property that Landlord elects to retain or dispose of
shall vest in Landlord upon expiration of the ten (10) day period. Tenant waives
all claims against Landlord for any damage to Tenant resulting from Landlord's
retention or disposition of any such property. Tenant shall be liable to
Landlord for Landlord's costs for removing and storing any such property, and
after Landlord gives notice as provided herein that Landlord may dispose of the
property, Tenant shall be liable for Landlord's costs for such disposition.

     22.3      Failure to Surrender. If Tenant fails to surrender the Premises
and complete removal and restoration work, if any is required, within the time
limits provided herein, Tenant shall indemnify Landlord against claims or loss
resulting from such delay, including without limitation, any claims made by any
succeeding tenant for such delay. Tenant's obligations to observe or perform the
requirements of this Article shall survive the expiration or Termination of this
Lease.

                   ARTICLE 23. INDEMNIFICATION AND INSURANCE

     23.1      Indemnity. Tenant agrees to indemnify and save Landlord harmless
from all claims and demands of any and every character that may be made,
presented, or allowed against Landlord by reason or on account of any injuries
or damage received or sustained from the date hereof by any person or property
arising out of or related to any activity of Tenant on the Premises, or any
condition of the Premises in the possession of or under the control of Tenant,
and including without limitation, claims, loss, or liability arising during or
after the Term as a result of contamination by Hazardous Material (defined in
Article 3) as a result of Tenant's, or Tenant's agent's or contractor's use or
activities, but excluding any claims, loss, or liability which may be solely
caused by Landlord's negligence or failure to effect any repair or maintenance
required of Landlord by this Lease; and in the event that any suit or action for
damages resulting therefrom shall be brought against Landlord by any person
whomsoever, Tenant agrees at Tenant's own cost and expense to defend Landlord
against any such suit or action and all appeals therefrom, to satisfy and
discharge any judgment or decree that may be awarded against Landlord in any
such proceeding, and to pay all costs, expenses, and reasonable attorney fees
incurred on any appeal in such litigation. Without limiting the foregoing, if
the presence of any Hazardous Material caused or permitted by Tenant or its
agents or contractors results in any contamination, Tenant shall promptly take
all actions at its sole expense as are necessary to return the contaminated
property to the condition existing prior to the release of any such Hazardous
Material, provided that Landlord's approval of such actions shall first be
obtained, which approval shall not be unreasonably withheld so long as such
actions would not potentially have any material adverse long-term or short-term
effect. The foregoing indemnity shall survive the expiration or earlier
termination of this Lease. In addition to the foregoing, except for Tenant's
negligence, Landlord does hereby indemnify and hold harmless Tenant from and
against all claims, liabilities, damages, causes of action, suits, judgments,
costs or expenses (including reasonable attorneys' fees) arising from an
incident in, on, or about the Center or Common Area or any other space under the
control and supervision of Landlord, or
<PAGE>
 
arising out of any willful misconduct or negligence of Landlord, its agents,
licensees, employees, or contractors in the Center, Common Area, or in the
Premises. In the event any such action is brought against Tenant by reason of
any such claim, Landlord shall defend at its own cost and expense such action or
proceeding with counsel reasonably satisfactory to Tenant.

     23.2      Tenant's Liability Insurance. Tenant shall, at its sole cost and
expense, maintain public liability and property damage insurance against
liability for injuries to persons and property with respect to the Premises and
the business operated by Tenant and by any licensee, concessionaires, and
tenants of Tenant, with, subject to the provisions of 23.7 below, a single limit
of one million ($1,000,000.00) dollars for any one occurrence. Such insurance
policy or policies of Tenant shall name Landlord and any persons, firms, or
corporation designated by Landlord as additional insured and shall contain
cross-liability endorsements.

     23.3      Tenant's Hazard Insurance. Tenant shall, at its cost, maintain on
all its personal property, Tenant's improvements and alterations in, on, or
about the Premises, a policy of standard form fire and extended coverage
insurance against all risks, including vandalism, malicious mischief, earthquake
and flood endorsements to the extent of full replacement cost. The proceeds from
any such policy shall be used by Tenant for the replacement of personal property
or the restoration of Tenant's improvements or alterations unless this Lease is
terminated pursuant to Article 25.

     23.4      Plate Glass/Storefront Insurance. Tenant shall at all times
maintain plate glass insurance on all interior and exterior plate glass windows
and doors on the Premises.

     23.5      Worker's Compensation and Employer's Liability Insurance. Tenant
shall procure such worker's compensation insurance as is required by state law
and shall promptly pay the premiums therefor. In addition, Tenant shall procure
and maintain employer's liability insurance in an amount not less than one
hundred thousand dollars ($100,000). If Landlord is required to remove any lien
for Tenant's failure to pay such premiums, Landlord, in addition to its other
remedies, may discharge such lien and charge Tenant therefor as additional rent.

     23.6      General Provisions. The policy or policies of insurance
maintained by Tenant shall provide that the insurer will not cancel or change
the insurance without first giving Landlord thirty (30) days prior written
notice. The insurance shall be in an insurance company or companies approved by
Landlord and qualified to do business in the state in which the Premises are
located. The insurance shall be issued as a primary policy or policies, or if
under a blanket policy, shall provide for continuation of the coverage and
limits required by this Lease, irrespective of other losses unrelated to the
Premises. Tenant shall file with Landlord or Landlord's agent certified copies
of certificates of insurance showing that the required coverage conforming with
the foregoing is afforded under blanket policies prior to occupancy of the
Premises. Landlord may require Tenant to increase the aforesaid maximum limits
of coverage to keep pace with the trend in insurance coverage during the Term.

     23.7      Landlord's Hazard Insurance. Landlord shall maintain (in
accordance with Section 9.1) on the building and other improvements in which the
Premises are located a policy of standard form fire and extended coverage
insurance, with vandalism, malicious mischief, earthquake and flood
endorsements, to the extent of full replacement cost.

     23.8      Waiver of Subrogation. Each party shall cause each insurance
policy obtained by it to provide that the insurance company waives all right of
recovery by way of subrogation against either party in connection with any
damage or loss covered by any policy. Neither party shall be liable to the other
for any damage or loss insured against under any insurance policy maintained by
either party. The waivers provided in this Section shall be applicable and
effective only in the event such waivers are obtainable from the insurance
carriers concerned and at no additional cost to Landlord or Tenant.

     23.9      Hazardous Use. Tenant agrees that it will not keep, use, sell, or
offer for sale in or upon the Premises any article which may be prohibited by
the insurance maintained by Landlord or Tenant. Tenant agrees to pay any
differences between the rate of premiums for insurance which may be maintained
by Landlord on the Premises resulting from the use of the Premises made by
Tenant, whether or not Landlord has consented to the same, and the rate charged
for such insurance for the least hazardous type of occupancy legally permitted
on the Premises. In the determination of whether 
<PAGE>
 
increased premiums were the result of Tenant's use of the Premises, a schedule,
issued by the organization making the insurance rate of the Premises, showing
the various components of such rate, shall be conclusive evidence of the several
items and charges which make up the insurance rate on the Premises. Bills for
such additional premiums shall be rendered by Landlord to Tenant at such times
as Landlord may elect, and shall be due from, and payable by Tenant when
rendered.

                         ARTICLE 24. LOSS AND DAMAGES

     Landlord shall not be liable for any damage to property of Tenant or of
others located on the Premises, nor for the loss of or damage to any property of
Tenant or of others by theft or otherwise. Landlord shall not be liable for any
injury or damage to persons or property resulting from fire, explosion, or other
casualty, falling plaster, steam, gas, electricity, water, rain or snow or leaks
from any part of the Premises or from the pipes, appliances or plumbing works or
from the roof, street or sub-surface or from any other place or by dampness or
by any other cause of whatsoever nature. Landlord shall not be liable for any
such damage caused by other tenants or persons in the Premises, caused by
occupants of adjacent property, caused by members of the public, or caused by
operations in construction of any private, public, or quasi-public work.
Landlord shall not be liable for any latent defect in the Premises or in the
building of which they form a part except for a period of three months from the
date Tenant takes possession of the Premises unless otherwise specified in
Exhibit C. All property of Tenant kept or stored on the Premises shall be so
kept or stored at the risk of Tenant only and Tenant shall hold Landlord
harmless from any claims arising out of damage to the same.

                      ARTICLE 25. FIRE AND OTHER CASUALTY

     25.1  Insured Loss. If, during the Term, the Premises or the building in
which the Premises are located are totally or partially destroyed from a risk
covered by the insurance described in Section 23.7, rendering the Premises
totally or partially inaccessible or unusable, Landlord shall restore the
Premises or the building in which the Premises are located to substantially the
same condition as they were in immediately before destruction. The term
"building" as used in this Article includes only buildings owned by Landlord.

           25.1.1 Commencement of Restoration. Landlord shall commence
restoration within ninety (90) days after the destruction and prosecute the same
diligently to completion.

           25.1.2 Termination. Such destruction shall not terminate this Lease
except as provided in this Article. If existing laws do not permit the
restoration, either party may terminate this Lease by giving notice to the other
party. If Landlord's mortgage requires that the insurance proceeds be applied
against the Landlord's mortgage, then Landlord may, upon notice to Tenant within
ninety (90) days of the destruction, elect to terminate this Lease.

           25.1.3  Loss Near End of Term. In the event of a partial or total
destruction of the Premises or the building in which the Premises are located
during the last two years of the Term, Landlord may terminate this Lease by
giving notice to Tenant within ninety (90) days of the destruction. For the
purpose of this Section 25.1.3, "partial destruction" means destruction for
which the restoration cost will exceed one-third (_) of the then full
replacement cost of the Premises or building in which the Premises are located.

     25.2  Uninsured Loss. If, during the Term, the Premises or the building in
which the Premises are located are totally or partially destroyed from a risk
not covered by the insurance which Landlord elects to carry pursuant to Section
10.1, rendering the Premises totally or partially inaccessible or unusable,
Landlord may within ninety (90) days of the destruction commence to restore the
Premises or the building in which the Premises are located to substantially the
same condition as they were in immediately before destruction and prosecute the
same diligently to completion, or Landlord may elect not to restore and to
terminate this Lease. In either event, Landlord shall give Tenant notice of its
intention within the ninety (90) day period.

     25.3  Loss to the Center. If there is destruction to any part or all of the
buildings comprising more than one-half (1/2) of the leasable area owned by
Landlord in the Center or for which the restoration cost will exceed one-third
(_) of the then full replacement cost of the buildings, Landlord
<PAGE>
 
may, upon notice to Tenant within ninety (90) days of the destruction, elect to
terminate this Lease, provided that Landlord terminates the leases of all
tenants in the building in which the Premises are located.

     25.4  Restoration. In the event that restoration of the Premises is
undertaken, it shall be in conformity with the provisions of Exhibit C. Landlord
shall be responsible for Landlord's work described in Exhibit C. Landlord's
responsibility to restore shall not include Tenant's work under Exhibit C or
Tenant's alterations, improvements, trade fixtures, stock in trade, signs, or
other personal property, all of which shall be Tenant's responsibility to
restore and shall be at Tenant's expense. Tenant shall commence its restoration
responsibility promptly upon delivery of possession of the Premises for that
purpose and shall diligently prosecute the same to completion.

     25.5  Rent Adjustment. From the date of destruction to the date of
completion of restoration or the date of termination of this Lease, whichever
occurs first, the Monthly Minimum Rent shall be reduced or abated
proportionately with the extent to which the destruction interferes with
Tenant's use of the Premises. The obligation of Tenant to pay Percentage Rent
and items of additional rent shall remain in effect. Notwithstanding the
foregoing, there shall be no abatement of rent if the destruction was the fault
of Tenant or his licensees, concessionaires, or tenants of Tenant unless
Landlord is reimbursed for such abatement of rent pursuant to any rental
insurance that Landlord in its sole discretion may elect to maintain.

     25.6  Effect of Termination. If Landlord elects to terminate this Lease
pursuant to this Article, termination shall be effective ten (10) days after
giving the required notice. If the Lease is terminated, all proceeds from
Tenant's insurance required under Section 23.3 covering the items of Landlord's
work in Exhibit C and Tenant's fixtures (except moveable trade fixtures),
alterations, additions, and improvements described in Article 18 shall be paid
to Landlord.

     25.7  Continuous Operations. Tenant agrees during any period of
reconstruction or repair of the Premises to continue the operation of its
business in the Premises to the extent reasonably practicable.

                          ARTICLE 26. EMINENT DOMAIN

     26.1  Definitions. The term "takes by (or taken or taking by) eminent
domain" shall include the exercise of any power of condemnation, whether by
public authority or private corporation and any purchase or other acquisition in
lieu of condemnation. The expression "date of taking" means the date the order
adjudicating public use becomes final or the date the authority exercising its
right of "eminent domain" shall agree to the purchase price in lieu of
condemnation.

     26.2  Total Condemnation of Premises. If a condemning authority takes by
eminent domain all of the Premises or a portion thereof sufficient to render the
remaining Premises reasonably unsuitable for the use which Tenant was then
making of the Premises, this Lease shall terminate as of the date of taking.
Neither Tenant, nor the licensees, concessionaires, or tenants of Tenant shall
have any claim against Landlord or the condemning authority for the value of any
unexpired Term.

     26.3  Partial Condemnation. If a condemning authority takes by eminent
domain a portion of the Premises which is not extensive enough to render the
Premises unsuitable for the business of Tenant, then Landlord shall promptly
restore the Premises to a condition comparable to its condition on the date of
taking less the portion lost in the taking, and this Lease shall continue in
full force and effect as to the remainder of the Premises. The Monthly Minimum
Rent payable by Tenant for the balance of the Term shall be abated in the ratio
that the square footage ground area of the Premises taken bears to the total
ground area of the Premises immediately prior to such taking.

     26.4  Total Condemnation of Center. If a condemning authority takes by
eminent domain any substantial part of the Center, this Lease, at the option of
Landlord, shall terminate as of the date of taking. Neither Tenant, nor the
licensees, concessionaires, or tenants of Tenant shall have any claim against
Landlord or the condemning authority for the value of any unexpired Term.
<PAGE>
 
     26.5  Damages. In the event of any taking by eminent domain as aforesaid,
whether whole, partial, or affecting parking facilities or other buildings
outside the Premises, Tenant shall not be entitled to any part of the award paid
for such taking and Landlord is to receive the full amount of such award,
whether for diminution in the value of the leasehold or for the fee of the
Premises, Tenant hereby expressly waiving any right or claim to any part
thereof. Nothing herein shall be construed to preclude Tenant from receiving
compensation or damages from the condemning authority for its relocation
expenses, the taking of its moveable trade fixtures and removable personal
property and the interruption of or damage to Tenant's business, provided that
such claim does not diminish Landlord's award, and further provided that any
such claim by Tenant shall be subject and subordinate to the claim of the first
mortgagee.

       ARTICLE 27. SUBORDINATION, ATTORNMENT, AND ESTOPPEL CERTIFICATES

     27.1  Subordination and Nondisturbance. This Lease is and shall be subject
and subordinate to any mortgages that are now or may hereafter be placed on the
Premises and to all modifications, renewals, extensions, and replacements
thereof, provided that the mortgagees shall agree to recognize this Lease in the
event of foreclosure or sale if Tenant is not then in default. Tenant will
execute, acknowledge, and deliver any instrument requested by Landlord upon
demand to assure the subordination of this Lease. If any mortgagee elects to
have this Lease superior to its mortgage by notice to Tenant, then this Lease
shall be deemed superior to such mortgage.

     27.2  Attornment. In the event that the Premises are sold in connection
with the judicial or non-judicial foreclosure of any mortgage or by voluntary
conveyance by Landlord, Tenant shall (at the election of the purchaser) attorn
to the purchaser as Landlord herein and this Lease shall continue in full force
and effect notwithstanding that it may have been terminated by said foreclosure.
In the event that the Premises are transferred by voluntary conveyance by
Landlord, Tenant shall attorn to the transferee as Landlord herein.

     27.3  Estoppel Certificates. Tenant agrees at any time upon demand by the
Landlord to execute, acknowledge, and deliver to Landlord, within fifteen (15)
days of request, a statement in writing certifying that this Lease is unmodified
and in full force and effect (or if there have been modifications, that the same
is in full force and effect as modified and stating the modifications), stating
the dates to which the rent and other charges have been paid in advance, if any,
confirming Tenant's acceptance of the Premises, the commencement of the Term,
and the rent provided under the Lease, stating whether Landlord is in default
under the Lease and whether there are any set-offs or defenses against
enforcement of any right or remedy of Landlord or duty or obligation of Tenant
(and specifying the same). It is intended that any such statement delivered
pursuant to this Section may be relied upon by any prospective purchaser,
mortgagee, or assignee of any mortgages of the Premises or the Center.

                      ARTICLE 28. INVOLUNTARY ASSIGNMENT

28.1  Involuntary Assignment. No interest of Tenant in this Lease shall be
assignable by operation of law (including, without limitation, the transfer of
this Lease by testacy or intestacy). An involuntary assignment shall constitute
a default by Tenant and Landlord shall have the right to elect to terminate this
Lease, in which case this Lease shall not be treated as an asset of Tenant. Each
of the following acts shall be considered an involuntary assignment:

     28.1.1  Insolvency or Creditors Proceedings. An assignment by Tenant for
the benefit of creditors, or the filing by or against Tenant of any proceeding
under any insolvency or bankruptcy law; or, if Tenant is a partnership or
consists of more than one person or entity, the occurrence of any of the
foregoing acts by or against any partner of the partnership or other related
person or entity;

     28.1.2  Attachment or Execution. Levy of a writ of attachment or execution
on this Lease;

     28.1.3  Appointment of Receiver. In any proceeding or action to which
Tenant is a party, appointment of a receiver with authority to take possession
of the Premises.

<PAGE>
 

     28.2  Effect of Involuntary Assignment. An involuntary assignment shall
constitute a default by Tenant and Landlord shall have the right to elect to
terminate this Lease, in which case the Lease shall not be treated as an asset
of Tenant.

                       ARTICLE 29. VOLUNTARY ASSIGNMENT

     29.1  Consent Required. Tenant shall not voluntarily assign or encumber its
interest in this Lease or in the Premises, or grant any license or concession or
sublease all or any part of the Premises, or allow any other person or entity to
occupy or use all or any part of the Premises, without first obtaining
Landlord's written consent which may be withheld in Landlord's sole discretion.
Any assignment, encumbrance, license, concession, sublease, occupancy, or use
without consent shall be voidable and, at Landlord's election, shall constitute
a default. No consent to any assignment, encumbrance, sublease, occupancy, or
use shall constitute a further waiver of the provisions of this Article.

     29.2  Effect of Change in Partnership. If Tenant is a partnership, a
withdrawal or change, voluntary, involuntary, or by operation of law, of any
partner, or the dissolution of the partnership, shall be deemed a voluntary
assignment.

     29.3  Effect of Individual Transfer. If Tenant consists of more than one
person, a purported assignment, voluntary, involuntary, or by operation of law,
from one or more persons to another person or persons shall be deemed a
voluntary assignment.

     29.4      Effect of Change in Corporation or Limited Liability Company. If
Tenant is a corporation or limited liability company, any dissolution, merger,
consolidation, or other reorganization of Tenant, or the sale or other transfer
of a controlling percentage of the capital stock or membership interests of
Tenant, or the sale of more than one-half (1/2) of the value of the assets of
Tenant, shall be deemed a voluntary assignment. The phrase "controlling
percentage" means the ownership of, and the right to vote, stock or membership
interests possessing more than one-half (1/2) of the total combined voting power
of all classes of Tenant's capital stock issued, outstanding and entitled to
vote for the election of directors or one-half (1/2) of all membership
interests. This Section shall not apply to corporations the stock of which is
traded through an exchange or over the counter.

     29.5      Assignment of Rent. Tenant immediately and irrevocably assigns to
Landlord as security for Tenant's obligations under this Lease, all rent,
deposit and/or prepaid rent, from any assignment, subletting of all or a part of
the Premises, encumbrance, occupancy or use, and Landlord, as assignee and as
attorney-in-fact for Tenant, or a receiver for Tenant appointed on Landlord's
application, may collect such rent and apply it toward Tenant's obligations
under this Lease; except that, until Landlord exercises its option to declare
Tenant in default, Tenant shall have the right to collect rent.

     29.6      Increase in Rent. In the event of an assignment or sublease of
Tenant's interest or a part thereof in this Lease, whether voluntary or
involuntary and whether with Landlord's consent or pursuant to law, Landlord
shall be entitled to increase the Monthly Minimum Rent and the percentage by
which Percentage Rent is computed to the then current market level for Monthly
Minimum Rent and Percentage Rent for the Premises for the use permitted under
this Lease.

     29.7      Assignment Fee. In the event that Landlord shall consent to a
sublease, assignment, or transfer hereunder, Tenant shall pay Landlord
reasonable fees, not to exceed $500 incurred in connection with the processing
of documents necessary to giving of such consent.

     29.8      Continuing Liability. Regardless of Landlord's consent, no
subletting, assignment, hypothecation, license, or concession shall release
Tenant of Tenant's obligation or alter the primary liability of Tenant to pay
the rental and to perform all other obligations to be performed by Tenant
hereunder. The acceptance of rental by landlord from any other person shall not
be deemed to be a waiver by landlord of any provision hereof.

                ARTICLE 30. WASTE, NUISANCE, AND ENVIRONMENTAL
<PAGE>
 
     30.1      Waste or Nuisance. Tenant shall permit no damage to or defacement
of the Premises nor shall Tenant commit or suffer to be committed any waste upon
the Premises or permit any nuisance or other act or thing which may disturb the
quiet enjoyment of any other tenant in the building in which the Premises may be
located, or in the Center, or which may disturb the quiet enjoyment of any
person outside of the boundaries of the Center.

     30.2      Compliance with Law. Tenant, at Tenant's expense, shall comply
with all laws, rules, orders, ordinances, directions, regulations, and
requirements of federal, state, county, and municipal authorities pertaining to
Tenant's use of the Premises and with all recorded covenants, conditions, and
restrictions, regardless of when they become effective. These include, without
limitation, any requiring alteration of the Premises because of Tenant's
specific use, and all applicable federal, state, and local laws, regulations, or
ordinances pertaining to air and water quality, Hazardous Materials (as defined
in Section 3.6), waste disposal, air emissions, and other environmental matters,
all zoning and other land use matters, and utility availability, and with any
direction of any public officer or officers, pursuant to law, which shall impose
any duty upon Landlord or Tenant with respect to the use or occupation of the
Premises.

     30.3      Permits. In the furtherance of, and not in limitation of,
Tenant's obligations under the foregoing Section, throughout the term of this
Lease, Tenant shall do or cause to be done all things necessary to preserve and
keep in full force and effect permits required for the conduct of its business
and operations from the time of execution of this Lease until its expiration or
termination.

     30.4      Use of Hazardous Material. Tenant shall not cause or permit any
Hazardous Material to be brought upon, kept, or used in our about the Premises
by Tenant, its agents, employees, contractors, or invitees without the prior
written consent of Landlord, which shall not be unreasonably withheld as long as
Tenant demonstrates to Landlord's reasonable satisfaction that such Hazardous
Material is necessary or useful to Tenant's business and will be used, kept, and
stored in a manner that complies with all laws regulating any such Hazardous
Material so brought upon or used or kept in or about the Premises.

                     ARTICLE 31. ADVERTISING AND PROMOTION

     31.1      Promotional Program. Landlord shall conduct an advertising,
promotional, and public relations program for the general purpose of furthering
the interests of all tenants in the Center. Landlord shall determine in its sole
discretion the composition and manner of implementation of such program.

     31.2      Merchants' Association. Upon commencement of the Term, Tenant
shall become a member of the Merchants' Association. Tenant shall thereafter
participate fully in and remain in good standing in the Merchants' Association
throughout the Term. Tenant shall pay dues to the Merchants' Association in the
amount specified in Section 31.3 of the Lease. Tenant shall maintain membership
in the Seaside Chamber of Commerce during the Term.

     31.3      Tenant's Contribution. Tenant's initial annual contribution to
the fund shall be at the rate provided in Section 1.18 per square foot of
Tenant's leasable area. The contribution shall be paid as additional rent, one-
twelfth (1/12) with each Monthly Minimum Rent payment. Once each year, by a
notice to all of the tenants, Landlord may increase the annual contribution due
(the Adjustment Period"). Said increase shall be established by increasing the
contribution then being paid prior to the Adjustment Period by the same
percentage that the Consumer Price Index For All Urban Consumers, all items, for
the Portland, Oregon/Washington area 1982-84 equals 100, published by the Bureau
of Labor Statistics of the U.S. Dept. of Labor ("C.P.I.") has increased since
the previous adjustment. To determine the adjustment for each Adjustment Period,
the contribution then being paid shall be multiplied by a fraction, the
denominator of which shall be the C.P.I. for the half of the calendar year
immediately preceding the Adjustment Period and the numerator of which shall be
the C.P.I. for the half of the calendar year immediately preceding the
commencement of the Adjustment Period. Provided, however, in no event shall the
contribution be reduced below the contribution being paid immediately preceding
the Adjustment Period for which a redetermination is being made. In the event
the numerator of said fraction is not available on the commencement of the
Adjustment Period, Tenant shall continue to pay the contribution then being
paid, and the parties shall promptly adjust and Tenant 
<PAGE>
 
shall promptly pay any amounts due at such time as the C.P.I. needed to make the
appropriate adjustment is available. In the event there are any changes in the
basis for the C.P.I. or a change is made in the term or number of items
contained in the C.P.I., or if the C.P.I. is altered, modified, converted or
revised in any other way, then the C.P.I. shall be adjusted by Landlord to the
figure that would have been arrived at had the change in the manner of computing
the C.P.I. in effect at the date of this Lease not been altered. If the C.P.I.
is no longer published by said Bureau, then any substitute or successor index
published by said Bureau or other governmental agency of the United States and
similarly adjusted as aforesaid, shall be utilized by Landlord for purposes of
this subparagraph. If the C.P.I. is not available, a reliable governmental or
other reputable publication selected by Landlord and similarly evaluating the
information heretofore used in determining the C.P.I. shall be used.

     31.4      Grand Opening. Tenant agrees to pay with the first month rent a
one-time grand opening assessment at the rate provided in Section 1.18 per
square foot of Tenant's gross leasable area.

     31.5      Joint Advertisements. The Board of Directors of the Merchants'
Association shall have the authority to designate certain editions, volumes, and
numbers of newspaper publications as appropriate for the publication of joint
advertisements by the members of the Merchants' Association. Tenant shall
purchase space in such joint advertisements in not less than twelve (12) such
publications each Lease Year. Tenant shall purchase not less than the smallest
space increment available in the joint advertisement. Tenant's advertisement
shall include the name under which Tenant does business on the Premises, a
general description of Tenant's merchandise, Tenant's telephone number at the
Premises, and the name of the Center. Tenant may apply amounts so expanded
toward the fulfillment of Tenant's obligation under Section 31.5. If Tenant
fails to purchase space in the required number of joint advertisements in any
Lease Year, Tenant shall not later than January 31 of the immediately succeeding
Lease Year pay to the Merchants' Association Promotional Fund $100 for each
joint advertisement less than the required number of joint advertisements
participated in by Tenant.

     31.6      Advertising. Tenant shall expend an amount each Lease Year equal
to not less than one and one-half percent (1 1/2%) of Tenant's Gross Sales for
such Lease Year on advertising to promote Tenant's business on the Premises.
Tenant shall furnish to Landlord on or before January 31 of the succeeding Lease
Year a statement certified as accurate by Tenant setting forth the amounts
expended on advertising during such Lease Year together with copies of receipts
for all such expenditures.

     31.7      Accounting. On or before January 31 of each Lease Year during the
Term, Tenant shall furnish to Landlord a statement certified as accurate by
Tenant setting forth the amounts expended by Tenant to advertise Tenant's
business on the Premises during the preceding Lease Year, together with copies
of all receipts and other records evidencing such expenditures. If Tenant has
failed to expend an amount equal to one and one-half percent (1%) of Tenant's
Gross Sales during such preceding Lease Year, Tenant shall immediately pay an
amount equal to the deficiency to the Merchants' Association Promotional Fund.
Amounts so paid shall be in addition to any amounts paid to the Merchants'
Association Promotional Fund pursuant to Section 1.18.

     31.8      Collection. Failure to pay any sum payable hereunder for a period
of ten (10) days after the same is due shall be an event of default pursuant to
Article 33 of this Lease. Upon the occurrence of such an event of default by
Tenant, Landlord may, in addition to any other rights and remedies given under
the Lease or by law, sue on behalf of the Merchants' Association to recover such
unpaid sums and all damages caused by the default including attorneys' fees.

                          ARTICLE 32. RIGHT OF ENTRY

     32.1      Right of Entry. Landlord or Landlord's agents shall have the
right to enter the Premises at all times to examine the same, to exhibit same to
others, to make such repairs, alterations, improvements, or additions as
Landlord may deem necessary or desirable and to gain entry to adjoining premises
and roof areas for repairs thereof or otherwise, and Landlord shall be allowed
to take all material into and upon the Premises that may be required therefor
without the same constituting an eviction of Tenant in whole or in part and the
rent reserved shall in no way abate while said repairs, alteration,
improvements, or additions are being made, by reason of loss or interruption of
business of Tenant, or otherwise unless otherwise specifically provided for
herein and Tenant specifically hereby 
<PAGE>
 
waives any clai m for damages for loss of business or otherwise, resulting from
such repairs, alterations, improvements, or additions.

     32.2      Entry in Tenant's Absence. If Tenant shall not be personally
present to open and permit an entry into the Premises, at any time, when for any
reason an entry therein shall be necessary or permissible, Landlord or
Landlord's agents may enter the same by a master key, or may forcibly enter the
same, without rendering Landlord or such agents liable therefor, and without in
any manner affecting the obligations and covenants of this Lease. Nothing herein
contained, however, shall be deemed or construed to impose upon Landlord any
obligation, responsibility, or liability whatsoever, for the care, maintenance,
or repair of the building or any part thereof, except as otherwise herein
specifically provided.

     32.3      Leasing Sign. During the six (6) months prior to the expiration
of the Term, Landlord may place upon the Premises the usual "for lease" notices
advertising the availability of the Premises for lease which notices Tenant
shall permit to remain thereon without molestation.

                              ARTICLE 33. DEFAULT

     33.1      Tenant's Default. The occurrence of any of the following shall
constitute a default by Tenant:

               33.1.1    Failure to Pay Rent and Other Charges. Failure to pay
any part of the rent, additional rent, or any other charges required to be paid
by Tenant to Landlord within ten (10) days after such rent, additional rent or
other charges become due.

               33.1.2    Abandonment. Abandonment or vacation of the Premises by
Tenant or the failure by Tenant to be open for business for five (5) consecutive
days, holidays excluded.

               33.1.3    Involuntary Assignment or Insolvency. Involuntary
assignment or insolvency as described in Article 28.

               33.1.4    Failure to Perform Covenants, Conditions, and
Obligations. Failure by Tenant to perform any of its covenants, conditions, or
obligations under this Lease, except for failures covered by Sections 33.1.1,
33.1.2, or 33.1.3, if such failure continues for twenty (20) thirty (30) days
after written notice by Landlord to Tenant thereof (or if such failure cannot be
cured within twenty (20) thirty (30) days, then, if Tenant does not commence to
attempt to cure such failure immediately upon notice and thereafter proceed with
due diligence to cure the same). Notwithstanding the foregoing provisions of
this Section, if Tenant shall have been in default for the same or similar
reason on two (2) occasions within the preceding twelve (12) months, then notice
by Landlord to Tenant under this Section of a third failure to comply with this
Lease for the same or similar reason shall constitute a default without a cure
period and Landlord shall immediately have any or all of the remedies provided
herein.

     33.2      Landlord's Remedies. In the event of a default by Tenant, and
without any further notice or demand to Tenant upon thirty (30) days written
notice under the provisions of Article 35 herein, Landlord shall have the
following remedies which are not exclusive; they are cumulative in addition to
any remedies now or later allowed by law:

               33.2.1    Termination. Declare the Term terminated and reenter
the Premises.

               33.2.2    Reentry. Reenter the Premises without declaring the
Term terminated.

               33.2.3    Termination Following Reentry. At any time after the
reentry provided in Section 33.2.2, declare the Term terminated.

               33.2.4    Compulsory and Binding Arbitration. This provision is
expressly subject to the binding arbitration clause set forth in Article 37.22
hereto.
<PAGE>
 
     33.3      Rights Upon Reentry. Upon any reentry by Landlord, whether under
this Lease or by summary proceedings, the Landlord may remove all persons and
property from the Premises and may store the property in a public warehouse or
elsewhere at the expense and risk of Tenant, all without being deemed guilty of
trespass or becoming liable for any loss or damage which may be occasioned
thereby. Tenant hereby grants to Landlord a security interest in all of Tenant's
property located on the Premises to secure payment of all sums due from Tenant
to Landlord under this Lease and all damages or loss which Landlord may suffer
by reason of Tenant's breach. The security interest shall be perfected upon
taking possession of such property in the event of Tenant's default. Thereafter,
Landlord may sell the property at public or private sale in accordance with the
Uniform Commercial Code of the state in which the Premises are located.

     33.4      No Termination by Reentry. Should Landlord have reentered the
Premises under the provisions of Section 33.2.2 above, Landlord shall not be
deemed to have terminated this Lease or the liability of Tenant to pay any rent,
additional rent, or other charges accrued or thereafter accruing or to have
terminated Tenant's liability for damages hereunder by any such reentry or by
any judicial action to obtain possession of the Premises. Service by Landlord of
any notice pursuant to the unlawful detainer statutes shall not be deemed notice
of termination. After such reentry, Landlord may from time to time relet for the
account of Tenant the Premises or any part thereof upon such terms and for such
length of time, whether greater or lesser than the unexpired portion of the Term
as Landlord may reasonably provide. Tenant shall be immediately liable to
Landlord for all costs of reletting the Premises including broker's commissions,
legal fees, and other expenses of recovering possession, expenses of remodeling
and repair of the Premises reasonably required and similar costs. Landlord shall
receive all rent from the reletting, applying it first to the cost of reletting
and then to payment of the Rental due from Tenant determined as provided in
Section 33.7 below. If the rent from reletting received by Landlord in any month
is less than the sum due from Tenant, Tenant shall pay any such deficiency to
Landlord within ten (10) days of notice.

     33.5      Notice of Termination; Damages. Should Landlord elect to
terminate this Lease either upon reentry as provided in Section 33.2.1 or at any
time thereafter as provided in Section 33.2.3, Landlord may do so by written
notice to Tenant. Notwithstanding any other provisions of this Lease, notice of
termination shall be effective on the date of personal delivery or mailing in
the manner provided in Article 35 unless provided otherwise in the notice. Upon
termination for breach, Landlord may recover from Tenant as damages, the
following:

               33.5.1    Unpaid Earned Rental. The Worth at Time of Award (as
hereafter defined) of any unpaid Rental (as hereafter defined) which had been
earned at the time of termination; plus

               33.5.2    Rental Between Termination and Award. The Worth at Time
of Award of the amount by which the unpaid Rental that would have been earned
after the date of termination until the time of award exceeds the amount of loss
of rental that Tenant proves could have been reasonably avoided; plus

               33.5.3    Rental Following Award. The Worth at Time of Award of
the amount by which the unpaid Rental for the balance of the Term after the time
of award exceeds the amount of the loss of rental that Tenant proves could have
been reasonably avoided; plus

               33.5.4    Other Damages. Any other amount, attorneys' fees, and
court costs necessary to compensate Landlord for all detriment proximately
caused by Tenant's default or due under the provisions of this Lease.

     33.6      Worth at Time of Award Defined. As used in Sections 33.5.1 and
33.5.2, the "Worth at Time of Award" is computed by allowing interest at the
maximum legal rate but not to exceed fifteen percent (15%) per annum. As used in
Section 33.5.3, the "Worth at Time of Award" is computed by discounting the
amounts at the rate of six percent (6%) per annum.

     33.7      Rent Defined. Unpaid Rental shall be deemed to be the sum of the
following: 1) the Monthly Minimum Rent; (2) the monthly average of the
Percentage Rent payable in respect of Gross Sales made in the Lease Year and
fractional Lease Year (or fractional Lease Year only, if such termination occurs
prior to the expiration of the first complete Lease Year) next preceding
termination;
<PAGE>
 
3) the Common Area Operating Cost; and 4) the amounts last payable by Tenant
pursuant to Articles 9, 21, and 31 above.

     33.8      Right to Cure Tenant's Default. Landlord, at any time after
Tenant commits a default, may, but shall not be obligated to do so, cure the
default at Tenant's cost. Any expense incurred by Landlord in curing such
default shall be due from Tenant to Landlord upon demand by Landlord and shall
bear interest at the rate of fifteen percent (15%) per annum until paid.

     33.9      Restoration. If Tenant fails to remove Tenant's furnishings,
trade fixtures, equipment, and other personal property at expiration of the Term
or earlier termination of this Lease, Landlord may remove any and all personal
property located in the Premises and place such property in a public or private
warehouse or elsewhere. Tenant shall be liable to Landlord for the cost of
removal, transportation to storage, and storage. In the event that Tenant shall
not immediately pay the cost of removal, transportation, and storage of such
property after the same has been stored for a period of thirty (30) days or
more, Landlord may sell any or all thereof at a public or private sale in such
manner and at such times and places as Landlord in its sole discretion may deem
proper, without notice to or demand upon Tenant. Tenant waives all claims for
damages that may be caused by Landlord's removing or storing or selling the
property as herein provided, and Tenant shall indemnify and hold Landlord free
and harmless from and against any and all losses, costs, and damages, including
without limitation all costs of court and attorneys' fees of Landlord occasioned
thereby.

     33.10     Landlord's Default. Landlord shall not be deemed to be in default
in the performance of any of its obligations under this Lease until Landlord
shall have failed to perform an obligation (except in the event of any emergency
or material interference with Tenant's business) within thirty (30) days, or
such additional time as is reasonably required to correct such default, after
notice in writing by Tenant to Landlord and any Mortgagee particularly
specifying the nature of the default; provided, however, that if on account of
any breach by Landlord of any of the provisions hereof, Tenant is physically
ejected from all or part of the Premises, or is restricted from the use of all
or any material part of the Premises, or its necessary use of the Common Areas,
Landlord shall not in any event have more than five (5) days after notice within
which to cause Tenant to be restored to possession of the Premises or to the use
of the Premises or Common Areas, as the case may be.

                       ARTICLE 34. RULES AND REGULATIONS

     The rules and regulations that are attached hereto as Exhibit D are hereby
made a part of this Lease, and Tenant agrees to comply with and observe the
same. Tenant's failure to keep and observe said rules and regulations shall
constitute a breach of the terms of this Lease in the same manner as if they
were contained herein as conditions. Landlord reserves the right from time to
time to revoke, amend, or supplement said rules and regulations and to adopt and
promulgate additional rules and regulations as may be reasonably required for
the safety, care or cleanliness of, or for the preservation of harmony and order
in, the Center.

                              ARTICLE 35. NOTICES

     35.1      Notice and Consents. All notices, demands, consents, or approvals
which may or are required to be given by either party to the other hereunder
shall be in writing and shall be deemed to have been fully given when deposited
in the United States mail, postage prepaid, and addressed as follows: to Tenant
at the address specified in Section 1.19 or 1.20 of the Lease, or to such other
place as Tenant may from time to time designate in a notice to Landlord; to
Landlord at the address specified in Section 1.21 of the Lease, or to such place
as Landlord may from time to time designate in a notice to Tenant; or in the
case of Tenant, delivered to Tenant at the Premises. Tenant hereby appoints as
its agent to receive the service of all dispossessory or distrait proceedings
and notices thereunder the person in charge of or occupying the Premises at the
time, and, if no person shall be in charge of or occupying the same, then such
service may be made by attaching the same on the main entrance of the Premises.
Provided, however, all notices by either party containing a claim of default or
a claim for monetary damages shall be sent both by regular mail and certified
mail, return receipt requested.

                             ARTICLE 36.  BROKERS
<PAGE>
 
     The parties recognize as the broker(s) who procured this Lease the firm(s)
specified in the Basic Provisions and agree that Landlord shall be solely
responsible for the payment of the brokerage commissions to said broker(s) and
that Tenant shall have no responsibility therefor unless a written provision to
the contrary has been made a part of this Lease. If Tenant has dealt with any
other person or real estate broker in respect to leasing or renting space in the
Premises, Tenant shall be solely responsible for the payment of any such fee due
said person or firm and Tenant shall hold Landlord free and harmless against any
liability in respect thereto.

                           ARTICLE 37. MISCELLANEOUS

     37.1      Quiet Enjoyment. Landlord covenants that so long as Tenant is not
in default under this Lease, Tenant shall peaceably and quietly enjoy the
Premises in accordance with the terms of the Lease subject to any mortgage,
master lease, or other recorded documents having priority over this Lease.

     37.2      Waiver and Consent. The waiver by Landlord of any breach of any
term, covenant, or condition herein contained shall not be deemed to be a waiver
of such term, covenant, or condition or any subsequent breach of the same or any
other term, covenant, or condition herein contained. The subsequent acceptance
of rent hereunder by Landlord shall not be deemed to be a waiver of any
preceding breach by Tenant of any term, covenant, or condition of this Lease,
other than the failure of Tenant to pay the particular rental so accepted,
regardless of Landlord's knowledge of such preceding breach at the time of
acceptance of such rent. No covenant, term, or condition of this Lease shall be
deemed to have been waived by Landlord, nor any consent by Landlord given,
unless such waiver or consent be in writing by Landlord.

     37.3      Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the rent and other charges herein stipulated
shall be deemed to be other than on account of the earliest stipulated rent and
other charges, nor shall any endorsement or statement of 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 rent or other charges or pursue any other
remedy in this Lease provided.

     37.4      Severability. If any term, covenant, or condition of this Lease
or the application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, neither the remainder of this Lease, nor the
application of such term, covenant, or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall be
affected thereby and each term, covenant, or condition of this Lease shall be
valid and be enforced to the fullest extent permitted by law.

     37.5      Excuse for Performance. Any prevention, delay, or stoppage due to
strikes, lockouts, labor disputes, acts of God, inability to obtain labor or
materials or reasonable substitutes therefor, enemy or hostile government
action, civil commotion, fire, or other casualty and other cause beyond the
reasonable control of the party obligated to perform, shall excuse the
performance by such party for a period equal to any such prevention, delay, or
stoppage, except performance of the obligations of the Tenant to pay percentage
rent, additional rent and other charges due under this Lease.

     37.6      Successors. This Lease shall be binding on and inure to the
benefit of the parties and their successors, assignees, transferees, personal
representatives, heirs, or other persons or entities succeeding lawfully and
pursuant to the provisions of this Lease to the rights or obligations of either
party.

     37.7      No Partnership. Landlord does not, in any way or for any purpose,
become a partner of Tenant in the conduct of its business, or otherwise, or
joint venturer or a member of a joint enterprise with Tenant. The provisions of
this Lease relating to the Percentage Rent payable hereunder are included solely
for the purpose of providing a method whereby the rent is to be measured and
ascertained.

     37.8      Relocation:
<PAGE>
 
               37.8.1    Prior to Commencement. Landlord shall have the sole and
exclusive right to relocate the Premises to another location within the Center
at any time prior to commencement of the Term, provided: 1) the new Premises are
substantially equivalent in area; 2) Tenant shall incur no cost or expense in
connection with the relocation; 3) the Monthly Minimum Rent shall be at the same
rate per square foot; and (4) the relocation does not otherwise materially
impair Tenant's capacity to conduct its business within the Center.

               37.8.2    During Term. During the Term, Landlord shall have the
sole and exclusive right, upon giving not less than sixty (60) days prior
written notice, to relocate the Premises, provided that 1) the new Premises are
substantially equivalent in area; 2) all costs and expenses related to the
movement of Tenant shall be borne by Landlord; and 3) the move does not
otherwise materially impair Tenant's capacity to conduct its business within the
Center. Tenant, however, may accept or reject the new Premises within ten (10)
days of receipt of notice. If Tenant rejects such move, Landlord shall have the
right, exercisable within ten (10) days, to cancel and terminate this Lease
effective seventy (70) days following receipt of written notice. If relocation
occurs, this Lease shall remain in full force and effect, and the new Premises
shall become the "Premises" for all purposes set forth in this Lease.

     37.9      Transfer of Ownership. If Landlord sells or transfers the Center,
Landlord shall be released from any liability thereafter accruing under this
Lease. If any security deposit or prepaid rent has been paid by Tenant, Landlord
can transfer the security deposit or prepaid rent to Landlord's successor and on
such transfer Landlord shall be discharged from any further liability in
reference to the security deposit or prepaid rent.

     37.10     Corporate Authority; Partnership Authority. If Tenant is a
corporation or limited liability company, each person signing this Lease on
behalf of Tenant represents and warrants that he has full authority to do so and
that this Lease binds Tenant. Concurrently with the execution and delivery of
this Lease, Tenant shall deliver to Landlord a certified copy of a resolution of
Tenant's Board of Directors or members authorizing the execution of this Lease
or other evidence of such authority reasonably acceptable to Landlord. If Tenant
is a partnership, each person signing this Lease for Tenant represents and
warrants that he is a general partner of the partnership, that he has full
authority to sign for the partnership and that this Lease binds the partnership
and all general partners of the partnership.

     37.11     Attorney Fees. In case suit or action shall be brought for an
unlawful detainer of the Premises, for the recovery of any rent due under the
provisions of this Lease or because of the breach of any other covenant or
condition herein contained on the part of Tenant or of the licensee,
concessionaires, or tenants of Tenant to be kept and performed, or if either
party shall bring legal proceedings against the other based on or relating to
the terms hereof, the prevailing party shall be entitled to recover its
reasonable attorney fees in any such action or proceeding including its
reasonable attorney fees on any appeal therefrom. Tenant also agrees to pay and
discharge all of Landlord's costs and expenses, including Landlord's attorney
fees, that shall arise from enforcing any provisions or covenants of this Lease,
including collection of any rent due, even though no suit or action is
instituted and from enforcing Landlord's rights hereunder in any proceeding
under any insolvency or bankruptcy laws, or as a result of any breach or default
in the performance of any of the provisions of this Lease.

     37.12     No Option. The submission of this Lease for examination does not
constitute a reservation of or option for the Premises and this Lease becomes
effective as a lease only upon execution and delivery thereof by Landlord and
Tenant.

     37.13     Captions. The titles to the Articles of this Lease are not a part
hereof and shall have no effect upon the construction or interpretation of any
part of this Lease.

     37.14     Gender. The use of the neuter gender or singular number is only
for simplicity in drafting and they shall be deemed a proper reference even
though Landlord or Tenant may be an individual, a partnership, a corporation, or
a group of two or more individuals, partnerships, or corporations.

     37.15     Covenants and Conditions. All provisions of this Lease, whether
covenants or conditions, on the part of Tenant shall be deemed to be both
covenants and conditions.
<PAGE>
 
     37.16     Reservation. Landlord reserves to itself the use of the roof,
walls, and the area beneath the Premises, together with the right to install,
maintain, use, repair, and replace plumbing, telephone facilities, equipment,
machinery, connections, pipes, ducts, conduits and wires leading through the
Premises and serving other parts of the Center in a manner and in locations
which will not unreasonably interfere with Tenant's use.

     37.17     Recordation. Tenant shall not record this Lease without the
written consent of Landlord. However, upon the request of either party hereto
the other party, shall join in the execution of a memorandum or so-called "short
form" of this Lease for the purposes of recordation. Said memorandum or short
form of this Lease shall describe the parties, the Premises, and the duration of
this Lease and shall incorporate this Lease by reference.

     37.18     Entire Agreement. This Lease and the Exhibits attached hereto and
forming a part hereof set forth all the covenants, promises, agreements,
conditions, and understandings between Landlord and Tenant concerning the
Premises and there are no covenants, promises, agreements, conditions, or
understandings, either oral or written, between them other than herein set
forth. Except as herein otherwise provided, no subsequent alteration, amendment,
change, or addition to this Lease shall be binding upon Landlord or Tenant
unless reduced to writing and signed by them.

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

     37.20     Venue. This Lease shall be governed by and construed in
accordance with the laws of the State of Oregon and venue shall be in the courts
of Multnomah or Clatsop County, Oregon.

     37.21     Survival. Any obligations of this Lease which, by their nature,
cannot be performed prior to the expiration or Termination shall survive such
expiration or termination unless expressly provided to the contrary herein.

     37.22     Compulsory and Binding Arbitration. Any disputes between Landlord
and Tenant under this Lease, of any kind or nature, shall be submitted to
compulsory, binding arbitration, under the rules and regulations of the American
Arbitration Association. If Landlord and Tenant cannot agree upon the person who
should serve as the arbitrator, then that person shall be named and selected by
the Office of the American Arbitration Association located nearest to the Leased
Premises. The prevailing party in any such arbitration shall have the right to
recover all reasonable attorneys' fees and costs in pursuit of the arbitration,
including the fees of the arbitrator, which shall otherwise be equally divided.
Any award or order entered by the arbitrator, within ten (10) days thereof,
shall be convertible immediately to a judgment by a court having competent
jurisdiction in the appropriate county of the State of Oregon. If it becomes
necessary for any party to enforce an arbitration award or order by taking court
action, then that party shall be entitled to its reasonable attorneys fees and
costs for such enforcement.

     Executed by the Landlord and Tenant as of the date first above written.


LANDLORD                                TENANT
Seaside, LLC, an Oregon                 Coldwater Creek, Inc.,
limited liability company               an Idaho corporation



By:___________________________________  By:___________________________________
     Graham C. Bryce                            Name:
     Member                                     Title:
                                                (Please print or type name and 
                                                 title.)


Date:_________________________________  By:___________________________________
<PAGE>
 
                                                Name:
                                                Title:
                                                (Please print or type name and 
                                                title.)



                                        Date:_________________________________
<PAGE>
 
EXHIBIT A

                         SEASIDE FACTORY OUTLET CENTER
                               Legal Description
                     12th and Highway 101, Seaside, Oregon


PARCEL #1                                                            7 June 1996

That certain tract or parcel of land situated in the S.W. 1/4, S.W. 1/4, Section
15, Township 6 North, Range 10 West, W.M., County of Clatsop, State of Oregon,
bounded and described as follows:

Commencing at the N.W. corner of Lot 24 of Block 4 of the Town of Long Branch as
laid out and recorded by C.R. Thompson and Mary P. Thompson, thence
northeasterly along the east line of the right of way of the Spokane, Portland
and Seattle Railway Company, formerly known as the Astoria and Columbia River
Railroad where said line of right of way intersects Wall Street (9th Avenue) of
said Long Branch, and to a point where the north line of said street intersects
said east line of said right of way, which is the true point of beginning;

Thence westerly along the north line of Wall Street 31.0 feet more or less to
the intersection of the center line of said Railroad right of way; thence
N14 degrees 31'20"E a distance of 387.31 feet more or less along the center line
of said Railroad right of way; thence easterly 31.0 feet more or less to the
easterly line of said Railroad right of way; thence N14 degrees 31'20"E a
distance of 369.18 feet along said easterly right of way to a point which is
located 10.0 feet southerly of the southerly right of way of 12th Avenue; thence
east parallel with and 10.0 feet south of the southerly right of way of said
12th Avenue a distance of 82.59 feet; thence north 10.00 feet to the southerly
right of way of said 12th Avenue which is also the south line of the street as
shown on the south side of Logan's Subdivision of Block 1 of Clatsop Grove as
laid out and recorded by H.F.L. Logan; thence east along said 12th Avenue a
distance of 387.55 feet; thence south a distance of 180.00 feet; thence
S11 degrees 43'13"W a distance of 202.54 feet to a point which is located 524.4
feet east of the easterly right of way of said Railroad; thence S23 degrees
36'42"W a distance of 82.84 feet along Neawanna Creek; thence S23 degrees
40'38"E a distance of 98.44 feet more or less along said Creek; thence S89
degrees 59'44"W which is approximately parallel to the existing chain link fence
of the PP&L sub station and 5.0 feet northerly of the said fence a distance of
253.47 feet more or less; thence N00 degrees 00'16"E a distance of 5.00 feet;
thence S89 degrees 59'44"W which is approximately parallel to the existing chain
link fence a distance of 102.00 feet; thence S00 degrees 06'13"E which is
approximately parallel to and 5.0 feet more or less westerly of the existing
chain link fence a distance of 38.61 feet; thence S14 degrees 31'20"W a distance
of 177.70 feet to the north line of said Wall Street (9th Avenue); thence
westerly along the north line of said Wall Street a distance of 226.73 feet more
or less to the point of beginning.

Containing approximately 7.73 acres.



PARCEL #2

Lots 25 and 26 Logan's Subdivision; Lots 25 and 26 Pleasant View Subdivision;
Lots 26 and 27 Rierson's Subdivision; Lots 24 and 25 McKee and Lemon's
Subdivision; along with that portion of the vacated 13th Avenue which abuts
these lots.
<PAGE>
 
Containing approximately 1.12 acres.



Total of approximately 8.85 acres.
<PAGE>
 
                                                                       EXHIBIT C

                         SEASIDE FACTORY OUTLET CENTER
                             Construction Exhibit


1.   PURPOSE OF EXHIBIT.

     This Exhibit defines the scope of the work for the Tenant's space
improvements and distinguishes the Landlord construction obligation (referred to
herein as the "Landlord's Work") from the Tenant's construction obligation
(referred to herein to as the "Tenant's Work").

2.   PLAN AND SPECIFICATIONS.

     2.1  LANDLORD'S PLANS. Landlord will prepare plans and specifications for
the buildings and common areas excluding work to be performed by Landlord's
tenants in the Factory Outlet Center and work to be performed by the owners of
other portions of the Factory Outlet Center (the size, dimensions, and type of
construction of the buildings and the common area shown on Exhibit "B" shall be
determined by Landlord) and such further working drawings and specifications
consistent with and in further development of the plans and specifications as
may from time to time be reasonably necessary ("Landlord's Plans"). As soon as
they are available, Landlord will provide Tenant with copies of such portions of
Landlord's Plans as materially affect Tenant's work (and which shall include a
floor plan of the Premises showing column spacing and overall dimensions) and a
Tenant Information Package.

     2.2  TENANT'S PLANS. Landlord and Tenant will cooperate in the preparation
of plans for the tenant improvements in the Premises in the following manner.

          2.2.1     Within thirty (30) days after Landlord provides Tenant with
the following information required in Section 2.1 above, Tenant will submit to
Landlord plans and specifications prepared at Tenant's expense by Tenant's
architect for Tenant's improvements ("Tenant's Plans"). Tenant's Plans shall
identify those items that are Landlord's and Tenant's construction obligations
respectively, consistent with the requirements of this Construction Exhibit.

          2.2.2     Within fifteen (15) days after submittal to Landlord of
Tenant's Plans, Landlord will either approve the Plans or indicate in writing
the reason for its disapproval. If the Plans are disapproved, the parties will
attempt to develop mutually acceptable Plans. If the initial Tenant's Plans are
not submitted in the time provided in Section 2.2.1 above, or Tenant's Plans
acceptable to Landlord are not approved within thirty (30) days after initial
submittal of Tenant's Plans to Landlord, Landlord may terminate this lease by
written notice to Tenant.

          2.2.3     After approval by Landlord, Tenant's Plans shall not be
changed without a written request from the party desiring the change and written
approval from the other party. Neither party shall unreasonably withhold its
approval of Tenant's Plans and any requested changes.

3.   CONSTRUCTION OF IMPROVEMENTS.

     3.1  CONSTRUCTION OBLIGATIONS. Landlord shall perform at its expense
Landlord's Work set forth below. Except for Landlord's Work, all other work
required to complete the Premises to a finished condition ready for the conduct
of Tenant's business shall be deemed Tenant's Work and shall be performed at
Tenant's sole cost and expense. All improvements to the Premises shall be
constructed in accordance with the Landlord's Plans and approved Tenant's Plans
as applicable. Landlord and Tenant agree to pursue construction of the
improvements diligently to completion, and both Landlord and Tenant agree to
comply with all city, county, and state ordinances, rules, and regulations in
performing their respective work.
<PAGE>
 
     3.2  INSURANCE. During the course of construction, the Landlord agrees at
the Landlord's expense to obtain and maintain public liability and worker's
compensation insurance adequate to fully protect the Tenant as well as the
Landlord from and against any and all liability for death of or injury to
persons or damage to property caused in or about the Premises or by reason of
the construction of the Landlord's Work. The Tenant agrees at the Tenant's
expense to obtain or maintain public liability and worker's compensation
insurance adequate to fully protect the Landlord as well as the Tenant from and
against any and all liability for the death of or injury to persons or damage to
the property caused in or about the Premises or by reason of the construction of
Tenant's Work.

     3.3  NOTICE OF SUBSTANTIAL COMPLETION. Upon notification to Tenant that
Landlord's Work is substantially complete, Tenant at Tenant's cost, will proceed
at once to complete any improvements to the Premises not the obligation of
Landlord. Landlord and Tenant will cooperate to permit Tenant to begin Tenant's
Work, including fixturing and equipping prior to substantial completion of
Landlord's Work to the extent that such is necessary or desirable and does not
interfere with Landlord's Work. Within ten (10) days after notice to Tenant of
substantial completion of Landlord's Work, Tenant shall give Landlord a list of
any contended defects or variances. Landlord will immediately commence to
complete or correct the items that it believes are justified. If Tenant does not
deliver the list within the ten (10) day period, Tenant shall be deemed to have
accepted the Premises. If Tenant gives Landlord a list within the ten (10) day
period, Tenant shall be deemed to have accepted the Premises subject to such
defects or variances. Landlord shall not be liable for any defects or variances
not included in Tenant's notice, whether latent or otherwise, but Tenant shall
have the benefit of any guarantees of Landlord's contractor or suppliers with
respect to Landlord's work and latent defects in the building in which the
Premises are located.

     3.4  PERFORMANCE OF TENANT'S WORK BY LANDLORD'S CONTRACTOR. If Tenant
wishes Landlord's contractor to perform Tenant's Work hereunder or any part
thereof, Tenant will so notify Landlord. Upon approval of Landlord and
Landlord's contractor, the work shall be performed subject to the following
conditions:

          3.4.1 The cost of such construction work as shown on the Tenant's
Plans shall be estimated by the Landlord's contractor prior to start of
construction. The Tenant shall have the prior right of approval of all such
costs as estimated by the Landlord's contractor. Such approval or disapproval
shall be given within fifteen (15) days following the receipt of the cost
estimate.

          3.4.2 At such time that the Tenant and Landlord's contractor mutually
approve such costs, the Tenant shall forthwith enter into a construction
contract with the Landlord's contractor for such work, and the Tenant shall pay
such construction costs in the manner and on the dates provided in such
construction contract. Failure of the Tenant to pay such construction costs as
provided in such construction contract shall constitute a default under the
terms of this lease in like manner as failure to pay rent when due. In the event
of any such failure of the Tenant to pay such construction cost, the Landlord
and the Landlord's contractor shall thereby be entitled without cost,
obligation, or liability of any kind or in any amount whatsoever, to discontinue
the construction of the Tenant's Work.

          3.4.3 Any requests for changes to the construction desired by the
Tenant after the Landlord's contractor has commenced work must be made to the
Landlord in the form of a written Change Request. The Landlord's contractor will
perform the requested change only after receipt of a Change Order issued by the
Landlord and approved by the Tenant and the Landlord's contractor stipulating
the adjustment of the construction sum.

          3.4.4 The Landlord shall have no liability to the Tenant for any acts
or omissions of the Landlord's contractor in the performance of Tenant's Work or
arising in any manner from such work.

4.   LANDLORD'S WORK.  Landlord shall provide the following:

     4.1  Structural shell to include foundations, columns, roof, rear wall, and
demising walls of exposed studs. Front walls are storefront to 9' high, with
wood framing and insulation to structure. Drywall is included from top of
storefront to 6" above ceiling line. Demising walls are 6" metal studs to
structure, with sheetrock each side (sheetrock is taped and sanded, ready for
paint). Rear and exterior 
<PAGE>
 
side walls are concrete tilt-up panels (no furring or drywall is included). No
stockroom walls are included except Landlord shall construct one (1) stockroom
wall not to exceed 56 lineal feet.

     4.2  Sign band and covered walk in front of Premises. Access to rear of
Premises and rear service door if required by code.

     4.3  Sanitary sewer line and water main to Premises for Tenant's
connection.

     4.4  Fire sprinkler system to the extent required by code (both upright and
pendant heads) and as designated by Landlord's architect, covering above and
below the ceilings.

     4.5  Storefront, with double acting entrance door not to exceed a maximum
of six feet (6') in width.

     4.6  Concrete floor slab--on-grade.

     4.7  Gypsum board interior demising walls finished and ready for paint.

     4.8  Landlord's standard suspended acoustical board ceiling.

     4.9  Demising walls, partitions, ceilings, doors, exit signs, hose
stations, and temporary fire protection equipment as required by local or state
codes and fire rating bureau. After taking possession of the Premises, continued
compliance with all of the above codes shall be the Tenant's responsibility.

     4.10 One toilet room including plumbing with Landlord's standard toilet
fixtures, including walls, door, drywall, ceiling, one toilet, one sink, floor
covering, exhaust fan and lights, and accessories consisting of mirror and
toilet paper holder.

     4.11 All electrical work not expressly provided for below shall be part of
Tenant's Work:

          4.11.1  200 amp electrical panel at the rear of the Premises.

          4.11.2  Convenience outlets, fed from the Tenant's panel, located
approximately fifteen feet (15') on center on the demising walls.

          4.11.3  Fluorescent lighting fixtures and lamps, the extent of which
shall not exceed the energy conservation guidelines issued by the state
(approximately 1/90 sq. ft.). The increased cost of wiring to other electrical
equipment furnished and installed by Tenant shall be paid for by Tenant.

          4.11.4  Conduit and "J" box for Tenant's sign as shown on drawings.

     4.12 H.V.A.C. system as per the Landlord's standard specifications for
retail space, complete with duct work, grilles, controls, etc. HVAC capacity is
based on one ton per 400 sq. ft. of tenant space.

     4.13 Food service tenants shall provide grease interceptors at sanitary
drains where required by the Landlord. The Landlord shall have the right to
inspect required grease traps and require maintenance.

     4.14 One continuous stockroom wall not exceed 56 lineal feet.
 
5.   TENANT'S WORK. Tenant shall furnish all labor, materials, equipment, and
payment for Tenant's Work and completion of the Premises not included in
Landlord's Work for which Tenant shall receive an allowance of $8.50 per square
foot not to exceed $36,380. All roof penetrations shall be made by Landlord's
contractor unless otherwise approved in writing by Landlord. Tenant's Work
includes, but is not limited to, the following:
<PAGE>
 
     5.1  Procurement and payment of all necessary permits, licenses, and fees
in connection with the Tenant's construction contracts, compliance with all
building codes, regulations, and ordinances and provide all required bonds and
insurance.

     5.2  Permission for Landlord to provide plumbing, electrical, and telephone
runs from other stores in building to pass through Premises in concealed areas.

     5.3  Providing a construction schedule and coordinating the work of the
contractor in order to maintain minimum disruption to the operation of the
Center.

     5.4  Conformance of Tenant's construction with the plans and specifications
of the Project Architect-Engineer. All changes, modifications, and additions are
subject to Landlord's or Landlord's architect's approval.

     5.5  Payment to Landlord for roofing repairs required as a result of
Tenant's contractors penetrating the existing roof, which repairs shall be
performed solely by Landlord's roofing contractor.
<PAGE>
 
                                                                       EXHIBIT D

                             Rules and Regulations


1.   The sidewalks, halls, passages, exits, entrances, stairways and elevators
     (if any) of the Factory Outlet Center shall not be obstructed by any of the
     Tenants or used by them for any purpose other than for ingress to and
     egress from their respective premises. The halls, passages, exits,
     entrances, elevators and stairways are not for the general public, and
     Landlord shall in all cases retain the right to control and prevent access
     thereto of all persons whose presence in the judgement of Landlord would be
     prejudicial to the safety, character, reputation and interests of the
     Factory Outlet Center and Tenants, provided that nothing herein contained
     shall be construed to prevent such access to persons with whom any Tenant
     normally deals in the ordinary course of its business, unless such persons
     are engaged in illegal activities. No Tenant and no employee or invitee of
     any Tenant shall go upon the roof of the Factory Outlet Center.

2.   No sign, placard, picture, name, advertisement or notice visible from the
     exterior of any Tenant's premises shall be inscribed, painted, affixed or
     otherwise displayed by any Tenant on any part of the Factory Outlet Center
     without the prior written consent of Landlord. Landlord will adopt and
     furnish to Tenant general guidelines relating to signs inside the Factory
     Outlet Center on the sales floor. Tenant agrees to conform to such
     guidelines, but may request approval of Landlord for modifications. All
     approved signs or lettering on doors shall be printed, painted, affixed or
     inscribed at the expense of the Tenant by a person approved by Landlord.
     Material visible from outside the Factory Outlet Center will not be
     permitted.

3.   The premises shall not be used for lodging or the storage of merchandise
     held for sale to the public, and unless ancillary to a restaurant or other
     food service use specifically authorized in the lease of a particular
     Tenant, no cooking shall be done or permitted by any Tenant on the
     premises, except that the preparation of coffee, tea, hot chocolate and
     similar items by Tenants and their employees shall be permitted.

4.   Landlord will furnish each Tenant with two keys free of charge. Landlord
     may make reasonable charge for any additional keys. No Tenant shall have
     any keys made. No Tenant shall alter any lock or install a new or
     additional lock or any bolt on any door of its premises without the prior
     consent of Landlord. Each Tenant shall in each case furnish Landlord with a
     key for any such lock. Each Tenant upon the termination of its tenancy,
     shall deliver to Landlord all keys to doors in the Factory Outlet Center
     which shall have been furnished to Tenant. Each Tenant shall see that the
     doors of its premises are closed and securely locked at such times as
     Tenant's employees leave the premises.

5.   No Tenant shall use or keep in the premises or the Factory Outlet Center
     any kerosene, gasoline or inflammable or combustible fluid or material or
     use any method of heating or air conditioning other than that supplied by
     Landlord. No Tenant shall use, keep or permit to be used or kept any
     foreign or noxious gas or substance in the premises, or permit or suffer
     the premises to be occupied or used in a manner offensive or objectionable
     to Landlord or other occupants of the Factory Outlet Center by reasons of
     noise, odors, or vibrations, or interfere in any way with other Tenants or
     those having business therein.

6.   In the case of invasion, mob, riot, public excitement, or other
     circumstances rendering such action advisable in Landlord's opinion,
     Landlord reserves the right to prevent access to the Factory Outlet 
<PAGE>
 
     Center during the continuance of the same by suggesting an action as
     landlord may deem appropriate, including closing entrances to the Factory
     Outlet Center.

7.   The toilet rooms, toilets, urinals, wash bowls and other apparatus shall
     not be used for any purpose other than that for which they were
     constructed; no foreign substance of any kind whatsoever shall be thrown
     therein. The expense of any breakage, stoppage, or damage resulting from
     the violation of this rule shall be borne by the Tenant who, or whose
     employees or invitees, shall have caused it.

8.   Except with prior consent of Landlord, no Tenant shall sell or permit the
     sale in the premises or use or permit the use of any common area for the
     sale of newspapers, magazines, periodicals, theater tickets or any other
     goods, merchandise, or service. Tenant shall not carry on, or permit or
     allow any employee or other person to carry on the business of stenography,
     typewriting, or any similar business in or from the premises for the
     service or accommodation of occupants of any other portion of the Factory
     Outlet Center, nor shall the premises of any Tenant be used for
     manufacturing of any kind, or any business or activity other than that
     specifically provided for in such Tenant's lease.

9.   Tenant shall not use any advertising media which may be heard outside of
     the premises and Tenant shall not place or permit the placement of any
     radio or television antenna, loudspeaker, sound amplifier, phonograph,
     searchlight, flashing light or other device of any nature on the roof or
     outside of the boundaries of the premises (except for Tenant's approved
     identification sign or signs) or at any place where the same may be seen or
     heard outside of the premises.

10.  All loading and unloading of merchandise, supplies, materials, garbage and
     refuse shall be made only through such entry ways and elevators (if any)
     and at such times as Landlord shall designate. In its use of the loading
     areas the Tenant shall not obstruct or permit the obstruction of said
     loading area and at no time shall park or allow its officers, agents or
     employees to park vehicles therein except for loading and unloading.

11.  Landlord shall have the right, exercisable without notice and without
     liability to any Tenant, to change the name and street address of the
     Factory Outlet Center.

12.  The freight elevators, if any, shall be available for use by all Tenants in
     the Factory Outlet Center, subject to such reasonable scheduling as
     Landlord in its discretion shall deem appropriate. The persons employed to
     move such equipment in or out of the Factory Outlet Center must be
     acceptable to Landlord. Landlord shall have the right to prescribe the
     weight, size and position of all equipment, materials, furniture or other
     property brought into the Building. Heavy objects shall if considered
     necessary to Landlord, stand on wood strips of such thickness as is
     necessary to properly distribute the weight. Landlord will not be
     responsible for loss or damage to any such property from any cause, and all
     damage done to the Factory Outlet Center by moving or maintaining such
     property shall be repaired at the expense of Tenant.

13.  The directory of the Factory Outlet Center, if any, will be provided for
     the display of the name and location of Tenants and Landlord reserves the
     right to exclude any other names therefrom.

14.  No curtains, draperies, blinds, shutters, shades, screens or other
     coverings, hangings or decorations shall be attached to, hung or placed in,
     or used in connection with any window of the Factory Outlet Center without
     the prior written consent of Landlord.

15.  Each Tenant shall see that the doors of its premises are closed and locked
     and that all water faucets, water apparatus and utilities are shut off
     before Tenant or Tenant's employees leave the premises, so as to prevent
     waste or damage, and for any default or carelessness in this regard Tenant
     shall make good all injuries sustained by other tenants or occupants of the
     Factory Outlet Center or Landlord.
<PAGE>
 
16.  No Tenant shall use any portion of the common areas for any purpose when
     the premises of such Tenant are not open for business or under construction
     in preparation for occupancy.

17.  Landlord may waive any one or more of these Rules and Regulations for the
     benefit of any particular Tenant or Tenants, but no such waiver by Landlord
     shall be construed as a waiver of such Rules and Regulations against any or
     all of the Tenants of the Factory Outlet Center.

18.  These Rules and Regulations are in addition to and shall not be construed
     to in any way modify, alter or amend, in whole or in part, the terms and
     conditions of any Lease of premises in the Factory Outlet Center.

19.  Landlord reserves the right to make such other and reasonable rules and
     regulations as in its judgement may from time to time be needed for the
     safety, care and cleanliness of the Factory Outlet Center, and for the
     preservation of good order therein.

20.  It is understood by the Landlord and Tenant that the demised premises may
     be subject to the Americans with Disabilities Act (the ADA), a Federal law
     codified at 42 USC Section 12101 et seq.

Tenant's Responsibilities.  Tenant shall be responsible for compliance with the
     Americans with Disabilities Act of 1990 ("ADA"), including making all
     necessary alterations and removing barriers to access for disabled persons
     and providing auxiliary aids.

Default.  Tenant's failure to comply with the ADA shall constitute a default
     under this lease. Notwithstanding any other provision in the lease,
     Landlord, upon discovery of noncompliance by Tenant with the ADA, may
     provide Tenant with 20 days written notice to bring the premises into
     compliance with the ADA to remedy the default. If Tenant fails to remedy
     the default, Landlord may (1) terminate Tenant's right to possession of the
     premises and seek damages and other judicial relief, or (2) enter the
     premises during normal business hours for the purposes of inspecting the
     same and making any necessary alterations and changes to the premises to
     bring the premises into compliance with the ADA. If the Landlord incurs any
     expense or costs, including any attorney fees, in bringing the premises
     into compliance with the ADA, Tenant shall pay such expenses or costs to
     the Landlord upon demand. The performance of any work by the Landlord shall
     not constitute a waiver of Tenant's default in failing to perform the same.
<PAGE>
 
                                                                       EXHIBIT E

                         SEASIDE FACTORY OUTLET CENTER
                               SIGN REGULATIONS


          Conformance with the following sign regulations will be strictly
enforced, and any installed non-conforming or unapproved signs must be brought
into conformance at Tenant's expense.

1.   GENERAL

     1.1  Each tenant is permitted two (2) business identification signs; one
(1) major sign referred to hereafter as a "Wall Sign," and, at Tenant's option,
one (1) pedestrian related sign hereafter referred to as a "Blade Sign."

     1.2  The sign guidelines herein are not intended to supersede local sign
and building codes and ordinances. Tenant and/or Tenant's Agent are expected to
understand and follow all local sign and building codes and ordinances.

     1.3  Tenant shall be responsible for all required sign permits and fees.
Each sign will require a permit from the City of Seaside.

     1.4  Tenant shall be responsible for all expenses related to the design,
fabrication, installation, maintenance, and removal of its sign.

2.  APPROVALS

     2.1  Sign approval will be based on conformance to this Exhibit "E" and all
applicable City regulations.

     2.2  All signs must be submitted for written approval to the Landlord prior
to commencing fabrication.

     2.3  Submittals shall include two sets of complete shop drawings indicating
location, size, layout, design and colors, lettering and graphics, fastening
systems, marquee penetrations, and any other pertinent information. Submit an
elevation, section, and details in a reasonably workable scale.

     2.4  It is recommended (not required) that Tenant submit a "design concept"
of the sign for review by the Landlord for discussion prior to making a formal
submittal for approval.

3.  WALL SIGNS

     3.1  Tenant's Wall Sign shall be located on the sign band provided directly
in front of and parallel to the respective storefront as indicated by the
Landlord. The sign shall be a minimum of six inches (6") above the bottom of the
sign band and six inches (6") below the top of the sign band.

     3.2  Four foot (4') clearance shall be maintained between the adjacent
Tenant's signs unless approved.

     3.3  Wall Signs shall not exceed thirty-six inches (36") high at any point
and shall not exceed an average height of thirty inches (30") and shall be no
wider than Tenant's available sign band width minus two feet (2') at each end.
Sign area shall be limited to 1.5 square feet per lineal foot of store frontage.
<PAGE>
 
     3.4  Individual "letter style" signs shall be the Factory Outlet Center's
standard. No "can style" signs will be considered. Tastefully handled exposed
neon lighting will be considered for approval.

     3.5  Flashing, moving, or audible signs will not be permitted.

     3.6  All letters shall be internally illuminated and faced with plexiglas
or similar material.

     3.7  Signs perpendicular to the marquee/gable are not permitted except as
provided in "Blade Signs" below. Painted lettering will not be permitted.

     3.8  All electrical signs shall bear a UL label, and their installation
shall comply with all applicable building and electrical codes.

     3.9  The sign's electrical connections shall be made to Tenant's electrical
service. A conduit shall be provided from the sign band to Tenant's space.
Wiring and connections are Tenant's responsibility.

     3.10 All sign installations shall be executed in a neat, professional
manner and approved in advance by Landlord. Tenant's Sign Contractor(s) shall
repair any damage caused by their work, and Tenant shall be fully responsible
for the operations of Tenant's contractor(s).

     3.11 If the Wall Sign is ever removed for replacement or because of a lease
termination, Tenant shall leave the sign band in good condition, normal
weathering excepted. Tenant shall be required to repair in a professional manner
any holes or damage related to the sign.

4.  BLADE SIGNS

     4.1  Tenant's Blade Sign shall be located immediately above Tenant's
entrance and under the covered walkway supports per building standard.

     4.2  The sign shall be perpendicular to Tenant's storefront and extend
approximately four feet (4') out from the storefront.

     4.3  The Blade Sign shall not exceed eighteen inches (18") in depth or
thirty-six inches (36") in length.

     4.4  Blade Signs shall be a maximum thickness of two inches with a
sculptured or raised graphics projection of one inch (1" maximum on each side
for a total Blade Sign maximum thickness of four inches (4").

     4.5  Blade Sign material shall be wood, metal, plastic, or glass. Plywood
or particle board is not permitted.

     4.6  Imaginative shapes with cut-outs and transparent materials
representing the shop's trade are encouraged.

     4.7  Blade Signs shall be connected to the covered walkway supports only
and in a neat professional manner. Tenant shall include connection details with
the shop drawing submittal (see Section 2.3) and shall demonstrate the sign's
structural integrity. The maximum allowable weight of the sign including
connection shall be 200 pounds.

5.  MISCELLANEOUS SIGNAGE

     5.1  Service doors shall be identified with two inch (2") high painted or
adhered letters/numbers located approximately five feet (5') above finish floor
on the door leaf(s).

     5.2  Other signs, banners, flags, etc., whether permanently fixed,
portable, or attached to vehicles will not be permitted beyond Tenant's lease
line unless approved by the Landlord.
<PAGE>
 
     5.3  Temporary (thirty (30) days or less) advertising and promotional signs
attached to the inside of Tenant's storefront windows shall be done tastefully
and with restraint so as not to distract from the quality character of the
Factory Outlet Center.

     5.4  Permanent signs (thirty (30) days duration or longer)
attached/suspended at the inside of Tenant's storefront windows (within five (5)
feet of the lease line) shall be submitted to the Landlord for approval before
fabrication and installation.

     5.5  Postal service required address numbers shall be three inch (3") high
block numbers on the transom glass immediately above Tenant's main entrance
door. Graphics painted on Tenant's storefront windows shall be considered
signage and is subject to this Exhibit "E".
<PAGE>
 
                                                                       EXHIBIT G

                         SEASIDE FACTORY OUTLET CENTER
                                OPTION TO RENEW


Provided Tenant is not in default hereunder, and provided Tenant is achieving
annual gross sales of, at least, $320 per square foot, Tenant shall have the
right to extend the term hereof for one (1) succeeding period of five (5) years
each by giving Landlord written notice of its intent to extend Lease on hundred
eighty (180) days prior to expiration of its initial term and first option
period.

All terms and conditions will remain the same for each said option except the
minimum monthly rental, which shall be $72,760 annually payable at $6,063.33 per
month. Percentage Rent: four percent (4%) of gross sales over $1,455,200 per
year.