PYRAMID BREWERIES INC
EXHIBIT 10.16
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>3
<FILENAME>v88040exv10w16.txt
<DESCRIPTION>EXHIBIT 10.16
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.16

                                 LEASE AGREEMENT

                                     BETWEEN

                  COUNTY SUPERVISORS ASSOCIATION OF CALIFORNIA,

                                   DBA "CSAC"

                                   AS LANDLORD

                                       AND

                PYRAMID BREWERIES, INC., A WASHINGTON CORPORATION

                                    AS TENANT

                              DATED APRIL 15, 2002

<PAGE>

                                 LEASE AGREEMENT

1.       Basic Lease Information.

         1.1  Lease Date:               April 15, 2002.

         1.2  Tenant:                   PYRAMID BREWERIES, INC., a Washington
                                        corporation

         1.3  Address of Tenant:        91 S. Royal Brougham Way
                                        Seattle, Washington 98134
                                        Attention: Chief Financial Officer

         1.4  Landlord:                 COUNTY SUPERVISORS ASSOCIATION OF
                                        CALIFORNIA, dba CSAC

         1.5  Address of                1100 K Street
              Landlord:                 Sacramento, CA 95814
                                        Attention: Steve O'Brien

         1.6  Premises:                 Approximately 9,100 rentable square feet
                                        ("RSF") located on the ground floor and
                                        the mezzanine level of the Building and
                                        shown on the Site Plan attached hereto
                                        as Exhibit B. The Premises are further
                                        described in Section 3 below.

         1.7  Building:                 The building located at 1029 "K" Street,
                                        in the City of Sacramento, Sacramento
                                        County, California, which is situated on
                                        the Land.

         1.8  Land:                     The real property more particularly
                                        described on Exhibit A attached hereto
                                        and by this reference incorporated
                                        herewith.

         1.9  Lease Term:               Ten (10) years and eight (8) months
                                        months, commencing on the Commencement
                                        Date (as defined in Section 4.1 below)
                                        and terminating on the last day of the
                                        one hundred twenty eighth (128th)
                                        calendar month thereafter ("the
                                        Termination Date").

         1.10 Base Rent:                See Section 5.1 below.

         1.12 Security Deposit:         Ten Thousand Dollars ($10,000).

         1.13 Rentable Square           Approximately 9,100 RSF.
              Feet in the Premises:

         1.14 Rentable Square Feet      Approximately 29,778_RSF.
              Feet in the Building:

         1.15 Tenant's Propor-          Thirty and 56/100 percent (30.56%).

                                       1-

<PAGE>

              tionate Share:

         1.16 Exhibits:

                       Exhibit A:       Legal Description of Land
                       Exhibit B:       Site Plan
                       Exhibit C:       Tenant Improvement/Workletter Agreement
                       Exhibit D:       Tenant's Signage

         The above Basic Lease Information is hereby incorporated into and made
a part of the attached Lease. Any reference in the Lease to the above terms
shall mean and refer to the information and terms set forth in the above Basic
Lease Information. In the event of any conflict between the Basic Lease
Information and the terms of the Lease, the terms of the Lease shall control.

         2.       Parties. This Lease is made by and between Landlord and Tenant
as specified in Article 1. The exhibits as may be referred to herein are
attached hereto and incorporated as a part of this Lease.

         3.       Premises.

                  3.1      Lease Grant. Landlord hereby leases the Premises to
Tenant and Tenant leases the Premises from Landlord for the term, at the rental,
and upon all the conditions set forth herein. The Premises are located in the
Building, which is situated on the Land. The Premises shall include (i) the
"Primary Premises" on the first floor of the Building consisting of
approximately eight thousand (8,000) rentable square feet, and (ii) the
"Mezzanine Premises" on the mezzanine level of the Building, consisting of
approximately one thousand one hundred (1,100) rentable square feet, for a total
of Nine Thousand One Hundred (9,100) rentable square feet. Notwithstanding the
rentable areas stated in this Lease, the actual Rentable area of the Premises
and the Building shall be calculated by using the method for determining
Rentable Area as set forth in the "Standard Method of Measuring Floor Area in
Office Buildings, ANSI/BOMA Z65.1-1996" published by the Building Owners and
Managers Association International, approved June 7, 1996 by American National
Standards Institute, Inc. ("BOMA"). Following the completion of the improvements
to be made to the Building and the Premises pursuant to this Lease, the actual
rentable area of both the Building and the Premises may change. In the event
they do change, then Landlord shall recalculate the rentable area of both in
accordance with BOMA and adjust Rent, Tenant's Proportionate Share and any other
amounts based on the rentable area of the Building or the Premises. If Tenant
disputes such calculation and Landlord and Tenant are unable to agree upon such
areas within thirty (30) days after Tenant's objection, the matter shall be
resolved by arbitration. Landlord also grants Tenant nonexclusive rights to the
use of all Common Areas located from time to time in the Building and on the
Land, and the benefit of all other easements, rights, and provisions of any
covenants and restrictions pertaining to the Building or the Land, subject to
reasonable rules and regulations promulgated by Landlord from time to time.

                  3.2      Mezzanine Expansion. Tenant shall have the right, at
its sole expense and

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<PAGE>

risk, to seek approval from the City of Sacramento and all other governmental
authorities having or asserting jurisdiction over the project (the "Governmental
Authorities") to expand the mezzanine portion of the Premises for additional
facilities for the Premises (the "Mezzanine Expansion"). Once approval has been
obtained (and written evidence of such approval supplied to Landlord), Tenant
may install the Mezzanine Expansion in a good and workmanlike manner, and in
compliance with the approved plans and specifications and with all zoning,
building, and safety codes, ordinances, standards, regulations and requirements
of the Governmental Authorities. Tenant shall be solely responsible for the
adequacy and safety of the installation, operation, maintenance or repair of
Mezzanine Expansion should Landlord request such upon termination of this Lease.
Tenant shall be solely liable for any damages or injury arising out of such
installation, operation, maintenance or repair, including without limitation,
any damage to the Building, except to the extent due to the negligence or
willful misconduct of Landlord. Tenant shall pay to Landlord upon demand the
cost of repairing any damage to the Building caused by such installation,
operation, maintenance or repair, Landlord shall review and approve the proposed
Mezzanine Expansion, and shall inspect the installation and operation of the
Mezzanine Expansion once approval is granted. Tenant covenants and agrees that
the design, size, location and configuration of the Mezzanine Expansion shall be
at all times during the Lease Term (i) reasonably acceptable to Landlord
(evidenced by Landlord's written statement of approval, not to be unreasonably
withheld or delayed); and (ii) in accordance with all applicable governmental
restrictions and all other covenants, conditions and restrictions applicable to
the project. Tenant acknowledges and agrees that Landlord is relying on the
foregoing covenant and but for such covenant, Landlord would not have agreed to
such Mezzanine Expansion. Landlord and Tenant agree that Tenant shall not be
required to pay Base Rent for the Mezzanine Expansion, but the Mezzanine
Expansion shall be considered part of the Premises for purposes of determining
Tenant's Proportionate Share and all sales from the Mezzanine Expansion, if any,
shall be subject to Percentage Rent.

                  3.3      Common Area. "Common Area" shall mean (i) the first
floor lobby; (ii) the elevators and elevator lobbies, and any other areas of the
Building which area is considered "Common Area" pursuant to BOMA.

                  3.4      Outdoor Dining Facilities. Tenant shall have the
right, at its sole expense and risk, to seek approval from the City of
Sacramento and all other governmental authorities having or asserting
jurisdiction over the project (the "Governmental Authorities") to utilize the
sidewalk on 11th and K Streets immediately outside the Premises for additional
facilities for the Premises (the "Outdoor Dining Facilities"). Once approval has
been obtained (and written evidence of such approval supplied to Landlord),
Tenant may install the Outdoor Dining Facilities in a good and workmanlike
manner, and in compliance with the approved plans and specifications and with
all zoning, building, and safety codes, ordinances, standards, regulations and
requirements of the Governmental Authorities. Tenant shall be solely responsible
for the adequacy and safety of the installation, operation, maintenance and
repair of Tenant's Outdoor Dining Facilities. Tenant shall be solely liable for
any damages or injury arising out of such installation, operation, maintenance
or repair, including without limitation, any damage to the Project, except to
the extent due to the negligence or willful misconduct of Landlord. Tenant shall
pay to Landlord upon demand the cost of repairing any damage to the Building
caused by such installation, operation, maintenance, repair or removal, Landlord
shall review and approve the proposed Outdoor Dining Facilities, and shall
inspect the installation and operation of the

                                       3-

<PAGE>

Outdoor Dining Facilities once approval is granted. Tenant covenants and agrees
that the design, size, location and configuration of the Outdoor Dining
Facilities shall be at all times during the Lease Term (i) reasonably acceptable
to Landlord (evidenced by Landlord's written statement of approval); and (ii) in
accordance with all applicable governmental restrictions and all other
covenants, conditions and restrictions applicable to the project. Tenant
acknowledges and agrees that Landlord is relying on the foregoing covenant and
but for such covenant, Landlord would not have agreed to such Outdoor Dining
Area. Landlord and Tenant agree that Tenant shall not be required to pay Base
Rent or Operating Costs for the Outdoor Dining Facilities, but all sales from
the Outdoor Dining Facilities shall be subject to Percentage Rent.

                  3.5      Employee Restroom And Dress Area. Landlord agrees to
provide Tenant with an area on the west elevation of the mezzanine level of the
Building for use as an employee restroom and changing and break area. Tenant
shall accept such space in its current, as-is condition, and all costs of
improving such space shall be borne by Tenant. Landlord and Tenant agree that
Tenant shall not be required to pay Base Rent for such mezzanine area, but such
mezzanine area shall be considered part of the Premises for purposes of
determining Tenant's Proportionate Share. Tenant agrees that no customers shall
be allowed in said area.

                  3.6      Insurance, Taxes And Maintenance. Notwithstanding the
foregoing, Tenant shall be responsible for all liability and property insurance,
repairs, remodeling, renovation, restoration and all taxes (real and personal)
required and/or assessed for the use and operation of the Mezzanine Expansion
Area, Outdoor Dining Facilities and the Employee Restroom and Dress area. All
limits of insurance to be required to be carried by Tenant shall be reviewed on
a frequent basis for the purpose of increasing the limits on a prudent basis
from time to time based on recommendations from industry experts.

                  3.7      Landlord Representations. Landlord represents and
warrants to Tenant that (i) fee title to the Land, Building and Premises is
vested in Landlord, and, as of the date of this Lease, is subject to no defects
or encumbrances; (ii) Landlord has the authority to enter into this Lease and
its execution and delivery by Landlord has been duly authorized; (iii) the
Building and all Common Areas therein (including Building electrical, HVAC,
mechanical, plumbing, and fire/life safety systems in the Building, Common Areas
and Premises) shall at all times meet all current laws, codes, and ordinances,
including use as a public accommodation as defined in the Americans With
Disabilities Act; (iv) the Building and Premises comply with all covenants,
conditions, restrictions and encumbrances, underwriter's requirements, and all
applicable rules, regulations, statutes, ordinances, laws and building codes;
(v) all electrical, plumbing, heating, ventilating, air conditioning ("HVAC"),
lighting, fire protection, mechanical and similar building service systems are
in reasonably good working order and condition; (vi) there are currently no
local improvement districts, special assessments, or state or local impact fees
which are assessed against, encumber or affect the Land, and, to Landlord's
knowledge, none of the foregoing are pending or threatened, and there are no
agreements relating to any such improvement districts, special assessments or
state or local impact fees to which Landlord, or any affiliate or predecessor of
Landlord is a party; and (vii) the Premises, Building and Land are free of the
presence of any hazardous substances (including without limitation asbestos or
asbestos containing materials). Landlord shall be responsible for removing any
hazardous materials on the Land or in the Building and shall indemnify, defend
and hold Tenant harmless from and against any loss or

                                       4-

<PAGE>

damage arising out of or relating to any hazardous materials on the Land or in
the Building except those brought thereon by Tenant or its agents, employees or
contractors.

                  3.8      Tenant Improvements. Landlord shall deliver the
Premises to Tenant in the condition described on Exhibit C attached hereto, with
the work described thereon completed. Further improvements to the Premises (the
"Tenant Improvements") shall be constructed by Tenant as further described on
Exhibit C. Plans and specifications for such tenant improvements, and the
contractors and subcontractors utilized by Tenant for such tenant improvements,
shall be subject to the prior approval of Landlord, which shall not be
unreasonably withheld. Upon expiration or sooner termination of this Lease, all
improvements and additions to the Premises, except Tenant's trade fixtures,
shall be deemed the property of Landlord.

         4.       Term.

                  4.1      Term. The term of this Lease shall be for the period
which commences on the date Landlord delivers the Premises to Tenant with all of
Landlord's Work (as defined on Exhibit C) substantially completed (the
"Commencement Date") and ends on the Termination Date unless sooner terminated
pursuant to any provision hereof. Notwithstanding the Commencement Date, Rent
shall not commence until the Rent Commencement Date, as defined in Section 5.1
below.

                  4.2      Delivery Date; Delay in Commencement. Landlord
warrants that the Premises are currently vacant. If Tenant occupies the Premises
prior to the Commencement Date, such occupancy shall be subject to all
provisions hereof except the obligation to pay Rent, but such occupancy shall
not advance the Termination Date. Before the Commencement Date, the parties
shall inspect the Premises, have all Building systems demonstrated, and prepare
a punchlist of incomplete or faulty items of construction or mechanical
installation, necessary mechanical adjustments, and finish work. Punchlist items
that Landlord is required to complete shall be completed not later than thirty
(30) days after the Commencement Date. Notwithstanding anything to the contrary
contained in this Lease, if the Commencement Date has not occurred by August 1,
2002 (provided such date shall be extended for delays due to causes outside of
the reasonable control of Landlord and delays caused by Tenant) Tenant may elect
to terminate this Lease by delivering written notice to Landlord, in which event
the Security Deposit shall be immediately returned to Tenant.

                  4.3      Tenant's Options to Extend. Provided Tenant is not in
default under this Lease beyond any applicable notice and cure period at the
time Tenant delivers notice of its intention to extend, Tenant shall have the
right to extend the term of this Lease for two (2) periods of five (5) years
each (each of which, an "Extension Term"). Tenant may exercise an extension
option by delivering to Landlord notice of Tenant's intention to exercise such
option no later than the date six (6) months prior to the expiration of the
then-existing term of this Lease. Each such Extension Term shall be on all of
the terms and conditions contained in this Lease, except that Base Rent shall be
adjusted as set forth in Section 5.2.

                  4.4      Landlord's Right to Terminate. Notwithstanding
anything to the contrary contained in this Lease, Landlord shall be entitled to
terminate this Lease upon written notice to

                                       5-

<PAGE>

Tenant if (i) Landlord reasonably determines that the cost of completing
Landlord's Work will exceed Seven Hundred Fifty Thousand Dollars ($750,000);
(ii) Landlord demonstrates to Tenant's reasonable satisfaction the basis for
such determination, including providing Tenant with copies of bids or estimates
for such work from reputable third party contractors; and (iii) Landlord
delivers written notice of such election to terminate to Tenant no later than
the date sixty (60) days after Landlord has obtained approval from the City of
Sacramento to perform Landlord's Work, provided Landlord shall apply for such
permit within thirty (30) days after the date this Lease is fully executed and
shall thereafter diligently pursue issuance of such approvals. Upon such
termination, the Security Deposit shall be immediately returned to Tenant and
the parties shall have no further obligations hereunder.

         5.       Rent.

                  5.1      Base Rent. Commencing on the Rent Commencement Date
(as defined below), Tenant shall pay Landlord as Base Rent the amounts set out
below in lawful money of the United States of America for each and every month
of the Lease payable in advance, without deduction or offset (except as
expressly provided in this Lease) on the first day of each month commencing with
the Commencement Date. Base Rent for any period during the term hereof which is
for less than one month shall be prorated based on the number of days in such
month. Base Rent shall be payable to Landlord at the address stated in Article 1
or to such other persons or at such other places as Landlord may designate in
writing. Landlord shall establish an account that will permit Tenant to pay Rent
through electronic funds transfers. Base Rent and any other amounts payable by
Tenant to Landlord hereunder are sometimes hereinafter referred to as "Rent."
Notwithstanding anything to the contrary contained in this Lease, Base Rent,
Percentage Rent, Operating Costs and all other amounts payable by Tenant under
this Lease shall not commence until the earlier of (i) the date five (5) months
after Landlord has delivered the Premises to Tenant with all of Landlord's Work
substantially completed and Tenant has obtained final approval of Construction
Documentation by the City of Sacramento; or (ii) the date Tenant first opens in
the Premises for normal business operations. (the "Rent Commencement Date"). The
months noted below commence as of the Rent Commencement Date.

<TABLE>
<CAPTION>
                Ground Floor                 Mezzanine
                ------------                 ---------
Months       8,000 square feet           1,100 square feet           Total
------       -----------------           -----------------           -----
<S>          <C>                         <C>                       <C>
1-6          $1.50 = $12,000.00          $1.50 = $1,650.00         $13,650.00

7-12         $1.75 = $14,000.00          $1.50 = $1,650.00         $15,650.00

13-36        $2.00 = $16,000.00          $1.50 = $1,650.00         $17,650.00
</TABLE>

<TABLE>
<S>          <C>
37-60        Base Rent payable immediately prior to such period, increased by
             the increase in the CPI (defined below) over the prior 24 months,
             with any such adjustment to be not less than 1.5% and not more than
             3.5%.

61-84        Base Rent payable immediately prior to such period,
</TABLE>

                                       6-

<PAGE>

<TABLE>
<S>          <C>
             increased by the increase in the CPI over the prior 24 months, with
             any such adjustment to be not less than 1.5% and not more than
             3.5%.

85-108       Base Rent payable immediately prior to such period, increased by
             the increase in the CPI over the prior 24 months, with any such
             adjustment to be not less than 1.5% and not more than 3.5%.

109-120      Base Rent payable immediately prior to such period, increased by
             the increase in the CPI over the prior 24 months, with any such
             adjustment to be not less than 1.5% and not more than 3.5%.
</TABLE>

                  5.2      Extension Term Base Rent. In the event one or both
of the Extension Terms described in Section 4.3 above exercised, then the Base
Rental shall be adjusted as follows:

<TABLE>
<CAPTION>
Months
------
<S>          <C>
121-144      Base Rent payable immediately prior to such period, increased by
             the increase in the CPI over the prior 12 months, with any such
             adjustment to be not less than 1.5% and not more than 3.5%.

145-168      Base Rent payable immediately prior to such period, increased by
             the increase in the CPI over the prior 24 months, with any such
             adjustment to be not less than 1.5% and not more than 3.5%.

169-180      Base Rent payable immediately prior to such period, increased by
             the increase in the CPI over the prior 24 months, with any such
             adjustment to be not less than 1.5% and not more than 3.5%.

181-204      Base Rent payable immediately prior to such period, increased by
             the increase in the CPI over the prior 12 months, with any such
             adjustment to be not less than 1.5% and not more than 3.5%.

205-228      Base Rent payable immediately prior to such period, increased by
             the increase in the CPI over the prior 24 months, with any such
             adjustment to be not less than 1.5% and not more than 3.5%.
</TABLE>

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<PAGE>

<TABLE>
<S>          <C>
229-240      Base Rent payable immediately prior to such period, increased by
             the increase in the CPI over the prior 24 months, with any such
             adjustment to be not less than 1.5% and not more than 3.5%.
</TABLE>

         As used herein, "CPI" shall mean the Consumer Price Index in the column
for "All items" in the table entitled "Consumer Price Index for All Urban
Consumers, San Francisco-Oakland-San Jose Metropolitan Area (1982-84 = 100)",
published by the Bureau of Labor Statistics of the United States Department of
Labor. If the Bureau of Labor Statistics changes the base period (now 1982-84
=100), or the composition of the CPI, the new index numbers shall be substituted
for the old index numbers in making the above computations. If the CPI is
discontinued, the parties shall accept comparable statistics on the purchasing
power of the consumer dollar, as published, at the time of such discontinuation,
by a responsible financial periodical of recognized authority, to be chosen by
Landlord and reasonably acceptable to Tenant. All determinations of the CPI
shall be based upon the CPI figure most recently released as of the date such
determination is being made.

                  5.3      Percentage Rent. In addition to the Base Rent, Tenant
shall pay to Landlord, throughout the Lease Term and at all times in the manner
hereinafter set forth without demand, notice, setoff or deduction, percentage
rent (the "Percentage Rent") in the amount set forth below. Percentage Rent
shall be due and payable quarterly, but shall be calculated on an annualized
basis and reconciled each calendar quarter on a year-to-date basis. Not later
than the twentieth (20th) day of the first calendar month following the end of
each Percentage Rent Quarter (as hereinafter defined) Tenant shall deliver to
Landlord a written statement in form and detail reasonably acceptable to
Landlord, showing month by month the Gross Sales (hereinafter defined) for the
preceding Percentage Rent Quarter (the "Percentage Rent Report"). Such
Percentage Rent Report shall be certified to be correct in all material respects
in the best information and belief of an authorized officer of Tenant. If
aggregate Quarterly Gross Sales (as hereinafter defined) for such Percentage
Rent Quarter and any previous Percentage Rent Quarter in that calendar year
exceed the aggregate Percentage Rent Base (hereinafter defined) for such year to
date, then such Percentage Rent Report shall be accompanied by payment to
Landlord of that sum which is equal to the Percentage Rent Multiplier (defined
below) times the difference between Percentage Rent Base and the Quarterly Gross
Sales. If Tenant has overpaid Percentage Rent based on such year-to-date
reconciliation, Landlord shall refund such overpayment to Tenant within ten (10)
days after Landlord's receipt of such Percentage Rent Report. A final
reconciliation shall be calculated after the final Percentage Rent Quarter of
each calendar year, with Percentage Rent being determined on an annualized basis
over the entire calendar year, and any payment being made by Landlord or Tenant,
as appropriate, to the other within ten (10) days after such determination. As
used herein, the term "Gross Sales" shall mean the total of any and all charges
for all purchases (whether for cash or credit) of any and all food and beverage
items, and any and all goods, wares or merchandise, including any amounts or
payments (whether cash or credit) for any vending machines, pay phones, etc. to
the extent of the amount paid to Tenant as consideration for such service (as
opposed to the absolute amount of merchandise and cash attributable to such
merchandise; for example, the amount of cash distributed from an ATM machine
would not be included but the amount of rental paid to Tenant for such machine
would be included), and any fees (whether cash or credit) rentals or
reimbursements for any private

                                       8-

<PAGE>

parties in the Leased Premises or catering from the Leased Premises; income,
interest and other monies directly or indirectly received by or on behalf of or
credited to Tenant from any source whatsoever with respect to Tenant's leasehold
interest in, use, operation or leasing of the Leased Premises; provided,
however, that the following items shall not be considered a part of Gross Sales:
(a) sales of fixtures, equipment or property which are stock-in-trade, including
proceeds of a bulk sale of Tenant's business (so long as the same is a permitted
transfer approved by Landlord in accordance with the terms and conditions of
this Lease); (b) transfers of merchandise to other restaurants affiliated with
Tenant (so long as the same are of a routine nature and are not for a
substantial portion of the merchandise assets of Tenant's business or otherwise
in connection with any reorganization, insolvency, bankruptcy, receivership,
dissolution, liquidation, or similar proceedings, federal or state, voluntary or
involuntary, under any present or future law or act); (c) bad debts, returns of
merchandise, charitable donations, discounts and/or free meals, employee meals,
refunds and promotional meals (so long as the same are in the ordinary course of
business); and (d) credit card fees and any amount of any city, county, state or
federal sales, luxury, excise or other tax on sales which is both added to the
selling price (or absorbed therein) and paid to the taxing authority by Tenant.
All rentals, sums or other considerations which are to be included in the Gross
Sales shall be computed on a cash accounting basis and shall include for each
year all amounts actually received in such year whether or not such amounts are
attributable to a change arising in such year or in prior or subsequent years.
In no event shall any amounts received by Tenant be counted more than once. As
used herein, the term "Percentage Rent Quarter" shall mean (i) for the first
quarter, that period commencing on the Lease Commencement Date and ending on
December 31, 2002; (ii) thereafter, each consecutive three (3) month period
coinciding with the calendar year quarters and continuing throughout the entire
Lease Term; and (iii) for the last quarter, that period commencing on the next
day following the end of the last full three month Percentage Rent Quarter and
ending on the Termination Date. For the purpose of delivering the Percentage
Rent Report and accompanying payment of Percentage Rent as contemplated herein,
the twentieth (20th) day of the first calendar month following each Percentage
Rent Quarter shall mean each April 20, July 20, October 20 and January 20, for
the immediately preceding Percentage Rent Quarter, respectively. For the purpose
of computing the Percentage Rent due for the first and last Percentage Rent
Quarters, the Percentage Rent Base shall be prorated in the same ratio as the
number of days in such period bears to the number of days that would have
elapsed should such period have been a full calendar year quarter. As used
herein, the term "Quarterly Gross Sales" shall mean the sum total of all Gross
Sales for a given Percentage Rent Quarter. As used herein, the term "Percentage
Rent Base" shall mean the sum total of all Base Rent due and payable during a
given Percentage Rent Quarter, divided by the Percentage Rent Multiplier for
such quarter. As used herein, the term "Percentage Rent Multiplier" shall mean
six and twenty-five hundredths percent (6.25%).

                  5.4      Landlord's Right to Audit. Tenant shall maintain all
books and records documenting Gross Sales and the calculation of Percentage Rent
in accordance with generally accepted accounting principles for a period of not
less than three years. As a bona fide reporting of Tenant's Gross Sales is
essential to Landlord, then, in addition to its rights specified in this Lease,
Landlord shall have the right, no more than once each year of the Lease Term, to
arrange a time, during regular business hours (within thirty (30) days following
notice from Landlord), at Tenant's office where Tenant's records are retained,
to cause an impartial, reputable certified public

                                       9-

<PAGE>

accountant (or other impartial professional auditor or comparable individual or
entity whose expertise includes the audit contemplated hereby and whose
compensation is not based on the results of such audit) to audit the accounts
and records supporting the quarterly statements in question. Tenant's employees
shall cooperate with Landlord however reasonably possible, including, without
limitation, by providing books and records for on-premises review. In the event
such audit discloses any overpayment or underpayment of Percentage Rent,
Landlord shall deliver a copy of such report to Tenant, and Landlord shall
forthwith pay any overpayment to Tenant, and Tenant shall forthwith pay any
underpayment to Landlord, as the case may be. Should Tenant dispute any claim
that Tenant has under-reported Gross Sales or has underpaid Percentage Rent, the
parties shall meet and confer within a reasonable period of time and attempt to
resolve such dispute. Should they be unable to resolve such dispute within a
reasonable period of time, then such dispute shall be resolved according to the
provision set forth in this Lease. Notwithstanding anything to the contrary
contained in this Lease, if any such audit discloses (i) an understatement, by
Tenant, in the aggregate, greater than or equal to three percent (3%) of the
total Gross Sales for such quarter which should have been payable by Tenant; or
(ii) that Tenant has failed to maintain its accounting records in a manner which
the accuracy of Tenant's Gross Sales statement can reasonably be determined,
then the cost of such audit shall be borne by Tenant.

                  5.5      Late Charge. In the event any payment of Rent is not
paid within five (5) business days after the due date therefor, Tenant shall pay
to Landlord a late payment fee equal to ten percent (10%) of the overdue amount
to compensate Landlord for the administrative and collection costs incident
thereto.

         6.       Security Deposit and First Month's Rent. As security for the
performance of this Lease by Tenant, Tenant has paid to Landlord the Security
Deposit as specified in Section 1.12 hereof, receipt of which is hereby
acknowledged. Landlord may apply all or any part of the Security Deposit to the
payment of any sum for which Tenant is in default hereunder beyond any
applicable notice and cure period. In such event, Tenant shall, within fifteen
(15) days after written demand therefor by Landlord, deposit with Landlord the
amount so applied to restore the Security Deposit to its original amount. The
amount of the Security Deposit held by Landlord and not applied by Landlord
under the provisions of this Section 6 shall be repaid to Tenant within thirty
(30) days after the expiration or sooner termination of this Lease. Landlord
shall not be required to keep any Security Deposit separate from its general
funds and Tenant shall not be entitled to any interest thereon. Said sum shall
be credited by Landlord as first month's Base Rent. Landlord shall notify Tenant
of the estimated Operating Costs, as provided for in this Lease, sixty (60) days
prior to the Rent Commencement Date for Tenant's payment thereof.

         7.       Insurance, Operating Costs and Taxes.

                  7.1      Tenant's Obligations. Commencing on the Commencement
Date, Tenant shall be responsible for Tenant's Proportionate Share of all
expenses of operating and maintaining the commercial/retail portions and
associated Common Areas of the Building, including but not limited to: (i) real
property taxes and assessments which accrue and are payable during the Term and
which are allocable to the commercial/retail portion and associated Common Areas
of the Building (provided, however, that the term "real property taxes" shall
not include any inheritance, estate, succession, transfer, gift, franchise, or
capital stock tax, or any income taxes arising out of or

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related to ownership and operation of income-producing real estate, or any
excise taxes imposed upon Landlord based upon gross or net rentals or other
income received by it); (ii) HVAC and other utility repair and maintenance costs
(but not replacements) for the commercial/retail portions of the Building; (iii)
the cost of ordinary, normal repairs and general maintenance and cleaning of the
commercial/retail and Common Areas portions of the Building; (iv) the cost of
fire, public liability and property damage insurance for the commercial/retail
and Common Areas portions of the Building; (v) wages, salaries and other labor
costs paid to employees, security and independent contractors actually and
reasonably engaged by Landlord to maintain and operate the commercial/retail and
Common Areas portions of the Building, but solely to the extent such costs are
reasonably expended and are allocable for the normal operation of the
commercial/retail and Common Areas portions of the Building and, to the extent
Landlord or its employees performs such services or expends such costs, are not
in excess of the current market rates for such services; and (vi) all reasonable
costs related to the operation and maintenance of the Building, including the
cost of utilities and the cost of any equipment used for such maintenance (which
cost shall be amortized over the useful life of such equipment). The preceding
expenses described in this Section 7.1 are hereinafter referred to as "Operating
Costs."

                  7.2      Landlord's Obligations. All other costs of owning,
operating and maintaining the Land and the Building shall be paid by Landlord.
These shall include, without limitation (and the following costs shall not be
included within Operating Costs): (a) costs occasioned by the act, omission or
violation of law by Landlord; (b) costs occasioned by casualties of a type that
would be covered by an all-risk property insurance policy (including earthquake
and flood) or by other insurance carried by Landlord or occasioned by the
exercise of the power of eminent domain; (c) costs relating to repairs,
alterations, improvements, and equipment which must be capitalized under
generally accepted accounting principles, including without limitation capital
expenditures and improvements made or to make the Building or Land comply with
applicable laws, regulations, or ordinances, including but not limited to the
Americans With Disabilities Act (but excluding any improvements required due to
Tenant's particular use of the Premises); (d) lease payments and the costs of
acquiring machinery and equipment which must be capitalized under generally
accepted accounting principles, such as air conditioners, elevators, and the
like; (e) costs for which Landlord has a right of reimbursement from others; (f)
costs to correct any construction defect in the Premises or the Building, or to
comply with any CC&R, underwriter's requirement or law applicable to the
Premises or the Building which was in effect as of the Commencement Date: (g)
costs of any renovation, improvement, painting or redecorating of any portion of
the Land or Building not made available for Tenant's use; (h) fees, commissions,
attorneys' fees, auditing fees, brokerage fees or commissions, and other costs
incurred in connection with negotiations or disputes with any other current,
past, or prospective occupant or tenant of the Land or in preparing, negotiating
or enforcing leases or lease-related documents such as guarantees, estoppels,
nondisturbance agreements, termination agreements, amendments, subleases,
assignments, and the like; (i) costs arising from the violation by Landlord or
any occupant of the Land (other than Tenant) of the terms and conditions of any
lease or other agreement, and any rental concessions or buyouts or tenant
relocations: (j) interest, charges and fees incurred on debt, payment on
mortgages and rent under ground leases, and costs expended in connection with
any sale, hypothecation, financing, refinancing, or ground lease of the Building
or Land or of the Landlord's interest therein; (k) any depreciation for any of
the real property associated with the Premises, Building or Land, including any
leasehold improvements; any reserves for any purpose, any bad debt, rent loss,
or

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<PAGE>

reserves for bad debt or rent loss; (l) advertising, promotional costs, costs
related to artwork, or market study fees; (m) insurance deductibles and
co-insurance payments and increases in insurance costs caused by the activities
of any other occupant of the Land; (n) costs incurred to remove or remediate any
hazardous substances from the Building or Land and any judgments, fines,
penalties, or other costs incurred in connection with any hazardous substance
exposure or release, except to the extent that the foregoing is caused by the
illegal storage, use or disposal of the hazardous substance in question by
Tenant; (o) wages, salaries, compensation, and labor burden for any employee not
stationed on the Building on a full-time basis or above the level of Landlord's
Building manager or any fee, profit or compensation retained by Landlord or its
affiliates for management and administration of the Building in excess of the
management fee which would be charged by an independent professional management
service for operation of comparable projects in the vicinity, and Landlord's
general overhead or any other expense not directly related to the Building or
the Land; (p) management and administrative fees greater than five percent (5%)
of the total of Operating Costs; (q) any governmental fines, penalties, or
interest imposed on Landlord, and any costs related to public transportation,
transit, or vanpool, unless imposed by governmental authority or at the request
of Tenant; (r) costs and expenses for which Tenant reimburses Landlord directly
or which Tenant pays directly to a third person; (s) costs, expenses, taxes, and
insurance allocable or related to portions of the Building and Land which are
not designated for commercial use or which are not part of the common use areas;
and (t) all costs of maintenance and repair performed by Landlord pursuant to
Section 9.1 below.

                  7.3      Estimate of Operating Costs. On or before the date
ten (10) days after the date this Lease is fully executed, with respect to the
first year of the term, and on or before January 1 of each year after the year
in which the Commencement Date occurs, Landlord shall reasonably estimate the
Operating Costs for the following year, per rentable square foot of
commercial/retail space in the Building, as determined by dividing Landlord's
estimate of Operating Costs by the number of rentable square feet of
commercial/retail space in the Building (as specified in Article 1). Commencing
on the Commencement Date (provided Landlord has delivered the Premises to Tenant
in the condition required herein), and in addition to Tenant's obligations to
pay the Base Rent and other sums hereunder, Tenant shall pay to Landlord on each
date a payment of Base Rent is due from January through December inclusive,
one-twelfth (1/12) of the amount said estimate of per square foot Operating
Costs, multiplied times the number of rentable square feet in the Premises (as
specified in Article 1).

                  7.4      Reconciliation Statement. Within ninety (90) days
after the expiration of each calendar year, Landlord shall furnish Tenant with a
statement of the actual Operating Costs of the Building. In the event the sum of
the payments made by Tenant during the preceding calendar year pursuant to
Section 7.3 above exceeds the amounts which Tenant would have been obligated to
pay if the actual Operating Costs for such year were used in lieu of Landlord's
estimates thereof in calculating Tenant's payments under Section 7.3 above, the
difference shall be credited by Landlord to Tenant's account against the next
payments owed by Tenant under the provisions of this Article 7 or, if the Lease
has terminated, the difference shall be paid to Tenant in cash within thirty
(30) days of determination. In the event the sum of payments made by Tenant
during the preceding calendar year pursuant to Section 7.3 above is less than
the amount which Tenant would have been obligated to pay if the actual Operating
Costs for such year were used in lieu of Landlord's estimates thereof, in
calculating Tenant's payments under Section 7.3 above, Tenant shall pay the
amount of such

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<PAGE>

difference to Landlord in cash within thirty (30) days after receipt of a demand
by Landlord accompanied by a statement of the actual Operating Costs for such
year.

                  7.5      Right to Audit. Tenant may audit Landlord's books and
records for the two-calendar-year period immediately preceding the last
effective calendar day of the written report upon which Tenant's request for an
audit is based. Any such audit shall be conducted by an impartial, reputable
certified public accountant (or other impartial professional auditor or
comparable individual or entity whose expertise includes the audit contemplated
hereby and whose compensation is not based on the results of such audit) and
completed within sixty (60) days after Tenant's request therefor, and in the
event that the results of any such audit disclose an error in Landlord's
determination of actual Operating Costs which have been charged to the Premises
for the period in question in excess of three percent (3%) in Landlord's favor
(i.e., resulting in a payment, credit or reimbursement by Landlord to Tenant)
then all costs of the audit shall be borne by Landlord; otherwise, all costs and
expenses associated with the audit shall be borne by Tenant. Landlord and Tenant
shall cooperate as may be reasonably necessary in order to facilitate the timely
completion of any audit. Nothing in this subsection shall in any manner modify
Tenant's obligations to make payments as and when provided under this Lease. The
results of any such audit shall be kept confidential by Tenant.

         8.       Use. The Premises shall be used for a sit-down restaurant
and pub and the sale of Tenant's branded merchandise and for no other purpose
without the prior written consent of Landlord, such consent not to be
unreasonably withheld or delayed. Landlord covenants and agrees that, throughout
the term of this Lease, as extended, Landlord shall not permit any party in the
Building to operate a sit-down dining facility unless Landlord first obtains the
written consent of Tenant. The foregoing shall not prohibit Landlord from
leasing space to a tenant whose primary use is the retail sale of non-alcoholic
beverages (such as a coffee shop or a juice bar) or that sells food strictly on
a carry out basis. Tenant shall remain open for normal business operations until
10:00 PM at least five (5) nights per week, excluding closures due to casualty,
refurbishment or other causes outside of the reasonable control of Tenant.

         9.       Maintenance, Repairs and Alterations.

                  9.1      Maintenance and Repair. Landlord shall maintain,
repair and replace as necessary the structural and Common Areas portions of the
Building in good condition and in compliance with all applicable laws, including
without limitation the roof, exterior surfaces of the Building including without
limitation the roof surface, foundation, flooring, heating and electrical
systems, HVAC and air conditioning systems, plumbing, elevators, escalators,
lobbies, stairs, corridors, restrooms, landscaping, parking areas, on- and
off-site utilities and improvements necessary for the operation of the retail
portions of the Building and Land, and all other Common Areas of the Building
and Land. Landlord covenants and agrees that alterations, repairs or additions
to the Building or the Premises shall be done with the least amount of
interference to Tenant, and, to the extent possible, such work shall be done
after Tenant's normal business hours. Landlord shall commence and thereafter
diligently proceed to complete any repairs required to be made by Landlord under
this Lease within a reasonable time. Subject to and except for the obligations
of Landlord pursuant to the terms of this Lease and except for loss or damage by
fire, earthquake, act of God or other casualty, Tenant shall keep and maintain
the Premises in a clean, sanitary and safe

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<PAGE>

condition and use the Premises in accordance with all applicable statutes,
ordinances and regulations of any governmental body having jurisdiction thereof.

                  9.2      Alterations and Additions. Tenant shall not make any
alterations, additions or improvements to the Premises unless it first obtains
Landlord's prior written consent, such consent not to be unreasonably withheld
or delayed. Notwithstanding the foregoing, Tenant may, without Landlord's prior
consent, but with prior written notice to Landlord, install alterations,
additions, or improvements to the interior or exterior of the Premises costing
$50,000 or less in any calendar year, so long as such alterations do not
materially affect the Building structure or Building systems. Any such
alterations, additions or improvements (excluding the initial improvements to
the Premises) shall be installed by Tenant at its sole cost and in compliance
with all laws, orders and regulations of any applicable governing body. Tenant
shall make no alterations, additions or improvements which constitute a
structural change to the Building, or significantly impact the existing HVAC
system, electrical service or major plumbing system, without first obtaining
Landlord's written consent, which consent shall not be unreasonably withheld or
delayed. Any structural alterations, additions or improvements made by Tenant
shall become the property of Landlord upon the expiration or sooner termination
of this Lease. Tenant shall be permitted to remove at Tenant's expense upon the
expiration or sooner termination of this Lease any trade fixtures or personal
property installed by Tenant, provided that Tenant shall reasonably repair any
damage to the Premises occasioned as a result of such removal. Tenant shall
remove any such alteration upon the expiration or earlier termination of this
Lease if Landlord notifies Tenant in writing, at the time Landlord approves such
alteration, that such alteration must be so removed from the Premises. In such
event, Tenant shall remove such alteration and repair any damage to the Premises
caused by such removal. In no event, however, shall Tenant be required to remove
the Mezzanine Expansion.

                  9.3      Exterior Alterations. Tenant may make alterations to
the exterior facade of the Premises if Tenant first obtains Landlord's prior
written consent, such consent not to be unreasonably withheld or delayed, but
which may be subject to applicable laws or codes or the approval of any
governing municipality. Such alterations may include, without limitation,
painting the exterior facade of the Premises and the remaining portion of the
facade of the Building above the Premises, and replacing the awnings outside the
Premises. Tenant shall cooperate with Landlord to coordinate any such work so
that the same or similar improvements may be made (but shall not be required to
be made) by Landlord to the balance of the exterior of the Building. Tenant
shall pay the cost, or proportionate cost, of all such improvements made to the
exterior facade of the Premises, but Tenant shall have no obligation to pay the
cost of such improvements made to the balance of the Building (either directly
or as an Operating Cost).

         10.      Insurance; Indemnity.

                  10.1     Liability Insurance Maintained by Landlord. Landlord
shall procure and maintain commercial general liability insurance with broad
form general liability endorsement covering all claims with respect to injuries
or damages to persons or property sustained in, on or about the Building and
Land excluding the Premises, the Mezzanine Expansion and the Outdoor Dining
Facilities, and the appurtenances thereto, including the sidewalks and alleyways
adjacent thereto, with limits of liability no less than Two Million Dollars
($2,000,000) combined single limit

                                      14-

<PAGE>

per occurrence and in the aggregate. Such limits may be achieved through the use
of umbrella liability insurance otherwise meeting the requirements of this
Section 10.1.

                  10.2     Liability Insurance Maintained by Tenant. Tenant,
throughout the Initial Term and the Extension Terms, shall, at its own expense,
provide or cause to be provided and kept in force commercial general liability
insurance against claims of personal injury or death and property damage caused
by an occurrence upon, in or about the Premises, and shall afford protection to
the limit of not less than Two Million Dollars ($2,000,000) in respect of
personal injury or death to any one person and in respect of injury or death to
any number of persons arising out of any one accident, and such insurance
against property damage in respect of any instance of property damage. Such
limits may be achieved through the use of umbrella liability insurance otherwise
meeting the requirements of this Section 10.2. Tenant's policies will be primary
as respects Tenant' sole negligence, and contributing with Landlord's insurance
in all other respects. Tenant shall deliver to Landlord a certificate of the
insurance required to be carried hereunder.

                  10.3     Property Insurance. Landlord will procure and
maintain physical damage insurance covering all real and personal property,
excluding Tenant's personal property, located on or in, or constituting a part
of, the Building in an amount equal to ninety percent (90%) of the replacement
value (with a co-insurance waiver) of all such property excluding foundations.
Such insurance shall afford coverage for damages resulting from (i) perils
covered by what is commonly referred to as "all risk" coverage insurance (but
excluding earthquake and flood unless required by Landlord's lender, and then
only to the extent obtaining such coverage is commercially reasonable), and (ii)
boilers and machinery coverage as appropriate for apparatus located in the
Building.

                  10.4     Waiver of Subrogation. Landlord and Tenant each waive
any and all rights to recover against the other, or against the officers,
directors, shareholders, partners, joint ventures, employees, agents, customers,
invitees or business visitors of such other party, for any loss or damage to
such waiving party arising from any cause covered by any property insurance
required to be carried pursuant to this Lease or any other property insurance
actually carried by such party. Landlord and Tenant, from time to time, will
cause their respective insurers to issue appropriate waiver of subrogation
rights endorsements to all property insurance policies carried in connection
with the Building or the Premises or the contents of either.

                  10.5     Workers' Compensation. Tenant shall procure and
maintain workers' compensation insurance as required by the State of California
and in amounts as may be required by applicable statute

         11.      Damage or Destruction.

                  11.1     Damage and Repair. If the Building is damaged by fire
or any other cause to such extent that the cost of restoration will equal or
exceed thirty five percent (35%) of the replacement value of the Building
(exclusive of foundations) just prior to the occurrence of the damage, then
Landlord may no later than the sixtieth (60th) day following the damage, give
Tenant a notice of election to terminate this Lease. In the event of such
election, this Lease shall be deemed to terminate on the date of such damage or
destruction. If the cost of restoration shall amount to less than thirty five
percent (35%) of said replacement value of the Building, or if Landlord does not

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<PAGE>

elect to terminate this Lease as permitted in the preceding sentence, Landlord
shall promptly restore the Building and the Premises (to the extent of the
improvements to the Premises originally provided by Landlord hereunder).
Notwithstanding anything to the contrary contained above, if any such repair is
reasonably estimated to require more than 120 days to complete, Landlord or
Tenant may elect to terminate this Lease by delivering written notice to the
other within ninety (90) days after the date of such casualty.

                  11.2     Damage Near End of Term. If the Premises are
partially destroyed or damaged during the last eighteen (18) months of the
Initial Term or any Extension Term of this Lease, Landlord or Tenant may elect
to terminate the Lease as of the date of occurrence of such damage.

                  11.3     Abatement of Rent. If the Premises are partially
destroyed or damaged and Landlord or Tenant repairs or restores them pursuant to
the provisions of this Article 11, the rent payable hereunder for the period
which such damage, repair or restoration continues shall be abated in proportion
to the degree to which Tenant's use of the Premises is thereby impaired.

         12.      Property Taxes.

                  12.1     Real Property Taxes. Subject to Tenant's partial
reimbursement obligations pursuant to Article 7, Landlord shall pay real
property taxes applicable to the Premises including any Tenant Improvements or
other betterments or improvements thereto; provided that any assessments,
charges, taxes, rents, fees, rates, levies, excises, license fees, permit fees,
inspection fees, or other authorization fees or charges which are allocable to
or caused by the development or installation of on- or off-site improvements or
utilities (including without limitation street and intersection improvements,
roads, rights of way, lighting, and signalization) necessary for the initial
development or construction of the Building or Land, or any past, present or
future system development reimbursement schedule or sinking fund related to any
of the foregoing, shall be the sole responsibility of Landlord and shall not be
included in "real property taxes" billed to Tenant pursuant to Article 7.

                  12.2     Personal Property Taxes. Tenant shall pay prior to
delinquency all taxes assessed against or levied upon trade fixtures,
furnishings, equipment and all other personal property of Tenant contained in
the Premises.

         13.      Utilities.

                  13.1     Utilities Provided by Landlord. Landlord shall cause
the Premises to have available the following services: telephone, electricity,
heating and air conditioning, water, sewer and refuse service, which services
and any start-up charges therefor shall be paid for by Tenant.

                  13.2     Interruption. The interruption or curtailment of any
service caused by any event beyond Landlord's reasonable control shall not
constitute constructive eviction and shall not entitle Tenant to any abatement
of rent or any other claim against Landlord, except that if any interruption is
caused by the act or omission of Landlord and continues for 48 hours or more,
Rent shall thereafter abate to the extent the Premises are unusable for their
normal purposes. Nothing

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<PAGE>

contained herein precludes Tenant from seeking recovery of any and all damages
suffered and losses incurred (including but not limited to loss of business) due
to an interruption of utilities for a period greater than forty eight (48)
hours, if such interruption was caused by the intentional or negligent act or
omission of Landlord, its agents, employees, or contractors.

                  13.3     Tenant's Access and Use. Except as otherwise provided
in this Lease, Tenant shall have full access and use of the Premises twenty-four
hours a day, seven days a week, 52 weeks a year.

         14.      Assignment and Subletting. Tenant may not assign or otherwise
transfer this Lease or sublease all or any portion of the Premises unless it
first obtains Landlord's prior written consent, such consent not to be
unreasonably withheld or delayed. Landlord shall respond to any requested
assignment or sublease by Tenant within twenty (20) days after Landlord's
receipt of Tenant's written request therefor. Notwithstanding anything to the
contrary in this Lease, Tenant may, without Landlord's prior written consent,
sublet all or portions of the Premises or assign this Lease to: (i) a
subsidiary, affiliate, parent or other entity which controls, is controlled by,
or is under common control with, Tenant; (ii) a successor corporation related to
Tenant by merger, consolidation, non-bankruptcy reorganization, or government
action; (iii) a purchaser of substantially all of Tenant's assets; or (iv) a
joint venture in which Tenant is a general partner. For the purpose of this
Lease, sale or transfer of stock of Tenant, Tenant's parent, or such parent's
parent, through any public exchange, or redemption or issuance of additional
stock of any class shall not be deemed an assignment, subletting, or any other
transfer of the Lease or the Premises. No assignment of this Lease or sublease
of all or any portion of the Premises shall relieve Tenant of any liability as
Tenant hereunder or change the terms and conditions of this Lease, including but
not limited to the use of the Premises permitted hereunder, provided that
Landlord shall not unreasonably withhold its approval to any requested change in
the permitted use hereunder.

         15.      Defaults; Remedies.

                  15.1     Defaults. The occurrence of any one or more of the
following events shall constitute a material default and breach of this Lease by
Tenant:

                           (a)      The failure by Tenant to make any payment of
rent or any other payment required to be made by Tenant hereunder for five (5)
business days after Tenant's receipt of written notice of nonpayment from
Landlord.

                           (b)      The failure by Tenant to observe or perform
any of the covenants, conditions or provisions of the Lease to be observed or
performed by Tenant, other than described in Section 15.1(a), where such failure
shall continue for a period of thirty (30) days after Tenant's receipt of
written notice of default from Landlord; provided, however, if more than thirty
(30) days are reasonably required for its cure then Tenant shall not be deemed
to be in default if Tenant commences such cure within said 30-day period and
thereafter diligently prosecutes such cure to completion.

                           (c)      (i) The making by Tenant of any general
assignment or general arrangement for the benefit of creditors, (ii) the filing
by or against Tenant of a petition to have

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<PAGE>

Tenant adjudged bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in the Lease, where possession
is not restored to Tenant within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where such
seizure is not discharged within thirty (30) days.

                  15.2     Remedies of Landlord. Should Landlord elect to
re-enter, as herein provided, or should Landlord take possession pursuant to
legal proceedings or pursuant to any notice provided for by law, Landlord may
either terminate this Lease or may from time to time, without terminating this
Lease, relet said Premises or any part thereof for the account of Tenant for
such term or terms (which may be for a term extending beyond the term of this
Lease) and at such rental or rentals payable to Landlord and upon such other
terms and conditions as Landlord in the exercise of Landlord's sole discretion
may deem advisable with the right to make alterations and repairs to said
Premises. Landlord shall have all remedies available to it at law or in equity.

                  15.3     Default by Landlord. Landlord shall not be in default
unless Landlord fails to perform obligations required of Landlord within a
reasonable time, but in no event later than thirty (30) days after written
notice by Tenant to Landlord; provided, however, that if the nature of
Landlord's obligation is such that more than thirty (30) days are required for
performance then Landlord shall not be in default if Landlord commences
performance within such 30-day period and thereafter diligently prosecutes the
same to completion. If Landlord fails to cure any such default within the
allotted time, Tenant, at its option, with or without further notice or demand
of any kind to Landlord or any other person, shall have the right to any one or
more of the following described remedies in addition to all other rights and
remedies provided at law or in equity or elsewhere herein: (i) to remedy such
default or breach and deduct the costs thereof (including but not limited to
attorneys fees) from the installments of Rent next falling due; (ii) to pursue
the remedy of specific performance; (iii) to seek money damages for loss arising
from Landlord's failure to discharge its obligations under this Lease; and (iv)
to terminate this Lease. Nothing herein contained shall relieve Landlord from
its duty to effect the repair, replacement, correction or maintenance required
to restore the affected services or utilities, or to perform of any other
obligations to the standard prescribed in this Lease, nor shall this Section be
construed to obligate Tenant to undertake any such work. Notwithstanding the
foregoing 30-day grace period, Tenant may cure any default without notice where
the failure promptly to cure such default would, in the reasonable opinion of
Tenant, create or allow to persist an emergency condition or materially and
adversely affect the operation of Tenant's business on the Premises.

         16.      Signage. Tenant, at its cost, may install or place signs,
awnings, and signs, or other advertising materials in or about the Premises or
the Building and may remove them provided that Tenant obtains Landlord's consent
for exterior signs or pylons, which consent shall not be unreasonably withheld,
conditioned or delayed. Tenant shall have the exclusive right to place signage
on the exterior facade of the Premises and on all portions of the exterior
facade of the Building above such areas. Said signs, awnings, and pylon signs
shall be in compliance with all applicable laws, regulations and rules; provided
that Tenant shall not be required to obtain Landlord's consent for any interior
promotional or advertising displays. Tenant acknowledges that

                                      18-

<PAGE>

other occupants of the Building may be allowed a share of the permitted exterior
signage, and that the total signage allowed for the Building may be restricted
by applicable laws or codes, but in no event shall the signage area allocated
for Tenant's use be less than the greater of (i) the area of the signage
currently on the exterior of the Building; or (ii) seventy percent (70%) of the
total signage area permitted for the Building.

         17.      Eminent Domain.

                  17.1     Entire Taking. If all of the Premises or such
portions of the Building as may be required for the reasonable use of the
Premises are taken by eminent domain, this Lease shall automatically terminate
as of the date title vests in the condemning authority. In the event of a taking
of a material part of but less than all of the Building, where the remaining
portions of the Building cannot be economically and effectively used (whether on
account of physical, economic, aesthetic or other reasons) or where the Building
would be restored in such a way as to materially alter the Premises, Landlord
shall forward a written notice to Tenant of such determination not more than
sixty (60) days after the date of taking. The term of this Lease shall expire
upon such date as Landlord shall specify in such notice but not earlier than
sixty (60) days after the date of such notice.

                  17.2     Partial Taking. Subject to the provisions of the
preceding Section 17.1, in case of taking of a part of the Premises, or a
portion of the Building not required for the reasonable use of the Premises,
then this Lease shall continue in full force and effect and the Rent shall be
equitably reduced based on the proportion by which the floor area of the
Premises is reduced, such Rent reduction to be effective as of the date title to
such portion vests in the condemning authority. If a portion of the Premises
shall be so taken which renders the remainder of the Premises unsuitable for
continued occupancy by Tenant under this Lease, Tenant may terminate this Lease
by written notice to Landlord no later than sixty (60) days after the date of
such taking and the term of this Lease shall expire upon such date as Tenant
shall specify in such notice not later than sixty (60) days after the date of
such notice.

                  17.3     Awards and Damages. Landlord reserves all rights to
damages to the Premises for any partial, constructive, or entire taking by
eminent domain, and Tenant hereby assigns to Landlord any right Tenant may have
to such damages or award. Tenant shall make no claim against Landlord or the
condemning authority for damages for termination of the leasehold interest or
interference with Tenant's business. Tenant shall have the right, however, to
claim and recover from the condemning authority compensation for any loss to
which Tenant may be put for Tenant's moving expenses, business interruption or
taking of Tenant's personal property and leasehold improvements paid for by
Tenant (not including Tenant's leasehold interest) provided that such damages
may be claimed only if they are awarded separately in the eminent domain
proceedings and not out of or as part of the damages recoverable by Landlord.

         18.      General Provisions.

                  18.1     Severability. The invalidity of any provision of this
Lease as determined by a court of competent jurisdiction, shall in no way affect
the validity of any other provision hereof.

                                      19-

<PAGE>

                  18.2     Time of Essence. Time is of the essence to the
performance of all of Tenant's obligations hereunder.

                  18.3     Captions. Article and Section captions are not part
hereof.

                  18.4     Incorporation of Prior Agreements; Amendments. This
Lease contains the final and complete expression of the parties with respect to
any matter mentioned herein. No prior agreement or understanding pertaining to
any such matter shall be effective. This Lease may be modified in writing only,
signed by the parties in interest at the time of the modification.

                  18.5     Notices. Any notice required or permitted to be given
hereunder shall be in writing and may be served personally or by certified mail,
return receipt requested, addressed to Landlord and Tenant respectively at the
time of the notification.

                  18.6     Recording. This Lease shall not be recorded. Either
party shall, upon request of the other, execute, acknowledge, and deliver to the
other a "short form" memorandum of this Lease for recording purposes.

                  18.7     Holding Over. If Tenant remains in possession of the
Premises or any part thereof after the expiration of the term hereof without the
express written consent of Landlord, such occupancy shall be a tenancy from
month-to-month at a rental in the amount equal to the last monthly rental plus
all other charges payable hereunder, and upon all the terms hereof applicable to
a month-to-month tenancy; provided, however, this clause does not convey any
right to the Tenant to holdover.

                  18.8     Cumulative Remedies. No remedy or election hereunder
shall be deemed exclusive, but shall, where ever possible, be cumulative with
all other remedies at law or in equity.

                  18.9     Binding Effect: Choice of Law. Subject to any
provisions hereof restricting assignment or subletting by Tenant, this Lease
shall bind the parties, their personal representatives, successors and assigns.
This Lease shall be governed by the laws of the state in which the Premises are
located.

                  18.10    Attorneys' Fees. If either party brings an action to
enforce the terms hereof or declare rights hereunder, the prevailing party in
any such action, on trial or appeal, shall be entitled to his reasonable
attorney's fees to be paid by the losing party as fixed by the court. Landlord
and Tenant each hereby waives its right to a jury trial.

                  18.11    Commissions. Except for any commissions owing to
Properties Unlimited Commercial Real Estate, all of which shall be paid by
Landlord, Landlord and Tenant each warrant and represent to the other that no
real estate brokerage commissions or fees of any kind or type are or will be
payable by such other party as a result of the transaction herein provided for,
or, if any such commissions or fees are payable (other than as provided above),
the warranting party shall pay the same and hereby indemnifies such other party
of, from and against any and all claims for any real estate brokerage
commissions or fees which may arise as a result of any acts of the warranting

                                      20-

<PAGE>

party.

                  18.12    Existing Encumbrances and Ground Leases. If
Landlord's interest in the Building or Land is encumbered as of the date of
mutual execution hereof by any financial encumbrances or is a lessee's interest
in one or more ground leases, then Landlord shall, within thirty (30) days after
mutual execution hereof, provide to Tenant an executed nondisturbance or
recognition agreement in form reasonably satisfactory to Tenant from each holder
or ground lessor thereof. If Landlord's interest in the Building or Land is a
lessee's interest in a ground lease, Landlord warrants that nothing in the
ground lease prevents Landlord from performing its obligations or assuming
liabilities as set forth in this Lease, and covenants to take no action or fail
to take any required action, under the terms of such ground lease that would
disturb Tenant's possession of the Premises or impair its rights under this
Lease, and Landlord warrants the term of any such ground lease permits a minimum
occupancy period for Landlord for no less than the Initial Term of this Lease.
This Lease shall be subordinate to any first mortgage or deed of trust now
existing or hereafter placed upon the Land, the Building or the Premises (and
any other mortgage or deed of trust upon the written election of Landlord),
created by or at the instance of Landlord, and to any and all advances to be
made thereunder, and to interest thereon and all modifications, renewals and
replacements or extensions thereof ("Landlord's Mortgage"). Upon request, Tenant
shall attorn to the holder of any Landlord's Mortgage or any person or persons
purchasing or otherwise acquiring the Land, Building or Premises at any sale or
other proceeding under any Landlord's Mortgage. Tenant shall properly execute,
acknowledge and deliver documents which the holder of any Landlord's Mortgage
may require to effectuate the provisions of this Section 18.12, provided such
documents shall contain a provision whereby the holder of any Landlord's
Mortgage agrees not to disturb Tenant's possession of the Premises so long as
Tenant is not in default under this Lease beyond any applicable notice and cure
period.

                  18.13    Quiet Enjoyment. Landlord covenants and agrees that,
so long as this Lease is in full force and effect, Tenant shall lawfully and
quietly hold, occupy and enjoy the Premises during the Term (as may be extended)
of this Lease without disturbance by Landlord or by any person having an
interest in the Premises paramount to Landlord's interest or by any person
claiming through or under Landlord. The foregoing express covenant shall be in
addition to and not in derogation of any implied or other rights of quiet
enjoyment Tenant may have under applicable law.

                  18.14    Estoppel Certificates. Tenant shall, from time to
time, upon written request of Landlord, execute, acknowledge and deliver to
Landlord or its designee a written statement stating: The date this Lease was
executed and the date it expires; the date the term commenced and the date
Tenant accepted the Premises; the amount of minimum monthly Rent and the date to
which such Rent has been paid; and certifying to the extent true: That this
Lease is in full force and effect; that all conditions under this Lease to be
performed by the Landlord have been satisfied; that there are no claims,
defenses or off-sets which the Tenant has against the enforcement of this Lease;
that no Rent has been paid more than one month in advance; and such other
matters as Landlord may reasonably request. Any such statement delivered
pursuant to this paragraph may be relied upon by a prospective purchaser of
Landlord's interest or holder of any mortgage upon Landlord's interest in the
Building.

                                      21-

<PAGE>

                  18.15    Waiver. Failure of Landlord to declare any default
immediately upon its occurrence, or delay in taking any action in connection
with an event of default shall not constitute a waiver of such default, nor
shall it constitute an estoppel against Landlord, but Landlord shall have the
right to declare the default at any time and take such action as is lawful or
authorized under this Lease. Failure by Landlord to enforce its rights with
respect to any one default shall not constitute a waiver of its rights with
respect to any subsequent default. Receipt by Landlord of Tenant's keys to the
Premises shall not constitute an acceptance or surrender of the Premises.

                  18.16    Hazardous Materials. Tenant shall not transport, use,
store, maintain, generate, manufacture, handle, dispose, release or discharge
any "Hazardous Material" (as defined below) upon or about the Building, or
permit Tenant's employees, agents, contractors, invitees and other occupants of
the Premises to engage in such activities upon or about the Building. However,
the foregoing provisions shall not prohibit the transportation to and from, and
use, storage, maintenance and handling within, the Premises of substances
customarily used in the business or activity expressly permitted to be
undertaken in the Premises under this Lease, provided: (a) Tenant gives Landlord
written notice of the types of all such substances, including the use and
location intended for such types of substances, (b) Landlord may from time to
time inspect the use and storage of such items, (c) such substances shall be
used and maintained only in such quantities as are reasonably necessary for such
permitted use of the Premises and the ordinary course of Tenant's business
therein, strictly in accordance with applicable Law, highest prevailing
standards, and the manufacturers' instructions therefor, (d) such substances
shall not be disposed of, released or discharged in the Building, and shall be
transported to and from the Premises in compliance with all applicable Laws, and
as Landlord shall reasonably require, (e) if any applicable Law or Landlord's
trash removal contractor requires that any such substances be disposed of
separately from ordinary trash, Tenant shall make arrangements at Tenant's
expense for such disposal directly with a qualified and licensed disposal
company at a lawful disposal site (subject to scheduling and approval by
Landlord), (f) any remaining such substances shall be completely, properly and
lawfully removed by Tenant from the Building upon expiration or earlier
termination of this Lease, and (g) for purposes of removal and disposal of any
such substances, Tenant shall be named as the owner and generator, obtain a
waste generator identification number, and execute all permit applications,
manifests, waste characterization documents and any other required forms.

         The parties hereto have executed this Lease as of the date first set
forth above.

         LANDLORD:       COUNTY SUPERVISORS ASSOCIATION OF
                         CALIFORNIA, dba CSAC

                         By /s/ STEVE O'BRIEN
                            ---------------------------
                         Its Controller

                                      22-

<PAGE>

         TENANT:         PYRAMID BREWERIES, INC., a Washington
                         corporation

                         By /s/ NICK WALPERT
                            ---------------------------
                         Its Vice-President - Alehouses

                                      23-

<PAGE>

                                    EXHIBIT A

                            LEGAL DESCRIPTION OF LAND

                           [ATTACH LEGAL DESCRIPTION]

                                       1-

<PAGE>

                                    EXHIBIT B

                                    SITE PLAN

                            [ATTACH PREMISES SKETCH]

                                     -B-1-

<PAGE>

                               EXHIBIT C to LEASE

                    TENANT IMPROVEMENTS/WORKLETTER AGREEMENT

         1.       Landlord's Work: Landlord shall deliver the Premises to Tenant
with the following work completed at Landlord's ("Landlord's Work"):

                  1.1      The minimum requirements as outlined in Tenant's
letter dated December 18, 2001 and incorporated herein as Exhibit C-1.

                  1.2      All seismic upgrades and improvements required by
applicable governing authorities as necessary to bring the Building into
compliance with all applicable laws and codes (regardless of whether any of such
upgrades or improvements are made necessary as a result of Tenant's proposed use
or improvement of the Premises);

                  1.3      Demolition of all interior walls in the Premises and
delivery of the Premises to Tenant in broom-clean condition; and

                  1.4      The removal of all Hazardous Material from the
Premises, including without limitation any asbestos or asbestos containing
materials.

                  Landlord warrants that all items of Landlord's Work shall be
in good and working condition until ninety (90) days after Tenant's opening for
business or provide to Tenant any warranty provided by installer or manufacturer
which may extend beyond that period of time. All other aspects of the Premises
shall be delivered to the Tenant in "As Is" condition.

         2.       Tenant's Construction.

                  2.1.     Tenant's Plans. Tenant shall provide Landlord with a
general space plan from a licensed architect, showing Tenant's proposed layout
for the Premises. Within fifteen (15) days after receipt thereof, Landlord shall
approve said plan or inform Tenant of its objections thereto, not to be
unreasonably withheld. Tenant shall not perform any construction and/or
alterations to the Premises without Landlord's prior written approval of
Tenant's plans and specifications.

                  2.2      Tenant's Work. Tenant shall furnish all labor and
materials to construct and complete in good, expeditious and workman like
manner, and accordance with the applicable building codes, the work described in
the Construction Documents.

         3.       Tenant's Improvement Allowance.

                  3.1      Tenant's Improvements. Landlord agrees to provide
Tenant the sum of Eight Hundred Thousand and no/100 Dollars ($800,000.00) to be
applied toward the cost of construction of the Tenant Improvements over and
above the Improvements to be made to Premises per the minimum requirements of
Exhibit C-1, plus Landlord shall pay for any sewage

                                     -C-1-

<PAGE>

connection fees and provide grease trap as required.

                  3.2      Mechanics' Liens. Tenant agrees to hold Landlord
harmless for any and all claims form any and all contractors, subcontractors or
any other entity that Tenant may contract for the completion of Tenants
improvements. After final payment, Tenant shall provide Landlord with mechanics'
lien releases from all contractors, subcontractors or any other entity which
Tenant may contract for the completion of Tenants improvements where applicable
project and shall provide Landlord with a copy of the Certificate of Occupancy
for the Premises and a recorded Notice of Completion.

                  3.3      Disbursement Of Lessee Improvement Allowance. So long
as there is no event of default, and no condition or event which, with notice or
passage of time shall constitute an event of default, Landlord shall make
disbursement of Landlord's agreed upon allowance to Tenant, but no more
frequently than one time each calendar month, by presentment to Landlord of the
following:

                           (a)      a request for disbursement which sets forth
details concerning the completion of Tenant's Improvements, including without
limitation, the work performed or materials delivered since the last
disbursement, the amounts paid by Tenant and the amounts then due and unpaid on
account of such work, and amounts necessary to complete such work, together
with;

                           (b)      such information and documents reasonably
required by Landlord to verify the level of improvements, including, without
limitation, conditional lien releases from subcontractors and suppliers for the
draw then being requested, and unconditional lien releases from subcontractors
and suppliers for the immediately preceding draw request.

         The parties shall agree on a form of draw request (which describes on
its face the documentation to be attached hereto). Landlord shall fund Tenant's
request for a draw as soon as reasonably possible, subject to the constraints of
its Project financing, but no later than fifteen (15) days after request
therefor (which request is properly documented in accordance the terms hereof).
Landlord shall have the right at all times to inspect the Premises and to
contact Tenant's contractors and subcontractors to verify the level of
improvements which have been completed and the payment of work therefor.

         4.       Completion; Delivery. Landlord shall substantially complete
Landlord's Work and deliver the Premises to Tenant on or before the required
Premises delivery date set forth in the Lease. Landlord shall give Tenant ten
(10) business days' notice prior to such delivery. As used herein, "substantial
completion" shall mean completion of Landlord's Work except for minor
"punchlist" items that can be completed without material interference with the
Tenant Improvements, but which in any event must be completed prior to the
Commencement Date. Upon delivery of the Premises to Tenant with Landlord's Work
substantially complete, Landlord's and Tenant's representatives will jointly
inspect the condition of the Premises and prepare a punchlist of work remaining
to be done to render the Premises suitable for delivery to Tenant in the
condition required by this Lease, and Landlord shall diligently and at its sole
expense accomplish any such remaining punchlist items.

                                     -C-2-

<PAGE>

         5.       Construction Work and Costs. Tenant shall complete the Tenant
Improvements at Tenant's sole risk, cost and expense (subject, however to
Landlord's reimbursement obligations set forth above). Construction shall be
performed in a good and workmanlike manner and in compliance with all applicable
rules, laws, codes and regulations. Landlord shall provide at its cost adequate
power and water to Tenant's contractors at all times during construction of the
Improvements.

         6.       Tenant's Access During Construction. Tenant or its
representatives may enter upon the Premises during construction of Landlord's
Work and Tenant's Work for purposes of conducting all such activities as are
necessary, appropriate or desirable with respect to completing the Tenant
Improvements. All terms and conditions of this Lease shall be in full force and
effect upon the date possession is given to Tenant, except as to Term and Rent
Commencement, which shall be as set forth elsewhere in the Lease.

                                     -C-3-

</TEXT>
</DOCUMENT>
