<PAGE>


                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549


                                      FORM 10-Q



                      QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                        OF THE SECURITIES EXCHANGE ACT OF 1934


FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997     COMMISSION FILE NUMBER 0-18761



                              HANSEN NATURAL CORPORATION
                (Exact name of registrant as specified in its charter)


                DELAWARE                                        39-1679918
     (State or other jurisdiction of                        (I.R.S. Employer
     incorporation or organization)                         Identification No.)
    
    2401 EAST KATELLA AVENUE, SUITE 650
         ANAHEIM, CALIFORNIA                                       92806
  (Address of principal executive offices)                       (Zip Code)

                                    (714) 634-4200
                 (Registrant's telephone number, including area code)



    INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
    REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
    REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO
    SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
    

                                YES  X    NO    
                                    ---      ---
                                           
                                           
                 THE REGISTRANT HAS 9,122,868 SHARES OF COMMON STOCK
                           OUTSTANDING AS OF AUGUST 1, 1997
                                           
                                           

<PAGE>
                     HANSEN NATURAL CORPORATION AND SUBSIDIARIES
                                    June 30, 1997
                                           
                                        INDEX
                                           
                                           
                                           
                                                                       Page No.

PART I.       FINANCIAL INFORMATION


Item 1.       Consolidated Financial Statements

              Consolidated Balance Sheets as of June 30, 1997
              and December 31, 1996                                         3

              Consolidated Statements of Operations for the three
              and six months ended June 30, 1997 and 1996                   5

              Consolidated Statements of Cash Flows for the
              six months ended June 30, 1997 and 1996                       6

              Notes to Consolidated Financial Statements                    7


Item 2.       Management's Discussion and Analysis of Financial 
              Condition and Results of Operations                           9



PART II.      OTHER INFORMATION


Items 1-5.    Not Applicable                                               15


Item 6.       Exhibits and Reports on Form 8-K                             15

              Signature                                                    15

                

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)
- ------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                  June 30,       December 31,
                                                                    1997            1996
                                                                ------------     ------------
ASSETS
<S>                                                            <C>              <C>
CURRENT ASSETS:
Cash                                                           $     288,064    $     186,931
Accounts receivable (net of allowance for doubtful      
  accounts, sales returns and cash discounts of $236,543 
  in 1997 and $234,749 in 1996 and promotional allowances 
  of $1,062,001 in 1997 and $926,045 in 1996)                      2,023,713          944,227
Inventories                                                        3,149,496        3,111,124
Prepaid expenses                                                     652,303          331,869
                                                                ------------     ------------
  Total current assets                                             6,113,576        4,574,151

PLANT AND EQUIPMENT, net                                             631,075          602,272

INTANGIBLE AND OTHER ASSETS:
Trademark license and trademarks (net of accumulated
  amortization of $2,236,640 in 1997 and $2,089,640 in 1996)      10,356,895       10,459,144
Notes receivable from officers                                        71,322           70,153

Deposits and other assets                                            459,850          403,353
                                                                ------------     ------------
  Total intangible and other assets                               10,888,067       10,932,650
                                                                ------------     ------------
                                                               $  17,632,718    $  16,109,073
                                                                ------------     ------------
                                                                ------------     ------------


           See accompanying notes to consolidated financial statements.
</TABLE>



                                       3

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (UNAUDITED)(CONTINUED)
- ------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                  June 30,       December 31,
                                                                    1997            1996
                                                                ------------     ------------
LIABILITIES & SHAREHOLDERS' EQUITY
<S>                                                            <C>               <C>
CURRENT LIABILITIES: 
Short-term borrowings                                          $     899,457     $    893,429
Accounts payable                                                   3,076,912        2,139,050
Accrued liabilities                                                  247,801          200,602
Current portion of long-term debt (net of unamortized premium  
  of $49,786 in 1997 and 48,541 in 1996)                             512,584        4,048,541
                                                                ------------     ------------
  Total current liabilities                                        4,736,754        7,281,622

LONG-TERM DEBT                                                     3,551,128

SHAREHOLDERS' EQUITY:
Common stock - $.005 par value; 30,000,000
  Shares authorized; 9,122,868 shares issued
  and outstanding in 1997 and 1996                                    45,614           45,614
Additional paid-in capital                                        10,847,355       10,847,355
Accumulated deficit                                               (1,542,381)      (2,126,100)
Foreign currency translation adjustment                               (5,752)          60,582
                                                                ------------     ------------
  Total shareholders' equity                                       9,344,836        8,827,451
                                                                ------------     ------------
                                                               $  17,632,718     $  16,109,073
                                                                ------------     ------------
                                                                ------------     ------------


           See accompanying notes to consolidated financial statements.
</TABLE>

                                                                      
                                         4

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- ------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                          THREE MONTHS     THREE MONTHS      SIX MONTHS       SIX MONTHS
                                               ENDED          ENDED             ENDED            ENDED  
                                             JUNE 30,        JUNE 30,          JUNE 30,         JUNE 30, 
                                                1997           1996              1997            1996  
                                         -------------    -------------    -------------    -------------
<S>                                      <C>              <C>              <C>              <C>
NET SALES                                $  11,496,228    $  10,399,155    $  18,615,814    $  17,769,736
     
COST OF SALES                                6,791,491        6,252,600       11,027,737       10,860,553
                                         -------------    -------------    -------------    -------------
GROSS PROFIT                                 4,704,737        4,146,555        7,588,077        6,909,183
     
OPERATING EXPENSES:                                  
Selling, general and administrative          3,809,192        3,514,143        6,396,957        6,001,647
Amortization of trademark license and
 trademarks                                     73,500          124,705          147,000          250,129
Other expenses                                  72,991           74,291          147,135          148,582
                                         -------------    -------------    -------------    -------------
  Total operating expenses                   3,955,683        3,713,139        6,691,092        6,400,358
                                         -------------    -------------    -------------    -------------
OPERATING INCOME                               749,054          433,416          896,985          508,825

NONOPERATING EXPENSE (INCOME):
Net interest and financing expense             148,691          157,845          273,066          319,238
Other income                                                   (125,793)                         (232,683)
                                         -------------    -------------    -------------    -------------
  Net nonoperating expense                     148,691           32,052          273,066           86,555
                                         -------------    -------------    -------------    -------------
INCOME BEFORE INCOME TAX
  PROVISION                                    600,363          401,364          623,919          422,270
     
INCOME TAX PROVISION                            37,800                            40,200            2,400
                                         -------------    -------------    -------------    -------------
NET INCOME                                  $  562,563       $  401,364       $  583,719       $  419,870
                                         -------------    -------------    -------------    -------------
                                         -------------    -------------    -------------    -------------
NET INCOME PER COMMON SHARE:
     
  Primary                                   $     0.06       $     0.04       $     0.06       $     0.05
                                         -------------    -------------    -------------    -------------
                                         -------------    -------------    -------------    -------------
  Fully diluted                             $     0.06       $     0.04       $     0.06       $     0.04
                                         -------------    -------------    -------------    -------------
                                         -------------    -------------    -------------    -------------
NUMBER OF COMMON SHARES USED                          
  IN PER SHARE COMPUTATIONS:                          
  Primary                                    9,214,962        9,406,004        9,195,639        9,185,944
                                         -------------    -------------    -------------    -------------
                                         -------------    -------------    -------------    -------------
  Fully diluted                              9,219,049        9,726,478        9,219,049        9,726,478
                                         -------------    -------------    -------------    -------------
                                         -------------    -------------    -------------    -------------


                           See accompanying notes to consolidated financial statements.
</TABLE>


                                                       5

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (Unaudited)
- ------------------------------------------------------------------------------

                                                           1997         1996
                                                      -----------   ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                             $  583,719   $  419,870
Adjustments to reconcile net income to 
  net cash provided by operating activities:
  Amortization of trademark license and trademarks        147,000      250,129
  Depreciation and other amortization                     124,034       94,783
  Loss on sale of equipment                                              4,730
  Effect on cash of changes in operating assets
  and liabilities:
     Accounts receivable                               (1,079,485)    (772,243)
     Inventories                                          (38,372)    (169,925)
     Prepaid expenses                                    (320,434)     162,988
     Accounts payable                                     937,861      361,583
     Accrued liabilities                                   47,199      199,490
                                                      -----------   ----------
        Net cash provided by operating activities         401,522      551,405
                                                          
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of plant and equipment                          (151,952)     (67,497)
Proceeds from sale of plant and equipment                     360       68,302
Increase in trademark license                             (44,750)     (23,846)
(Increase) decrease in notes receivable from officers      (1,169)         764
Increase in deposits and other assets                     (56,497)     (56,717)
                                                      -----------   ----------
        Net cash used in investing activities            (254,008)     (78,994)

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings                6,028     (438,591)
Increase in long-term debt                                 14,546
Principal payments on long-term debt                         (621)     (34,717)
                                                      -----------   ----------
        Net cash provided by (used in) financing 
            activities                                     19,953     (473,308)

EFFECT OF EXCHANGE RATE CHANGES ON CASH                   (66,334)     (18,055)
                                                      -----------   ----------
NET INCREASE (DECREASE) IN CASH                           101,133      (18,952)

CASH, beginning of period                                 186,931       87,916
                                                      -----------   ----------
CASH,  end of period                                   $  288,064   $   68,964
                                                      -----------   ----------
                                                      -----------   ----------

SUPPLEMENTAL INFORMATION:
  Cash paid during the period for interest             $  225,505   $  224,867
                                                      -----------   ----------
                                                      -----------   ----------
  Cash paid during the period for taxes                $    2,400   $    2,400
                                                      -----------   ----------
                                                      -----------   ----------


           See accompanying notes to consolidated financial statements.


                                        6

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------

1.  BASIS OF PRESENTATION
    
    Reference is made to the Notes to Consolidated Financial Statements, in the
    Company's Form 10-K for the year ended December 31, 1996, which is
    incorporated by reference, for a summary of significant policies utilized
    by Hansen Natural Corporation ("Hansen" or "Company") and its subsidiaries,
    Hansen Beverage Company ("HBC") and CVI Ventures, Inc. ("CVI"), and its
    indirect subsidiary, Hansen Beverage Company (UK) Limited ("HBC (UK)"). 
    The information set forth in these interim financial statements is
    unaudited and may be subject to normal year-end adjustments.  The
    information reflects all adjustments, which include only normal recurring
    adjustments, which in the opinion of  management are necessary to make the
    financial statements not misleading.  Results of operations covered by this
    report may not necessarily be indicative of results of operations for the
    full fiscal year.

2.  LONG-TERM DEBT

    On June 30, 1997, HBC entered into a definitive agreement (the "Loan
    Agreement") with a bank (the "Bank") pursuant to which the Bank agreed to
    provide credit facilities to HBC consisting of a revolving line of credit
    (the "Revolver") of up to $3,000,000 in aggregate at any time outstanding
    and a term loan of up to $4,000,000 (the "Term Loan") or such lesser amount
    as may be necessary to retire the note payable to ERLY Industries, Inc. 
    ("ERLY") due July 27, 1997 (the "ERLY Note"). The Term Loan will
    mature 60 months after the date of funding of the Term Loan.  The credit
    facilities are secured by all of the assets of the Company and its
    subsidiaries, including, but not limited to, accounts receivable,
    inventory, machinery and equipment, as well as all trademarks, trademark
    licenses, formulas and recipes and other intellectual property.  The credit
    facilities are also guaranteed by the Company, CVI and HBC (UK).
    
    The initial proceeds received under the Revolver were used to refinance the
    outstanding balance due on HBC's previous line of credit.  The Revolver
    will expire on May 1, 1998.  The Company anticipates that the Revolver will
    be renewed on the expiration date, but there can be no assurance it will,
    in fact, be renewed, or if renewed, that the terms of such renewal will not
    be disadvantageous to HBC and its business.
    
    On July 24, 1997, the Bank, by written letter (the "Commitment Letter"),
    confirmed its commitment to fund the Term Loan pursuant to HBC's
    instructions at any time up to August 31, 1997.  On July 28, 1997, HBC
    tendered payment to ERLY under the ERLY Note, offsetting damages claimed by
    HBC in its lawsuit against ERLY.  In that lawsuit, the trial court has ruled
    that ERLY breached certain of its obligations to HBC under the ERLY Note
    and the only issue remaining for determination is the amount of HBC's
    damages.  ERLY has not responded to that tender.
    
    In light of the conclusion of the Loan Agreement, the receipt of the
    Commitment Letter referred above, and management's intent to utilize the
    Term Loan to satisfy the ERLY Note, the Company reclassified a portion of
    the amount due under the ERLY Note from "current portion of long-term debt"
    to "long-term debt".  The amount reclassified is equal to the long-


                                      7

<PAGE>

HANSEN NATURAL CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------

    term portion of the Term Loan, based upon the assumption that $4,000,000 
    will be paid to satisfy the ERLY Note.
    
3.  EARNINGS PER SHARE
    
    The Financial Accounting Standards Board recently issued Statement of
    Financial Accounting Standards No. 128 "Earnings Per Share", which is
    effective for financial statements for both interim and annual periods
    ending after December 15, 1997.  Early adoption of the statement is not
    permitted.  The Company has applied this statement to the results for the
    first and second quarters of 1997 and determined that the adoption of this
    statement would not have had a material impact on the earnings per share
    calculations for these periods.
    

                                      8

<PAGE>

M
ANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------

General

         During the six months ended June 30, 1997, the expansion of 
distribution of certain of the Company's products into markets outside of 
California continued to contribute positively to the profitability of the 
Company.  However, both the Company's operations in the United Kingdom and 
route distribution system in Southern California continued to incur losses, 
albeit at a lower rate than were incurred from these activities during the 
comparable six-month period ended June 30, 1996.  During the period the 
Company completed the discontinuation of the operation of its route 
distribution system.

         During late April 1997, the Company introduced a lightly carbonated 
Energy drink in an 8-ounce slim can and intends to introduce additional 
flavors and other types of beverages to complement its existing product lines 
consistent with the overall image of the Hansen's-Registered Trademark- 
brand, during 1997. 

         The Company continues to incur expenditures in connection with the 
development and introduction of new products and flavors.

         During the second quarter management re-evaluated the Company's 
warehousing, distribution and repacking arrangements.  Management concluded 
that, in consequence of the expansion of the Company's business and increased 
volumes, it would be cost efficient for the Company to rent its own warehouse 
facility and to appoint an independent contractor to manage the warehouse 
facility, as well as the distribution and repacking of the Company's 
products.  Management also determined that it would be cost efficient and 
beneficial for the Company's corporate offices to be relocated to such 
facility.

         In consequence, on April 25, 1997, the Company agreed to lease 
approximately 66,700 square feet of warehouse space in Corona, California for 
use as the Company's corporate offices and the primary national warehouse, 
distribution and repacking center for the Company's products, for a term of 
eighty-nine (89) months commencing on the later of August 1, 1997 or the date 
on which the facility is ready for occupancy.

         Concurrently, the Company agreed to sublease approximately 10,000 
square feet of the space to an independent contractor for two (2) years, 
subject to early termination upon sixty (60) days prior written notice.  It 
is anticipated that the Company will ultimately need to utilize this space to 
accommodate the expansion of its business.

         In terms of a separate agreement, that independent contractor agreed 
to manage the warehouse facility and the distribution and repacking of the 
Company's products therefrom.  In addition, the independent contractor will 
utilize its sublet space to repack products for other customers whose 
products are not directly competitive with the Company's products.  As a 
result, it will not be necessary for the Company to employ additional 
personnel to manage the warehouse facility and the distribution of its 
products.

         Under the terms of the lease, the landlord has agreed to pay for the 
construction of office facilities and certain other improvements.  It is 
anticipated that the Company will move its warehouse, distribution and 
repacking operations to the Corona, California site from a temporary site 
leased from the same landlord, in September 1997 and will move its corporate 
offices in January 1998.


                                      9

<PAGE>


MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------

RESULTS OF OPERATIONS FOR THE THREE-MONTH PERIOD ENDED JUNE 30, 1997 COMPARED TO
THE THREE-MONTH PERIOD ENDED JUNE 30, 1996

         NET SALES.  For the three-month period ended June 30, 1997, net 
sales were approximately $11.5 million, an increase of $1.1 million or 10.5% 
over the $10.4 million net sales for the three-month period ended June 30, 
1996.  The increase in net sales was attributable to increased sales of 
Hansens's-Registered Trademark- fruit juice Smoothies, increased sales of 
Hansens's-Registered Trademark- apple juice and sales of Hansens's-Registered 
Trademark- Energy drink, which was introduced during the second quarter of 
1997.  The increase in net sales was partially offset by a decrease in net 
sales of soda and the discontinuance of distribution of Equator-Registered 
Trademark- products in certain markets.  Sales of iced teas, lemonades and 
juice cocktails were about the same as in the comparable period in 1996. 

         GROSS PROFIT.  Gross profit was $4.7 million for the three-month 
period ended June 30, 1997, an increase of $558,000 or 13.5% over the $4.1 
million gross profit for the three-month period ended June 30, 1996.  Gross 
profit as a percentage of net sales increased to 40.9% for the three-month 
period ended June 30, 1997 from 39.9% for the three-month period ended June 
30, 1996.  The increase in gross profit was primarily attributable to 
increased net sales and higher margins achieved.  The increase in gross 
profit as a percentage of net sales was primarily attributable to higher 
margins achieved as a result of a change in the Company's product mix.
 
         TOTAL OPERATING EXPENSES.  Total operating expenses were $4.0 
million for the three-month period ended June 30, 1997, an increase of 
$242,000 or 6.5% over total operating expenses of $3.7 million for the 
three-month period ended June 30, 1996.  However, total operating expenses as 
a percentage of net sales decreased to 34.4% for the three-month period ended 
June 30, 1997 from 35.7% for the three-month period ended June 30, 1996.  The 
increase in total operating expenses was primarily attributable to increased 
selling, general and administrative expenses which was partially offset by a 
decrease in amortization of trademark license and trademarks.  The decrease 
in total operating expenses as a percentage of net sales was primarily 
attributable to the increase in net sales and the comparatively smaller 
increase in operating expenses from the comparable period in 1996.

         Selling, general and administrative expenses were $3.8 million for 
the three-month period ended June 30, 1997, an increase of $295,000 or 8.4% 
over selling, general and administrative expenses of $3.5 million for the 
three-month period ended June 30, 1996.  However, selling, general and 
administrative expenses as a percentage of net sales decreased to 33.1% for 
the three-month period ended June 30, 1997 from 33.8% for the three-month 
period ended June 30, 1996.  The increase in selling expenses was primarily 
attributable to increases in distribution, advertising and other promotional 
expenditures, and costs of promotional materials.  The increase in general 
and administrative expenses was primarily attributable to increased 
professional and legal fees incurred in connection with the Company's claim 
against ERLY, increased costs in connection with the development of and 
support for new products and increased payroll costs in connection with the 
Company's expansion activities into additional states.

         Amortization of trademark license and trademarks was approximately 
$74,000 for the three- month period ended June 30, 1997, a decrease of 
$51,000 from the $125,000 for the three-month period ended June 30, 1996.  
This decrease is attributable to the change in the amortization period from 
25 years to 40 years as more fully described in Note 1 in the Company's Form 
10-K for the year ended December 31, 1996.

         OPERATING INCOME.  Operating income was $749,000 for the three-month 
period ended June 30, 1997 compared to operating income of $433,000 for the 
three-month period ended June 30, 1996.  The 


                                      10

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------

$316,000 increase in operating income was attributable to a $558,000 increase 
in gross profit which was partially offset by an increase of $242,000 in 
operating expenses.

         NET NONOPERATING EXPENSE.  Net nonoperating expense was $149,000 for 
the three-month period ended June 30, 1997, which was $117,000 higher than 
net nonoperating expense of $32,000 for the three-month period ended June 30, 
1996. Net nonoperating expense for the three-month period ended June 30, 1997 
consists of net interest and financing expense.  Net nonoperating expense for 
the three-month period ended June 30, 1996 consists of net interest and 
financing expense and other income.  Interest and financing expense for the 
three-month period ended June 30, 1997 was $149,000 compared to $158,000 for 
the three-month period ended June 30, 1996.  The decrease in net interest and 
financing expense was attributable to the decrease in the amortization of 
certain capitalized financing costs incurred in connection with the securing 
of the Company's existing revolving line of credit in August 1995, which were 
fully amortized in the third quarter of 1996, and lower average short-term 
borrowings during the three-month period ended June 30, 1997 than during the 
comparable three-month period in 1996.  Other income for 1996 consisted of 
$126,000 of income from the recovery under the Hawaiian Water Partners note 
described in Note 3 in the Company's Form 10-K for the year ended December 
31, 1996.

         NET INCOME.  Net income was $562,000 for the three-month period 
ended June 30, 1997 compared to net income of $401,000 for the three-month 
period ended June 30, 1996.  The $161,000 increase in net income for this 
period consists of an increase in operating income of $316,000 which was 
partially offset by an increase of $117,000 in net nonoperating expense and a 
provision for income taxes of $38,000.

RESULTS OF OPERATIONS FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1997 COMPARED TO
THE SIX-MONTH PERIOD ENDED JUNE 30, 1996

         NET SALES.  For the six-month period ended June 30, 1997, net sales 
were approximately $18.6 million, an increase of $846,000 or 4.8% over the 
$17.8 million net sales for the six-month period ended June 30, 1996.  The 
increase in net sales was attributable to increased sales of 
Hansens's-Registered Trademark-fruit juice Smoothies, increased sales of 
Hansens's-Registered Trademark- apple juice and sales of Hansens's-Registered 
Trademark- Energy drink, which was introduced during the second quarter of 
1997. The increase in net sales was partially offset by a decrease in net 
sales of soda, iced teas, lemonades and juice cocktails and the 
discontinuance of distribution of Equator-Registered Trademark- products in 
certain markets.

         GROSS PROFIT.  Gross profit was $7.6 million for the six-month 
period ended June 30, 1997, an increase of $679,000 or 9.8% over the $6.9 
million gross profit for the six-month period ended June 30, 1996.  Gross 
profit as a percentage of net sales increased to 40.8% for the six-month 
period ended June 30, 1997 from 38.9% for the six-month period ended June 30, 
1996.  The increase in gross profit was primarily attributable to increased 
net sales and higher margins achieved.  The increase in gross profit as a 
percentage of net sales was primarily attributable to higher margins achieved 
as a result of a change in the Company's product mix.

         TOTAL OPERATING EXPENSES.  Total operating expenses were $6.7 
million for the six-month period ended June 30, 1997, an increase of $291,000 
or 4.5% over total operating expenses of $6.4 million for the six-month 
period ended June 30, 1996.  However, total operating expenses as a 
percentage of net sales decreased to 35.9% for the six-month period ended 
June 30, 1997 from 36.0% for the six-month period ended June 30, 1996.  The 
increase in total operating expenses was primarily attributable to increased 
selling, general and administrative expenses which was partially offset by 
decreases in amortization of trademark license and trademarks.  The decrease 
in total operating expenses as a percentage of net sales was primarily 
attributable to the increase in net sales and the comparatively smaller 
increase in operating expenses from the comparable period in 1996.


                                      11

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------

         Selling, general and administrative expenses were $6.4 million for 
the six-month period ended June 30, 1997, an increase of $395,000 or 6.6% 
over selling, general and administrative expenses of $6.0 million for the 
six-month period ended June 30, 1996.  Selling, general and administrative 
expenses as a percentage of net sales increased to 34.4% for the six-month 
period ended June 30, 1997 from 33.8% for the six-month period ended June 30, 
1996. The increase in selling expenses was primarily attributable to 
increases in distribution, advertising and other promotional expenditures and 
costs of promotional materials.  The increase in general and administrative 
expenses was primarily attributable to increased professional and legal fees 
incurred in connection with the Company's claim against ERLY, increased costs 
in connection with the development of and support for new products and 
increased payroll costs in connection with the Company's expansion activities 
into additional states.

         Amortization of trademark license and trademarks was approximately 
$147,000 for the six-month period ended June 30, 1997, a decrease of $103,000 
from the $250,000 for the six-month period ended June 30, 1996.  This 
decrease is attributable to the change in the amortization period from 25 
years to 40 years as more fully described in Note 1 in the Company's Form 
10-K for the year ended December 31, 1996.

         OPERATING INCOME.  Operating income was $897,000 for the six-month 
period ended June 30, 1997 compared to operating income of $509,000 for the 
six-month period ended June 30, 1996.  The $388,000 increase in operating 
income was attributable to a $679,000 increase in gross profit which was 
partially offset by an increase of $291,000 in operating expenses.

         NET NONOPERATING EXPENSE.  Net nonoperating expense was $273,000 for 
the six-month period ended June 30, 1997, which was $186,000 higher than net 
nonoperating expense of $87,000 for the six-month period ended June 30, 1996. 
Net nonoperating expense for the six months ended June 30, 1997 consists of 
net interest and financing expense.  Net nonoperating expense for the six 
months ended June 30, 1996 consists of interest and financing expense and 
other income. Net interest and financing expense for the six-month period 
ended June 30, 1997 was $273,000 compared to $319,000 for the six-month 
period ended June 30, 1996. The decrease in net interest and financing 
expense was attributable to the decrease in the amortization of certain 
capitalized financing costs incurred in connection with the securing of the 
Company's existing revolving line of credit in August 1995, which were fully 
amortized in the third quarter of 1996, and lower average short-term 
borrowings during the six-month period ended June 30, 1997 than during the 
comparable six-month period in 1996.  Other income for 1996 consisted of 
$233,000 of income from the recovery under the Hawaiian Water Partners note 
described in Note 3 in the Company's Form 10-K for the year ended December 
31, 1996.

         NET INCOME.  Net income was $584,000 for the six-month period ended 
June 30, 1997 compared to net income of $420,000 for the six-month period 
ended June 30, 1996.  The $164,000 increase in net income for this period 
consists of an increase in operating income of $388,000 which was partially 
offset by an increase of $186,000 in net nonoperating expense and a provision 
for income taxes of $38,000.

LIQUIDITY AND CAPITAL RESOURCES

         As of June 30, 1997, the Company had working capital of $1,376,822 
compared to a working capital deficit of $2,707,471 as of December 31, 1996.  
The increase in working capital was primarily attributable to the 
reclassification of the amount due under the ERLY Note from current portion 
of long-term debt to long-term debt, as explained above in Note 2 to the 
Company's unaudited financial statements for the period ended June 30, 1997, 
and partially attributable to net income earned, after 


                                      12

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------

adjustments for certain noncash expenses, primarily amortization of trademark 
license and trademarks, depreciation and other amortization, during the 
six-month period ended June 30, 1997.

         As explained in Note 2 to the Company's unaudited financial 
statements for the period ended June 30, 1997, HBC obtained a revolving line 
of credit of up to $3 million in aggregate at any time outstanding. The line 
of credit is secured by substantially all of HBC's assets, including accounts 
receivable, inventory, trademarks, trademark licenses and certain equipment. 
The initial use of proceeds under this line of credit was to refinance HBC's 
previous line of credit.  The line of credit is subject to renewal on the 
maturity date.  As of June 30, 1997, $890,414 was outstanding under this line 
of credit. 

         During the first and second quarters of 1997, HBC utilized a portion 
of the then existing line of credit, together with its own funds, for working 
capital and to finance its expansion and development plans.  Purchases of 
inventory and financing of accounts receivable, as well as HBC's expansion 
and development plans, have been, and for the foreseeable future, are 
expected to remain, HBC's principal recurring use of working capital funds.

         Also, as explained in Note 2, HBC obtained a commitment for a Term 
Loan, the proceeds of which will be used for the repayment of principal on 
the ERLY Note. 

         In the event that funding of the Term Loan does not occur by August 
31, 1997, and the bank does not extend its commitment to fund the same 
thereafter, it will be necessary for management to secure alternative 
financing to enable HBC to meet its obligations under the ERLY Note.  There 
can be no assurance that any replacement financing, if required, can be 
completed prior to the due date for payment of the ERLY Note or, if 
completed, that the terms of any such financing will not be disadvantageous 
to HBC and its business.  

         The obligations of HBC under certain consulting agreements entered 
into in connection with the acquisition of the Hansen Business terminated on 
July 27, 1997.

         Management believes that cash available from operations, current 
cash resources and the Revolver, will be sufficient for its working capital 
needs, including its purchase commitments for raw materials, through June 30, 
1998.

         Although the Company has no current plans to incur any material 
capital expenditures, management, from time to time, considers the 
acquisition of capital equipment, businesses compatible with the image of the 
Hansen's-Registered Trademark- brand and the introduction of new product 
lines. The Company may require additional capital resources in the event of 
any such transaction, depending upon the cash requirements relating thereto.  
Any such transaction will also be subject to the terms and restrictions of 
HBC's credit facility.

FORWARD LOOKING STATEMENTS

         Certain statements made in this Report, including certain statements 
made in this Management's Discussion and Analysis, contain "forward looking 
statements" within the meaning of Section 27A of the Securities Act of 1933, 
as amended, and Section 21E of the Securities Exchange Act of 1934, as 
amended, regarding the expectations of management with respect to revenues, 
profitability, refinancing of the ERLY Note, adequacy of funds from 
operations and the Company's existing credit facility, among other things.


                                      13

<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- ------------------------------------------------------------------------------

         Management cautions that these statements are qualified by their 
terms and/or important factors, many of which are outside of the control of 
the Company, that could cause actual results and events to differ materially 
from the statements made herein, including, but not limited to, the 
following: changes in consumer preferences, changes in demand that are 
weather related, particularly in areas outside of California, competitive 
pricing pressures, changes in the price of the raw materials for the 
Company's beverage products, the marketing efforts of the distributors of the 
Company's products, most of which distribute products that are competitive 
with the products of the Company, as well as unilateral decisions that may be 
made by grocery chain stores, specialty chain stores and club stores to 
discontinue carrying all or any of the Company's products that they are 
carrying at any time.  Management further notes that the Company's plans and 
results may be affected by the terms of the Company's credit facilities and 
the actions of its creditors and the court's final adjudication of damages in 
the ERLY litigation.

INFLATION

         The Company does not believe that inflation has a significant impact 
on the Company's results of operations for the periods presented.


                                      14

<PAGE>

 
                            PART II - OTHER INFORMATION



Items 1-5.     Non Applicable


Item 6.        Exhibits and Reports on Form 8-K

          (a)  Exhibits - See Exhibit Index.

          (b)  Reports on Form 8-K - None






                                      SIGNATURES

               Pursuant of the requirements of the Securities Exchange Act of 
1934, the Registrant has duly caused this report to be signed on its behalf 
by the undersigned, thereunto duly authorized.

                                            HANSEN NATURAL CORPORATION
                                            Registrant

Date:  August 8, 1997

                                            By: RODNEY SACKS
                                                ------------------------------
                                                Rodney C. Sacks
                                                Chairman of the Board
                                                and Chief Executive Officer;
                                                Principal Financial Officer


                                      15

<PAGE>


                                INDEX TO EXHIBITS

     The following designated exhibits, as indicated below, are either filed
herewith or have hereto fore been filed with the Securities and Exchange
Commission under the Securities Act of 1933 or the Securities Exchange Act of
1934 as indicated by footnote. 

Exhibit No.                              Document Description
- -----------                              --------------------

Exhibit 10(uu)                           Standard Industrial Lease Agreement

Exhibit 10(vv)                           Sublease Agreement

Exhibit 27                               Financial Data Schedule


                                      16






<PAGE>

                          STANDARD INDUSTRIAL LEASE
          
                         Dated (for reference) as of April 25, 1997
          
1. DEFINED TERMS. Each reference in this Lease to any of the following terms
shall include the data for such term as stated below with any additional terms
used in this Lease to have the meaning and definition given hereinafter:

TENANT: Hansen Beverage Company           LANDLORD: 27 Railroad Partnership L.P.
        a Delaware Corporation            a  California limited partnership

TENANT'S ADDRESS: 2401 East Katella       LANDLORD'S ADDRESS: c/o Investment 
                   Avenue                         Building Group 
                  Anaheim, CA 92806              4100 Newport Place, Suite 750
                                                 Newport Beach, CA 92660
DESCRIPTION OF THE PREMISES:

   FLOOR AREA OF IMPROVEMENTS: Approximately 66,700 square feet indicated on
Exhibit "A". including +- 3,400 square feet of mezzanine office

Street Address:     2378 Railroad Street, Corona, California 91720

Term:               Eighty-nine (89) months

Commencement Date:  August 1, 1997

Rent:               Fifteen thousand dollars ($15,000) per month 
                     (see paragraph 39).

Taxes, Insurance and Maintenance Reserve Deposit: $3,270 per month

Security Deposit: $25,000; first month's rent to be prepaid at execution hereof
                  (see paragraph 40)

Insurance Amounts: Bodily Injury per Person     Three million dollars 
                                                 ($3,000,000)
                   Bodily Injury per Occurrence Three million
 dollars 
                                                  ($3,000,000)
                   Property Damage               One million dollars 
                                                  ($1,000,000)
Tenant Improvement Plans (approved by Tenant and Landlord): See paragraph 41

Tenant's Construction Representative: Rodney Sacks

Uses: Warehousing, packaging and distribution of consumer products/corporate
       offices

Tenant's Share (if multi-tenant) of: Real Property Taxes 43.2% 
                                     Insurance Expenses 43.2% 
                                     Maintenance Expenses 43.2%

2. PREAMBLE. Landlord hereby leases to Tenant, and Tenant hereby leases and
accepts from Landlord, that certain real property, building area, and Tenant
Improvements more particularly described in Paragraph 1 (the "Premises") for the
Term and upon the covenants and conditions hereinafter specified.

3. CONSTRUCTION AND COMMENCEMENT.

   3.1 CONSTRUCTION. Landlord shall construct or cause to be constructed the 
building and improvements substantially in accordance with the Tenant 
Improvement Plans. The Premises shall be ready for occupancy on the date upon 
which the work of construction to be undertaken by Landlord has been 
substantially completed ("Ready for Occupancy") as determined by the issuance 
of a written certificate by Landlord to Tenant certifying (a) that the 
improvements have been substantially completed in accordance with the Tenant 
Improvement Plans, and (b) the date of such completion. Landlord shall 
complete, as soon as reasonably possible, any items of work or adjustment not 
completed when the Premises are Ready for Occupancy and such defective or 
omitted work undertaken by Landlord of which Tenant has given Landlord 
written notice within thirty (30) days after the date the Premises are Ready 
for Occupancy. The Premises shall be Ready for Occupancy not later than the 
Commencement Date; provided, however, that the Commencement Date may be 
extended for a period of time equal to the period of any delay encountered by 
Landlord affecting said work of construction because of fire, inclement 
weather, acts of God, riot, governmental regulations, strikes, shortages of 
material or labor, changes in the Tenant Improvement Plans, or any other 
cause beyond the reasonable control of Landlord.
   
   3.2 COMMENCEMENT. The Term of this Lease shall commence upon the earlier 
of: (a) the Commencement Date, or if the Premises are not Ready for Occupancy 
by the Commencement Date, the date upon which the Premises are Ready for 
Occupancy, (b) the date upon which Tenant first occupies any portion of the 
Premises, or (c) the date upon which Rent would have otherwise commenced to 
accrue under this Lease had Tenant not delayed in the performance of any of 
its duties or obligations hereunder or had not otherwise interfered with or 
caused a delay in the performance of Landlord's obligations hereunder. If the 
work of construction is not completed within one hundred twenty (120) days 
after the Commencement Date as extended pursuant to Paragraph 3.1, the sole 
remedy of either party shall be the option to terminate this Lease by the 
delivery to the other party of written notice of such termination within ten 
(10) days thereafter.
   
4. RENT; NET LEASE. Tenant agrees to pay Landlord at Landlord's address or at 
such other place designated by Landlord by written notice to Tenant the Rent, 
in lawful money of the United States, in advance, without demand, off-set or 
deduction, on the first day of each calendar month of the Term hereof and in 
the event the Term commences or the date of expiration of this Lease occurs 
other than on the first day or the last day of a calendar month, the Rent for 
such month shall be prorated. This Lease is what is commonly called a "net 
lease," it being understood that Landlord shall receive the Rent free and 
clear of any and all impositions, taxes, liens, charges or expenses of any 
nature or kind whatsoever in connection with the ownership and operation of 
the Premises, including reimbursement of an asset management fee equal to two 
percent (2%) of the Rent. If Rent is not received as provided above, a late 
charge shall be payable by Tenant as provided in Paragraph 13.4. In the event 
that a late charge is payable, whether or not collected, two times in any 
twelve month period, then Rent shall automatically become due and payable 
quarterly in advance, rather than monthly.

5. DEPOSITS.

   5.1 TAXES, INSURANCE AND MAINTENANCE RESERVE. Tenant shall deposit with 
Landlord each month the amount set forth in Paragraph 1 as a reserve to be 
used to pay real property taxes, maintenance expenses and insurance expenses 
on the Premises which are payable by Tenant under the terms of this Lease. If 
the amounts deposited with Landlord by Tenant under the provisions of this 
Paragraph are insufficient to discharge the obligations of Tenant, Tenant 
shall send to Landlord, upon Landlord's demand, the additional sums necessary 
to fully satisfy such obligations. All monies deposited with Landlord under 
this Paragraph may be intermingled with other moneys of Landlord and shall 
not bear interest.
   
   5.2 SECURITY DEPOSIT. Tenant has deposited with Landlord the Security 
Deposit set forth in Paragraph 1 above as security for Tenant's faithful 
performance of Tenant's obligations hereunder. If Tenant fails to pay Rent or 
other charges due hereunder, or otherwise defaults with respect to any 
provision of this Lease, Landlord may use, apply or retain all or any portion 
of said deposit for the payment of any Rent or other charge in default or for 
the payment of any other sum to which Landlord may become obligated by reason 
of Tenant's default, or to compensate Landlord for any loss or damage which 
Landlord may suffer thereby. If Landlord so uses or applies all or any 
portion of said deposit, Tenant shall within ten (10) days after written 
demand therefor deposit cash with Landlord in an amount sufficient to restore 
said deposit to the full amount stated in Paragraph 1 and Tenant's failure to 
do so shall be a material breach of this Lease. Landlord shall not be 
required to keep said deposit separate from its general accounts. If Tenant 
performs all of Tenant's obligations hereunder, said deposit, or so much 
thereof as has not theretofore been applied by Landlord, shall be returned, 
without payment of interest or other increment for its use, to Tenant (or, at 
Landlord's option, to the last assignee, if any, of Tenant's interest 
hereunder) at the expiration of the Term hereof, and after Tenant has vacated 
the Premises. No trust relationship is created herein between Landlord and 
Tenant with respect to said Security Deposit.
   
6. USE.

   6.1 USE. The Premises shall be used and occupied only for the uses stated 
in Paragraph 1.

                      NET   NET   NET


<PAGE>

   6.2 COMPLIANCE WITH LAW; PRIOR RESTRICTION. Tenant shall, at Tenant's sole 
expense, comply promptly and continuously with all applicable statutes, 
ordinances, rules, regulations, orders, restrictions of record, and 
requirements in effect during the Term or any part of the Term hereof 
regulating the Use of the Premises. Tenant shall not use or permit the use of 
the Premises in any manner that will tend to create waste or a nuisance. 
Permanent outside storage shall not be allowed without prior written approval 
from Landlord under any circumstances.
             
   6.3 CONDITIONS OF PREMISES. Tenant hereby accepts the Premises in their 
condition existing as of the date of the execution hereof, except for those 
specific Improvements which Landlord has undertaken to provide in Paragraph 3 
and subject to all applicable zoning, municipal, county and state laws, 
ordinances and regulations and any covenants or restrictions of record 
governing and regulating the use of the Premises, and accepts this Lease 
subject thereto and to all matters disclosed thereby and by any exhibits 
attached hereto. Tenant acknowledges that neither Landlord nor Landlord's 
agent has made any representation or warranty as to the suitability of the 
Premises for the conduct of Tenant's business, and that Tenant has made such 
legal and factual inquiries with respect thereto as it deems appropriate and 
has relied solely thereon.
   
   6.4 HAZARDOUS MATERIALS. Tenant shall not cause any hazardous wastes, 
chemicals or materials (collectively "Hazardous Materials") to be used, 
generated, stored or disposed of on or about the Premises except with 
Landlord's written permission and in strict compliance with all applicable 
regulations and using all necessary and appropriate precautions. Landlord's 
permission may be withheld for any reason and may be revoked at any time. 
Tenant shall be liable to Landlord for any and all damages caused by Tenant's 
failure to keep, store, use, maintain or handle Hazardous Materials on the 
Premises. Landlord shall not be liable to Tenant for any claims, damages or 
losses due to the effects of Hazardous Materials on the Premises that is 
caused by owners, tenants, licensees, and invitees of other properties or is 
not directly caused by Landlord. Landlord shall not be liable to Tenant 
regardless of whether or not Landlord has approved Tenant's activities. 
Tenant shall indemnify, defend by counsel acceptable to Landlord and hold 
Landlord harmless from and against any claims, damages or liabilities arising 
out of a breach of any provision of this Paragraph 6.4.
   
 7. MAINTENANCE, REPAIRS AND ALTERATIONS.

   7.1 TENANT'S OBLIGATIONS. Subject to Paragraph 7.3 below, Tenant shall 
keep in good order, condition and repair, the Premises and every part 
thereof, structural and non-structural, and all adjacent sidewalks, 
landscaping, driveways, parking lots, and fences located in the areas which 
are adjacent to and included with the Premises. At the cost and expense of 
Tenant, the landscaping shall be maintained by a professional gardener and 
the exterior of the building shall be repainted at least once every six (6) 
years.
   
   7.2 SURRENDER. On the last day of the Term hereof, or on any sooner 
termination, Tenant shall surrender the Premises to Landlord in the same 
condition as when received, ordinary wear and tear excepted, clean and free 
of debris. Tenant shall repair any damage to the Premises occasioned by the 
removal of Tenant's trade fixtures, furnishings and equipment. Tenant shall 
leave the air lines, power panels, electrical distribution systems, lighting 
fixtures, space heaters, air conditioning, plumbing and fencing on the 
Premises in good operating condition.
   
   7.3 LANDLORD RIGHTS. If Tenant fails to perform Tenant's obligations under 
this Paragraph 7, or under any other paragraph of this Lease, Landlord may, 
at its option (but shall not be required to), enter upon the Premises, after 
ten (10) days' prior written notice to Tenant (except in the case of an 
emergency, in which case no notice shall be required), perform such 
obligations on Tenant's behalf and put the same in good order, condition and 
repair, and the cost thereof shall become due and payable as additional 
rental to Landlord together with Tenant's  next rental installment.     
          
   7.4 LANDLORD'S OBLIGATIONS. Except for the repair of any latent 
construction defects in the structural bearing elements of the building and 
the obligations of Landlord under Paragraph 9 and 14, it is intended by the 
parties hereto that Landlord shall have no obligation, in any manner 
whatsoever, to repair and maintain the Premises nor the building located 
thereon nor the equipment therein, whether structural or non-structural, all 
of which obligations are intended to be that of the Tenant. Tenant hereby 
waives the provisions of California Civil Code Section 1941 and 1942 or any 
related or successor provision of law which would otherwise afford Tenant the 
right to make repairs at Landlord's expense or to terminate this Lease 
because of Landlord's failure to keep the Premises in good order, condition 
and repair.
   
                              
7.5 ALTERATIONS AND ADDITIONS.     

    (a) Tenant shall not without Landlord's prior written consent, make any 
alterations, improvements, additions or Utility Installations which for 
non-structural alterations and utility installations shall not be 
unreasonably withheld in, on or about the Premises, except for non-structural 
alterations not exceeding ten thousand dollars ($10,000.00) during the Term 
of this Lease. As used in this Paragraph 7.5, the term "Utility 
Installations" shall include carpeting, window coverings, air lines, power 
panels, electrical distribution systems, lighting fixtures, space heaters, 
air-conditioning, plumbing, and fencing. Landlord may require that Tenant 
remove any or all of said alterations, improvements, additions or Utility 
Installations at the expiration of the Term, and restore the Premises to 
their prior condition. Landlord may require Tenant to provide Landlord, at 
Tenant's sole cost and expense, a lien and completion bond in an amount equal 
to one and one-half times the estimated cost of such improvements, to insure 
Landlord against any liability for mechanic's and materialmen's liens and to 
insure completion of work. Should Tenant make any alterations, improvements, 
additions or Utility Installations without the prior approval of Landlord, 
Landlord may require that Tenant remove any or all of the same.

    (b) Any alterations, improvements, additions or Utility Installations in, 
or about the Premises that Tenant shall desire to make and which require the 
consent of the Landlord shall be presented to Landlord in written form, with 
proposed detailed plans. If Landlord shall give its consent, the consent 
shall be deemed conditioned upon Tenant acquiring a permit to do so from 
appropriate governmental agencies, the furnishing of a copy thereof to 
Landlord prior to the commencement of the work and the compliance by Tenant 
with all conditions of said permit in a prompt and expeditious manner.

    (c) Tenant shall pay, when due, all claims for labor or materials 
furnished or alleged to have been furnished to or for Tenant at or for use in 
the Premises, which claims are or may be secured by any mechanics' or 
materialmen's lien against the Premises or any interest therein. Tenant shall 
give Landlord not less than ten (10) days' notice prior to the commencement 
of any work in or on the Premises, and Landlord shall have the right to post 
notices of non-responsibility in or on the Premises as provided by law.

    (d) Unless Landlord requires their removal, as set forth in Paragraph 
7.5(a), all alterations, improvements, additions and Utility Installations 
(whether or not such Utility Installations constitute trade fixtures of 
Tenant), which may be made on the Premises, shall become the property of 
Landlord and remain upon and be surrendered with the Premises at the 
expiration of the Term. Notwithstanding the provisions of this Paragraph 
7.5(d), Tenant's machinery and equipment, other than that which is affixed to 
the Premises so that it cannot be removed without material damage to the 
Premises, shall remain the property of Tenant and may be removed by Tenant 
subject to the provisions of Paragraph 7.2.

   7.6 COMMON AREA MAINTENANCE. In the event that the Premises are a portion 
of a larger building or complex, Landlord, at Landlord's option, may arrange 
for any portion of the exterior or common area maintenance and repair. Tenant 
shall pay to Landlord upon demand a reasonable proportion to be determined by 
Landlord of all costs including a ten percent administration fee on 
landscaping, irrigation and exterior lighting charges, in the event Landlord 
administrates the same.
   
8. INSURANCE, INDEMNITY.

   8.1 COVERAGE. The following insurance and any additional insurance 
coverage that may be required by law, holders of mortgages or deeds of trust 
shall be carried protecting Landlord and the holders of any mortgages or 
deeds of trust covering the Premises. Any insurance policies provided by 
Tenant shall provide that such policies are primary and non-contributing with 
any insurance carried by the Landlord.

    (a) Insurance covering loss or damage to the Premises in the amount of 
the full replacement value thereof, as the same may exist from time to time, 
but in no event less than the total amount required by lenders having liens 
on the Premises, against all perils included within the classification of 
fire, extended coverage, vandalism, malicious mischief, and special extended 
perils ("all risk" as such term is used in the insurance industry). Said 
insurance shall provide for payment of loss thereunder to Landlord or to the 
holders of mortgages or deeds of trust on the Premises. A stipulated value or 
agreed amount endorsement deleting the co-insurance provision of the policy 
shall be procured with said insurance. If such insurance coverage has a 
deductible clause, the deductible amount shall not exceed $5,000 per 
occurrence, and Tenant shall be liable for such deductible amount.

                                 -2-


<PAGE>
                                                                     
    (b) Comprehensive general liability (Landlord's risk only including 
without limitation bodily injury, personal injury and property damage 
insurance) in the amount of six million dollars or such higher limits as 
Landlord may reasonably require.

    (c) Insurance against abatement or loss of rent in case of fire or other 
casualty in an amount equal to the Rent, Real Property Taxes, and insurance 
premium payments to be made by Tenant during one (1) year; and

    (d) Comprehensive public liability insurance (including without 
limitation bodily injury, personal injury and property damage insurance), 
with limits at least as high as the amounts respectively stated in Paragraph 
1, or such higher limits as Landlord may reasonably require.
            
   8.2 PAYMENT OF PREMIUMS. Tenant shall obtain the insurance policy called 
for in Paragraph 8.1(d). Landlord shall obtain the insurance policies called 
for in Paragraphs 8.1(a), (b), and (c) and Tenant shall pay the cost thereof 
to the extent not prepaid through reserves paid pursuant to Paragraph 5.1 upon 
demand as additional rent.  However, if the Premises is a one-tenant building 
and Tenant can provide suitable insurance at lesser cost within thirty (30) days
after notice of the company and rate obtained by Landlord; Tenant may do so and 
shall not be liable to Landlord for any cost of temporary insurance in excess 
of the rate for the substitute insurance. If Tenant fails to maintain 
insurance which Tenant has undertaken to provide, Tenant shall pay for any 
loss or cost resulting from said failure.

   8.3 INSURANCE POLICIES. Insurance required hereunder shall be with 
companies holding a Best's Insurance Guide "General Policyholders Rating" of 
at least "A" and a "Financial Size Category" rating of at least Class VIII. 
Insurance policies shall not be cancelable or subject to reduction in 
coverage or other modification except after thirty (30) days' prior written 
notice to Landlord. The insuring party shall deposit with such mortgage 
holders as Landlord may require, policies, duplicates or certificates as such 
holders may require, and shall in all cases furnish the other party with 
policies, duplicates and certificates. Tenant shall not violate or permit to 
be violated any of the conditions or provisions of any policy provided for in 
Paragraph 8.1, and Tenant shall so perform and satisfy the requirements of 
the companies writing such policies so that at all times companies of good 
standing reasonably satisfactory to Landlord shall be willing to write and/or 
continue such insurance.
   
   8.4 WAIVER OF SUBROGATION. Tenant and Landlord each hereby release and 
relieve the other, and waive their entire right of recovery against the other 
for loss or damage arising out of or incident to the perils insured against 
hereunder, which perils occur in, on or about the Premises, whether due to 
the negligence of Tenant or Landlord or their agents, employees, contractors 
and/or invitees. Tenant and Landlord shall, upon obtaining the policies of 
insurance required hereunder, give notice to the insurance carrier or 
carriers that the foregoing mutual waiver of subrogation is contained in this 
Lease.
   
   8.5 INDEMNITY. Tenant shall indemnify and hold harmless Landlord from and 
against any and all claims arising from Tenant's use of the Premises, or from 
the conduct of Tenant's business or from any activity, work or things done, 
permitted or suffered by Tenant in or about the Premises or elsewhere and 
shall further indemnity and hold harmless Landlord from and against any and 
all claims arising from any breach or default in the performance of any 
obligation on Tenant's part to be performed under the terms of this Lease, or 
arising from any negligence of Tenant, or any of Tenant's agents, 
contractors, or employees, and from and against all costs, attorneys' fees, 
expenses and liabilities incurred in the defense of any such claim or any 
action or proceeding brought thereon, and in case any action or proceeding be 
brought against Landlord by reason of any such claim, Tenant upon notice from 
Landlord shall defend the same at Tenant's expense by counsel satisfactory to 
Landlord. Tenant as a material part of the consideration to Landlord hereby 
assumes all risk of damage to property or injury to persons, in, upon or 
about the Premises arising from any cause and Tenant hereby waives all claims 
in respect thereof against Landlord.
   
   8.6 EXEMPTION OF LANDLORD FROM LIABILITY. Tenant hereby agrees that 
Landlord shall not be liable for injury to Tenant's business or any loss of 
income therefrom or for damage to the goods, wares, merchandise or other 
property of Tenant, Tenant's employees, invitees, customers, or any other 
person in or about the Premises; nor shall Landlord be liable for injury to 
the person of Tenant, Tenant's employees, agents or contractors, whether such 
damage or injury is caused by or results from fire, steam, electricity, gas, 
water or rain, or from the breakage, leakage, obstruction or other defects of 
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting 
fixtures, or from any other cause, whether said damage or injury results from 
conditions arising upon the Premises or upon other portions of the building 
of which the Premises are a part, or from other sources or places, and 
regardless of whether the cause of such damage or injury or the means of 
repairing same is inaccessible to Tenant. Landlord shall not be liable for 
any damages arising from any act or neglect of any other tenant, if any, of 
the building in which the Premises are located.
   
9. DAMAGE OR DESTRUCTION.

   9.1 PARTIAL DAMAGE - INSURED. Subject to the provisions of Paragraphs 9.3 
and 9.4, if the Premises are damaged and such damage was caused by a casualty 
covered under an insurance policy, Landlord shall, or at Landlord's option, 
Tenant shall repair such damage as soon as reasonably possible and this Lease 
shall continue in full force and effect. If the insurance proceeds received 
by Landlord are not sufficient to effect such repair and such insufficiency 
is not due to an insufficient policy coverage amount, and Landlord elects to 
repair, Tenant shall pay to Landlord upon demand any costs incurred by 
Landlord not fully covered by insurance proceeds. If Tenant repairs the 
damage, Landlord shall reimburse Tenant for the costs of repair to the extent 
of insurance proceeds received by Landlord. Insurance claim shortfalls 
greater than $25,000 per occurrence for capital repairs/replacements may, at 
Tenant's election, be amortized over the life of the capital asset as 
determined by Generally Accepted Accounting Practices 10% annual interest and 
paid as additional rent over the remainder of the Term.

    
   9.2 PARTIAL DAMAGE - UNINSURED. Subject to the provisions of Paragraphs 
9.3 and 9.4, if at any time during the Term hereof the Premises are damaged 
where the cost to repair such damage exceeds $25,000, except by a negligent 
or willful act of Tenant (in which event Tenant shall make the repairs at its 
expense), and such damage was caused by a casualty not covered under an 
insurance policy required to be maintained pursuant to Paragraph 8.1, 
Landlord may at Landlord's option either (a) repair such damage as soon as 
reasonably possible at Landlord's expense, in which event this Lease shall 
continue in full force and effect, or (b) give written notice to Tenant 
within thirty (30) days after the date of the occurrence of such damage of 
Landlord's intention to cancel and terminate this Lease as of the date of the 
occurrence of such damage. In the event Landlord elects to give such notice 
of Landlord's intention to cancel and terminate this Lease, Tenant shall have 
the right within ten (10) days after the receipt of such notice to give 
written notice to Landlord of Tenant's intention to repair such damage at 
Tenant's expense, without reimbursement from Landlord, in which event this 
Lease shall continue in full force and effect, and Tenant shall proceed to 
make such repairs as soon as reasonably possible. If Tenant does not give 
such notice within such ten (10) day period, this Lease shall be canceled and 
terminated as of the date of the occurrence of such damage.
  
   9.3 TOTAL DESTRUCTION. If at any time during the Term of this Lease there 
is damage, whether or not an insured loss, (including destruction required by 
any authorized public authority) to the building of which the Premises are a 
part to the extent that the cost of repair exceeds fifty percent (50%) of the 
then replacement cost of such building as a whole, then this Lease shall 
automatically terminate as of the date of such destruction.
          
   9.4 DAMAGE NEAR END OF TERM. If the Premises are significantly damaged 
during the last year of the Term of this Lease, Landlord may at Landlord's 
option cancel and terminate this Lease as of the date of occurrence of such 
damage by giving written notice to Tenant of Landlord's election to do so 
within thirty (30) days after the date of occurrence of such damage.
   
   9.5 ABATEMENT OF RENT. In the event of damage described in Paragraphs 9.1 
or 9.2, and Landlord or Tenant repairs or restores the Premises, Rent for the 
period during which such damage, repair or restoration continues shall be 
abated in proportion to the degree to which Tenant's use of the Premises is 
impaired, but only to the extent of any proceeds received by Landlord from 
rental abatement insurance described in Paragraph 8.1. Except for the 
abatement of Rent, if any, Tenant shall have no claim against Landlord for 
any damage suffered by reason of any such damage, destruction, repair or 
restoration.
   
   9.6 WAIVER. Tenant and Landlord hereby waive the provisions of California 
Civil Code Paragraphs 1932 (2) and 1933 (4) or any related or successor 
provision of law which relate to termination of leases when the thing leased 
is destroyed and agree that such event shall be governed by the terms of this 
Lease.

                                 -3-

<PAGE>

10. REAL PROPERTY TAXES.

   10.1 PAYMENT OF TAXES. Tenant shall pay the real property tax, as defined 
in Paragraph 10.2, applicable to the Premises during the Term of this Lease. 
If deposits collected for real property taxes as provided in Paragraph 5.1 
are not sufficient to discharge the Tenant's obligations, payment of the 
balance shall be made at least ten (10) days prior to the delinquency date of 
such payment by depositing the payment with Landlord. If any such taxes paid 
by Tenant shall cover any period of time after the expiration of the Term 
hereof, Tenant's share of such taxes shall be equitably prorated to cover 
only the period of time within the tax fiscal year during which this Lease 
shall be in effect, and Landlord shall reimburse Tenant to the extent 
required within thirty (30) days following expiration of the Term. If Tenant 
shall fail to pay any such taxes, Landlord shall have the right to pay the 
same, in which case Tenant shall repay such amount to Landlord with Tenant's 
next rent installment together with interest at the maximum rate then 
allowable by law.
   
   10.2 DEFINITION OF "REAL PROPERTY TAX". As used herein, the term Real 
Property Tax shall include any form of real estate tax or assessment, 
general, special, ordinary or extraordinary, and any license fee, commercial 
rental tax, improvement bond or bonds, levy or tax (other than inheritance, 
personal income or estate taxes) imposed on the Premises by any authority 
having the direct or indirect power to tax, including any city, state or 
federal government, or any school, agricultural, sanitary, fire, street, 
drainage or other improvement district thereof, as against any legal or 
equitable interest of Landlord in the Premises or in the real property of 
which the Premises are a part, as against Landlord's right to rent or other 
income therefrom, and as against Landlord's business of leasing the Premises. 
Real Property Tax shall also include any tax, fee, levy, assessment or charge 
(i) in substitution of, partially or totally, any tax, fee, levy assessment 
or charge hereinabove included within the definition of Real Property Tax or 
(ii) the nature of which was hereinbefore included within the definition of 
Real Property Tax.
   
   10.3 JOINT ASSESSMENT. If the Premises are not separately assessed, 
Tenant's liability shall be an equitable proportion of the Real Property 
Taxes for all of the land and improvements included within the tax parcel 
assessed, such proportion to be determined by Landlord from the respective 
valuations assigned in the assessor's work sheets or such other information 
as may be reasonably available. Landlord's reasonable determination thereof, 
in good faith, shall be conclusive.
   
   10.4 PERSONAL PROPERTY TAXES. Tenant shall pay prior to delinquency all 
taxes assessed against and levied upon trade fixtures, furnishings, equipment 
and all personal property of Tenant contained in the Premises or elsewhere. 
When possible, Tenant shall cause said trade fixtures, furnishings, equipment 
and all other personal property to be assessed and billed separately from the 
real property of Landlord.
   
11. UTILITIES. Tenant shall pay for heat, water, gas, electricity, and any 
other utilities and services supplied to the Premises together with taxes 
thereon. Tenant shall be responsible for any installation or hook-up charge. 
Landlord shall not be liable to Tenant for interruption in or curtailment of 
any utility service, nor shall any such interruption in or curtailment 
constitute a constructive eviction or grounds for rental abatement. If any 
such services are not separately metered to Tenant, Tenant shall pay a 
reasonable proportion to be determined by Landlord of all charges jointly 
metered with other premises.

12. ASSIGNMENT AND SUBLETTING.

   12.1 LANDLORD'S CONSENT REQUIRED. Tenant shall not voluntarily or by 
operation of law assign, mortgage, sublet, or otherwise transfer or encumber 
all or any part of Tenant's interest in this Lease or in the Premises without 
Landlord's prior written consent. Landlord shall not unreasonably withhold 
its consent to an assignment or sublet, provided the proposed assignee or 
sublessee is reasonably satisfactory to Landlord as to credit and will occupy 
and use the Premises for the same purposes specified in Paragraph 1. Any 
attempted assignment, transfer, mortgage, encumbrance or subletting without 
such consent shall constitute a breach of this Lease and be voidable at 
Landlord's election. Tenant shall pay to Landlord five hundred dollars ($500) 
as compensation for expenses in connection with any request for Landlord's 
consent by Tenant. See addendum.
   
   12.2 NO RELEASE OF TENANT. Regardless of Landlord's consent, no subletting 
or assignment shall release Tenant of Tenant's obligation or alter the 
primary liability of Tenant to pay the Rent and to perform all other 
obligations to be performed by Tenant hereunder. The acceptance of Rent by 
Landlord from any other person shall not be deemed to be a waiver by Landlord 
of any provision hereof. Consent to one assignment or subletting shall not be 
deemed consent to any subsequent assignment or subletting.
   
   12.3 RECAPTURE OF PREMISES. In connection with any proposed assignment or 
sublease of the entire Premises, Tenant shall submit to Landlord in writing 
(a) the name of the proposed assignee or sublessee, (b) such information as 
to its financial responsibility and standing as Landlord may reasonably 
require, and (c) all of the terms and conditions upon which the proposed 
assignment or subletting is to be made. Landlord shall have an option to 
cancel and terminate this Lease with respect to the Premises which is to be 
assigned or sublet. Landlord may exercise said option in writing within 
thirty (30) days after its receipt from Tenant of such request to assign or 
sublease the Premises. If Landlord shall exercise its option, Tenant shall 
surrender possession of the entire Premises.  
   
   12.4 EXCESS SUBLEASE RENTAL. If, on account of or in connection with any 
assignment or sublease of more than 50% of the Premises Tenant receives rent 
or other consideration in excess of the Rent called for hereunder, or in the 
case of the sublease of a portion of the Premises, in excess of the pro rata 
Rent based on the floor area of such portion, after appropriate adjustments 
to assure all other payments called for hereunder are appropriately taken 
into account, Tenant shall pay to Landlord Fifty Percent (50%) of the excess 
of such payment of rent or other consideration received by Tenant promptly 
after its receipt.
   
13. DEFAULTS; REMEDIES.

   13.1 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 vacating or abandonment of the Premises by Tenant for at least 
thirty (30) days.

    (b) The failure by Tenant to make any payment of Rent or any other 
payment required to be made by Tenant hereunder, as and when due, where such 
failure shall continue for a period of three (3) days after written notice 
thereof from Landlord to Tenant.

    (c) The failure by Tenant to observe or perform any of the covenants, 
conditions or provisions of this Lease to be observed or performed by Tenant, 
other than described in Paragraph 13.1(b), where such failure shall continue 
for a period of thirty (30) days after written notice thereof from Landlord 
to Tenant; provided, however, that if the nature of Tenant's default is such 
that more than thirty (30) days are reasonably required for its cure, then 
Tenant shall not be deemed to be in default it Tenant commences such cure 
within said thirty (30) day period and thereafter diligently prosecutes such 
cure to completion.

    (d)(i) The making by Tenant of any general arrangement or assignment for 
the benefit of creditors; (ii) the filing by or against Tenant of a petition 
to have Tenant adjudged bankrupt or a petition for reorganization or 
arrangement under any law relating to bankruptcy (unless, 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 this 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.

    (e) The discovery by Landlord that any financial statement given to 
Landlord by Tenant, any assignee of Tenant, any subtenant of Tenant, any 
successor in interest or any guarantor of Tenant's obligations hereunder was 
materially false.

13.2 REMEDIES. In the event of any material default or breach by Tenant, 
Landlord may at any time thereafter, with or without notice or demand and 
without limiting Landlord in the exercise of any right or remedy which 
Landlord may have by reason of such default or breach:

    (a) Terminate Tenant's right to possession of the Premises, in which case 
this Lease shall terminate and Tenant shall immediately surrender possession 
of the Premises to Landlord. In such event, Landlord shall be entitled to 
recover from Tenant all damages incurred by Landlord by reason of Tenant's 
default including, but not limited to, the cost of recovering possession of 
the Premises; expenses of reletting including necessary renovation of the 
Premises, reasonable attorneys' fees, and any real estate commission actually 
paid; the worth at the time of award by the court having jurisdiction thereof 
of the amount by which the unpaid Rent for the balance of the Term after the 
time of such award exceeds the amount of such rental loss for the same period 
that Tenant proves could be reasonably avoided; and that portion of the 
leasing commission paid by Landlord applicable to the unexpired Term of this 
Lease. Unpaid installments of Rent or other sums shall bear interest from the 
date due at the lesser of twelve percent (12%) or the maximum rate then 
allowable by law.
          
                                   -4-


<PAGE>

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

    (c) Pursue any other remedy now or hereafter available to Landlord under the
laws or judicial decisions of the State of California.

   13.3 DEFAULT BY LANDLORD. Landlord shall not be in default unless Landlord 
fails to perform obligations required of Landlord within thirty (30) days 
after written notice by Tenant to Landlord and to the holder of any mortgage 
or deed of trust covering the Premises whose name and address shall have 
theretofore been furnished to Tenant in writing, specifying wherein Landlord 
has failed to perform such obligations; 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 thirty (30) day period and thereafter diligently 
prosecutes the same to completion.

   13.4 LATE CHARGES. Tenant hereby acknowledges that late payment by Tenant to 
Landlord of Rent and other sums due hereunder will cause Landlord to incur 
costs not contemplated by this Lease, the exact amount of which will be 
extremely difficult to ascertain. Such costs include, but are not limited to, 
processing and accounting charges, and late charges which may be imposed on 
Landlord by the terms of any mortgage or trust deed covering the Premises. 
Accordingly, if any installment of Rent or any other sum due from Tenant 
shall not be received by Landlord or Landlord's designee within five business 
(5) days after such amount shall be due, then, without any requirement for 
notice to Tenant, Tenant shall pay to Landlord a late charge equal to five 
percent (5%) of such overdue amount. The parties hereby agree that such late 
charge represents a fair and reasonable estimate of the costs Landlord will 
incur by reason of late payment by Tenant. Acceptance of such late charge by 
Landlord shall in no event constitute a waiver of Tenant's default with 
respect to such overdue amount, nor prevent Landlord from exercising any of 
the other rights and remedies granted hereunder.

14. CONDEMNATION. If the Premises or any portion thereof are taken under 
the power of eminent domain, or sold under the threat of the exercise of said 
power (all of which are herein called "Condemnation"), this Lease shall 
terminate as to the part so taken as of the date the condemning authority 
takes title or possession, whichever first occurs. If more than ten percent 
(10%) of the floor area of the building on the Premises or more than twenty- 
five percent (25%) of the land area of the Premises which is not occupied by 
any building is taken by Condemnation; then Tenant may, at Tenant's option to 
be exercised in writing only within ten (10) days after Landlord shall have 
given Tenant written notice of such taking (or in the absence of such notice, 
within ten (10) days after the condemning authority shall have taken 
possession), terminate this Lease as of the date the condemning authority 
takes such possession. If Tenant does not terminate this Lease in accordance 
with the foregoing, this Lease shall remain in full force and effect as to 
the portion of the Premises remaining, except that the Rent shall be reduced 
in the proportion that the floor area taken bears to the total floor area of 
the building situated on the Premises. No reduction in Rent shall occur if 
the only area taken is that which does not have a building located thereon. 
Any award for the taking of all or any part of the Premises under the power 
of eminent domain or any payment made under threat of the exercise of such 
power shall be the property of Landlord, whether such award shall be made as 
compensation for diminution in value of the leasehold or for the taking of 
the fee, or as severance damages, provided, however, that Tenant shall be 
entitled to any award for loss or damage to Tenant's trade fixtures and 
removable personal property. In the event that this Lease is not terminated 
by reason of such Condemnation, Landlord shall, to the extent of severance 
damages received by Landlord in connection with such Condemnation, repair any 
damage to the Premises caused by such Condemnation except to the extent that 
Tenant has been reimbursed therefor by the condemning authority. 

15. EXAMINATION OF LEASE. Submission of this instrument for examination or 
signature by Tenant does not constitute a reservation of or option to lease. 
This instrument is not effective as a lease or otherwise until execution and 
delivery by Landlord and Tenant.

16. ESTOPPEL CERTIFICATE.

    (a) Tenant shall, at any time during the Term, upon ten (10) days prior 
written notice from Landlord execute, acknowledge and deliver to Landlord a 
statement in writing (i) certifying that this Lease is unmodified and in full 
force and effect (or, if modified, stating the nature of such modification 
and certifying that this Lease, as so modified, is in full force and effect) 
and the date to which the Rent and other charges are paid in advance, if any, 
and (ii) acknowledging that there are not, to Tenant's knowledge, any uncured 
defaults on the part of Landlord hereunder, or specifying such defaults if 
any are claimed. Any such statement may be conclusively relied upon by any 
prospective purchaser or encumbrancer of the Premises.

    (b) At Landlord's option, Tenant's failure to deliver such statement 
within ten (10) days of receipt of written notice shall be a material breach 
of this Lease or shall be conclusive upon Tenant (i) that this Lease is in 
full force and effect, without modification except as may be represented by 
Landlord, (ii) that there are no uncured defaults in Landlord's performance, 
and (iii) that not more than one month's Rent has been paid in advance.

     (c) If Landlord desires to finance, refinance or sell the Premises, or 
any part thereof, Tenant hereby agrees upon ten (10) days prior written 
notice to deliver to Landlord such financial statements of Tenant as may be 
reasonably required by a lender or purchaser. Such statement shall include 
the most recent three years' financial statements of Tenant. All such 
financial statements shall be received by Landlord in confidence and shall be 
used only for the purposes herein set forth.

17. LANDLORD'S LIABILITY. Whenever Landlord conveys its interest in the 
Premises, Landlord shall be automatically released from all liability as 
respects the further performance of covenants on the part of Landlord herein 
contained provided the assignee executes an assumption agreement expressly 
agreeing to assume all of Landlord's obligations with respect to this Lease. 
If requested, Tenant shall execute a form of release and such other 
documentation as may be required to further effect these provisions. Tenant 
agrees to look solely to Landlord's estate and interest in the Premises for 
the satisfaction of any liability, duty or obligation of Landlord in respect 
to this Lease or the relationship of Landlord and Tenant hereunder and no 
other assets of Landlord shall be subject to any liability therefor. Tenant 
agrees it will not seek and hereby waives any recourse against the individual 
partners, directors, officers, employees or shareholders of Landlord or any 
of their personal assets for such satisfaction.

18. 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. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, 
any amount due to Landlord not paid when due shall bear interest at the 
lesser of twelve percent (12%) or the maximum rate then allowable by law from 
the date due. Payment of such interest shall not excuse or cure any default 
by Tenant under this Lease. 

20. TIME OF ESSENCE. Time is of the essence.

21. ADDITIONAL RENT. Any monetary obligations of Tenant to Landlord under the 
terms of this Lease shall be deemed to be rent.

22. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all 
agreements 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.

23. NOTICES. Any notice required or permitted to be given hereunder shall be 
in writing and may be given by personal service or by certified mail, return 
receipt requested. Notice by certified mail shall be deemed served on the 
date of delivery as shown on the postal receipt. Either party may by notice 
to the other specify a different address for notice purposes, except that, 
upon Tenant's taking possession of the Premises, the Premises shall 
constitute Tenant's address for notice purposes. A copy of all notices to be 
given to Landlord hereunder shall be concurrently transmitted by Tenant to 
such party or parties at such addresses as Landlord may hereafter designate 
by notice to Tenant.

24. WAIVERS. No waiver by Landlord of any provision hereof shall be deemed a 
waiver of any other provision hereof or of any subsequent breach by Tenant of 
the same or any other provision. Landlord's consent to or approval of any act 
shall not be deemed to render unnecessary the obtaining of Landlord's consent 
to or approval of any subsequent act by Tenant. The acceptance of Rent 
hereunder by Landlord shall not be a waiver of any preceding breach by Tenant 
or of any provision hereof, other than the failure of Tenant to pay the 
particular Rent so accepted, regardless of Landlord's knowledge of such 
preceding breach at the time of acceptance of such Rent. Partial or 
incomplete payments accepted by Landlord shall not be a waiver or considered 
an accord and satisfaction of any amounts due.

                                        -5-


<PAGE>

25. CAPTIONS. Paragraph captions are not a part hereof.
 
26. HOLDING OVER. If Tenant remains in possession of the Premises or any part 
thereof after the expiration of the Term without the express written consent 
of Landlord, such occupancy shall be a tenancy from month to month at a 
rental equal to the Rent during the last month of the Term increased by 
twenty percent (20%) and upon all the terms hereof applicable to a 
month-to-month tenancy.
 
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed 
exclusive but shall, wherever possible, be cumulative with all other remedies 
at law or in equity.
 
28. COVENANTS AND CONDITIONS. Each provision of this Lease performable by 
Tenant shall be deemed both a covenant and a condition.
 
29. BINDING EFFECT; CHOICE OF LAW. Subject to the provisions of Paragraphs 12 
and 17, this Lease shall be binding upon and inure to the benefit of the 
parties hereto and their respective successors, assigns and legal 
representatives. This Lease shall be governed by the laws of the State of 
California.
 
30. SUBORDINATION.

    (a) This Lease, at Landlord's option, shall be subordinate to any ground 
lease, mortgage, deed of trust, or any other hypothecation or security now or 
hereafter placed upon the real property of which the Premises are a part and 
to any and all advances made on the security thereof and to all renewals, 
modifications, consolidations, replacements and extensions thereof. 
Landlord's election to subordinate this Lease shall not be effective unless 
the ground lessor, mortgagee or trustee shall execute with Tenant a 
nondisturbance agreement recognizing that Tenant's right to quiet possession 
of the Premises shall not be disturbed if Tenant is not in default and so 
long as Tenant shall pay the Rent and observe and perform all the provisions 
of this Lease. If any mortgagee, trustee or ground lessor shall elect to have 
this Lease prior to the lien of its mortgage, deed of trust or ground lease, 
and shall give written notice thereof to Tenant, this Lease shall be deemed 
prior to such mortgage, deed of trust, or ground lease, whether this Lease is 
dated prior or subsequent to the date of said mortgage, deed of trust or 
ground lease or the date of recording thereof.

    (b) Tenant agrees to execute any documents required to effectuate an 
attornment, a subordination or to make this Lease prior to the lien of any 
mortgage, deed of trust or ground lease, as the case may be. Tenant's failure 
to execute such documents within ten (10) days after written demand shall 
constitute a default by Tenant hereunder, or at Landlord's option, Landlord 
shall execute such documents on behalf of Tenant as Tenant's 
attorney-in-fact. Tenant does hereby make, constitute and irrevocably appoint 
Landlord as Tenant's attorney-in-fact and in Tenant's name, place and stead 
to execute such documents.

31. ATTORNEY'S FEES. If Landlord or Tenant brings an action to enforce its 
respective rights hereunder, the unsuccessful party therein agrees to pay all 
costs incurred by the prevailing party therein, including reasonable 
attorney's fees and court costs to be fixed by the court.
 
32. LANDLORD'S ACCESS. Landlord and Landlord's agents shall have the right to 
enter the Premises at reasonable times for the purpose of inspecting the 
same, showing the same to prospective purchasers, lenders, or tenants, and 
making such alterations, repairs, improvements or additions to the Premises 
or to the building of which they are a part as Landlord may deem necessary or 
desirable. Landlord may at any time during the last one hundred twenty (120) 
days of the Term hereof place on or about the Premises any ordinary "For 
Sale" or "For Lease" signs, all without rebate of Rent or liability to Tenant.
 
33. AUCTIONS. Tenant shall not conduct any auction without Landlord's prior 
written consent.
                                             
34. SIGNS. Any sign placed on the Premises shall contain only Tenant's name 
and slogan or the name of any affiliate of Tenant actually occupying the 
Premises, but no advertising matter. No such sign shall be erected until 
Tenant has obtained Landlord's written approval which shall not unreasonably 
be withheld, of the location, materials, size, design, and content thereof 
and any necessary permit therefor. Tenant shall remove any such sign upon 
termination and return the Premises to their condition prior to the placement 
of said sign.
 
35. MERGER. The voluntary or other surrender of this Lease by Tenant, or a 
mutual cancellation thereof, or a termination by Landlord, shall not work a 
merger and shall at the option of the Landlord, terminate all or any existing 
subtenancies or may, at the option of Landlord, operate as an assignment to 
Landlord of any or all of such tenancies.
 
36. EASEMENTS, BOUNDARY CHANGES. Landlord reserves to itself the right, from 
time to time, to grant such easements, rights, dedications and enact boundary 
and common area configuration adjustments that Landlord deems necessary or 
desirable and to cause the recordation of parcel maps and restrictions, so 
long as they do not unreasonably interfere with the use of the Premises by 
Tenant. Tenant shall sign any of the aforementioned documents upon request of 
Landlord and failure to do so shall constitute a breach of this Lease by 
Tenant.
 
37. QUIET POSSESSION. Upon Tenant's paying the Rent, additional rent and 
other sums provided hereunder and observing and performing all of the 
covenants, conditions and provisions on Tenant's part to be observed and 
performed hereunder, Tenant shall have quiet possession of the Premises for 
the entire Term hereof, subject to the provisions of this Lease.
 
38. AUTHORITY. If Tenant is a corporation, trust or partnership, each 
individual executing this Lease on behalf of such entity represents and 
warrants that he is duly authorized to execute and deliver this Lease on 
behalf of said entity. If Tenant is a corporation, trust or partnership, 
Tenant shall, within thirty (30) days after execution of this Lease, deliver 
evidence of such authority satisfactory to Landlord.

See addendum for paragraphs 39 through 45.
 
The Parties hereto have executed this Lease on the dates immediately
above their respective signatures.
 
Dated: April 25, 1997                   Dated:
                                              -------------------------
    Hansen Beverage Company             27 Railroad Partnership L. P.
    a Delaware corporation              a California limited partnership

                                        By: Investment Building Group,
 By: /s/ Rodney C. Sacks                      a California corporation,
                                              general partner
 Its: Chairman
 
 By:                                    By:
    --------------------------------        -----------------------------
                                             Jack M. Langson, president
 Its:
    -------------------------------

                                 -6-

<PAGE>

            ADDENDUM TO STANDARD INDUSTRIAL LEASE 
              DATED APRIL 25, 1997 BY AND BETWEEN
        27 RAILROAD PARTNERSHIP L.P. ("LANDLORD") AND 
                HANSEN BEVERAGE COMPANY ("TENANT")
                          
39. RENT INCREASES. The Rent as called for in Paragraph 1 shall commence at 
fifteen thousand dollars ($15,000) per month. The Rent shall be increased 
periodically according to the following schedule:
           
               Months                   Monthly Rental
               -----------              --------------
               1 through 5                 $15,000
               6 through 24                $23,200
               25 through 45               $24,700
               46 through 69               $25,900
               70 through 89               $27,200
              
40. ADDITIONAL SECURITY DEPOSIT. As additional Security Deposit, Tenant will, 
during months 4 through 28 of the Term, provide in favor of Landlord an 
unconditional, irrevocable standby letter of credit, available to Landlord's 
drafts at sight, drawn on a major bank in the amount of fifty thousand 
dollars ($50,000) ("Additional Security Deposit"). Such Additional Security 
Deposit shall be submitted to Landlord in a form satisfactory to Landlord 
prior to the commencement of the construction of the additional office 
improvements contemplated in Paragraph 41 below. If the letter of credit is 
issued for less than the 24 month period as shown above, Tenant shall replace 
the letter of credit prior to its expiration. Any draws on the letter of 
credit shall become a cash Security Deposit only and be governed by the 
provisions of Paragraph 5.2 and shall not be considered payments for amounts 
due nor shall such draws cure any prior defaults. If Tenant cures the default 
and pays the amount of any prior draw so that all Tenant's defaults are 
cured, Landlord shall upon written request from Tenant return the balance of 
the Security Deposit to Tenant provided Tenant shall again provide to 
Landlord the letter of credit in an amount as outlined above.
      
41. TENANT IMPROVEMENT ALLOWANCE. Landlord shall provide a tenant improvement 
allowance (the "Improvement Allowance") in the amount of two hundred and ten 
thousand dollars ($210,000) for the design and construction, etc., of 
additional offices and other improvements as outlined in Exhibit "B" or any 
other improvement approved by Landlord ("Improvements") as well as for 
payment of any upgrade costs that may be incurred toward initial 1,800 sq. 
ft. of existing office space over the specified allowances and rates provided 
therefore. In the event that the Improvements cost more than the Improvement 
Allowance, Tenant shall have the right to reduce the Improvements to limit 
the cost to the Improvement Allowance; or, alternatively, Tenant shall pay to 
Landlord on demand the cost of the Improvements above the Improvement 
Allowance. If Tenant does not pay to Landlord the extra costs above the 
Improvement Allowance or notify Landlord of the items to be eliminated within 
ten (10) days of written notice from Landlord, Landlord may in its sole 
discretion eliminate items to bring the budget within the Improvement 
Allowance and proceed with the construction of the Improvements as revised. 
In no event shall commencement of Rent be delayed due to any delay in 
completion of the tenant improvement items. Up to ten percent (10%) of any 
Improvement Allowance unspent after the first year of the Term may be applied 
toward the Rent.
      
    Tenant shall provide Landlord with the mutually acceptable office tenant 
improvement plan on or before September 15, 1997 and Landlord shall cause the 
construction of the additional offices to be completed no later than January 
31, 1998.
      
42. RENT WAIVER. Landlord hereby grants a rent waiver to Tenant in the amount 
of sixty thousand dollars ($60,000) to be applied toward the Rent due under 
this Lease as follows:
      
               Months 1 - 6              $6,000 per month
               Months 7 - 12             $4,000 per month
               
                                                   
                                1


<PAGE>

In the event of a default as defined in paragraph 13 of the Lease and the 
Lease is not reinstated within sixty (60) days of such occurrence, the rent 
waiver shall automatically be deemed deleted from this Lease and of no 
further force and effect, and any portion theretofore previously credited 
against the Rent shall be immediately due and payable by Tenant to Landlord 
and recoverable by Landlord as additional rent due under this Lease.

43. ADDITIONAL IMPROVEMENTS TO BE INSTALLED BY LANDLORD. Landlord shall, 
prior to occupancy by an adjoining tenant, construct the required full height 
demising wall to partition the Premises.
      
44. FENCING OF VEHICLES ON SITE. Subject to Landlord's reasonable approval on 
scope and configuration and Tenant compliance with other governmental codes, 
Tenant shall be permitted to erect fences in the paved areas onsite adjacent 
to the Premises for the purposes of vehicular security.
      
45. INITIAL PREMISES SPECIFICATION: The Premises include approximately 1,800 
sq. ft. of HVAC office space with "bonus" structural mezzanine above. At 
Landlord's expense the Premises shall be modified from the existing 
construction plans to include a total of ten (10) dock high loading doors.

    
                                      2


<PAGE>


                          EXHIBIT "A" - PREMISES





                                   [map]







* Exact separation wall                OWNER/DEVELOPER
  location subject to minor            Investment Building Group
  adjustment.                          500 N. State College Boulevard
                                       Suite 525
                                       Orange, California  92668
                                       (714) 634-1111



<PAGE>
                                                             
                          EXHIBIT "B"
                                
                    Tenant Improvements 
                             and
                        Cost Estimates
                        
                                                    Budget
 Item                                              Estimate
 ----                                              ---------
 Partition existing offices                        $ 12,000
 
 Build +- 1,600 sq. ft. of additional mezzanine      17,000
 
 Add two stairways                                    5,000
 
 Add +- 5,000 sq. ft. office                        150,000
 
 Add shop restrooms                                  15,000
 
 Architectural/Engineering plans and permits         11,000
                                                   ----------
                                     Total         $210,000
                                                   ----------
                                                   ----------






<PAGE>

                                   SUBLEASE 

1.  PARTIES

    This Sublease, dated April 25, 1997, is made between Hansen Beverage
    Company ("Sublessor") and U.S. Continental Packaging, Inc. ("Sublessee").
    
2.  MASTER LEASE

    Sublessor is the lessee under a written lease dated April 25, 1997, wherein
    27 Railroad Partnership LP, a California Limited Partnership leased to
    Sublessor the real property measuring approximately 66,700 square feet in
    aggregate and situated at 2378 Railroad Street, Corona, California 91720,
    as indicated on Exhibit A (the "Master Premises"). Said lease is herein
    referred to as the "Master Lease" and is attached hereto as Exhibit B.
    
3.  PREMISES

    Sublessor hereby sublets to the Sublessee on the terms and conditions set
    forth in this Sublease, a portion of the Master Premises measuring
    approximately 10,000 square feet and being the area identified in red on
    Exhibit A hereto (the "Premises"). It is recorded that the Master Premises
    is the Facility contemplated in clause 3(a) of the Packaging Agreement
    between the Sublessor and Sublessee dated April 14, 1997 (the "Packaging
    Agreement").
    
4.  TERM

    The Term of this Sublease shall commence on the commencement date of the
    Master Lease and continue for a period of twenty-four (24) months
    thereafter (the "Term") unless
 sooner terminated in accordance with the
    provisions of this Sublease. Possession of the Premises ("Possession")
    shall be delivered to the Sublessee on the commencement of the Term. If,
    for any reason, Sublessor does not deliver Possession to Sublessee on the
    commencement of the Term, Sublessor shall not be subject to any liability
    for such failure or delay.
    
    Notwithstanding anything to the contrary contained or implied in this
    sublease and, in particular, clause 4, the Sublessor shall have the right
    at any time to terminate this Sublease on sixty (60) days written notice to
    the Sublessee and which notice may be given by the Sublessor at any time,
    in the event that the Premises are required for the Sublessor's products.
    
5.  RENT

    5.1 MINIMUM RENT. Sublessee shall pay to Sublessor as Minimum Rent, without
    deduction, setoff, notice, or demand, at the Premises or at such other
    place as Sublessor shall designate from time to time by notice to
    Sublessee, a sum calculated by dividing the area of the Premises occupied
    by the Sublessee by the total area of the Master Premises and by
    multiplying the result by the monthly Rent for the Master Premises. The
    monthly rent for the Master Premises shall
    
    
                                       1


<PAGE>

    include all additional costs and charges for which the Sublessor is liable
    in terms of the Master Lease and which constitute additional rent and which
    shall be taken into account for the purposes of determining the Minimum
    Rent payable by the Sublessee to the Sublessor in terms hereof. In
    determining the monthly rent for the Master Premises the rent waiver
    contemplated in Clause 42 of the Master Lease shall not constitute a
    reduction in the rent payable for the months in which it is deducted or
    waived but shall be amortized over the entire term of the Master Lease
    namely, eighty-nine (89) months. Consequently, in calculating the monthly
    rent for the Master Premises for the purposes of this clause, such rental
    shall be deemed to be reduced by $674 per month in consequence of the rent
    waiver contemplated in Clause 42 of the Master Lease. Sublessee's
    entitlement to a reduction in the Minimum Rent through its proportionate
    share of the rent waiver calculated in accordance with the foregoing shall
    be subject to Sublessee not defaulting in any of its obligations in terms
    of this Sublease. For the first six (6) months of this sublease the Minimum
    Rent calculated in terms of the above shall be increased by $700 per month.
    The Minimum Rent shall be paid in advance on the first day of each month of
    the Term. If the Term begins or ends on a day other than the first or last
    day of a month, the rent for the partial month shall be prorated on a per
    day basis.
    
    5.2 OPERATING COSTS. As the Master Lease requires the Sublessor to pay to
    Lessor certain expenses of operating the building and/or the project of
    which the Premises are a part ("Operating Costs"), including but not
    limited to taxes, utilities, and insurance, the Sublessee hereby agrees to
    and shall pay to the Sublessor as additional rent its proportionate share
    of all amounts payable by Sublessor for Operating Costs during the Term.
    Such additional rent shall be payable as and when the Operating Costs are
    payable by Sublessor to Lessor. As the Master Lease provides for payment by
    Sublessor to Lessor of Operating Costs from month to month on the basis of
    estimates thereof, as and when adjustments are made between estimated and
    actual Operating Costs under the Master Lease, the obligations of Sublessee
    hereunder shall be adjusted appropriately and if any such adjustment shall
    occur after the expiration or earlier termination of the Term, then the
    obligations of Sublessee under this Subsection 5.2 shall survive such
    expiration or termination. Sublessor shall, upon request by Sublessee,
    furnish Sublessee with copies of all statements submitted by Lessor of
    actual or estimated Operating Costs during the Term.
    
6.  USE OF PREMISES

    The Premises shall be used and occupied only for warehousing, packaging 
    and distribution of consumer products and corporate offices, and for no 
    other use or purpose.
    
7.  ASSIGNMENT AND SUBLETTING

    Sublessee shall not assign the Sublease or further sublet all or any part 
    of the Premises without the prior written consent of Sublessor (and the 
    consent of Lessor, if such is required under the terms of the Master 
    Lease).


                                       2


<PAGE>

8.  OTHER PROVISIONS OF SUBLEASE

    All applicable terms and conditions of the Master Lease and any subsequent
    amendment or change in the provisions thereof, are incorporated into and
    made a part of this Sublease as if Sublessor were the lessor thereunder and
    Sublessee the lessee thereunder, and the Premises the Master Premises.
    Sublessee assumes and agrees to perform the lessee's obligations under the
    Master Lease during the Term to the extent that such obligations are
    applicable to the Premises, except that the obligation to pay rent to the
    Lessor under the Master Lease shall be considered performed by Sublessee
    for purposes of this Sublease to the extent and in the amount rent is paid
    to Sublessor in accordance with Section 5 of this Sublease. Neither
    Sublessor nor Sublessee shall commit or suffer any act or omission that
    will violate any of the provisions of the Master Lease. Sublessor shall
    exercise due diligence in attempting to cause Lessor to perform its
    obligations under the Master Lease for the benefit of Sublessee. If the
    Master Lease terminates, this Sublease shall terminate and the Sublessee
    shall have no further occupancy or other rights to the Premises and shall
    immediately vacate the Premises. Upon such vacation of the Premises, the
    parties shall be relieved of any further liability or obligation under this
    Sublease, provided however, that if the Master Lease terminates as a result
    of a default or breach by Sublessor or Sublessee under this Sublease and/or
    the Master Lease, then the defaulting party shall be liable to the
    nondefaulting party for the damage suffered as a result of such
    termination. Notwithstanding the foregoing, if the Master Lease gives
    Sublessor any right to terminate the Master Lease in the event of the
    partial or total damage, destruction, or condemnation of the Master
    Premises or the building or project of which the Master Premises are a
    part, the exercise of such right by Sublessor shall not constitute a
    default or breach hereunder. This Sublease shall at all times be subject
    and subordinate to the Master Lease and any other instruments which the
    Master Lease is or may become subordinate to.
    
9.  It is expressly recorded that all electrical and other costs of operating 
    all and any equipment for the activities of the Sublessee in the 
    Premises, including activities performed by it for and on behalf of or 
    for the benefit of the Sublessor, shall be borne and paid for in full by 
    the Sublessee. The Sublessee shall procure that such electrical costs are 
    separately metered. It is further expressly recorded that all the terms 
    of the Packaging Agreement between the Sublessor and the Sublessee, 
    excluding the provisions of paragraph 3 thereof which are dealt with in 
    this Sublease and shall be governed hereby, shall continue to apply as 
    between the parties and be of full force and effect. In the event of the 
    termination of the Packaging Agreement at any time, the Sublessor or 
    Sublessee shall have the right to summarily terminate this Sublease 
    irrespective of whether or not there shall have been any breach by the 
    Sublessor or Sublessee under this Sublease, the intention of the parties 
    being that if the Packaging Agreement between the parties is no longer 
    operative or of force and effect, then this Sublease shall simultaneously 
    no longer be operative or of force or effect.
          
                                      3


<PAGE>

10. ATTORNEYS' FEES

    If Sublessor or Sublessee shall commence an action against the other 
    arising out of or in connection with this Sublease, the prevailing party 
    shall be entitled to recover its costs of suit and reasonable attorney's 
    fees.

11. NOTICES

    All notices and demands which may or are to be required or permitted to be
    given by either party on the other hereunder shall be in writing. All
    notices and demands by the Sublessor to the Sublessee shall be sent by
    United States Mail, postage prepaid, addressed to the Sublessee at the
    Premises or delivered by hand. All notices by the Sublessee to the
    Sublessor shall be sent by United States Mail, postage prepaid, addressed
    to the Sublessor at the Master Premises or delivered by hand or to such
    other address as the Sublessor may from time to time advise the Sublessor
    by written notice.
          
12. CONSENT BY LESSOR

    THIS SUBLEASE SHALL BE OF NO FORCE OR EFFECT UNLESS CONSENTED TO BY THE
    LESSOR, IF SUCH CONSENT IS REQUIRED UNDER THE TERMS OF THE MASTER LEASE.
          
13. COMPLIANCE

    The parties hereto agree to comply with all applicable federal, state and
    local laws, regulations, codes ordinances and administrative orders having
    jurisdiction over the parties, property or the subject matter of this
    Agreement, including, but not limited to, the 1965 Civil Rights Act and all
    amendments thereto, the Foreign Investment In Real Property Tax Act, the
    Comprehensive Environmental Response Compensation and Liability Act, and
    The Americans With Disabilities Act.
          
Sublessor:                              Sublessee: 
          ---------------------------             --------------------------
          
By: /s/ Rodney Sacks                    By: /s/ David Williams
   ----------------------------------      ---------------------------------

Title: Chairman                         Title: President
      -------------------------------         ------------------------------

By:                                     By:
   ----------------------------------      ---------------------------------

Title:                                  Title:
      -------------------------------         ------------------------------

Date:  4/25/97                          Date:  4/25/97
     --------------------------------        -------------------------------
          
          
                                       4


<PAGE>

                          LESSOR'S CONSENT TO SUBLEASE

The undersigned ("Lessor"), landlord under the Master Lease, hereby consents to
the foregoing Sublease without waiver of any restriction in the Master Lease
concerning further assignment or subletting. Lessor certifies that, as of the
date of Lessor's execution hereof, Sublessor is not in default or breach of any
of the provisions of the Master Lease, and that the Master Lease has not been
amended or modified except as expressly set forth in the foregoing Sublease. 

Lessor:
          27 Railroad Partnership L.P., 
          a California partnership
                                          
          By: Investment Building Group, 
              a California corporation, 
              General Partner
          
          By: /s/ Jack M. Langson
             ----------------------------
             Jack M. Langson, President
               
CONSULT YOUR ADVISORS - This document has been prepared for approval by your
attorney. No representation or recommendation is made by Broker or any party as
to the legal sufficiency or tax consequences of this document or the transaction
to which it relates. These are questions for your attorney.

In any real estate transaction, it is recommended that you consult with a
professional, such as a civil engineer, industrial hygienist or other person,
with experience in evaluating the condition of the property, including the
possible presence of asbestos, hazardous materials and underground storage
tanks.
                                                 
                                                  
                                       5


<PAGE>

                            EXHIBIT "A" - PREMISES


                                     [MAP]









* Exact separation wall                  OWNER/DEVELOPER
  location subject to minor              Investment Building Group 
  adjustment.                            500 N. State College Boulevard
                                         Suite 525
                                         Orange, California  92668
                                         (714) 634-1111
          

                                       6




<TABLE> <S> <C>


<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 3-5 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   6-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-START>                             JAN-01-1997
<PERIOD-END>                               JUN-30-1997
<CASH>                                         288,064
<SECURITIES>                                         0
<RECEIVABLES>                                3,322,257
<ALLOWANCES>                                 1,298,544
<INVENTORY>                                  3,149,496
<CURRENT-ASSETS>                             6,113,576
<PP&E>                                       1,250,887
<DEPRECIATION>                                 619,812
<TOTAL-ASSETS>                              17,632,718
<CURRENT-LIABILITIES>                        4,736,754
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                        45,614
<OTHER-SE>                                   9,299,222
<TOTAL-LIABILITY-AND-EQUITY>                17,632,718
<SALES>                                     18,615,814
<TOTAL-REVENUES>                            18,616,983
<CGS>                                       11,027,737
<TOTAL-COSTS>                                6,396,957
<OTHER-EXPENSES>                               294,135
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                             274,236
<INCOME-PRETAX>                                623,919
<INCOME-TAX>                                    40,200
<INCOME-CONTINUING>                            583,719
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                   583,719
<EPS-PRIMARY>                                      .06
<EPS-DILUTED>                                      .06
        

</TABLE>