Preferred Capital Corporation                          Lease Number
12770 High Bluff Drive Ste 340
San Diego, CA 92130

FULL NAME AND ADDRESS OF LEASEE                        SUPPLIER OF EQUIPMENT
-------------------------------                        ---------------------
American Fire Retardant Corp                           See Attached Schedule "A"
9337 Bond Ave
El Cajon, CA 92021-2852

Equipment
Leased         See Attached Schedule "A"

Equipment      STREET ADDRESS  __________________________________
Location if
Different      CITY ________________ COUNTY _____  STATE _____  ZIP __________

Terms:         AMOUNT OF EACH PAYMENT
               (PLUS SALES TAX, IF APPLICABLE)    $1,666.44

               Monthly   [ X ]
               Other

               TERM OF LEASE (# OF MONTHS)   48

               # OF PAYMENTS                 48

               #OF ADVANCE PAYMENTS          2

               SECURITY DEPOSIT              0.00


                          TERMS AND CONDITIONS OF LEASE

     1. LEASE.  Lessee hereby  leases from Lessor,  and Lessor leases to Lessee,
the personal  property  described  above,  together with any replacement  parts,
additions, repairs or accessories now or hereafter incorporated in or affixed to
it (hereinafter referred to as the "Equipment").

     2.  ACCEPTANCE OF EQUIPMENT.  Lessee agrees to inspect the Equipment and to
execute an  Acknowledgment  and  Acceptance  of Equipment by Lessee  notice,  as
provided by Lessor,  after the Equipment has been  delivered and after Lessee is
satisfied that the Equipment is  satisfactory  in every  respect.  Lessee hereby
authorizes  Lessor to insert in the Lease  serial  numbers or other  identifying
data with respect to the Equipment.

     3. DISCLAIMER OF WARRANTIES AND CLAIMS;  LIMITATION OF REMEDIES.  THERE ARE
NO WARRANTIES BY OR ON BEHALF OF LESSOR.  Lessee  acknowledges and agrees by his
signature below as follows:

     (a)  LESSOR  MAKES  NO  WARRANTIES  EITHER  EXPRESS  OR  IMPLIED  AS TO THE
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY,  ITS FITNESS OR SUITABILITY FOR
ANY PARTICULAR PURPOSE,  ITS DESIGN, ITS CAPACITY,  ITS QUALITY, OR WITH RESPECT
TO ANY  CHARACTERISTICS  OF THE  EQUIPMENT;  (b) Lessee has fully  inspected the
Equipment  which it has  requested  Lessor to acquire  and lease to Lessee,  and
Equipment is in good condition and to Lessee's complete satisfaction; (c) Lessee
leases the  Equipment  "as is " and with all  faults;  (d)  Lessee  specifically
acknowledges  that the  Equipment is leased to Lessee  solely for  commercial or
business purposes and not for personal,  family, or household  purposes;  (e) If
the  Equipment is not properly  installed,  does not operate as  represented  or
warranted by the supplier or manufacturer,  or is unsatisfactory for any reason,
regardless  of cause or  consequence,  Lessee's  only remedy,  if any,  shall be
against the supplier or  manufacturer  of the Equipment and not against  Lessor;
(f) Provided  Lessee is not in fault under this Lease,  Lessor assigns to Lessee
any warranties made by the supplier or the  manufacturer  of the Equipment;  (g)
LESSEE SHALL HAVE NO REMEDY FOR  CONSEQUENTIAL  OR  INCIDENTAL  DAMAGES  AGAINST
LESSOR; and (h) NO DEFECT, DAMAGE, OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE
SHALL  RELIEVE  LESSEE OF THE  OBLIGATION  TO PAY RENT OR RELIEVE  LESSEE OF ANY
OTHER OBLIGATION UNDER THIS LEASE.

     The  parties  have  specifically  negotiated  and  agreed  to the  forgoing
paragraph. Initials: /s/ AMR

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<PAGE>
     4. STATUTORY  FINANCE LEASE.  Lessee agrees and acknowledges that it is the
intent of both  parties to this Lease  that it  qualify as a  statutory  finance
lease under Article 2A of the Uniform  Commercial Code as adopted in California.
Lessee acknowledges and agrees that Lessee has selected both: (1) the Equipment;
and (2) the  supplier  from whom Lessor is to  purchase  the  Equipment.  Lessee
acknowledges  that Lessor has not participated in any way in Lessee's  selection
of the Equipment or of the supplier, and Lessor has not selected,  manufactured,
or supplied the  Equipment.

LESSEE IS ADVISED  THAT IT MAY HAVE RIGHTS  UNDER THE  CONTRACT  EVIDENCING  THE
LESSOR'S  PURCHASE OF THE EQUIPMENT FROM THE SUPPLIER  CHOSEN BY LESSEE AND THAT
LESSEE SHOULD  CONTACT THE SUPPLIER OF THE  EQUIPMENT  FOR A DESCRIPTION  OF ANY
SUCH RIGHTS.

     5. ASSIGNMENT BY LESSEE PROHIBITED. WITHOUT LESSOR'S PRIOR WRITTEN CONSENT,
LESSEE  SHALL NOT ASSIGN THIS LEASE OR SUBLEASE  THE  EQUIPMENT  OR ANY INTEREST
THEREIN, OR PLEDGE OR TRANSFER THIS LEASE, OR OTHERWISE DISPOSE OF THE EQUIPMENT
COVERED HEREBY.

     6. COMMENCEMENT;  TERM; RENTAL PAYMENTS;  INTERIM RENTALS. This Lease shall
commence  upon the written  acceptance  hereof by Lessor and shall end upon full
performance  and  observance  by Lessee of each and every  term,  condition  and
covenant  set forth in this  Lease,  and  Schedules  hereto  and any  extensions
hereof.  Rental  payments  shall by in the amounts and frequency as set forth on
the face of this Lease or any Schedules  hereto. In addition to regular rentals,
Lessee shall pay to Lessor  interim rent for the use of the  Equipment  prior to
the due date of the first payment.  Interim rent shall be in the amount equal to
1/30th of the monthly rental,  multiplied by the number of days elapsing between
the date on which the Equipment is accepted by Lessee and the commencement  date
of this Lease, together with the number of days elapsing between commencement of
the Lease and the due date of the first  payment.  The  payment of interim  rent
shall be due and payable upon  Lessee's  receipt of invoice from Lessor.  Lessor
shall have no  obligation  to Lessee  under the Lease if Lessee fails to execute
and deliver to Lessor an  Acknowledgement  and Acceptance of Equipment by Lessee
acknowledging  its acceptance of the Equipment  within thirty (30) days after it
is delivered to Lessee, with respect to the Lease or any Schedule hereto.

     This  lease  may be  terminated  by  Lessee  at the end of the  term if one
hundred  eighty (180) days prior to the end of the term,  written notice of such
termination  is delivered to Lessor (by certified  mail).  Otherwise the term of
each Lease  automatically  shall be extended for a  successive  one month period
following  the end of the  initial  term at the rent  stated  on the  respective
Schedule(s).  During this extension  period,  Lessor of Lessee at the end of any
calendar  month,  provided one hundred twenty (120) days prior written notice of
such termination is delivered to the other party (by certified mail).

     7. CHOICE OF LAW;  CONSENT TO JURISDICTION  VENUE.  This Lease shall not be
effective  until signed by Lessor at its principal  office  listed  above.  This
Lease shall be considered  to have been made in the state of Lessor's  principal
place of business.

     Lessee agrees to jurisdiction  in the state of Lessor's  principle place of
business listed above in any action,  suit or proceeding  regarding this lease ,
and  concedes  that it , and each of them,  transacted  business in the state of
Lessor's  principal  place of business listed above by entering into this lease.
In the event of any legal  action  with  regard to this  lease or the  equipment
covered hereby,  Lessee aggress that venue shall be laid in the State and County
of Lessor's  principal place of business,  or in the State and County of whoever
holds the Lessor's interest.

     8.  SECURITY  DEPOSIT.  As security  for the prompt and full payment of the
amounts  due under this Lease,  Lessee has  deposited  with Lessor the  security
amount set forth in the section  shown as  'Security  Deposit.  In the event any
default shall be made in the  performance of any of Lessee's  obligations  under
this Lease,  Lessor shall have the right,  but shall not be obligated,  to apply
the security deposit to the curing of such default.  Within 15 days after Lessor
mails  notice to Lessee that  Lessor has  applied  any  portion of the  security
deposit to the curing of any default, Lessee shall restore said security deposit
to the full amount set forth above. On the expiration or earlier  termination or
cancellation of this Lease, or any extension or renewal hereof,  provided Lessee
has fully  performed  all  provisions  of this Lease,  Lessor will return to the
Lessee any then remaining  balance of said security  deposit,  without Interest.
Said security deposit may be commingled with Lassoes other funds.

     9. LIMITED PREARRANGED AMENDMENTS; SPECIFIC POWER OF ATTORNEY. In the event
it is  necessary  to amend the terms of this Lease to  reflect  change in one or

                                       2
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more of the  following  conditions;  (a) Lassoes  actual cost of  procuring  the
Equipment,  or (b) Lessors actual cost of providing the Equipment to Lessee,  or
(c) A  change  in  rental  payments  as a  result  of (1) or (2),  above  or (d)
Description  of the Equipment.  Lessee agrees that any such  amendment  shall be
described in a letter from Lessor to Lessee, and unless within 15 days after the
date of such  letter  Lessee  objects in writing to Lessor,  this Lease shall be
deemed amended and such amendments shall be incorporated in this Lease herein as
if originally  set forth.  Lessee grants to Lessor a specific  power of attorney
for Lessor to use as follows:  (1) Lessor may sign and file on  Lessee's  behalf
any document Lessor deems necessary to perfect or protect  Lessor's  interest in
the  Equipment or pursuant to the Uniform  Commercial  Code,  and (2) Lessor may
sign,  endorse or negotiate  for Lessor's  benefit any  instrument  representing
proceeds from any policy of insurance covering the Equipment.

     10. LOCATION.  The Equipment shall be kept at the location  specified above
or, if none is specified,  at Lessee's  address as set forth above and shall not
be removed without Lessor's prior written consent.

     11. USE.  Lessee  shall use the  Equipment  in a careful  manner,  make all
necessary  repairs at Lessee's  expense,  shall comply with all laws relating to
its possession, use, or maintenance. All additions, repairs or improvements made
to the Equipment shall belong to Lessor.

     12. OWNERSHIP; PERSONALTY. The Equipment is, and shall remain, the property
of Lessor,  and Lessee shall have no right,  title, or interest in the Equipment
except as expressly set forth in this Lease. The Equipment shall remain personal
property even though installed in or attached to real property.

     13.  SURRENDER.  By this Lease,  Lessee acquires no ownership rights in the
Equipment,  and has no option to purchase same. Upon the expiration,  or earlier
termination or  cancellation  of this Lease,  or in the event of a default under
this Lease,  Lessee, at its expense,  shall return the Equipment in good repair,
ordinary  wear and tear  resulting  from proper use thereof alone  excepted,  by
delivering it, packed and ready for shipment, to such place or carrier as Lessor
may specify.

     14.  OFFER  AND  ACCEPTANCE.   Lessee's  signing  of  this  document  shall
constitute  an offer to Lessor to enter  into the  Lease.  In  consideration  of
Lessor's  time and effort in reviewing  and acting on the offer,  Lessee  agrees
that,  should  Lessee  elect,  for any  reason,  not to  proceed  with the Lease
transaction.  Lessor shall retain all advance rentals and deposits as liquidated
damages  to  compensate  Lessor  for  Lessor's  costs in  processing  this Lease
transaction.  Lessor  shall hold Lessee  harmless  from any  additional  damages
resulting from Lessee's  election not to proceed with any lease transaction with
Lessor.  If Lessor  elects not to provide  financing to Lessee,  for any reason,
other than a default by Lessee (as defined in Section 21. Default below), Lessor
agrees to return  any  advance  rentals,  deposits,  or any other fees to Lessee
within ten (10) days of said election.

     15.  LOSS AND  DAMAGE.  Lessee  shall at all times bear the entire  risk of
loss,  theft,  damage or destruction of the Equipment from any cause whatsoever,
and no loss, theft,  damage or destruction of the Equipment shall relieve Lessee
of the obligation to pay rent or to comply with any other  obligation under this
Lease.  In the  event of  damage  to any  part of the  Equipment,  Lessee  shall
immediately  place  the same in good  repair  at  Lessee's  expense.  If  Lessor
determines that any part of the Equipment is lost, stolen, destroyed, or damaged
beyond repair,  Lessee shall, at Lessee's option,  do one of the following:  (a)
Replace the same with like  equipment in good repair,  acceptable to Lessor;  or
(b) Pay Lessor in cash the  following:  (i) all  amounts due by Lessee to Lessor
under this Lease up to the date of the loss, (ii) the accelerated balance of the
total  amounts due for the  remaining  term of this Lease  attributable  to said
item,  discounted  to present  value at a discount  rate of 9% as of the date of
loss;  and;  (iii) the  Lessor's  estimate as of the time this Lease was entered
into of Lassoes residual  interest in the Equipment  discounted to present value
at a discount rate of 9%, as of the date of loss.

     16. INSURANCE;  LIENS;  TAXES.  Lessee shall provide and maintain insurance
against loss,  theft,  damage,  or destruction of the Equipment in an amount not
less than the full  replacement  value of the  Equipment,  with loss  payable to
Lessor.  Lessee also shall provide and maintain  comprehensive  general all-risk
liability  insurance  Including but not limited to product  liability  coverage,

                                       3
<PAGE>
insuring Lessor and Lessee, with a severability of interest endorsement,  or its
equivalent,  against any and all loss or liability  for all  damages,  either to
persons  or  property  or  otherwise,  which  might  result  from or  happen  in
connection  with the condition,  use, or operation of the  Equipment,  with such
limits and with an insurer  satisfactory to Lessor.  Each policy shall expressly
provide  that  said  insurance  as to  Lessor  and  its  assigns  shall  not  be
invalidated  by any act,  omission,  or neglect of Lessee and cannot be canceled
without 30 days prior written  notice to Lessor.  As to each policy Lessee shall
furnish to Lessor a certificate of insurance from the insurer, which certificate
shall evidence the Insurance  coverage required by this paragraph.  Lessor shall
have no  obligation  to  ascertain  the  existence  of or provide any  insurance
coverage for the Equipment or for Lessee's  benefit.  If Lessee fails to provide
such  insurance,  Lessor will have the right,  but no  obligation,  to have such
insurance  protecting  Lessor placed at Lessee's  expense.  Such  placement will
result in an  increase  in  Lessee's  periodic  payments,  such  increase  being
attributed  to Lessor's  costs of obtaining  such  insurance  and any  customary
charges or fees of  Lessor's or its  designee  associated  with such  Insurance.
Lessee  shall  keep the  Equipment  free  and  clear of all  levies,  liens  and
encumbrances.  Lessee shall  reimburse  Lessor for all charges and taxes (local,
state and federal)  which may now or  hereafter  be imposed upon the  ownership,
leasing,  rental, sale, purchase,  possession or use of the Equipment excluding,
however, all taxes on or measured by Lessor's net income. If Lessee fails to pay
said charges,  Lessor shall have the right,  but shall not be obligated,  to pay
such  charges.  In that event,  Lessor shall  notify  Lessee of such payment and
Lessee shall repay to Lessor the cost  thereof  within 15 days after such notice
is mailed to Lessee.

     17. INDEMNITY.  Lessee shall indemnity Lessor against any claims,  actions,
damages, or liabilities including all attorney fees, arising out of or connected
with  Equipment,  without  limitation.  Such  indemnification  shall survive the
expiration,  cancellation,  or  termination  of this  Lease.  Lessee  waives any
immunity  Lessee may have under any  industrial  insurance  act,  with regard to
indemnification of Lessor.

     18.  ASSIGNMENT  BY LESSOR.  Any  assignee of Lessor  shall have all of the
rights but none of the  obligations  of Lessor  under this Lease.  Lessee  shall
recognize and hereby  consents to any  assignment  of this Lease by Lessor,  and
shall not assert against the assignee any defense,  counterclaim, or setoff that
Lessee may have against Lessor.  Subject to the foregoing,  this Lease inures to
the   benefit  of  and  is   binding   upon  the   heirs,   devisees,   personal
representatives,  survivors,  successors  in interest,  and assigns of the party
hereto.

     19.  SERVICE  CHARGES;  INTEREST.  If Lessee shall fail to make any payment
required by this Lease within 10 days of the due date thereof,  Lessee shall pay
to Lessor a service charge of 8% of the amount due; provided,  however, that not
more  than one such  service  charge  shall be made on any  delinquent  payment,
regardless  of the  length of the  delinquency.  In  addition  to the  foregoing
service  charge,  Lessee  shall pay to Lessor  any  actual  additional  expenses
incurred  by  Lessor  in  collection  efforts,  including  but not  limited  to,
long-distance telephone charges and travel expenses.  Lessee shall pay to Lessor
interest on any  delinquent  payment or amount due under this Lease from the due
date thereof until paid,  at the lesser of the maximum rate of interest  allowed
by law or 18% per annum.

     20. TIME OF THE  ESSENCE.  Time Is of the  essence of this Lease,  and this
provision shall not be impliedly waived by the acceptance on occasion of late or
defective performance.

     21.  DEFAULT.  Lessee shall be in default if: (a) Lessee shall fail to make
any  payment  due under the terns of this Lease for a period of 10 days from the
due date  thereof;  or (b) Lessee  shall fail to  observe,  keep or perform  any
provision  of this Lease,  and such  failure  shall  continue for a period of 10
days;  or (c) Lessee has made any  misleading  or false  statement in connection
with  application  for or performance of this Lease.  or any  representation  or
warranty made by Lessee herein or otherwise  furnished Lessor in connection with
the Agreement or any Lease hereunder shall prove at any time to have been untrue

                                       4
<PAGE>
or misleading in any material respect;  or (d) The equipment or any part thereof
shall  be  subject  to any  lien,  levy,  seizure,  assignment,  transfer,  bulk
transfer,  encumbrance,  application,  attachment,  execution, sublease, or sale
without  prior  written  consent  of  Lessor,  or it Lessee  shall  abandon  the
Equipment or permit any other entity or person to use the Equipment  without the
prior written  consent of Lessor;  or (e) Lessee dies or ceases to exist; or (f)
Lessee defaults on any other agreement it has with Lessor;  or (g) Any guarantor
of this Lease  defaults on any  obligation  to Lessor or any of the above listed
events or default  occur with  respect to any  guarantor  or any such  guarantor
files or has filed against it a petition under the bankruptcy laws.

     22. REMEDIES.  If Lessee is in default,  Lessor,  with or without notice to
Lessee,  shall  have the  right  to  exercise  any one or more of the  following
remedies, concurrently or separately, and without any election of remedies being
deemed to have been made:

     Lessor may enter upon  Lessee's  premises  and  without  any court order or
other  process of law may  repossess  and remove  the  Equipment,  or render the
Equipment  unusable  without  removal,  either with or without notice to Lessee.
Lessee  hereby  waives any  trespass or right of action for damages by reason of
such entry, removal, or disabling.  Any such repossession shall not constitute a
termination of this Lease unless Lessor notifies Lessee in writing;

     Lessor may require Lessee, at its expense,  to return the Equipment in good
repair, ordinary wear and tear resulting from proper use thereof alone excepted,
by  delivering  it,  packed and ready for  shipment  to such place or carrier as
Lessor may specify;

     Lessor may cancel or terminate  this Lease and may retain any and all prior
payments paid by Lessee;

     Lessor  may  declare  all sums  due and to  become  due  under  this  Lease
immediately  due and  payable,  including  as to any or all items of  Equipment,
without notice or demand to Lessee;

     Lessor may re-lease the Equipment,  without notice to Lessee,  to any third
party,  upon such terns and conditions as Lessor alone shall  determine,  or may
sell the  Equipment,  without  notice to Lessee,  at private or public sale,  at
which sale Lessor may be the purchaser;

     Lessor may sue for and recover  from Lessee the sum of all unpaid rents and
other  payments  due under this  Lease  then  accrued,  all  accelerated  future
payments due under this Lease,  discounted  to their present value at a discount
rate of 9% as of the date of default,  plus  Lessor's  estimate at the time this
Lease was entered into of Lessor's residual  interest in the Equipment,  reduced
to present  value at a discount  rate of 9% as of the date of default,  less the
net proceeds of disposition, If any, of the Equipment;

     To pursue any other remedy  available  at law. by statute or In equity.  No
right or remedy herein  conferred upon or reserved to Lessor is exclusive of any
other right or remedy herein, or by law or by equity provided or permitted,  but
each shall be  cumulative  of every other right or remedy given herein or now or
hereafter  existing  by law or  equity or by  stature  or  otherwise  and may be
enforced  concurrently  therewith  or from time to time.  No  single or  partial
exercise by Lessor of any right or remedy  hereunder shall preclude any other or
further exercise of any other right or remedy.

     23.  MULTIPLE  LESSEES.  Lessor  may,  with the  consent  of any one of the
Lessees hereunder, modify, extend, or change any of the terms hereof without the
consent or knowledge of the others,  without in any way releasing,  waiving,  or
impairing  any right granted to Lessor  against the others.  Lessees and each of
them are  jointly  and  severally  responsible  and liable to Lessor  under this
Lease.

     24. EXPENSE OF ENFORCEMENT. In the event of any legal action or arbitration
with respect to this Lease,  the prevailing  party in such action or arbitration
shall be entitled to reasonable attorney fees,  including attorney fees incurred
at arbitration,  at the trial level,  including  action in bankruptcy  court, on
appeal or review,  or incurred  without action,  suits or proceedings,  together
with all costs and expenses incurred In pursuit thereof.

     25. ENTIRE AGREEMENT;  NO ORAL  MODIFICATIONS;  NO WAIVER.  This instrument
constitutes the entire agreement between Lessor and Lessee. No provision of this
Lease  shall  be  modified  or   rescinded   unless  in  writing   signed  by  a
representative  of  Lessor.  Waiver  by Lessor  of any  provision  hereof in one
instance shall not constitute a waiver as to any other instance.

                                       5
<PAGE>
     26.  SEVERABILITY.  This  Lease  is  intended  to  constitute  a valid  and
enforceable  legal  instrument and no provision of this Lease that may be deemed
unenforceable  shall in any way  invalidate  any other  provision or  provisions
hereof, all of which shall remain in full force and effect.

THIS LEASE IS NOT CANCELABLE OR TERMINABLE BY LESSEE

LESSEE  UNDERSTANDS  AND  ACKNOWLEDGES  THAT  NO  BROKER  OR  SUPPLIER,  NOR ANY
SALESMAN,  BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, IS AN AGENT OF LESSOR. NO
BROKER OR SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER
IS  AUTHORIZED  TO WAIVE OR ALTER ANY TERM OR  CONDITION  OF THIS LEASE,  AND NO
REPRESENTATION  AS TO THE  EQUIPMENT  OR ANY  OTHER  MATTER  BY  THE  BROKER  OR
SUPPLIER, NOR ANY SALESMAN, BROKER, OR AGENT OF ANY BROKER OR SUPPLIER, SHALL IN
ANY WAY  AFFECT  LESSEE'S  DUTY  TO PAY  THE  RENTALS  AND TO  PERFORM  LESSEE'S
OBLIGATIONS SET FORTH IN THIS LEASE.

--------------------------------------------------------------------------------


LESSEE:  American Fire Retardant Corp                  LEASE NO._______________

                                                       DATE OF LEASE: 8/25/99


/s/ Angela M. Raidl
-------------------------------------
Angela Raidl, EVP



Preferred Capital Corporation

/S/ Vicki A. Kohoutek
-------------------------------------
Vicki A. Kohoutek, Funding Manager                Date: 8/25/99

                                       6
<PAGE>
Preferred Capital Corporation
12770 High Bluff Drive Ste 340
San Diego, CA 92130
619-794-2040

                            EQUIPMENT LEASE GUARANTY

LEASE NO:
DATE OF LEASE:

     This  Guaranty  Agreement  made  and  entered  into  this  ________  day of
____________________,________   by  Angela   Raidl   (hereinafter   referred  to
collectively  as  "Guarantor',   in  favor  of  Preferred  Capital   Corporation
(hereinafter referred to as ("Lessor").

     WHEREAS, it is contemplated that Lessor may enter into a lease and/or other
related  agreements  (hereinafter   collectively  "Lease")  with  American  Fire
Retardant Corp (hereinafter collectively 'Lessee); and,

     WHEREAS,  Guarantor has an interest,  financial or otherwise in Lessee, and
it is to the benefit of Guarantor  that Lessor enter into the Lease with Lessee,
and  Guarantor  has read the proposed  Lease in full and finds the terms of said
Lease  acceptable,  and in  recognition  that Lessor would be unwilling to enter
into the Lease without the Guaranty hereinafter set forth, and in recognition of
Lessor's reliance upon the Guaranty in entering into the Lease;

     NOW,  THEREFORE,  in order  to  induce  Lessor  to  enter  into the  Lease,
Guarantor,  jointly and severally,  unconditionally  guaranties the faithful and
full  performance  by Lessee of all terms and  conditions  of the Lease.  In the
event of default by Lessee,  a failure to faithfully  perform any of the terms a
conditions  required  of Lessee  under the  Lease,  a in the event of failure of
Lessee to make any or all  payments  of money  required  of it under the  Lease,
Guarantor  unconditionally  promises  to pay to Lessor,  in lawful  money of the
United States,  all sums at any firm due and unpaid under the Lease,  plus costs
of collection,  including a reasonable  attorney fee with a without  trial,  and
upon appeal and review.

     The  obligations  of  Guarantor  hereunder  are joint and  several  and are
independent of the obligations of Lessee under the Lease,  and a separate action
a actions may be brought  against  Guarantor,  whether action is brought against
Lessee a whether  Lessee be joined in any action a  actions,  the  liability  of
Guaranty  hereunder  being primary.  Guarantor  hereby waives the benefit of any
suretyship defenses affecting its liability hereunder a the enforcement hereof.

     Guarantor authorizes lessor, without notice a demand, and without affecting
Guantor's liability hereunder,  from time to time to renew, extend,  accelerate,
or  otherwise  change the  payment  terms a other terms of the Lease or any part
thereof. Lessor may, without notice, assign this Guaranty in whole a in part.

     Guaranty  hereby waives any right to require Lessor to: (a) proceed against
Lessee; (b) proceed against a exhaust any security held by Lessor; or (c) pursue
any other  remedy in Lessor's  power.  Guaranty  waives any  defense  arising by
reason of any defense at Lessee,  a by reason of the  cessation,  from any cause
whatsoever,  of the liability of lessee under the Lease.  Guaranty waves any and
all demands for performance, notices of nonperformance a default, and notices of
cancellation a forfeiture.  Lessor may apply all proceeds received from Lessee a
others m such  part of  Lessee's  indebtedness  as Lessor  may deem  appropriate
without  consulting  Guaranty and without  prejudice to or in any way limiting a
lessening liability of Guarantor under this Guaranty.

     If Lessee is a corporation, the undersigned warrant and represent that they
are  stockholders,  directors  a officers  and/or are  financially  a  otherwise
interested  in  Lessee,  and  if  married,  their  marital  communities  are  so
interested.

     This  Guaranty  shall  not be  affected  a  discharged  by the death of the
undersigned, but shall bind Guarantor's heirs and personal representatives,  and
shall inure to the benefit of any successors a assigns of Lessor.

     This  instrument  constitutes  the  entire  agreement  between  Lessor  and
Guarantor.  No oral a written  representation  not contained herein shall in any
way affect this Guaranty,  which shall not be modified  except by the parties in
writing.  Waiver by Lessor of any  provision  hereof in one  instance  shall not
constitute a waiver as to any other instance.

                                  Page 1 of 2
<PAGE>

IMPORTANT:  THIS AGREEMENT  CREATES SPECIFIC LEGAL  OBLIGATIONS.  DO NOT SIGN IT
UNTIL YOU HAVE FULLY READ IT. BY SIGNING YOU COMPLETELY AGREE TO ITS TERMS.

     IN WITNESS WHEREOF,  the undersigned  Guarantor(s)  has/have  executed this
Guaranty this 25th day of June, 1999.


/s/ Angela M. Raidl
--------------------------------------
Guarantor:    Angela Raidl, Individual
                1951 Ta4 Rd.
                Alpine, CA 91901



----------------------------------
WITNESS

                                  Page 2 of 2
<PAGE>
Lessor:
PREFERRED CAPITAL CORPORATION
12770 High Bluff Drive Ste 340
San Diego, CA 92130
619-794-2040

LEASE NUMBER: _______________________

DATE OF LEASE: 8/25/99

LESSEE: American Fire Retardant Corp


                          ACKNOWLEDGMENT AND ACCEPTANCE

                             OF EQUIPMENT BY LESSEE

                            See Attached Schedule "A"

Lessee hereby  acknowledges that the Equipment described above has been received
in  good  condition  and  repair,  has  been  properly  installed,  tested,  and
inspected,  and is operating  satisfactorily in all respects for all of Lessee's
intended  uses  and  purposes.   Lessee  hereby  accepts   unconditionally   and
irrevocably the Equipment.

By signature  below,  Lessee  specifically  authorizes  and  requests  Preferred
Capital  Corporation  to make payment to the supplier of the  Equipment.  Lessee
agrees that said Equipment has not been delivered,  installed,  or accepted on a
trial basis.

WITH THE DELIVERY OF THIS  DOCUMENT TO LESSOR,  LESSEE  ACKNOWLEDGES  AND AGREES
THAT LESSEE'S  OBLIGATIONS TO LESSOR BECOME  ABSOLUTE AND IRREVOCABLE AND LESSEE
SHALL BE FOREVER ESTOPPED FROM DENYING THE  TRUTHFULNESS OF THE  REPRESENTATIONS
MADE IN THIS DOCUMENT.

                                           LESSEE: American Fire Retardant Corp.

                                           /s/ Angela M. Raidl
                                           ------------------------------------
                                           Angela Raidl, EVP

DATE OF ACCEPTANCE

8/25/99
----------------------


     I HEREBY  AUTHORIZE /S/ Augustine  Alvarez,  Title:  Supervisor,  TO ORALLY
VERIFY MY/OUR ACCEPTANCE OF THE ABOVE EQUIPMENT IN MY ABSENCE.


IMPORTANT:  THIS  DOCUMENT HAS LEGAL AND FINANCIAL  CONSEQUENCES  TO YOU. DO NOT
SIGN THIS DOCUMENT UNTIL YOU HAVE ACTUALLY RECEIVED ALL OF THE EQUIPMENT AND ARE
COMPLETELY SATISFIED WITH IT

<PAGE>
                                Preferred CAPITAL

                                   CORPORATION


                           Addendum to Lease Agreement

     That certain lease Schedule entered into by and between  Preferred  Capital
Corporation  as Lessor and American Fire Retardant Corp as Lessee dated 8/25/99,
in  consideration  of the mutual  covenants herein contained and upon having met
all the  terms and  conditions  of the Lease  Agreement  and for other  good and
valuable consideration, is hereby amended to include the following:

Lessee has the option to purchase all of the  equipment  described in said Lease
(and not merely part thereof) upon the  expiration of the initial lease term for
the then Fair Market  Value but not to exceed Ten Percent  (10%) of the original
equipment  cost  plus  applicable  sales  tax  (and  any  other  additional  tax
applicable to such sale), if any.

The said purchase price (and applicable  tax(es) if any shall be due and payable
by Lessee in full within 10 days after expiration of the initial lease term.

Upon  receipt by the Lessor of the full  purchase  price,  Lessor  will  furnish
Lessee with a bill of sale warranting good title to the equipment, but excepting
any impairment thereof by reason of any acts by the Lessee or those making claim
against the Lessee.  The bill of sales will also provide that the purchase shall
be "as is", "where is" and without any other warranties, expressed or implied.

Except as  specifically  provided  herein,  all the terms and conditions of said
Lease shall remain in full force and effect as provided therein.

Lessee:                                      Lessor:

American Fire Retardant Corp                 Preferred Capital Corporation


/s/ Angela Raidl                             /S/ Vicki A. Kohoutek
-------------------------                    -----------------------------------
Angela Raidl, EVP                            Vicki A. Kohoutek, Funding Manager

Date: 8/25/99                                Date: 8/25/99

<PAGE>
                                Preferred CAPITAL

                                   CORPORATION

                           Addendum to Lease Agreement

This Addendum to Lease Agreement  references  Lease  #__________________,  dated
8/25/99 between  American Fire Retardant  Corp,  Lessee,  and Preferred  Capital
Corporation, Lessor. Lease to be amended as follows:

         Old Lease Term:                      48 months
         New Lease Term:                      36 months

Lessee:   American Fire Retardant Corp


          By:   /s/ Angela Raidl
          -----------------------------------------------
          Angela Raidl, EVP

          Date:  8/25/99


Lessor:   Preferred Capital Corporation

          By:  /s/ Vicki A. Kohoutek
          -----------------------------------------------
          Vicki A Kohoutek, Funding Manager


          Date: 8/25/99

                          Preferred Capital Corporation
                          12770 High Bluff Dr. Ste 340
                        San Diego, CA 92130 800.585.1936
                                Fax: 858-794-2060