LEASE

     THIS  LEASE  (this  "Lease")  is  entered  into  as  of  the  ____  day  of
_______________, 1998 (the "Commencement Date"), by and between [ICCMIC entity],
a_______________  (the  "Landlord"),   whose  address  for  purposes  of  notice
hereunder is  ______________,  and [Ugly Duckling Car Sales,  Inc.],  an Arizona
corporation  (the "Tenant"),  whose address for purposes of notice  hereunder is
Attn.: General Counsel,  2525 East Camelback Road, Suite 1150, Phoenix,  Arizona
85016.

                                 R E C I T A L S

     This Lease is made with reference to the following facts and objectives:

     Landlord is the owner of the following:  (i) certain  tract(s) or parcel(s)
of land  located  in , and  more  particularly  described  on the  attached  and
incorporated  Exhibit "A" (the land described  above,  together with all rights,
interests,  easements,  rights of way and appurtenances  related thereto,  shall
hereinafter  be referred  to as the  "Land");  and (ii) a building or  buildings
located or to be located on the Land and all other  structures and  improvements
existing  or to be  constructed  on the Land,  together  with all  fixtures  and
equipment  therein  owned  by  Landlord  and used in the  operation  of the same
(collectively,  the  "Improvements").  The Land and Improvements are hereinafter
collectively  referred to as the "Premises." No easement for light,  air or view
is included with or appurtenant to the Premises.

     Pursuant to all of the terms, conditions,  covenants and provisions of this
Lease, Tenant desires to lease the Premises from Landlord,  and Landlord desires
to lease the Premises to Tenant,  for the rents and during the terms hereinafter
set forth.

     Landlord  acquired the Premises on the Commencement Date and for the period
of at least  _________  years  prior to the  Commencement  Date,  Tenant  owned,
occupied and operated the Premises.

     Tenant has examined the title of the  Premises,  the physical  condition of
the  Premises,  environmental  studies  and  reports  of the  Premises,  and the
economic feasibility of conducting its business in and from the Premises. Tenant
has determined that the same are satisfactory to Tenant,  and Tenant accepts the
Premises  on an "AS IS - WHERE IS"  basis.  TENANT  ACKNOWLEDGES  THAT  LANDLORD
(WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY) HAS NOT MADE AND
WILL NOT MAKE,  NOR SHALL  LANDLORD  BE DEEMED TO HAVE  MADE,  ANY  WARRANTY  OR
REPRESENTATION,  EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES, INCLUDING ANY
WARRANTY OR  REPRESENTATION  AS TO ITS  FITNESS  FOR USE OR  PURPOSE,  DESIGN OR
CONDITION FOR ANY PARTICULAR  USE OR PURPOSE,  AS TO THE QUALITY OF THE MATERIAL
OR WORKMANSHIP THEREIN,  LATENT OR PATENT, AS TO LANDLORD'S TITLE THERETO, OR AS
TO  VALUE,   COMPLIANCE   WITH   SPECIFICATIONS,   LOCATION,   USE,   CONDITION,
MERCHANTABILITY,  QUALITY, DESCRIPTION, DURABILITY OR OPERATION, IT BEING AGREED
THAT ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT.  Tenant  acknowledges
that the Premises are of its selection and to its  specifications,  and that the
Premises have been inspected by Tenant and are  satisfactory to it. In the event
of any defect or  deficiency  in the Premises of any nature,  whether  patent or
latent,  Landlord  shall not have any  responsibility  or liability with respect
thereto  or for  any  incidental  or  consequential  damages  (including  strict
liability in tort).

<PAGE>

     It is the parties'  objective to provide for an absolute "bond  equivalent"
net net net lease to Landlord;  the Basic Rent (as hereinafter  defined) payable
by Tenant hereunder shall be an absolute "bond equivalent" net net net return to
Landlord and Tenant  shall pay all costs and  expenses  relating to the Premises
and Tenant's operations thereon. Landlord would not have entered into this Lease
if it did not meet the aforesaid criteria.

     NOW,  THEREFORE,  IN  CONSIDERATION  of  the  aforesaid  Recitals,  and  in
consideration  of the  Premises  leased by  Landlord  to Tenant  hereby,  and in
consideration  of the rents and  covenants  to be paid and  performed  by Tenant
hereunder,  and for other  good and  valuable  consideration,  the  receipt  and
sufficiency of which are hereby acknowledged,  the parties covenant and agree as
follows:


     I. LEASE.

          1.1.  Demise of  Premises.  Landlord  hereby  demises the  Premises to
     Tenant, and Tenant hereby lets and accepts the Premises from Landlord,  for
     the term herein described.

          1.2.  Title and  Condition.  The  Premises are demised and let "as is"
     subject to all matters of record and all other title exceptions,  including
     but not  limited to (a) the rights of any  parties  in  possession  and the
     existing  state  of the  title as of the  commencement  of the term of this
     Lease,  (b) any  state  of facts  which  an  accurate  survey  or  physical
     inspection  thereof might show, (c) all zoning  regulations,  restrictions,
     rules and ordinances,  building restrictions and other laws and regulations
     now in effect or hereafter  adopted by any  governmental  authority  having
     jurisdiction  over the  condition of any  buildings,  structures  and other
     improvements  located  thereon,  all as of the  commencement of the term of
     this  Lease,  without  representation  or  warranty  by  Landlord.   Tenant
     represents  that it has  examined  the  title to and the  condition  of the
     Premises and has found the same to be satisfactory to it.

<PAGE>

          1.3. Use of Leased Premises.

               (a) Tenant is currently operating the Premises for the purpose of
          used car sales and  activities  incidental  and related  thereto  (the
          "Intended  Use").  Tenant  agrees to remain open for  business  and to
          operate the Intended Use in all or  substantially  all of the Premises
          during the Term.  Tenant may  occupy and use the  Premises  for no use
          other than the Intended Use without  Landlord's  consent,  which shall
          not be  unreasonably  withheld  conditioned  or delayed.  In no event,
          however,  shall the  Premises be used for a use which would (i) have a
          permanent  and material  adverse  effect on the value of the Premises,
          (ii)  increase  (when  compared  to  use  as  the  Intended  Use)  the
          likelihood that Tenant, Landlord or Lender would incur liability under
          any provisions of any  Environmental  Laws, or (iii) result in or give
          rise to any material environmental deterioration or degradation of the
          Premises.  Tenant  shall not  create or suffer to exist any  public or
          private  nuisance,  hazardous or illegal condition or waste on or with
          respect to the Premises. Tenant shall not use, occupy or permit any of
          the Premises to be used or occupied,  nor do or permit  anything to be
          done in or on any of the  Premises,  in a manner  which would (A) make
          void or voidable any insurance  which Tenant is required  hereunder to
          maintain  then in force with  respect to any of the  Premises,  or (B)
          affect the ability of Tenant to obtain any  insurance  which Tenant is
          required  to furnish  hereunder,  (C) impair  Landlord's  title to the
          Premises,  or in such manner as might reasonably make possible a claim
          or claims of adverse  usage or adverse  possession  by the public,  as
          such, or third  Persons,  or of implied  dedication of the Premises or
          any portion  thereof,  or (D) conflict with the terms or conditions of
          any  instrument  or agreement  between  Landlord  and Tenant.  Nothing
          contained  in this Lease and no action by Landlord  shall be construed
          to mean that  Landlord  has granted to Tenant any  authority to do any
          act or make any  agreement  that may create  any such  third  party or
          public right, title, interest,  lien, charge or other encumbrance upon
          the estate of the Landlord in the Premises.

               (b)  Tenant  shall not  conduct  its  business  operation  in the
          Premises unless and until (and only during such time as) all necessary
          certificates of occupancy, permits, licenses and consents from any and
          all appropriate  governmental authorities have been obtained by Tenant
          and are in full force and effect.

          1.4.  Quiet  Enjoyment.  For  so  long  as no  Event  of  Default  (as
     hereinafter  defined) has occurred and is  continuing  hereunder,  Landlord
     warrants  peaceful and quiet  enjoyment  of the Premises by Tenant  against
     acts of  Landlord  or  anyone  claiming  through  Landlord,  provided  that
     Landlord  and its  agents  may  enter  upon and  examine  the  Premises  at
     reasonable  times.  Exercise  by  Landlord  of its  rights to come upon the
     Premises as set forth in this Lease  shall not  constitute  a violation  of
     this Section.

<PAGE>

     II. TERM.

          2.1. Term.  Subject to the terms and conditions  hereof,  Tenant shall
     have and hold the Premises  for a primary term (herein  called the "Primary
     Term")  commencing  on the  Commencement  Date and  ending at  midnight  on
     _______________,  2013,  unless  this Lease shall be sooner  terminated  or
     extended.  Tenant  shall have the right and option to extend this Lease for
     four (4)  consecutive  extended  terms,  of five (5)  years  each  (herein,
     collectively  called the "Extended  Terms" and  individually,  an "Extended
     Term" and together with the Primary Term, sometimes  hereinafter called the
     "Term" "term of this Lease" or "term hereof"). If no Event of Default shall
     exist at the time of  exercise of such  option,  each  Extended  Term shall
     commence  on the day  immediately  succeeding  the  expiration  date of the
     Primary Term or the  preceding  Extended  Term and shall end at midnight on
     the day  immediately  preceding the fifth  anniversary  of the first day of
     such Extended Term. Provided no Event of Default shall exist at the time of
     exercise of such  option,  Tenant may  exercise  each said option to extend
     this Lease for an Extended Term by giving  written notice to that effect at
     least six (6) months prior to the  expiration of the then existing term. If
     Tenant  fails to  exercise  an option to extend  the Term six (6) months or
     more prior to the expiration of the then current Term,  Tenant's  option to
     extend the Term  shall not be  terminated  and this Lease  shall not expire
     unless  Landlord  delivers to Tenant written notice of Tenant's  failure to
     exercise  its option to extend the Term of this Lease and Tenant then fails
     to  exercise  the option  within  fifteen  (15) days  after  receipt of the
     written notice from  Landlord.  If Tenant does not exercise any such option
     in a timely manner, then Landlord shall have the right during the remainder
     of the Term of this Lease to advertise the availability of the Premises for
     reletting and to erect upon the Premises signs  appropriate for the purpose
     of  indicating  such  availability.  The term  "Lease  Year"  shall  mean a
     calendar year, except that the first partial "Lease Year" (the "First Lease
     Year") shall commence on the "Commencement  Date and expire on December 31,
     1998.


     III. BASIC RENT; ADDITIONAL RENT.

          3.1.  Basic Rent.  Tenant  covenants to pay to Landlord as and for the
     rental of the  Premises  the  amounts set forth below  (which  amounts,  as
     increased by the amounts  provided  for in Section 3.2 hereof,  is together
     called the "Basic Rent"):

          (a)  For and with  respect  to the First  Lease  Year the  amount of $
               ___________,   payable   in   equal   monthly   installments   of
               $____________ (but if the Commencement Date does not occur on the
               first day of a calendar  month,  the  installment  for the period
               from the  Commencement  Date to the end of the calendar  month in
               which  the  Commencement   Date  occurs  shall  be  paid  on  the
               Commencement  Date and shall be  prorated  based on a thirty (30)
               day month).

          (b)  For and with  respect to the second  Lease Year  (i.e.,  calendar
               year 1999), the amount of $ ___________, payable in equal monthly
               installments of $____________ .

          (c)  Basic Rent shall be adjusted  commencing with the first (1st) day
               of the third  Lease  Year and as of the  first  (1st) day of each
               Lease Year thereafter (each such date being referred to herein as
               an "BR Adjustment  Date" and each such Lease Year commencing with
               the third Lease Year being  referred to herein as a "BR Period").
               Basic Rent for the first BR Period  will be adjusted on the first
               BR Adjustment  Date by an amount  calculated by  multiplying  the
               Basic Rent then in effect by the percentage increase,  if any, in
               the "CPI",  as defined  below in this  paragraph,  from the month
               immediately preceding the BR Adjustment Date over the CPI for the
               month immediately preceding the second Lease Year. Basic Rent for
               each  subsequent BR Period will be adjusted on each subsequent BR
               Adjustment Date by an amount  calculated by multiplying the Basic
               Rent then in effect, by the percentage  increase,  if any, in the
               CPI from the last month of the BR Period then ending over the CPI
               for the last month of the most recent prior BR  Adjustment  Date.
               Notwithstanding the foregoing to the contrary,  in no event shall
               the  percentage  increase  for any such  Lease Year  exceed  four
               percent  (4%) or be less than two percent  (2%).  The "CPI" shall
               mean (and charges subject to adjustment pursuant to the CPI under
               this Lease  shall mean  adjustment  pursuant  to changes  in) the
               "Consumer  Price  Index  For All Urban  Consumers  (1982-84=100),
               published  by  the  Bureau  of  Labor   Statistics  of  the  U.S.
               Department  of Labor.  If no CPI is  published  for the month for
               which CPI is to be  utilized  pursuant  to this  Lease,  the most
               recent prior month shall be utilized. In the event the CPI is not
               published   by  the  Bureau  of  Labor   Statistics   or  another
               governmental  agency  at any  time  during  the  Term,  the  most
               comparable  statistics  on the  purchasing  power of the consumer
               dollar as published by a responsible  financial  authority and as
               selected by Landlord shall be used for making such computation.

<PAGE>

          (d)  If an  option  to  extend  the  Term is  exercised,  for and with
               respect to the  applicable  Extended  Term,  at the rate equal to
               ninety-five  percent (95%) of fair market rental value, but in no
               event  less than the Basic  Rent  payable in the last year of the
               prior  portion of the Term  ("Extended  Term Basic  Rent").  Fair
               market rental value will be determined as of the first day of the
               applicable  Extended  Term but at the time and on the  basis  set
               forth in Section 11.3 hereof.

          Tenant  unconditionally  and irrevocably agrees to make the Basic Rent
     payments directly to Landlord or Landlord's designee and to pay the same on
     the first day of each month, commencing on the Commencement Date. After any
     Event of  Default,  Landlord  shall  have the  right to  require  that such
     payments be made in immediately available funds.

          3.2.  Additional  Rent.  Tenant  shall pay and  discharge  before  the
     imposition of any fine, lien,  interest or penalty may be added thereto for
     late payment thereof, as Additional Rent, all other amounts and obligations
     which Tenant assumes or agrees to pay or discharge  pursuant to this Lease,
     together with every fine, penalty,  interest and cost which may be added by
     the  party to whom  such  payment  is due for  nonpayment  or late  payment
     thereof.  In the event of any failure by Tenant to pay or discharge  any of
     the foregoing, Landlord shall have all rights, powers and remedies provided
     herein, by law or otherwise, in the event of nonpayment of Basic Rent.

          3.3. Late Charge.  If any installment of Basic Rent is not paid within
     five (5) days after notice that the same is due and not paid,  Tenant shall
     pay to Landlord  or Lender,  as the case may be, on demand,  as  Additional
     Rent, a late charge equal to three percent (3%) (the "Late Charge") on such
     overdue  installment  of Basic Rent.  Such payment shall be in addition to,
     and not in lieu of, the interest payable pursuant to Section 11.17.

          3.4.  True Lease.  Landlord and Tenant agree that this Lease is a true
     lease and does not  represent  a  financing  arrangement.  Each party shall
     reflect the transactions represented by this Lease in all applicable books,
     records and reports (including,  without limitation, income tax filings) in
     a manner  consistent with "true lease"  treatment  rather than  "financing"
     treatment.

          3.5. Net Lease; Non-Terminability.

          (a)  This is an absolutely net lease to Landlord.  It is the intent of
               the parties  hereto that the Basic Rent payable  under this Lease
               shall be an  absolutely  net return to  Landlord  and that Tenant
               shall pay all costs and  expenses  relating to the  Premises  and
               operations carried on therein, including but not limited to costs
               and  expenses  relating to any period  prior to the  Commencement
               Date.  Any amount or obligation  herein  relating to the Premises
               which is not expressly  declared to be that of Landlord  shall be
               deemed to be an  obligation  of Tenant to be timely  performed by
               Tenant at Tenant's expense.  Basic Rent,  Additional Rent and all
               other sums  payable  hereunder  by Tenant,  shall be paid without
               notice, demand,  set-off,  counterclaim,  abatement,  suspension,
               deduction or defense.

<PAGE>

          (b)  This Lease shall not terminate nor shall Tenant have any right to
               terminate  this  Lease,  nor  shall  Tenant  be  entitled  to any
               abatement  or  reduction  of  rent   hereunder,   nor  shall  the
               obligations  of Tenant under this Lease be affected by reason of:
               (i)  any  damage  to or  destruction  of all or any  part  of the
               Premises from whatever cause; (ii) the taking in whole or in part
               of  the  Premises  or  any  portion   thereof  by   condemnation,
               requisition or otherwise except as provided in Article VII; (iii)
               the prohibition, limitation or restriction of Tenant's use of all
               or any part of the Premises,  or any interference  with such use;
               (iv) any eviction by paramount  title or otherwise;  (v) Tenant's
               acquisition or ownership of all or any of the Premises  otherwise
               than as expressly  provided herein;  (vi) any default on the part
               of Landlord  under this Lease,  or under any other  agreement  to
               which Landlord and Tenant may be parties;  (vii) any  abandonment
               of the  Premises  by  Tenant or (viii)  any other  cause  whether
               similar or dissimilar to the foregoing, any present or future law
               to  the  contrary  notwithstanding.  It is the  intention  of the
               parties hereto that the obligations of Tenant  hereunder shall be
               separate and independent covenants and agreements, that the Basic
               Rent,  the  Additional  Rent and all other sums payable by Tenant
               hereunder shall continue to be payable in all events and that the
               obligations of Tenant hereunder shall continue unaffected, unless
               the  requirement  to pay or  perform  the same  shall  have  been
               terminated pursuant to Articles VII or XI (Section 11.18) of this
               Lease.

          (c)  Tenant agrees that it will remain  obligated  under this Lease in
               accordance  with its  terms,  and it will not take any  action to
               terminate,  rescind  or avoid  this  Lease  because  of:  (i) any
               readjustment,  liquidation,  dissolution,  or winding-up or other
               proceeding  affecting Landlord or its  successors-in-interest  or
               (ii) any action with  respect to this Lease which may be taken by
               any trustee or receiver of Landlord or its successors-in-interest
               or by any court in any such proceeding.

          (d)  To the extent  permitted by  applicable  law,  Tenant  waives all
               rights  which may now or  hereafter  be  conferred  by law (i) to
               quit,  terminate or  surrender  this Lease or the Premises or any
               part thereof, or (ii) to any abatement,  suspension, deferment or
               reduction  of the Basic Rent,  Additional  Rent or any other sums
               payable under this Lease.

     IV.  PAYMENT  OF  IMPOSITIONS,  TAXES  AND  ASSESSMENTS;   COMPLIANCE  WITH
LAW;ENVIRONMENTAL MATTERS.

          4.1.  Payment  of  Impositions.  Tenant  shall  pay or  discharge  all
     Impositions (as hereinafter defined) when due, including but not limited to
     Impositions  relating  to  any  period  prior  to  the  Commencement  Date.
     Notwithstanding  the foregoing  provision of this Section 4.1, Tenant shall
     not be  required  to pay any  franchise,  corporate,  estate,  inheritance,
     succession, transfer (other than transfer taxes, recording fees, or similar
     charges  payable in  connection  with a  conveyance  hereunder  to Tenant),
     income or excess  profits  taxes of Landlord  hereunder.  Tenant  agrees to
     furnish  to  Landlord  and  Lender,  evidence  of the  payment of the taxes
     described  in Section  11.12(a)(i)  within  thirty (30) days after  payment
     thereof.  Tenant agrees to furnish evidence of payment of other Impositions
     with fifteen (15) days of Landlord's  request  therefor.  In the event that
     any  Imposition  levied or assessed  against the  Premises  becomes due and
     payable  during the term  hereof and may be legally  paid in  installments,
     Tenant shall have the option to pay such  Imposition  in  installments.  In
     such event, Tenant shall be liable only for those installments which become
     due and payable  during the term hereof or which were due and payable prior
     to the term hereof.

<PAGE>

          4.2.  Compliance with Laws. Tenant shall, at its expense,  comply with
     and shall  cause the  Premises to comply  with all  governmental  statutes,
     laws,  rules,  orders,   regulations  and  ordinances,   including  without
     limitation, the Americans with Disabilities Act of 1990, as the same may be
     amended from time to time, all fire  regulations,  occupational  health and
     safety laws,  applicable point of sale laws, building codes,  Environmental
     Laws,  zoning  and land use laws and  regulations,  and any  other  law the
     failure to comply with which at any time would  materially  affect Landlord
     or the Premises or any part thereof,  or the use thereof,  including  those
     which require the making of any  structural,  unforeseen  or  extraordinary
     changes,  whether or not any of the same  involve a change of policy on the
     part of the body enacting the same.  Tenant shall,  at its expense,  comply
     with all changes  required in order to obtain the  Required  Insurance  (as
     hereinafter defined), and with the provisions of all contracts, agreements,
     instruments and restrictions  existing at the commencement of this Lease or
     thereafter  suffered or permitted by Tenant  affecting  the Premises or any
     part thereof or the ownership, occupancy or use thereof.

          4.3.  Permitted  Contests.  Provided  that Tenant shall have  complied
     with, and shall continue to comply with, its obligations under Section 4.2,
     Tenant may contest, in good faith and at its expense and in accordance with
     all laws and governmental  requirements,  the existence,  the amount or the
     validity of the requirements imposed pursuant to Section 4.2, or the extent
     of its liability therefor, by appropriate proceedings. At least thirty (30)
     days prior to any such contest,  and as a condition  thereto,  Tenant shall
     notify  Landlord  as to the  proposed  contest in  reasonable  detail,  and
     Landlord  shall have the right to require Tenant to post security in amount
     and form  reasonably  required by Landlord.  No such contest or proceedings
     shall in any way eliminate or otherwise  interfere with Tenant's obligation
     to make timely payments of Basic Rent and Additional Rent under this Lease.
     Tenant further  agrees that each such contest shall be promptly  prosecuted
     to a final  conclusion.  Tenant  shall  pay,  indemnify  and save  Landlord
     harmless  against,  any  and  all  losses,  judgments,  decrees  and  costs
     (including all attorneys' fees,  appearance costs and expenses) incurred by
     Landlord  during the Lease Term in  connection  with any such  contest  and
     shall, promptly after the final settlement,  compromise or determination of
     such  contest,  fully pay and  discharge the amounts which shall be levied,
     assessed,  charged or imposed or be determined to be payable  therein or in
     connection therewith,  together with all penalties, fines, interests, costs
     and expenses thereof or in connection therewith,  and perform all acts, the
     performance  of which shall be ordered or decreed as a result  thereof.  No
     such contest shall subject  Landlord to the risk of any criminal  liability
     or shall subject the Premises to the risk of foreclosure.

          4.4. Hazardous Materials. Tenant shall:

          (a)  not cause, or permit any Hazardous Material (as defined below) to
               exist on or discharge from the Premises (except for items sold or
               used in the  ordinary  course of Tenant's  business and for which
               any required  licenses and permits are issued and in any event in
               accordance with Environmental Laws), and shall promptly:  (i) pay
               any claim against Tenant, Landlord,  Lender or the Premises; (ii)
               remove  any  charge or lien upon any of the  Premises;  and (iii)
               defend,  indemnify and hold Landlord and Lender harmless from any
               and all claims,  expenses,  liability,  loss or damage (including
               reasonable attorneys' fees) resulting from any Hazardous Material
               that at any time  exists on or is  discharged  from the  Premises
               except to the extent it is the direct  result of the actual gross
               negligence or willful misconduct of Landlord;

<PAGE>

          (b)  not  cause  or  permit  any  Hazardous  Material  to  exist on or
               discharge  from any property  owned or used by Tenant which would
               result  in any  charge  or  lien  upon  the  Premises  and  shall
               promptly: (i) pay any claim against Tenant,  Landlord,  Lender or
               the  Premises;  (ii) remove any charge or lien upon the Premises;
               and (iii) defend, indemnify and hold Landlord and Lender harmless
               from any and all  claims,  expenses,  liability,  loss or  damage
               (including   reasonable   attorneys'  fees)  resulting  from  the
               existence or discharge of any such Hazardous  Material  except to
               the extent it is the direct result of the actual gross negligence
               or willful misconduct of Landlord;

          (c)  notify  Landlord  and Lender  within  ten (10) days after  Tenant
               first has knowledge of any of the following:

               (i)  that  Hazardous  Material  exists on or has been  discharged
                    from or onto the Premises  (whether  originating  thereon or
                    migrating to the Premises from other property);

               (ii) that Tenant is subject to  investigation by any governmental
                    authority  evaluating  whether any remedial action is needed
                    to  respond  to the  release  or  threatened  release of any
                    Hazardous Material into the environment from the Premises;

               (iii)notice  or  claim to the  effect  that  Tenant  is or may be
                    liable  to  any  person  as  a  result  of  the  release  or
                    threatened  release  of  any  Hazardous  Material  into  the
                    environment from the Premises;

               (iv) notice that the  Premises  are  subject to an  environmental
                    lien;

               (v)  notice of  violation  to Tenant or  awareness by Tenant of a
                    condition  which  might  reasonably  result  in a notice  of
                    violation of any applicable Environmental Law.

          (d)  comply,  and cause the  Premises  to comply,  with all  statutes,
               laws,  ordinances,  rules and regulations of all local,  state or
               federal  authorities  having  authority  over the Premises or any
               portion  thereof  or their  use,  including  without  limitation,
               relative to any Hazardous Material,  petroleum products, asbestos
               containing materials or PCB's.

          (e)  "Hazardous  Material"  means  any  hazardous  or toxic  material,
               substance or waste which is defined by those or similar  terms or
               is regulated as such under any Environmental Laws. "Environmental
               Laws" means any statute,  law,  ordinance,  rule or regulation of
               any local, county, state or federal authority having jurisdiction
               over the  Property or any portion  thereof or its use as the same
               may be amended from time to time,  including  but not limited to:
               (i) the Federal Water  Pollution  Control Act (33 U.S.C.  Section
               1317) as amended;  (ii) the  Federal  Resource  Conservation  and
               Recovery Act (42 U.S.C.  Section 6901 et seq.) as amended;  (iii)
               the  Comprehensive   Environmental   Response   Compensation  and
               Liability Act (42 U.S.C.  Section 9601 et seq.) as amended;  (iv)
               the Toxic  Substance  Control  Act (15  U.S.C.  Section  2601) as
               amended;  and (v) the Clean Air Act (42 U.S.C.  Section  7401) as
               amended.

<PAGE>
          (f)  The Tenant's  obligations and liabilities  under this Section 4.4
               shall  survive the  expiration or  termination  of this Lease and
               shall include,  without limitation,  matters arising prior to the
               Commencement Date.

     [Note:   Additional   covenants,   etc.   may  be  required  to  deal  with
recommendations included in, or issues raised by, the environmental audits.]


     V. MAINTENANCE AND REPAIR; ALTERATIONS.

          5.1. Maintenance and Repair.  Tenant acknowledges that it has received
     the Premises in good condition, repair and appearance.  Tenant agrees that,
     at its  expense,  it will keep and  maintain the  Premises,  including  any
     altered, rebuilt, additional or substituted buildings, structures and other
     improvements  thereto, in good condition and repair. It will make promptly,
     all structural and  nonstructural,  foreseen and  unforeseen,  ordinary and
     extraordinary  changes and repairs or  replacements of every kind which may
     be  required  to be made to keep and  maintain  the  Premises  in such good
     condition,  repair and appearance and it will keep the Premises orderly and
     free and clear of rubbish.  Tenant covenants not to install any underground
     storage  tanks on the  Premises.  [Note:  depending  on the  results of the
     environmental audits, we may need to include language regarding remediation
     of any existing  tanks.]  Tenant agrees that its obligation to maintain and
     repair the Premises as set forth in this Section 5.1 benefit both  Landlord
     and  Tenant,  are  the  sole  responsibility  of  Tenant,  and  may  not be
     delegated.  Tenant  further  covenants  to perform  or  observe  all terms,
     covenants or conditions of any reciprocal easement or maintenance agreement
     to  which  it may at any  time be a party  or to  which  the  Premises  are
     currently  subject.  Tenant shall, at its expense,  use its best efforts to
     enforce  compliance with any reciprocal  easement or maintenance  agreement
     benefiting  the  Premises by any other  person  subject to such  agreement.
     Landlord shall not be required to maintain,  repair or rebuild,  or to make
     any Alterations of any nature to the Premises, or any part thereof, whether
     ordinary or  extraordinary,  structural or  nonstructural,  foreseen or not
     foreseen,  or to  maintain  the  Premises  or any part  thereof in any way.
     Tenant hereby  expressly waives the right to make repairs at the expense of
     Landlord  which may be provided for in any law in effect at the time of the
     commencement  of the term of this Lease or which may thereafter be enacted.
     If Tenant shall  abandon the  Premises,  it shall give  Landlord and Lender
     immediate  notice thereof.  The obligations of the Tenant to pay Basic Rent
     and  Additional  Rent  shall  not be  eliminated,  reduced,  suspended,  or
     otherwise  impaired by reason of such  abandonment of the Premises.  In the
     event  that the  Premises  shall  violate  any law and as a result  of such
     violation an enforcement  action is threatened or commenced  against Tenant
     or with respect to the Premises,  then Tenant shall either (i) obtain valid
     and effective waivers or settlements of all claims, liabilities and damages
     resulting from each such violation, whether the same shall affect Landlord,
     Tenant or both,  or (ii) take such action as shall be  necessary  to remove
     such violation,  including,  if necessary,  making any necessary repairs or
     replacements, structural or otherwise.

<PAGE>

          5.2.  Engineering  Report.  Beginning the Sixth Lease Year,  and every
     five (5) years thereafter,  Tenant shall provide Landlord,  upon Landlord's
     written request,  with an engineering  study of the Premises  ("Engineering
     Report")  addressed  to  Landlord,  in form,  content and scope  reasonably
     acceptable  to  Landlord,  prepared by a qualified  engineering  firm.  The
     Engineering Report shall include,  without limitation,  a study or analysis
     of (a) all  structural  components  of the  Premises,  (b) all  mechanical,
     electrical,  plumbing,  HVAC, sprinkler,  fire suppression,  elevators, and
     other building  systems and equipment  designated by Landlord,  and (c) the
     roof of all buildings.

          5.3.  Encroachments.  If any Improvements  situated on the Premises at
     any time during the Term of this Lease shall  encroach  upon any  property,
     street or  right-of-way  adjoining  or adjacent to the  Premises,  or shall
     violate the agreements or conditions  contained in any restrictive covenant
     affecting the Premises or any part  thereof,  or shall impair the rights of
     others under or hinder or obstruct any  easement or  right-of-way  to which
     the Premises  are  subject,  then,  promptly  after the written  request of
     Landlord  or any  person  affected  by any  such  encroachment,  violation,
     impairment,  hindrance or obstruction, Tenant shall, at its expense, either
     (i) obtain effective waivers, or settlements of all claims, liabilities and
     damages  resulting  from each  such  encroachment,  violation,  impairment,
     hindrance or obstruction whether the same shall affect Landlord,  Tenant or
     both,  or (ii) make such  changes in the  improvements  on the Premises and
     take such other action as shall be necessary to remove such  encroachments,
     hindrances  or  obstructions  and to end such  violations  or  impairments,
     including,  if necessary,  the alteration or removal of any  improvement on
     the  Premises.  Any such  alteration or removal shall be made in conformity
     with the  requirements  of Section 5.4 hereof to the same extent as if such
     alteration  or removal were an Alteration  under the  provisions of Section
     5.4.

          5.4. Alterations.

          (a)  Tenant may, at its expense,  make additions to and alterations of
               the  Improvements  to the  Premises  and make  substitutions  and
               replacements thereto (sometimes hereinafter collectively referred
               to as "Alterations"), provided that: (i) Landlord approves, which
               approval  shall  not be  unreasonably  withheld,  conditioned  or
               delayed,  any Alterations to the Premises before such alterations
               are commenced,  after having  received from Tenant a complete set
               of  plans  and  specifications  for the  proposed  work,  (ii) in
               Landlord's reasonable judgment,  the market value of the Premises
               and the Intended Use shall not thereby be reduced or impaired and
               the  appearance of the Property  will not be adversely  affected;
               (iii)  the  Alterations  are   architecturally   consistent  with
               existing Improvements; (iv) the Alterations shall be performed in
               a good and  workmanlike  manner;  (v) such work shall not violate
               any term of any  restriction to which the Premises are subject or
               the   requirements  of  any  insurance   policy  required  to  be
               maintained  by  Tenant  hereunder,  and  shall  be  expeditiously
               completed  in  compliance  with  all  laws,  ordinances,   rules,
               regulations  and  requirements   applicable  thereto,   including
               without  limitation,  the Americans with Disabilities Act of 1990
               and all regulations issued thereunder, as the same may be amended
               from time to time; and (vi) no  Improvements  shall be demolished
               unless  Tenant  shall have  first  furnished  Landlord  with such
               surety bonds or other security acceptable to Landlord as shall be
               necessary to assure rebuilding of such Improvements. Tenant shall
               promptly  pay all costs  and  expenses  of each such  Alteration,
               discharge all liens arising therefrom and procure and pay for all
               permits and licenses required in connection  therewith.  All such
               Alterations  shall  be and  remain  part  of the  realty  and the
               property of Landlord  and shall be subject to this Lease.  Tenant
               may  place  upon the  Premises  any  inventory,  trade  fixtures,
               machinery or equipment  belonging to Tenant or third  parties and
               may remove the same at any time  during  the Term.  Tenant  shall
               repair  any  damage  to  the  Premises  or  any  portion  thereof
               (including all Improvements thereon) caused by such removal.

<PAGE>

          5.5. No Liens.  Tenant will not,  directly  or  indirectly,  create or
     permit to be created or to remain,  and shall  within  thirty  (30) days of
     filing of any, mechanics, contractors or other liens, discharge or bond, at
     its expense, any liens with respect to, the Premises or any part thereof or
     Tenant's interest therein or the Basic Rent,  Additional Rent or other sums
     payable by Tenant  under this  Lease,  other than the lien for real  estate
     taxes which are not yet due and  payable.  Nothing  contained in this Lease
     shall be construed  as  constituting  the consent or request,  expressed or
     implied,  by Landlord to the performance of any labor or services or of the
     furnishing of any materials for any Alterations, repair or demolition of or
     to the  Premises  or any part  thereof  by any  contractor,  subcontractor,
     laborer,  materialman or vendor.  Notice is hereby given that Landlord will
     not be liable for any  labor,  services  or  materials  furnished  or to be
     furnished to Tenant, or to anyone holding the Premises or any part thereof,
     and that no  mechanic's  or other  liens  for any such  labor  services  or
     materials  shall attach to or affect the interest of Landlord in and to the
     Premises.

<PAGE>

     VI. INSURANCE; INDEMNIFICATION.

          6.1. Insurance.  Tenant shall maintain, or cause to be maintained,  at
     its sole expense,  the following  insurance on the Premises  (herein called
     the "Required Insurance"):

          (a)  Insurance  against  loss  or  damage  to  the  Improvements  (the
               "Improvements Insurance") under a fire and broad form of all risk
               extended  coverage  insurance  policy  (which shall include flood
               insurance if the Premises is located  within a flood hazard area,
               and   earthquake   insurance)   together  with  an  agreed  value
               endorsement.  Such  insurance  shall be in amounts  sufficient to
               prevent  Landlord or Tenant from becoming a co-insurer  under the
               applicable policies,  and not less than the full replacement cost
               of the Improvements (excluding footings and foundations and other
               parts of the Improvements  which are not insurable) as reasonably
               determined  from time to time by Landlord but not more frequently
               than once in any 12-month  period.  Such  insurance  policies may
               contain  reasonable  exclusions  and  deductible  amounts  as are
               common to properties similar to the Premises.

          (b)  General public  liability  insurance for the benefit of Landlord,
               Tenant  and  Lender  against  claims  for  damages  to  person or
               property occurring on, in or about the Premises and the adjoining
               streets,  sidewalks,  gutters, curbs, passageways and other areas
               adjacent  thereto,  if any,  with a combined  single  limit of at
               least Five Million  Dollars  ($5,000,000.00)  for personal injury
               and property  damage,  such insurance to include full coverage of
               the  indemnity  set  forth in  Section  6.10.  Policies  for such
               insurance shall be for the mutual benefit of Landlord, Tenant and
               Lender, as their respective interests may appear.

          (c)  Workers'  compensation  insurance  to  the  extent  necessary  to
               protect  Landlord,  Tenant  and  the  Premises  against  workers'
               compensation claims,  covering all persons employed in connection
               with any work done on or about the Premises with respect to which
               claims  for  death or bodily  injury  could be  asserted  against
               Landlord,  Tenant  or  the  Premises.  Such  policy  of  workers'
               compensation  insurance shall comply with all of the requirements
               of applicable state law.

          (d)  At  any  time  when  any  portion  of  the   Premises  are  being
               constructed,  altered or replaced,  builder's  risk insurance (in
               completed value non-reporting form) in an amount no less than the
               actual  replacement  value  of  the  Improvements,  exclusive  of
               foundations and excavations.

          6.2.  Permitted  Insurers.  The Required Insurance shall be written by
     companies  of  recognized  financial  standing  authorized  to do insurance
     business  in the state in which the  Premises  are  located  and have Bests
     ratings of A X or better.  The Required Insurance shall name as the insured
     parties thereunder  Landlord and Tenant, as their interests may appear, and
     Lender as an additional insured under a standard "mortgagee" endorsement or
     its equivalent satisfactory to Landlord.  Landlord shall not be required to
     prosecute any claim against,  or to contest any settlement  proposed by, an
     insurer.  Tenant may, at its expense,  prosecute  any such claim or contest
     any  such  settlement  in the name of  Landlord,  Tenant  or both  with the
     consent of  Landlord,  and Landlord  will join therein at Tenant's  written
     request  upon the receipt by Landlord of an indemnity  from Tenant  against
     all costs, liabilities and expenses in connection therewith.

<PAGE>

          6.3.  Insurance  Claims.  Insurance  claims  by reason of damage to or
     destruction of any portion of the Premises  shall be primarily  adjusted by
     Tenant,  but both  Landlord  and  Lender  shall have the right to join with
     Tenant in adjusting  any such loss and approve any  adjustment  proposed by
     Tenant.

          6.4.  Insured  Parties.  Any loss under any such policy  shall be made
     payable to Landlord (or, if Landlord so elects, to Lender),  subject to the
     requirements  of Section  6.9.  Every  policy of Required  Insurance  shall
     contain an agreement  that the insurer  will not cancel such policy  except
     after thirty (30) days' written  notice to Landlord and Lender and that any
     loss otherwise payable thereunder shall be payable  notwithstanding any act
     or  negligence  of  Landlord,  Tenant or Lender  which  might,  absent such
     agreement,  result  in a  forfeiture  of all or a part  of  such  insurance
     payment and  notwithstanding (i) any foreclosure or other action taken by a
     creditor  pursuant to any  provision of any Mortgage or other Loan Document
     upon the happening of a default or Event of Default  thereunder or (ii) any
     change in ownership of the Premises.

          6.5.  Delivery of Policies.  Tenant shall deliver to Landlord promptly
     after the delivery of this Lease,  the  original or  duplicate  policies or
     Accord-27 form certificates of insurers, satisfactory to Lender, evidencing
     all of the Required Insurance. Tenant shall, prior to the expiration of any
     such  policy,  deliver to Landlord  another  original or  duplicate of such
     policy or certificates evidencing the renewal of any such policy. If Tenant
     fails to maintain or renew any  Required  Insurance,  or to pay the premium
     therefor, or to deliver such certificate, then Landlord, at its option, but
     without  obligation to do so, procure such insurance.  Any sums so expended
     by  Landlord  shall be  Additional  Rent  hereunder  and shall be repaid by
     Tenant within five (5) days after notice to Tenant of such  expenditure and
     the amount thereof. together with interest thereon at the Interest Rate.

          6.6. No Double  Coverage.  Tenant  shall not obtain or carry  separate
     insurance  covering the same risks as any Required Insurance unless Tenant,
     Landlord  and  Lender are  included  therein  as named  insured,  with loss
     payable as provided in this Lease and the policy contains a first mortgagee
     endorsement  in  favor  of the  Lender.  Tenant  shall  immediately  notify
     Landlord whenever any such separate insurance is obtained and shall deliver
     to Landlord the policies or certificates evidencing the same. Any insurance
     which Landlord may elect to carry shall be excess and not primary coverage.

<PAGE>
          6.7. Blanket  Insurance.  Anything contained in this Article VI to the
     contrary  notwithstanding,  all Required  Insurance  may be carried under a
     "blanket"  or  "umbrella"  policy or policies  covering  other  property or
     liabilities of Tenant,  provided that such policies  otherwise  comply with
     the  provisions of this Lease and specify the coverage and amounts  thereof
     with respect to the Premises.

          6.8.  Damages for  Tenant's  Failure to Properly  Insure.  Landlord or
     Lender shall not be limited in the proof of any damages  which  Landlord or
     Lender may claim  against  Tenant  arising  out of or by reason of Tenant's
     failure to provide and keep in force  insurance,  as provided above, to the
     amount of the insurance  premium or premiums not paid or incurred by Tenant
     and which would have been payable  under such  insurance;  but Landlord and
     Lender  shall also be entitled to recover as damages for such  breach,  the
     uninsured  amount  of any loss,  to the  extent  of any  deficiency  in the
     Required  Insurance  and damages,  costs and  expenses of suit  suffered or
     incurred  by reason  of or damage  to, or  destruction  of,  the  Premises,
     occurring  during any period when  Tenant  shall have failed to provide the
     Required  Insurance.  Tenant  shall  indemnify,  defend  and hold  harmless
     Landlord  and Lender  for any  liability  incurred  by  Landlord  or Lender
     arising out of any deductibles for Required Insurance.

          6.9. Casualty.  If all or any part of the Premises shall be damaged or
     destroyed by casualty which is insured or required to be insured under this
     Lease,  or by any other  casualty if the cost to repair such other casualty
     does not exceed twenty percent (20%) of the total  replacement  cost of the
     Improvements, Tenant shall promptly notify the Landlord thereof, and shall,
     with reasonable promptness and diligence,  rebuild,  replace and repair any
     damage or destruction to the Premises,  at its expense,  in conformity with
     the requirements of Section 5.4(a) hereof, in such manner as to restore the
     same to the same or better  condition  as existed  prior to such  casualty,
     using  materials  of the same or better  grade  than that of the  materials
     being replaced, and there shall be no abatement of Basic Rent or Additional
     Rent.  Proceeds of casualty  insurance of $100,000.00 or less shall be paid
     to Tenant. Proceeds in excess of $100,000.00 shall be held by Landlord or a
     proceeds  trustee (which may be Lender,  an escrow or title  company,  or a
     bank or trust company  designated by Landlord) and paid to Tenant, but only
     against  certificates  of Tenant,  appropriate  lien waivers and such other
     information  reasonably  required  by  Landlord  or  the  proceeds  trustee
     delivered to Landlord from time to time, but not more  frequently than once
     per  calendar  month,  as  such  work  or  repair  progresses.   Each  such
     certificate  shall  describe  the  work  or  repair  for  which  Tenant  is
     requesting payment and the cost incurred by Tenant in connection  therewith
     and stating that Tenant has not theretofore  received payment for such work
     and has  sufficient  funds  remaining to complete the work free of liens or
     claims. Any proceeds remaining after Tenant has repaired the Premises shall
     be delivered  to Tenant No payment  shall be made to Tenant if there exists
     any Event of Default under this Lease. If Tenant is not required to restore
     after a casualty,  this Lease shall  nevertheless  remain in full force and
     effect,  with no abatement of Basic Rent or  Additional  Rent,  except that
     Landlord  shall have the right to terminate  this Lease by notice to Tenant
     if Tenant  does not  agree to  restore  within  sixty  (60) days  after the
     casualty, or if Tenant agrees to restore but does not diligently proceed to
     do so.

<PAGE>
          6.10. Indemnification.

          (a)  Tenant agrees to pay, and to protect,  defend, indemnify and save
               harmless  Landlord,  Lender and their agents from and against any
               and all actual  liabilities,  losses,  damages,  costs,  expenses
               (including  all  reasonable   attorneys'  fees  and  expenses  of
               Landlord but  excluding  lost  profits and all other  indirect or
               consequential damages),  causes of action, suits, claims, demands
               or judgments of any nature whatsoever (i) arising from any injury
               to, or the death of, any person or damage to property  (including
               property of employees  and invitees of Tenant) on the Premises or
               upon  adjoining  sidewalks,  streets  or ways,  to the extent not
               occasioned by the actual gross  negligence or willful  misconduct
               of  Landlord,  (ii)  arising  from the use,  non-use,  condition,
               maintenance,  repair or  occupation  of the  Premises or any part
               thereof or adjoining  sidewalks,  streets or ways,  to the extent
               not  occasioned  by  the  actual  gross   negligence  or  willful
               misconduct of Landlord, (iii) arising from violation by Tenant of
               any  agreement  or  condition  of  this  Lease  or  any  sublease
               (including without limitation the failure to pay Impositions), or
               any  contract or  agreement  to which  Tenant is a party,  or any
               restriction,  law,  ordinance or  regulation  (including  without
               limitation,  the Americans With  Disabilities Act of 1990 and all
               regulations issued thereunder) affecting the Premises or any part
               thereof or the ownership, occupancy or use thereof, to the extent
               not  occasioned  by  the  actual  gross   negligence  or  willful
               misconduct  of  Landlord;  or (iv)  arising out of any  permitted
               contest  referred to in Section 4.3  (collectively,  "Indemnified
               Matters").  Without limiting the generality of the foregoing, the
               Indemnified  Matters shall include  matters  arising prior to the
               Commencement  Date. If Landlord,  Lender or any agent of Landlord
               or Lender shall be made a party to any such litigation  commenced
               against  Tenant,  and if Tenant,  at its  expense,  shall fail to
               provide  Landlord,  Lender or their  agents  with  counsel  (upon
               Landlord's request) reasonably approved by Landlord, Tenant shall
               pay all costs and attorneys'  fees and expenses  incurred or paid
               by  Landlord,  Lender  or their  agents in  connection  with such
               litigation.  Tenant's  obligations  and  liabilities  under  this
               Section 6.10 shall survive the  expiration of this Lease.  Tenant
               waives all claims  against  Landlord  arising from any  liability
               described in this Section 6.10 (a),  except to the extent  caused
               by the actual gross negligence or willful misconduct of Landlord.
               The  waiver  and  indemnity  provisions  in  this  paragraph  are
               intended to exculpate and indemnify Landlord (i) from and against
               the  direct  consequences  of its own  negligence  or fault  when
               Landlord  is  solely  negligent  or  contributorily,   partially,
               jointly,  comparatively or concurrently  negligent with Tenant or
               any  other  person  (but  is not  grossly  negligent  and has not
               committed  willful  misconduct)  and (ii)  from and  against  any
               liability of Landlord based on any applicable  doctrine of strict
               liability  unless  resulting from the gross negligence or willful
               misconduct of Landlord.

          (b)  Should any claim be made against Landlord by a person not a party
               to this Lease with respect to any  Indemnified  Matter,  Landlord
               shall promptly give Tenant written notice of any such claim,  and
               Tenant shall  thereafter  defend or settle any such claim, at its
               sole  expense,  on  its  own  behalf  and  with  counsel  of  its
               selection;  provided,  however,  that  Tenant's  counsel shall be
               competent counsel  experienced in the type of litigation or claim
               at issue and shall be acceptable to Landlord,  acting reasonably.
               Upon  Tenant's  assumption  of the  defense of any claim  against
               Landlord pursuant to Tenant's indemnity,  Landlord shall have the
               right to  participate  in the defense or  settlement of the claim
               with  counsel  retained and paid by it and Tenant shall cause the
               attorneys  retained  by it to consult  and  cooperate  fully with
               counsel  for  Landlord.  In such  defense  or  settlement  of any
               claims, Landlord shall provide Tenant with originals or copies of
               all  relevant  documents  and  shall  cooperate  with and  assist
               Tenant, at no expense to Landlord.  Notwithstanding any provision
               of this Section 6.10 to the contrary, Tenant shall not enter into
               any  settlement or agreement in connection  with any  Indemnified
               Matters  binding upon or adversely  affecting  either Landlord or
               Lender,  or admit any  liability or fact in  controversy  binding
               upon or adversely  affecting  either Landlord or Lender,  without
               the prior written consent of Landlord or Lender,  as the case may
               be, in such party's sole discretion.

          (c)  Landlord  agrees to pay, and to protect,  defend,  indemnify  and
               save harmless  Tenant and its agents from and against any and all
               liabilities,  losses, damages (actual and consequential),  costs,
               expenses  (including all reasonable  attorneys' fees and expenses
               of Tenant), causes of action, suits, claims, demands or judgments
               of any nature whatsoever arising from the actual gross negligence
               or  willful   misconduct  of  Landlord  in  connection  with  the
               Premises.

<PAGE>
     VII. CONDEMNATION.

          7.1. Assignment of Award. Subject to the rights of Tenant set forth in
     this Article VII, Tenant hereby  irrevocably  assigns to Landlord any award
     or  payment  to which  Tenant  may be or become  entitled  with  respect to
     Complete,  Partial or Temporary Taking of the Premises or any part thereof,
     by  condemnation or other eminent domain  proceedings  pursuant to any law,
     general or special, by any governmental  authority,  whether the same shall
     be paid or payable in respect of Tenant's  leasehold  interest hereunder or
     otherwise.  Notwithstanding the foregoing,  Tenant may recover the value of
     its personal  property at the Premises,  if taken, so long as the amount of
     the Net Award  received  by Landlord is at least equal to the higher of (a)
     the net book value of the  Premises as reflected  on  Landlord's  financial
     statements,  or (b) the fair market value of the  Premises,  on the date of
     the  Complete,  Partial or Temporary  Taking.  Landlord and Lender shall be
     entitled to participate in any such proceeding.

          7.2. Definitions for Article VII.

          (a)  "Complete  Taking"  shall  mean the  occurrence  of any actual or
               threatened   condemnation  or  other  eminent  domain  proceeding
               pursuant to any general or special law, or any agreement  with an
               authority  having the power of eminent  domain,  which results in
               the taking or conveyance of (i) the entire  Premises or (ii) such
               a  significant  portion of the Premises  that,  in the good faith
               judgment  of  either  Tenant or  Landlord,  it is  uneconomic  to
               rebuild or restore the remaining  portion of the Premises for the
               continued operation of the business.

          (b)  "Partial  Taking"  shall mean the  occurrence  of any taking of a
               portion of the Premises by  condemnation  or other eminent domain
               proceedings,  or any agreement with an authority having the power
               of  eminent  domain,  which  does not  result  in the  taking  or
               conveyance of such a significant portion of the Premises that, in
               the good  faith  judgment  of either  Tenant or  Landlord,  it is
               uneconomic  to rebuild or restore  the  remaining  portion of the
               Premises for the continued operation of the business.

          (c)  "Temporary  Taking"  shall  mean the  occurrence  of a  temporary
               taking  of the  use or  occupancy  of the  Premises  or any  part
               thereof by any governmental authority.

          (d)  "Net  Award"  shall mean all  amounts  payable as a result of any
               condemnation  or other eminent domain  proceeding and all amounts
               payable  pursuant to any agreement with any condemning  authority
               (which  agreement  shall be deemed to be a taking) which has been
               made in  settlement  of or under  threat of any  condemnation  or
               other eminent domain proceeding affecting the Premises,  less all
               expenses  incurred  as a result  thereof  not  otherwise  paid by
               Tenant and the collection of such amounts.

          (e)  "Purchase Offer" shall mean a purchase offer as described in this
               Article VII.

<PAGE>
          7.3. Complete Taking.

          Upon the occurrence of a Complete  Taking Landlord or Tenant may elect
     to terminate this Lease by delivering a notice of termination  specifying a
     Termination Date occurring not less than sixty (60) days after the delivery
     of such  notice,  and this Lease  shall  continue  in full force and effect
     without abatement of rent until the Termination Date.

          7.4. Partial Taking.  Upon the occurrence of any Partial Taking,  this
     Lease shall continue in full effect without abatement or reduction of Basic
     Rent,  Additional  Rent or other  sums  payable  by  Tenant.  In the  event
     Landlord  receives a Net Award in connection  with any such Partial  Taking
     Landlord shall,  provided there is no Event of Default hereunder,  make the
     Net Award available to Tenant, and Tenant shall, regardless of the adequacy
     of the award,  make repairs in accordance with the  requirements of Section
     5.4(a)  hereof so that,  thereafter,  the  Premises  shall be, as nearly as
     possible, in a condition as good as the condition thereof immediately prior
     to such  Taking,  but,  if such Net Award shall be in excess of One Hundred
     Thousand  Dollars  ($100,000),  the proceeds shall be held by Landlord or a
     proceeds  trustee (which may be Lender or Lender's  designee,  or a bank or
     trust  company  designated  by  Landlord),  and paid only upon  delivery to
     Landlord  of (i)  certificates  of Tenant  identifying  the repair work for
     which  Tenant is  requesting  payment  and the cost  incurred  by Tenant in
     connection  therewith and stating that Tenant has not theretofore  received
     payment for such work; (ii) appropriate lien waivers;  and (iii) such other
     information as may be reasonably required by the proceeds trustee.  Any Net
     Award  remaining  after such  repairs  have been made shall be delivered to
     Tenant if no Event of Default exists;  otherwise,  the excess shall be paid
     to Landlord.

          7.5.  Temporary  Taking.  Upon the occurrence of any Temporary Taking,
     Tenant shall,  promptly  after any such  Temporary  Taking  ceases,  at its
     expense,   repair  any  damage  caused  thereby  in  conformity   with  the
     requirements  of Section  5.4(a) hereof so that,  thereafter,  the Premises
     shall be, as nearly as possible,  in a condition  as good as the  condition
     thereof  immediately  prior to such Temporary  Taking. In the event of such
     Temporary Taking,  Tenant shall be entitled to receive the entire Net Award
     payable by reason of such Temporary Taking,  less any costs incurred by the
     Landlord in connection therewith. If the cost of any repairs required to be
     made by Tenant  pursuant to this Section 7.5 shall exceed the amount of the
     Net Award,  the  deficiency  shall be paid by Tenant.  No payments shall be
     made to Tenant  pursuant to this Section 7.5, if any Event of Default shall
     exist  under this  Lease.  No Basic  Rent or  Additional  Rent shall  abate
     through the duration of such Temporary Taking.

<PAGE>

     VIII. ASSIGNMENT AND SUBLETTING.

          8.1.  Power to  Assign  and  Sublet.  With  Landlord's  prior  written
     consent, which shall not be unreasonably withheld,  conditioned or delayed,
     Tenant  may sublet  all of the  Premises  and may assign all its rights and
     interests  under this Lease (provided that each such sublease or assignment
     shall expressly be made subject to all of the provisions, including the use
     provisions  of Section 1.3 of this Lease).  Tenant  shall,  within ten (10)
     days  after  the  execution  and  delivery  of any such  assignment  or the
     sublease  of all of the  Premises,  deliver a  conformed  copy  thereof  to
     Landlord.

          8.2. Assumption by Assignee;  Tenant Remains Liable. If Tenant assigns
     its  rights  and  interests  under  this  Lease,  the  assignee  under such
     assignment  shall expressly  assume all the obligations of Tenant hereunder
     in an instrument  delivered to Landlord at the time of such assignment.  No
     assignment  or sublease made as permitted by this Article VIII shall affect
     or reduce any of the obligations of Tenant  hereunder or the obligations of
     any guarantor of Tenant,  and all such  obligations  shall continue in full
     force and effect as  obligations of a principal and not as obligations of a
     guarantor  or  surety,  to the same  extent  as  though  no  assignment  or
     subletting had been made, provided that performance by any such assignee or
     sublessee  of any of the  obligations  of Tenant  under this Lease shall be
     deemed to be  performance  by Tenant.  No  sublease or  assignment  made as
     permitted by this Article VIII shall impose any  obligations on Landlord or
     otherwise  affect any of the rights of Landlord  under this  Lease.  Tenant
     hereby  grants a security  interest to Landlord  in all  subleases  and all
     rents,  issues and profits derived and to be derived  therefrom,  to secure
     performance  of  Tenant's  obligations  under this Lease.  Landlord  hereby
     grants to Tenant a license to collect all rents  payable under any sublease
     (up to one month in advance),  but upon any Event of Default,  Landlord may
     in its sole  discretion  revoke such license and collect the rents directly
     from any sublessee and retain the same.

          8.3.  Other  Transfers  Void.  Neither  this Lease nor the Term hereby
     demised shall be mortgaged by Tenant,  nor shall Tenant  mortgage or pledge
     the  interest  of  Tenant in and to any  sublease  of the  Premises  or the
     rentals payable thereunder.  Any mortgage,  pledge,  sublease or assignment
     made in violation of this Article VIII shall be void.

     IX. FINANCIAL INFORMATION.

          9.1. Financial Statements.  Tenant will furnish to Landlord and Lender
     (i) Tenant's annual audited  financial  statements  within ninety (90) days
     after  the  end of  Tenant's  fiscal  year,  and  (ii)  Tenant's  unaudited
     quarterly financial statements within forty-five (45) days after the end of
     each quarter.

<PAGE>

     X. DEFAULT.

          10.1.  Events of Default.  Any of the  following  occurrences  or acts
     shall  constitute an event of default (herein called an "Event of Default")
     under this Lease:

          (a)  If Tenant,  at any time during the continuance of this Lease (and
               regardless  of the  pendency of any  bankruptcy,  reorganization,
               receivership,  insolvency or other proceedings at law, in equity,
               or before any administrative  tribunal,  which have or might have
               the effect of preventing  Tenant from complying with the terms of
               this Lease), shall (i) fail to make any payment when due of Basic
               Rent,  Additional Rent or other sum herein required to be paid by
               Tenant  hereunder for ten (10) days after written  notice of such
               failure;  (ii) fail to continuously  operate the Premises for the
               Intended  Use in  accordance  with the  terms and  conditions  of
               Section  1.3 of this  Lease for thirty  (30) days  after  written
               notice of such  failure;  or (iii) fail to observe or perform any
               other provision  hereof for thirty (30) days after written notice
               of such failure to observe or perform; or

          (b)  If any  representation  or  warranty of Tenant  hereunder  or set
               forth  in any  notice,  certificate,  demand,  request  or  other
               instrument  delivered  pursuant  to, or in  connection  with this
               Lease or in connection  with the  acquisition  of the Premises by
               Landlord,  shall  either prove to be false or  misleading  in any
               material  respect  as of the time when the same  shall  have been
               made and Landlord  actually  suffers damages as a proximate cause
               thereof which are not paid by Tenant; or

          (c)  If Tenant shall file a petition commencing a voluntary case under
               the Federal  Bankruptcy  Code or any federal or state law (as now
               or  hereafter  in  effect)   relating   bankruptcy,   insolvency,
               reorganization,  winding-up or  adjustment of debts  (hereinafter
               collectively  called  "Bankruptcy  Law") or if Tenant shall:  (i)
               apply for or  consent  to the  appointment  of, or the  taking of
               possession by, any receiver,  custodian,  trustee,  United States
               Trustee or liquidator (or other similar official) of the Premises
               or any part  thereof or of any  substantial  portion of  Tenant's
               property; or (ii) generally not pay its debts as they become due,
               or admit in writing its  inability to pay its debts  generally as
               they  become  due;  or (iii)  make a general  assignment  for the
               benefit of its  creditors;  or (iv) file a petition  commencing a
               voluntary  case  under  or  seeking  to  take  advantage  of  any
               Bankruptcy   Law;  or  (v)  fail  to  controvert  in  timely  and
               appropriate  manner,  or in writing  acquiesce  to, any  petition
               commencing an involuntary  case against Tenant or otherwise filed
               against Tenant  pursuant to any Bankruptcy  Law; or (vi) take any
               action in furtherance of any of the foregoing; or

          (d)  If an order for  relief  against  Tenant  shall be entered in any
               involuntary case under the Federal Bankruptcy Code or any similar
               order  against  Tenant  shall be  entered  pursuant  to any other
               Bankruptcy Law, or if a petition  commencing an involuntary  case
               against  Tenant or proposing the  reorganization  of Tenant under
               any Bankruptcy Law shall be filed and not be discharged or denied
               within ninety (90)) days after such filing, or if a proceeding or
               case shall be commenced  in any court of  competent  jurisdiction
               seeking:  (i)  the  liquidation,   reorganization,   dissolution,
               winding-up  or  adjustment  of  debts  of  Tenant;  or  (ii)  the
               appointment  of a receiver,  custodian,  trustee,  United  States
               Trustee or liquidator  (or any similar  official) of the Premises
               or any part thereof or of Tenant or of any substantial portion of
               Tenant's  property;  (iii) the  attachment of the Premises or any
               portion thereof, or (iv) any similar relief as to Tenant pursuant
               to any  Bankruptcy  Law,  and any such  proceeding  or case shall
               continue  undismissed  for ninety  (90) days after such relief is
               granted; or

<PAGE>

          (e)  If the  Premises  shall  be  left  both  unattended  and  without
               maintenance  as  provided  herein,  for a period of  thirty  (30)
               consecutive days or more; or

          (f)  If there occurs an "Event of Default" (as defined  therein) under
               any of the leases  listed on Exhibit "C" and the Event of Default
               is not cured  within the  applicable  cure period and as a result
               thereof  Landlord  either  terminates the other lease or recovers
               possession of the premises leased pursuant to the other lease.

          10.2. Landlord's Remedies.

          (a)  In the event of an Event of Default and Tenant's  failure to cure
               the Event of Default within the applicable cure period,  Landlord
               shall  have the right at its  election  to give  Tenant  ten (10)
               days'  written  notice of  Landlord's  intention to terminate the
               term of this Lease on a date specified in such notice. Thereupon,
               the  term of this  Lease  and the  estate  hereby  granted  shall
               terminate on such date as completely  and with the same effect as
               if such date were the date fixed herein for the expiration of the
               term of this  Lease,  and all  rights of Tenant  hereunder  shall
               terminate, but Tenant shall remain liable as provided herein.

          (b)  In the event of an Event of Default and Tenant's  failure to cure
               the Event of Default within the applicable cure period,  Landlord
               shall have the immediate  right,  whether or not the term of this
               Lease shall have been terminated  pursuant to Section 10.2(a), to
               (i)  re-enter and  repossess  the Premises or any part thereof by
               force,  summary  proceedings,  ejection  or  otherwise,  and (ii)
               remove  all  persons  and  property   therefrom,   Tenant  hereby
               expressly  waiving  any and all  notices to quit,  cure or vacate
               provided by current or any future law. Landlord shall be under no
               liability  by  reason  of  any  such  re-entry,  repossession  or
               removal. No such re-entry or taking of possession of the Premises
               by Landlord shall be construed as an election on Landlord's  part
               to terminate  the term of this Lease  unless a written  notice of
               such intention to be given to Tenant pursuant to Section 10.2(a).


<PAGE>

          (c)  At any time or from time to time  after the  repossession  of the
               Premises or any part thereof pursuant to Section 10.2(b), whether
               or not the term of this Lease shall have been terminated pursuant
               to  Section  10.2(a),   Landlord  may  (but  shall  be  under  no
               obligation  to) relet the  Premises  or any part  thereof for the
               account  of  Tenant,  in  the  name  of  Tenant  or  Landlord  or
               otherwise,  without  notice  to  Tenant,  for such  term or terms
               (which  may be  greater  or less  than  the  period  which  would
               otherwise have constituted the balance of the term of this Lease)
               and on such reasonable  conditions (which may include concessions
               or free  rent)  and for  such  uses as  Landlord  may  reasonably
               determine, and Landlord may collect and receive any rents payable
               by reason of such reletting. Landlord shall not be responsible or
               liable for any failure to relet the  Premises or any part thereof
               or for any  failure  to  collect  any  rent  due  upon  any  such
               reletting.

          (d)  No  termination  of the term of this  Lease  pursuant  to Section
               10.2(a), by operation of law or otherwise, and no repossession of
               the Premises or any part thereof  pursuant to Section  10.2(b) or
               otherwise,  and no  reletting of the Premises or any part thereof
               pursuant  to  Section  10.2(c),   shall  relieve  Tenant  of  its
               liabilities and obligations hereunder, all of which shall survive
               such expiration, termination, repossession or reletting.

          (e)  In the event of any such termination or repossession, Tenant will
               pay to Landlord  the Basic Rent,  Additional  Rent and other sums
               required to be paid by Tenant to and  including  the date of such
               termination  or  repossession  (together  with  interest  at  the
               Interest  Rate on past  due  amounts);  and,  thereafter,  Tenant
               shall,  until  the end of what  would  have been the term of this
               Lease in the absence of such  termination  or  repossession,  and
               whether or not the Premises or any part  thereof  shall have been
               relet,  be liable to Landlord for, and shall pay to Landlord,  as
               liquidated  and  agreed  current  damages:  (i) the  Basic  Rent,
               Additional  Rent and other sums which would be payable under this
               Lease  by  Tenant  in  the   absence  of  such   termination   or
               repossession,  less  (ii)  the  net  proceeds,  if  any,  of  any
               reletting  effected for the account of Tenant pursuant to Section
               10.2(c),  after  deducting  from such  proceeds all of Landlord's
               reasonable  out-of-pocket  expenses  incurred in connection  with
               such reletting (including,  without limitation,  all repossession
               costs,  brokerage commissions,  legal expenses,  attorneys' fees,
               employees'  expenses,   and  expenses  of  preparation  for  such
               reletting).  Tenant will pay such current  damages on the days on
               which the Basic Rent would have been payable  under this Lease in
               the absence of such  termination  or  repossession,  and Landlord
               shall be  entitled  to recover  the same from Tenant on each such
               day.

          (f)  At any time after such  termination or  repossession by reason of
               the  occurrence of any Event of Default,  whether or not Landlord
               shall have  collected  any  current  damages  pursuant to Section
               10.2(e),  Landlord shall be entitled to recover from Tenant,  and
               Tenant will pay to Landlord on demand,  as and for liquidated and
               agreed  final  damages  for  Tenant's  default and in lieu of all
               current  damages  beyond the date of such demand (it being agreed
               that it would be impracticable or extremely  difficult to fix the
               actual damages), an amount equal to the present value of all rent
               payable  under the Lease  beyond the date of such demand over the
               then  present  value  of the  then  fair  market  rental  for the
               Premises,  at the  date of such  demand  for  what  would  be the
               unexpired  term of the Lease,  which  present value shall in each
               case be determined by the application of a discount factor of ten
               percent  (10%)  per  annum.  If  any  law,   [including   without
               limitation,   California   Civil  Code  Section   1951.2  or  its
               successor,]  shall be  construed  to  limit  the  amount  of such
               liquidated  final  damages to less than the amount  above  agreed
               upon,  Landlord shall be entitled to the maximum amount allowable
               under such statute or rule of law.

<PAGE>

          (g)  Notwithstanding  anything to the contrary  stated  herein,  if an
               Event of Default shall have happened and be  continuing,  whether
               or not Tenant shall have  abandoned  the  Premises,  Landlord may
               elect  to  continue  this  Lease  in  effect  for so  long as the
               Landlord does not terminate  Tenant's  right to possession of the
               Premises  and Landlord may enforce all of its rights and remedies
               hereunder including, without limitation, the right to recover all
               Basic Rent,  Additional Rent and other sums payable  hereunder as
               the same become due. [In  connection  therewith,  Landlord  shall
               have all of its rights under California Civil Code Section 1951.4
               or its successor.]

          10.3.  Additional  Rights  of  Landlord.  No  right or  remedy  herein
     conferred  upon or reserved to Landlord is intended to be  exclusive of any
     other  right or  remedy,  and each and  every  right  and  remedy  shall be
     cumulative and in addition to any other right or remedy given  hereunder or
     now or hereafter existing at law or in equity or by statute. The failure of
     Landlord to insist at any time upon the strict  performance of any covenant
     or agreement or to exercise any option, right, power or remedy contained in
     this Lease shall not be construed as waiver or a relinquishment thereof for
     the future. A receipt by Landlord of any Basic Rent, any Additional Rent or
     any  other  sum  payable  hereunder  with  knowledge  of the  breach of any
     covenant or agreement  contained in this Lease shall not be deemed a waiver
     of such  breach,  and no waiver by Landlord of any  provision of this Lease
     shall be deemed to have been made unless expressed in writing and signed by
     Landlord.  In addition to other remedies  provided in this Lease,  Landlord
     shall be entitled, to the extent permitted by applicable law, to injunctive
     relief in case of the violation,  or attempted or threatened violation,  of
     any of the covenants,  agreements,  conditions or provisions of this Lease,
     or to a decree compelling performance of any of the covenants,  agreements,
     conditions or  provisions  of this Lease,  including but not limited to the
     provisions of this Lease setting forth Tenant's operating  covenant,  or to
     any other remedy allowed to Landlord at law or in equity.

          10.4.  Waivers by Tenant.  To the extent  permitted by applicable law,
     Tenant hereby waives and surrenders for itself and all those claiming under
     it,  including  creditors of all kinds, (i) any right or privilege which it
     or any of them may have under any present or future  construction,  statute
     or rule of law to redeem  the  Premises  or to have a  continuance  of this
     Lease for the term hereby  demised after  termination  of Tenant's right of
     occupancy  by order or  judgment  of any court or by any legal  process  or
     writ, or under the terms of this Lease or after the termination of the term
     of this Lease as herein  provided,  and (ii) the benefits of any present or
     future  constitution,  statute or rule of law which  exempts  property from
     liability for debt or for distress for rent.

          10.5.  Attorneys'  Fees.  In the  event  of an Event  of  Default  and
     Tenant's  failure to cure the Event of Default within the  applicable  cure
     period,  if an action shall be brought by Landlord for the  enforcement  of
     any  right set forth  herein  in  connection  with,  and  subject  to,  the
     indemnification  provisions contained in Section 6.10 hereof,  Tenant shall
     be liable for all of the  reasonable  out-of-pocket  expenses  incurred  by
     Landlord in connection therewith, including without limitation,  attorneys'
     fees.  However,  should Tenant  prevail in an action for violation of quiet
     enjoyment  under this Lease,  then and only in such event shall Landlord be
     liable  for  reasonable   out-of-pocket  expenses  incurred  by  Tenant  in
     connection therewith, including attorneys' fees.

<PAGE>

     XI. MISCELLANEOUS.

          11.1. Notices,  Demands and Other Instruments.  All notices,  demands,
     requests,  consents,  approvals and other instruments required or permitted
     to be given  pursuant  to the terms of this Lease  shall be in writing  and
     shall be deemed to have been properly  given if (a) with respect to Tenant,
     sent by  registered  or  certified  mail with a return  receipt  requested,
     postage  prepaid,  or sent by facsimile,  nationally  recognized  overnight
     express  carrier or delivered by hand, in each case  addressed to Tenant at
     its notice address first above set forth, and (b) with respect to Landlord,
     sent by registered or certified mail with a return receipt request, postage
     prepaid,  or sent by facsimile,  nationally  recognized  overnight  express
     courier or delivered by hand in each case, addressed to the Landlord at its
     address  first  above set forth  along with a copy to the Lender (if Tenant
     shall have been given  Lender's  address).  Landlord  and Tenant shall each
     have the right from time to time to specify as its address for  purposes of
     this Lease any other  address in the United  States of America  upon giving
     fifteen (15) days written notice  thereof,  similarly  given,  to the other
     party. Notices shall be deemed communicated upon the earlier of receipt, or
     seventy-two  (72) hours from the time of mailing if mailed as  provided  in
     this Section 11.1.

          11.2. Estoppel Certificates and Consents.

          (a)  Tenant  will,  from time to time,  upon not less than twenty (20)
               days prior  written  request by Landlord  or by Lender,  execute,
               acknowledge and deliver a certificate  certifying:  (i) that this
               Lease is  unmodified  and in full  effect (or  setting  forth any
               modifications  along  with  the  statement  that  this  Lease  as
               modified  is in full  effect  );  (ii)  that the  Basic  Rent and
               Additional  Rent  payable  and the dates to which the Basic Rent,
               Additional Rent and other sums payable  hereunder have been paid;
               (iii) that to the best  knowledge  of Tenant,  Landlord is not in
               any default of the Lease;  (iv) the  commencement  and expiration
               dates of the  Lease;  (v) the  amount  of any  security  or other
               deposits;  (vi)  that  either  Tenant  is in  possession  of  the
               Premises or who is in possession;  (vii) any concessions or other
               rights  that Tenant  (including  first  refusal,  option or other
               occupancy  claims) or  Landlord  may have;  and (viii) such other
               matters as may  reasonably be required by the  requesting  party.
               Any  such   certificate   may  be  relied  upon  by  any  Lender,
               prospective  purchaser,  or  prospective  Lender of the Premises.
               Tenant further agrees to reasonably cooperate with Lender and its
               affiliates in the  preparation of disclosure  documents which may
               be issued  in  connection  with a  secondary  market  transaction
               involving a sale or securitization of its loan.

          (b)  From time to time during the term of this Lease, Landlord expects
               to secure  financing of its interest in the Premises by assigning
               Landlord's interest in this Lease and the sums payable hereunder.
               In the event of any such  assignment to the Lender,  Tenant will,
               upon not less than  twenty  (20) days  prior  written  request by
               Landlord, execute,  acknowledge and deliver to Landlord a consent
               clearly indicating (i) that Tenant is to make Basic Rent payments
               or portions thereof directly to Lender if required by Lender, and
               (ii)  consent to such  assignment  addressed  to such Lender in a
               form satisfactory to Lender; and Tenant will produce, at Tenant's
               expense,   such  certificates  and  other  documents  as  may  be
               reasonably requested by the Lender.  Tenant acknowledges that, by
               execution hereof, it has agreed to make payments of Basic Rent or
               portions  thereof  directly to Lender,  without further notice or
               direction if required by Lender,  and  Landlord  consents to said
               payments by Tenant to Landlord.

<PAGE>

          11.3.  Determination  of Fair Market Rental Value.  Fair market rental
     value for purposes of setting  Extended Term Basic Rent shall be determined
     by an  appraisal,  which shall be  performed  by an  appraiser  selected by
     Landlord  within  thirty  (30) days after  notice to  Landlord  of Tenant's
     exercise of the option for the  applicable  Extended Term and paid one half
     by Tenant and one half by  Landlord.  Any  appraiser  selected  by Landlord
     shall  have  qualifications  that  include a  minimum  of five (5) years of
     experience in the appraisal of commercial real estate in the State in which
     the Premises are located. Such appraiser shall be disinterested,  and shall
     be a member of a nationally recognized appraisal association.  Further, any
     such  appraiser  shall  comply  with any  licensing  law then in effect for
     appraisers  authorized to perform general  appraisals within such State. If
     there  are  then any  existing  Federal  laws  governing  appraisers,  said
     appraiser shall be in compliance with the then applicable  Federal laws for
     appraisers  performing  appraisals of commercial real estate.  In the event
     that Tenant  disputes the appraised fair market rental value  determined by
     an  appraiser  (hereinafter  the  "First  Appraiser"),   who  performed  an
     appraisal pursuant to this Section 11.3, it shall so notify Landlord within
     fifteen (15) days after receipt of such written  determination by the First
     Appraiser, and the disagreement shall be resolved as follows:

          (a)  Within  five (5) days after the  service of such notice by Tenant
               to  Landlord,  Tenant  shall  designate a second  appraiser  (the
               "Second  Appraiser"),  who shall  appraise the fair market rental
               value of the  Premises.  This Second  Appraiser  shall render its
               opinion of the fair market rental value no later than thirty (30)
               days after the service of notice by Tenant stated  above.  In the
               event that the higher of the two  appraised  fair  market  rental
               values rendered herein is not more than ten percent (10%) greater
               than the lower of the two appraised  fair market  rental  values,
               then the mean between the two appraised  values shall be utilized
               to fix the appraised fair market rental value.

          (b)  In the event that the  higher of the two  appraised  fair  rental
               values is more than ten  percent  (10%)  higher than the lower of
               the two  appraised  fair  market  rental  values,  then the First
               Appraiser and the Second  Appraiser will meet within fifteen (15)
               days after  receipt and  acceptance  of the Second  Appraisal  by
               Tenant, to attempt to agree upon the appraised fair market rental
               value. If the First  Appraiser and Second  Appraiser do not agree
               upon the  appraised  fair rental value after such  meeting,  then
               they shall appoint a third appraiser (the "Third Appraiser").

          (c)  If the First and Second  Appraiser  shall be unable to agree upon
               the appointment of the Third  Appraiser  within fifteen (15) days
               after receipt and  acceptance of the Second  Appraisal by Tenant,
               then the Third  Appraiser  shall be  selected  by the  Tenant and
               Landlord  themselves.  If Tenant and Landlord cannot agree on the
               third  appraiser,  within a further period of five (5) days, then
               either,  on  behalf  of  both,  may  apply to the  United  States
               District  Court  for the  District  of  where  the  Premises  are
               located,  for the selection of the Third Appraiser.  The fees and
               costs of the Second  Appraiser  will be borne by Tenant,  and the
               fees and costs of the Third  Appraiser,  will be divided  equally
               between  Tenant  and  Landlord.  The cost of  application  to the
               United States  District  Court shall be divided  equally  between
               Tenant  and  Landlord.  In the event of the  failure,  refusal or
               inability  of any  appraiser  to act,  a new  appraiser  shall be
               appointed in its stead,  which  appointment  shall be made in the
               same manner as provided  herein;  e.g.,  if the Second  Appraiser
               must be  replaced,  then Tenant will have the right to  designate
               its replacement.  In the event that a Third Appraiser is selected
               in the manner  aforesaid,  it shall  perform an  appraisal of the
               fair market rental value of the Premises in  accordance  with the
               terms of this  Section  11.3  within  thirty  (30) days after its
               appointment.  In the event that the appraised  fair market rental
               value  rendered by the Third  Appraiser  is higher than the lower
               appraised  fair market  rental  value,  but lower than the higher
               appraised  fair  market  rental  value,  as rendered by the First
               Appraiser  and the  Second  Appraiser,  then the  appraised  fair
               market rental value rendered by the Third  Appraiser shall become
               the  appraised  value.  In the  event  that the  appraised  value
               rendered by the Third Appraiser is lower than the lower appraised
               value or higher than the higher  appraised fair rental value,  as
               rendered by the First  Appraiser  and Second  Appraiser,  than an
               Appraisal Panel shall be convened.

<PAGE>
               The "Appraisal Panel," consisting of the First,  Second and Third
               Appraiser,   shall  convene   within   fifteen  (15)  days  after
               submission  of a written  appraisal to Landlord and Tenant by the
               Third  Appraiser  (which  Third  Appraisal  does not  resolve the
               appraised  fair market  value  question in  accordance  with this
               Section  11.3).  The purpose of the  formation  of the  Appraisal
               Panel will be to attempt  to reach a decision  by two  members of
               the  Appraisal  Panel  on the  appraised  fair  rental  value.  A
               decision  joined in by any two of the appraisers of the Appraisal
               Panel shall be the decision of the Appraisal  Panel, and shall be
               binding upon the parties hereto following written notice thereof,
               which notice shall state the  appraised  fair rental value of the
               Premises.  If no two members of the Appraisal Panel can concur in
               a decision of the appraised fair rental value within fifteen (15)
               days after the submission of the appraisal by the Third Appraiser
               to the parties,  then the parties shall go to a neutral  mediator
               for  mediation.  If the  parties  are unable to agree upon a fair
               rental value through  mediation,  the matter will be submitted to
               binding  arbitration under the rules of the American  Arbitration
               Association.

          (d)  Each appraiser  shall be instructed to assume that the provisions
               of this Lease  (excluding the Basic Rent provision)  would govern
               for a five (5) year term,  that the  Premises may be used for any
               lawful commercial use (regardless of their actual use), and that,
               as set forth in the Recitals to this Lease,  the  Premises  being
               leased (and the fair market rent applicable thereto) includes the
               Land and the Improvements.

          11.4.  No  Merger.  There  shall  be no  merger  of this  Lease or the
     leasehold  estate hereby created with the fee estate in the Premises or any
     part thereof by reason of the same person acquiring or holding, directly or
     indirectly,  this  Lease or the  leasehold  estate  hereby  created  or any
     interest  in this  Lease  or in such  leasehold  estate  as well as the fee
     estate in the Premises or any portion thereof.

          11.5.  Surrender.  Upon the  termination  of this Lease,  Tenant shall
     peaceably surrender the Premises to Landlord in the same condition in which
     they were received from Landlord at the commencement of this Lease,  except
     as altered as  permitted  or  required  by this Lease and except for normal
     wear and tear.  Tenant shall remove from the Premises  prior to or within a
     reasonable time after such termination (not to exceed thirty (30) days) all
     its personal  property that is capable of removal without causing damage to
     the  Premises,  and, at Tenant's  expense,  shall at such times of removal,
     repair any damage  caused by such  removal.  Property not so removed  shall
     become  the  property  of  Landlord.  Landlord  may  thereafter  cause such
     property to be removed and  disposition  of and the cost of  repairing  any
     damage caused by such removal shall be borne by Tenant. Any holding over by
     Tenant of the Premises after the  expiration or earlier  termination of the
     term of this Lease or any extensions thereof, with the consent of Landlord,
     shall  operate and be construed  as a tenancy from month to month only,  at
     one hundred ten (110%) of the Basic Rent reserved  herein and upon the same
     terms and  conditions  as  contained  in this  Lease.  Notwithstanding  the
     foregoing,  any holding  over  without  Landlord's  consent  shall  entitle
     Landlord, in addition to collecting Basic Rent at a rate of one hundred ten
     percent (110%) thereof, to exercise all rights and remedies provided by law
     or in equity.

          11.6. Separability. Each and every covenant and agreement contained in
     this Lease is separate  and  independent,  and the breach of any thereof by
     Landlord  other than the covenant of quiet  enjoyment in Section 1.4, shall
     not discharge or relieve Tenant from any obligation hereunder.  If any term
     or  provision  of this  Lease or the  application  thereof to any person or
     circumstances  or at any time to any extent be invalid  and  unenforceable,
     the remainder of this Lease,  or the  application of such term or provision
     to persons or  circumstances or at any time other than those to which it is
     invalid or unenforceable,  shall not be affected thereby, and each term and
     provision  of this Lease shall be valid and shall be enforced to the extent
     permitted by law.

<PAGE>

          11.7. Merger, Consolidation or Sale of Assets. It shall be a condition
     precedent  to  the  merger  of  Tenant  into  another  corporation,  to the
     consolidation of Tenant with one or more other corporations and to the sale
     or other  disposition of all or  substantially  all the assets of Tenant to
     one or more other  entities  that the  surviving  entity or  transferee  of
     assets,  as the case may be,  shall  deliver to  Landlord  and to Lender an
     acknowledged  instrument  in  recordable  form  assuming  all  obligations,
     covenants and responsibilities of Tenant hereunder and under any instrument
     executed by Tenant  consenting to the assignment of Landlord's  interest in
     this Lease to the Lender as security  for  indebtedness.  Tenant  covenants
     that it will not merge or consolidate  or sell or otherwise  dispose of all
     or  substantially  all of its assets unless such an  instrument  shall have
     been so  delivered  and unless  the entity  with which it intends to merge,
     consolidate,  sell or otherwise  transfer its assets to has a credit rating
     at least equal to Tenant's then current credit rating.

          11.8.  Savings  Clause.  No  provision  contained  in this Lease which
     purports  to  obligate  Tenant to pay any amount of  interest  or any fees,
     costs  or  expenses  which  are in  excess  of  the  maximum  permitted  by
     applicable  law, shall be effective to the extent that it calls for payment
     of any interest or other sums in excess of such maximum.

          11.9. Binding Effect;  Limitation of Liability.  All of the covenants,
     conditions  and  obligations  contained in this Lease shall be binding upon
     and inure to the  benefit  of the  respective  successors  and  assigns  of
     Landlord and Tenant to the same extent as if each successor and assign were
     in each case named,  except that a successor  and assign of Landlord  shall
     only be bound as to covenants, conditions and obligations arising after the
     transfer. Notwithstanding anything to the contrary set forth in this Lease,
     if Landlord  shall fail to perform any covenant,  term or condition of this
     Lease upon Landlord's part to be performed, and if as a consequence of such
     default  Tenant shall recover a judgment  against  Landlord,  such judgment
     shall be satisfied only out of the proceeds of sale received upon execution
     of such judgment and levy thereon against the right,  title and interest of
     Landlord in the  Premises,  and  Landlord  shall not be  personally  liable
     therefor,  provided  Landlord then owns the Premises and such limitation of
     liability shall not apply if Landlord does not then own the Premises.

          11.10.  Table of Contents  and  Headings.  The table of  contents  and
     headings used in this Lease are for convenience of reference only and shall
     not to any extent have the effect of  modifying,  amending or changing  the
     provisions of this Lease.

          11.11.  Governing Law. This Lease shall be governed by and interpreted
     under the laws of the  state in which  the  Premises  is  located,  but not
     including such state's conflict of laws rules.

<PAGE>
          11.12. Certain Definitions.

          (a)  The term "Imposition" means:

               (i)  All real estate taxes imposed by governmental authorities of
                    any kind;

               (ii) All  other  taxes  and  any   payments   in  lieu   thereof,
                    assessments  (including assessments for benefits from public
                    works or  improvements,  whether  or not begun or  completed
                    prior  to the  commencement  of the term of this  Lease  and
                    whether or not to be  completed  within said term),  levies,
                    fees,  water and  sewer  rents  and  charges,  and all other
                    governmental  charges of every kind,  general  and  special,
                    ordinary  and  extraordinary,  whether or not the same shall
                    have been  within the express  contemplation  of the parties
                    hereto,  together with any interest and  penalties  thereon,
                    which are, , imposed or levied upon or assessed against: (A)
                    the Premises or any part  thereof;  (B) any Basic Rent,  any
                    Additional  Rent reserved or payable  hereunder;  and/or (C)
                    this Lease or the leasehold  estate  created hereby or which
                    arise in respect of the operation,  possession, occupancy or
                    use of the Premises,  to the extent payable during the Lease
                    Term.

               (iii)Any gross  receipts or similar taxes imposed or levied upon,
                    assessed  against or measured by the Basic Rent,  Additional
                    Rent or any other sums payable by Tenant hereunder or levied
                    upon or assessed  against the Premises to the extent payable
                    during the Lease Term;

               (iv) All  sales and use  taxes  which  may be levied or  assessed
                    against or payable by Landlord  and Tenant on account of the
                    acquisition,  leasing or use of the  Premises or any portion
                    thereof including but not limited to any taxes levied on the
                    rental  payable  hereunder to the extent  payable during the
                    Lease Term; and

               (v)  All  charges  for  water,  gas,  light,   heat,   telephone,
                    electricity,  power and other  utilities and  communications
                    services  rendered or used on or about the  Premises  during
                    the Lease Term.

<PAGE>

          (b)  The term "Landlord"  means the owner,  for the time being, of the
               rights of the lessor  under this Lease,  and its  successors  and
               assigns,  and upon any  assignment  or transfer  of such  rights,
               except  an  assignment  or  transfer  made  as  security  for  an
               obligation,  the assignor or transferor  shall be relieved of all
               future  duties and  obligations  under this Lease,  provided  the
               assignee or transferee  assumes in writing in recordable form all
               such future duties and  obligations  of Landlord and such written
               assumption is delivered to Tenant.

          (c)  The term "Lease"  means this Lease as amended and  modified  from
               time to time together with any  memorandum or short form of lease
               entered into for the purpose of recording.

          (d)  The term "Lender" means the holder of a mortgage or deed of trust
               ("Mortgage") or other security agreement  encumbering  Landlord's
               interest in the Premises  and its  successors  and  assigns.  The
               documents,  including but not limited to the Mortgage, evidencing
               and  securing  any loan  encumbering  Landlord's  interest in the
               Premises are herein called "Loan Documents".

          (e)  The  term  "Tenant's  Certificate"  means a  written  certificate
               signed by the Chairman of the Board, the Chief Executive Officer,
               the President, any Vice President or the Secretary of Tenant.

          (f)  The term  "Termination  Date"  means the date on which this Lease
               terminates  in  accordance  with  its  terms,  and  shall  be any
               business day and not a Saturday, Sunday or legal holiday.

          11.13. Exhibits. The exhibits to this Lease are hereby incorporated by
     reference  herein and made a part hereof.  The Guaranty  attached hereto as
     Exhibit B is being  executed and delivered on the  Commencement  Date,  and
     such  execution  and  delivery,  at the  election of  Landlord,  shall be a
     condition to the effectiveness of this Lease.

          11.14.   Integration.   This  Lease,   the  exhibits  hereto  and  the
     memorandum,  if any, hereof,  constitute the entire  agreement  between the
     parties hereto with regard to the subject matter hereof,  and supersede any
     prior  understandings,  agreements or  negotiations.  This Lease may not be
     amended or modified  except by a writing  executed by Tenant and  Landlord,
     with the consent of any Lender.

          11.15.  Lease  Memorandum.  Each of Landlord and Tenant shall execute,
     acknowledge  and  deliver to the other a written  memorandum  of this Lease
     ("Memorandum")  to be  recorded  in the  appropriate  land  records  of the
     jurisdiction  in which the  Premises  is  located,  in order to give public
     notice  and  protect  the  validity  of this  Lease.  In the  event  of any
     discrepancy  between the  provisions  of the  recorded  Memorandum  and the
     provisions of this Lease, the provisions of this Lease shall prevail.


<PAGE>
          11.16. Subordination to Landlord Financing.

          (a)  (i)  Subject to the  provisions  of Section  11.16(a)(ii)  below,
                    Tenant  agrees that this Lease shall at all times be subject
                    and  subordinate  to the lien of any Mortgage,  provided the
                    original  principal  amount of the Mortgage  does not exceed
                    90% of the fair market  value of the Premises at the time of
                    origination of the Mortgage and Tenant agrees,  upon demand,
                    without  cost, to execute  instruments  as may be reasonably
                    required   to   further    effectuate    or   confirm   such
                    subordination.

               (ii) Tenant's  agreement  to  subordinate  set  forth in  Section
                    11.16(a)(ii)  above is conditioned  upon the Lender agreeing
                    that:  Tenant's tenancy and Tenant's rights under this Lease
                    shall not be disturbed,  terminated  or otherwise  adversely
                    affected,  nor shall this Lease be affected,  by any default
                    under any  Mortgage,  and in the event of a  foreclosure  or
                    other enforcement of any Mortgage,  or sale in lieu thereof,
                    the  purchaser  at such  foreclosure  sale shall be bound to
                    Tenant  for the Term of this  Lease,  the  rights  of Tenant
                    under this Lease  shall  expressly  survive,  and this Lease
                    shall in all  respects  continue in full force and effect so
                    long as no Event of Default has occurred and is  continuing;
                    provided, however, that such purchaser shall not:

                    (A)  be liable for any prior act or omission of Landlord;

                    (B)  be subject  to any  defense,  counterclaim,  set-off or
                         offset which Tenant may then have against Landlord;

                    (C)  be bound by any  payment  of rent that  Tenant may have
                         made to Landlord  more than thirty (30) days before the
                         date such rent was first  due and  payable  under  this
                         Lease  with  respect  to any  period  after the date of
                         attornment  other  than,  and only to the extent  that,
                         this Lease expressly required such a prepayment;

                    (D)  be  bound by any  obligation  to make  any  payment  to
                         Tenant  which was required to be made prior to the time
                         such   successor   landlord   succeeded  to  Landlord's
                         interest;

                    (E)  be bound by any  obligation  to perform  any work or to
                         make improvements to the Premises; or

          (b)  Notwithstanding the provisions of Section 11.16(a), the holder of
               any Mortgage to which this Lease is subject and subordinate shall
               have the right,  at its sole option,  at any time, to subordinate
               and subject the  Mortgage,  in whole or in part, to this Lease by
               recording a unilateral declaration to such effect.

<PAGE>

          (c)  At any time prior to the  expiration of the Term,  Tenant agrees,
               at the  election  and upon  demand  of any  owner  of the  Leased
               Premises,  or of a  Lender  who has  granted  non-disturbance  to
               Tenant pursuant to Section  11.16(a) above, to attorn,  from time
               to  time,  to any such  owner  or  lender,  upon  the  terms  and
               conditions  of this Lease,  for the  remainder  of the Term.  The
               provisions of this Section 11.16(c) shall inure to the benefit of
               any such owner or Lender, shall apply  notwithstanding that, as a
               matter of law, this Lease may terminate  upon the  foreclosure of
               the Mortgage,  shall be self-operative  upon any such demand, and
               no further  instrument  shall be  required to give effect to said
               provisions.

          (d)  Each of Tenant, Landlord and Lender, however, upon written demand
               of the  other,  hereby  agrees  to  execute,  from  time to time,
               instruments  in  confirmation  of  the  foregoing  provisions  of
               Sections  11.16(a) and 11.16(c),  in the form customarily used by
               such Lender to the extent  consistent  with the  requirements  of
               such Sections, acknowledging such subordination,  non-disturbance
               and attornment as are provided in such Sections and setting forth
               the terms and conditions of its tenancy.

          11.17 Waiver of Statutory  Liens.Landlord  hereby  forever  waives and
     releases  any and all liens,  security  interests  and  rights of  Landlord
     created,  granted or  imposed by  statute,  law or  regulation  ("Statutory
     Liens") on, in or to any tangible  personal  property of Tenant  located at
     any time at the Premises (the "Tenant  Personalty").  Landlord acknowledges
     and agrees that Tenant may convey the Tenant Personalty, including granting
     security  interests  in the Tenant  Personalty,  from time to time free and
     clear of all  Statutory  Liens.  Landlord  and Lender  shall,  upon written
     demand of Tenant  from time to time,  execute  and  deliver to Tenant  such
     documents as may reasonably be required to evidence and confirm  Landlord's
     waiver of the Statutory Liens.

          11.18  Interest  Rate.  Any amount due from either  party to the other
     under this  Lease  which is not paid  within  ten (10) days  after  written
     notice  that such  amount was not  received  when due  (including,  without
     limitation,  amounts due as reimbursement  for costs incurred in performing
     obligations  of such party  hereunder upon its failure to so perform) shall
     bear  interest  at the prime rate of Bank of America NA  ("Interest  Rate")
     from  the date due  until  paid,  unless  otherwise  specifically  provided
     herein,  but the  payment  of such  interest  shall not  excuse or cure any
     default by Tenant under this Lease.

          11.19.  Right of First  Offer  and  First  Refusal.  [Provision  to be
     inserted if not in a separate document.]

<PAGE>
     IN WITNESS  WHEREOF,  the parties hereto have executed this Lease as of the
day and year first above set forth.

"LANDLORD"

__________________________
a ________________________

By:_______________________

Title:____________________


"TENANT"

[UGLY DUCKLING CAR SALES, INC.],
an Arizona corporation

By:_______________________

Title:____________________

By:_______________________

Title:____________________

<PAGE>

                                    GUARANTY

     THIS GUARANTY,  dated as of ________,  1998,  (together with all amendments
and supplements hereto,  referred to as this "Guaranty"),  is from UGLY DUCKLING
CORPORATION,  a corporation  organized  and existing  under the laws of Delaware
(herein,   together  with  its  successors  and  assigns,   including,   without
limitation,   any  entity  succeeding   thereto  by  merger,   consolidation  or
acquisition  of  its  assets  substantially  as  an  entirety,  referred  to  as
"Guarantor"),  to _______, a _________ (herein, together with its successors and
assigns, referred to as "Lessor").

     WHEREAS,  Ugly  Duckling Car Sales,  Inc., an Arizona  corporation  herein,
together  with  any  entity  succeeding  thereto  by  merger,  consolidation  or
acquisition  of  its  assets  substantially  as  an  entirety,  referred  to  as
"Lessee"), a subsidiary [describe relationship] of Guarantor, leased from Lessor
and Lessor has leased to Lessee a certain parcel of real property  together with
the building and  improvements  located  thereon,  and as described in Exhibit A
attached  hereto  (the  "Premises")  pursuant  to a Lease  dated as of even date
herewith, between Lessor and Lessee (the "Lease") (capitalized terms not defined
herein shall have the meanings given in the Lease); and

     WHEREAS,  the  execution  and delivery of this  Guaranty by Guarantor is an
inducement  to Lessor to enter into the Lease and Lessor has  advised  Guarantor
that it is not willing to enter into the Lease unless this  Guaranty is executed
and delivered  (the Lease and the other  documents  executed and delivered at or
prior to the  closing by Lessee,  other  documents  related to the Lease made by
Lessee to or with Lessor and all  modifications and amendments to the foregoing,
made by Lessee to or with Lessor being, collectively, the "Lease Documents");

     NOW,  THEREFORE,  in  consideration  of the  premises,  and other  valuable
consideration,  the receipt and  sufficiency  of which are hereby  acknowledged,
Guarantor agrees with Lessor as follows:

     1. Guarantor unconditionally and irrevocably guarantees (i) the payment and
performance by Lessee of all its obligations,  covenants,  agreements, terms and
conditions  under the Lease  Documents  and (ii) the prompt  payment of all sums
which may become  payable by Lessee  pursuant to any of the Lease  Documents  in
full when due in  accordance  with the  provisions  thereof.  This  Guaranty  is
irrevocable, unconditional and absolute. If for any reason any sums shall not be
paid by  Lessee  promptly  when due  (after  any  notice  required  by the Lease
Documents and prior to the expiration of any applicable period of grace provided
for in the Lease Documents), or any such agreement,  covenant, term or condition
is not performed or observed by Lessee in accordance  with the Lease  Documents,
Guarantor  promptly,  after  notice  thereof,  will pay the  same to the  person
entitled  thereto pursuant to the provisions of any such Lease Document and will
promptly perform and observe the same or cause the same promptly to be performed
or observed,  in any case  regardless of (a) any defenses or rights of setoff or
counterclaims  which Lessee or Guarantor may have or assert,  (b) whether Lessor
shall  have taken any steps to enforce  any rights  against  Lessee or any other
remedy  thereunder as a result of the default of Lessee  thereunder  and (c) any
other condition,  contingency, thing or matter whatsoever. Guarantor also agrees
to pay to  Lessor  such  further  reasonable  and  actual  amounts  as  shall be
sufficient to cover the cost and expense  actually  incurred in collecting  such
sums, or any part thereof,  or of otherwise  enforcing this Guaranty,  including
without limitation, in any case, reasonable attorneys' fees and disbursements.

     2. The  obligations,  covenants,  agreements and duties of Guarantor  under
this Guaranty shall in no way be affected or impaired by reason of the happening
from time to time of any of the  following,  although  without  notice to or the
further consent of Guarantor:

          (a) the  extension,  in whole or in part,  of the time for  payment by
     Lessee or  Guarantor  of any sums owing or  payable  under any of the Lease
     Documents  (provided,  however,  that if any such  extension  is  expressly
     granted by Lessor,  then Guarantor shall be entitled to the benefit of such
     extension);

          (b) any assignment or  reassignment  of the Lease or subletting of the
     Premises  or any part  thereof  but only  during the Lease Term and not any
     Extended Term resulting from an assignee's  exercise of an extension of the
     Lease Term;

          (c) the  modification or amendment of any of the obligations of Lessee
     under  the  Lease  Documents,  whether  the  same  be in the  form of a new
     agreement or the modification or amendment of an existing  Document (any of
     the foregoing being a "Modification"), or of Guarantor under this Guaranty;

          (d) the doing or the omission of any of the acts  (including,  without
     limitation,  the giving of any consent referred to therein)  referred to in
     the Lease Documents or this Guaranty;

          (e) any  failure,  omission or delay on the part of Lessor to enforce,
     assert or exercise any right,  power or remedy conferred on or available to
     Lessor in or by any of the Lease Documents or this Guaranty,  or any action
     on the  part  of  Lessor  granting  indulgence  or  extension  in any  form
     whatsoever  (except to the extent,  if any, that such indulgence shall have
     been expressly granted by Lessor);

          (f) the voluntary or involuntary liquidation, dissolution, sale of all
     or substantially all of the assets,  marshalling of assets and liabilities,
     receivership,   conservatorship,   custodianship,  insolvency,  bankruptcy,
     assignment  for the  benefit  of  creditors,  reorganization,  arrangement,
     composition  or  readjustment  of, or other  similar  proceeding  affecting
     Lessee or Guarantor or any of their assets;

          (g) the  inability of Lessor or Lessee,  respectively,  to enforce any
     provision of the Lease Documents or this Guaranty, for any reason;

          (h) any change in the relationship between Lessee and Guarantor or any
     termination of such relationship;

          (i) the inability of Lessee to perform, or, to the extent permitted by
     applicable  law, the release of Lessee or Guarantor from the performance of
     any obligation,  agreement, covenant, term or condition of Lessee under any
     of the Lease Documents by reason of any law,  regulation or decree,  now or
     hereafter in effect; or

          (j) any action or inaction by Lessor which  results in any  impairment
     or  destruction  of any  subrogation  rights of  Guarantor or any rights of
     Guarantor to proceed against Lessee for reimbursement.

     3. In the event of the rejection or disaffirmance of the Lease by Lessee or
Lessee's receiver  pursuant to any law affecting  creditor's  rights,  Guarantor
will,  and does hereby  (without the necessity of any further  agreement or act)
assume all  obligations  and  liabilities  of Lessee under or arising out of the
Lease, to the same extent as if Guarantor had been  originally  named the lessee
under  the  Lease,  and  there  had  been no such  rejection  or  disaffirmance;
Guarantor will confirm such assumption in writing at the request of Lessor, upon
or after such rejection or disaffirmance. Guarantor, upon such assumption, shall
have all rights of Lessee  under the Lease and shall be  entitled to a new lease
on all of the terms and  conditions  of the Lease with respect to the  unexpired
portion of the Lease (to the extent  permitted by law).  Guarantor  will execute
and deliver such documents as Lessor may from time to time reasonably require to
evidence such assumption, to confirm this Guaranty and to certify that Guarantor
is not in default hereunder.

     4. Notice of acceptance of this Guaranty and notice of any  obligations  or
liabilities  contracted  or incurred by Lessee under any of the Lease  Documents
are hereby waived by Guarantor.

     5. This  Guaranty  shall be  construed in  accordance  with the laws of the
state in which the Premises are located.

     6. This Guaranty may not be modified or amended except by written agreement
duly executed by Guarantor with the consent in writing of Lessor and any Lender.

     7.  [Guarantor  is a company  required  to file  certain  reports  with the
Securities  and Exchange  Commission  ("SEC").  Guarantor will deliver to Lessor
within 30 days of filing  with the SEC (other than on a  confidential  basis) or
otherwise making public, copies of all financial statements,  8-K, 10-K and 10-Q
reports,   and  notices  and  proxy   statements   sent  by   Guarantor  to  its
stockholders.]

     8. Guarantor  waives any right it may have (a) to require Lessor to proceed
against Lessee or against any other party or (b) to require Lessor to pursue any
remedy  within  the  power  of the  Lessor  and  Guarantor  agrees  that  all of
Guarantor's  obligations  under this Guaranty are independent of the obligations
of Lessee under the Lease Documents or under any other  instrument or agreement,
and that a separate  action may be brought against  Guarantor  whether or not an
action is commenced against Lessee under any thereof.

     9. All  notices  given  pursuant to this  Guaranty  shall be in writing and
shall be validly  given when sent by a courier or express  service  guaranteeing
overnight  delivery  and which  will  upon  request  provide  a receipt  of such
delivery or by certified letter return receipt requested,  and all other notices
shall be validly  given when  addressed  as set forth  below.  If this  Guaranty
provides for a designated  period after notice  within which to perform any act,
such period shall commence on the date of receipt or refusal of such notice.  If
this Guaranty  requires the exercise of a right by notice on or before a certain
date or within a designated period,  such right shall be deemed exercised on the
date of receipt or refusal  of  receipt of such  notice  pursuant  to which such
right is exercised.

                  Notices shall be addressed as follows:

                  If to Lessor:


                  If to Guarantor:          Ugly Duckling Corporation
                                            Attention:  General Counsel
                                            2525 East Camelback Road, Suite 1150
                                            Phoenix, Arizona  85016

Lessor and Lessee each may from time to time specify,  by giving 15 days' notice
to each other party,  (i) any other  address in the United States as its address
for purposes of this  Guaranty and (ii) any other person or entity in the United
States  that is to  receive  copies  of  notices,  offers,  consents  and  other
instruments hereunder.

     10. Guarantor hereby consents to, and no further consent by Guarantor shall
be required for, (i) any assignment of rights of Lessor  hereunder,  in whole or
in part,  either as collateral  security for  obligations of Lessor secured by a
lien on the  Premises  or in  connection  with the sale of the  Premises  or any
interest therein or (ii) any assignment of the rights of Lessor under the Lease.
Lessor will give notice to Guarantor of any such assignment, but a failure to do
so will not  result  in any  liability  on  Lessor,  affect  in any  manner  the
enforceability of this Guaranty,  the rights and remedies of Lessor hereunder or
the obligations of Guarantor hereunder.

     11.  In  case  any one or more of the  provisions  hereof  or of the  Lease
Documents shall be held to be invalid,  illegal or unenforceable in any respect,
such  invalidity,  illegality  or  unenforceability  shall not  affect any other
provision  hereof  and this  Guaranty  shall be  construed  as if such  invalid,
illegal or unenforceable provision had never been contained herein.

     12. Guarantor shall not, directly or indirectly,  without the express prior
written  consent  of  Lessor,  which may be  withheld  by Lessor in its sole and
absolute  discretion,  (i) merge into or consolidate with any other corporation,
partnership  or any other entity  ("Person") or permit any other Person to merge
into or consolidate  with  Guarantor;  (ii) sell,  lease,  transfer,  abandon or
otherwise  dispose of all or  substantially  all of  Guarantor's  properties  or
assets;  or (iii)  sell or offer  for sale any  shares of  capital  stock or any
securities convertible into, or any rights to acquire,  shares of capital stock,
unless in each case, of each of (i),  (ii) or (iii) above,  Guarantor' s ability
to perform all of its  obligations  under this Guaranty (in Landlord's  opinion)
will not be impaired  after giving  effect to such  transaction.  Within 10 days
following the merger of Guarantor into another corporation, or the consolidation
of  Guarantor  with  one or  more  other  corporations  or  the  sale  or  other
disposition of all or  substantially  all the assets of Guarantor to one or more
other entities,  the surviving  entity or transferee of assets,  as the case may
be,  shall  deliver to Lessor an  acknowledged  instrument  in  recordable  form
assuming all obligations,  covenants and responsibilities of Guarantor hereunder
and under this Guaranty.

     13. Lessor will accept  performance by Guarantor of any of the  obligations
guaranteed  under the Lease  Documents as if such  performance  had been made by
Lessee;  provided,  however,  that the  foregoing  shall  not be deemed to be an
agreement  by  Lessor  to  allow  access  to the  Premises  in order to cure any
default,  it being  acknowledged that any such right of access shall be obtained
by Guarantor  pursuant to a separate agreement with Lessee (and Lessor agrees to
recognize  any such rights of access which are so granted,  provided that Lessor
shall have received appropriate written notice thereof).

     14. This Guaranty shall be binding upon, and inure to the benefit of and be
enforceable by, the Guarantor,  the Lessor,  the Lessee,  any Lender,  and their
respective successors and assigns.

     15.  Guarantor  further  agrees  that,  to the  extent  that the  Lessee or
Guarantor  makes a payment or payments to the Lessor,  which payment or payments
or any part thereof are subsequently  invalidated,  declared to be fraudulent or
preferential,  set aside  and/or  required  to be  repaid  to the  Lessee or the
Guarantor or their respective estate trustee,  receiver or any other party under
any bankruptcy  law, state or federal law, common law or equitable laws, then to
the extent of such payment or repayment,  this Guaranty and the advances or part
thereof  which have been paid,  reduced or  satisfied  shall be  reinstated  and
continued  in  full  force  and  effect  as of the  date  such  initial  payment
reduction, or satisfaction occurred.

     16.  Guarantor  shall have no rights  (direct or indirect) of  subrogation,
contribution,  reimbursement,  indemnification  or  other  right of  payment  or
recovery from any person or entity (including,  without limitation,  the Lessee)
for any payments made by the Guarantor  hereunder,  and Guarantor  hereby waives
and releases,  absolutely and  unconditionally,  any such right of  subrogation,
contribution, reimbursement,  indemnification and other rights or recovery which
it may nor or hereafter acquire.

                                             Ugly Duckling Corporation,
                                             a Delaware corporation

                                             By:
                                             Title:

                                             By:
                                             Title: