EXHIBIT 10.6


                          INDUSTRIAL REAL ESTATE LEASE
                            (SINGLE TENANT NET FORM)

ARTICLE ONE:  BASIC TERMS

         This  Article One  contains  the Basic Terms of this Lease  between the
Landlord and Tenant named below. Other Articles,  Sections and Paragraphs of the
Lease referred to in this Article One explain and define the Basic Terms and are
to be read in conjunction with the Basic Terms.

         Section 1.01. Date of Lease: February 25, 1998.

         Section 1.02. Landlord (include legal entity): Palo Cristi Airpark III,
L.L.C.,  and  Arizona  limited  liability  company,  whose  address  is 15685 N.
Greenway-Hayden Loop, Suite 200, Scottsdale, AZ 85260.

         Section  1.03.   Tenant   (include   legal   entity):   Premium  Cigars
International,  LTD. an Arizona corporation, whose address is 15651 N. 83rd Way,
Suite 3, Scottsdale, AZ 85260.

         Section 1.04.  Property:  The Property is Landlord's 20,434 approximate
s.f. real property  located at 15849 N. 77th Street,  Scottsdale,  AZ 85260-1754
and described or depicted in Exhibit "A" (the  "Project").  The Project includes
the land,  the buildings  and all other  improvements  located on the land.  The
Properly is will be improved  substantially  in  accordance  with the space plan
("Exhibit  B") and the Standard  Tenant  Improvements  and  Allowances  schedule
("Exhibit C"), both attached hereto and incorporated herein by reference.

         Section  1.05.  Lease Term:  Five (5) years  beginning  May 1, 1998 and
ending on April 30, 2003.

         a) Delay in  Possession:  If for any  reason  Landlord  cannot  deliver
possession  of the Property to Tenant by April 15, 1998,  Landlord  shall not be
subject to any liability therefor, nor shall such failure affect the validity of
this Lease or the obligations of Tenant hereunder, but in such case Tenant shall
receive one (1) day of free Base Rent for each day of delay. *

* Notwithstanding the foregoing,  if Landlord does not deliver possession of the
Property to Tenant on or before May 1, 1998 (except as for delays as a result of
acts of God),  Landlord  shall pay to Tenant a per day penalty of $1,000 payable
on Monday of each  applicable  week. If Landlord does not deliver  possession of
the Property to Tenant on or before May 15, 1998,  in addition to the  foregoing
remedies, Tenant may at its option cancel this Lease.

         b) Option to Extend:  Provided  Tenant is not then in  default,  Tenant
shall have the option to extend the Lease Term for one additional three (3) year
period by giving  Landlord  notice one  hundred  twenty  (120) days prior to the
expiration  of the  original  Lease  Term.  In such  event the Base Rent for the
extended Lease Term shall be the then existing market rental rate
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for an approximate 20,000 s.f.  comparable properly which is 100% airconditioned
with 50% office and 50%  warehouse,  but in no event lower than  $19,000.00  per
month.

         Section 1.06.  Permitted Uses: (See Article Five) Corporate  office and
warehousing/distribution of Premium Cigars International related products.

         Section 1.07. Tenant's Guarantor: None.

         Section 1.08. Brokers. Landlord's Broker: Classic Real Estate; Tenant's
Broker: Grubb and Ellis

         Section 1.09.  Commission  Payable to Landlord's  Broker:  (See Article
Fourteen) By separate agreement.

         Section 1.10. Initial Security Deposit: (See Section 3.03) $18,000.00.

         Section 1.11. Vehicle Parking Spaces Allocated to Tenant:  (See Section
4.05) 10 covered, 100% open.

         Section 1.12. Rent and Other Charges Payable by Tenant:

         (a) Base Rent:  Eighteen  Thousand and no/100 Dollars  ($18,000.00) per
month for months 1 through 36, Nineteen Thousand and no/100 Dollars ($19,000.00)
for months 37 through 60.

         (b) OTHER  PERIODIC  PAYMENTS:  (i) Real  Property  Taxes (See  Section
4.02); (ii) Utilities (See Section 4.03);  (iii) Insurance Premiums (See Section
4.04);  (iv) Tenant's Pro Rata Share of Common Area Expenses (100%) (See Section
4.05); (v) ---- Impounds for Insurance  Premiums and Property Taxes (See Section
4.08); (vi) Maintenance, Repairs and Alterations (See Article Six).

         Section  1.13.  Landlord's  Share of Profit on  Assignment or Sublease:
(See Section 9.05) 100%) of the Profit (the "Landlord's Share").

         Section 1.14 Riders:  The  following  Riders are attached to and made a
part of this Lease: None.

         Section  2.01.  Lease of Property For Lease Term.  Landlord  leases the
Property to Tenant and Tenant  leases the Property  from  Landlord for the Lease
Term.  The Lease Term is for the period  stated in Section  1.05 above and shall
begin and end on the dates specified in Section 1.05 above, unless the beginning
or end of the Lease Term is  changed  under any  provision  of this  Lease.  The
"Commencement  Date" shall be the date  specified  in Section 1.05 above for the
beginning of the Lease Term,  unless  advanced or delayed under any provision of
this Lease.
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         Section 2.02.  Delay in  Commencement.  Except as provided in paragraph
1.05(a)  herein.  Landlord  shall not be liable to Tenant if  Landlord  does not
deliver  possession  of  the  Property  to  Tenant  on  the  Commencement  Date.
Landlord's  non-delivery of the Property to Tenant on that date shall not affect
this  Lease or the  obligations  of Tenant  under  this  Lease  except  that the
Commencement  Date shall be delayed until  Landlord  delivers  possession of the
Property  to Tenant and the Lease Term shall be extended  for a period  equal to
the delay in delivery of possession  of the Property to Tenant,  plus the number
of days necessary to end the Lease Term on the last day of a month.  If Landlord
does not deliver  possession of the Property to Tenant on or before May 15, 1998
Date, Tenant may elect to cancel this Lease by giving written notice to Landlord
ends.  If Tenant  gives such notice,  the Lease shall be  cancelled  and neither
Landlord nor Tenant shall have any further  obligation  to the other.  If Tenant
does not give such notice,  Tenant's  right to cancel the Lease shall expire and
the Lease Term shall commence upon the delivery of possession of the Property to
Tenant. If delivery of possession of the Property to Tenant is delayed, Landlord
and Tenant shall, upon such delivery, execute an amendment to this Lease setting
forth the actual Commencement Date and expiration date of the Lease.  Failure to
execute  such  amendment  shall not  affect  the  actual  Commencement  Date and
expiration date of the Lease.

         Section 2.03. Early Occupancy.  f Tenant occupies the Property prior to
the Commencement  Date,  Tenant's  occupancy of the Property shall be subject to
all of the provisions of this Lease.  Early  occupancy of the Property shall not
advance the  expiration  date of this Lease.  Tenant shall pay all other charges
except Base Rent specified in this Lease for the early occupancy period.

         Section 2.04.  Holding Over.  Tenant shall vacate the Property upon the
expiration or earlier termination of this Lease. Tenant shall reimburse Landlord
for and  indemnify  Landlord  against all  damages  which  Landlord  incurs from
Tenant's delay in vacating the Property.  If Tenant does not vacate the Property
upon the expiration or earlier  termination of the Lease and Landlord thereafter
accepts  rent  from  Tenant,  Tenant's  occupancy  of the  Property  shall  be a
"month-to-month"  tenancy,  subject to all of the terms of this Lease applicable
to a month-to- month tenancy,  except that the Base Rent then in effect shall be
increased by fifteen percent (15%).

ARTICLE THREE:  BASE RENT

         Section 3.01. Time and Manner of Payment. Upon execution of this Lease,
Tenant  shall pay  Landlord  the Base  Rent in the  amount  stated in  Paragraph
1.12(a)  above for the first  month of the Lease  Term.  On the first day of the
second  month of the Lease  Term and each  month  thereafter,  Tenant  shall pay
Landlord the Base Rent, in advance,  without offset,  deduction or prior demand.
The Base Rent shall be payable at  Landlord's  address or at such other place as
Landlord may designate in writing.

         Section 3.02. Deleted.
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         Section 3.03. Security Deposit; Increases.

         (a) Upon  the  execution  of this  Lease,  Tenant  shall  deposit  with
Landlord a cash Security  Deposit in the amount set forth in Section 1.10 above.
Landlord  may apply all or part of the  Security  Deposit to any unpaid  rent or
other  charges  due from  Tenant or to cure any other  defaults  of  Tenant.  If
Landlord  uses  any part of the  Security  Deposit,  Tenant  shall  restore  the
Security  Deposit  to its full  amount  within  ten (10) days  after  Landlord's
written  request.  Tenant's  failure to do so shall be a material  default under
this Lease.  No interest shall be paid on the Security  Deposit.  Landlord shall
not be required to keep the Security  Deposit  separate from its other  accounts
and no trust relationship is created with respect to the Security Deposit.

         (b)  Each  Time  the  Base  Rent is  increased,  Tenant  shall  deposit
additional funds with Landlord sufficient to increase the Security Deposit to an
amount  which  bears  the same  relationship  to the  adjusted  Base Rent as the
initial Security Deposit bore to the initial Base Rent.

         Section 3.04.  Termination;  Advance Payments. Upon termination of this
Lease under Article Seven (Damage or Destruction),  Article Eight (Condemnation)
or any other termination not resulting from Tenant's  default,  and after Tenant
has vacated the Property in the manner  required by this Lease,  Landlord  shall
refund or credit to Tenant (or  Tenant's  successor)  the unused  portion of the
Security  Deposit,  any advance rent or other advance payments made by Tenant to
Landlord,  and any amounts paid for real property taxes and other reserves which
apply to any time periods after termination of the Lease.

ARTICLE FOUR:  OTHER CHARGES PAYABLE BY TENANT

         Section 4.01. Additional Rent. All charges payable by Tenant other than
Base Rent are called  "Additional  Rent." Unless this Lease provides  otherwise,
Tenant shall pay all Additional Rent then due with the next monthly  installment
of Base Rent. The term "rent" shall mean Base Rent and Additional Rent.

         Section 4.02. Property Taxes.

         (a) Real Property  Taxes.  Tenant shall pay all real property  taxes on
the Property  (including any fees, taxes or assessments  against, or as a result
of, any tenant  improvements  installed on the Property by or for the benefit of
Tenant)  during the Lease Term.  Subject to  Paragraph  4.02(c) and Section 4.07
below,  such  payment  shall  be  made at  least  ten  (10)  days  prior  to the
delinquency  date of the taxes.  Within such ten (10) day period,  Tenant  shall
furnish  Landlord with  satisfactory  evidence that the real property taxes have
been paid.  Landlord shall reimburse  Tenant for any real property taxes paid by
Tenant  covering any period of time prior to or after the Lease Term.  If Tenant
fails to pay the real  property  taxes when due,  Landlord may pay the taxes and
Tenant shall reimburse Landlord for the amount of such tax payment as Additional
Rent.
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         (b) Definition of "Real  Property Tax." "Real property tax" means:  (i)
any fee, license fee, license tax, business license fee,  commercial rental tax,
levy, charge, assessment, penalty or tax imposed by any taxing authority against
the Property;  (ii) any tax on the Landlord's  right to receive,  or the receipt
of, rent or income from the Property or against  Landlord's  business of leasing
the Property; (iii) any tax or charge for fire protection,  streets,  sidewalks,
road  maintenance,  refuse or other  services  provided  to the  Property by any
governmental  agency; (iv) any tax imposed upon this transaction or based upon a
re-assessment  of the  Property  due to a change of  ownership,  as  defined  by
applicable  law, or other transfer of all or part of Landlord's  interest in the
Property; and (v) any charge or fee replacing any tax previously included within
the  definition  of real property tax.  "Real  property tax" does not,  however,
include  Landlord's  federal or state income,  franchise,  inheritance or estate
taxes.

         (c) Joint  Assessment.  If the  Property  is not  separately  assessed,
Landlord  shall  reasonably  determine  Tenant's  share of the real property tax
payable by Tenant under  Paragraph  4.02(a) from the  assessor's  worksheets  or
other reasonably available information.  Tenant shall pay such share to Landlord
within fifteen (15) days after receipt of Landlord's written statement.

         (d) Personal Property Taxes.

              (i) Tenant shall pay all taxes  charged  against  trade  fixtures,
         furnishings,  equipment  or any other  personal  property  belonging to
         Tenant.  Tenant shall try to have personal  property  taxed  separately
         from the Property.

              (ii) If any of  Tenant's  personal  property  is  taxed  with  the
         Property, Tenant shall pay Landlord the taxes for the personal property
         within fifteen (15) days after Tenant receives a written statement from
         Landlord for such personal property taxes.

         (e)  Tenant's  Right to Contest  Taxes.  Tenant may attempt to have the
assessed  valuation  of the  Property  reduced or may  initiate  proceedings  to
contest the real property taxes. If required by law,  Landlord shall join in the
proceedings  brought  by  Tenant.  However,  Tenant  shall  pay all costs of the
proceedings,  including any costs or fees  incurred by Landlord.  Upon the final
determination  of any proceeding or contest,  Tenant shall  immediately  pay the
real  property  taxes  due,  together  with all  costs,  charges,  interest  and
penalties  incidental  to the  proceedings.  If  Tenant  does  not pay the  real
property taxes when due and contests such taxes,  Tenant shall not be in default
under this Lease for  nonpayment  of such  taxes if Tenant  deposits  funds with
Landlord or opens an interest-bearing  account reasonably acceptable to Landlord
in the joint names of Landlord and Tenant.  The amount of such deposit  shall be
sufficient  to pay the real  property  taxes plus a  reasonable  estimate of the
interest,  costs,  charges and penalties  which may accrue if Tenant's action is
unsuccessful,  less any  applicable  tax impounds  previously  paid by Tenant to
Landlord.  The  deposit  shall be applied  to the real  property  taxes due,  as
determined  at such  proceedings.  The real  property  taxes shall be paid under
protest from such deposit if such payment  under protest is necessary to prevent
the  Property  from  being  sold  under  a "tax  sale"  or  similar  enforcement
proceeding.
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         Section 4.03. Utilities.  Tenant shall pay, directly to the appropriate
supplier,  the cost of all natural  gas,  heat,  light,  power,  sewer  service,
telephone,  water,  refuse disposal and other utilities and services supplied to
the Property.  However,  if any services or utilities  are jointly  metered with
other  property,  Landlord  shall make a  reasonable  determination  of Tenant's
proportionate  share of the cost of such utilities and services and Tenant shall
pay such share to Landlord  within fifteen (15) days after receipt of Landlord's
written statement.

         Section 4.04. Insurance Policies.

         (a) Liability Insurance. During the Lease Term, Tenant shall maintain a
policy of commercial general liability insurance  (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury,  property damage (including loss of use of property) and personal
injury  arising out of the operation,  use or occupancy of the Property.  Tenant
shall name  Landlord as an  additional  insured  under such policy.  The initial
amount  of  such  insurance  shall  be  One  Million  Dollars  ($1,000,000)  per
occurrence  and shall be  subject to  periodic  increase  based upon  inflation,
increased liability awards,  recommendation of Landlord's professional insurance
advisers and other relevant factors.  The liability insurance obtained by Tenant
under this  Paragraph  4.0(a)  shall (i) be primary and  non-contributing;  (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant's
performance  under  Section  5.05,  if the matters  giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance  shall not limit Tenant's  liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability  insurance  in an amount  and with  coverage  determined  by  Landlord
insuring Landlord against liability arising out of ownership,  operation, use or
occupancy  of the  Property.  The  policy  obtained  by  Landlord  shall  not be
contributory and shall not provide primary insurance.

         (b)  Property  and Rental  Income  Insurance.  During  the Lease  Term,
Landlord shall maintain policies of insurance  covering loss of or damage to the
Property in the full amount of its  replacement  value.  Landlord shall obtain 3
bids for such  insurance  policies and select the lowest bid.  Such policy shall
contain an inflation Guard Endorsement and shall provide  protection against all
perils included within the classification of fire, extended coverage, vandalism,
malicious  mischief,  special extended perils (all risk),  sprinkler leakage and
any other perils which Landlord deems reasonably necessary.  Landlord shall have
the right to obtain  flood and  earthquake  insurance  if required by any lender
holding a security interest in the Property. Landlord shall not obtain insurance
for Tenant's fixtures or equipment or building improvements  installed by Tenant
on the Property.  During the Lease Term,  Landlord  shall also maintain a rental
income insurance  policy,  with loss payable to Landlord,  in an amount equal to
one year's Base Rent plus estimated real property taxes and insurance  premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord's
or Tenant's insurance policies  maintained  pursuant to this Section 4.04, in an
amount not to exceed  Two  Thousand  Dollars  ($2,000).  Tenant  shall not do or
permit anything to be done which invalidates any such insurance policies.
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         (c) Payment of Premiums.  Subject to Section 4.07, Tenant shall pay all
premiums for the  insurance  policies  described in  Paragraphs  4.04(a) and (b)
(whether obtained by Landlord or Tenant) within fifteen (15) days after Tenant's
receipt of a copy of the premium  statement or other evidence of the amount due,
except  Landlord  shall pay all premiums for  non-primary  comprehensive  public
liability  insurance  which  Landlord  elects to obtain as provided in Paragraph
4.04(a). If insurance policies maintained by Landlord cover improvements on real
property  other than the Property,  Landlord shall deliver to Tenant a statement
of the premium  applicable  to the  Property  showing in  reasonable  detail how
Tenant's share of the premium was computed. If the Lease Term expires before the
expiration of an insurance policy maintained by Landlord, Tenant shall be liable
for Tenant's prorated share of the insurance  premiums.  Before the Commencement
Date,  Tenant shall deliver to Landlord a copy of any policy of insurance  which
Tenant is required to maintain  under this  Section  4.04.  At least thirty (30)
days  prior to the  expiration  of any such  policy,  Tenant  shall  deliver  to
Landlord a renewal of such policy.  As an  alternative  to providing a policy of
insurance,  Tenant  shall have the right to provide  Landlord a  certificate  of
insurance,  executed by an authorized officer of the insurance company,  showing
that the insurance  which Tenant is required to maintain under this Section 4.04
is in full force and effect and containing such other information which Landlord
reasonably requires. *

*Tenant  shall have the right to approve the  insurance  carrier  and  insurance
coverage prior to paying any insurance premiums.

         (d) General Insurance Provisions.

              (i) Any insurance  which Tenant is required to maintain under this
         Lease shall include a provision which requires the insurance carrier to
         give Landlord not less than thirty (30) days'  written  notice prior to
         any cancellation or modification of such coverage.

              (ii) If Tenant fails to deliver any policy, certificate or renewal
         to Landlord required under this Lease within the prescribed time period
         or if any such policy is  cancelled  or modified  during the Lease Term
         without  Landlord's  consent,  Landlord may obtain such  insurance,  in
         which  case  Tenant  shall  reimburse  Landlord  for  the  cost of such
         insurance  within  fifteen (15) days after receipt of a statement  that
         indicates the cost of such insurance.

              (iii) Tenant  shall  maintain all  insurance  required  under this
         Lease  with  companies  holding a  "General  Policy  Rating" of A-12 or
         better,  as set forth in the most  current  issue of "Best  Key  Rating
         Guide".  Landlord  and Tenant  acknowledge  the  insurance  markets are
         rapidly  changing and that insurance in the form and amounts  described
         in  this  Section  4.04  may not be  available  in the  future.  Tenant
         acknowledges  that the insurance  described in this Section 4.04 is for
         the primary benefit of Landlord.  If at any time during the Lease Term,
         Tenant is unable to maintain the  insurance  required  under the Lease,
         Tenant  shall   nevertheless   maintain  insurance  coverage  which  is
         customary and  commercially  reasonable  in the insurance  industry for
         Tenant's type of business, as that
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         coverage may change from time to time. Landlord makes no representation
         as to the adequacy of such insurance to protect  Landlord's or Tenant's
         interests.  Therefore, Tenant shall obtain any such additional property
         or liability insurance which Tenant deems necessary to protect Landlord
         and Tenant.

              (iv) Unless  prohibited  under any applicable  insurance  policies
         maintained, Landlord and Tenant each hereby waive any and all rights of
         recovery against the other, or against the officers,  employees, agents
         or  representatives of the other, for loss of or damage to its property
         or the property of others under its control,  if such loss or damage is
         covered by any insurance  policy in force  (whether or not described in
         this  Lease) at the time of such loss or  damage.  Upon  obtaining  the
         required  policies of insurance,  Landlord and Tenant shall give notice
         to the insurance carriers of this mutual waiver of subrogation.

         Section 4.05. Deleted.

         Section  4.06.  Interest  on Past Due  Obligations.  Any amount owed by
Tenant to Landlord which is not paid when due shall bear interest at the rate of
fifteen  percent  (15%) per  annum  from the due date of such  amount.  However,
interest  shall not be payable on late  charges to be paid by Tenant  under this
Lease.  The  payment of interest  on such  amounts  shall not excuse or cure any
default by Tenant under this Lease. If the interest rate specified in this Lease
is higher than the rate permitted by law, the interest rate is hereby  decreased
to the maximum legal interest rate permitted by law.

         Section 4.07.  Impounds for Insurance Premiums and Real Property Taxes.
Tenant shall pay Landlord a sum equal to  one-twelfth  (1/12) of the annual real
property  taxes and  insurance  premiums  payable by Tenant  under  this  Lease,
together with each payment of Base Rent.  Landlord shall hold such payments in a
non-interest  bearing impound  account.  If unknown,  Landlord shall  reasonably
estimate the amount of real  property  taxes and  insurance  premiums  when due.
Tenant shall pay any deficiency of funds in the impound account to Landlord upon
written  request.  If Tenant  defaults under this Lease,  Landlord may apply any
funds in the impound account to any obligation then due under this Lease.

ARTICLE FIVE:  USE OF PROPERTY.

         Section 5.01.  Permitted Uses. Tenant may use the Property only for the
Permitted Uses set forth in Section 1.06 above.

         Section  5.02.  Manner of Use.  Tenant  shall  not cause or permit  the
Property  to be  used in any way  which  constitutes  a  violation  of any  law,
ordinance, or governmental regulation or order, which interferes with the rights
of other tenants of Landlord,  or which constitutes a nuisance or waste.  Tenant
shall  obtain and pay for all permits,  including a  Certificate  of  Occupancy,
required for Tenant's  occupancy  of the  Property and shall  promptly  take all
actions  necessary to comply with all applicable  statutes,  ordinances,  rules,
regulations, orders and
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requirements  regulating  the  use by  Tenant  of the  Property,  including  the
Occupational Safety and Health Act.

         Section  5.03.  Hazardous  Materials.  As used in this Lease,  the term
"Hazardous  Material"  means  any  flammable  items,   explosives,   radioactive
materials,  hazardous  or  toxic  substances,   material  or  waste  or  related
materials,  including any substances defined as or included in the definition of
"hazardous  substances",  "hazardous  wastes",  "hazardous  materials" or "toxic
substances" now or subsequently regulated under any applicable federal, state or
local  laws  or  regulations,   including  without  limitation   petroleum-based
products,   paints,   solvents,   lead,  cyanide,  DDT,  printing  inks,  acids,
pesticides,  ammonia compounds and other chemical products,  asbestos,  PCBs and
similar compounds,  and including any different products and materials which are
subsequently  found to have adverse effects on the environment or the health and
safety of persons  except  warehousing/distribution  of cigars and related cigar
products and other consumer packaged goods. Tenant shall not cause or permit any
Hazardous  Materials to be  generated,  produced,  brought upon,  used,  stored,
treated  or  disposed  of in or  about  the  Property  by  Tenant,  its  agents,
employees, contractors, sublessees or invitees without the prior written consent
of Landlord.  Landlord shall be entitled to take into account such other factors
or facts as Landlord  may  reasonably  determine  to be relevant in  determining
whether to grant or withhold consent to Tenant's  proposed activity with respect
to  Hazardous  Material.  In no event,  however,  shall  Landlord be required to
consent to the installation or use of any storage tanks on the Property.

         Section 5.04.  Signs and Auctions.  Tenant shall not place any signs on
the Property without Landlord's prior written consent.  Tenant shall not conduct
or permit any auctions or sheriff's sales at the Property.

         Section 5.05.  Indemnity.  Tenant shall indemnify  Landlord against and
hold Landlord harmless from any and all costs, claims or liability arising from:
(a)  Tenant's  use of the  Property;  (b) the  conduct of  Tenant's  business or
anything  else done or permitted by Tenant to be done in or about the  Property,
including any contamination of the Property or any other property resulting from
the presence or use of Hazardous Material caused or permitted by Tenant; (c) any
breach or default in the performance of Tenant's  obligations  under this Lease;
(d) any  misrepresentation  or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant.  Tenant shall defend Landlord against any
such cost,  claim or  liability  at Tenant's  expense  with  counsel  reasonably
acceptable  to Landlord  or, at  Landlord's  election,  Tenant  shall  reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord,  Tenant assumes
all risk of damage to  property  or injury to persons  in or about the  Property
arising from any cause,  and Tenant hereby waives all claims in respect  thereof
against  Landlord,  except  for  any  claim  arising  out  of  Landlord's  gross
negligence or willful  misconduct.  As used in this  Section,  the term "Tenant"
shall  include  Tenant's  employees,   agents,   contractors  and  invitees,  if
applicable. Landlord shall indemnify Tenant from damages or injury to any person
arising from the use of the common areas arising from  Landlord's  negligence in
maintaining the common areas.
                                        9
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         Section 5.06.  Landlord's Access.  Landlord or its agents may enter the
Property  at all  reasonable  times to show the  Property to  potential  buyers,
investors  or tenants or other  parties;  to do any other act or to inspect  and
conduct  tests in order  to  monitor  Tenant's  compliance  with all  applicable
environmental  laws and all laws  governing  the  presence  and use of Hazardous
Material; or for any other purpose Landlord deems necessary. Landlord shall give
Tenant prior notice of such entry, except in the case of an emergency.  Landlord
may place customary "For Sale" or "For Lease" signs on the Property.

         Section 5.07.  Quiet  Possession.  If Tenant pays the rent and complies
with all other terms of this Lease, Tenant may occupy and enjoy the Property for
the full Lease Term, subject to the provisions of this Lease.

ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE, REPAIRS AND ALTERATIONS

         Section 6.01. Existing  Conditions.  Tenant accepts the Property in its
condition  as of the  execution of the Lease,  subject lo all recorded  matters,
laws,  ordinances,  and governmental  regulations and orders. Except as provided
herein,  Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any  representalion  as to the condition of the Property or the suitability
of the Property for Tenant's  intended use. Tenant  represents and warrants that
Tenant has made its own inspection of and inquiry regarding the condition of the
Property  and is not  relying on any  representations  of Landlord or any Broker
with respect thereto.  If Landlord or Landlord's  Broker has provided a Property
Information Sheet or other Disclosure  Statement regarding the Property,  a copy
is attached as an exhibit to the Lease.

         Section 6.02. Exemption of Landlord from Liability.  Landlord shall not
be liable  for any  damage or injury  to the  person,  business  (or any loss of
income  therefrom),  goods,  wares,  merchandise  or other  property  of Tenant,
Tenant's  employees,  invitees,  customers  or any other  person in or about the
Properly,  whether such damage or injury is caused by or results from: (a) fire,
steam, electricity,  water, gas or rain; (b) the breakage, leakage,  obstruction
or  other  defects  of  pipes,  sprinklers,  wires,  appliances,  plumbing,  air
conditioning or lighting fixtures or any other cause; (c) conditions  arising in
or about the  Property  or upon other  portions  of the  Project,  or from other
sources  or  places;  or (d) any act or  omission  of any  other  tenant  of the
Project.  Landlord shall not be liable for any such damage or injury even though
the cause of or the means of repairing  such damage or injury are not accessible
to Tenant.  The  provisions  of this  Section  6.02 shall now,  however,  exempt
Landlord from liability for Landlord's gross negligence or willful misconduct.

         Section  6.03.  Landlord's  Obligations.  Subject to the  provisions of
Article Seven (Damage or Destruction) and Article Eight (Condemnation), Landlord
shall have  absolutely  no  responsibility  to repair,  maintain  or replace any
portion of the Property at any time except  Landlord  shall be  responsible  for
maintenance of the roof.  Tenant also beneficiary of warranties on HVAC Systems.
If Landlord does have responsibility to repair or replace any portion of the
                                       10
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property and fails to do so, within three (3) business  days,  Tenant may at its
option  make such  repairs  and deduct the cost of such  repairs due to Landlord
from the rent.

         Section 6.04. Tenant's Obligations.

         (a) Except as  provided  in  Article  Seven  (Damage  or  Destruction),
Section 6.03  (maintaining  the roof) and Article Eight  (Condemnation),  Tenant
shall keep all portions of the Property  (including  structural,  nonstructural,
interior,  exterior, and landscaped areas,  portions,  systems and equipment) in
good order, condition and repair (including interior repainting and refinishing,
as needed).  If any portion of the  Property or any system or  equipment  in the
Property  which  Tenant is  obligated  to repair  cannot  be fully  repaired  or
restored,  Tenant shall promptly  replace such portion of the Property or system
or  equipment  in the  Property,  regardless  of  whether  the  benefit  of such
replacement  extends beyond the Lease Term; but if the benefit or useful life of
such replacement  extends beyond the Lease Term (as such term may be extended by
exercise of any options),  the useful life of such replacement shall be prorated
over the remaining portion of the Lease Term (as extended),  and Tenant shall be
liable only for that portion of the cost which is  applicable  to the Lease Term
(as extended). Tenant shall maintain a preventive maintenance contract providing
for the regular  inspection and maintenance of the heating and air  conditioning
system by a licensed heating and air conditioning contractor. If any part of the
Property is damaged by any act or omission of Tenant,  Tenant shall pay Landlord
the cost of  repairing  or  replacing  such  damaged  property,  whether  or nol
Landlord  would  otherwise  be  obligated  to pay  the  cost of  maintaining  or
repairing such property.  It is the intention of Landlord and Tenant that at all
times  Tenant  shall  maintain  the  portions of the  Property  which  Tenant is
obligated  to  maintain  in  an  attractive,  first-class  and  fully  operative
condition.

         (b) Tenant shall fulfill all of Tenant's obligations under this Section
6.04 at Tenant's  sole expense.  If Tenant fails to maintain,  repair or replace
the Property as required by this Section 6.04, Landlord may, upon ten (10) days'
prior  notice to Tenant  (except that no notice shall be required in the case of
an  emergency),  enter the  Property  and  perform  such  maintenance  or repair
(including  replacement,  as needed) on behalf of Tenant.  In such case,  Tenant
shall reimburse  Landlord for all costs incurred in performing such  maintenance
or repair immediately upon demand.

         Section 6.05. Alterations, Additions, and Improvements.

         (a) Tenant shall not make any alterations,  additions,  or improvements
to  the  Property  without   Landlord's   prior  written  consent,   except  for
non-structural alterations which do not exceed Ten Thousand Dollars ($10,000) in
cost cumulatively over the Lease Term and which are not visible from the outside
of any  building of which the Property is part.  Landlord may require  Tenant to
provide  demolition  and/or  lien  and  completion  bonds  in  form  and  amount
satisfactory  to  Landlord.   Tenant  shall  promptly  remove  any  alterations,
additions,  or improvements  constructed in violation of this Paragraph  6.05(a)
upon Landlord's written request.  Ail alterations,  additions,  and improvements
shall be done in a good and workmanlike manner,
                                       11
<PAGE>
in conformity  with all  applicable  laws and  regulations,  and by a contractor
approved by Landlord.  Upon  completion  of any such work,  Tenant shall provide
Landlord with "as built" plans, copies of all construction contracts,  and proof
of payment for all labor and materials.

         (b)  Tenant  shall  pay when due all  claims  for  labor  and  material
furnished to the Property. Tenant shall give Landlord at least twenty (20) days'
prior written notice of the commencement of any work on the Property, regardless
of whether  Landlord's  consent to such work is required.  Landlord may elect to
record and post notices of non-responsibility on the Property.

         Section 6.06.  Condition upon Termination.  Upon the termination of the
Lease,  Tenant shall surrender the Property to Landlord,  broom clean and in the
same  condition as received  except for ordinary  wear and tear which Tenant was
not otherwise  obligated to remedy under any  provision of this Lease.  However,
Tenant shall not be obligated to repair any damage which Landlord is required to
repair under Article Seven (Damage or  Destruction).  in addition,  Landlord may
require Tenant to remove any alterations,  additions or improvements (whether or
not made with  Landlord's  consent)  prior to the expiration of the Lease and to
restore  the  Property to its prior  condition,  all at  Tenant's  expense.  All
alterations,  additions and improvements  which Landlord has not required Tenant
to remove shall become Landlord's  property and shall be surrendered to Landlord
upon the expiration or earlier  termination of the Lease, except that Tenant may
remove any of  Tenant's  machinery  or  equipment  which can be removed  without
material damage to the Property.  Tenant shall repair, at Tenant's expense,  any
damage to the Property caused by the removal of any such machinery or equipment.
In no event,  however,  shall Tenant  remove any of the  following  materials or
equipment (which shall be deemed Landlord's  property) without  Landlord's prior
written  consent:  any  power  wiring  or power  panels;  lighting  or  lighting
fixtures; wall coverings;  drapes, blinds or other window coverings;  carpets or
other floor  coverings;  heaters,  air  conditioners or any other heating or air
conditioning  equipment;  fencing or security gates;  or other similar  building
operating equipment and decorations.

ARTICLE SEVEN:  DAMAGE OR DESTRUCTION

         Section 7.01. Partial Damage to Property.

         (a)  Tenant  shall  notify  Landlord  in writing  immediately  upon the
occurrence  of any damage to the  Property.  If the  Property is only  partially
damaged (i.e.,  less than fifty percent (50%) of the Property is untenantable as
a result of such damage or less than fifty percent (50%) of Tenant's  operations
are  materially  impaired)  and if the  proceeds  received by Landlord  from the
insurance policies described in Paragraph, 4.04(b) are sufficient to pay for the
necessary  repairs,  this Lease shall remain in effect and Landlord shall repair
the damage within thirty (30) days.  Landlord may elect (but is not required) to
repair any damage to Tenant's fixtures, equipment, or improvements.
                                       12
<PAGE>
         (b) If the insurance  proceeds  received by Landlord are not sufficient
to pay the entire  cost of repair,  or if the cause of the damage is not covered
by the insurance  policies which Landlord  maintains  under  Paragraph  4.04(b),
Landlord  may  elect  either to (i)  repair  the  damage  as soon as  reasonably
possible,  in which case this Lease shall  remain in full force and  effect,  or
(ii)  terminate  this Lease as of the date the damage  occurred.  Landlord shall
notify Tenant within thirty (30) days after receipt of notice of the  occurrence
of the damage  whether  Landlord  elects to repair the damage or  terminate  the
Lease.  If Landlord  elects to repair the damage,  Tenant shall pay Landlord the
"deductible amount" (if any) under Landlord's  insurance  policies.  If Landlord
elects to terminate  the Lease,  Tenant may elect to continue this Lease in full
force and effect,  in which case Tenant  shall repair any damage to the Property
and any building in which the Property is located.  Tenant shall pay the cost of
such repairs, except that upon satisfactory completion of such repairs, Landlord
shall  deliver to Tenant any  insurance  proceeds  received by Landlord  for the
damage  repaired by Tenant.  Tenant shall give Landlord  written  notice of such
election within ten (10) days after receiving Landlord's termination notice.

         (c) If the damage to the property occurs during the last six (6) months
of the Lease Term and such  damage  will  require  more than thirty (30) days to
repair,  either  Landlord or Tenant may elect to terminate  this Lease as of the
date  the  damage  occurred,  regardless  of the  sufficiency  of any  insurance
proceeds.  The party  electing  to  terminate  this  Lease  shall  give  written
notification  to the other party of such election  within thirty (30) days after
Tenant's notice to Landlord of the occurrence of the damage.

         Section  7.02.  Substantial  or Total  Destruction.  If the Property is
substantially or totally  destroyed by any cause whatsoever (i.e., the damage to
the Property is greater than partial damage as described in Section  7.01),  and
regardless of whether Landlord receives any insurance proceeds, this Lease shall
terminate as of the date the destruction occurred. Notwithstanding the preceding
sentence,  if the Property can be rebuilt within thirty (30) days after the date
of  destruction,  Landlord may elect to rebuild the Property at  Landlord's  own
expense,  in which  case  this  Lease  shall  remain in full  force and  effect.
Landlord  shall notify  Tenant of such  election  within  thirty (30) days after
Tenant's  notice  of the  occurrence  of total or  substantial  destruction.  If
Landlord so elects,  Landlord  shall  rebuild the  Property at  Landlord's  sole
expense,  except  that if the  destruction  was caused by an act or  omission of
Tenant,  Tenant  shall pay Landlord  the  difference  between the actual cost of
rebuilding and any insurance proceeds received by Landlord.

         Section 7.03. Temporary Reduction of Rent. If the Property is destroyed
or damaged and Landlord or Tenant  repairs or restores the Property  pursuant to
the provisions of this Article Seven, any rent payable during the period of such
damage,  repair and/or  restoration shall be reduced according to the degree, if
any, to which Tenant's use of the Property is impaired.  However,  the reduction
shall not exceed the sum of one year's payment of Base Rent,  insurance premiums
and real  property  taxes.  Except  for such  possible  reduction  in Base Rent,
insurance premiums and real property taxes,  Tenant shall not be entitled to any
compensation,  reduction,  or  reimbursement  from  Landlord  as a result of any
damage, destruction, repair, or restoration of or to the Property.
                                       13
<PAGE>
         Section 7.04. Waiver. Tenant waives the protection of any statute, code
or judicial decision which grants a tenant the right to terminate a lease in the
event of the  substantial or total  destruction of the leased  property.  Tenant
agrees that the  provisions  of Section  7.02 above shall  govern the rights and
obligations  of  Landlord  and Tenant in the event of any  substantial  or total
destruction to the Property.

ARTICLE EIGHT:  CONDEMNATION

         If all or any  portion  of the  Property  is taken  under  the power of
eminent  domain or sold  under the threat of that power (all of which are called
"Condemnation"),  this Lease shall terminate as to the part taken or sold on the
date the condemning authority takes title or possession, whichever occurs first.
If more than twenty percent (20%) of the floor area of the building in which the
Property  is  located,  or which is located on the  Property,  is taken,  either
Landlord  or  Tenant  may  terminate  this  Lease as of the date the  condemning
authority takes title or possession,  by delivering  written notice to the other
within ten (10) days after  receipt of written  notice of such taking (or in the
absence of such  notice,  within ten (10) days  after the  condemning  authority
takes title or  possession).  If neither  Landlord  nor Tenant  terminates  this
Lease,  this Lease shall  remain in effect as to the portion of the Property not
taken,  except  that the Base  Rent and  Additional  Rent  shall be  reduced  in
proportion to the reduction in the floor area of the Property.  Any Condemnation
award or payment shall be distributed in the following  order: (a) first, to any
ground lessor,  mortgagee or beneficiary  under a deed of trust  encumbering the
Property,  the amount of its interest in the  Property;  (b) second,  to Tenant,
only the amount of any award  specifically  designated  for loss of or damage to
Tenant's  trade  fixtures or  removable  personal  property;  and (c) third,  to
Landlord,  the remainder of such award, whether as compensation for reduction in
the value of the leasehold,  the taking of the fee, or otherwise.  If this Lease
is not  terminated,  Landlord shall repair any damage to the Property  caused by
the  Condemnation,  except that  Landlord  shall not be  obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority.  If the
severance  damages  received  by  Landlord  are not  sufficient  to pay for such
repair,  Landlord  shall have the right to either  terminate  this Lease or make
such repair at Landlord's expense.

ARTICLE NINE:  ASSIGNMENT AND SUBLETTING

         Section 9.01.  Landlord's Consent Required.  No portion of the Property
or of Tenant's  interest  in this Lease may be  acquired by any other  person or
entity, whether by sale, assignment,  mortgage, sublease, transfer, operation of
law, or act of Tenant,  without  Landlord's  prior  written  consent,  except as
provided in Section 9.02 below.  Landlord has the right to grant or withhold its
consent as  provided in Section  9.05  below.  Any  attempted  transfer  without
consent shall be void and shall constitute a non-curable breach of this Lease.

         Section 9.0. Tenant Affiliate. Tenant may assign this Lease or sublease
the Property,  without Landlord's consent, to any corporation which controls, is
controlled  by or is under common  control with  Tenant,  or to any  corporation
resulting from the merger of or
                                       14
<PAGE>
consolidation  with Tenant  ("Tenant's  Affiliate").  In such case, any Tenant's
Affiliate shall assume in writing all of Tenant's obligations under this Lease.

         Section  9.03.  No Release of Tenant.  No  transfer  permitted  by this
Article Nine, whether with or without Landlord's  consent,  shall release Tenant
or change  Tenant's  primary  liability to pay the rent and to perform all other
obligations of Tenant under this Lease.  Landlord's  acceptance of rent from any
other person is not a waiver of any provision of this Article  Nine.  Consent to
one transfer is not a consent to any subsequent transfer. If Tenant's transferee
defaults under this Lease,  Landlord may proceed directly against Tenant without
pursuing  remedies  against the  transferee.  Landlord may consent to subsequent
assignments  or  modifications  of this Lease by  Tenant's  transferee,  without
notifying  Tenant or  obtaining  its  consent.  Such  action  shall not  relieve
Tenant's liability under this Lease.

         Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease
or sublease the Property,  Tenant shall have the right to offer, in writing,  to
terminate the Lease as of a date specified in the offer.  If Landlord  elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer,  the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing  termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise  terminated and
the  provisions  of Section  9.05 with respect to any  proposed  transfer  shall
continue to apply.

         Section 9.05. Landlord's Consent.

         (a) Tenant's  request for consent to any transfer  described in Section
9.01 shall set forth in writing the details of the proposed transfer,  including
the name,  business  and  financial  condition  of the  prospective  transferee,
financial  details of the proposed  transfer (e.g., the term of and the rent and
security  deposit  payable under any proposed  assignment or sublease),  and any
other  information  Landlord  deems  relevant.  Landlord shall have the right to
withhold  consent,  if reasonable,  or to grant consent,  based on the following
factors: (i) the business of the proposed assignee or subtenant and the proposed
use of the Property; (ii) the net worth and financial reputation of the proposed
assignee or subtenant;  (iii) Tenant's  compliance  with all of its  obligations
under the Lease;  and (iv) such other  factors as Landlord may  reasonably  deem
relevant. If Landlord objects to a proposed assignment solely because of the net
worth  and/or  financial  reputation  of  the  proposed  assignee,   Tenant  may
nonetheless  sublease (but not assign),  all or a portion of the Property to the
proposed transferee, but only on the other terms of the proposed transfer.

         (b) If Tenant assigns or subleases, the following shall apply:

              (i) Tenant  shall pay to  Landlord  as  Additional  Rent under the
         Lease the  Landlord's  Share  (stated  in  Section  1.13) of the Profit
         (defined  below) on such  transaction  as and when  received by Tenant,
         unless  Landlord  gives  written  notice to Tenant and the  assignee or
         subtenant  that  Landlord's  Share  shall  be paid by the  assignee  or
         subtenant to Landlord directly. The "Profit" means (A) all amounts paid
         to Tenant for such assignment or
                                       15
<PAGE>
         sublease,  including "key" money, monthly rent in excess of the monthly
         rent payable under the Lease, and all fees and other consideration paid
         for the  assignment or sublease,  including  fees under any  collateral
         agreements,  less (B) costs and expenses directly incurred by Tenant in
         connection  with the execution and  performance  of such  assignment or
         sublease for real estate  broker's  commissions and costs of renovation
         or construction of tenant  improvements  required under such assignment
         or  sublease.  Tenant is  entitled to recover  such costs and  expenses
         before Tenant is obligated to pay the Landlord's Share to Landlord. The
         Profit in the case of a sublease  of less than all the  Property is the
         rent  allocable  to the  subleased  space as a  percentage  on a square
         footage basis.

              (ii) Tenant shall provide Landlord a written statement  certifying
         all amounts to be paid from any  assignment or sublease of the Property
         within thirty (30) days after the transaction  documentation is signed,
         and  Landlord  may  inspect  Tenant's  books and  records to verity the
         accuracy of such statement.  On written request,  Tenant shall promptly
         furnish to Landlord copies of all the transaction documentation, all of
         which shall be certified  by Tenant to be  complete,  true and correct.
         Landlord's  receipt of  Landlord's  Share shall not be a consent to any
         further  assignment or  subletting.  The breach of Tenant's  obligation
         under this Paragraph 9.05(b) shall be a material default of the Lease.

         Section 9.06. No Merger.  No merger shall result from Tenant's sublease
of the Property under this Article Nine, Tenant's surrender of this Lease or the
termination of this Lease in any other manner.  In any such event,  Landlord may
terminate  any or all  subtenancies  or  succeed  to the  interest  of Tenant as
sublandlord under any or all subtenancies.

ARTICLE TEN:  DEFAULTS; REMEDIES

         Section 10.01.  Covenants and Conditions.  Tenant's performance of each
of Tenant's  obligations  under this Lease is a condition as well as a covenant.
Tenant's  right to continue in  possession of the Property is  conditioned  upon
such performance. Time is of the essence in the performance of all covenants and
conditions.

         Section 10.02. Defaults. Tenant shall be in material default under this
Lease:

         (a) If Tenant  abandons  the  Property or if  Tenant's  vacation of the
Property results in the cancellation of any insurance described in Section 4.04;

         (b) If Tenant  fails to pay rent or any other charge when due, and such
failure  continues for ten business days following  written notice from Landlord
to Tenant thereof;

         (c) If  Tenant  fails  to  perform  any of  the  Tenant's  non-monetary
obligations  under  this Lease for a period of thirty  (30) days  after  written
notice from  Landlord;  provided that if more than thirty (30) days are required
to complete such performance, Tenant shall not be in default if Tenant commences
such performance within the thirty (30)-day period and thereafter diligently
                                       16
<PAGE>
pursues its  completion.  However,  Landlord  shall not be required to give such
notice if Tenant's failure to perform  constitutes a non-curable  breach of this
Lease.  The notice required by this Paragraph is intended to satisfy any and all
notice  requirements  imposed by law on  Landlord  and is not in addition to any
such requirement.

         (d) (i) If Tenant makes a general assignment or general arrangement for
the benefit of creditors;  (ii) if a petition for  adjudication of bankruptcy or
for  reorganization  or  rearrangement  is filed by or against Tenant and is not
dismissed  within thirty (30) days;  (iii) if a trustee or receiver is appointed
to take  possession  of  substantially  all of  Tenant's  assets  located at the
Property or of Tenant's interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially  all of Tenant's assets
located at the  Property or of Tenant's  interest in this Lease is  subjected to
attachment,  execution or other judicial seizure which is not discharged  within
thirty (30) days. If a court of competent  jurisdiction  determines  that any of
the acts described in this  subparagraph  (d) is not a default under this Lease,
and a trustee is appointed to take  possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers  Tenant's  interest  hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.

         (e) If any guarantor of the Lease revokes or otherwise  terminates,  or
purports to revoke or otherwise terminate, any guaranty of all or any portion of
Tenant's  obligations under the Lease. Unless otherwise  expressly provided,  no
guaranty of the Lease is revocable.

         Section 10.03.  Remedies.  On the occurrence of any material default by
Tenant,  Landlord may, at any time thereafter,  with or without notice or demand
and  without  limiting  Landlord in the  exercise  of any right or remedy  which
Landlord may have:

         (a)  Terminate  Tenant's  right to  possession  of the  Property by any
lawful  means,  in which  case this  Lease  shall  terminate  and  Tenant  shall
immediately  surrender  possession  of the Property to Landlord.  In such event,
Landlord  shall be  entitled  to recover  from  Tenant all  damages  incurred by
Landlord by reason of Tenant's  default,  including (i) the worth at the time of
the award of the  unpaid  Base Rent,  Additional  Rent and other  charges  which
Landlord had earned at the time of the  termination;  (ii) the worth at the time
of the award of the amount by which the unpaid  Base Rent,  Additional  Rent and
other charges which Landlord would have earned after  termination until the time
of the award exceeds the amount of such rental loss that Tenant proves  Landlord
could have reasonably  avoided;  (iii) the worth at the time of the award of the
amount by which the unpaid Base Rent,  Additional  Rent and other  charges which
Tenant would have paid for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant  proves  Landlord  could have
reasonably  avoided;  and (iv) any other amount necessary to compensate Landlord
for all the  detriment  proximately  caused by  Tenant's  failure to perform its
obligations  under the Lease or which in the ordinary  course of things would be
likely to result therefrom,  including, but not limited to, any cost or expenses
Landlord  incurs in  maintaining  or preserving the Property after such default,
the cost of  recovering  possession  of the  Property,  expenses  of  reletting,
including necessary renovation or
                                       17
<PAGE>
alteration of the Property,  Landlord's  reasonable  attorneys' fees incurred in
connection therewith, and any real estate commission paid or payable. As used in
subparts (i) and (ii) above, the "worth at the time of the award" is computed by
allowing  interest on unpaid  amounts at the rate of fifteen  percent  (15%) per
annum,  or such lesser amount as may then be the maximum lawful rate. As used in
subpart  (iii)  above,  the  "worth  at the time of the  award" is  computed  by
discounting  such amount at the discount rate of the Federal Reserve Bank of San
Francisco  at the time of the  award,  plus one  percent  (1%).  If  Tenant  has
abandoned  the  Property,  Landlord  shall  have  the  option  of  (i)  retaking
possession of the Property and  recovering  from Tenant the amount  specified in
this Paragraph 10.03(a), or (ii) proceeding under Paragraph 10.03(b);

         (b) Deleted.

         (c) Pursue any other  remedy now or  hereafter  available  to  Landlord
under the laws or  judicial  decisions  of the state in which  the  Property  is
located.

         Section  10.04.  Repayment of "Free" Rent. If this Lease provides for a
postponement  of any monthly rental  payments,  a period of "free" rent or other
rent concession, such postponed rent or "free" rent is called the "Abated Rent".
Tenant  shall  be  credited  with  having  paid  all of the  Abated  Rent on the
expiration  of the  Lease  Term  only  if  Tenant  has  fully,  faithfully,  and
punctually  performed  all of  Tenant's  obligations  hereunder,  including  the
payment  of all rent  (other  than  the  Abated  Rent)  and all  other  monetary
obligations and the surrender of the Property in the physical condition required
by this  Lease.  Tenant  acknowledges  that its right to receive  credit for the
Abated Rent is absolutely  conditioned upon Tenant's full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any  applicable  grace  period,  the Abated  Rent shall  immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession.  In such case Abated Rent shall
be calculated based on the full initial rent payable under this Lease.

         Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act  which  affirms  the  Landlord's  intention  to  terminate  the Lease as
provided in Section 10.03 hereof,  including the filing of an unlawful  detainer
action against Tenant. On such termination, Landlord's damages for default shall
include all costs and fees, including  reasonable  attorneys' fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy  restraining any action to evict
Tenant;  or the  pursuing  of any action  with  respect to  Landlord's  right to
possession of the Property.  All such damages suffered (apart from Base Rent and
other rent payable  hereunder) shall constitute  pecuniary damages which must be
reimbursed  to  Landlord  prior to  assumption  of the  Lease by  Tenant  or any
successor to Tenant in any bankruptcy or other proceeding.
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<PAGE>
         Section 10.06. Cumulative Remedies. Landlord's exercise of any right or
remedy shall not prevent it from exercising any other right or remedy.

ARTICLE ELEVEN:  PROTECTION OF LENDERS

         Section  11.01.  Subordination.   Landlord  shall  have  the  right  to
subordinate  this  Lease  to  any  ground  lease,  deed  of  trust  or  mortgage
encumbering  the  Property,  any advances  made on the security  thereof and any
renewals,  modifications,  consolidations,  replacements or extensions  thereof,
whenever made or recorded.  Tenant shall  cooperate with Landlord and any lender
which is  acquiring  a security  interest in the  Property or the Lease.  Tenant
shall execute such further  documents and assurances as such lender may require,
provided  that Tenant's  obligations  under this Lease shall not be increased in
any  material  way (the  performance  of  ministerial  acts  shall not be deemed
material),  and Tenant  shall not be  deprived  of its rights  under this Lease.
Tenant's right to quiet  possession of the Property  during the Lease Term shall
not be  disturbed  if  Tenant  pays  the  rent  and  performs  all  of  Tenant's
obligations  under this Lease and is not  otherwise  in  default.  If any ground
lessor,  beneficiary or mortgagee elects to have this Lease prior to the lien of
its ground lease,  deed of trust or mortgage and gives written notice thereof to
Tenant,  this Lease shall be deemed prior to such ground lease, deed of trust or
mortgage  whether  this Lease is dated prior or  subsequent  to the date of said
ground lease, deed of trust or mortgage or the date of recording thereof.

         Section 11.02.  Attornment.  If Landlord's  interest in the Property is
acquired by any ground lessor,  beneficiary under a deed of trust, mortgagee, or
purchaser at a  foreclosure  sale,  Tenant shall attorn to the  transferee of or
successor to Landlord's  interest in the Property and recognize such  transferee
or successor as Landlord  under this Lease.  Tenant waives the protection of any
statute  or rule of law which  gives or  purports  to give  Tenant  any right to
terminate  this Lease or surrender  possession of the Property upon the transfer
of Landlord's interest.

         Section 11.03. Signing of Documents.  Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written  request,  Tenant hereby makes,  constitutes  and irrevocably
appoints   Landlord,   or  any   transferee   or  successor  of  Landlord,   the
attorney-in-fact  of  Tenant to  execute  and  deliver  any such  instrument  or
document.

         Section 11.04. Estoppel Certificates.

         (a) Upon Landlord's written request, Tenant shall execute,  acknowledge
and deliver to  Landlord a written  statement  certifying:  (i) that none of the
terms or  provisions  of this  Lease  have  been  changed  (or if they have been
changed,  stating how they have been changed); (ii) that this Lease has not been
cancelled  or  terminated;  (iii) the last date of  payment of the Base Rent and
other charges and the time period covered by such payment; (iv) that Landlord is
not in default  under this Lease (or,  if  Landlord is claimed to be in default,
stating why); and (v) such other  representations or information with respect to
Tenant or the Lease as Landlord may
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<PAGE>
reasonably  request or which any  prospective  purchaser or  encumbrancer of the
Property may require. Tenant shall deliver such statement to Landlord within ten
(10) days after  Landlord's  request.  Landlord  may give any such  statement by
Tenant to any  prospective  purchaser  or  encumbrancer  of the  Property.  Such
purchaser or encumbrancer may rely  conclusively upon such statement as true and
correct.

         (b) If Tenant does not deliver such  statement to Landlord  within such
ten (10)-day period,  Landlord,  and any prospective  purchaser or encumbrancer,
may conclusively  presume and rely upon the following facts:  that the terms and
provisions of this Lease have not been changed  except as otherwise  represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise  represented  by  Landlord;  (iii) that not more than one month's Base
Rent or other  charges have been paid in advance;  and (iv) that Landlord is not
in default under the Lease. In such event, Tenant shall be estopped from denying
the truth of such facts.

         Section 11.05. Tenant's Financial Condition. Within ten (10) days after
written  request from Landlord,  Tenant shall deliver to Landlord such financial
statements as Landlord  reasonably requires to verify the net worth of Tenant or
any  assignee,  subtenant,  or  guarantor of Tenant.  In addition,  Tenant shall
deliver to any lender designated by Landlord any financial  statements  required
by such lender to  facilitate  the  financing or  refinancing  of the  Property.
Tenant represents and warrants to Landlord that each such financial statement is
a true and accurate  statement as of the date of such  statement.  All financial
statements  shall be  confidential  and shall be used only for the  purposes set
forth in this Lease.

ARTICLE TWELVE:  LEGAL COSTS

         Section  12.01.  Legal  Proceedings.  If Tenant or Landlord shall be in
breach or default under this Lease,  such party (the  "Defaulting  Party") shall
reimburse the other party (the "Nondefaulting  Party") upon demand for any costs
or expenses that the Nondefaulting Party incurs in connection with any breach or
default  of the  Defaulting  Party  under  this  Lease,  whether  or not suit is
commenced or judgment  entered.  Such costs shall  include  legal fees and costs
incurred  for  the  negotiation  of  a  settlement,  enforcement  of  rights  or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is  entered,  a  reasonable  sum as  attorneys'  fees and
costs. The losing party in such action shall pay such attorneys' fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action  (a)  instituted  by Tenant  against  any
third party, or by any third party against  Tenant,  or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant;  (b) for  foreclosure of any lien for labor or material  furnished to or
for Tenant or such other person;  (c) otherwise arising out of or resulting from
any act or  transaction  of Tenant or such other  person;  or (d)  necessary  to
protect  Landlord's  interest  under this Lease in a bankruptcy  proceeding,  or
other  proceeding  under Title 11 of the United States Code, as amended.  Tenant
shall defend Landlord against any such claim or action at Tenant's
                                       20
<PAGE>
expense  with  counsel  reasonably  acceptable  to  Landlord  or, at  Landlord's
election,  Tenant shall reimburse  Landlord for any legal fees or costs Landlord
incurs in any such claim or action.

         Section  12.02.   Landlord's  Consent.   Tenant  shall  pay  Landlord's
reasonable  attorneys'  fees  incurred in connection  with Tenant's  request for
Landlord's  consent  under  Article  Nine  (Assignment  and  Subletting),  or in
connection  with any other act which  Tenant  proposes to do and which  requires
Landlord's consent.

ARTICLE THIRTEEN:  MISCELLANEOUS PROVISIONS

         Section  13.01.  Non-Discrimination.  Tenant  promises,  and  it  is  a
condition to the continuance of this Lease, that there will be no discrimination
against, or segregation of, any person or group of persons on the basis of race,
color,  sex,  creed,  national  origin or ancestry in the  leasing,  subleasing,
transferring, occupancy, tenure or use of the Property or any portion thereof.

         Section 13.02. Landlord's Liability; Certain Duties.

         (a) As used in this Lease,  the term "Landlord"  means only the current
owner or owners of the fee title to the Property or the leasehold estate under a
ground lease of the Property at the time in question. Each Landlord is obligated
to perform the  obligations  of  Landlord  under this Lease only during the time
such Landlord owns such interest or title.  Any Landlord who transfers its title
or interest is relieved of all  liability  with  respect to the  obligations  of
Landlord  under this  Lease to be  performed  on or after the date of  transfer.
However,  each Landlord  shall deliver to its  transferee  all funds that Tenant
previously  paid if such funds have not yet been applied under the terms of this
Lease.

         (b) Tenant  shall give  written  notice of any  failure by  Landlord to
perform any of its  obligations  under this Lease to Landlord  and to any ground
lessor,  mortgagee  or  beneficiary  under  any  deed of trust  encumbering  the
Property  whose  name and  address  have been  furnished  to Tenant in  writing.
Landlord  shall not be in  default  under this Lease  unless  Landlord  (or such
ground  lessor,  mortgagee or  beneficiary)  fails to cure such  non-performance
within  thirty (30) days after  receipt of  Tenant's  notice.  However,  if such
non-performance reasonably requires more than thirty (30) days to cure, Landlord
shall not be in default if such cure is  commenced  within such thirty  (30)-day
period and thereafter diligently pursued to completion.

         (c) Notwithstanding  any term or provision herein to the contrary,  the
liability of Landlord for the  performance of its duties and  obligations  under
this Lease is limited to Landlord's  interest in the  Property,  and neither the
Landlord nor its partners, shareholders, officers or other principals shall have
any personal liability under this Lease.

         Section 13.03.  Severability.  A determination  by a court of competent
jurisdiction  that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or
                                       21
<PAGE>
invalidate the remainder of such provision or this Lease,  which shall remain in
full force and effect.

         Section 13.04. Interpretation. The captions of the Articles or Sections
of this Lease are to assist the parties in reading this Lease and are not a part
of the terms or  provisions of this Lease.  Whenever  required by the context of
this Lease,  the singular  shall include the plural and the plural shall include
the singular. The masculine,  feminine and neuter genders shall each include the
other.  In any provision  relating to the conduct,  acts or omissions of Tenant,
the  term  "Tenant"  shall  include  Tenant's  agents,  employees,  contractors,
invitees,  successors  or others using the  Property  with  Tenant's  express or
implied permission.

         Section 13.05. Incorporation of Prior Agreements;  Modifications.  This
Lease is the only agreement  between the parties  pertaining to the lease of the
Property and no other  agreements  are  effective.  All amendments to this Lease
shall be in writing and signed by all  parties.  Any other  attempted  amendment
shall be void.

         Section 13.06.  Notice.  All notices  required or permitted  under this
Lease shall be in writing and shall be personally delivered or sent by certified
mail,  return receipt  requested,  postage  prepaid.  Notices to Tenant shall be
delivered  to the address  specified  in Section  1.03  above,  except that upon
Tenant's  taking  possession  of the  Property,  the Property  shall be Tenant's
address for notice  purposes.  Notices to  Landlord  shall be  delivered  to the
address  specified in Section 1.02 above.  All notices  shall be effective  upon
delivery.  Either party may change its notice address upon written notice to the
other party.

         Section  13.07.  Waivers.  All waivers must be in writing and signed by
the waiving party.  Landlord's failure to enforce any provision of this Lease or
its acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future.

         Section  13.08.  No  Recordation.  Tenant  shall not record  this Lease
without prior written consent from Landlord.  However, either Landlord or Tenant
may  require  that a "Short  Form"  memorandum  of this Lease  executed  by both
parties be recorded.  The party  requiring such recording shall pay all transfer
taxes and recording fees.

         Section  13.09.  Binding  Effect;  Choice of Law.  This Lease binds any
party who legally acquires any rights or interest in this Lease from Landlord or
Tenant. However,  Landlord shall have no obligation to Tenant's successor unless
the rights or interests of Tenant's  successor are acquired in  accordance  with
the terms of this Lease.  The laws of the state in which the Property is located
shall govern this Lease.

         Section 13.10. Corporate Authority; Partnership Authority. If Tenant is
a corporation, each person signing this Lease on behalf of Tenant represents and
warrants  that he has full  authority  to do so and that  this  Lease  binds the
corporation.  Within  thirty (30) days after this Lease is signed,  Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant's
                                       22
<PAGE>
Board of Directors  authorizing the execution of this Lease or other evidence of
such authority  reasonably  acceptable to Landlord.  If Tenant is a partnership,
each person or entity signing this Lease for Tenant represents and warrants that
he or it is a  general  partner  of the  partnership,  that  he or it  has  full
authority to sign for the  partnership and that this Lease binds the partnership
and all general partners of the partnership. Tenant shall give written notice to
Landlord of any general  partner's  withdrawal  or addition.  Within thirty (30)
days  after this Lease is signed,  Tenant  shall  deliver to  Landlord a copy of
Tenant's   recorded   statement  of   partnership   or  certificate  of  limited
partnership.

         Section 13.11.  Joint and Several  Liability.  All parties signing this
Lease as Tenant shall be jointly and  severally  liable for all  obligations  of
Tenant.

         Section  13.12.  Force Majeure.  If Landlord  cannot perform any of its
obligations  due to events  beyond  Landlord's  control,  the time  provided for
performing such  obligations  shall be extended by a period of time equal to the
duration of such events.  Events beyond Landlord's control include,  but are not
limited to, acts of God, war, civil commotion,  labor disputes,  strikes,  fire,
flood or other casualty,  shortages of labor or material,  government regulation
or restriction and weather conditions.

         Section  13.13.  Execution  of Lease.  This  Lease may be  executed  in
counterparts and, when all counterpart documents are executed,  the counterparts
shall constitute a single binding instrument.  Landlord's delivery of this Lease
to Tenant  shall not be deemed to be an offer to lease and shall not be  binding
upon either party until executed and delivered by both parties.

         Section 13.14. Survival. All representations and warranties of Landlord
and Tenant shall survive the termination of this Lease.

ARTICLE FOURTEEN:  BROKERS

         Section 14.01. Deleted.

         Section 14.02. Deleted.

         Section 14.03. Agency Disclosure; No Other Brokers.

Landlord  and Tenant each warrant that they have dealt with no other real estate
broker(s) in connection with this transaction  except: CB Commercial Real Estate
Group, Inc., who represents ____________________________________________________
and ____________________________________________________________________________
who represents _________________________________________________________________
_______________________________________________________________________________.
                                       23
<PAGE>
ARTICLE FIFTEEN:  COMPLIANCE

         The parties hereto agree to comply with all applicable  federal,  state
and local laws, regulations,  codes, ordinances and administrative orders having
jurisdiction over the parties, property or the subject matter of this Agreement,
including,  but not  limited  to, the 1964 Civil  Rights Act and all  amendments
thereto,  the Foreign  Investment  In Real  Property Tax Act, the  Comprehensive
Environmental  Response  Compensation  and Liability act, and The Americans With
Disabilities Act.

         ADDITIONAL  PROVISIONS  MAY BE SET FORTH IN A RIDER OR RIDERS  ATTACHED
HERETO OR IN THE BLANK SPACE BELOW.  IF NO ADDITIONAL  PROVISIONS  ARE INSERTED,
PLEASE DRAW A LINE THROUGH THE SPACE BELOW.



         Landlord  and  Tenant  have  signed  this Lease at the place and on the
dates  specified  adjacent to their  signatures  below and have  initialled  all
Riders which are attached to or incorporated by reference in this Lease.


                                             "LANDLORD"

Signed on _____________________, 19____      Palo Cristi Airpark III, L.L.C.

at___________________________________        By: /s/ Scott P. LeMarr, President
                                                 -------------------------------

                                             Its: Palo Cristi Investments, Inc.
                                                  Managing Member


                                             "TENANT"

Signed on _____________________, 19____      Premium Cigars International, Ltd.

at___________________________________        By: /s/ John Greenwell
                                                 -------------------------------

                                                  Its:  President and COO


         IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH
A PROFESSIONAL,  SUCH AS A CIVIL ENGINEER,  INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH  EXPERIENCE  IN EVALUATING  THE  CONDITION OF THE  PROPERTY,  INCLUDING THE
POSSIBLE  PRESENCE OF ASBESTOS,  HAZARDOUS  MATERIALS  AND  UNDERGROUND  STORAGE
TANKS.
                                       24
<PAGE>
         THIS  PRINTED  FORM  LEASE HAS BEEN  DRAFTED  BY LEGAL  COUNSEL  AT THE
DIRECTION OF THE SOUTHERN  CALIFORNIA  CHAPTER OF THE SOCIETY OF INDUSTRIAL  AND
OFFICE  REALTORS,  INC.  NO  REPRESENTATION  ON  RECOMMENDATION  IS  MADE BY THE
SOUTHERN  CALIFORNIA  CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE  REALTORS,
INC.,  ITS  LEGAL  COUNSEL,  THE REAL  ESTATE  BROKERS  NAMED  HEREIN,  OR THEIR
EMPLOYEES  OR  AGENTS,  AS  TO  THE  LEGAL  SUFFICIENCY,  LEGAL  EFFECT  OR  TAX
CONSEQUENCES  OF THIS LEASE OR OF THIS  TRANSACTION.  LANDLORD AND TENANT SHOULD
RETAIN  LEGAL  COUNSEL TO ADVISE  THEM ON SUCH  MATTERS AND SHOULD RELY UPON THE
ADVICE OF SUCH LEGAL COUNSEL.
                                       25