<PAGE>
                                                                    EXHIBIT 10.1


RECORDATION REQUESTED BY:
     THE NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY
     Keahole Point
     P.O. Box 1749
     Kailua-Kona, Hawaii   96745

AFTER RECORDATION, RETURN TO:
     THE NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY
     P.O. Box 1749
     Kailua-Kona, Hawaii   96745


RETURN BY:  MAIL [  ]   PICKUP  [   ]
               STATE MESSENGER  [   ]

_________________________________________________________________



                                 STATE OF HAWAII

         THE NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY


                                SUBLEASE NO. K-4

                                     between

                THE NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY

                      in relation with the State Department
                      of Business, Economic Development and
                                     Tourism

                                       and

                              CYANOTECH CORPORATION

                              a NEVADA CORPORATION

                                    covering

                             77.068 acres of land at


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                         Ke-ahole Airport, Kona, Hawaii
                                TABLE OF CONTENTS

                                                                         Page(s)
                                                                         ------

TERM OF SUBLEASE..........................................................    1

RENTAL:

     1.   Rental fees.....................................................    2

     2.   Reopening of rental fees........................................    4

     3.   Determination of rental fees....................................    4

     4.   Business records................................................    5

     5.   Additional rent.................................................    6

     6.   Security Deposit................................................    7

RESERVATIONS:

     7.   Minerals and waters.............................................    7

     8.   Prehistoric and historic remains................................    7

     9.   Ownership of fixed improvements.................................    7

AGREEMENTS & COVENANTS BETWEEN PARTIES:

    10.  Payment of rent..................................................    7

    11.  Taxes, assessments, etc..........................................    8

    12.  Seawater, brackish water and ground water........................    8

    13.  Utilities........................................................    8

    14.  Equipment and apparatus..........................................    9

    15.  Construction within premises.....................................    9

    16.  Seawater systems and utility connections.........................    9


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<PAGE>
          17.  Operations.................................................    9

          18.  Seawater discharges........................................   10

          19.  Sublessee responsibility...................................   10

          20.  Covenant against discrimination............................   10

          21.  Sanitation, etc............................................   10

          22.  Waste and unlawful, improper or offensive
               use of premises............................................   10

          23.  Compliance with laws.......................................   11

          24.  Inspection of premises.....................................   11

          25.  Improvements...............................................   11

          26.  Repairs to improvements....................................   11

          27.  Non-adverse effects........................................   11

          28.  Non-obstruction reservations...............................   11

          29.  Liens......................................................   12

          30.  Assignments................................................   12

          31.  Subletting.................................................   13

          32.  Indemnity..................................................   13

          33.  Cost of litigation.........................................   13

          34.  Liability insurance........................................   13

          35.  Bond, performance..........................................   14

          36.  Sublessor's liens..........................................   14

          37.  Mortgage...................................................   14

          38.  Breach of termination......................................   14

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<PAGE>

     39.  Right of holder of record of a
               security interest..........................................   16

     40.  Condemnation....................................................   16

     41.  Right to enter..................................................   17

     42.  Inspection by prospective bidders...............................   17

     43.  Acceptance of rent not a waiver.................................   17

     44.  Ingress and Egress..............................................   18

     45.  Extension of time...............................................   18

     46.  Justification of sureties.......................................   18

     47.  Waiver, modification, reimposition of
               bond and liability insurance provisions....................   18

     48.  Suspension of operations........................................   19

     49.  Quite enjoyment.................................................   19

     50.  Surrender.......................................................   19

     51.  Non-warranty....................................................   19

     52.  Hazardous materials.............................................   19

     53.  Fire and extended coverage insurance............................   20

     54.  Withdrawal......................................................   21

     55.  Clearance.......................................................   21

     56.  Force majeure...................................................   21

     57.  Notices.........................................................   21

     58.  Bond, improvement...............................................   22

     59.  Headings........................................................   22


                                      iii
<PAGE>

     60.  Modification of sublease........................................   22

     61.  Hawaii law......................................................   22

     62.  Exhibits - incorporated in sublease.............................   22

     63.  Partial invalidity..............................................   22

THIS SUBLEASE IS ALSO SUBJECT TO THE FOLLOWING SPECIAL
TERMS AND CONDITIONS:

     64.  Design standards................................................   22

     65.  Administrative rules............................................   22

     66.  Restoration of subleased land...................................   22

     67.  Sublease subject to master lease................................   23

DEFINITIONS...............................................................   23

SIGNATURE PAGE............................................................   24

ACKNOWLEDGEMENT PAGE......................................................   25


EXHIBIT "A".............Project Proposal

EXHIBIT "B".............Site Survey Description

EXHIBIT "C".............Site Survey Map

EXHIBIT "D" ............FAA Regulations, Part 77

EXHIBIT "E" ............Assignment of Lease Evaluation Policy

EXHIBIT "F" ............Master Lease


ADDENDUM


CONSENT TO AGREEMENT OF GENERAL LEASE NO. S-4717


                                       vi
<PAGE>
                                 STATE OF HAWAII
                THE NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY

                               SUBLEASE NO.  K-4

     THIS INDENTURE OF Sublease, made this 29th day of _December_ 1995_, but
effective as of the signing of the attached Consent by the State Board of Land
and Natural Resources, by and between the NATURAL ENERGY LABORATORY OF HAWAII
AUTHORITY, a body corporate and a public instrumentality of the State of Hawaii
organized pursuant to Hawaii Revised Statutes, Chapter 227D, hereinafter
referred to as the "Sublessor", and whose business and post office address is
P.O. Box 1749, Kailua-Kona, Hawaii 96745, and         CYANOTECH CORPORATION   ,
                                            -----------------------------------
a   CORPORATION        ,
  ----------------------
under the laws of
(INSERT "CORPORATION," "PARTNERSHIP," "JOINT VENTURE," "SOLE PROPRIETORSHIP," OR
OTHER LEGAL FORM OF THE TENANT)
the State of           NEVADA            , hereinafter referred to as
            -----------------------------
"Sublessee", whose business and mailing address is P. O. BOX 4385, KAILUA-KONA,
HAWAII  96745.

                                   WITNESSETH

     WHEREAS, the Sublessee desires to sublease certain NELHA leased land near
Keahole airport, North Kona, Island of Hawaii, only for the purposes specified
in the Sublessee's project proposal attached hereto as Exhibit "A" and
incorporated by reference herein.

     The Sublessor for and in consideration of the rent to be paid and of the
terms, covenants, and conditions herein contained, all on the part of the
Sublessee to be kept, observed, and performed, does hereby sublease unto the
Sublessee, and the Sublessee does hereby sublease from the Sublessor the
premises identified as:

     Lease Parcel  G  being a portion of the Natural Energy Laboratory of Hawaii
                  ---
     Authority site at Kalaoa 1st - 4th and OOMA 1st District of North Kona,
     Island, County and State of Hawaii more particularly described in Exhibit
     "B" and as shown on the map marked Exhibit "C", hereto attached and made a
     part hereof.
     TO HAVE AND TO HOLD THE subleased premises unto the Sublessee for the term
of Thirty (30) years, commencing on the 1st day of January, 1996, up to and
including the 31st day of December, 2025, unless sooner terminated as
hereinafter provided, the Sublessor reserving and the Sublessee yielding and
paying to the Sublessor at the Office of the Natural Energy Laboratory of Hawaii
Authority, Kona, Hawaii, State of Hawaii, a monthly rental as provided herein,
payable in advance, without notice or demand, in twelve equal installments on
the first day of each and every month during said term and a percentage rental
as follows:

     1.   RENTAL FEES.  In consideration of the property and services provided
by


                                       1
<PAGE>

Sublessor, Sublessee agrees to pay to Sublessor a fixed rental fee in the
amount of $ 9,328.40   per month, payable in advance, without notice or
          ----------
demand, in equal installments on the first day of each and every month or two
percent (2%) of gross sales as indicated below (the "Percentage Rent")
whichever is greater, subject to the following:

     (a)  The "Percentage Rent" shall be paid to Sublessor by Sublessee only to
the extent such percentage rent is greater than the fixed monthly rental fee
provided above.  The percentage rent shall be two percent (2%) of gross sales.
For purposes of this agreement "gross sales" shall be defined as all receipts,
income, and revenues derived from relating to, or connected with the operations
on the rental property, and received by Sublessee under this agreement provided
however the following shall be excluded from the computation of gross sales:
(i) costs for goods shipped to a foreign destination from the State of Hawaii;
(ii) import tariffs;  (iii)  brokerage commission for foreign sales; and (iv)
the State of Hawaii general excise tax.  Within ninety (90) days of the end of
each sublease year during the rental term, Sublessee shall submit to Sublessor a
report showing its gross sales less the above exclusions.  Sublessee shall pay
to Sublessor the Percentage Rent due thereby within thirty (30) days after the
submission of the report of gross sales.

     (b)  In recognition of the capital investment by Sublessee to the Premises
during the early years of the prior sublease and the prior facilities rental
agreement as well as the financial risks undertaken by Sublessee together with
other direct and indirect benefits which will accrue to the State of Hawaii,
Sublessee shall be entitled to an offset for the period noted below in a total
amount not to exceed $505,000.  This offset is contained within the following
offset allowance schedule, which references the allowable offset during the past
four years under the prior sublease and facilities rental agreement as well as
the first two years under this sublease:

     i.   Year 1 (1/1/92-12/31/92) in the amount of percentage rent payable
annually in excess of $25,000.00;

     ii.  Year 2 (1/1/93-12/31/93) in the amount of percentage rent payable
annually in excess of $35,000.00;

     iii. Year 3 (1/1/94-12/31/94) in the amount of percentage rent payable
annually in excess of $40,000.00;

     iv.  Year 4 (1/1/95-12/31/95) in the amount of percentage rent payable
annually in excess of $45,000.00;

     v.   Year 5 (1/1/96-12/31/96) in the amount of percentage rent payable
annually in excess of $65,000.00; and

     vi.  Year 6 (1/1/97-12/31/97) in the amount of percentage rent payable
annually in


                                       2
<PAGE>

excess of $75,000.

     However, capital expenditure shall have occurred in order for Sublessee to
claim the offset.  For purposes of this offset provision, "capital expenditures"
shall mean all costs incurred by Sublessee in making site improvements,
including: grading, contouring, road construction, paving, fill materials,
landscaping, utility installation, sea water and deep well pipelines and pumps
installation, building or office structures, permanent ponds, and metal fences.
Capital expenditures shall be established by receipts and certified audit
conducted in accordance with generally accepted accounting standards, available
to Sublessor upon written request.

     Sublessee agrees to pay any costs incurred by Sublessor that result from
the installation and use of Sublessee's seawater systems and utility systems.
These costs will be billed to the Sublessee in monthly invoices and shall be
payable within ten (10) days of receipt.

     A penalty fee of 1% per month (12% per annum) will be charged on any unpaid
balances which are thirty (30) days past due.  Payments may be made at the
laboratory or mailed to the Sublessor's office in Kailua-Kona.  Checks should be
made payable to: NELHA/State of Hawaii.

     (c)  INTEREST RATE:  The interest rate on any and all unpaid or delinquent
rentals shall be at one per cent (1%) per month, plus a service charge of FIFTY
AND NO/100 DOLLARS ($50.00) per month for each month of delinquency.

     (d)  "GROSS SALES" DEFINED.  As used herein, the term "gross sales" means:

          i.   All income and revenue derived from, relating to, or connected
with the operations, sales, and services rendered under this sublease, whether
for cash or credit and whether paid or unpaid; provided, however, that the
following shall be excluded from the computation of gross sales:

     A.   Any and all retail sales taxes, excise taxes, or related direct taxes
          upon the consumer and collected by the Sublessee on these sales.

     B.   Receipts from the sale or trade-in value of any furniture, fixtures,
          or equipment used upon the premises and owned by the Sublessee.

     C.   The value of any merchandise, supplies or equipment exchanged or
          transferred from or to the other locations of business of the
          Sublessee where the exchanges or transfers are not made for the
          purpose of avoiding a sale by the Sublessee which otherwise would be
          made at or from the premises.

     D.   Receipts in the form of refunds from or the value of merchandise,
          supplies, or


                                       3
<PAGE>

          equipment returned to shippers, suppliers, or manufacturers.

     E.   Receipts with respect to any sale where the subject of the sale, or
          some part thereof, is returned by the purchaser and accepted by the
          Sublessee, to the extent of any refund actually granted or adjustment
          actually made, either in the form of cash or credit.

     F.   The amount of any cash or quantity discounts received from sellers,
          suppliers, or manufacturers.

     G.   Receipts from the sales at cost of uniforms or clothing to Sublessee's
          employees where the uniforms or clothing are required by the
          Sublessee.

     H.   Shipping costs to a foreign destination from the State of Hawaii.

     I.   Brokerage commissions for foreign sales.

     J.   Import tariffs.

          ii.  The Sublessee shall not be credited with or allowed to have any
reduction in the amount of the gross sales, which results in any arrangements
for a rebate, kickback, or hidden credit given or allowed to any customer;
provided, however, that the Sublessee may allow customary discounts on sales of
commodities and products to its own employees or volume purchasers.

     2.   REOPENING OF MONTHLY RENTAL FEES:  The minimum monthly rental fees and
the percentage rental reserved shall be reopened and redetermined as of the day
following the expiration of the Twentieth (20th) year of the sublease term.

     3.   DETERMINATION OF RENTAL FEES AND PERCENTAGE RENTAL UPON REOPENING OF
THE ANNUAL RENTAL:  The rental fees for any ensuing period shall be the fair
market rental at the time of reopening.  Except as provided herein, the
provisions in Hawaii Revised Statutes, Chapter 658, shall be followed.  At least
six (6) months prior to the time of reopening, the fair market rental shall be
determined by an appraiser whose services shall be contracted for by Sublessor,
and the Sublessee shall be promptly notified by certified mail, return receipt
requested of the fair market rental as determined by Sublessor's appraiser;
provided, that should the Sublessee fail to notify Sublessor in writing within
thirty (30) days after receipt thereof that Sublessee disagrees with the fair
market rental as determined by Sublessor's appraiser and that Sublessee has
appointed its own appraiser to prepare an independent appraisal report, then the
fair market rental as determined by Sublessor's appraiser shall be deemed to
have been accepted by Sublessee and shall be the fair market rental as of the
date of the reopening.  If Sublessee has notified Sublessor and appointed its
appraiser as stated hereinabove, Sublessee's appraiser shall complete its
appraisal and two appraisers shall then exchange their reports within forty-


                                       4
<PAGE>

five (45) days from the date of the Sublessee's appointment of the appraiser.

     The two appraisers shall review each other's reports and make every effort
to resolve whatever differences they may have.  However, should differences
still exist fourteen (14) days after the exchange, the two appraisers shall
within seven (7) days thereafter appoint a third appraiser who shall also
prepare an independent appraisal report based on the review of the two appraisal
reports prepared and any other data.  Copies thereof shall be furnished to the
first two appraisers within forty-five (45) days of the appointment.  Within
twenty (20) days after receiving the third appraisal report, all three shall
meet and determine the fair market rental in issue.  The fair market rental as
determined by a majority of the appraisers shall be final and binding upon both
Sublessor and Sublessee, subject to vacation, modification or correction in
accordance with the provisions of Sections 658-8 and 658-9, Hawaii Revised
Statutes.  Each party shall pay for its own appraiser and the cost of the
services of the third appraiser shall be borne equally by the Sublessor and the
Sublessee.  All appraisal reports shall become part of the public record of the
Sublessor.

     In the event the appraisers are unable to determine the fair market rental
before the reopening date, or by the foregoing prescribed time, whichever is
later, the Sublessee shall pay the fair market rental as determined and the
rental paid by Sublessee shall then be subject to retroactive adjustments as
appropriate to reflect the fair market rental determined as set forth
hereinabove.  However, Sublessee or Sublessee's appraiser's failure to comply
with the procedures set forth above shall constitute a waiver of Sublessee's
right to contest the new rent, and the Sublessee shall pay the rent as
determined by Sublessor's appraiser without any retroactive adjustments.
Alternatively, Sublessor may treat this failure as a breach of this sublease and
terminate the sublease.

     4.   BUSINESS RECORDS.   The Sublessee shall:

     a.   Prepare and keep for a period for at least one (1) year following the
termination of the sublease, all pertinent original sales records including
serially numbered sales slips and other sales records which would normally be
examined by an independent accountant pursuant to accepted auditing standards in
performing an audit of the Sublessee's sales and gross sales.

     b.   Submit to the Sublessor on or before the ninetieth (90th) day
following the end of each sublease year at the place fixed for the payment of
rent, a statement certified as correct by the Sublessee or by a person duly
authorized by the Sublessee to certify showing in accurate detail the amount of
gross sales during the preceding sublease year, duly verified by an independent
certified public accountant.  These statements shall be in a form and style and
contain details and breakdowns as Sublessor may require.

     Without prejudice to any remedies provided in this sublease for Sublessee's
default, if the Sublessee shall fail to promptly furnish any sublease period
report or certified public accountant's annual verification report, the
Sublessor may have the report prepared on


                                       5

<PAGE>

Sublessee's behalf by an accountant to be selected by the Sublessor, at the
expense of the Sublessee.  The Sublessee shall furnish to the accountant all
records requested for the purpose of preparing the reports, and the Sublessee
shall pay to the Sublessor all expense incurred by the Sublessor in securing
the reports.  Furthermore, the Sublessor may make assessments upon the
Sublessee by recourse to those procedures selected by the Sublessor which
would produce a reasonable gross sales expectation upon which percentage
rentals may be computed.

     In the event that records have not been prepared and kept in accordance
with the provisions set forth herein, the Sublessor shall, in addition to all
other payments required herein, be entitled to demand and receive an additional
payment of ten percent (10%) of the applicable minimum rental fees for the
sublease periods involved.

     c.   Grant unto the Sublessor at all reasonable times access to all books,
accounts, records, and reports including gross income tax reports, showing
sales, and other pertinent records including the following:

          i.   shipping costs to foreign destinations;
         ii.   import tariffs;
        iii.   Hawaii General Excise Tax;
         iv.   Hawaii Corporate, Partnership, or Individual  Income Tax;
          v.   Federal Corporate, Partnership, or Individual Income Tax;
         vi.   records showing capital expenditures made until the full
               offset against percentage rent has been achieved, if offset
               is provided.

     Sublessee shall at any reasonable time upon twenty-four (24) hours notice,
permit the Sublessor's accountant or a certified public accountant to complete
an audit of the Sublessee's entire business affairs and records relating to the
business conducted on the premises for the term of the sublease.  The Sublessee
shall cooperate fully in making any inspection, examination, or audit.  If the
audit by a certified public accountant or by Sublessor's accountant discloses
that rental has been underpaid by two percent (2%) or more for any period under
examination, the Sublessor shall, in addition to the remedies provided in
paragraph b. above, be entitled to reimbursement of the reasonable cost of the
audit in addition to the deficiency.  If the audit by a certified public
accountant or by Sublessor's accountant shall disclose that rent has been
underpaid by five percent (5%) or more for the period under examination, the
Sublessor shall have the right to terminate this sublease.

     5.   ADDITIONAL RENT:  All utility, office space, services and compound
charges shall be charged to and payable by Sublessee as additional rent.

     6.   SECURITY DEPOSIT.  Upon execution of this Sublease, Sublessee shall
deposit with Sublessor the sum of $_0.00____________________ as security for the
faithful performance of all of these terms and conditions.  The whole or a
portion of the deposit will be returned to the Sublessee upon termination of
this Sublease, but only after all of the terms and conditions


                                       6


<PAGE>

of this Sublease have been observed and performed to the satisfaction of
Sublessor.

RESERVING UNTO THE STATE OF HAWAII AND SUBLESSOR THE FOLLOWING:


     7.   MINERALS AND WATERS.   (a)  All minerals as hereinafter defined, in,
on or under the premises and the right, on the State of Hawaii's or Sublessor's
own behalf or through persons authorized by it, to prospect for, mine and remove
such minerals and to occupy and use so much of the surface of the ground as may
be required for all purposes reasonably extending to the mining and removal of
such minerals by means whatsoever, including strip mining.  "Minerals", as used
herein, shall mean any or all oil, gas, coal, phosphate, sodium, sulfur, iron,
titanium, gold, bauxite, silver, bauxite clay, diaspore, boehmite, laterite,
gibbsite, alumina, all ores of aluminum and, without limitation thereon, all
other mineral substances and ore deposits, whether solid, gaseous or liquid,
including all geothermal resources in, on, or under the land, fast or submerged;
provided, that "minerals" shall not include sand, gravel, rock or other material
suitable for use and used in general construction in furtherance of the
Sublessee's permitted activities on the premises and not for sale to others.
(b) All surface and ground waters appurtenant to the premises (but specifically
excluding seawater) and the right on the State of Hawaii's or Sublessor's own
behalf or through persons authorized by it, to capture, divert or impound the
same and to occupy and use so much of this right reserved; provided, however,
that as a condition precedent to the exercise by the State of Hawaii or
Sublessor of the rights reserved in this paragraph just compensation shall be
paid to the Sublessee for any of Sublessee's improvements taken.

     8.   PREHISTORIC AND HISTORIC REMAINS.  All prehistoric and historic
remains found on said premises.

     9.   OWNERSHIP OF FIXED IMPROVEMENTS.  The ownership of all improvements of
whatever kind or nature, including but not limited to fences and pipeline
system(s) located on the land prior to or on January 23, 1986, when the original
sublease was executed.


THE SUBLESSEE COVENANTS AND AGREES WITH THE SUBLESSOR AS FOLLOWS:

     10.  PAYMENT OF RENT.  Sublessee shall pay said rent to the Sublessor
at the times, in the manner and form provided in this sublease and at the place
specified above, or at such other place as the Sublessor may from time to time
designate, in legal tender of the United States of America.

     11.  TAXES, ASSESSMENTS, ETC.  Sublessee shall pay or cause to be paid,
when due, the amount of all taxes, rates, and assessments of every description
as to which the premises or any part, or any improvements, or the Sublessor or
Sublessee, are now or may be assessed or become liable by authority of law
during the term of this sublease; provided, however, that with respect to any
assessment made under any betterment or improvement law which may be


                                       7
<PAGE>


payable in installments, Sublessee shall be required to pay only such
installments, together with interest, which becomes due and payable during
said term.

     12.  SEAWATER, BRACKISH WATER, AND GROUNDWATER.  If applicable, Sublessor
will use reasonable efforts to maintain seawater flow at the times and rates
required by Sublessee, but because of the unpredictable conditions and aging
equipment relating to the seawater delivery, Sublessor does not guarantee a
continuous delivery of seawater.  Sublessor shall not be liable for any and all
claims, loss, costs, damages, or expenses arising out of Sublessor's inability
to provide seawater to Sublessee.

     Sublessee acknowledges that Sublessor cannot warrant, guarantee, or
represent that the quality of its seawater, brackish water, and groundwater is
never subject to contamination.  Sublessee further acknowledges that it assumes
all risk of loss for injury or property damage which may result from
contamination of seawater, brackish water, and groundwater.  Sublessor shall not
be liable for any and all claims, loss, costs, damages, or expenses arising out
of the contamination of seawater, brackish water, and groundwater.

     13.  UTILITIES.  Sublessee shall pay when due all charges, duties, and
rates of every description, including water, electricity, sewer, gas, refuse
collection, and any other charges, as to which the premises or any part, or any
improvements or the Sublessor of Sublessee may become liable for during the
term, whether assessed to or payable by the Sublessor or Sublessee.

     Sublessor will use reasonable efforts to accommodate Sublessee's
requirements for utilities at the site.  However, Sublessor shall not be
responsible for any inability to provide utilities to Sublessee.  In the event
that the utilities furnished to Sublessee must be interrupted or diminished by
Sublessor on a scheduled basis, Sublessor will attempt to provide Sublessee with
adequate notice thereof.  Sublessor shall not be liable for any and all claims,
loss, costs, damages, or expenses arising out of any interruption of utility
service to the Sublessee.

     Sublessee recognizes that freshwater is in limited supply in the North
Kona-Kohala area and Sublessee agrees that it shall conserve freshwater whenever
possible.

Provision of freshwater will be on a non-guaranteed basis and is subject to the
provisions of the County Board of Water Supply.

     Subject to Sublessor's prior approval, Sublessee may install its own
telephone equipment using existing utility conduits.

     14.  EQUIPMENT AND APPARATUS.  Sublessee shall be solely responsible for
any equipment and apparatus provided and operated by the Sublessee.  All of
Sublessee's equipment and apparatus that will be connected to the seawater
systems and the electrical systems at the facility shall be subject to
inspection by the Sublessor or its designated


                                       8
<PAGE>


representative prior to any connection.  All of Sublessee's test equipment
and apparatus shall be made in accordance with applicable standards,
regulations, codes and sound engineering practice.  Sublessor or its
designated representative may request inspection and certification by outside
experts and/or professional engineers.

     15.  CONSTRUCTION WITHIN PREMISES.  The Sublessee shall not make or cause
to be made any additions, alterations, or improvements, or install or cause to
be installed any buildings, structures, electrical, or plumbing fixtures, except
upon the prior review and consent of Sublessor.  All buildings, structures, and
landscaping shall express the island character and be of high quality, but shall
be natural in appearance emphasizing the outdoor environment.  The Sublessee
shall provide sufficient landscaping to make the project site visually
attractive to local residents and island visitors.  All allowed structures shall
comply with applicable County building codes and construction permits.

     16.  SEAWATER SYSTEMS AND UTILITY CONNECTIONS.  It shall be the
responsibility of the Sublessee to make the necessary connections to the
existing seawater, freshwater, electrical, process air, and utility systems.
All connections and service lines shall be made in accordance with the
applicable rules, regulations, laws, and codes and shall be subject to
Sublessor's prior approval.  Sublessee shall discuss with and obtain the
concurrence of the Sublessor or its designated representative as to the method
proposed for each connection and line, and the days and time that any proposed
connection might cause disruption to Sublessor's operations, utilities, or
services.  Sublessor shall be permitted to inspect all connections before any
connections shall be made.

     17.   OPERATIONS.  Sublessee shall conduct its activities on the premises
in accordance with all applicable Federal, State, and County statutes,
ordinances and regulations in addition to Sublessor's rules and regulations.
Sublessor will provide the Sublessee with a copy of its Facilities Use Manual
(FUM) which outlines the day to day operating rules, regulations, and expected
conduct on the premises.  All discharges from the Sublessee's project shall be
in conformity with and comply with existing permits at the site and the
Sublessee shall obtain and be responsible for all required importation permits
and shall give a copy to Sublessor.  Project sites shall be kept visually
attractive to local residents and to island visitors.

      18. SEAWATER DISCHARGES.  Sublessee shall minimize any adverse
environmental effects to the surrounding ocean waters and to the water returned
by Sublessee to the ocean.  Sublessee shall permit Sublessor to monitor the
surrounding ocean waters and the water returned by Sublessee to the ocean.
Sublessee shall submit discharge water quality and quantity samples to Sublessor
for inspection, review, and testing upon request by Sublessor.  Water discharged
by Sublessee into any disposal system shall meet the applicable water quality
criteria prescribed by the department of health in its rules relating to water
quality standards.  Sublessee shall be responsible and bear all costs incurred
for re-treating its discharged water to meet these standards.


                                       9
<PAGE>


     Sublessor may require Sublessee to monitor, record, and report the quality
of Sublessee's discharged water to Sublessor monthly.  Sublessee shall allow
Sublessor to enter the premises at any time for the purpose of taking samples of
Sublessee's water discharge for independent water quality analysis.  In the
event that Sublessee's water discharge fails to meet the department of health's
water quality standards, Sublessor shall have the authority to order the
Sublessee to cease all of its operations until the water discharge problem has
been corrected to the satisfaction of the Sublessor and/or the department of
health.  Should the Sublessee fail to cease all of its operations when ordered
to do so by the Sublessor, Sublessee's actions shall amount to a breach of this
sublease, thereby entitling the Sublessor to terminate this sublease in
accordance with paragraph 38 herein.  In any event, Sublessee shall be liable
for any and all property or environmental damage resulting from its water
discharge.

     19.   SUBLESSEE RESPONSIBILITY.  All persons hired or used by Sublessee
shall be considered Sublessee's agents and employees and Sublessee shall be
responsible for all services performed by its agents and employees.  Further,
Sublessee intentionally, voluntarily, and knowingly assumes the sole and entire
liability for any of its agents and employees, and to third persons for all
loss, cost, damage, or injury caused, either direct or indirectly, by
Sublessee's agents and employees in the course of their employment.

     20.  COVENANT AGAINST DISCRIMINATION.  The use and enjoyment of the
premises shall not be in support of any policy which discriminates against
anyone based upon race, creed, sex, color, national origin, religion, marital
status, familial status, ancestry, physical handicap, disability, age, or HIV
(human immunodeficiency virus) infection .
     21.  SANITATION, ETC.  Sublessee shall keep the premises and improvements
in a strictly clean, sanitary, and orderly condition.

     22.  WASTE AND UNLAWFUL, IMPROPER OR OFFENSIVE USE OF PREMISES.  Sublessee
shall not commit, suffer, or permit to be committed any waste, nuisance, strip
or unlawful, improper or offensive use of the premises, or any part, nor,
without the prior written consent of the Sublessor, cut down, remove or destroy,
or suffer to be cut down, removed or destroyed, any trees now growing on the
premises.

     23.  COMPLIANCE WITH LAWS.  Sublessee shall comply with all of the
requirements of all county, state, and federal authorities and observe all
county, state, and federal laws applicable to the premises, now in force or
which may be in force.

     24.  INSPECTION OF PREMISES.  Sublessee shall permit the Sublessor and its
agents, at all reasonable times during the sublease term, to enter the premises
and examine the state of repair and condition of the premises.

     25.  IMPROVEMENTS.  Sublessee shall not at any time during said term
construct, place, maintain, and install on the premises any building, structure
or improvement of any kind and description except with the prior written
approval of Sublessor and upon those


                                       10
<PAGE>

conditions the Sublessor may impose, including any adjustment of rent, unless
otherwise provided in this sublease. The Sublessee shall own these
improvements until the expiration, surrender, or termination pursuant to a
breach of the sublease, at which time the ownership shall, at the option of
the Sublessor, remain and become the property of the Sublessor or shall be
removed by the Sublessee at the Sublessee's expense.

     26.  REPAIRS TO IMPROVEMENTS.  Sublessee shall, at its own expense, keep,
repair and maintain all buildings and improvements now existing or hereafter
constructed or installed on the premises in good order, condition, and repair,
reasonable wear and tear excepted.

     27.  NON-ADVERSE EFFECTS.  Any building, structure, or improvement erected
or constructed by the Sublessee on the premises, shall not in any way adversely
affect the safe and efficient operations of the Ke-ahole Airport and prior to
construction or erection shall be approved in writing by the Sublessor.

     28.  NON-OBSTRUCTION RESERVATIONS.  The conveyance of this sublease shall
be subject to the following reservations:

          a.   There is hereby reserved to the Department of Transportation,
Airports Division, its successors, and assigns, for the use and benefit of the
public, a right of flight for the passage of aircraft in the airspace above the
surface of the premises herein conveyed.  This public right of flight shall
include the right to cause any noise inherent in the landing, departing or
operation of any aircraft used for navigation or flight through the airspace or
on or about the Ke-ahole Airport.

          b.   The erection of structures or growth of natural objects that
would constitute an obstruction to air navigation is prohibited.

          c.   Any activity on the land or along the adjacent coast that would
interfere with or be a hazard to the flight of aircraft over the land or to and
from the Ke-ahole Airport or interfere with air navigation and communication
facilities serving said Airport is prohibited.

          d.   The height limitations above which no structure or growth shall
be permitted shall be in accordance with the Airport Zoning Regulations all as
shown on Exhibit  "D".

          e.   The filing of notice of construction requirements in FAA Part 77
shall remain in effect.

     29.  LIENS.  Sublessee shall not commit or suffer any act or neglect which
results in the premises, any improvement, or the leasehold estate of the
Sublessor becoming subject to any attachment, lien, charge, or encumbrance,
except as provided in this sublease, and shall indemnify, defend, and hold the
Sublessor harmless from and against all attachments, liens,


                                       11
<PAGE>

charges, and encumbrances and all resulting expenses and attorneys' fees.

     30.  ASSIGNMENTS.  The Sublessee shall not transfer, assign, or permit any
other person to occupy or use the premises or any portion or transfer or assign
this sublease or any interest, either voluntarily or by operation of law, except
by way of devise, bequest, or intestate succession, and any transfer or
assignment made shall be null and void; provided that with the prior written
approvals of the Board of Land and Natural Resources and the  Sublessor the
assignment and transfer of this sublease or any portion may be made if (1) in
the case of commercial, industrial, and other business uses, the Sublessee was
required to put in substantial building improvements; (2) the Sublessee becomes
mentally or physically disabled; (3) extreme economic hardship is demonstrated
to the satisfaction of the Board of Land and Natural Resources and the
Sublessor; or (4) it is to the corporate successor the Sublessee; provided,
further, that prior to the approval of any assignment of sublease, the Sublessor
shall have the right to review and approve the consideration paid the Assignee
and may condition consent to the assignment of the sublease on payment by the
Sublessee of a premium based on the amount by which the consideration for the
assignment, whether by cash, credit, or otherwise, exceeds the straight-line
depreciated cost of improvements and trade fixtures being transferred to the
Assignee pursuant to the Board of Land and Natural Resources' Assignment of
Lease Evaluation Policy, as it may be amended, a copy of which is attached
hereto as Exhibit "E."  The premium on any subsequent assignments shall be based
on the difference in the selling and purchase price plus the straight-line
depreciated cost of any improvements constructed by the then Assignor, pursuant
to the above-mentioned Evaluation Policy.

     With respect to state agricultural or aquaculture subleases, in the event
of foreclosure or sale, the above-described premium shall be assessed only after
the encumbrances of record and any other advances made by the holders of a
security interest are paid.

     If the Sublessee is a partnership, joint venture or corporation, the sale
or transfer of 50% interest or more of ownership in one year or stocks by
dissolution, merger, or any other means shall be deemed an assignment for
purposes of this paragraph and subject to the rights of the Board of Land and
Natural Resources and the Sublessor to impose the foregoing premium.

     31.  SUBLETTING.   The Sublessee shall not rent or sublet the whole or any
portion of the premises, without the prior written approvals of the Board of
Land and Natural Resources and the Sublessor; provided, however, that prior to
this approval, the Board of Land and Natural Resources and the Sublessor shall
have the right to review and approve the rent to be charged to the proposed
sublessee and that in the case where the Sublessee is required to pay rent based
on a percentage of its gross sales, the receipts of the  proposed  sublessee or
any subsequent sublessee shall be included as part of the Sublessee's gross
sales, and the Board of Land and Natural Resources and the Sublessor shall have
the right to revise the rent of the premises based upon the rental rate charged
to the proposed sublessee including the percentage rent, if applicable, and
provided, further, that the rent may not be revised downward.


                                       12
<PAGE>

     32.  INDEMNITY.  The Sublessee shall indemnify, defend, and hold the State
and Sublessor harmless from and against any claim or demand for loss, liability,
or damage including claims for bodily injury, wrongful death, or property
damage, arising out of or resulting from:  (1) any act or omission on the part
of Sublessee relating to Sublessee's or its employee's or agent's use,
occupancy, maintenance, or enjoyment of the premises; (2) any failure on the
part of the Sublessee to maintain the premises and sidewalks, roadways and
parking areas adjacent thereto in Sublessee's use and control, and including any
accident, fire, or nuisance, growing out of or caused by any failure on the part
of the Sublessee to maintain the premises in a safe condition; and (3) from and
against all actions, suits, damages, and claims by whomsoever brought or made by
reason of the Sublessee's non-observance or non-performance of any of the terms,
covenants, and conditions of this sublease or the rules, regulations,
ordinances, and laws of the federal, state, municipal or county governments.

     33.  COSTS OF LITIGATION.  In case the Sublessor shall, without any fault
on its part, be made a party to any litigation commenced by or against the
Sublessee (other than condemnation proceedings), the Sublessee shall pay all
costs, including reasonable attorney's fees, and expenses incurred by or imposed
on the Sublessor; furthermore, the Sublessee shall pay all costs, including
reasonable attorney's fees and expenses which may be incurred by or paid by the
Sublessor in enforcing the covenants and agreements of this sublease, in
recovering possession of the premises or in the collection of delinquent rental,
taxes, and any and all other charges.

     34.  LIABILITY INSURANCE.  The Sublessee shall procure and maintain, at its
cost and expense and acceptable to the Sublessor, in full force and effect
throughout the term of this sublease, commercial general liability insurance, in
an amount of at least $500,000.00 for each occurrence and $1,000,000.00
aggregate, with an insurance company or companies licensed to do business in the
State of Hawaii.  The policy or policies of insurance shall name the State of
Hawaii and the Sublessor as additional insureds.  The insurance shall cover the
entire premises, including buildings, improvements, and grounds and all roadways
or sidewalks on or adjacent to the premises in the use or control of the
Sublessee.

     The Sublessee, prior to entry and use of the premises or within fifteen
(15) days from the effective date of this sublease, whichever is sooner, shall
furnish the Sublessor with a certificate(s) showing the policy(s) to be
initially in force, keep the certificate(s) on deposit during the entire
sublease term, and furnish a like certificate(s) upon each renewal of the
policy(s).  This insurance shall not be cancelled, limited in scope of coverage,
or nonrenewed until after thirty (30) days written notice has been give to the
Sublessor.

     The Sublessor shall retain the right at any time to review the coverage,
form, and amount of the insurance required by this sublease.  If, in the opinion
of the Sublessor, the insurance provisions in this sublease do not provide
adequate protection for the Sublessor, the Sublessor may require Sublessee to
obtain insurance sufficient in coverage, form, and amount to provide adequate
protection.  The Sublessor's requirements shall be reasonable but shall be


                                       13
<PAGE>

designed to assure protection for and against the kind and extent of the risks
which exist at the time a change in insurance is required.  The Sublessor shall
notify Sublessee in writing of changes in the insurance requirements and
Sublessee shall deposit copies of acceptable insurance policy(s) or
certificate(s) thereof, with the Sublessor incorporating the changes within
thirty (30) days of receipt of the notice.

     The procuring of the required policy(s) of insurance shall not be construed
to limit the Sublessee's liability under this sublease nor to release or relieve
the Sublessee of the indemnification provisions and requirements of this
sublease.  Notwithstanding the policy(s) of insurance, sublessee shall be
obligated for the full and total amount of any damage, injury, or loss caused by
Sublessee's negligence or neglect connected with this sublease.

     It is agreed that any insurance maintained by the Sublessor will apply in
excess of, and not contribute with, insurance provided by Sublessee's policy.

     35.  BOND, PERFORMANCE.  The Sublessee shall, at its own cost and expense,
within thirty (30) days after the date of receipt of this sublease document,
procure and deposit with the sublessor and thereafter keep in full force and
effect during the term of this sublease a good and sufficient surety bond,
conditioned upon the full and faithful observance and performance by Sublessee
of all the terms, conditions, and covenants of this sublease, in an amount equal
to two times the annual and estimated additional rental then payable.  This bond
shall provide that in case of a breach or default of any of the sublease terms,
covenants, conditions, and agreements, the full amount of the bond shall be paid
to the Sublessor as liquidated and ascertained damages and not as a penalty.

     36.  SUBLESSOR'S LIEN.  Sublessor shall have a lien on all the buildings
and improvements placed on the premises by the Sublessee, on all property kept
or used on the premises, whether the same is exempt from execution or not and on
the rents of all improvements and buildings situated on the premises for all
such costs, attorney's fees, rent reserved, for all taxes and assessments paid
by the Sublessor on behalf of the Sublessee and for the payment of all money
provided in this sublease to be paid by the Sublessee, and such lien continue
until the amounts due are paid.

     37.  MORTGAGE.  Except as provided in this sublease,  Sublessee shall not
mortgage, hypothecate or pledge the premises or any portion, or any interest in
this sublease, without the prior written approval of Sublessor and the State of
Hawaii's Board of Land and Natural Resources and mortgage, hypothecation or
pledge without the approval shall be null and void.

     That upon due application and with the written consent of the Sublessor and
the State of Hawaii Board of Land and Natural Resources, the Sublessee may
mortgage this sublease or any interest, or create a security interest in the
subleasehold of the premises.  If the mortgage or security interest is to a
recognized lending institution in either the State of Hawaii or elsewhere in the
United States, consent may extend to foreclosure and sale of Sublessee's
interest


                                       14
<PAGE>


at the foreclosure to any purchaser, including the mortgagee, without regard
to whether or not the purchaser is qualified to sublease, own or otherwise
acquire and hold the land or any interest.  The interest of the mortgagee or
holder shall be freely assignable.  The term "holder" shall include an
insurer or guarantor of the obligation or condition of such mortgage,
including the Department of Housing and Urban Development through the Federal
Housing Administration, the Federal National Mortgage Association, the
Veterans Administration, the Small Business Administration, Farmers Home
Administration, or any other federal agency and their respective successors
and assigns or any lending institution authorized to do business in the State
of Hawaii or elsewhere in the United States; provided, that the consent to
mortgage to a non-governmental holder shall not confer any greater rights or
powers in the holder than those which would be required by any of the
aforementioned Federal agencies.

     38.  BREACH AND TERMINATION.  Time is of the essence of this agreement and
if the Sublessee shall fail to pay the rent or any part thereof at the times and
in the manner provided within ten (10) calendar days after delivery by the
Sublessor of a written notice of the breach or default, or if the Sublessee
shall become bankrupt, or shall abandon the premises, or if this sublease and
the premises shall be attached or taken by operation of law, of if any
assignment be made of the Sublessee's property for the benefit of creditors, or
if the Sublessee uses the property for purposes other than as specified in
Exhibit "A," or if the Sublessee ceases all activities for a period of three (3)
months without the Sublessor's written consent for reasons other than force
majeure, or if sublessee shall fail to observe and perform any of the covenants,
terms and conditions contained in this sublease and on its part to be observed
and performed and this failure shall continue for a period of more than thirty
(30) days after delivery by the Sublessor of a written notice of the breach or
default, by personal service, registered mail, or certified mail to the
Sublessee at its last known address and to each mortgagee or holder of record
having a security interest in the premises, the Sublessor may, subject to the
provisions of Section 171-21, Hawaii Revised Statutes, at once re-enter the
premises or any part thereof, and upon or without this entry, at its option,
terminate this sublease without prejudice to any other remedy or right of action
for arrears of rent or for any preceding or other breach of contract; and in the
event of termination at the option of the Sublessor, all buildings and
improvements shall remain and become the property of the Sublessor or shall be
removed by Sublessee at the Sublessee's cost; furthermore, Sublessor shall
retain all rent paid in advance to be applied to any damages.  This does not
prohibit the Sublessor from seeking further damages. Sublessor shall not be
deemed guilty of trespass or become liable for loss or damage which may be
occasioned thereby.

     39.  RIGHT OF HOLDER OF RECORD OF A SECURITY INTEREST. In the event the
Sublessor seeks to forfeit the privilege, interest, or estate created by this
sublease, each recorded holder of a security interest may, at its option, cure
or remedy the default or breach of rent payment within ten (10) days or any
other default or breach within sixty (60) days, from the date of receipt of the
Sublessor's notice, or within such additional period as the Sublessor may allow
for good cause, and add the cost thereof to the mortgage debt and the lien of
the mortgage.  Upon failure of the holder to exercise its option, the Sublessor
may:  (a) pay to the holder


                                       15
<PAGE>

from any moneys at its disposal, the amount of the mortgage debt, together
with interest and penalties, and secure an assignment of the debt, including
interest and penalties, and all reasonable expenses incurred by the holder in
connection with the foreclosure and preservation of its security interest,
less appropriate credits, including income received from the privilege,
interest, or estate subsequent to the foreclosure; or (b) if the property
cannot be reasonably reassigned without loss to the Sublessor or State, then
terminate the outstanding privilege, interest, or estate without prejudice to
any other right or remedy for arrears of rent or for any preceding or other
breach or default and use its best efforts to redispose of the affected land
to a qualified and responsible person free and clear of the mortgage and the
debt secured; provided that a reasonable delay by the Sublessor in
instituting or prosecuting its rights or remedies shall not operate as a
waiver of these rights or to deprive it of a remedy when it may still
otherwise hope to resolve the problems created by the breach or default.  The
proceeds of any redisposition shall be applied, first, to reimburse the
Sublessor for costs and expenses in connection with the redisposition; second
to discharge in full any unpaid purchase price or other indebtedness owing
the Sublessor in connection with the privilege, interest, or estate
terminated; third, to the mortgagee to the extent of the value received by
the State upon redisposition which exceeds the fair market sublease value of
the land as previously determined by the Sublessor's or State's appraiser;
and fourth, to the owner of the privilege, interest, or estate.

     40.  CONDEMNATION.  If at any time, during the term of this sublease, any
portion of the premises should be condemned or required for public purposes by
the State, any county, or city and county, the rental shall be reduced in
proportion to the value of the portion of the premises condemned.  The Sublessee
shall be entitled to receive from the condemning authority (a) the value of
growing crops or animals, if any, which it is not permitted to harvest and (b)
the proportionate value of the Sublessee's permanent improvements so taken in
the proportion that it bears to the unexpired term of the sublease; provided,
that the Sublessee may, in the alternative, remove and relocate its improvements
to the remainder of the lands occupied by the Sublessee.  The Sublessee shall
not by reason of such condemnation be entitled to any claim against the
Sublessor for condemnation or indemnity for subleasehold interest and all
compensation payable or to be paid for or on account of said subleasehold
interest by reason of such condemnation shall be payable to and be the sole
property of the Sublessor.  The foregoing rights of the Sublessee shall not be
exclusive of any other to which Sublessee may be entitled by law.  Where the
portion so taken renders the remainder unsuitable for the use or uses for which
the land was subleased, the Sublessee shall have the option to surrender this
sublease and be discharged and relieved from any further liability; provided,
that Sublessee may remove the permanent improvements constructed, erected and
placed by it within any reasonable period as may be allowed by the Sublessor.

     41.  RIGHT TO ENTER.  The State of Hawaii's Board of Land and Natural
Resources or Sublessor or the County, or their respective agents or
representatives upon reasonable notice shall have the right to enter and cross
any portion of the premises for the purpose of performing any public or official
duties; provided, however, in the exercise of such rights, the


                                       16

<PAGE>

Sublessor, the State of Hawaii Board of Land and Natural Resources or the
County shall not interfere unreasonably with the Sublessee or Sublessee's use
and enjoyment of the premises.  The Sublessor or its designated
representative specifically reserves the right to enter the premises or any
part thereof for purposes related to the State of Hawaii's operation and
maintenance of the Ke-ahole Airport, provided that such entry, operation, or
maintenance does not unreasonably interfere with or hinder the use,
occupancy, operation, and enjoyment of the premises by the Sublessee.

     42.  INSPECTION BY PROSPECTIVE BIDDERS.  The Sublessor shall have the right
to authorize any person or persons to enter upon and inspect the premises at all
reasonable times following a published notice for its proposed disposition for
purposes of informing and appraising that person or persons of the condition of
the lands preparatory to the proposed disposition; provided, however, that any
entry and inspection shall be conducted during reasonable hours after notice to
enter is first given to the Sublessee, and shall, if the Sublessee so requires,
be made in the company of the Sublessee or designated agents of the Sublessee;
provided, further, that no authorization shall be given more than two years
before the expiration of the term of the sublease.

     43.  ACCEPTANCE OF RENT NOT A WAIVER.  The acceptance of rent by the
Sublessor shall not be deemed a waiver of any breach by the Sublessee of any
term, covenant, or condition of this sublease, nor the Sublessor's right of re-
entry for breach of term, condition, or covenant, nor of the Sublessor's right
to declare and enforce a forfeiture for any breach of any term, covenant, or
condition, or to exercise any option conferred, in any one or more instances,
shall not be construed as a waiver or relinquishment of any term, covenant,
condition, or option.

     44.  INGRESS AND EGRESS.  Sublessee shall possess the right, by the most
convenient route(s) as approved by the Sublessor, of ingress and egress from the
premises for utilities, roadway purposes and pipelines and related facilities
necessary for Sublessee's operations and maintenance, subject to any reasonable
safety requirements of the Sublessor.  This right of ingress and egress shall
inure to the benefit of the Sublessee and its duly authorized agents,
representatives, contractors, employees, and invitees.

      45. EXTENSION OF TIME.  Notwithstanding any provision to the contrary
contained in this sublease, when applicable, Sublessor may for good cause shown,
allow additional time beyond the time or times specified in this sublease for
the Sublessee to comply, observe, and perform any of the sublease terms,
conditions, and covenants.

     46.  JUSTIFICATION OF SURETIES.  Any bonds required by this sublease shall
be supported by the obligation of a corporate surety organized for the purpose
of being a surety and qualified to do business in the State of Hawaii, or not
less than two personal sureties, corporate or individual, for which
justifications shall be filed as provided in Section 78-20, Hawaii Revised
Statutes; provided, however, the Sublessee may furnish a bond in like amount,


                                       17
<PAGE>

conditioned as aforesaid, executed by it alone as obligor, if, in lieu of any
surety or sureties, it shall also furnish and at all times thereafter keep and
maintain on deposit with the Sublessor security in certified checks,
certificates of deposit (payable on demand or after such period as the Sublessor
may stipulate), bonds, stocks or other negotiable securities pro  endorsed, or
execute and deliver to the Sublessor a deed or deeds of trust of real property,
all of such character which is satisfactory to the Sublessor and valued in the
aggregate at not less than the principal amount of said bond.  It is agreed that
the value of any securities which may be accepted and at any time thereafter
held by the Sublessor shall be determined by the Sublessor, and that the
Sublessee may, with the approval of the Sublessor, exchange other securities or
money for any of the deposited securities if in the judgment of the Sublessor
the substitute securities or money shall be at least equal in value to those
withdrawn.  It is further agreed that substitution of securities or the
substitution of a deposit of security for the obligation of a surety or sureties
may be made by the Sublessee, but only upon the written consent of the Sublessor
and that until this consent is granted, which shall be discretionary with the
Sublessor, no surety shall be released or relieved from any obligation.

     47.  WAIVER, MODIFICATION, REIMPOSITION OF BOND AND LIABILITY INSURANCE
PROVISIONS.  Upon substantial compliance by the Sublessee of the terms,
covenants, and conditions contained in this sublease on its part to be observed
or performed, the Sublessor at its discretion may in writing, waive or suspend
the performance bond and/or improvement bond requirements or may in writing,
modify the particular bond(s) or liability insurance requirements by reducing
its amount; provided, however, that the Sublessor reserves the right to
reactivate the bonds or reimpose the bond(s) and/or liability insurance in and
to their original tenor and form at any time throughout the term of this
sublease.

     48.  SUSPENSION OF OPERATIONS.  In the event of any disaster or pollution,
or likelihood of either, having or capable of having a detrimental effect on
public health, safety, welfare, or the environment caused in any manner or
resulting from operations under this sublease, the Sublessee shall immediately
take corrective action, seek to mitigate any damage and promptly notify
Sublessor and the State of Hawaii Board of Land and Natural Resources.

     49.  QUIET ENJOYMENT.  Sublessor hereby covenants and agrees with the
Sublessee that upon payment of the rent at the times and in the manner provided
and the observance and performance of the covenants, terms, and conditions on
the part of the Sublessee to be observed and performed, the Sublessee may have,
hold, possess and enjoy the premises for the term of the sublease, without
hindrance or interruption by the Sublessor or any other person or persons
lawfully claiming by, through or under it.

     50.  SURRENDER.  The Sublessee shall, at the end of the term or other
sooner termination of this sublease, peaceably deliver unto the Sublessor
possession of the premises, together with all improvements existing or
constructed thereon or the Sublessee, at its expense, shall remove such
improvements, at the option of the Sublessor.  Furthermore, upon the expiration,
voluntary surrender, termination, and/or revocation of this sublease, should the


                                       18
<PAGE>


Sublessee fail to remove any and all of the Sublessee's personal property from
the premises, after notice thereof, the Sublessor may remove any and all
personal property from the premises and either deem the property abandoned and
dispose of the property or place the property in storage at the cost and expense
of the Sublessee, and the Sublessee does agree to pay all costs and expenses for
disposal, removal, or storage of the personal property.  This provision shall
survive the termination of the sublease.

     51.  NON-WARRANTY.   Sublessor does not warrant the conditions of the
premises, as the same is being subleased as is.

     52.  HAZARDOUS MATERIALS.  Sublessee shall not cause or permit the
escape, disposal, or release of any hazardous materials, except as provided by
law.  Sublessee shall not allow the storage or use of such materials in any
manner not sanctioned by law or by the highest standards prevailing in the
industry for the storage and use of such materials, nor allow to be brought onto
the premises any such materials except to use in the ordinary course of
Sublessee's business, and then only after written notice is given to Sublessor
of the identity of such materials and upon Sublessor's consent, which consent
may be withheld at Sublessor's sole and absolute discretion.  Sublessor shall
have the sole and absolute discretion to permit such materials to be brought
onto and remain on the premises.  Sublessee's failure to comply with Sublessor's
directions under this section shall constitute a breach of this sublease.  If
any lender or governmental agency shall ever require testing to ascertain
whether or not there has been any release of hazardous materials by Sublessee,
then Sublessee shall be responsible for the reasonable costs thereof.  In
addition, Sublessee shall execute affidavits, representations and the like from
time to time at Sublessor's request concerning Sublessee's best knowledge and
belief regarding the presence of hazardous materials on the premises placed or
released by Sublessee.

     Sublessee agrees to indemnify, defend and hold Sublessor harmless, from any
damages and claims resulting from the release of hazardous materials on the
premises occurring while Sublessee is in possession, or elsewhere if caused by
Sublessee or persons acting under Sublessee.  These covenants shall survive the
expiration or earlier termination of the sublease.

     For the purpose of this sublease "hazardous material" shall mean any
pollutant, toxic substance, hazardous waste, hazardous material, hazardous
substance, or oil as defined in or pursuant to the Resource Conservation and
Recovery Act, as amended, the Comprehensive Environmental Response,
Compensation, and Liability Act as amended, the Federal Clean Water Act, or any
other federal, state, or local environmental law, regulation, ordinance, rule,
or by-law, whether existing as of the date hereof, previously enforced, or
subsequently enacted.

     53.  FIRE AND EXTENDED COVERAGE INSURANCE.  The sublessee, at its cost and
expense, shall procure and maintain at all times during the term of this
sublease fire and extended coverage insurance with an insurance company(s)
licensed to do business in the State of


                                       19
<PAGE>

Hawaii, insuring all buildings and improvements erected on the land subleased
in the joint names of the Sublessor and the Sublessee, with the standard
mortgage clause for Mortgagee, if any, as their interest may appear, in an
amount equal to the replacement cost of the facilities and shall pay the
premiums at the time and place required under the policy.

     In the event of total or partial loss, any proceeds derived from the
policy(s) shall be used by the Sublessee for rebuilding, repairing, or otherwise
reinstating the same buildings in a good and substantial manner according to the
plans and specifications approved in writing by the Sublessor; provided,
however, that with the approval of the Sublessor, the Sublessee may surrender
this sublease and pay the balance owing on any mortgage and the Sublessee shall
then receive that portion of the proceeds which the unexpired term of this
sublease at the time of the loss or damage bears to the whole of the term, the
Sublessor to be paid the balance of the proceeds.

     All rights or claims of subrogation against the Sublessor or State of
Hawaii, their officers, employees, and agents are waived.

     54.  WITHDRAWAL.   The Sublessor shall have the right to withdraw the
premises, or any portion, at any time during the term of this sublease upon
giving of reasonable notice and without compensation, except as provided in the
sublease, for public uses or purposes, for constructing new roads or extensions,
or changes in line or grade of existing roads, for rights of way and easements
of all kinds, and shall be subject to the right of the Sublessor to remove all
soil, rock or gravel as may be necessary for the construction of roads and
rights of way within or without the premises; provided, that upon the
withdrawal, or upon the taking which causes any portion of the land originally
subleased to become unusable for the specific use or uses for which it was
subleased, the rent shall be reduced in proportion to the value of the land
withdrawn or made unusable, and if any permanent improvement constructed upon
the land by the Sublessee is destroyed or made unusable in the process of the
withdrawal or taking, the proportionate value thereof shall be paid upon the
unexpired term of the sublease; provided, further that no withdrawal or taking
shall be had of those portions of the land which are then under production of
crops or aquatic species until the crops or aquatic species are harvested,
unless the Sublessor pays to the Sublessee the value of the crops or aquatic
species.

     55.  CLEARANCE.  The premises are subleased in an "as is" condition and
Sublessee shall be responsible for obtaining all necessary federal, state and
county clearances.  The Sublessor, however will use its best efforts to assist
the Sublessee in obtaining the necessary permits for Sublessee's operation.


     56.  FORCE MAJEURE.  If the Sublessee is rendered unable wholly or in part
by force majeure to carry out its obligations under this sublease, Sublessee
shall give to Sublessor prompt written notice of the Force Majeure.  Thereupon,
and if the circumstances relied upon by Sublessee constitute force majeure in
the good faith opinion of the Sublessor, any obligations of the Sublessee to
perform, so far as they are affected by the force majeure, shall


                                       20
<PAGE>

be suspended during the continuance of the force majeure and the primary term
of any continuation period shall be extended for a period equal to the period
of suspended performance caused by the force majeure.  Sublessee shall use
all possible diligence to resolve the settlement of strikes, lockouts or
other difficulties.  In no event shall any extension affect the terms,
conditions, or covenants of this sublease.

      57. NOTICES.  Sublessor may give any notice or deliver any document
hereunder to Sublessee by mailing the same by registered or certified mail
addressed to Sublessee's address above or by delivering the same in person to
any officer of Sublessee.  Sublessee may give any notice or deliver any document
hereunder to Sublessor by mailing the same by registered or certified mail
addressed to Sublessor's address above or by delivering the same to Sublessor in
person.  For the purposes of this paragraph, either party may change its address
by written notice to the other.  In case of any notice or document delivered by
certified or registered mail, the same shall be deemed delivered when deposited
in any United States post office, properly addressed as herein provided, with
postage fully prepaid.

     58.  BOND, IMPROVEMENT.  The Sublessee shall, within thirty (30) days
after the date of receipt of this sublease document, procure and deposit with
the Sublessor a surety bond in the amount of_________________________________,
DOLLARS ($_____________), acceptable to the Sublessor, which bond shall name the
State and Sublessor as obligees, conditioned upon the faithful observance,
performance, and completion of the building requirement contained in this
sublease, the completion of the building and improvements on or before the
specified date of completion free from all liens and claims, and that the
Sublessee shall hold the State and Sublessor harmless from all liens, suits,
actions or damages arising out of, caused from or attributable to the work
performed pursuant to the building requirement.

     59.  HEADINGS.  The article and paragraph headings are inserted only
for the convenience of the Sublessor and the Sublessee and are not intended to
construe the intent or meaning of any of the provisions thereof.

     60.  MODIFICATION OF SUBLEASE.  Any modification, alteration, or
change in this sublease shall be made only by written agreement executed by the
parties.

     61.  HAWAII LAW.   This sublease shall be construed, interpreted, and
governed by the laws of the State of Hawaii.

     62.  EXHIBITS - INCORPORATION IN SUBLEASE.  All exhibits referred to are
attached to this sublease and hereby are deemed incorporated by reference.

     63.  PARTIAL INVALIDITY.  If any term, provision, covenant, or condition of
this sublease should be held to be invalid, void, or unenforceable, the
remainder of this sublease shall continue in full force and effect and shall in
no way be affected, impaired, or invalidated


                                       21
<PAGE>

thereby.

THIS SUBLEASE IS ALSO SUBJECT TO THE FOLLOWING SPECIAL TERMS AND CONDITIONS:

     64.   DESIGN STANDARDS.   The Sublessee shall comply with the established
design standards of the Sublessor or the Board of Land and Natural Resources in
the preparing, design and construction of structures and other site
improvements.

     65.  ADMINISTRATIVE RULES.   The Sublessee shall comply with all
administrative rules adopted by Sublessor pursuant to Chapter 91 and Chapter
227D, Hawaii Revised Statutes, relating to the Natural Energy Laboratory of
Hawaii Authority.

     66.  RESTORATION OF SUBLEASED LAND.  Upon termination, surrender, or
expiration of this sublease, the Sublessor may require the Sublessee to restore
the lands covered herein to its original condition insofar as it is reasonable
to do so within ninety (90) calendar days thereof, except for such roads,
excavations, alterations or other improvements which may be designated for
retention by the Sublessor or a State agency having jurisdiction over said
lands.  When determined by the Sublessor or such State agency, cleared sites and
roadways shall be replanted with grass, shrubs, or trees by the Sublessee.

     67.  SUBLEASE SUBJECT TO MASTER LEASE.  This sublease is subject to the
terms and conditions of the master lease No. S-5157 between the Board of Land
and Natural Resources of the State of Hawaii and Sublessor, a copy of which is
attached hereto as Exhibit "F."  Any conflicts between the provisions of this
sublease and the foregoing master lease shall be resolved in favor of the master
lease.


DEFINITIONS

     68.  The use of any gender shall include all genders, and if there is more
than one Sublessee, then all words used in the singular shall extend to and
include the plural.

     69.  As used herein, unless clearly repugnant to the context:

          a.   "County" means the County of Hawaii and any governmental agencies
or authorities thereof.

          b.   "Sublessee" means and includes the Sublessee, its officers,
employees, invitees, successors or permitted assigns.

          c.   "Holder of a record of a security interest" means any person who
is the


                                       22
<PAGE>

owner or possessor of a security interest in the land subleased and who has
filed with the Natural Energy Laboratory of Hawaii Authority and with the
Bureau of Conveyances of the State of Hawaii a copy of such interest.

          d.   "Premises"  means the land and all buildings and improvements now
or hereinafter constructed and installed on the subleased land.

          e.   "Waste" includes, but is not limited to, (1) permitting the
premises or any portion thereof to become unduly eroded or failure to take
proper precautions or make reasonable effort to prevent or correct the erosion;
(2) permitting a substantial increase in noxious weeds in uncultivated portions
of the premises; and (3) failure to employ all of the usable portions of the
premises.


                                      23
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed this _29th__ day of December, 1995.

                              NATURAL ENERGY LABORATORY OF HAWAII
                                   OF HAWAII AUTHORITY


                              By__/s/ Robert Kihine_____________________________
                                   Its Executive Director

                              _Cyanotech Corporation______ (Sublessee)


                              By_/s/ Gerald R. Cysewski__________
                                   Its President



APPROVED AS TO FORM:



_____________________________
Deputy Attorney General

Dated:_______________________



                                       24
<PAGE>

STATE OF HAWAII     )
                    )    SS.
COUNTY OF HAWAII    )


     On this ______________________ day of _____________, 19____, before me
personally appeared __________________________________________________________,
to me known to be the person(s) described in and who executed the foregoing
instrument and acknowledgement to me that _____________________ executed the
same as _____________ free act and deed.



                         ____________________________________
                         Notary Public, State of Hawaii

                         My commission expires:________________




STATE OF HAWAII     )
                    )    SS.
COUNTY OF           )


     On this ______ day of ______________, 19___, before me appeared
______________________________ and ________________________________, to me
personally known, who, being by me duly sworn, did say that they are the
______________________________ and ________________________________,
respectively of ___________________________________________________, a Hawaii
corporation, and that the seal affixed to the foregoing instrument is the
corporate seal of said corporation and that the said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors, and
the said ______________________ and ______________________, acknowledged said
instrument to be the free act and deed of said corporation.



                         ____________________________________
                         Notary Public, State of Hawaii

                         My commission expires:________________



                                       25
<PAGE>

                                    ADDENDUM



     Sublessor and Sublessee agree to waive paragraph 35 (Bond, Performance) and
paragraph 58 (Bond, Improvement), as provided for by paragraph 47 (Waiver,
modification, reimposition of bond and liability insurance provisions) in
attached sublease K-4, dated _December 29th_______, 1995.

                    SUBLESSOR:

                    NATURAL ENERGY LABORATORY OF HAWAII AUTHORITY


                    By __/s/ Robert Kihune____________________
                         Its Executive Director



                    SUBLESSEE:

                    CYANOTECH CORPORATION


                    By __/s/ Gerald R. Cysewski________________
                         Its  President


<PAGE>

                            CONSENT TO AGREEMENT OF
                            GENERAL LEASE NO. S-4717


     Consent is hereby given by the STATE OF HAWAII, by its Board of Land and
Natural Resources, Lessor under General Sublease No. S-4717 to the attached
Agreement dated _______________________, 1996, from the NATURAL ENERGY
LABORATORY OF HAWAII AUTHORITY, a body corporate and politic and an
instrumentality and agency of the State of Hawaii, as "Sublessor", to
CYANOTECH CORPORATION, as "Sublessee"; PROVIDED, that nothing contained
---------------------
herein shall change, modify, waive or amend the provisions, terms, conditions
and covenants or duties and obligations of the Lessee or Sublessee under
General Lease No. S-4717.

     SUBJECT further to the following conditions:
     1.   The terms and conditions of the Agreement shall be reviewed and
examined effective ______________________ and, if warranted, the rent of the
premises under General Lease No. S-4717 shall be revised based on the rental
rate charged to the Sublessee.
     2.   The Sublessee is required to seek approval of the Department of
Transportation for all improvements to insure compatibility with airport
operations prior to submission to the Chairperson of the Board of Land and
Natural Resources for review and approval.
     3.   IT IS UNDERSTOOD that except as provided herein, should there be any
conflict between the terms of the General Lease No. S-4717 and the terms of the
sublease, the former shall control; and further, that except as provided herein,
this Consent shall not act or nor in any manner be construed as varying in any
respect the terms and conditions of the general lease; and also that no further
sublease or assignment of any interest of the premises or any portion thereof,
if permitted by Sublessor, shall be made without the prior written consent of
the Board of Land and Natural Resources.

     IN WITNESS WHEREOF, the STATE OF HAWAII, by its Board of Land and Natural
Resources, has caused this seal of the Department of Land and Natural Resources
to be hereunto affixed and there presents to be duly executed this _____ day of
______________, 1996.
                         STATE OF HAWAII



                         By __________________________________
                              Chairman and Member
                              Board of Land and Natural
                              Resources

Approved by the Board
at its meeting held on


<PAGE>

_________________________.

                    And  By __________________________________
                              Member
                              Board of Land and Natural
                              Resources


APPROVED AS TO FORM:


________________________
Deputy Attorney General

Date:____________________