<PAGE>   1
                                                                  EXHIBIT 10.13




                             LEASE AGREEMENT BETWEEN


            UTAH STATE RETIREMENT INVESTMENT FUND, AS LANDLORD, AND
           PETE'S BREWING COMPANY, A CALIFORNIA CORPORATION, AS TENANT
                                   SUITE 1010
                               DATED JULY 15,1997


<PAGE>   2
                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                           Page
<S>                                                                        <C>
1.    DEFINITIONS ...........................................................1

2.    PREMISES ..............................................................1

3.    TERM ..................................................................1

4.    USE ...................................................................1

5.    RENT ..................................................................1
      5.1      Base Rent.....................................................1
      5.2      Base Rent Adjustment..........................................1
      5.3      Additional Rent...............................................1
      5.4      Parking Charge................................................2
      5.5      Payment of Rent...............................................2
      5.6      Delinquent Payments and Handling Charge.......................2
      5.7      Prepaid Rent and Security Deposit.............................2

6.    CONSTRUCTION OF IMPROVEMENTS ..........................................2
      6.1      General.......................................................2
      6.2      Access by Tenant Prior to Commencement of Term................2
      6.3      Commencement Date; Adjustments to Commencement Date...........2

7.    SERVICES TO BE FURNISHED BY LANDLORD ..................................3
      7.1      General.......................................................3
      7.2      Keys..........................................................3
      7.3      Tenant Identity...............................................3
      7.4      Charges.......................................................3
      7.5      Operating Hours...............................................4

8.    REPAIR AND MAINTENANCE.................................................4
      8.1      By Landlord...................................................4
      8.2      By Tenant.....................................................4

9.    TAXES ON TENANTS PROPERTY..............................................4

10.   TRANSFER BY TENANT.....................................................4
      10.1     General.......................................................4
      10.2     Conditions....................................................4
      10.3     Liens.........................................................5

11.   ALTERATIONS............................................................5

12.   SPECIFICALLY PROHIBITED USES...........................................5

13.   ACCESS BY LANDLORD.....................................................5

14.   CONDEMNATION...........................................................5

15.   CASUALTY...............................................................6
      15.1     General ......................................................6
      15.2     Acts of Tenant ...............................................6

16.   SUBORDINATION AND ATTORNMENT ..........................................6
      16.1     General ......................................................6
      16.2     Attornment ...................................................6

17.   INSURANCE .............................................................6
      17.1     General.......................................................6
      17.2     Waiver of Subrogation.........................................7

18.   TENANT'S INDEMNITY.....................................................7

19.   THIRD PARTIES; ACTS OF FORCE MAJEURE...................................7
</TABLE>


                                       i
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<TABLE>
<S>                                                                          <C>
20.   SECURITY INTEREST.......................................................7

21.   CONTROL OF COMMON AREAS.................................................7

22.   RIGHT TO RELOCATE.......................................................7

23.   QUIET ENJOYMENT.........................................................8

24.   DEFAULT BY TENANT.......................................................8
      24.1      Events of Default.............................................8
      24.2      Remedies of Landlord..........................................8
      24.3      Payment by Tenant.............................................8
      24.4      Reletting.....................................................9
      24.5      Landlords Right to Pay or Perform.............................9
      24.6      No Waiver; No Implied Surrender...............................9

25.   DEFAULTS BY LANDLORD....................................................9

26.   RIGHT OF REENTRY........................................................9

27.   MISCELLANEOUS...........................................................9
      27.1     Independent Obligations; No Offset.............................9
      27.2     Time of Essence...............................................10
      27.3     Applicable Law................................................10
      27.4     Assignment by Landlord........................................10
      27.5     Commencement Date and Estoppel Certificates...................10
      27.6     Signs, Building Name and Building Address.....................10
      27.7     Notices.......................................................10
      27.8     Entire Agreement, Amendment and Binding Effect................10
      27.9     Severability..................................................10
      27.10    Number and Gender, Captions and References....................10
      27.11    Attorneys' Fees...............................................11
      27.12    Brokers.......................................................11
      27.13    Interest on Tenant's Obligations..............................11
      27.14    Authority.....................................................11
      27.15    Recording.....................................................11
      27.16    Exhibits......................................................11
      27.17    Multiple Counterparts.........................................11

               Signature Page ...............................................12
</TABLE>

<PAGE>   4

                                 LEASE AGREEMENT


      THIS LEASE AGREEMENT (this "LEASE") is entered as of July 15, 1997 ,
between UTAH STATE RETIREMENT INVESTMENT FUND ("LANDLORD") and PETE'S BREWING
COMPANY, A CALIFORNIA CORPORATION ("TENANT").

1. DEFINITIONS. The definitions of certain of the capitalized terms used in this
Lease are set forth in the Glossary of Defined Terms attached as EXHIBIT A.

2. PREMISES. Subject to the provisions of this Lease, Landlord hereby leases to
Tenant, and Tenant hereby leases from Landlord, approximately 821 rentable
square feet of space in the Building, which space is outlined on the floor plan
attached hereto as Exhibit B (the "PREMISES"). In connection with such demise,
Landlord hereby grants to Tenant the non-exclusive right to use during the Term
all Common Areas designed for the use of all tenants in the Building, in common
with all tenants in the Building and their invitees, for the purposes for which
designed and in accordance with all Legal Requirements. By occupying the
Premises, Tenant accepts the Premises as being suitable for Tenant's intended
use of the Premises.

3. TERM. The Term of this Lease shall commence on the Commencement Date (which
is scheduled to be August 15, 1997) and shall expire at 5:00 pm. August 31, 2000
unless earlier terminated as provided herein (the "TERM").

4. USE. Tenant shall occupy and use the Premises solely for lawful, general
business office purposes in strict compliance with the Building Rules and
Regulations from time to time in effect and all other Legal Requirements.

5. RENT.

         5.1 BASE RENT. In consideration of Landlord's leasing the Premises to
Tenant, Tenant shall pay to Landlord as follows: 

<TABLE>
<CAPTION>
                                                  Monthly
                  Term                            Amount
                  ----                            ------
<S>                                             <C>
      September 1, 1997 - August 31, 1998        $1,461.38
      September 1, 1998 - August 31, 1999        $1,529.79
      September 1, 1999 - August 31, 2000        $1,598.21
</TABLE>


         The Base Rent set forth in this Section 5.1 is a negotiated figure and
shall govern whether or not the actual gross rentable square footage of the
Premises is the same as set forth in Section 2 hereof or changes pursuant to the
standards set in the definition of Net Rentable Area. Tenant shall have no right
to withhold, deduct or offset any amount of the monthly Base Rent or any other
sum due hereunder even if the actual gross rentable square footage of the
premises is less than that set forth in Section 2 hereof or changes pursuant to
the standards set forth in the definition of Net Rentable Area.

         5.3 Additional Rent. For purposes of this Lease, Tenant's "ADDITIONAL
RENT" for any Fiscal Year (or portion thereof) shall mean the product of (a) Net
Rentable Area of the Premises multiplied by (b) the difference between (i) the
Operating Expenses divided by the Net Rentable Area of the Building minus (ii)
the Expense Stop, all as applicable for the period in question. By the
Commencement Date, Landlord shall estimate the Additional Rent to be due by
Tenant for the balance of the Fiscal Year in which the Commencement Date occurs.
Thereafter, unless Landlord delivers to Tenant a revision of the estimated
Additional Rent, Tenant shall pay to Landlord, coincident with Tenant's payment
of Base Rent, an amount equal to the estimated Additional Rent for the remainder
of such year divided by the number of months remaining in such year. From time
to time during any Fiscal Year, Landlord may estimate and re-estimate the
Additional Rent to be due by Tenant for that Fiscal Year and deliver a copy of
the estimate or re-estimate to Tenant. Thereafter, the monthly installments of
Additional Rent payable by Tenant shall be appropriately adjusted in accordance
with the estimation so that, by the end of the Fiscal Year, Tenant shall have
paid all of the Additional Rent as estimated by Landlord. After the conclusion
of each Fiscal Year during the Term, and after the termination or expiration of
the Term, Landlord shall deliver to Tenant a statement of actual Additional Rent
due by Tenant for the Fiscal Year (or, with respect to termination or
expiration, the portion



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<PAGE>   5
of the Fiscal Year) just ended. Within 30 days thereafter, Tenant shall pay to
Landlord or Landlord shall credit against the next installment of Additional
Rent due by Tenant (or Landlord shall refund to Tenant, if the Term has expired
and ail payments due by Tenant to Landlord have been paid in full) the
difference between the actual Additional Rent due for such year and the
estimated Additional Rent paid by Tenant during such year. Tenant may review, at
Tenant's expense and after giving 20-days' prior written notice to Landlord,
Landlord's records relating to Operating Expenses for any periods within two
Fiscal Years prior to the review; provided, however, no review shall extend to
periods of time preceding the Commencement Date. In lieu of allowing Tenant to
review Landlord's records under this Section 5.3, Landlord may deliver to Tenant
a report of the Operating Expenses prepared by a certified public accountant,
which report shall be conclusive for purposes of this Lease.

      5.4 PARKING CHARGES. Tenant shall at all times during the Term lease from
Landlord three (3) unassigned automobile parking spaces in the Parking Facility
at no extra charge.

      5.5 PAYMENT OF RENT. Except as otherwise expressly provided in this Lease,
all Rent shall be due in advance monthly installments on the first day of each
calendar month during the Term. Rent shall be paid to Landlord at its address
recited in Section 27.7 or to such other person or at such other address as
Landlord may from time to time designate in writing. Rent shall be paid without
notice, demand, abatement, deduction or offset in legal tender of the United
States of America. If the Term commences or ends on other than the first or the
last day of a calendar month, the Rent for the partial month shall be prorated
on the basis of the number of days during the month for which the Term was in
effect. If the Term commences or ends on other then the first or the last day of
a Fiscal Year, the Additional Rent for the partial Fiscal Year shall be prorated
on the basis of the number of days during the Fiscal Year for which the Term was
in effect.

      5.6 DELINQUENT PAYMENTS AND HANDLING CHARGE. All Rent and other payments
required of Tenant hereunder shall bear interest from the date due until the
date paid at the rate of interest specified in Section 27.13. Alternatively,
Landlord may charge Tenant, as additional Rent hereunder, a fee equal to five
percent of the delinquent payment to reimburse Landlord for its cost and
inconvenience incurred as a consequence of Tenant's delinquency. In no event,
however, shall the charges permitted under this Section 5.6 or elsewhere in this
Lease, to the extent the same are considered to be interest under applicable
law, exceed the maximum rate of interest allowable under applicable law.

      5.7 PREPAID RENT AND SECURITY DEPOSIT. Landlord hereby acknowledges
receipt of $ 2,368.85, representing (a) the first monthly installment of Base
Rent paid in advance, to be applied to the Rent for the first PARTIAL month of
the Term when due, and (b) the Security Deposit as security for the full and
timely payment and performance by Tenant of its obligations under this Lease.
Landlord may apply any or all of the Security Deposit toward the payment of any
sum or the performance of any obligation which Tenant was obligated, but failed,
to pay or perform hereunder. The Security Deposit shall not be considered an
advance payment of Rent by Tenant or a measure of or a limit to Landlord's
damages upon an Event of Default. TENANT SHALL PAY TO LANDLORD A DEPOSIT OF
$15.00 FOR EACH ACCESS CARD REQUESTED TO GAIN ACCESS TO THE BUILDING,

6. CONSTRUCTION OF IMPROVEMENTS.

      6.1 GENERAL. Subject to events of Force Majeure, Landlord shall install,
furnish, perform and apply, at its expense, the Landlord's Work as specified in
the Work Letter. Performance of the Landlord's Work shall constitute Landlord's
sole construction obligation to Tenant under this Lease.

      6.2 ACCESS BY TENANT PRIOR TO COMMENCEMENT OF TERM. Provided that Tenant
obtains and delivers to Landlord the certificates or policies of insurance
called for in Section 17.1, Landlord, in its sole discretion, may permit Tenant
and its employees, agents, contractors and suppliers to enter the Premises
before the Commencement Date (and such entry, alone, shall not constitute
Tenant's taking possession of the Premises for the purpose of Section 6.3(c)) to
prepare the Premises for Tenant's occupancy. Tenant and each other person or
firm who or which enters the Premises before the Commencement Date shall conduct
itself so as to not interfere with Landlord or other occupants of the Building.
Landlord may withdraw any permission granted under this Section 6.2 upon
24-hours' notice to Tenant if Landlord, in its sole discretion, determines that
any such interference has been or may be caused. Any prior entry shall be under
all of the terms of this Lease (other than the obligation to pay Base Rent and
Additional Rent) and at Tenant's sole risk. Landlord shall not be liable in any
way for personal injury, death or property damage (including damage to any
personal property which Tenant May bring into, or any work which Tenant may
perform in, the Premises) which may occur in or about the Complex by Tenant or
such other person or firm as a result of any prior entry.

      6.3 COMMENCEMENT DATE: ADJUSTMENTS TO COMMENCEMENT DATE. For purposes of
this Lease, the "COMMENCEMENT DATE" shall mean the earliest of: (a) the date on
which Landlord substantially completes the Landlord's Work and tenders
possession of the Premises to Tenant; (b) the date on which Landlord would have
substantially completed the Landlords Work and tendered possession of the
Premises to Tenant but for (i) the delay or failure of Tenant to furnish
information or other matters required in the Work Letter, (ii) Tenants request
for changes in the Plans or non-Building Standard Items or (iii) any other
action or inaction of Tenant, or any person or firm employed or retained by
Tenant or (1) the date on which Tenant takes possession of the Premises. If by
the scheduled Commencement Date specified in Section 3 the Landlord's Work has
not been substantially completed, and such failure to substantially complete
renders the Premises untenable for their intended purpose, all as reasonably
determined by Landlord, or Landlord is unable to tender possession of the
Premises to Tenant, then the



                                        2
<PAGE>   6
Commencement Date (and the commencement of payment of Base Rent and Additional
Rent) shall be postponed until the Landlord's Work is substantially completed as
reasonably determined by Landlord or until possession of the Premises is
tendered to Tenant, as the case may be. Such postponement shall extend the
scheduled expiration of the Term for a number of days equal to the postponement.
The postponement of the payment of Base Rent and Additional Rent under this
Section 6.3 shall be Tenant's exclusive remedy for Landlord's delay in
completing the Landlord's Work or tendering possession of the Premises to
Tenant.

7. SERVICES TO BE FURNISHED BY LANDLORD.

      7.1 GENERAL. Subject to applicable Legal Requirements and Tenant's
performance of its obligations hereunder, Landlord shall use all reasonable
efforts to furnish the following services:

             (a) Air-conditioning and heating to the Premises during Building
        Operating Hours, at such temperatures and in such amounts as are
        considered by Landlord to be suitable and standard (thus excluding
        air-conditioning or heating for electronic data processing or other
        specialized equipment);

             (b) Hot and cold water at those points of supply common to all
        floors for lavatory and drinking purposes only;

             (c) Janitor service and periodic window washing in and about the
        Building and the Premises;

             (d) Elevator service, if necessary, to provide access to and egress
        from the Premises;

             (e) Electric current during Building Operating Hours for normal
        office machines and other machines of low electrical consumption (which
        shall exclude electric current for electronic data processing equipment,
        lighting in excess of Building Standard or any other item of electrical
        equipment which singly consumes more than 0.5 kilowatts per hour at
        rated capacity or requires a voltage other than 120 volts single phase);
        and

             (f) Replacement of fluorescent lamps in Building Standard light
        fixtures installed by Landlord and of incandescent bulbs or fluorescent
        lamps in all public restrooms, stairwells and other common areas in the
        Building.

if any of the services described above or elsewhere in this Lease are
interrupted, Landlord shall use reasonable diligence to promptly restore same.
However, neither the interruption or cessation of such services nor the failure
of Landlord to restore same shall render Landlord liable for damages to person
or property, or be construed as an eviction of Tenant, or work an abatement of
Rent or relieve Tenant from fulfilling any of its other obligations hereunder.

      7.2 KEYS. Landlord shall furnish Tenant, at Landlords expense, with three
(3) keys, and at Tenant's expense with such additional keys as Tenant may
request, to unlock each corridor door entering the Premises. Tenant shall not
install, or permit to be installed, any additional lock on any door into or in
the Premises or make, or permit to be made, any duplicates of keys to the
Premises. Landlord shall be entitled at all times to possession of a duplicate
of all keys to all doors to or inside of the Premises. All keys referred to in
this Section 7.2 shall remain the property of Landlord. Upon the expiration or
termination of the Term, Tenant shall surrender all such keys to Landlord and
shall deliver to Landlord the combination to all locks on all safes, cabinets
and vaults which will remain in the Premises. Landlord shall be entitled to
install, operate and maintain security systems in or about the Premises and the
Complex which monitor, by closed circuit television or otherwise, all persons
leaving or entering the Complex, the Building and the Premises.

      7.3 TENANT IDENTITY. Landlord shall provide and install, in Building
Standard graphics, letters or numerals identifying Tenant's name and suite
number on entrance doors to the Premises. Without Landlord's prior written
consent, no other signs, numerals, letters, graphics, symbols or marks
identifying Tenant shall be placed on the exterior, or on the interior if they
are visible from the exterior, of the Premises. Landlord shall install up to one
(1) directory strip(s) for each 821 net rentable square feet in the Premises,
listing the names and suite numbers of Tenant on the Building directory board to
be placed in the main lobby of the Building.

      7.4 CHARGES. Tenant shall pay to Landlord, monthly as billed, as
additional Rent, such charges as may be separately metered or as Landlord may
compute for the following:

      (a) any utility services utilized by Tenant for computers, data processing
      equipment or other electrical equipment in excess of that agreed to be
      furnished by Landlord pursuant to Section 7.1(e),

      (b) lighting installed in the Premises in excess of Building Standard
      lighting, or provided at times other than Building Standard Hours;

      (c) air-conditioning, heating and other services in excess of that stated
      in Section 7.1(a) or provided at times other than Building Operating
      Hours; and



                                       3
<PAGE>   7
      HVAC and lighting utilized at times other than Building Standard Hours
will be furnished only upon the request of Tenant, provided that Tenant shall
pay to the Landlord for the actual costs of such additional services monthly,
upon receipt of a bill therefor, the sum equal to the amount charged to Landlord
by the applicable utilities authority plus a $5.00 monthly service charge for
such metering recording device. Tenant acknowledges that such service and
temperature may be subject to change by local, county, state or federal
regulation. Whenever machines or equipment that generate abnormal heat are used
in the Leased Premises which affect the temperature otherwise maintained by the
air conditioning system, Landlord shall have the right to install supplemental
air conditioning in the Leased Premises, and the cost thereof, including the
cost of installation, operating, use and maintenance, shall be paid by Tenant to
Landlord as additional rental upon demand.

      With respect to any other Non-Building Standard services provided to
Tenant, Landlord may elect to estimate the charges to be paid by Tenant under
this Section 7.4 and bill such charges to Tenant monthly in advance, in which
event Tenant shall promptly pay the estimated charges. When the actual charges
are determined by Landlord an appropriate cash adjustment shall be made between
Landlord and Tenant to account for any underpayment or overpayment by Tenant.


      7.5 OPERATING HOURS. Subject to Building Rules and Regulations and such
security standards as Landlord may from time to time adopt, the Building shall
be open to the public during the Building Operating Hours and the Premises shall
be open to Tenant during hours other then Building Operating Hours.

8. REPAIR AND MAINTENANCE.

      8.1 BY LANDLORD. Landlord shall maintain the Building (excluding leasehold
improvements which become fixtures thereto) in a good and operable condition,
and shall make such repairs and replacements as may be required to maintain the
Building in such condition. This Section 8.1 shall not apply to damage
resulting from a Taking (as to which Section 14 shall apply), or damage
resulting from a casualty (as to which Section 15.1 shall apply) or to damage
for which Tenant is otherwise responsible under this Lease.

      8.2 BY TENANT. Tenant shall maintain the Premises in a clean, safe,
operable, attractive condition, and will not commit or allow to remain any waste
or damage to any portion of the Premises. Tenant shall repair or replace,
subject to Landlord's direction and supervision, any damage to the Complex
caused by Tenant or Tenant's agents, contractors or invitees. If Tenant fails to
make such repairs or replacements, Landlord may make same at Tenant's cost. Such
cost shall be payable to Landlord by Tenant on demand as additional Rent. All
contractors, workmen, artisans and other persons which or who Tenant proposes to
retain to perform Work in the Premises (or the Complex, pursuant to the second
sentence of this Section 8.2) pursuant to this Section 8.2 or Section 11 shall
be approved by Landlord prior to the commencement of any such work.

9. TAXES ON TENANT'S PROPERTY. Tenant shall be liable for and shall pay, before
their becoming delinquent, all taxes and assessments levied against any personal
property placed by Tenant in the Premises (even if same becomes a fixture by
operation of law or the property of Landlord by operation of this Lease),
including any additional Impositions which may be assessed, levied, charged or
imposed against Landlord or the Building by reason of Non-Building Standard
Items in the Premises. Tenant may withhold payments of any taxes and assessments
described in this Section 9 so long as Tenant contests its obligation to pay in
accordance with applicable law and the non-payment thereof does not pose a
threat of loss or seizure of the Building or any interest of Landlord therein.

10. TRANSFER BY TENANT.

      10.1 GENERAL. Without the prior written consent of Landlord, Tenant shall
not effect or suffer any Transfer. Any attempted Transfer without such consent
shall be void. If Tenant desires to effect a Transfer, it shall deliver to
Landlord written notice thereof in advance of the date on which Tenant proposes
to make the Transfer, together with all of the terms of the proposed Transfer
and the identity of the proposed Transferee. Landlord shall have 30 days
following receipt of the notice and information within which to notify Tenant in
writing whether Landlord elects (a) to refuse to consent to the Transfer and to
terminate this Lease as to the space proposed to be Transferred as of the date
so specified by Tenant, in which event Tenant will be relieved of all further
obligations hereunder as to such space, (b) to refuse to consent to the Transfer
and to continue this Lease in full force as to the entire Premises or (c) to
permit Tenant to effect the proposed Transfer. If Landlord fails to notify
Tenant of its election within said 30 day period, Landlord shall be deemed to
have elected option (b). The consent by Landlord to a particular Transfer shall
not be deemed a consent to any other Transfer. If a Transfer occurs without the
prior written consent of Landlord as provided herein, Landlord may nevertheless
collect rent from the Transferee and apply the net amount collected to the Rent
payable hereunder, but such collection and application shall not constitute a
waiver of the provisions hereof or a release of Tenant from the further
performance of its obligations hereunder.

      10.2 CONDITIONS. The following conditions shall automatically apply to
each Transfer, without the necessity of same being stated in or referred to in
Landlord's written consent:

               (a) Tenant shall execute, have acknowledged and deliver to
        Landlord, and cause the Transferee to execute, have acknowledged and
        deliver to Landlord, an instrument in form and substance acceptable to
        Landlord in which (i) the Transferee adopts this Lease and agrees to
        perform, jointly and severally with



                                       4
<PAGE>   8
        Tenant, all of the obligations of Tenant hereunder, as to the space
        transferred to it, (ii) the Transferee grants Landlord an express first
        and prior security interest in its personal property brought into the
        transferred space to secure its obligations to Landlord hereunder, (iii)
        Tenant subordinates to Landlord's statutory lien and security interest
        any liens, security interests or other rights which Tenant may claim
        with respect to any property of the Transferee, (iv) Tenant agrees with
        Landlord that, if the rent or other consideration due by the Transferee
        exceeds the Rent for the transferred space, then Tenant shall pay
        Landlord as additional Rent hereunder all such excess rent and other
        consideration immediately upon Tenant's receipt thereof, (v) Tenant and
        the Transferee agree to provide to Landlord, at their expense, direct
        access from a public corridor in the Building to the transferred space,
        (vi) the Transferee agrees to use and occupy the transferred space
        solely for the purpose specified in Section 4 and otherwise in strict
        accordance with this Lease and (vii) Tenant acknowledges that,
        notwithstanding the Transfer, Tenant remains directly and primarily
        liable for the performance of all the obligations of Tenant hereunder
        (including, without limitation, the obligation to pay all Rent), and
        Landlord shall be permitted to enforce this Lease against Tenant or the
        Transferee, or both, without prior demand upon or proceeding in any way
        against any other persons, and

             (b) Tenant shall deliver to Landlord a counterpart of all
        instruments relative to the Transfer executed by all parties to such
        transaction (except Landlord).

        10.3 LIENS. Without in any way limiting the generality of the foregoing,
Tenant shall not grant, place or suffer, or permit to be granted, placed or
suffered, against the Complex or any portion thereof, any lien, security
interest, pledge, conditional sale contract, claim, charge or encumbrance
(whether constitutional, contractual or otherwise) and if any of the aforesaid
does arise or is asserted, Tenant will, promptly upon demand by Landlord and at
Tenant's expense, cause same to be released.

11. ALTERATIONS. Tenant shall not make, or permit to be made, any alteration,
improvement or addition to, or install, or permit to be installed, any fixture
or equipment (other than desk top electrical equipment) in, the Premises without
the prior written consent of Landlord. All such alterations, improvements and
additions (including all articles attached to the floor, wall or ceiling of the
Premises) shall become the property of Landlord and shall, at Landlord's
election, be (a) surrendered with the Premises as part thereof at the
termination or expiration of the Term, without any payment, reimbursement or
compensation therefor, or (b) removed by Tenant, at Tenant's expense, with all
damage caused by such removal repaired by Tenant. Tenant may remove Tenant's
trade fixtures, office supplies, movable office furniture and equipment not
attached to the Building provided such removal is made within five days after
the expiration of the Term, no uncured Event of Default has occurred and Tenant
promptly repairs all damage caused by such removal.

12. SPECIFICALLY PROHIBITED USES. Tenant will not (a) use, occupy or permit the
use or occupancy of the Premises for any purpose or in any manner which is or
may be, directly or indirectly, violative of any Legal Requirement, or dangerous
to life or property, or a public or private nuisance or disruptive or
obstructive of any other tenant of the Building, (b) keep, or permit to be kept,
any substance in or conduct, or permit to be conducted, any operation from the
Premises which might emit offensive odors or conditions into other portions of
the Building, or make undue noise or create undue vibrations, (c) commit or
permit to remain any waste to the Premises, (d) install or permit to remain any
improvements to the Premises (other than window coverings which have first been
approved by Landlord) which are visible from the outside of the Premises, or
exceed the structural loads of floors or walls of the Building, or adversely
affect the mechanical, plumbing or electrical systems of the Building or affect
the structural integrity of the Building in any way, (e) install any food, soft
drink or other vending machine (other than those for the exclusive,
non-commercial use of Tenant and its business invitees) in the Premises or (f)
commit, or permit to be committed, any action or circumstance in or about the
Building which, directly or indirectly, would or might justify any insurance
carrier in cancelling or increasing the premium on the fire and extended
coverage insurance policy maintained by Landlord on the Building or contents,
and if any increase results from any act of Tenant, then Tenant shall pay such
increase promptly upon demand therefor by Landlord.

13. ACCESS BY LANDLORD. Landlord, its employees, contractors, agents and
representatives, shall have the right (and Landlord, for itself and such persons
and firms, hereby reserves the right) to enter the Premises at all hours (a) to
inspect, clean, maintain, repair, replace or alter the Premises or the Building,
(b) to show the Premises to prospective purchasers (or, during the last 12
months of the Term, to prospective tenants), (c) to determine whether Tenant is
performing its obligations hereunder and, if it is not, to perform same at
Landlord's option and Tenant's expense or (d) for any other purpose deemed
reasonable by Landlord. In an emergency, Landlord (and such persons and firms)
may use any means to open any door into or in the Premises without any liability
therefor. Entry into the Premises by Landlord or any other person or firm named
in the first sentence of this Section 13 for any purpose permitted herein shall
not constitute a trespass or an eviction (constructive or otherwise), or entitle
Tenant to any abatement or reduction of Rent, or constitute grounds for any
claim (and Tenant hereby waives any claim) for damages for any injury to or
interference with Tenant's business, for loss of occupancy or quiet enjoyment or
for consequential damages.

14. CONDEMNATION. If all of the Complex is Taken, or if so much of the Complex
is Taken that, in Landlord's opinion, the remainder cannot be restored to an
economically viable, quality office building, or if the awards payable to
Landlord as a result of any Taking are, in Landlords opinion, inadequate to
restore the remainder to an economically viable, quality office building,
Landlord may, at its election, exercisable by the giving of written notice to
Tenant within 60 days after the date of the Taking, terminate this Lease as of
the date of the Taking or the



                                       5
<PAGE>   9
date Tenant is deprived of possession of the Premises (whichever is later). If
this Lease is not terminated as result of a Taking, Landlord shall restore the
Premises remaining after the Taking to a Building Standard condition. During the
period of restoration, Base Rent shall be abated to the extent the Premises are
rendered untenantable and, after the period of restoration, Base Rent and
Tenant's Share shall be reduced in the proportion that the area of the Premises
Taken or otherwise rendered untenantable bears to the area of the Premises just
prior to the Taking. If any portion of Base Rent is abated under this Section
14, Landlord may elect to extend the expiration date of the Term for the period
of the abatement. All awards, proceeds, compensation or other payments from or
with respect to any Taking of the Complex or any portion thereof shall belong to
Landlord, Tenant hereby assigning to Landlord all of its right, title, interest
and claim to same. Tenant may assert a claim for and recover from the condemning
authority, but not from Landlord, such compensation as may be awarded on account
of Tenant's moving and relocation expenses, and depreciation to and loss of
Tenant's moveable personal property.

15. CASUALTY.

        15.1 GENERAL. TENANT shall give prompt written notice to Landlord of any
casualty to the Complex of which Tenant is aware and any casualty to the
Premises. If the Complex or the Premises are totally destroyed, or if the
Complex or the Premises are partially destroyed but in Landlord's opinion, they
cannot be restored to an economically viable, quality office building, or if the
insurance proceeds payable to Landlord as a result of any casualty are, in
Landlord's opinion, inadequate to restore the portion remaining to an
economically viable and quality office building, Landlord may, at its election
exercisable by the giving of written notice to Tenant within 60 days after the
casualty, terminate this Lease as of the date of the casualty or the date Tenant
is deprived of possession of the Premises (whichever is later). If this Lease is
not terminated as a result of a casualty, Landlord shall (subject to Section
15.2) restore the Premises to a Building Standard condition. During the period
of restoration, Base Rent shall be abated to the extent the Premises are
rendered untenantable and, after the period of restoration, Base Rent and
Tenant's Share shall be reduced in the proportion that the area of the Premises
remaining tenantable after the casualty bears to the area of the Premises just
prior to the casualty. If any portion of Base Rent is abated under this Section
15. 1, Landlord may elect to extend the expiration date of the Term for the
period of the abatement.

        15.2 ACTS OF TENANT. Notwithstanding any provisions of this Lease to the
contrary, if the Premises or the Complex are damaged or destroyed as a result of
a casualty arising from the acts or omissions of Tenant, or any of Tenant's
officers, directors, shareholders, partners, employees, contractors, agents,
invitees or representatives, (a) Tenant's obligation to pay Rent and to perform
its other obligations under this Lease shall not be abated, reduced or altered
in any manner, (b) Landlord shall not be obligated to repair or restore the
Premises or the Complex and (c) subject to Section 17.2, Tenant shall be
obligated, at Tenant's cost, to repair and restore the Premises or the Complex
to the condition they were in just prior to the damage or destruction under the
direction and supervision of, and to the satisfaction of, Landlord and any
Landlord Mortgagee.

16.     SUBORDINATION AND ATTORNMENT.

        16.1 GENERAL. This Lease, Tenant's leasehold estate created hereby and
all of Tenant's rights, titles and interests hereunder and in and to the
Premises are subject and subordinate to any Mortgage presently existing or
hereafter placed upon all or any portion of the Complex. However, Landlord and
Landlord's Mortgagee may, at any time upon the giving of written notice to
Tenant and without any compensation or consideration being payable to Tenant,
make this Lease, and the aforesaid leasehold estate and rights, titles and
interests, superior to any Mortgage. Upon the written request by Landlord or by
Landlord's Mortgagee to Tenant, and within five (5) days of the date of such
request, and without any compensation or consideration being payable to Tenant,
Tenant shall execute, have acknowledged and deliver a recordable instrument
confirming that this Lease, Tenant's leasehold estate in the Premises and all of
Tenant's rights, titles and interests hereunder are subject and subordinate (or,
at the election of Landlord or Landlord's Mortgagee, superior) to the Mortgage
benefiting Landlord's Mortgagee.

        16.2 ATTORNMENT. Upon the written request of any person or party
succeeding to the interest of Landlord under this Lease, Tenant shall
automatically become the tenant of and attorn to such successor in interest
without any change in any of the terms of this Lease. No successor in interest
shall be (a) bound by any payment of Rent for more than one month in advance,
except payments of security for the performance by Tenant of Tenant's
obligations under this Lease, (b) subject to any offset, defense or damages
arising out of a default or any obligations of any preceding Landlord or (c)
bound by any amendment of this Lease entered into after Tenant has been given
written notice of the name and address of Landlord's Mortgagee and without the
written consent of Landlord's Mortgagee or such successor in interest. The
subordination, attornment and mortgage protection clauses of this Section 16
shall be self-operative and no further instruments of subordination, attornment
or mortgagee protection need be required by any Mortgagee or successor in
interest thereto. Nevertheless upon the written request therefor and without any
compensation or consideration being payable to Tenant, Tenant agrees to execute,
have acknowledged and deliver such instruments as may be requested to confirm
the same.

17.   INSURANCE.

      17.1 GENERAL. Tenant shall obtain and maintain throughout the Term the
following policies of insurance:

             (a) fire and all risk insurance, with vandalism, malicious mischief
        and sprinkler leakage endorsements, on all of Tenant's personal property
        located in, and on all Non-Building Standard Items to, the Premises in
        an amount not less than eighty percent of the replacement cost thereof;
        



                                       6
<PAGE>   10
             (b) comprehensive general and contractual liability insurance
        against claims for personal injury, bodily injury, death and property
        damage occurring in or about the Premises, such insurance to afford
        protection to the limits of (i) not less than $1,000,000 per occurrence;

             (c) insurance required hereunder shall be written by companies
        licensed to do business in the State of Texas and shall have a minimum
        rating of A:X by Best's Key Rating Guide.

             (d) such other policy or policies of insurance as Landlord may
        reasonably require or as Landlord is then requiring from one or more
        other tenants in the Building.

Tenant shall deliver to Landlord, prior to the Commencement Date, certificates
of such insurance and shall, at all times during the Term, deliver to Landlord
upon request true copies of such insurance policies. The policy described in
clause (b) shall (i) name Landlord as an addition insured, (ii) provide that it
will not be cancelled, reduced or nonrenewed without 30-days' prior written
notice to Landlord, (iii) insure performance of the indemnities of Tenant
contained in Section 18 and elsewhere in this Lease and (iv) be primary
coverage, so that any insurance coverage obtained by Landlord shall be in excess
thereto. Tenant shall deliver to Landlord certificates of renewal at least 30
days before the expiration date of each such policy and copies of new policies
at least 30 days before terminating any such policies. All policies of insurance
required to be obtained and maintained by Tenant shall be subject to the
approval of Landlord as to terms, coverage, deductibles and issuer.

      17.2 WAIVER OF SUBROGATION. Landlord and Tenant hereby waive all claims,
rights of recovery and causes of action that either party or any party claiming
by, through or under such party may now or hereafter have by subrogation or
otherwise against the other party or against any of the other party's officers,
directors, shareholders, partners or employees for any loss or damage that may
occur to the Complex, the Premises, Tenant's improvements or any of the contents
of any of the foregoing by reason of fire or other casualty, or by reason of any
other cause except gross negligence or willful misconduct (thus including simple
negligence of the parties hereto or their officers, directors, shareholders,
partners or employees), that could have been insured against under the terms of
(a) in the case of Landlord, the standard fire and extended coverage insurance
policies available in the state where the Complex is located at the time of the
casualty and (b) in the cue of Tenant, the fire and extended coverage insurance
policy required to be obtained and maintained under Section 17.1; provided,
however, that the waiver set forth in this Section 17.2 shall not apply to any
deductibles on insurance policies carried by Landlord or to any coinsurance
penalty which Landlord might sustain. Landlord and Tenant shall cause an
endorsement to be issued to their respective insurance policies recognizing this
waiver of subrogation.

18. TENANT'S INDEMNITY. Subject to Section 17.2, Tenant shall defend, indemnify
and hold harmless Landlord and Landlord's officers, directors, shareholders,
partners and employees from and against, all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, costs, expenses and disbursements
(including court costs and reasonable attorneys' fees) resulting from any
injuries to or death of any person or damage to any property occurring during
the Term in or about the Premises.

19. THIRD PARTIES: ACTS OF FORCE MAJEURE. Landlord shall have no liability to
Tenant, or to Tenant's officers, directors, shareholders, partners, employees,
agents, contractors or invitees, for bodily injury, death, property damage,
business interruption, loss of profits, loss of trade secrets or other direct or
consequential damages occasioned by (a) the acts or omissions of any other
tenant or such other tenant's officers, directors, shareholders, partners,
employees, agents, contractors or other invitees within the Complex, (b) Force
Majeure, (c) vandalism, theft, burglary and other criminal acts (other than
those committed by Landlord and its employees), (d) water leakage or (e) the
repair, replacement, maintenance, damage, destruction or relocation of the
Premises.

20. SECURITY INTEREST. As security for Tenant's payment of Rent and performance
of all of its other obligations under this Lease, Tenant hereby grants to
Landlord a security interest in all property of Tenant now or hereafter placed
in the Premises. Landlord, as secured party, shall be entitled to all of the
rights, remedies and recourses afforded to a secured party under the Texas
Uniform Commercial Code, which rights, remedies and recourses shall be
cumulative of all other rights, remedies, recourses, liens and security
interests afforded Landlord by law, equity or this Lease. Contemporaneously with
the execution of this Lease, Tenant shall execute and deliver, as debtor,
promptly upon request and without any compensation or consideration being
payable to Tenant, such additional financing statement or statements as Landlord
may request. However, Landlord may at any time file a copy of this Lease as a
financing statement.

21. CONTROL OF COMMON AREAS. Landlord shall have the exclusive control over the
Common Areas. Landlord may, from time to time, create different Common Areas,
close or otherwise modify the Common Areas, and modify and the Building Rules
and Regulations with respect thereto.

22. RIGHT TO RELOCATE. Landlord retains the right and power, to be exercised
reasonably and at Landlord's expense, to relocate Tenant within the Building in
space which is comparable in size to the Premises and is suited to Tenant's use.
Instances when the exercise of Landlord's right and power to relocate Tenant
shall be deemed reasonable include, but shall not be limited to, instances where
Landlord desires to consolidate the rentable area in the Building to provide
Landlord's services more efficiently, or to provide contiguous vacant space for
a prospective tenant. Landlord shall not be liable to Tenant for any claims
arising in connection with a relocation permitted under this Section 22.



                                       7
<PAGE>   11
23. QUIET ENJOYMENT. Provided Tenant has performed all its obligations under
this Lease, Tenant shall and may peaceably and quietly have, hold, occupy, use
and enjoy the Premises during the Term subject to the provisions of this Lease.
Landlord shall warrant and forever defend Tenant's right to occupancy of the
Premises against the claims of any and all persons whomsoever lawfully claiming
the same or any part thereof, by, through or under Landlord, but not otherwise,
subject to the provisions of this Lease.

24. DEFAULT BY TENANT.

      24.1 EVENTS OF DEFAULT. Each of the following occurrences shall constitute
an Event of Default (herein so called):

             (a) The failure of Tenant to pay Rent as and when due hereunder and
        the continuance of such failure for a period of three days after written
        notice from Landlord to Tenant specifying the failure; provided,
        however, after Landlord has given Tenant written notice pursuant to this
        clause (a) on two separate occasions Landlord shall not be required to
        give Tenant any further notice under this clause (a);

             (b) The failure of Tenant to perform, comply with or observe any
        other agreement, obligation or undertaking of Tenant, or any other term,
        condition or provision, in this Lease, and the continuance of such
        failure for a period of ten days after written notice from Landlord to
        Tenant specifying the failure;

             (c) The abandonment of the Premises by Tenant or the failure of
        Tenant to occupy the Premises or any significant portion thereof,

             (d) The filing of a petition by or against Tenant (the term
        "Tenant" also meaning, for the purpose of this clause (d), any guarantor
        of the named Tenants obligations hereunder) (i) in any bankruptcy or
        other insolvency proceeding, (ii) seeking any relief under the
        Bankruptcy Code or any similar debtor relief law, (iii) for the
        appointment of a liquidator or receiver for all or substantially all of
        Tenant's property or for Tenant's interest in this Lease or (iv) to
        reorganize or modify Tenant's capital structure; and

             (e) The admission by Tenant in writing that it cannot meet its
        obligations as they become due or the making by Tenant of an assignment
        for the benefit of its creditors.

      24.2 REMEDIES OF LANDLORD. Upon any Event of Default, Landlord may, at
Landlord's option and in addition to all other rights, remedies and recourses
afforded Landlord hereunder or by law or equity, do any one or more of the
following:

             (a) Terminate this Lease by the giving of written notice to Tenant,
        in which event Tenant shall pay to Landlord the sum of (i) all Rent and
        other amounts accrued hereunder to the date of termination, (ii) all
        amounts due under Section 24.3 and (iii) liquidated damages in an amount
        equal to (A) the total Rent that Tenant would have been required to pay
        for the reminder of the Term discounted to present value at the prime
        lending rate (or equivalent rate, however denominated) in effect on the
        date of termination at the largest national bank in the state where the
        Complex is located minus (B) the then present fair rental value of the
        Premises for such period, similarly discounted.

             (b) Terminate Tenant's right to possession of the Premises without
        terminating this Lease by the giving of written notice to Tenant, in
        which event Tenant shall pay to Landlord (i) all Rent and other amounts
        accrued hereunder to the date of termination of possession, (ii) all
        amounts due from time to time under Section 24.3 and (iii) all Rent and
        other sums required hereunder to be paid by Tenant during the remainder
        of the Term, diminished by any net sums thereafter received by Landlord
        through reletting the Premises during said period. Reentry by Landlord
        in the Premises will not affect the obligations of Tenant hereunder for
        the unexpired Term. Landlord may bring action against Tenant to collect
        amounts due by Tenant on one or more occasions, without the necessity of
        Landlords waiting until expiration of the Term. If Landlord elects to
        proceed under this Section 24.2(b), it may at any time elect to
        terminate this Lease pursuant to Section 24.2(a).

             (c) Without notice, alter any and all locks and other security
        devices at the Premises without being obligated to deliver new keys to
        the Premises, unless Tenant has cured all Events of Default before
        Landlord has terminated this Lease under Section 24.2(a) or has entered
        into a lease to relet all or a portion of the Premises.

             (d) If an Event of Default specified in Section 24.1(c) occurs,
        Landlord may remove and store any property that remains on the Premises,
        and, if Tenant does not claim such property within ten days after
        Landlord has delivered to Tenant notice of such storage, Landlord may
        appropriate, sell, destroy, or otherwise dispose of the property in
        question without notice to Tenant or any other person and without any
        obligation to account for such Property.

      24.3 PAYMENT BY TENANT. Upon any Event of Default, Tenant shall also pay
to Landlord all costs and expenses incurred by Landlord, including court costs
and reasonable attorneys' fees, in (a) retaking or otherwise obtaining
possession of the Premises, (b) removing and storing Tenant's or any other
occupant's property, (c)



                                       8
<PAGE>   12
repairing, restoring, altering, remodeling or otherwise putting the Premises
into condition acceptable to a new tenant or tenants, (d) reletting all or any
part of the Premises, (e) paying or performing the underlying obligation which
Tenant failed to pay or perform and (f) enforcing any of Landlord's rights,
remedies or recourses arising as a consequence of the Event of Default.

      24.4 RELETTING. Upon termination of this Lease or upon termination of
Tenant's right to possession of the Premises, Landlord shall use reasonable
efforts to relet the Premises on such terms and conditions as Landlord in its
sole discretion may determine (including a term different then the Term, rental
concessions, and alterations to, and improvements of, the Premises); however,
Landlord shall not be obligated to relet the Premises before leasing other
portions of the Building. Landlord shall not be liable, nor shall Tenant's
obligations hereunder be diminished because of, Landlord's failure to relet the
Premises or collect rent due in respect of such reletting. Tenant shall not be
entitled to the excess of any rent obtained by reletting over the Rent herein
reserved.

      24.5 LANDLORD'S RIGHT TO PAY OR PERFORM. Upon an Event of Default,
Landlord may, but without obligation to do so and without thereby waiving or
curing such Event of Default, pay or perform the underlying obligation for the
account of Tenant, and enter the Premises and expend the Security Deposit for
such purpose.

      24.6 NO WAIVER, NO IMPLIED SURRENDER, Provisions of this Lease may only be
waived by the party entitled to the benefit of the provision evidencing the
waiver in writing. Thus, neither the acceptance of Rent by Landlord following an
Event of Default (whether known to Landlord or not), nor any other custom or
practice followed in connection with this Lease, shall constitute a waiver by
Landlord of such Event of Default or any other Event of Default. Further, the
failure by Landlord to complain of any action or inaction by Tenant, or to
assert that any action or inaction by Tenant constitutes (or would constitute,
with the giving of notice and the passage of time) an Event of Default,
regardless of how long such failure continues, shall not extinguish, waive or in
any way diminish the rights, remedies and recourses of Landlord with respect to
such action or inaction. No waiver by Landlord of any provision of this Lease or
of any breach by Tenant of any obligation of Tenant hereunder shall be deemed to
be a waiver of any other provision hereof, or of any subsequent breach by Tenant
of the same or any other provision hereof. Landlord's consent to any act by
Tenant requiring Landlord's consent shall not be deemed to render unnecessary
the obtaining of Landlord's consent to any subsequent act of Tenant. No act or
omission by Landlord (other than Landlord's execution of a document
acknowledging such surrender) or Landlord's agents, including the delivery of
the keys to the Premises, shall constitute an acceptance of a surrender of the
Premises.

25. DEFAULTS BY LANDLORD. Landlord shall not be in default under this Lease, and
Tenant shall not be entitled to exercise any right, remedy or recourse against
Landlord or otherwise as a consequence of any alleged default by Landlord under
this Lease, unless Landlord fails to perform any of its obligations hereunder
and said failure continues for a period of 30 days after Tenant gives Landlord
and (provided that Tenant shall have been given the name and address of
Landlord's Mortgagee) Landlord's Mortgagee written notice thereof specifying,
with reasonable particularity, the nature of Landlord's failure. If, however,
the failure cannot reasonably be cured within the 30-day period, Landlord shall
not be in default hereunder if Landlord or Landlord's Mortgagee commences to
cure the failure within the 30 days and thereafter pursues the curing of same
diligently to completion. If Tenant recovers a money judgment against Landlord
for Landlord's default of its obligations hereunder or otherwise, the judgment
shall be limited to Tenant's actual direct, but not consequential, damages
therefor and shall be satisfied only out of the interest of Landlord in the
Complex as the same may then be encumbered, and Landlord shall not otherwise be
liable for any deficiency. In no event shall Tenant have the right to levy
execution against any property of Landlord other than its interest in the
Complex. The foregoing shall not limit any right that Tenant might have to
obtain specific performance of Landlord's obligations hereunder.

26. RIGHT OF REENTRY. Upon the expiration or termination of the Term for
whatever cause, or upon the exercise by Landlord of its right to re-enter the
Premises without terminating this Lease, Tenant shall immediately, quietly and
peaceably surrender to Landlord possession of the Premises in "broom clean" and
good order, condition and repair, except only for ordinary wear and tear, damage
by casualty not covered by Section 15.2 and repairs to be made by Landlord
pursuant to Section 15.1. If Tenant fails to surrender possession as herein
required, Landlord may, without giving Tenant prior notice to vacate the
Premises or any other notice, initiate any and all legal action as Landlord may
elect to dispossess Tenant and all of its property, and all persons or firms
claiming by, through or under Tenant and all of their property, from the
Premises, and may remove from the Premises and store (without any liability for
loss, theft, damage or destruction thereto) any such property at Tenant's cost.
While Tenant remains in possession of the Premises after such expiration,
termination or exercise by Landlord of its re-entry right, Tenant shall be
deemed to be occupying the Premises as a tenant-at-sufferance, subject to all of
the obligations of Tenant under this Lease, except that the daily Rent shall be
twice the per day Rent in effect immediately before such expiration, termination
or exercise by Landlord. No such holding over shall extend the Term. If Tenant
fails to surrender possession of the Premises in the condition herein required,
Landlord may, at Tenants expense, restore the Premises to such condition.

27. MISCELLANEOUS.

      27.1 INDEPENDENT OBLIGATIONS; NO OFFSET. The obligations of Tenant to pay
Rent and to perform the other undertakings of Tenant hereunder constitute
independent unconditional obligations to be performed at the times specified
hereunder, regardless of any breach or default by Landlord hereunder. Tenant
shall have no right, and Tenant hereby waives and relinquishes all rights which
Tenant might otherwise have, to claim any nature of lien



                                       9
<PAGE>   13
specified hereunder, regardless of any breach or default by Landlord hereunder.
Tenant shall have no right, and Tenant hereby waives and relinquishes all rights
which Tenant might otherwise have, to claim any nature of lien against the
Complex or to withhold, deduct from or offset against any Rent or other sums to
be paid to Landlord by Tenant.

      27.2 TIME OF ESSENCE. Time is of the essence with respect to each date or
time specified in this Lease by which an event is to occur.

      27.3 APPLICABLE-LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State of Texas. All monetary and other
obligations of Landlord and Tenant are performable in the county where the
Complex is located.

      27.4 ASSIGNMENT BY LANDLORD. Landlord shall have the right to assign, in
whole or in part, any or all of its rights, titles or interests in and to the
Complex or this Lease and, upon any such assignment, Landlord shall be relieved
of all unaccrued liabilities and obligations hereunder to the extent of the
interest so assigned.

      27.5 COMMENCEMENT DATE AND ESTOPPEL CERTIFICATES. From time to time at the
request of Landlord or Landlord's Mortgagee, Tenant will promptly and without
compensation or consideration execute, have acknowledged and deliver a
certificate stating (a) the Commencement Date and the date of expiration of the
Term, (b) the rights (if any) of Tenant to extend the Term or to expand the
Premises, (c) the Rent (or any components of the Rent) currently payable
hereunder, (d) whether this Lease has been amended in any respect and, if so,
submitting copies of or otherwise identifying the amendments, (e) whether,
within the knowledge of Tenant, there are any existing breaches or defaults by
Landlord hereunder and, if so, swing the defaults with reasonable particularity
and (f) such other information pertaining to this Lease as Landlord or
Landlord's Mortgagee may reasonably request.

      27.6 SIGNS, BUILDING NAME AND BUILDING ADDRESS. Landlord may, from time to
time at its discretion, maintain any and all signs anywhere in the Complex, and
to change the name and street address of the Complex. Tenant shall not use the
name of the Building for any purpose other than as the address of the business
to be conducted by Tenant from the Premises.

      27.7 NOTICES. All notices and other communications given pursuant to this
Lease shall be in writing and shall either be mailed by first class United
States mail, postage prepaid, registered or certified with return receipt
requested, and addressed as set forth in this Section 27.7, or delivered in
person to the intended addressee, or sent by prepaid telegram, cable or telex
followed by a confirmatory letter. Notice mailed in the aforesaid manner shall
become effective three business days after deposit; notice given in any other
manner, and any notice given to Landlord, shall be effective only upon receipt
by the intended addressee. Each party shall have the continuing right to change
its address for notice hereunder by the giving of 15 days' prior written notice
to the other party in accordance with this Section 27.7. ALL PAYMENTS SHOULD BE
MADE PAYABLE TO "THE MADISON OFFICE BUILDING" AND DELIVERED TO THE PROPERTY
MANAGER'S OFFICE.

     Landlord:                                  Tenant:

     State of Utah Retirement Investment Fund   Pete's Brewing Company
     c/o Cottonwood Partners                    15851 Dallas Parkway, Suite 1010
     7557 Rambler Rd., Suite 932                Dallas, TX 75248
     Dallas, Texas 75231

cc:  Attn: Property Manager              cc:    Attn: Jennifer Torrance Funk
     Cottonwood Management Services             Pete's Brewing Company
     15851 Dallas Parkway, Suite 950            514 High Street
     Dallas, TX 75248                           Palo Alto, CA 94301

      27.8 ENTIRE AGREEMENT, AMENDMENT AND BINDING EFFECT. This Lease
constitutes the entire agreement between Landlord and Tenant relating to the
subject matter hereof and all prior agreements relative hereto which are not
contained herein are terminated. This Lease may be amended only by a written
document duly executed by Landlord and Tenant (and, if a Mortgage is then in
effect, by the Landlord's Mortgagee entitled to the benefits thereof), and any
alleged amendment which is not so documented shall not be effective as to either
party. The provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their heirs, executors, administrators,
successors and assigns; provided, however, that this Section 27.8 shall not
negate, diminish or alter the restrictions on Transfers applicable to Tenant set
forth elsewhere in this Lease.

      27.9 SEVERABILITY. This Lease is intended to be performed in accordance
with and only to the extent permitted by all Legal Requirements. If any
provision of this Lease or the application thereof to any person or circumstance
shall, for any reason and to any extent, be invalid or unenforceable, but the
extent of the invalidity or unenforceability does not destroy the basis of the
bargain between the parties as contained herein, the remainder of this Lease and
the application of such provision to other persons or circumstances shall not be
affected thereby, but rather shall be enforced to the greatest extent permitted
by law.

      27.10 NUMBER AND GENDER, CAPTIONS AND REFERENCES. As the context of this
Lease may require, pronouns shall include natural persons and legal entities of
every kind and character, the singular number shall



                                       10
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section hereof. Whenever the terms "hereof," "hereby," "herein", "hereunder" or
words of similar import are used in this Lease, they shall be construed as
referring to this Lease in its entirety rather than to a particular section or
provision, unless the context specifically indicates to the contrary. Any
reference to a particular "Section" shall be construed as referring to the
indicated section of this Lease.

      27.11 ATTORNEYS' FEES. If either party hereto initiates any litigation
against the other party relating to this Lease, the prevailing party shall be
entitled to recover, in addition to all damages allowed by law and other relief,
all court costs and reasonable attorneys' fees incurred in connection with such
litigation.

      27.12 BROKERS. Tenant and Landlord hereby wan-ant and represent unto the
other that it has not incurred or authorized any brokerage commission, finder's,
fees or similar payments in connection with this Lease, other than that which is
due to Fults Associates and Cottonwood Partners, which payment(s) shall be paid
by Landlord. Each party shall defend, indemnify and hold the other harmless
from and against any claim for brokerage commission, finder's fees or similar
payment arising by virtue of authorization of such party, or any Affiliate of
such party, in connection with this Lease.

      27.13 INTEREST ON TENANT'S OBLIGATIONS. Any amount due from Tenant to
Landlord which is not paid when due shall bear interest at the maximum rate
allowed by law from the date such payment is due until paid, but the payment of
such interest shall not excuse or cure the default in payment.

      27.14 AUTHORITY. The person executing this Lease on behalf of Tenant
personally warrants and represents to Landlord that (a) Tenant is a duly
organized and existing legal entity, in good standing in the State of Texas; (b)
Tenant has full right and authority to execute, deliver and perform this Lease;
(c) the person executing this Lease on behalf of Tenant was authorized to do so;
and (d) upon request of Landlord, such person will deliver to Landlord
satisfactory evidence of his or her authority to execute this Lease on behalf of
Tenant.

      27.15 RECORDING. Neither this Lease (including any Exhibit hereto) nor any
memorandum hereof shall be recorded without the prior written consent of
Landlord.

      27.16 EXHIBITS. All Exhibits and written addenda hereto are incorporated
herein for any and all purposes.

      27.17 MULTIPLE COUNTERPARTS. This Lease may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one instrument.



                           [INTENTIONALLY LEFT BLANK]



                                       11
<PAGE>   15
EXECUTED as of the date and year above first written.


TENANT ACKNOWLEDGES THAT LANDLORD HAS MADE NO WARRANTIES TO TENANT AS TO THE
CONDITION OF THE PREMISES, EITHER EXPRESS OR IMPLIED, AND LANDLORD AND TENANT
EXPRESSLY DISCLAIM ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR
TENANT'S INTENDED COMMERCIAL PURPOSE, AND TENANT'S OBLIGATION TO PAY RENT
HEREUNDER IS NOT DEPENDENT UPON THE CONDITION OF THE PREMISES OR THE PERFORMANCE
BY LANDLORD OF ITS OBLIGATIONS HEREUNDER, AND TENANT SHALL CONTINUE TO PAY THE
RENT, WITHOUT ABATEMENT (EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN), SET
OFF, DEDUCTION, NOTWITHSTANDING ANY BREACH BY LANDLORD OF ITS DUTIES OR
OBLIGATIONS HEREUNDER, WHETHER EXPRESS OR IMPLIED.

              TENANT:      PETE'S BREWING COMPANY, a California corporation

                           By: /s/ JEFFREY A. ATKINS
                              -------------------------------

                           Name: Jeffrey A. Atkins
                                -------------------------------

                           Title: CEO
                                -------------------------------

                           Date:8/14/97
                                -------------------------------




              LANDLORD:    UTAH STATE RETIREMENT INVESTMENT FUND, 
                           an independent agency of the State of Utah

                           BY: Wallace Realty Advisors, Ltd., 
                               A Texas limited partnership

                               BY: Wallace Realty Advisors I, Inc., 
                                   A Texas corporation, its general partner

                                   By: ROBERT J. AXLEY
                                      -------------------------------

                                   Name: Robert J. Axley
                                       ------------------------------

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

                                   By: JOHN L. WEST
                                      -------------------------------

                                   Name: John L. West
                                       ------------------------------

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



                                       12
<PAGE>   16
                                  EXHIBIT INDEX

EXHIBIT A:   Glossary

EXHIBIT B:   Description of Premises

EXHIBIT C:   Rules and Regulations

EXHIBIT D:   Work Letter

EXHIBIT E:   Property Legal Description



<PAGE>   17
                                    EXHIBIT A
                            GLOSSARY OF DEFINED TERMS

      1. "ADDENDUM" shall mean the Addendum, if any, attached to this Lease.

      2. "AFFILIATE" shall mean a person or party who or which controls, is
controlled by or is under common control with another person or party.

      3. "BUILDING" shall mean that certain 12 floor office building and garage
structure constructed on the Land, the street address of which is 15851 Dallas
Parkway, Addison, Texas, and is more particularly described in the deed recorded
in Volume 85021, Page 1686 of the Deed Records of Dallas County, Texas. The term
"Building" shall include all fixtures and appurtenances in and to the aforesaid
structure, including specifically but without limitation all above grade
walkways and all electrical, mechanical, plumbing, security, elevator, boiler,
HVAC, telephone, water, gas, storm sewer, sanitary sewer and all other utility
system and connections, all life support systems, sprinklers, smoke detection
and other fire protection systems, and all equipment, machinery, shafts, flues,
piping, wiring, ducts, duct work, panels, instrumentation and other
appurtenances relating thereto.

      4. "BUILDING OPERATING HOURS" shall mean 7:00 a.m. to 7:00 p.m. Monday
through Friday and Saturday 8:00 a.m. to 1:00 p.m., exclusive of Sundays and
Holidays.

      5. "BUILDING RULES AND REGULATIONS" shall mean the rules and regulations
governing the Complex promulgated by Landlord from time to time. The current
Building Rules and Regulations maintained by Landlord are attached as Exhibit C
hereto.

      6. "BUILDING STANDARD", when applied to an item, shall mean such item as
has been designated by Landlord (orally or in writing) as generally applicable
throughout the leased portions of the Building.

      7. "COMMENCEMENT DATE" shall mean the date of the commencement of the Term
as determined pursuant to Section 6.3.

      8. "COMMON AREAS" shall mean all areas and facilities within the Complex
which have been constructed and are being maintained by Landlord for the common,
general, non-exclusive use of all tenants in the Building, and shall include
restrooms, lobbies, corridors, service areas, elevators, stairs and stairwells,
the Parking Facility, driveways, loading areas, ramps, walkways and landscaped
areas.

      9. "COMPLEX" shall mean the Land and all improvements thereon, including
the Building and the Parking Facility.

      10. "EXPENSE STOP" shall mean that portion of the Operating Expenses,
expressed in terms of dollars per square foot of Net Rentable Area per Fiscal
Year, which will be excluded from the computation of Additional Rent. Unless
changed by mutual agreement of the parties, the "Expense Stop" shall equal the
actual operating expenses for calendar year 1997.

      11. "FISCAL YEAR" shall mean the fiscal year (or portion thereof) of
Landlord as elapses during the Term. The Fiscal Year currently commences on
January 1; however, Landlord may change the Fiscal Year at any time or times.

      12. "FORCE MAJEURE" shall mean the occurrence of any event which hinders,
prevents or delays the performance by Landlord of any of its obligations
hereunder and which is beyond the reasonable control of Landlord.


      13. "HOLIDAYS" shall mean (a) Now Year's Day, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day, (b) other days on which
national or state banks located in the state where the Complex is located must
or may close for ordinary operations and (c) other days which are commonly
observed as holidays by the majority of tenants of the Building. If the Holiday
occurs on a Saturday or Sunday, the Friday preceding or the Monday following
may, at Landlords discretion, be observed as a Holiday.

      14. "HVAC" shall mean the heating, ventilation and air conditioning
systems in the Building.

      15. "IMPOSITIONS" shall mean (a) all real estate, personal property,
rental, water, sewer, transit, use, occupancy and other taxes, assessments,
charges, excises and levies (including any interest, costs or penalties with
respect thereto), general and special, ordinary and extraordinary, foreseen and
unforeseen of any kind and nature whatsoever which are assessed, levied, charged
or imposed upon or with respect to the Complex, or any portion thereof, or the
sidewalks, streets or alley ways adjacent thereto, or the ownership, use,
occupancy or enjoyment thereof (including but not limited to mortgage taxes and
other taxes and assessments passed on to Landlord by Landlord's Mortgagee) and
(b) all charges for any easement, license, permit or agreement maintained for
the benefit of the Complex. "Impositions" shall not include income taxes, estate
and inheritance taxes, excess profit taxes, franchise taxes, taxes imposed on or
measured by the income of Landlord from the operation of the Complex, and taxes
imposed on account of the transfer of ownership of the Complex or the Land. If
any or all of the Impositions



                                      A-1
<PAGE>   18
be discontinued and, in substitution therefor, taxes, assessments, charges,
excises or impositions be assessed, levied, charged or imposed wholly or
partially on the Rents received or payable hereunder (a "SUBSTITUTE
IMPOSITION"), then the Substitute Imposition shall be deemed to be included
within the term "Impositions".

      17. "LAND" shall mean the real property on which the Building is
constructed and which is further described in Exhibit E hereto.

      18. "LANDLORD'S MORTGAGEE" shall mean the mortagee of any mortgage, the
beneficiary of any deed of trust, the pledgee of any pledge, the secured party
of any security interest. the assignee of any assignment and the transfer of any
other instrument of transfer (including the ground lessor of any ground lease on
the Land) now or hereafter in existence on all of any portion of the Complex,
and their successors, assigns and purchasers. "MORTGAGE" shall mean any such
mortgage, deed of trust, pledge, security agreement, assignment or transfer
instrument, including all renewals, extensions and rearrangements thereof and of
all debts secured thereby.

      19. "LANDLORD'S WORK" shall mean all improvements, components, assemblies,
installations, finish, labor, materials and services that Landlord is required
to furnish, install, perform, provide or apply to the Premises as specified in
the Work Letter.

      20. "PREMISES" shall mean the area leased by Tenant pursuant to this Lease
as outlined on the floor plan drawing attached as Exhibit B hereto and all other
space added to the Premises pursuant to the terms of this Lease. The Premises
includes the space between the top surface of the floor slab of the outlined
area and the finished surface of the coiling immediately above.

      21. "LEGAL REQUIREMENTS" shall mean any and all (a) judicial decisions,
orders, injunctions, writs, statutes, rulings, rules, regulations,
promulgations, directives, permits, certificates or ordinances of any
governmental authority in any way applicable to Tenant or the Complex, including
but not limited to the Building Rules and Regulations, zoning, environmental and
utility conservation matters, (b) requirements imposed on Landlord by any
Landlord's Mortgagee, (c) insurance requirements and (d) other documents,
instruments or agreements (written or oral) relating to the Complex or to which
the Complex may be bound or encumbered.

      22. "NET RENTABLE AREA" whether of the Premises or the Complex shall mean
the area determined pursuant to the American National Standard Method for
measuring floor space in office buildings, as set forth in American National
Standard's Institute publication Z65.1-1980 and as, from time to time, revised.
Landlord and Tenant hereby stipulate that, unless and until revised by virtue of
the application of the standards set forth in said publication or in a revised
publication, the Net Rentable Area of the Premises shall be 821. square feet and
the Net Rentable Area of the Building shall be 278,367 square feet.

      23. "OPERATING EXPENSES" shall mean all costs and expenses which Landlord
pays or accrues by virtue of the ownership, use, management, leasing,
maintenance, service, operation, insurance or condition of the Complex during a
particular Fiscal Year or portion thereof as determined by Landlord or its
certified public accountants in accordance with generally accepted accounting
principles plus (in instances where the Building was not fully occupied for the
entire period in question) all additional costs and expenses which Landlord or
such accountant reasonably determines Landlord would have paid or accrued during
such period if the Building has been fully occupied (defined as 95% occupied).
"Operating Expenses" shall include, but shall not be limited to, the following
to the extent they relate to the Complex:

             (a) all Impositions and other governmental charges;

             (b) all insurance premiums charged for policies obtained by
        Landlord, which may include without limitation, at Landlord's election,
        (i) fire and extended coverage insurance including earthquake,
        windstorm, hail, explosion, riot, strike, civil commotion, aircraft,
        vehicle and smoke insurance, (ii) public liability and property damage
        insurance, (iii) elevator insurance, (iv) workmen's compensation
        insurance for the employees covered by clause (h), (v) boiler,
        machinery, sprinkler, water damage, legal liability, burglary, hold-up,
        fidelity and pilferage insurance, (vi) rental loss insurance and (vii)
        such other insurance as Landlord may elect to obtain;

             (c) all deductible amounts incurred in any Fiscal Year relating to
        an insurable loss;

             (d) all maintenance, repair, replacement and painting costs;




                                       A-2
<PAGE>   19
             (e) all janitorial, custodial, cleaning, washing, landscaping,
        landscape maintenance, trash removal and pest control costs;

             (f) all security costs;

             (g) all electrical, energy monitoring, water, water treatment, gas,
        sewer, telephone and other utility and utility related charges;

             (h) all wages, salaries, salary burdens, employee benefits,
        payroll taxes, social security and insurance for all persons engaged by
        Landlord or an Affiliate of Landlord;

             (i) all costs of leasing or purchasing supplies, tools, equipment
        and materials;

             (j) all management fees and other charges for management services
        (including, without limitation, travel and related expenses), whether
        provided by an independent management company, by Landlord or by an
        Affiliate of Landlord;

             (k) all few and other charges paid under all maintenance and
        service agreements, including but not limited to window cleaning,
        elevator and HVAC maintenance;

             (l) all legal, accounting and auditing fees and expense; and

             (m) amortization of the cost of acquiring, financing and installing
        capital items which are intended to reduce (or avoid increases in)
        operating expenses or which are required by a governmental authority.
        Such costs shall be amortized over the reasonable life of the items in
        accordance with generally accepted accounting principles, but not beyond
        the reasonable life the Building.

"Operating Expenses" shall not include (i) expenditures classified as capital
expenditures for federal income tax purposes except as set forth in clause (m),
(ii) costs for which Landlord is entitled to specific reimbursement by Tenant,
by any other tenant of the Building or by any other third party, (iii)
allowances specified in the Work Letter for expenses incurred by Landlord for
improvements to the Premises, (iv) leasing commissions, and all non-cash
expenses (including depreciation), except for the amortized costs specified in
clause (m), (v) land or ground rent, if applicable, and (vi) debt service on any
indebtedness secured by the Complex (except debt service on indebtedness to
purchase or pay for items specified as permissible "Operating Expenses" under
clause (a) through (m).

      24. "PARKING FACILITY" shall mean (a) any parking garage and any other
parking lot or facility adjacent to or in the Complex servicing the Building and
(b) any parking area, open or covered, leased by Landlord to service the
Building.

      25. "RENT" shall mean Base Rent, Additional Rent, the parking charge
called for in Section 5.4 and all other amounts provided for under this Lease to
be paid by Tenant, whether as additional rent or otherwise. "BASE RATE" shall
mean the base rent specified in Section 5.1 as adjusted in accordance with
Section 5.2. "BASE RENT ADJUSTMENT" shall mean the increase in the annual Base
Rent as set forth in Section 5.2. "ADDITIONAL RENT" shall mean the additional
rent specified in Section 5.3.

      26. "SECURITY DEPOSIT" shall mean $1,519.53 paid by Tenant as security for
the full and faithful performance of the obligations of Tenant under this Lease.

      27. "TAKING" or "TAKEN" shall mean the actual or constructive
condemnation, or the actual or constructive acquisition by or under threat of
condensation, eminent domain or similar proceeding, by or at the direction of
any governmental authority or agency.

      28. "TENANT'S SHARE" shall mean the proportion by which the Net Rentable
Area of the Premises beats to the Net Rentable Area of the Building. "Tenant's
Share" shall be adjusted by Landlord from time to time to reflect adjustments to
the then current Net Rentable Area of the Building or the Premises. "Tenant's
Share" shall initially mean 821 rentable square fed + 278,367 rentable square
feet = 0.2949 %.

      29. "TRANSFER" shall mean (a) an assignment (direct or indirect, absolute
or conditional, by operation of law or otherwise) by Tenant of all or any
portion of Tenant's interest in this Lease or the leasehold estate created
hereby, (b) a sublease of all or any portion of the Promises or (c) the grant or
conveyance by Tenant of any concession or license within the Premises. If Tenant
is a corporation then any transfer of this Least by merger, consolidation or
dissolution, or by any change in ownership or power to vote a majority of the
voting stock (being the shares of stock regularly entitled to vote for the
election of directors) in Tenant outstanding at the time of execution of this
Lease shall constitute a Transfer. If Tenant is a partnership having one or more
corporations as general partners, the preceding sentence shall apply to each
corporation as if the corporation alone had been the Tenant hereunder. If Tenant
is a general or limited partnership, joint venture or other form of association,
the transfer of a majority of the ownership interests therein shall constitute a
Transfer. "TRANSFEREE" shall mean the assignee, sublessee, pledgee,
concessionee, licensee or other transferee of all or any portion of Tenant's
interest in this Lease, the leasehold estate created hereby or the Premises.




                                      A-3
<PAGE>   20
30. "WORK LETTER" shall mew the agreement, if any, attached as Exhibit D hereto
between Landlord and Tenant for the construction of improvements in the
Premises.



                                      A-4
<PAGE>   21
                                   EXHIBIT B

                                    PREMISES

                                   Suite 1010

                    (Approximately 821 Rentable Square Feet)



                                  [FLOOR PLAN]


THE MADISON                                                           10TH FLOOR



<PAGE>   22
                                    EXHIBIT C

                              RULES AND REGULATIONS


      1. Landlord may from time to time adopt appropriate system and procedures
for the security or safety of the Building, any persons occupying, using, or
entering the Building, or any equipment, finishings, or contents of the
Building, and each tenant shall comply with such systems and procedures.

      2. Tenant's employees, visitors, and licensees shall not loiter in or
interfere with the use of the Parking Facility or the Complex's driveway or
parking areas nor consume alcohol in the common areas of the Complex or the
Parking Facility. The sidewalks, halls, passages, exits, entrances, elevators,
escalators, and stairways of the Building will not be obstructed by any tenants
or used by any of them for any purpose other than for ingress to and egress from
their respective premises. The halls, passages, exits, entrances, elevators,
escalators, and stairways am not for the general public, and Landlord may
control and prevent access to them by all persons whose presence, in the
reasonable judgment of Landlord, would be prejudicial to the safety, character,
reputation and interests of the Building and its tenants; in determining whether
access will be denied, Landlord may consider attire worn by a person and its
appropriateness for an office building, whether shoes are being worn, use of
profanity, either verbally or on clothing, actions of a person (including,
without limitation, spitting, verbal abusiveness, and the like), and such other
matters as Landlord may reasonably consider appropriate.

      3 . No sign, placard, picture, name, advertisement, or notice visible from
the exterior of any tenant's premises shall be inscribed, painted, affixed, or
otherwise displayed by any tenant on any part of the Building without the prior
written consent of Landlord. All approved signs or lettering on doors will be
printed, painted, affixed, or inscribed at the expense of the tenant desiring
such by a person approved by Landlord. Material visible from outside the
Building will not be permitted. Landlord may remove such material without any
liability, and my charge the expense incurred by such removal to the tenant in
question.

      4. No curtains, draperies, blinds, shutters, shades, screens, or other
coverings, hangings, or decorations will be attached to, hung, or placed in, or
used in connection with any window of the Building or the Premises.

      5. The sashes, sash doors, skylights, windows, heating, ventilating, and
air conditioning vents and doors that reflect or admit light and air into the
halls, passageways, or other public places in the Building shall not be covered
or obstructed by any tenant, nor will any bottles, parcels, or other articles be
placed on any window sills.

      6. No showcases or other articles will be put in front of or affixed to
any part of the exterior of the Building, nor placed in the public halls,
corridors, or vestibules without the prior written consent of Landlord.

      7. No tenant will permit its Premises to be used for lodging or sleeping.
No cooking will be done or permitted by any tenant on its premises, except in
areas of the premises which are specially constructed for cooking, so long as
such use is in accordance with all applicable federal, state, and city laws,
codes, ordinances, rules, and regulations.

      8. No tenant will employ any person or persons other than the cleaning
service of Landlord for the purpose of cleaning the premises, unless otherwise
agreed by Landlord in writing. If any tenant's actions result in any increased
expense for any required cleaning, Landlord may assess such tenant for such
expenses. Janitorial service will not be furnished on nights to offices which
are occupied after business hours on those nights unless, by prior written
agreement of Landlord, service is extended to a later hour for specifically
designated offices.

      9. The toilets, urinals, wash bowls, and other plumbing fixtures will not
be used for any purposes other than those for which they were constructed, and
no sweepings, rubbish, rags, or other foreign substances will be thrown in them.
All damages resulting from any misuse of the fixtures will be borne by the
tenant who, or whose servants, employees, agents, visitors, or licensees, have
caused the damage.

      10. No tenant will deface any part of the premises or the Building.
Without the prior written consent of Landlord, no tenant will lay linoleum, or
other similar floor covering, so that it comes in direct contact with the floor
of such tenant's premises. If linoleum or other similar floor covering is to be
used, an interlining of builder's deadening felt will be first affixed to the
floor, by a paste or other material, soluble in water. The use of cement or
other similar adhesive material is expressly prohibited.

      11. No tenant will alter, change, replace, or rekey any lock or install a
new lock or a knocker on any door of the premises. Landlord, its agent or
employee, will retain a master key to all door locks on the premises. Any new
door locks required by a tenant or any change in keying of existing locks will
be installed or changed by Landlord following such tenant's written request to
Landlord and will be at such tenant's expense. All new locks and rekeyed locks
will remain operable by Landlord's master key. Landlord will furnish to each
tenant, free of charge, two (2) keys to each door lock on its premises. Landlord
will have the right to collect a reasonable charge for additional keys and cards
requested by any tenant. Each tenant, upon termination of its tenancy, will
deliver to Landlord all keys and access cards for the premises and Building
which have been furnished to such tenant.

      12. The elevator designated for freight by Landlord will be available for
use by all tenants in the Building during the hours and pursuant to such
procedures as Landlord may determine from time to time. The persons employed to
move tenant's equipment, Material, furniture, or other property in or out of the
Building must be acceptable to Landlord; such



                                      C-1
<PAGE>   23
persons must be a locally recognized professional mover, whose primary business
is the performing of relocation services, and must be bonded and fully insured.
A certificate or other verification of such insurance must be received and
approved by Landlord prior to the start of any moving operations. Insurance must
be sufficient, in Landlord's sole opinion, to cover all personal liability,
theft, or damage to the Building, including without limitation floor coverings,
doors, walls, elevators, stairs, foliage, and landscaping. All moving operations
will be conducted at such times and in such a manner as Landlord may direct, and
all moving will take place during nonbusiness hours unless Landlord otherwise
agrees in writing. The moving tenant shall be responsible for the provision of
Building security during all moving operations, and shall be liable for all
losses and damages sustained by any party as a result of the failure to supply
adequate security. Landlord may prescribe the weight, size, and position of all
equipment, materials, furniture, or other property brought into the Buildings.
Heavy objects will, if considered necessary by Landlord, stand on wood strips of
such thickness as is necessary to distribute the weight properly. Landlord will
not be responsible for loss of or damage to any such property from any cause,
and all damage done to the Building by moving or maintaining such property will
be repaired at the expense of the moving tenant. Landlord may inspect all such
property to be brought into the Building and to exclude from the Building all
such property which violates any of these rules and regulations or the lease of
which these rules and regulations are a part. Supplies, goods, materials,
packages, furniture, and all other items of every kind delivered to or taken
from the premises will be delivered or removed through the entrance and route
designated by Landlord.

      13. No tenant will use or keep in the premises or the Building any
kerosene, gasoline, or inflammable or combustible or explosive fluid or material
or chemical substance other then limited quantities of them reasonably necessary
for the operation or maintenance of office equipment or limited quantities of
cleaning fluids and solvents required in normal operation of the premises.
Without Landlord's prior written approval, no tenant will use any method of
heating or air conditioning other than that supplied by Landlord. No tenant will
keep any firearms within the Premises. No tenant will use or keep or permit to
be used or kept any foul or noxious gas or substance in the premises, or permit
of suffer the premises to be occupied or used in an manner offensive or
objectionable to Landlord or other occupants of the Building by reason of noise,
odors, or vibrations, or interfere in any way with other tenants or those having
business in the Building.

      14. Landlord may without notice and without liability to any tenant,
change the name and street address of the Building.

      15. Landlord will have the right to prohibit any advertising by tenant,
mentioning the Building, which, in Landlord's reasonable opinion, tends to
impair the reputation of the Building or its desirability as a Building for
offices, and upon written notice from Landlord, tenant will discontinue such
advertising.

      16. Tenant will not bring any animals or birds into the Building, and will
not permit bicycles or other vehicles inside or on the sidewalks outside the
Building except in areas designated from time to time by Landlord for such
purposes.

      17. All persons entering or leaving the Building at any time other than
the Building's business hours shall comply with such off-hour regulations as
Landlord may establish and modify from time to time. Landlord may limit or
restrict access to the Building during such periods.

      18. Each tenant will store all its trash and garbage within its premise.
No material will be placed in the trash boxes or receptacles if such material is
of such nature that it may not be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage without being in violation
of any law or ordinance governing such disposal. All garbage and refuse disposal
will be made only through entryways and elevators provided for such purposes and
at such times as Landlord may designate. No furniture, appliances, equipment, or
flammable products of any type may be disposed of in the Building trash
receptacles.

      19. Canvassing, peddling, soliciting, and distribution of handbills or any
other written materials in the Building are prohibited, and each tenant will
cooperate to prevent same.

      20. Each tenant shall keep the doors of the premises closed and locked and
shall shut off all water faucets, water apparatus, and utilities before tenant
or tenants employees leave the premises, so as to prevent waste or damage, and
for any default or carelessness in this regard tenant shall be liable for all
injuries sustained by other tenants or occupants of the Building or Landlord. On
multiple-tenancy floors, all tenants will keep the doors to the Building
corridors closed at all times except for ingress and egress.



                                      C-2
<PAGE>   24
                                    EXHIBIT D
                                   WORKLETTER

      Landlord agrees, at its sole expense (not to exceed $4,708.00), to make
the following leasehold improvements:

      -     Repair base in breakroom.

      -     Clean carpet throughout.

      -     Clean damaged drape in breakroom.

      -     Repaint existing adjustable shelves and breakroom walls.

      -     Install 4' base cabinet with sink, and "insta-hot".

      -     Install 4' of upper cabinets in breakroom.

      -     Install duplex wall outlet above cabinet in breakroom capable of
            handling both microwave and coffee machine.

In all other respects, Tenant accepts the Premises "As-built".



                                      D-1
<PAGE>   25
                                    EXHIBIT E

                          LEGAL DESCRIPTION OF PROPERTY


BEING a tract or parcel of land out of the D.W. FISHER SURVEY, Abstract No. 482,
Dallas County, Texas, said tract being all of that tract recorded as the 15851
DALLAS NORTH PARKWAY ADDITION, an Addition to the City of Addison, as recorded
in Volume 85021, Page 1686, Map Records, Dallas County, Texas, except that
portion thereof conveyed by The Young Companies IV to the Texas Turnpike
Authority for right of way for the Dallas North Tollway as recorded in Volume
86134, Page 435, Deed Records, Dallas County, Texas, said 4.022 acre tract of
land being more particularly described as follows:

BEGINNING at a 1/2 inch iron rod with cap set in the south right of way line of
Airport Parkway (55 feet wide) said point being at the intersection of said line
of Airport Parkway with the west right of way line of the Dallas North Tollway
as defined by said conveyance by The Young Companies IV to the Texas Turnpike
Authority, said point being North 89 degrees 37 minutes 15 seconds West, a
distance of 92.70 feet along said line of Airport Parkway from the northeast
comer of said 15851 Dallas North Parkway Addition;

THENCE South 40 degrees 26 minutes 12 seconds East, with said west right of way
line of the Dallas North Tollway (a Variable width right of way), a distance of
23.50 feet to a 1/2 inch iron rod with cap set at an angle point;

THENCE South 08 degrees 41 minutes 31 seconds West, continuing with said line of
the Dallas North Tollway, a distance of 53.20 feet to a 1/2 inch iron rod with
cap set at the beginning of a curve to the left, the center of which bears South
81 degrees 18 minutes 29 seconds East, a distance of 1283.24 feet from said
point;

THENCE in a southerly direction continuing with said line of said Dallas North
Tollway, through a central angle of 07 degrees 42 minutes 30 seconds, an arc
distance of 172.64 feet to a 1/2 inch iron rod with cap set at the end of said
curve;

THENCE South 00 degrees 59 minutes 01 seconds West, continuing with said line of
the Dallas North Tollway a distance of II 7.56 feet to a 1/2 inch iron rod with
cap set in the south line of said 15851 Dallas North Parkway Addition;

THENCE North 89 degrees 37 minutes 15 seconds West, with the south line of said
15851 Dallas North Parkway Addition and with the north line of a tract of land
conveyed to Opubco Resources, Inc. by deed recorded in Volume 78070, Page 3638,
Deed Records, Dallas County, Texas, a distance of 477.99 feet to a 1/2 inch iron
rod with cap found for comer, said point being the southeast comer of a tract of
land conveyed to Chaney and Hope, Inc., by deed recorded in Volume 78194, Page
1741, Deed Records, Dallas County, Texas;

THENCE North 00 degrees 19 minutes 15 seconds West, with the west line of said
15851 Dallas North Parkway Addition, and with the east line of said Chaney and
Hope, Inc. tract, a distance of 360.00 feet to a 1/2 inch iron rod with cap
found for comer in the south line of Airport Parkway;

THENCE South 89 degrees 37 minutes 15 seconds East, with said line of Airport
Parkway a distance of 489.38 feet to the POINT OF BEGINNING and CONTAINING
175,196 square feet or 4.022 acres of land, more or less.




                                      E-1



<PAGE>   26
                               ADDENDUM TO LEASE

     THIS FIRST ADDENDUM TO LEASE (this "Addendum") is made between UTAH STATE
RETIREMENT INVESTMENT FUND ("Landlord"), and PETE'S BREWING COMPANY ("Tenant"),
to be a part of that certain Lease Agreement between Landlord and Tenant of even
date herewith (the "Lease"). Landlord and Tenant agree that, notwithstanding
anything to the contrary in the Lease, the Lease is hereby modified and
supplemented as follows:

     1.   Assignment and Subletting.

          A.   Landlord shall not unreasonably withhold its consent to a
proposed Transfer.

          B.   With prior written notice to Landlord. Tenant may, without
Landlord's prior written consent and without being subject to Landlord's right
to terminate the Lease or otherwise recapture the Premises, Transfer the
Premises to: (i) a subsidiary, affiliate, division or corporation, controlling,
controlled by or under common control with Tenant; (ii) a successor corporation
related to Tenant by merger or consolidation, or (iii) a purchaser of all or
substantially all of Tenant's assets. For the purpose of this Lease, the sale
or transfer of Tenant's capital stock, including without limitation, a transfer
in connection with the merger or consolidation of Tenant and any sale through
any public exchange, shall not be deemed a Transfer.

     2.   Alterations. Landlord's consent to any alterations proposed by Tenant
shall not be unreasonably withheld.

     3.   Access by Landlord: Except in the case of an emergency, Landlord shall
give Tenant reasonable notice prior to entering the Premises for the purposes
stated in Sections 13(b) through 13(d) of the Lease. Landlord shall only have
the right to show the Premises to prospective tenants during the last six (6)
months of the Term.

     4.   Casualty.

          A.   The last sentence of Section 15.1 is deleted.

          B.   Section 15.2 is modified as follows: (i) by adding the following
at the end of clause (a): "; provided however,  that Tenant shall be entitled
to rental statement in the amount provided in Section 15.1 hereof, but not to
exceed the amount of rental abatement proceeds which Landlord receives under
insurance policies carried by Landlord"; and (ii) clause (b) is deleted.

     5.   Insurance.  The last sentence of Section 17.1 is modified by adding
the following at the end thereof: "which approval shall not be unreasonably
withheld".

     6.   Indemnity. Section 18 is modified by deleting "about the Premises" and
replacing it with the following: "on the Premises or from any injuries to or
death of any person or damage to any property arising from the act or omission
of Tenant, or its employees, agents, contractors, and/or invitees."



                                       1
<PAGE>   27
     8.   Right to Relocate. The following is added to Section 22. If Landlord
elects to relocate Tenant the new space shall be comparable in size and
configuration to the Premises and with comparable leasehold improvements.
Tenant shall not be required to pay any increase in Base Rent or Additional
Rent as a result of the relocation, unless Tenant requests larger space.

     9.   Default by Tenant. The following is added at the end of Subsection
24.1(b): "or such longer time as may reasonably be required to cure the default
so long as Tenant commences to cure such failure within such ten (10)-day
period and diligently prosecutes such cure to completion provided however,
that in no event shall such additional time exceed sixty (60) days."

     10.  Condition of Premises. Landlord represents that as of the Commencement
Date the Premises will be in good condition and repair and free of defects and
the electrical, mechanical, HVAC, plumbing, elevator (if any), fire safety,
security and other systems serving the Premises and the Building will be in
good condition and repair consistent with similar grade buildings in the far
North Dallas submarket.

     11.  Operating Expenses. Operating Expenses shall not include costs
related to the remediation and cleanup of groundwater and/or soils
contamination from hazardous substances in, on, or under the Premises or the
Complex except to the extent resulting from (i) the release, disposal, emission
or discharge of hazardous substances by Tenant, or (ii) minor occurrences
resulting from the daily operation of the Building.

     12.  Effect of Addendum: All terms with initial capital letters used
herein as defined terms shall have the meanings ascribed to them in the Lease
unless specifically defined herein. In the event of any inconsistency between
the Lease and this the terms of this Addendum shall prevail.

<TABLE>
<CAPTION>

<S>                                                 <C>
LANDLORD:                                          TENANT:

UTAH STATE RETIREMENT INC. INVESTMENT FUND         PETE'S BREWING COMPANY

By: WALLACE REALTY ADVISORS, LTD.                  By: /s/ JEFFREY A. ATKINS
    ----------------------------                       ---------------------

    Wallace Realty Advisors I, Inc.                Its:  CEO
    -------------------------------                     -------------------- 
    /s/ ROBERT J. AXLEY
    --------------------------------               Date: 8/22/97
    Robert J. Axley                                     --------------------
    Chairman
                                                           
By: /s/ JOHN L. WEST     
    --------------------------------
    John L. West
    President

</TABLE>


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