Document:

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                                                                   Exhibit 10.28

                        CATALYTICA ENERGY SYSTEMS, INC.

                     CHANGE OF CONTROL SEVERANCE AGREEMENT

This Change of Control Severance Agreement (the "Agreement") is made and entered
into by and between ____________________  (the "Employee") and Catalytica Energy
Systems, Inc. (the "Company"), effective as of the latest date set forth by the
signatures of the parties hereto below.

                                   RECITALS
                                   --------

A.   It is expected that the Company from time to time will consider the
possibility of an acquisition by another company or other change of control as a
means of enhancing stockholder value. The Board of Directors of the Company (the
"Board") recognizes that such consideration can be a distraction to the Employee
and can cause the Employee to consider alternative employment opportunities. The
Board has determined that it is in the best interests of the Company and its
stockholders to assure that the Company will have the continued dedication and
objectivity of the Employee, notwithstanding the possibility, threat or
occurrence of a Change of Control (as defined below) of the Company.

B.   The Board believes that it is in the best interests of the Company and its
stockholders to provide the Employee with an incentive to continue his
employment and to motivate the Employee to maximize the value of the Company
upon a Change of Control for the benefit of its stockholders.

C.   The Board believes that it is imperative to provide the Employee with
certain severance benefits upon Employee's termination of employment following a
Change of Control which provides the Employee with enhanced financial security
and provides incentive and encouragement to the Employee to remain with the
Company notwithstanding the possibility of a Change of Control.

D.   Certain capitalized terms used in the Agreement are defined in Section 6
below.

The parties hereto agree as follows:

1.   Term of Agreement. This Agreement shall terminate upon the date that all
     -----------------
obligations of the parties hereto with respect to this Agreement have been
satisfied.

2.   At-Will Employment. The Company and the Employee acknowledge that the
     ------------------
Employee's employment is and shall continue to be at-will, as defined under
applicable law.  If the Employee's employment terminates for any reason,
including (without limitation) any termination
<PAGE>

after an announcement of Change of Control and prior to twenty-four (24) months
following a Change of Control or the announcement of a Change of Control,
whichever comes later, the Employee shall not be entitled to any payments,
benefits, damages, awards or compensation other than as provided by this
Agreement, or as may otherwise be available in accordance with the Company's
established employee plans and practices or pursuant to other agreements with
the Company.

3.   Severance Benefits.
     ------------------

     (a)  Termination In Connection With A Change of Control. If the Employee's
          --------------------------------------------------
employment terminates as a result of Involuntary Termination (as defined below)
other than for Cause at any time after an announcement of a Change of Control
and prior to twenty-four (24) months following a Change of Control or the
announcement of a Change of Control, whichever comes later (a "Severance
Termination"), then, subject to Section 5, the Employee shall be entitled to
receive the following severance benefits:

               (1) Severance Payment. A cash payment in an amount equal to two
                   -----------------
hundred percent (200%) of the Employee's Annual Compensation plus a pro rata
payment of the current year bonus award based on the target bonus for the
Employee;

               (2) Continued Employee Benefits. One hundred percent (100%)
                   ---------------------------
Company-paid health, dental and life insurance coverage at the same level of
coverage as was provided to such employee immediately prior to the Severance
Termination (the "Company-Paid Coverage"). If such coverage included the
Employee's dependents immediately prior to the Severance Termination, such
dependents shall also be covered at Company expense. Company-Paid Coverage shall
continue until the earlier of (i) two years from the date of the Involuntary
Termination or (ii) the date that the Employee and his dependents become covered
under another employer's group health, dental or life insurance plans that
provide Employee and his dependents with comparable benefits and levels of
coverage. For purposes of Title X of the Consolidated Budget Reconciliation Act
of 1985 ("COBRA"), the date of the "qualifying event" for Employee and his
dependents shall be the date upon which the Company-Paid Coverage terminates.

               (3) Option and Restricted Stock Accelerated Vesting. One Hundred
                   -----------------------------------------------
percent (100%) of the unvested portion of any stock option or restricted stock
held by the Employee shall automatically be accelerated in full so as to become
completely vested.

               (4) Timing of Severance Payments. Any severance payment to which
                   ----------------------------
Employee is entitled under Section 3(a)(1) shall be paid by the Company to the
Employee (or to the Employee's successor in interest, pursuant to Section 7(b))
in cash and in full, not later than thirty (30) calendar days following the
Termination Date, subject to Section 9(f).

     (b)  Voluntary Resignation; Termination For Cause. If the Employee's
          --------------------------------------------
employment terminates by reason of the Employee's voluntary resignation (and is
not an Involuntary
<PAGE>

Termination), or if the Employee is terminated for Cause, then the Employee
shall not be entitled to receive severance or other benefits except for those
(if any) as may then be established under the Company's then existing option,
severance and benefits plans and practices or pursuant to other agreements with
the Company.

     (c)  Disability; Death. If the Company terminates the Employee's employment
          -----------------
as a result of the Employee's Disability, or such Employee's employment is
terminated due to the death of the Employee, then the Employee shall not be
entitled to receive severance or other benefits except for those (if any) as may
then be established under the Company's then existing severance and benefits
plans and practices or pursuant to other agreements with the Company.

     (d)  Termination Apart from Change of Control. In the event the Employee's
          ----------------------------------------
employment is terminated for any reason, either prior to the three-month notice
period before a Change of Control or after the twenty-four (24)-month period
following a Change of Control, then the Employee shall be entitled to receive
severance and any other benefits only as may then be established under the
Company's existing severance and benefits plans and practices or pursuant to
other agreements with the Company.

4.   Attorney Fees, Costs and Expenses. The Company shall reimburse Employee for
     ---------------------------------
the reasonable attorney fees, costs and expenses incurred by the Employee in
connection with any action brought by Employee to enforce his rights hereunder,
provided such action is not decided in favor of the Company.

5.   Limitation on Payments.
     ----------------------

     (a)  In the event that the severance and other benefits provided for in
this Agreement or otherwise payable to the Employee (i) constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and (ii) but for this Section 5, would be subject
to the excise tax imposed by Section 4999 of the Code, then the Employee's
severance benefits under Section 3(a)(1) shall be either

          (A)  delivered in full, or

          (B)  delivered as to such lesser extent which would result in no
               portion of such severance benefits being subject to excise tax
               under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal,
state and local income taxes and the excise tax imposed by Section 4999, results
in the receipt by the Employee on an after-tax basis, of the greatest amount of
severance benefits, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code.  Any taxes due under
Section 4999 shall be the responsibility of the employee.

                                      -3-
<PAGE>

          (b) If a reduction in the payments and benefits that would otherwise
be paid or provided to the Employee under the terms of this Agreement is
necessary to comply with the provisions of Section 5(a), the Employee shall be
entitled to select which payments or benefits will be reduced and the manner and
method of any such reduction of such payments or benefits (including but not
limited to the number of options that would vest under Section 3(a)) subject to
reasonable limitations (including, for example, express provisions under the
Company's benefit plans) (so long as the requirements of Section 5(a) are met).
Within thirty (30) days after the amount of any required reduction in payments
and benefits is finally determined in accordance with the provisions of Section
5(c), the Employee shall notify the Company in writing regarding which payments
or benefits are to be reduced. If no notification is given by the Employee, the
Company will determine which amounts to reduce. If, as a result of any reduction
required by Section 5(a), amounts previously paid to the Employee exceed the
amount to which the Employee is entitled, the Employee will promptly return the
excess amount to the Company.

          (c) Unless the Company and the Employee otherwise agree in writing,
any determination required under this Section 5 shall be made in writing by the
Company's Accountants immediately prior to Change of Control, whose
determination shall be conclusive and binding upon the Employee and the Company
for all purposes.  For purposes of making the calculations required by this
Section 5, the Accountants may, after taking into account the information
provided by the Employee, make reasonable assumptions and approximations
concerning applicable taxes and may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code.  The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section.  The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 5.

6.   Definition of Terms.  The following terms referred to in this Agreement
     -------------------
shall have the following meanings:

     (a)  Annual Compensation. "Annual Compensation" means an amount equal to
          -------------------
the greater of (i) Employee's Company salary for the twelve (12) months
preceding the Change of Control plus the employee's target bonus for the same
period or (ii) Employee's Company Salary on an annualized basis and the
employee's target bonus as of the Termination Date.

     (b)  Cause. "Cause" shall mean (i) any act of personal dishonesty taken by
          -----
the Employee in connection with his responsibilities as an employee and intended
to result in substantial personal enrichment of the Employee, (ii) the
conviction of a felony, (iii) a willful act by the Employee that constitutes
gross misconduct and that is injurious to the Company, or (iv) for a period of
not less than thirty (30) days following delivery to the Employee of a written
demand for performance from the Company that describes the basis for the
Company's belief that the Employee has not substantially performed his duties,
continued violations by the Employee of

                                      -4-
<PAGE>

the Employee's obligations to the Company that are demonstrably willful and
deliberate on the Employee's part. Any dismissal for cause in accordance with
Subsection (iv) of this Section 6(b) must be approved by the Company's Board of
Directors prior to the dismissal date.

     (c)  Change of Control. "Change of Control" means the occurrence of any of
          -----------------
the following events:

               (i)    Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing fifty percent (50%) or
more of the total voting power represented by the Company's then outstanding
voting securities;

               (ii)   A change in the composition of the Board occurring within
a twelve-month period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date hereof, or (B) are
elected, or nominated for election, to the Board with the affirmative votes of
at least a majority of the Incumbent Directors at the time of such election or
nomination (but shall not include an individual whose election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company);

               (iii)  The consummation of a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or such surviving
entity's parent) at least fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity or
such surviving entity's parent outstanding immediately after such merger or
consolidation;

               (iv)   The consummation of the sale or disposition by the Company
of all or seventy-five percent (75%) or more of the Company's assets.

          (d)  Disability. "Disability" shall mean that the Employee has been
               ----------
unable to perform his Company duties as the result of his incapacity due to
physical or mental illness, and such inability, at least twenty-six (26) weeks
after its commencement, is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Employee or the
Employee's legal representative (such Agreement as to acceptability not to be
unreasonably withheld).  Termination resulting from Disability may only be
effected after at least thirty (30) days' written notice by the Company of its
intention to terminate the Employee's employment.  In the event that the
Employee resumes the performance of substantially all of his duties hereunder
before the termination of his employment becomes effective, the notice of intent
to terminate shall automatically be deemed to have been revoked.

                                      -5-
<PAGE>

          (e)  Involuntary Termination. "Involuntary Termination" shall mean (i)
               -----------------------
without the Employee's express written consent, the significant reduction of the
Employee's duties, authority or responsibilities, relative to the Employee's
duties, authority or responsibilities as in effect immediately prior to such
reduction, or the assignment to Employee of such reduced duties, authority or
responsibilities; (ii) without the Employee's express written consent, a
substantial reduction, without good business reasons, of the facilities and
perquisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) a reduction by the Company in the
base salary or target bonus of the Employee as in effect immediately prior to
such reduction; (iv) a material reduction by the Company in the kind or level of
employee benefits to which the Employee was entitled immediately prior to such
reduction with the result that the Employee's overall benefits package is
significantly reduced; (v) the relocation of the Employee to a facility or a
location more than twenty-five (25) miles from the Employee's then present
location, without the Employee's express written consent; (vi) any purported
termination of the Employee by the Company that is not effected for Disability
or for Cause, or any purported termination for which the grounds relied upon are
not valid; (vii) the failure of the Company to obtain the assumption of this
Agreement by any successors contemplated in Section 7(a) below; or (viii) any
act or set of facts or circumstances that would, under California case law or
statute constitute a constructive termination of the Employee.

          (f)  Termination Date. "Termination Date" shall mean (i) if this
               ----------------
Agreement is terminated by the Company for Disability, thirty (30) days after
notice of termination is given to the Employee (provided that the Employee shall
not have returned to the performance of the Employee's duties on a full-time
basis during such thirty (30)-day period), (ii) if the Employee's employment is
terminated by the Company for any other reason, the date on which a notice of
termination is given, provided that if within thirty (30) days after the Company
gives the Employee notice of termination, the Employee notifies the Company that
a dispute exists concerning the termination or the benefits due pursuant to this
Agreement, then the Termination Date shall be the date on which such dispute is
finally determined, either by mutual written agreement of the parties, or a by
final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected), or
(iii) if the Agreement is terminated by the Employee, the date on which the
Employee delivers the notice of termination to the Company.

     7.   Successors.
          ----------

          (a)  Company's Successors. Any successor to the Company (whether
               --------------------
direct or indirect and whether by purchase, merger, consolidation, liquidation
or otherwise) to all or substantially all of the Company's business and/or
assets shall assume the obligations under this Agreement and agree expressly to
perform the obligations under this Agreement in the same manner and to the same
extent as the Company would be required to perform such obligations in the
absence of a succession.  For all purposes under this Agreement, the term
"Company" shall

                                      -6-
<PAGE>

include any successor to the Company's business and/or assets which executes and
delivers the assumption agreement described in this Section 7(a) or which
becomes bound by the terms of this Agreement by operation of law.

          (b)  Employee's Successors. The terms of this Agreement and all rights
               ---------------------
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

     8.   Notice.
          ------

          (a)  General. Notices and all other communications contemplated by
               -------
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Employee,
mailed notices shall be addressed to him at the home address which he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Secretary.

          (b)  Notice of Termination. Any termination by the Company for Cause
               ---------------------
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with Section 8(a) of this Agreement.  Such notice
shall indicate the specific termination provision in this Agreement relied upon,
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination under the provision so indicated, and shall
specify the termination date (which shall be not more than thirty (30) days
after the giving of such notice).  The failure by the Employee to include in the
notice any fact or circumstance which contributes to a showing of Involuntary
Termination shall not waive any right of the Employee hereunder or preclude the
Employee from asserting such fact or circumstance in enforcing his rights
hereunder.

     9.   Miscellaneous Provisions.
          ------------------------

          (a)  No Duty to Mitigate. The Employee shall not be required to
               -------------------
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.

          (b)  Waiver. No provision of this Agreement shall be modified, waived
               ------
or discharged unless the modification, waiver or discharge is agreed to in
writing and signed by the Employee and by an authorized officer of the Company
(other than the Employee).  No waiver by either party of any breach of, or of
compliance with, any condition or provision of this Agreement by the other party
shall be considered a waiver of any other condition or provision or of the same
condition or provision at another time.

                                      -7-
<PAGE>

          (c)  Whole Agreement. This Agreement and any outstanding stock option
               ---------------
agreements represent the entire understanding of the parties hereto with respect
to the subject matter hereof and supersedes all prior arrangements and
understandings regarding same. Other than the agreements described in the
preceding sentence, no agreements, representations or understandings (whether
oral or written and whether express or implied) which are not expressly set
forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof.

          (d)  Choice of Law. The validity, interpretation, construction and
               -------------
performance of this Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the laws of the State
of California without regard to principles of conflicts of laws.

          (e)  Severability. The invalidity or unenforceability of any provision
               ------------
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.

          (f)  Withholding. All payments made pursuant to this Agreement will be
               -----------
subject to withholding of applicable income and employment taxes.

          (g)  Counterparts. This Agreement may be executed in counterparts,
               ------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.

                                      -8-
<PAGE>

          IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year set forth below.

COMPANY                            CATALYTICA ENERGY SYSTEMS, INC.

                                   By:__________________________________
                                              Craig N. Kitchen

                                   Title:    President and CEO
                                          ------------------------------

                                   Date:___________________

EMPLOYEE                           _____________________________________

                                   Date:___________________

                                      -9-<PAGE>

                                 STANDARD FORM
                               INDUSTRIAL LEASE
                                (SINGLE TENANT)

Landlord     GH TECH I L.L.C., a Delaware limited liability company

Tenant       CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation

                           Dated as of June 22, 2001

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                             <C>
1.       Defined Terms.................................................................................          1
2.       Leased Premises...............................................................................          3
         (a)      Property to be Leased................................................................          3
         (b)      Common Areas.........................................................................          3
         (c)      Parking..............................................................................          3
         (d)      Reserved Rights of Landlord..........................................................          3
3.       Completion of Premises........................................................................          3
         (a)      Space Plans and Preliminary Tenant Improvement Plans.................................          3
         (b)      Final Tenant Improvement Plans.......................................................          4
         (c)      Scheduled Completion Date............................................................          4
         (d)      Remedy for Delays....................................................................          5
         (e)      Changes..............................................................................          6
         (f)      Ready for Occupancy..................................................................          6
         (g)      Construction Representative..........................................................          6
         (h)      Early Entry..........................................................................          6
         (i)      Quality of Construction..............................................................          7
         (j)      Tenant Delays........................................................................          7
         (k)      Removal of Certain Improvements......................................................          7
         (l)      Tenant Improvement Allowance.........................................................          7
         (m)      Permits..............................................................................          9
4.       Term..........................................................................................          9
5.       Rent..........................................................................................          9
         (a)      Fixed Rent...........................................................................          9
         (b)      Adjustments..........................................................................         10
         (c)      Pro Rata Rent........................................................................         10
         (d)      Net Lease............................................................................         11
         (e)      Reimbursable Expenses................................................................         11
6.       Security......................................................................................         12
         (a)      Security Deposit.....................................................................         12
         (b)      Special Security Deposit Provisions..................................................         13
         (c)      Lien and Security Interest...........................................................         13
</TABLE>
<PAGE>

<TABLE>
<S>                                                                                                             <C>
7.       Use...........................................................................................         13
         (a)      General..............................................................................         13
         (b)      Compliance with Law..................................................................         14
         (c)      Existing Title and Condition of Premises.............................................         14
         (d)      Signs................................................................................         14
         (e)      Governmental Regulation..............................................................         15
8.       Maintenance and Repairs.......................................................................         15
         (a)      Tenant's Maintenance.................................................................         15
         (b)      Service Contracts....................................................................         15
         (c)      Landlord's Obligations to Repair.....................................................         15
         (d)      Payment for Capital Expenditures.....................................................         16
         (e)      Surrender............................................................................         16
9.       Utilities.....................................................................................         17
10.      Alterations and Additions.....................................................................         17
         (a)      Limitation...........................................................................         17
         (b)      Liens................................................................................         17
         (c)      Removal..............................................................................         17
11.      Insurance.....................................................................................         18
         (a)      Liability............................................................................         18
         (b)      Property.............................................................................         18
         (c)      Policies.............................................................................         19
         (d)      Waiver of Subrogation................................................................         20
         (e)      Tenant's Contents....................................................................         20
         (f)      Workmen's Compensation...............................................................         21
         (g)      [Intentionally Deleted]..............................................................         21
12.      Indemnity; Exemption of Landlord from Liability...............................................         21
         (a)      General..............................................................................         21
         (b)      Tenant's Business....................................................................         22
         (c)      Landlord's Indemnity.................................................................         22
13.      Damage or Destruction; Obligation to Rebuild..................................................         22
         (a)      Landlord's Obligation to Rebuild.....................................................         22
         (b)      Abatement of Rent....................................................................         22
         (c)      Option to Terminate..................................................................         22
         (d)      Uninsured Casualties.................................................................         23
         (e)      Damage Near End of Term..............................................................         23
         (f)      Tenant's Waiver......................................................................         23
14.      Taxes and Assessments.........................................................................         23
         (a)      Payment..............................................................................         23
         (b)      Definition...........................................................................         24
         (c)      Separate Assessment..................................................................         24
         (d)      Personal Property....................................................................         24
         (e)      Rent Tax.............................................................................         24
         (f)      Declaration..........................................................................         24
         (g)      Project Assessments..................................................................         24
         (h)      Property Tax Challenges..............................................................         25
15.      Condemnation..................................................................................         25
</TABLE>

                                      ii
<PAGE>

<TABLE>
<S>                                                                                                             <C>
         (a)      Rent Reduction or Lease Termination..................................................         25
         (b)      Award................................................................................         26
         (c)      Temporary Condemnation...............................................................         26
16.      Assignment and Subletting.....................................................................         26
         (a)      Consent..............................................................................         26
         (b)      Tenant's Continuing Liability........................................................         26
         (c)      Information..........................................................................         26
         (d)      Acceptance of Performance............................................................         27
         (e)      Landlord's Recapture Rights..........................................................         27
         (f)      Standards............................................................................         27
         (g)      [Intentionally Deleted]..............................................................         27
         (h)      Release..............................................................................         27
         (i)      Controlled Entity....................................................................         28
         (j)      Transfer Fee and Attorneys' Fees.....................................................         28
         (k)      Additional Terms and Conditions Applicable to Subletting.............................         28
         (l)      Injunctive Relief....................................................................         29
17.      Defaults; Remedies............................................................................         29
         (a)      Defaults.............................................................................         29
         (b)      Remedies.............................................................................         29
         (c)      Late Charges.........................................................................         33
         (d)      Payment or Performance by Landlord...................................................         33
         (e)      Landlord's Default...................................................................         33
18.      Miscellaneous.................................................................................         34
         (a)      Estoppel Certificate.................................................................         34
         (b)      Landlord's Liability.................................................................         34
         (c)      Construction.........................................................................         34
         (d)      Interest on Past-Due Obligations.....................................................         35
         (e)      Time of Essence......................................................................         35
         (f)      Counterparts.........................................................................         35
         (g)      Incorporation of Prior Agreements; Amendments........................................         35
         (h)      Notices..............................................................................         35
         (i)      Waivers..............................................................................         35
         (j)      Recording............................................................................         35
         (k)      Holding Over.........................................................................         35
         (l)      Covenants and Conditions.............................................................         36
         (m)      Binding Effect.......................................................................         36
         (n)      Subordination........................................................................         36
         (o)      Attorneys' Fee.......................................................................         36
         (p)      Landlord's Access....................................................................         37
         (q)      Auctions.............................................................................         37
         (r)      Merger...............................................................................         37
         (s)      Joint and Several Liability..........................................................         37
         (t)      Individual Liability.................................................................         37
         (u)      Attornment...........................................................................         37
         (v)      Lenders Right to Cure................................................................         38
         (w)      Revisions to Lease...................................................................         38
</TABLE>

                                      iii
<PAGE>

<TABLE>
<S>                                                                                                             <C>
         (x)      [Intentionally Deleted]..............................................................         38
         (y)      Reasonable Expenditures..............................................................         38
19.      Toxic Materials...............................................................................         38
         (a)      Definitions..........................................................................         38
         (b)      Prohibition on Hazardous Materials...................................................         39
         (c)      Exception to Prohibition.............................................................         39
         (d)      Compliance with Environmental Laws...................................................         40
         (e)      Environmental Notices................................................................         40
         (f)      Environmental Indemnity..............................................................         40
         (g)      Remedial Work........................................................................         40
         (h)      Landlord's Option....................................................................         41
         (i)      Injunctive Relief....................................................................         41
         (j)      Self-Help............................................................................         41
         (k)      Other Tenants........................................................................         41
         (l)      Environmental Inspection.............................................................         41
         (m)      Surrender of Premises - Environmental Considerations.................................         42
         (n)      Landlord's Indemnity For Environmental Matters.......................................         42
20.      Option to Purchase
21.      Option to Renew
</TABLE>

                                      iv
<PAGE>

         1.     Defined Terms. Each reference in this Lease to any of the
following terms shall incorporate the data stated for that term. Other terms are
as defined in the Lease.

         (a)   Landlord and Landlord's     GH TECH I L.L.C.
               Address (subparagraph       c/o Hewson Properties, Inc.
               18(h)):                     4636 East University Drive, Suite 265
                                           Phoenix, AZ 85034

         (b)   Tenant and Tenant's         CATALYTICA ENERGY SYSTEMS, INC.
               Address for Notices Prior   15678 N. Greenway-Hayden Loop
               to Commencement Date        Suite 105
               (subparagraph 18(h)):       Scottsdale, Arizona 85260
                                           Attn: Doug Chase
               After Commencement
               Date:                       CATALYTICA ENERGY SYSTEMS, INC. 1388
                                           -------------------------------------
                                           North Tech Blvd.Gilbert, Arizona
                                           --------------------------------
                                           Attn: Doug Chase
                                           ----------------

                                           _____________________________________

         (c)   Street Address of           1388 North Tech Blvd.
               Premises (paragraph 2):     Gilbert, Arizona

         (d)   Project in which            Fiesta Tech Centre
               Premises are located
               (paragraph 2):

         (e)   Approximate Square          43,425
               Footage:
         (f)   Landlord's Construction     Jason Meszaros
               Representative (subpara-
               graph 3(g)):
         (g)   Tenant's Construction       Doug Chase
                                           -------------------------------------
               Representative (subpara-    _____________________________________
               graph 3(g)):                _____________________________________

         (h)   Term (paragraph 4):         Eighty-four (84) months subject to
                                           two options to renew for five years
                                           each on the terms set forth in
                                           paragraph 21 hereof

         (i)   Scheduled Completion        12:01 a.m. on October 1, 2001
               Date (paragraph 4):         (estimated)
         (j)   Commencement Date           October 8, 2001 (estimated)
               (paragraph 4):
         (k)   Fixed Rent                  Month
               (subparagraph 5(a)):        -----
                                           1-30       $33,654.00
                                           31-60      Plus CPI adjustment*
<PAGE>

                                           61-84      Plus CPI adjustment*

                                           *Plus applicable rental taxes
         (l)   Rental Period               Monthly
               (subparagraph 5(a)):
         (m)   Security Deposit            $300,000.00 letter of credit,
               (subparagraph 6(a)):        subject to possible periodic
                                           reductions
         (n)   Permitted Uses              General Office, Warehouse,
               (paragraph 7):              Manufacturing, Research and
                                           Development, and all other legal
                                           uses related thereto
         (o)   Liability Insurance         $2,000,000.00
               (subparagraph 11(a)):

         Exhibits       A -    Legal Description (2(a))
         --------
                        B -    Shell Building Plans Description (2(a))

                        C -    Description of Tenant Improvements (2(a))

                        D -    Early Entry Hold Harmless Agreement (3(h))

                        E -    Improvements that Tenant will be obligated to
                               remove at Lease expiration or termination (3(k))

                        F -    Letter of Credit Provisions (6(a))

                        G -    Terms of the Construction Contract (3(l)(iii))

                        H -    Option to Purchase (20)

                        I -    Option to Renew (21)

                                       2
<PAGE>

          2.    Leased Premises.

         (a)    Property to be Leased. Landlord hereby leases to Tenant, and
Tenant hereby leases from Landlord, subject to the terms and conditions
contained herein, (i) that certain real property located at the street address
set forth in paragraph 1 hereof and more particularly described in Exhibit A
attached hereto and incorporated herein by this reference (the "Property") and
(ii) those improvements already constructed or to be constructed on the Property
in accordance with the shell building plans described in Exhibit B (the
"Building Shell Plans") (the "Building Improvements") and those tenant
improvements to be constructed on the Property in accordance with the provisions
of paragraph 3 below and more particularly described in Exhibit C attached
hereto and incorporated herein by this reference (the "Tenant Improvements").
The Tenant Improvements and the Building Improvements (as such Building
Improvements may be modified in accordance with paragraph 3 below to accommodate
the Tenant Improvements) are sometimes hereinafter referred to collectively as
the "Improvements." The Property and the Improvements are sometimes hereinafter
referred to collectively as the "Premises."

         (b)    Common Areas. Tenant shall have, as appurtenant to the Premises,
rights to use in common, subject to reasonable rules from time to time made by
Landlord of which Tenant is given reasonable advance written notice, common
walkways, sidewalks and driveways necessary for access to the Premises;
greenbelt areas; and, except for parking spaces that may be reserved for persons
other than Tenant, parking spaces or area from time to time maintained on the
Project for use by tenants in and visitors to the Premises.

         (c)    Parking. At no additional cost to Tenant, Tenant shall be
provided with at least one hundred forty-two (142) parking spaces, ten (10) of
which shall be covered. Tenant may utilize areas behind grade and dock loading
doors for additional parking and shall be permitted to install in the parking
area a pad for outside storage and equipment testing subject to the provisions
of subparagraphs 7(b) and 10 hereof.

         (d)    Reserved Rights of Landlord. Notwithstanding the foregoing,
Landlord reserves the right from time to time, without unreasonable interference
with Tenant's use, to alter the boundaries of the Premises, grant easements on
the Premises and dedicate for public use portions thereof without Tenant's
consent, provided that no such grant or dedication shall unreasonably interfere
with Tenant's use of the Premises, materially decrease Tenant's rights or
increase Tenant's obligations under this Lease or otherwise cause Tenant to
incur cost or expense.

         3.     Completion of Premises.

         (a)    Space Plan and Preliminary Tenant Improvement Plans. Landlord's
architect has prepared a space plan and outline specifications (the "Preliminary
Tenant Improvement Plans") for the construction of the Tenant Improvements.

         (b)    Final Tenant Improvement Plans. Landlord shall thereafter cause
to be prepared final plans and specifications (the "Final Tenant Improvement
Plans") substantially in conformity with the Preliminary Tenant Improvement
Plans, which need not include working detail drawings. Notwithstanding anything
to the contrary herein, Landlord will use reasonable

                                       3
<PAGE>

efforts to include working detail drawings with the Final Tenant Improvement
Plans. The term "Tenant Improvement Plans" shall hereinafter mean the
Preliminary Tenant Improvement Plans and, if and when prepared, the Final Tenant
Improvement Plans. The Final Tenant Improvement Plans shall be delivered to
Tenant as soon as reasonably possible after the preparation thereof, subject to
any reasonable period of delay encountered by Landlord in such preparation as a
result of requests by Tenant for changes in the Final Tenant Improvement Plans
subsequent to the date hereof. Within five (5) days after delivery of the Final
Tenant Improvement Plans, Tenant shall set forth in writing, with reasonable
particularity and precision, any corrections or changes necessary to bring the
Final Tenant Improvement Plans into substantial conformity with the Preliminary
Tenant Improvement Plans. Failure to deliver to Landlord written notice of any
such corrections or changes within said five (5) day period shall constitute
approval of the Final Tenant Improvement Plans by Tenant. If Tenant disapproves
in writing of the Final Tenant Improvement Plans within said five (5) day
period, Landlord shall revise or correct the Final Tenant Improvement Plans
should Landlord determine, in its reasonably exercised discretion, that changes
are necessary to bring the Final Tenant Improvement Plans into substantial
conformity with the Preliminary Tenant Improvement Plans and resubmit the same
to Tenant for approval. Tenant shall then have three (3) days to approve the
Final Tenant Improvement Plans. Failure to deliver to Landlord written notice of
disapproval within said three (3) day period shall constitute approval of the
Final Tenant Improvement Plans by Tenant. Following such approval of the Final
Tenant Improvement Plans, both parties shall endorse approval for filing
purposes thereon, in duplicate, and thereafter changes may be made only in
accordance with subparagraph (e) below. If Tenant has not approved the Final
Tenant Improvement Plans on or before July 6, 2001, the provisions of
subparagraph (d) below shall apply.

         (c)    Scheduled Completion Date. Landlord shall proceed diligently
with construction and completion of the Building Improvements and Tenant
Improvements substantially in accordance with the Building Shell Plans and the
Tenant Improvement Plans, respectively. Landlord shall complete the Improvements
and they shall be Ready for Occupancy (as defined below) by Tenant not later
than the Scheduled Completion Date set forth in paragraph 1 above; provided,
however, that such Scheduled Completion Date shall be extended for a period of
time equal to the period of any delay or delays encountered by Landlord
affecting construction because of fire, earthquake, inclement weather, or other
acts of God, acts of the public enemy, riot, insurrection, governmental
regulations of the sales of materials or supplies or the transportation thereof,
strikes or boycotts, shortages of material or labor or any other cause beyond
the control of Landlord ("Force Majeure" and such delays a "Force Majeure
Delay"), Tenant's early entry under the provisions of subparagraph (h) below or
changes in the Final Tenant Improvement Plans pursuant to subparagraph (e)
below. A Force Majeure Delay shall not be deemed to have occurred unless
Landlord informs Tenant in writing that such delay has occurred promptly after
Landlord learns of such delay.

         (d)    Remedy for Delays. If the Premises are not substantially
completed on or before the Scheduled Completion Date as extended pursuant to
subparagraph (c) above:

                (i)    Landlord shall pay a penalty to Tenant of:

                       (A) $1,000.00 for each Business Day (defined below)
after October 1, 2001 and through October 22, 2001 that the Premises are not
Ready for Occupancy; and

                                       4
<PAGE>

                       (B) $2,000.00 for each Business Day after October 22,
2001 that the Premises are not Ready for Occupancy.

                (ii)   Notwithstanding the foregoing, Landlord's obligation to
pay such penalties is conditional upon Tenant having approved the Final Tenant
Improvement Plans on or before July 6, 2001. Each day beyond July 6, 2001 that
approval of the Final Tenant Improvement Plans has not been received by Landlord
from Tenant is a "Final Plans Delay Day". The total number of Final Plans Delay
Days shall be known as the "Delay Days". For each Delay Day that occurs, an
additional three (3) days shall be added to the Scheduled Completion Date and to
the dates set forth in subparagraph (d)(i) above for all purposes under this
Lease. Notwithstanding anything to the contrary herein, (i) each day of delay
caused by the Architect's failure to timely respond to the reasonable requests
of Tenant during the preparation and completion of the Final Tenant Improvement
Plans ("Architect's Delay Day") shall not constitute a Delay Day, and (ii) the
dates Landlord's penalties begin to accrue under subparagraph 3(d)(i) above
shall be abated one day for each Architect's Delay Day. An Architect's Delay Day
shall not be deemed to have occurred unless the party claiming any such delay
informs the other party in writing that such delay has occurred promptly after
it learns of such delay.

                (iii)  Once the total Delay Days become greater than ten (10),
Tenant shall be obligated to pay to Landlord $850.00 per Delay Day for each
Delay Day thereafter.

                (iv)  Notwithstanding anything to the contrary contained
herein, if Landlord is unable to make the Premises Ready for Occupancy (as
defined in subparagraph (f) below) on or before November 15, 2001 (as may be
extended three (3) days for each Delay Day and one (1) day for each Architect's
Delay Day), including, without limitation, as a result of any delay as a result
of Force Majeure, Tenant shall have the right to terminate this Lease, at which
time any Letter of Credit or other Security Deposit previously delivered to
Landlord by Tenant shall be returned to Tenant, and Tenant shall have no further
liability hereunder. Such termination shall become effective on the date which
is ten (10) days after delivery of such termination notice if the Premises are
not Ready for Occupancy at the expiration of ten (10) days after delivery of
such termination notice.

                (v)   "Business Day" shall mean any day that is not a
Saturday, Sunday or state or Federal holiday on which banks are closed.

         (e)    Changes. Tenant shall have the right to request changes in the
Final Tenant Improvement Plans ("Change Orders"), which request shall not be
unreasonably denied, provided, however, that no such request shall effect any
structural change in the Premises. In the event that Tenant requests a Change
Order in writing from Landlord, Landlord shall, within five (5) business days of
receipt of such Change Order request from Tenant (or such reasonable time as may
be required), provide to Tenant in writing: (i) the estimated costs that would
be incurred by Landlord required to implement such change ("Change Order
Costs"), including without limitation, architecture fees and increases in
construction costs (but excluding lost rent costs or any other costs unrelated
to construction costs); (ii) the number of days of delay that would be caused by
such Change Order ("Landlord's Change Order Notification"); and (iii) whether

                                       5
<PAGE>

Landlord would require removal of such changes at the expiration of the Term. In
the event Tenant determines to proceed with such Change Order, Tenant shall
provide its approval in writing to Landlord, and shall, no later than three (3)
business days after such approval, pay to Landlord the Change Order Costs. Upon
approval by Tenant of a Change Order, each delay day identified by Landlord in
the Landlord's Change Order Notification for such Change Order shall constitute
a "Delay Day".

         (f)    Ready for Occupancy. The Premises shall be deemed to be ready
for occupancy ("Ready for Occupancy") when (i) the architect or engineer in
charge of the work of construction certifies: (x) that the work of construction
has been substantially completed in accordance with the Building Shell Plans and
the Final Tenant Improvement Plans such that there are only punch-list items
remaining that will not materially interfere with Tenant's operations in the
Premises for the operation of its business therein, and (y) the date of such
completion; and (ii) the Premises may be legally occupied by Tenant. Landlord
shall diligently complete, as soon as reasonably possible, any items of work and
adjustment not completed when the Premises are Ready for Occupancy. Tenant shall
have seven (7) days after the Premises are Ready for Occupancy to move into the
Premises before Rent commences.

         (g)    Construction Representative. In connection with the original
construction of the Premises, including, without limitation, the Tenant
Improvements, each party shall be bound by its Construction Representative set
forth in paragraph 1 above. A party may designate a substitute Construction
Representative by giving written notice to the other party.

         (h)    Early Entry. Tenant may, at any time on or after September 10,
2001 (extended for Delay Days), at its sole risk, enter upon and install such
trade fixtures and equipment, systems furniture and low voltage wiring for
telephones, facsimiles, data systems and security in the Premises as it may
elect; provided, however, that (i) Tenant's early entry shall not unreasonably
interfere with Landlord's work of construction or cause labor difficulties; (ii)
Tenant shall execute a Hold Harmless Agreement in favor of Landlord in the form
attached hereto as Exhibit D; (iii) Tenant shall pay for and provide evidence of
insurance satisfactory to Landlord; (iv) Tenant shall pay utility charges
reasonably allocated to Tenant by Landlord; and (v) Tenant shall pay any
reasonable additional costs incurred by Landlord, including, without limitation,
increase in construction costs and additional interest charges, as a result of
Tenant's early entry into the Premises. In the event that Landlord believes that
Tenant's activities in the Premises are interfering with Landlord's construction
schedule, Landlord shall notify Tenant in writing of such interference and
Tenant shall have twenty-four (24) hours to cease such interfering activities.
Each day beyond the expiration of such twenty-four (24) hour period that such
interference continues shall constitute a "Delay Day." Tenant shall not use the
Premises for the storage of inventory or otherwise commence the operation of
business prior to the commencement of the Term without the express prior written
consent of Landlord.

         (i)    Quality of Construction. All work shall be done in a good and
workmanlike manner and in compliance with all Applicable Requirements (as
defined in subparagraph 7(b) below) using materials of good quality. Except for
the penalties set forth in subparagraph 3(d)(i) of this Lease, Landlord assumes
no liability for special, consequential or incidental damages of any kind with
respect to the quality of the work, the time for completion of the Premises or
otherwise. There are no representations, warranties or guaranties, express or
implied, including

                                       6
<PAGE>

warranties of merchantability or use of the Premises, except as are expressly
set forth herein. Notwithstanding anything to the contrary herein, Landlord
warrants that at the Commencement Date, the Premises and the Building shall
conform to all Applicable Requirements. Landlord shall be responsible for
performing and paying for any alterations required as a result of any breach of
the representation and warranty contained in the immediately preceding sentence.
Landlord shall require that all warranties and guaranties provided by the
general contractor, subcontractors and any manufacturers or suppliers of
equipment and materials used in the construction of the Building Shell and
Tenant Improvements inure to the benefit of Tenant and, where applicable,
Landlord. In the event that Landlord is unable to provide this benefit to Tenant
for any particular warranty or guaranty, Landlord agrees that it shall apply and
pursue such warranties and guaranties for the benefit of Tenant (including where
such application will to reduce Tenant's repair and maintenance obligations
hereunder).

         (j)    Tenant Delays. The term "Tenant Delays" shall mean the Tenant
Delay Days identified in Sections 3(d), (e) and (h) above and any other
unreasonable, interfering or negligent conduct by Tenant which causes a delay in
the Premises being Ready for Occupancy; provided, however, that no such delay in
this subsection (j) shall be deemed to have occurred unless Landlord notifies
Tenant in writing of such delay and Tenant has not cured such delay within the
same day of receipt of Landlord's notice with respect to such delay. The amount
of time for any one Tenant Delay shall be calculated as the amount of time
beyond the time that it would have otherwise taken to have the Premises Ready
for Occupancy had the Tenant Delay not occurred. Tenant Delays may be in
addition to Delay Days.

         (k)    Removal of Certain Improvements. Notwithstanding anything to the
contrary contained in this Lease (but subject to Section 3(e) above), Tenant
shall be required to remove the Improvements designated on Exhibit E to this
Lease from the Premises at the expiration of the Term. Landlord shall, at the
time of any revisions to or approval of the Final Tenant Improvement Plans,
designate any items which it will require Tenant to remove as a condition to any
such revisions or approvals.

         (l)    Tenant Improvement Allowance.

                (i)   The cost of constructing (including plans, permit fees,
etc.) the Tenant Improvements shall be paid by Landlord; provided, however, if
the amount expended for constructing the Tenant Improvements is or will be more
than $868,500.00 (the "Allowance"), Tenant shall reimburse Landlord for all
reasonable costs incurred in excess of the Allowance. The Allowance is
Landlord's entire monetary obligation for the Tenant Improvements; provided,
however, any excess costs incurred as a result of the fault or neglect of
Landlord or of Landlord's contractors, employees or agents shall be borne
entirely by Landlord, and Tenant shall be responsible for all costs incurred as
a result of the fault or neglect of Tenant. Landlord and Tenant acknowledge that
prior to the execution hereof, Landlord engaged the services of Peter Lendrum
Architecture, Inc. (the "Architect") to perform space planning and work on the
Preliminary Tenant Improvement Plans. The cost of all such work by Architect
performed prior to the execution hereof (as well as work performed by Architect
after the execution hereof for space planning and Preliminary and Final Tenant
Improvement Plans) shall be charged against the Allowance.

                                       7
<PAGE>

                (ii)  Tenant shall pay any costs that are Tenant's
responsibility hereunder (the "Excess Costs") on a pro rata basis with
Landlord's payments for design and construction of the Tenant Improvements, so
that Landlord will always have paid a share of the total costs then incurred
that is equal to the percentage that the Allowance is of the sum of the
Allowance and Excess Costs, as then determined, and Tenant will always have paid
a share of the total costs for the Tenant Improvements then incurred that is
equal to the percentage that the Excess Costs, as then determined, is to the sum
of the Allowance and the Excess Costs, as then determined. Determination(s) of
the amount of the Excess Costs may be made from time to time prior to, during or
after construction. Tenant shall make such payments, including any adjustments
necessary to maintain the Tenant's appropriate share of the total costs as a
result of subsequent determinations, based upon requisitions setting forth in
reasonable detail the reason for such Excess Costs and the amount thereof,
together with any other information reasonably requested by Tenant, and the
amounts owing by Tenant shall be paid by Tenant to Landlord within ten (10)
business days after receipt of each such requisition and other information.
Except as otherwise provided in this Lease, Tenant shall have complete
responsibility for the cost of the Tenant Improvements and for the construction
by Tenant of any other improvements and alterations to the Premises in
connection with Tenant's occupancy thereof, Tenant agreeing to accept the same
"AS IS", subject only to the construction by Landlord of the Tenant Improvements
and any other obligation of Landlord under this Lease. Landlord shall promptly
furnish to Tenant estimates of the anticipated costs of the various elements of
the Tenant Improvements as such estimates are received by Landlord. If Tenant
believes that the amount of any estimate is excessive, Tenant may request
changes in the Final Tenant Improvement Plans in accordance with subparagraph
(e) above.

                (iii) Landlord agrees to procure a Guaranteed Maximum Price
contract from its general contractor for the performance of the Tenant
Improvements, and Tenant shall have the opportunity to review and approve such
contract prior to its execution. The contract shall be "open book" and shall
contain the unit pricing and other conditions set forth on Exhibit G attached
                                                           ---------
hereto.

                (iv)  In the event that the entire amount of the Allowance is
not disbursed during the construction of the initial Tenant Improvements, Tenant
may apply such remaining amounts to any other costs for tenant improvements of
the type set forth below incurred by Tenant during the first thirty (30) months
following the Commencement Date. If Tenant desires to use the remaining
Allowance for such purposes, Tenant shall notify Landlord ten (10) days prior to
the commencement of work with an estimate of the cost to be incurred, a
reasonably detailed description of the work to be performed and the estimated
date on which the funds will be required to be disbursed to the persons
performing the work. All work performed must be done in accordance with the
terms of this Lease. The excess Allowance may be applied only for the following:
space planning, design fees and construction documents; permit fees, utility
fees and other related charges; office improvements; light manufacturing
improvements; restroom finishes and plumbing; HVAC and duct work in the office
area; HVAC in the manufacturing area; drop ceiling grid with acoustical tiles;
lighting and light fixtures; carpet and other typical finished floor coverings;
heating, ventilating, and associated work; millwork.

                                       8
<PAGE>

         (m)    Permits. Landlord shall be solely responsible for the procuring
of all building and other permits, licenses and approvals and certificates of
occupancy necessary for construction of the Tenant Improvements and for the
occupancy of the Premises as constructed in accordance with the Tenant
Improvement Plans, the cost of which shall be charged against the Allowance. If
Landlord determines that any permitting or other activities or installations by
Tenant or Tenant's agents, employees, contractors or licensees have, will or are
likely to result in any delays or failures of Landlord to obtain any such
permits, licenses or approvals, Landlord will promptly notify Tenant in writing
pursuant to subparagraph 3(j) above, Landlord will not be responsible for any
delays caused by such activities or installations, and the November 15, 2001
deadline set forth below in paragraph 4 shall be extended one (1) day for each
day of delay which is caused by such activities or installations. Tenant shall
be responsible for obtaining permits for its operations (including, but not
limited to any required air permitting, or additional permits for Tenant's
construction in the Premises that does not constitute Tenant Improvements.
Landlord acknowledges that Tenant shall seek such permits during the
construction phase and agrees to cooperate with Tenant in Tenant's procurement
of such permits.

         4.     Term. The Term of this Lease, which shall be for the period set
forth in paragraph 1 above, shall commence on the first to occur of the
following dates (the "Commencement Date") (it being agreed that in addition to
any other termination rights set forth herein, if the Term of this Lease shall
not commence on or before November 15, 2001 as may be extended for any Tenant
Delays or delays set forth in subparagraph 3(m) hereof, Tenant may, at its
option, terminate this Lease and this Lease shall be of no further force and
effect, and any Letter of Credit or other Security Deposit previously delivered
to Landlord by Tenant shall be returned to Tenant, and it also being agreed
that, in addition to any other termination rights set forth herein, if the Term
of this Lease shall not commence within one (1) year of the Scheduled Completion
Date, this Lease shall terminate and be of no further force and effect, and any
Letter of Credit or other Security Deposit previously delivered to Landlord by
Tenant shall be returned to Tenant):

         (a)    Seven (7) days after the date on which the Premises are Ready
for Occupancy;

         (b)    The date on which Tenant actually commences to do business in
the Premises; or

         (c)    Seven (7) days after the date on which the Premises would have
been Ready for Occupancy except for Tenant Delays.

         (d)    Within a reasonable time after the Commencement Date, Landlord
will deliver to Tenant an executed "Memorandum of Commencement Date" specifying
the Commencement Date and the termination date. Tenant, within seven (7) days
after its receipt thereof, will either execute and deliver to Landlord the
Memorandum of Commencement Date or note any errors or omissions thereon and
return it to Landlord.

         5.     Rent.

         (a)    Fixed Rent. Tenant shall pay Landlord as fixed rent for the
Premises a sum equal to the Fixed Rent set forth in paragraph 1 on or before the
first day of each and every calendar month during the Term of this Lease, except
that Fixed Rent for the first full calendar month of

                                       9
<PAGE>

the Term shall be payable simultaneously with the execution of this Lease by
Tenant (with any overpayment, as a result of the first month of the Term being a
partial month, credited to the next month's Fixed Rent).

         (b)    Adjustments. On or before the first day of each and every Rental
Period (the "Adjustment Period"), the first of which shall commence thirty-one
(31) months after the first day of the calendar month in which the Commencement
Date shall have occurred, and the second of which shall occur sixty-one (61)
months after the first day of the calendar month in which the Commencement Date
shall have occurred, in addition to the Fixed Rent due pursuant to subparagraph
(a) above, Tenant shall pay as additional rent an additional amount (the
"Adjustment") to be determined in accordance with the variations, if any, in the
costs of living as shown by the Consumer Price Index for all Urban Consumers
(average of all cities), most recent base, as published by the Bureau of Labor
Statistics, United States Department of Labor, or any successor agency (the
"CPI"). The Adjustment for each Rental Period of each Adjustment Period shall be
an amount equal to (i) the product obtained by multiplying the Fixed Rent by a
fraction, the numerator of which shall equal the CPI reported for the calendar
month occurring three (3) months prior to the first day of such Adjustment
Period (e.g., if the first day of the Adjustment Period shall be June 1, the CPI
used shall be that of the immediately preceding month of March) and the
denominator of which shall equal the CPI reported for the calendar month
occurring three (3) months prior to the first day of the month in which the
Commencement Date shall occur less (ii) the Fixed Rent. The computation of the
Adjustment for each Rental Period of each Adjustment Period shall be made
without regard to whether any Adjustment was payable with respect to any
preceding Adjustment Period. In no event shall the calculation of the amount of
the Adjustment operate to reduce the total rent due pursuant to this
subparagraph (b) below the Fixed Rent, as last adjusted. In the event that the
necessary CPI figures are not available to compute the Adjustment upon the
commencement of any Adjustment Period, Tenant shall continue to pay the Fixed
Rent plus the Adjustment in effect, if any, for the prior Adjustment Period (the
"Tentative Adjustment") until such CPI figures become available, at which time
the appropriate Adjustment for each Rental Period of such Adjustment Period
shall be determined. Immediately following such determination, either Landlord
shall refund to Tenant the amount by which the sum of all Tentative Adjustments
actually paid during such Adjustment Period exceeds the sum of all Adjustments
properly payable during such Adjustment Period, or Tenant shall pay to Landlord
the amount by which the sum of all Adjustments properly payable during such
Adjustment Period exceeds the sum of all Tentative Adjustments actually paid
during such Adjustment Period. In the event the CPI is no longer published,
Landlord, in its reasonable discretion, shall determine another index most
similar to the CPI showing changes in the cost of living to be used to calculate
the Adjustment due Landlord. The Fixed Rent and any Adjustments are sometimes
collectively referred to as the "Rent." Notwithstanding anything to the contrary
herein, in no event shall the Adjustment result in an increase in Fixed Rent
that is less than three percent (3%) or more than six percent (6%) per annum
(compounded annually) higher than the Fixed Rent before such Adjustment.

         (c)    Pro Rata Rent. Rent for any period during the Term which is for
less than one month shall be a pro rata portion of the Rental Period
installment. Rent shall be payable, without deduction or offset, in lawful money
of the United States to Landlord at the address stated herein or to such other
persons or at such other places as Landlord may designate in writing.

                                      10
<PAGE>

         (d)    Net Lease. This Lease is what is commonly called a "net lease",
it being understood that Landlord shall receive the Rent set forth in this
paragraph free and clear of any and all impositions, taxes, liens, charges or
expenses of any nature whatsoever in connection with its ownership and leasing
of the Premises, except as otherwise set forth herein. In addition to the Rent
provided in this paragraph, Tenant shall pay all impositions, taxes, insurance
premiums, operating charges, management fees (provided, however, that in no
event shall such management fees exceed $750.00 a month, and in no event shall
Tenant be charged for any such management fees during the first twelve (12)
months of the Term), costs and expenses which arise or may be contemplated to be
borne by Tenant under any provisions of this Lease during the Term. All of the
charges, costs and expenses to be borne by Tenant hereunder shall constitute
additional rent and, upon the failure of Tenant to pay any of such costs,
charges or expenses, Landlord shall have the same rights and remedies as
otherwise provided in this Lease for the failure of Tenant to pay Rent. It is
the intention of the parties hereto that Tenant shall in no event be entitled to
any abatement of or reduction in Rent or additional rent payable hereunder,
except as expressly provided herein. Any present or future law to the contrary
shall not alter this agreement of the parties.

         (e)    Reimbursable Expenses. Any sum which is designated specifically
in this Lease as a "Reimbursable Expense" for which Landlord is to be paid by
Tenant shall be paid by Tenant to Landlord in accordance with the following
provisions:

                (i)     Landlord shall prepare an annual statement (the "Annual
         Statement") setting forth the sum of the Reimbursable Expenses for the
         calendar year ending on the prior December 31 and setting forth the
         estimated Reimbursable Expenses that will be incurred by Landlord
         during the current calendar year ending on the next following December
         31.

                (ii)    Landlord shall endeavor to give to Tenant such Annual
         Statement on or before March 1 of each calendar year throughout the
         Term of the Lease, but Landlord's failure to provide Tenant with an
         Annual Statement by said date shall not constitute a waiver by Landlord
         of its right to require payment by Tenant of estimated Reimbursable
         Expenses or actual Reimbursable Expenses unless Landlord fails to
         provide such a calendar year statement by December 31 of the year
         following the calendar year covered by an Annual Statement, so long as
         Tenant has delivered to Landlord reasonable notice of such failure.

                (iii)   The Reimbursable Expenses for the calendar year in which
         the Annual Statement is received shall be divided by twelve (12) and
         one such installment shall be paid concurrently with each rental
         payment thereafter until receipt by Tenant of the next Annual
         Statement. In addition, Tenant shall pay in full concurrently with the
         first monthly rent payment due following receipt of the Annual
         Statement an amount equal to the excess of the monthly installment
         required to be paid under the most current Annual Statement over the
         monthly installment made under the preceding Annual Statement (or the
         amount specified in subparagraph (v) below, as applicable) multiplied
         by the number of months from January through the month in which the
         Annual Statement is received by Tenant.

                                      11
<PAGE>

                (iv)    If actual Reimbursable Expenses for the past calendar
         year as shown on the Annual Statement are greater than the payments
         made by Tenant for that calendar year, then concurrently with the first
         monthly rent payment due following receipt by Tenant of the Annual
         Statement, Tenant shall pay in full an amount equal to such excess. If
         actual Reimbursable Expenses for the past calendar year as shown on the
         Annual Statement is less than the payments made by Tenant for that
         calendar year, the amount of such overpayment shall be credited against
         the next monthly rent payment(s) falling due.

                (v)     An Annual Statement need not be given during the period
         from the Commencement Date (or implementation of this monthly payment
         program) until December 31 of the year in which the Commencement Date
         (or implementation of this monthly payment program) occurs and
         estimated payments of Reimbursable Expenses during such period and
         until the first Annual Statement is issued to Tenant in the next
         calendar year shall be in the amount specified by Landlord.

                (vi)    Even though the Term has expired and the Tenant has
         vacated the Premises when the final determination is made of the
         Reimbursable Expenses for the calendar year in which the Lease expires,
         Tenant shall immediately pay the excess of the Reimbursable Expenses
         for the portion of such year in which Tenant was in occupancy over the
         estimated payments made by Tenant for that calendar year and,
         conversely, any overpayment made shall be immediately rebated by
         Landlord to Tenant.

                (vii)   Each Annual Statement shall be prepared in accordance
         with generally recognized and established accounting practices and each
         determination and Annual Statement, certified by Landlord, shall be
         final and conclusive on both parties, including any determination made
         by Landlord of the appropriate estimated payment during the period
         prior to issuance of the first Annual Statement to Tenant.

                (viii)  Tenant may cause an audit by a reputable third party
         accountant of Landlord's books and records to determine the accuracy of
         Landlord's charges under the Lease. If such audit reveals that the
         actual direct expenses for any given year were less than the amount
         that Tenant paid for such expenses and other charges for any such year,
         then Landlord shall pay to Tenant the excess within ten (10) business
         days of the receipt of such audit. If such audit reveals a discrepancy
         of more than five percent (5%) of the actual amount of any expenses and
         other charges, then Landlord shall pay the cost of the audit.

         6.     Security.

         (a)    Security Deposit. The amount of the Security Deposit shall
initially be $300,000.00. Concurrently with the execution of this Lease by
Landlord and Tenant, Tenant shall deposit with Landlord the Security Deposit in
the form of either (i) cash, or (ii) a letter of credit as described in Exhibit
F (the "Letter of Credit"), which Security Deposit shall constitute security for
Tenant's faithful performance of Tenant's obligations hereunder; provided,
however, (x) if the Security Deposit is delivered to Landlord in the form of
cash, and Tenant later replaces the cash Security Deposit with a Letter of
Credit, then the original cash Security Deposit shall be returned to Tenant upon
Landlord's receipt of the Letter of Credit, (y) if the Letter of Credit

                                      12
<PAGE>

described in Exhibit F is at any time converted to cash, then cash shall be
substituted therefor upon release of the Letter of Credit, and (z) if the amount
of the required Security Deposit is achieved by a combination of cash and the
Letter of Credit, then such cash or combination of cash and the Letter of Credit
shall constitute the Security Deposit under this Lease. If there is a default or
breach of this Lease under subparagraph 17(a) of this Lease (which breach or
default occurs under subparagraph 17(a) only after the expiration of any notice
and/or cure period if a notice and/or cure period is applicable), Landlord may
at its option use, apply or retain all or any portion of the Security Deposit
reasonably necessary to (i) remedy Tenant's defaults in the payment of Rent,
additional rent or any other sums payable by Tenant pursuant to the terms
hereof, (ii) repair any damage to the Premises that Tenant is obligated to pay
for hereunder, (iii) clean and otherwise maintain the Premises, or (iv)
compensate Landlord or any other loss or damage which Landlord may suffer
thereby. If Landlord so uses or applies all or any portion of the Security
Deposit, Tenant shall, within ten (10) days after written demand therefor,
deposit cash with Landlord, or increase the undrawn amount of the Letter of
Credit, in an amount sufficient to restore the Security Deposit to the full
amount then required by this paragraph 6 and Exhibit F and Tenant's failure to
do so shall be a breach of and a default under this Lease. If Tenant performs
all of Tenant's obligations hereunder, the Security Deposit, or so much thereof
as has not theretofore been applied by Landlord, shall be returned to Tenant
(or, at Landlord's option, to the last assignee, if any, of Tenant's Interest
hereunder) at the expiration of the Term hereof (and the reimbursement by Tenant
of Reimbursable Expenses) or earlier termination of the Lease pursuant to
paragraphs 13 or 15 below, after Tenant has vacated the Premises.

         (b)    Special Security Deposit Provisions. The provisions of this
subparagraph (b) shall also apply to the Security Deposit. So long as (i) there
is no default or breach of this Lease under subparagraph 17(a) of this Lease in
existence at the time of a Partial Reduction Date specified below (which breach
or default occurs under subparagraph 17(a) only after the expiration of any
notice and/or cure period if a notice and/or cure period is applicable), (ii)
there is also at the time of such Partial Reduction Date in existence no event
or condition in connection with which Tenant is entitled to receive notice and a
reasonable opportunity to cure, Tenant has received such notice and no cure of
such event or condition has been completed, and Tenant's failure to complete
such cure would constitute a default or breach under subparagraph 17(a) of this
Lease, (iii) there have not been two or more defaults under subparagraph 17(a)
in the payment of Rent during the twelve (12) month period immediately prior to
such Partial Reduction Date; and (iv) as of the date which is thirty (30) days
prior to such Partial Reduction Date Tenant has furnished to Landlord financial
statements as hereinafter described which show that Tenant has had positive net
income in each of the immediately preceding four (4) quarterly reported periods,
the undrawn amount of the Letter of Credit may be reduced on such Partial
Reduction Date in accordance with the following schedule; provided, however, the
amount of any reduction which may otherwise be effected on the Partial Reduction
Dates shall be reduced by the amount of any prior drawings by Landlord under the
Letter of Credit which have not been restored by Tenant:

      -------------------------------------------------------------------
      Partial Reduction Date     Amount of Reduction in Letter of
      ----------------------     --------------------------------
                                 Credit which May Occur on Such Date
                                 -----------------------------------
      -------------------------------------------------------------------
      October 1, 2003            1/5 of original amount
      -------------------------------------------------------------------
      October 1, 2004            1/5 of original amount
      -------------------------------------------------------------------

                                      13
<PAGE>

      -------------------------------------------------------------------
      October 1, 2005            1/5 of original amount
      -------------------------------------------------------------------
      October 1, 2006            1/5 of original amount
      -------------------------------------------------------------------
      October 1, 2007            All Remaining
      -------------------------------------------------------------------

The financial statements to be submitted to Landlord shall be prepared in
accordance with generally accepted accounting principles, shall be audited by a
certified public accountant and shall include the complete annual statement for
the fiscal year of the Tenant ending within such four (4) quarter period and
profit and loss statements for the three quarters whose last day does not
coincide with the last day of Tenant's fiscal year; provided, however, the
financial statements for quarterly periods not coinciding with the end of
Tenant's fiscal year may be certified by Tenant's chief financial officer
instead of audited by a certified public accountant.

         (c)    Lien and Security Interest. Landlord shall have no lien or
security interest upon any of Tenant's personal property now or hereafter placed
in or about the Premises ("Tenant's Property") except as specifically set forth
herein. Landlord shall be entitled to a statutory lien and security interest in
Tenant's Property, as provided under Arizona law, to secure payment of all rents
and other sums payable to Landlord hereunder and the payment of any damages or
losses suffered by Landlord by reason of Tenant's default under this Lease.
Notwithstanding anything to the contrary herein, so long as Tenant is not in
default under this Lease, Landlord shall subordinate any such lien or security
interest in Tenant's Property as may be required by any existing or future
lender (which is not an affiliate of Tenant) to Tenant.

         7.     Use.

         (a)    General. The Premises shall be used and occupied only for the
Permitted Uses set forth in paragraph 1 above and for no other purpose.

         (b)    Compliance with Law. Subject to subparagraph 3(i) above, Tenant
shall, at Tenant's sole cost and expense, comply with all present and future
laws, ordinances, orders, declarations of covenants and restrictions, rules,
regulations and requirements of all federal, state and municipal governments,
courts, departments, commissions, boards and officers, and any national or local
Board of Fire Underwriters, or any other body exercising functions similar to
those of any of the foregoing (collectively "Applicable Requirements"), foreseen
or unforeseen, ordinary as well as extraordinary, which arise as a result of
Tenant's particular use of the Premises, whether or not such law, ordinance,
order, rule, regulation or requirement shall necessitate structural changes or
improvements, or the removal of any encroachments or projections, ornamental,
structural or otherwise, onto or over the streets or sidewalks adjacent to the
Premises, or onto or over other property contiguous or adjacent thereto. Except
as set forth above, Landlord shall be responsible for compliance with any and
all Applicable Requirements affecting the Premises which would necessitate
structural changes or improvements, or the removal of any encroachments or
projections, ornamental, structural or otherwise, onto or over the streets or
sidewalks adjacent to the Premises, or onto or over other property contiguous or
adjacent thereto. To the extent any such improvements identified in the
preceding sentence could be treated as a capital improvement under generally
accepted accounting principles, then Tenant shall pay its share of the costs for
such improvements as set forth in subparagraph 8(d)

                                      14
<PAGE>

hereof. Tenant shall not use or permit the use of the Premises in any manner
that will tend to create waste or a nuisance.

         (c)    Existing Title and Condition of Premises. Except as set forth in
subparagraphs 3(i) above and 18(n) below, Tenant hereby accepts the Premises in
their condition existing as of the Commencement Date and also accepts the
Premises and this Lease subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of the
Premises, subject to all covenants, conditions and restrictions affecting the
Property, Project or Premises and subject to all liens, claims and encumbrances
currently existing against the Premises or any part thereof, including all
matters disclosed by any of the foregoing or by any exhibits attached hereto.
Landlord, in accordance with (and except as otherwise provided in) subparagraph
8(b) below, shall be responsible for causing the roof and bearing walls of the
Premises to be in good condition and repair at the Commencement Date and shall
also cause the heating, ventilating and air conditioning system, the plumbing
system and the electrical system to be in operating condition as of the
Commencement Date. All such systems shall be deemed in the condition required at
the Commencement Date unless Tenant gives Landlord written notice of any defects
in such systems on or before ninety (90) days after the Commencement Date.
Except for any representation or warranty which may be specifically set forth in
this Lease, Tenant acknowledges that neither Landlord nor Landlord's agents have
made any representations or warranties as to the Premises, including without
limitation, any representation or warranty as to condition or fitness of the
Building or the suitability of the Building for the conduct of Tenant's
business.

         (d)    Signs. Tenant shall not erect or install on any exterior or
interior window, any exterior door, or any exterior wall any signs, advertising
media, placards, trademarks, drapes, screens, tinting materials, shades, blinds
or similar items, without first securing Landlord's written permission, which
permission shall not be unreasonably withheld or delayed. All signs shall comply
with all applicable governmental requirements, covenants, conditions and
restrictions, shall conform to the design, motif and decor of the Project and
shall be fabricated, installed, maintained, repaired and replaced at Tenant's
expense. Landlord may also establish such sign criteria as Landlord deems
appropriate for the Project (so long as such criteria is reasonable and
non-discriminatorily applied to all tenants of the Project) and Tenant shall
cause all signs which are located on the Premises and are visible from outside
the Premises to conform to such sign criteria. Tenant shall properly maintain
all approved signs. Upon expiration of the Lease, Tenant promptly shall remove
all signs placed in and around the Premises by Tenant and shall repair any
damage to the Premises caused by the removal of such signs.

         (e)    Governmental Regulation. In addition to the general obligation
of Tenant to comply with laws and without limitation thereof, Landlord shall not
be liable to Tenant nor shall this Lease be affected if any parking privileges
appurtenant to or on the Premises or the Building are impaired by reason of any
moratorium, initiative, referendum, statute, regulation, or other governmental
decree or action which could in any manner prevent or limit the parking rights
of Tenant hereunder. Any governmental charges or surcharges or other monetary
obligations imposed relative to parking rights with respect to the Premises or
the Building shall be considered as Property Taxes and shall be payable by
Tenant under the provisions of paragraph 14 hereof.

                                      15
<PAGE>

         8.     Maintenance and Repairs.

         (a)    Tenant's Maintenance. Tenant shall, at Tenant's sole cost and
expense, keep and maintain the Premises in good order and repair, including,
without limitation, the roof, outside wall surfaces (including that if the
Landlord reasonably determines that the Building requires painting during the
initial seven (7) year Term, Tenant shall pay for the cost of painting the
Building; provided, however, that in the event that Tenant does not exercise any
option to extend this Lease, the Landlord shall reimburse the Tenant for half
the cost of painting the Building at the expiration of the initial seven (7)
year Term, foundation and subfloors (to the extent such maintenance or repair is
required as a result of Tenant's activities in the Building), floor coverings,
the electrical, plumbing and HVAC systems, any and all non-structural
alterations and additions made by Landlord or Tenant pursuant to the provisions
hereof, all walks, driveways, parking and loading areas, lawns and landscaping,
fences and signs located in the areas which are adjacent to or included with the
Premises, in all respects in good repair and in a clean and safe condition.
Tenant shall, at Tenant's own expense, immediately replace all interior,
exterior or other glass in or about the Premises that may be broken during the
Term with glass at least equal to the specification and quality of the glass so
replaced. If Tenant fails to perform Tenant's obligations under this
subparagraph, Landlord may at its option enter upon the Premises after ten (10)
days prior written notice to Tenant and put the same in good order, condition
and repair, and the cost thereof together with interest thereon at the rate of
ten percent (10%) per annum, or the maximum legal rate if the rate of ten
percent (10%) per annum is usurious, shall become due and payable as additional
rental to Landlord together with Tenant's next monthly Rent payment. Nothing
herein shall imply any duty upon the part of Landlord to do any such work and
the performance thereof by Landlord shall not constitute a waiver of Tenant's
default in failing to perform the same. Landlord may, during the progress of any
such work in or on the Premises, keep and store therein all necessary materials,
tools, supplies and equipment. Landlord shall not be liable for the
inconvenience, annoyance, disturbance, loss of business or other damage of
Tenant by reason of making such repairs or the performance of any such work, or
on account of bringing materials, tools, supplies or equipment into or through
the Premises during the course thereof, and the obligations of Tenant under this
Lease shall not be affected thereby, except to the extent such inconvenience,
annoyance, disturbance, loss of business or other damage to Tenant results from
the willful misconduct or negligence of Landlord.

        (b)     Service Contracts. Tenant shall, at Tenant's sole expense,
procure and maintain contracts, with copies to Landlord, in customary form and
substance for, and with contractors specializing and experienced in, the
maintenance of the following equipment and improvements, if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler, and pressure
vessels, (iii) fire extinguishing systems, including fire alarm and/or smoke
detection, (iv) landscaping and irrigation systems, (v) roof covering and
drains, (vi) driveways and parking lots, (vii) basic utility feed to the
perimeter of the Building, and (viii) any other equipment, if reasonably
required by Landlord. Notwithstanding anything to the contrary herein, Tenant
may conduct its own maintenance and repair on any of the foregoing items so long
as Tenant provides evidence to Landlord that such maintenance and repair is
being conducted in a manner satisfactory to Landlord, as reasonably determined
by Landlord.

                                      16
<PAGE>

        (c)     Landlord's Obligations to Repair. Landlord shall, at its
expense, after written notice from Tenant, repair in a prompt and diligent
manner any damage to structural portions of the roof and bearing walls of the
Premises and to the foundation and subfloors (except to the extent such
obligation results from Tenant's activities in the Building as provided in
subparagraph 8(a) above), and; provided, however, that if such damage is caused
by an act or omission of Tenant or Tenant's agents, invitees, employees or
contractors, then, subject to subparagraph 11(d) hereof, such repairs shall be
at Tenant's expense, payable to Landlord immediately upon Landlord invoicing
Tenant therefor. There shall be no abatement of Rent during the performance of
such work except to the extent of any material interference with Tenant's use of
the Premises as a result of Landlord's willful misconduct or negligence, and
only to the extent of rental loss insurance proceeds received by Landlord.
Except as otherwise set forth in this Lease, Landlord shall not be liable to
Tenant for injury or damage that may result from any defect in the construction
or conditions of the Premises and Tenant shall seek recovery for such injury or
damage solely from Tenant's insurance and/or any other persons or entities which
may be liable to Tenant. Tenant waives any right to make repairs at the expense
of Landlord under any law, statute or ordinance now or hereafter in effect
unless Tenant has given Landlord written notice of the need for such repairs,
such repairs are the obligation of Landlord under this Lease and Landlord has
failed, within ten (10) days following receipt of such notice to make the needed
repairs or, in the event such repairs cannot be completed within such ten (10)
day period, Landlord has not begun such repairs within the ten (10) day period
and is not diligently prosecuting such repairs to completion (or in the event
Tenant's ability to operate its business in the Premises is materially affected
by such failure, if Landlord has not begun such repairs within two (2) days
following Landlord's receipt of Tenant's notice and Landlord is not diligently
prosecuting such repairs to completion). The foregoing shall not give Tenant to
right to deduct amounts from Rent, except as set forth in subparagraph 17(e) of
this Lease.

        (d)     Payment for Capital Expenditures. If any of Tenant's obligations
under subparagraphs 7(b) and 8(a) of this Lease would require Tenant to pay all
or any portion of any charge which could be treated as a capital improvement
under generally accepted accounting principles, then Tenant shall pay its share
of such expense as follows:

                (i)    The cost of such improvement shall be amortized over the
        useful life of the improvement (as reasonably determined by Landlord)
        with interest on the unamortized balance at the prime rate (as
        determined by Bank One of Arizona) plus three percent (3%), and Landlord
        shall inform Tenant of the monthly amortization payment required to so
        amortize such costs, and shall also provide Tenant with the information
        upon which such determination is made.

                (ii)   Tenant shall pay its proportionate share (based on the
        percentage of the Building or Project leased by Tenant, or other
        equitable basis) of such amortization payment for each month after such
        improvement is completed until the first to occur of (i) the expiration
        of the Lease term or (ii) the end of the term over which such costs were
        amortized, which amount shall be due at the same time the base monthly
        rent is due.

        (e)     Surrender. On the last day of the Term, or on any earlier
termination of this Lease, Tenant, except as hereinafter specifically provided
in this subparagraph (e), shall remove all of its personal property, including
movable furniture, trade fixtures and equipment not

                                      17
<PAGE>

permanently attached to the Premises and surrender the Premises to Landlord in
the same condition as when received, broom clean, ordinary wear and tear,
casualty and condemnation excepted. Subject to Tenant's right to remove
improvements and alterations to the Premises as provided in paragraph 10 below,
all improvements and alterations to the Premises, whether such were made by the
Landlord pursuant to the provisions of paragraph 3 above or by the Tenant as
allowed by paragraph 10 below, whether temporary or permanent in character,
shall be the Landlord's property on termination of this Lease and shall be
surrendered to Landlord in good condition and repair, ordinary wear and tear,
casualty and condemnation excepted, upon expiration of the Term or other
termination of this Lease, all without compensation to Tenant; provided,
however, if, except as otherwise provided in subparagraph 3(k) above, Landlord
has retained the option under subparagraphs 10(a) or 3(e) to require Tenant to
remove any such alterations or improvements, Tenant shall remove such upon
written notice given by Landlord to Tenant not later than sixty (60) days prior
to the expiration date of the Term or within fifteen (15) days after any earlier
termination of this Lease. Tenant shall repair in a workmanlike manner all
damage to the Premises occasioned by the Tenant's removal of alterations,
improvements and personal property (including, without limitation, its trade
fixtures, furnishings and equipment), which repair shall include, without
limitation, the patching and filling of holes and repair of structural damage to
the Premises. Notwithstanding the provisions of this subparagraph (e), in the
event Tenant is in default of this Lease as defined in paragraph 17 below, at
the end of the Term or on any earlier termination of this Lease, all personal
property of Tenant shall remain at the Premises so as to enable Landlord to
enforce its statutory lien interests set forth in subparagraph 6(c) hereof.

        9.      Utilities. Tenant shall pay for water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises, together
with any taxes thereon. If any such services are not separately metered to
Tenant, Tenant shall pay a reasonable proportion to be determined by Landlord of
all charges jointly metered with other premises. Landlord reserves the right to
grant easements on the Premises, and to dedicate for public use portions
thereof, without Tenant's consent provided that no such grant or dedication
shall interfere with Tenant's use of the Premises, materially decrease Tenant's
rights or increase Tenant's obligations, or otherwise cause Tenant to incur cost
or expense. From time to time upon Landlord's demand, Tenant shall execute,
acknowledge and deliver to Landlord, in accordance with Landlord's instructions,
any and all documents or instruments necessary to effect Tenant's covenants
herein.

        10.     Alterations and Additions.

        (a)     Limitation. Tenant shall not, without Landlord's prior written
consent, make any alterations, improvements, additions, or utility installations
(which term "utility installations" shall include ducting, power panels,
fluorescent fixtures, space heaters, conduits and wiring) in, on or about the
Premises, except for interior nonstructural alterations to the Premises costing
less than Twenty-Five Thousand Dollars ($25,000) per event of improvement. As a
condition to and at the time of giving such consent, Landlord may require that
Tenant agree to (i) remove any such alterations, improvements, additions or
utility installations at the expiration of the Term and restore the Premises to
their prior condition or, in the alternative, (ii) require that such
alterations, improvements, additions or utility installations shall become the
property of Landlord and shall be left by Tenant upon the expiration of the
Term. As a further condition to giving such consent, Landlord may require Tenant
to provide Landlord, at Tenant's sole cost and expense,

                                      18
<PAGE>

lien and completion bonds in an amount equal to one hundred fifty percent (150%)
of the estimated cost of such improvements to insure Landlord against any
liability for mechanics' and materialmen's liens and to insure completion of the
work.

        (b)     Liens. Tenant shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Tenant at or for
use on or in connection with the Premises, which claims are or may be secured by
any mechanics' or materialmen's lien against the Premises or any interest
therein. Tenant shall give Landlord not less than ten (10) days notice prior to
the commencement of any work on the Premises, and Landlord shall have the right
to post notices of non-responsibility in or on the Premises as provided by law.

        (c)     Removal. Unless Landlord requires their removal as set forth in
subparagraph (a) above or otherwise consents to such removal, all alterations,
improvements, additions and utility installations which may be made on or to the
Premises shall become the property of Landlord and remain upon and be
surrendered with the Premises at the expiration of the Term. Notwithstanding the
provisions of this subparagraph (c), Tenant's machinery and equipment, other
than that which is affixed to the Premises so that it cannot be removed without
material damage to the Premises, shall remain the property of Tenant and may be
removed by Tenant subject to the provisions of subparagraphs 6(c) and 8(c)
above.

        11.     Insurance.

        (a)     Liability. Tenant at its sole cost and expense shall obtain and
keep in full force a policy of commercial general liability and property damage
insurance (including but not limited to personal injury, broad form contractual
liability, owner's (i.e., Tenant's) contractors protective and broad form
property damage) on an "occurrence basis" under which Tenant is named as the
insured and Landlord, Landlord's agent and any lessors and mortgagees (whose
names shall have been furnished to Tenant) are named as additional insureds. The
minimum limits of liability shall be a combined single limit with respect to
each occurrence of not less than Two Million Dollars ($2,000,000). The limits of
said insurance shall not, however, in any way limit the liability of Tenant
under this Lease. The policy shall contain a cross liability endorsement and
shall be primary coverage for Tenant and Landlord for any liability arising out
of Tenant's and Tenant's employees', agents' and contractors' use, occupancy or
maintenance of the Premises and all areas appurtenant thereto and any bodily
injury, death or property damage occurring upon, in or about the Premises, the
adjoining sidewalks, streets and passage ways and all other areas appurtenant
thereto. Tenant shall also obtain and keep in force automobile liability,
including bodily injury and property damage, with minimum limits of liability of
a combined single limit with respect to each occurrence of not less than Two
Million Dollars ($2,000,000.00). Such insurance policies shall provide that they
are primary insurance and not "excess over" or contributory. Not more frequently
than once each year, if, in the opinion of Landlord's lender or of the insurance
consultant retained by Landlord, the amount of public liability and property
damage insurance coverage at that time is not adequate, Tenant shall increase
the insurance coverage as required by either Landlord's lender or Landlord's
insurance consultant; provided however, that in no event shall any such
insurance coverage be increased in excess of that which is from time to time
being required by comparable landlords of comparable tenants leasing comparable
amounts of space in other comparable buildings in the vicinity of the Premises.
In addition, Landlord may, at its option and at commercially reasonable rates,
maintain commercial

                                      19
<PAGE>

general liability insurance and umbrella liability insurance which provides
coverage with respect to the Premises. Tenant shall pay to Landlord an amount
equal to the premiums for such insurance carried by Landlord as a Reimbursable
Expense pursuant to paragraph 5 above, with appropriate proration at the
beginning and end of the Term.

        (b)     Property.

                (i)    Unless otherwise provided in subparagraph 11(b)(ii)
        below, Tenant at its sole cost and expense, shall keep the Improvements
        insured during the Term for the mutual benefit of Landlord and Tenant as
        named insureds, against loss or damage by fire and lightning and against
        loss or damage by other risks embraced by coverage of the type now known
        as Causes of Loss - Special Form coverage, including but not limited to
        fire, riot and civil commotion, vandalism and malicious mischief,
        special extended perils (all risk) and sprinkler leakage, and against
        such other risks or hazards, including, without limitation, earthquake
        coverage, as Landlord may from time to time reasonably designate, in
        amounts sufficient to prevent Landlord or Tenant from becoming a co-
        insurer under the terms of the applicable policies, but in any event in
        an amount not less than the full replacement cost of the Improvements,
        without deduction for physical depreciation, and with not more than One
        Thousand Dollars ($1,000) deductible from the loss payable for any
        casualty. The policies of insurance carried in accordance with this
        paragraph shall contain a "Replacement Cost Endorsement." Such full
        replacement cost shall be determined from time to time, but not more
        frequently than once in any twelve (12) consecutive calendar months
        (except in the event of substantial changes or alterations to the
        Improvements undertaken by Tenant as permitted hereunder) upon the
        written request of Landlord by an appraiser, architect or contractor who
        shall be mutually and reasonably acceptable to Landlord and Tenant. A
        copy of any such determination shall promptly be sent to Landlord, and
        subject to the approval of such determination by Landlord, the insurance
        maintained in this paragraph shall be adjusted to the new full
        replacement cost. Said insurance shall provide for payment for loss
        thereunder to Landlord or, at Landlord's request, to the holder of any
        mortgage or deed of trust on the Premises.

                (ii)   In lieu of Tenant providing the insurance described in
        subparagraph 11(b)(i) above, Landlord may, by notice to Tenant, from
        time to time elect to provide the insurance described in this
        subparagraph 11(b)(ii); provided, however, execution of this Lease by
        Landlord shall constitute notice that Landlord will provide the
        insurance under this subparagraph 11(b)(ii) until Landlord gives written
        notice to Tenant that Tenant will thereafter be required to provide the
        insurance described in subparagraph 11(b)(i) above. During any period
        that Tenant actually carries insurance under subparagraph 11(b)(i)
        above, Tenant shall not be obligated to reimburse Landlord for insurance
        obtained by Landlord under this subparagraph 11(b)(ii). The insurance
        which Landlord may procure with respect to the Premises under this
        subparagraph 11(b)(ii) shall be a policy or policies of property
        insurance with special form coverage endorsement attached, and any other
        endorsements (such as earthquake coverage) which Landlord may elect to
        obtain or which may be required by the holder of any fee or leasehold
        mortgage, which insurance coverage may be in an amount up to one hundred
        percent (100%) of the full insurance replacement value (replacement cost
        new, including debris removal and demolition) thereof. Landlord may
        further obtain rental abatement insurance against abatement or

                                      20
<PAGE>

        loss of Rent in case of fire or other casualty in an amount at least
        equal to the amount of the Rent payable by Tenant during one (1) year
        next ensuing as reasonably determined by Landlord. The premiums for the
        insurance carried by Landlord pursuant to this subparagraph 11(b)(ii)
        shall be a Reimbursable Expense for which Tenant shall reimburse
        Landlord in accordance with the provisions of subparagraph 5(e) above,
        with appropriate proration at the beginning and end of the Term.

        (c)     Policies. Insurance required hereunder shall be by companies
rated A/X or better in "Best's Insurance Guide" licensed to do business in the
state in which the Premises are located and acceptable to Landlord and the
holder of any mortgage or deed of trust on the Premises or any part or portion
thereof. Tenant shall deliver to Landlord copies of policies of such insurance
or certificates evidencing the existence and amounts of such insurance with loss
payable clauses satisfactory to Landlord. No such policy shall be cancelable or
subject to reduction of coverage or other modification except after thirty (30)
days written notice to Landlord. Tenant shall, within ten (10) days prior to the
expiration of such policies, furnish Landlord with renewals or "binders"
thereof, or Landlord may order such insurance and charge the cost thereof to
Tenant, which amount shall be payable by Tenant upon demand. Each such policy or
certificate therefor issued by the insurer shall to the extent obtainable
contain (i) a provision that no act or omission of Tenant which would otherwise
result in forfeiture or reduction of the insurance therein provided shall affect
or limit the obligation of the insurance company to pay the amount of any loss
sustained and (ii) an agreement by the insurer that such policy shall not be
canceled without at least thirty (30) days prior written notice by registered
mail to Landlord. Tenant shall not do or permit to be done anything which shall
invalidate the insurance policies referred to herein. If Tenant shall fail to
procure and maintain any insurance required to be maintained by it by virtue of
any provision of this paragraph, Landlord may, after five (5) days advance
written notice to Tenant, but shall not be required to, procure and maintain the
same, but at the expense of Tenant (provided however that in the event the
insurance would lapse within such five (5) day period, Landlord may procure and
maintain the insurance within such shorter period of time as may be necessary to
prevent a lapse).

        (d)     Waiver of Subrogation. Notwithstanding anything to the contrary
contained herein, Landlord and Tenant each hereby waive any and all rights of
recovery against the other, or against the partners, officers, employees, agents
and representatives of the other, for loss of or damage to such waiving party or
its property or the property of the other under its control to the extent that
such loss or damage is insured against under any insurance policy in force at
the time of such loss or damage, is required to be insured against under this
Lease, or would normally be covered by all risk property insurance, without
regard to the negligence or willful misconduct of the entity so released. Tenant
shall, upon obtaining the policies of insurance required hereunder, give notice
to the insurance carrier or carriers that the foregoing mutual waiver of right
to recovery by way of subrogation is contained in this Lease.

        (e)     Tenant's Contents. Tenant shall assume the risk of damage to any
fixtures, goods, inventory, merchandise, equipment, furniture and leasehold
improvements which remain the property of Tenant or as to which Tenant retains
the right of removal from the Premises, and Landlord shall not be liable for
injury to Tenant's business or any loss of income therefrom relative to such
damage, except to the extent of a deductible not to exceed $100,000.00 if such

                                      21
<PAGE>

damage is caused by the negligence or willful misconduct of Landlord. Tenant
shall maintain the following insurance coverage with respect to such items
during the Term:

                (i)    Against fire, extended coverage, and vandalism and
        malicious mischief perils in an amount not less than ninety percent
        (90%) of the full replacement cost thereof;

                (ii)   Broad form boiler and machinery insurance on a blanket
        repair and replacement basis with limits per accident not less than the
        replacement cost of all leasehold improvements and of all boilers,
        pressure vessels, air conditioning equipment, miscellaneous electrical
        apparatus and all other insurable objects owned or operated by the
        Tenant or by others (other than Landlord) on behalf of Tenant in the
        Premises, or relating to or serving the Premises; and;

                (iii)  Business interruption insurance in such an amount as will
        reimburse Tenant for direct or indirect loss of earnings attributable to
        all such perils insured against in subparagraphs 11(e)(i) and (ii)
        hereinabove.

        (f)     Workmen's Compensation. Tenant shall, at its own cost and
expense, keep and maintain in full force and effect during the Term, a policy or
policies of workmen's compensation insurance covering all Tenant's employees
working in the Premises, and shall furnish Landlord with certificates thereof.

        (g)     Rental Income Insurance. Tenant shall obtain and keep in force
during the term of this Lease a policy of rental income insurance in an amount
adequate to cover Fixed Rent, Adjustments and Reimbursable Expenses for a period
of twelve (12) months, with loss payable to Landlord, which insurance shall also
cover all real estate taxes and insurance costs for which Tenant is obligated
hereunder during such twelve (12) month period.

        12.     Indemnity; Exemption of Landlord from Liability.

        (a)     General. In addition to any other obligations of Tenant
hereunder, including the obligations of Tenant to provide insurance, Tenant
shall indemnify and hold Landlord harmless for, from and against any and all
claims arising from Tenant's use of the Premises, or from the conduct of
Tenant's business or from any activity, work or things done, permitted or
suffered by Tenant in or about the Premises or elsewhere and shall further
indemnify and hold Landlord harmless for, from and against any and all claims
arising from any breach or default in the performance of any obligation on
Tenant's part to be performed under the terms of this Lease, or arising from any
negligence of Tenant, or any of Tenant's agents, contractors, or employees, and
for, from and against all costs, attorneys' fees, expenses and liabilities
incurred in the defense of any such claim or any action or proceeding brought
thereon; and in case any action or proceeding be brought against Landlord by
reason of any such claim, Tenant upon notice from Landlord shall defend the same
at Tenant's expense by counsel satisfactory to Landlord; provided, however, the
foregoing indemnity shall not apply to claims made as a result of the negligence
or intentional misconduct of Landlord. Except where caused by the negligence or
intentional misconduct of Landlord, Tenant, as a material part of the
consideration to Landlord for Landlord's execution of this Lease, also hereby
assumes all risk of damage to property or injury

                                      22
<PAGE>

to persons in, upon or about the Premises; hereby waives all claims in respect
thereof against Landlord (except where Landlord is at fault or negligent); and
agrees that all claims with respect thereto shall be made solely against any
insurance carried by Tenant and/or against any other persons or entities which
may be liable for such claims (except where Landlord is at fault or negligent).

         (b)    Tenant's Business. In addition to any other obligation of
Tenant hereunder, including any obligation of Tenant to provide insurance,
Tenant hereby agrees that, except where such injury or damage is caused by the
negligence of intentional misconduct of Landlord (in which case the Landlord's
liability shall be limited to the owner of the Premises' ownership interest in
the Premises), Landlord shall not be liable for injury to Tenant's business or
any loss of income therefrom or for damage to the goods, wares, merchandise or
other property of Tenant, Tenant's employees, invitees, customers, or any other
person in or about the Premises, nor shall Landlord be liable for injury to the
person of Tenant or Tenant's employees, agents or contractors, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause whatsoever, resulting from conditions arising
upon the Premises, or from other sources or places, and regardless of whether
the cause of such damage or injury or the means of repairing the same is
inaccessible to Tenant. Instead, Tenant shall seek recovery for any such injury,
loss or damage solely from any insurance carried by Tenant and/or from any other
persons or entities which may be liable to Tenant for such injury, loss or
damage (except where Landlord is at fault or negligent).

         (c)    Landlord's Indemnity. Landlord shall indemnify and hold Tenant
harmless for, from and against any and all claims arising from any breach or
default of Landlord under this Lease or in the performance of any obligation on
Landlord's part to be performed under the terms of this Lease, or arising from
any negligence of Landlord, or any of Landlord's agents, contractors, or
employees, and for, from and against all costs, attorneys' fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon; and in case any action or proceeding be brought
against Tenant by reason of any such claim, Landlord upon notice from Tenant
shall defend the same at Landlord's expense by counsel satisfactory to Tenant;
provided, however, the foregoing indemnity shall not apply to claims made as a
result of the negligence or intentional misconduct of Tenant.

         13.    Damage or Destruction; Obligation to Rebuild.

         (a)    Landlord's Obligation to Rebuild. If the Premises are damaged or
destroyed during the Term, Landlord shall, except as hereinafter provided,
diligently repair or rebuild them to substantially the condition in which they
existed immediately prior to such damage or destruction; provided that any
damage which is estimated in good faith by Landlord to be under Two Thousand
Five Hundred Dollars ($2,500.00) shall be repaired by Tenant, and Landlord shall
reimburse Tenant upon demand for expenses incurred in such repair work to the
extent of any proceeds received by Landlord from extended coverage insurance
maintained pursuant to paragraph 11 above.

                                      23
<PAGE>

         (b)    Abatement of Rent. Rent due and payable hereunder shall be
abated equitably, but only to the extent of any proceeds received by Landlord
from rental income insurance maintained pursuant to paragraph 11 above, during
the period commencing with such damage or destruction and ending with a
substantial completion by Landlord of the work of repair or reconstruction which
Landlord is obligated or undertakes to do.

         (c)    Option to Terminate. If the Improvements are damaged or
destroyed to the extent that Landlord determines that the same cannot, with
reasonable diligence, be fully repaired or restored by Landlord within one
hundred eighty (180) days after the date of the damage or destruction, the sole
right of both Landlord and Tenant shall be the option to terminate this Lease as
hereinafter provided; provided, however, neither Landlord nor Tenant shall have
the right to terminate this Lease unless Landlord reasonably determines that the
Premises cannot be so repaired or restored within such one hundred eighty (180)
day period of time. Landlord shall notify Tenant of its determination, in
writing, within thirty (30) days after the date of the damage or destruction. If
Landlord reasonably determines that the Building, including the Premises, can be
fully repaired or restored within the one hundred eighty (180) day period, or if
it is determined that such repair or restoration cannot be made within said
period but no party having the right to do so elects to terminate within thirty
(30) days from the date of said determination, this Lease shall remain in full
force and effect and Landlord shall diligently repair and restore the damage as
soon as reasonably possible.

         (d)    Uninsured Casualties. Notwithstanding anything contained herein
to the contrary, in the event of damage to or destruction of all or any portion
of the Improvements which is not covered by insurance and, in Landlord's
reasonable determination, would cost more than $100,000.00 to repair, replace or
restore, Landlord may terminate this Lease by written notice to Tenant, given
within thirty (30) days after the date of notice to Landlord that said damage or
destruction is not so covered or that the proceeds are not available for repair
of the damage or destruction. If Landlord does not elect to terminate this
Lease, the Lease shall remain in full force and effect and the Improvements
shall be repaired and rebuilt in accordance with the provisions for repair set
forth in subparagraph 13(a) above.

         (e)    Damage Near End of Term. If the Improvements are partially
destroyed or damaged during the last twelve (12) months of the Term, Landlord
may, at Landlord's option, cancel and terminate this Lease as of the date of
occurrence of such damage by giving written notice to Tenant of Landlord's
election to do so within thirty (30) days after the date of occurrence of such
damage.

         (f)    Tenant's Waiver. With respect to any destruction which Landlord
is obligated to repair or may elect to repair under the terms of this paragraph,
Tenant hereby waives all right to terminate this Lease pursuant to rights
otherwise presently or hereafter accorded by the provisions of Arizona Revised
Statutes Section 33-343 or other applicable laws to tenants, except as expressly
otherwise provided herein.

         14.    Taxes and Assessments.

         (a)    Payment. Tenant shall pay all Property Taxes (as defined below)
applicable to the Premises during the Term. Each payment shall be made at least
ten (10) days prior to the

                                      24
<PAGE>

delinquency date of such payment; provided, however, that upon not less than
twenty (20) days prior notice to Tenant, Landlord may require Tenant to pay into
an impound account one-twelfth (1/12) of Landlord's estimate of annual sums due
as Property Taxes, and Tenant shall thereafter pay such sums to Landlord in
satisfaction of Tenant's obligations to pay such sums due as Property Taxes as
additional rent and without deduction or offset on or before the first day of
each and every month during which said sums are required to be impounded. Tenant
shall promptly furnish Landlord with evidence satisfactory to Landlord that
Property Taxes have been paid. If any Property Taxes due with respect to the
Premises shall cover any period of time prior to or after the expiration of the
Term, Tenant's share of such Property Taxes shall be equitably prorated to cover
only the period of time within the tax fiscal year during which this Lease shall
be in effect. If Tenant shall fail to pay any Property Taxes, Landlord shall
have the right, but not the obligation, to pay the same, in which case Tenant
shall repay such amount to Landlord with Tenant's next Rent installment. In the
event Property Taxes include an assessment for which the Landlord has the option
of paying such assessment in installments, Landlord shall pay such assessment
over the longest permitted time period and Tenant shall only pay those portions
of the assessment that become due and owing during the Term.

         (b)    Definition. As used herein, the term "Property Taxes" shall
include any form of general or special assessment, license fee, levy penalty, or
tax (other than inheritance or estate taxes) imposed by any authority having the
direct or indirect power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other improvement
district, or any part or parts thereof, or against any legal or equitable
interest of Landlord in the Premises or any part thereof or against Landlord's
right to rent (but exclusive of taxes levied on or computed by reference to
Landlord's net income, inheritance or gift or estate taxes).

         (c)    Separate Assessment. If the Premises are not separately
assessed, Tenant's liability shall be an equitable portion of the Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such portion to be determined by Landlord from the respective valuations
assigned in the assessor's work sheet or such other information as may be
reasonably available. Landlord's reasonable determination thereof, in good
faith, shall be conclusive.

         (d)    Personal Property. Tenant shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property contained on the Premises or elsewhere and upon
any alterations or additions made pursuant to paragraph 10 above. Tenant shall
cause such trade fixtures, furnishings, equipment, alterations, additions and
all other personal property to be assessed and billed separately from the
Premises; provided, however, that in the event they are not so separately
assessed and billed to Tenant, but rather are billed to Landlord, Tenant shall
reimburse Landlord the amount so billed on account thereof within ten (10) days
after Landlord bills Tenant therefor.

         (e)    Rent Tax. Tenant shall pay to Landlord a sum equal to the
amount which Landlord is required to pay or collect by reason of any privilege
tax, sales tax, gross proceeds tax, rent tax, or like tax levied, assessed or
imposed by any governmental authority or subdivision thereof, upon or measured
by any Rent, Reimbursable Expense, or other charges or sums required to be paid
or improvements to be made by Tenant under this Lease. Such sum

                                      25
<PAGE>

shall be paid simultaneously with the payment by Tenant to Landlord of the Fixed
Rent or other charge to which such tax is attributable or, in the case of a tax
not attributable to Fixed Rent or other charges, at such time as Landlord shall
demand payment thereof. Nothing contained in this Lease shall require Tenant to
pay any franchise, corporate, estate, inheritance, succession, or transfer tax
of Landlord or any tax upon the net income of Landlord.

         (f)    Declaration. As between the parties hereto, Tenant alone shall
have the duty of attending to, making or filing any declaration, statement or
report which may be provided or required by law as the basis of or in connection
with the determination, equalization, reduction or payment of any Property Taxes
which are to be borne or paid or which may become payable by Tenant under the
provisions of this paragraph and Landlord shall not be or become responsible to
Tenant therefor, nor for the contents of any such declaration, statement or
report.

         (g)    Project Assessments. Tenant shall pay to Landlord or the
owner or manager of the Project, as Landlord may direct, prior to delinquency
any and all reasonable charges, assessments, fees or other costs of any type
which are due and payable by Landlord or other occupant of the Premises as a
result of the inclusion of the Premises in the Project, including but not
limited to those payable under any covenants, conditions, restrictions or
declarations affecting the Premises.

         (h)    Property Tax Challenges. Tenant shall have the right, by
appropriate proceedings, to protest or contest any assessment, reassessment or
allocation of Property Taxes or any change therein or any application of any
Applicable Requirements to the Premises or Tenant's use thereof. Landlord shall
notify Tenant in writing of any material change in Property Taxes within
sufficient time to allow Tenant to review and, if it so desires, to contest or
protest such change. In the contest or proceedings, Tenant may act in its own
name and Landlord will, at Tenant's request and expense, cooperate with Tenant
in connection with such contest. In the event that any such Property Taxes may
be challenged only by Landlord, Landlord will, at Tenant's request and expense,
reasonably cooperate with Tenant in considering a contest to such Property
Taxes. With respect to any contesting of property taxes or Laws, Tenant shall
hold Landlord and the Premises harmless from and shall indemnify Landlord from
any damage arising out of such protest or contest and shall pay any judgment
that may be rendered for which Tenant would otherwise be liable under this Lease
without such contest or protest. Any contest conducted by Tenant under this
paragraph shall be at Tenant's expense and if interest or late charges become
payable as a result of such contest or protest, then Tenant shall pay the same.

         15.    Condemnation.

         (a)    Rent Reduction or Lease Termination. If the Premises or any
portion thereof is taken under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs
(the "Condemnation Date") and the Rent shall be reduced (as of the Condemnation
Date) as provided below. If (i) more than ten percent (10%) of the floor area of
any building comprising the Improvements or more than twenty-five percent (25%)
of the land area of the Property which is not occupied by any such building is
taken by condemnation, and (ii) as a result of such taking by condemnation the
balance of the Premises remaining after such condemnation is not

                                      26
<PAGE>

reasonably suitable for the use to which the Premises were being put immediately
prior to the condemnation, Landlord or Tenant may, at either's option, to be
exercised in writing only within ten (10) days after Landlord shall have given
Tenant written notice of such taking (or in the absence of such notice, within
ten (10) days of the Condemnation Date) terminate this Lease as of the
Condemnation Date. If neither Landlord nor Tenant terminates this Lease in
accordance with the foregoing, or in the event that that portion of the Premises
taken by condemnation is not sufficiently large so as to give rise to the right
to terminate this Lease as above provided, this Lease shall remain in full force
and effect as to the portion of the Premises remaining, except that the Fixed
Rent shall be reduced (as of the Condemnation Date) in the proportion that the
area taken by condemnation bears to the total area of the Premises.
Notwithstanding the provisions of the preceding sentence, in the event the
portion of the Premises so taken consists of land only and does not exceed ten
percent (10%) of the total land area of the Property then Tenant shall not be
entitled to any reduction of Fixed Rent as provided in the preceding sentence.

         (b)    Award. Any award for the taking of all or any part of the
Premises under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Landlord, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Tenant
shall be entitled to any award specifically attributed by the condemning
authority to loss or damage to Tenant's trade fixtures and removable personal
property or to Tenant's relocation costs. In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall, to the extent of
severance damages received by Landlord in connection with such condemnation and
not paid to or retained by the holder of any mortgage or deed of trust on the
Property or the Premises, repair any damage to the Premises caused by such
condemnation except to the extent that Tenant has been reimbursed therefor by
the condemning authority (in which event such reimbursement to Tenant shall also
be applied to such repair). Tenant shall pay any amount in excess of such
severance damages required to complete such repair; provided, however, if the
severance damages are not sufficient to pay all of the repair costs and if any
specific item of repair work shall be expected to have a useful life which
extends beyond the term of this Lease (including the term of any options which
Tenant may have the right to exercise), then Tenant shall be obligated to pay
with respect to the identifiable cost of such item of repair only the portion of
the total cost of such item of repair which bears the same ratio to the total
cost of such item of repair as the remaining term of this Lease (as determined
on the Condemnation Date and including the term of any options which the Tenant
may have the right to exercise) bears to the reasonably anticipated useful life
of such item of repair.

        (c)     Temporary Condemnation. If the temporary use of the whole or any
part of the Premises shall be taken by condemnation, the Term shall not be
reduced or affected in any way, and Tenant in such event shall continue to pay
in full the Rent and other charges herein reserved, without reduction or
abatement, and, except to the extent that Tenant is prevented from so doing by
reason of any order of the condemning authority, shall continue to perform and
observe all of the other covenants, conditions and agreements of this Lease to
be performed or observed by Tenant as though such taking had not occurred. In
the event of any such temporary condemnation Tenant shall, so long as it is
otherwise in compliance with the provisions of this Lease, be entitled to
receive for itself any and all awards or payments made for such use of that
portion of the Premises so taken; provided, however, that Tenant shall repair
any and all

                                      27
<PAGE>

damages to the Premises (whether or not covered by any award to Tenant) caused
by such temporary condemnation.

        16.     Assignment and Subletting.

        (a)     Consent. Tenant shall not voluntarily or by operation of law
assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any
part of Tenant's interest in this Lease or in the Premises without Landlord's
prior written consent, which consent Landlord shall not unreasonably withhold.
Landlord may, however, withhold its consent to such assignment, transfer,
mortgage, subletting or other transfer or encumbrance pursuant to the preceding
sentence for substantive reasons including, without limitation, those set forth
in subparagraph 16(f) below. Any attempted assignment, transfer, mortgage,
subletting or encumbrance without such consent shall be void and shall
constitute a breach of this Lease. The consent of Landlord to any one
assignment, transfer, mortgage, subletting, or encumbrance shall not be deemed
to be a consent to any subsequent assignment, transfer, mortgage, subletting, or
encumbrance.

        (b)     Tenant's Continuing Liability. Regardless of Landlord's consent,
no subletting or assignment shall alter the primary liability of Tenant to pay
the Rent or release Tenant of Tenant's obligation to perform all other
obligations to be performed by Tenant hereunder unless Landlord's written
consent shall so specifically provide, and Landlord under no circumstances shall
be obligated to release Tenant from any such liability. The acceptance of rent
by Landlord from any other person shall not be deemed to be a waiver by Landlord
of any provision hereof.

        (c)     Information. In connection with any proposed assignment or
sublease, Tenant shall submit to Landlord in writing:

                (i)    The name and address of the proposed assignee or
        sublessee;

                (ii)   Such information as to the financial responsibility and
        standing of said assignee or sublessee as Landlord may reasonably
        require;

                (iii)  The type of use proposed for the Premises; and

                (iv)   All of the terms and conditions upon which the proposed
        assignment or subletting is to be made.

        (d)     Acceptance of Performance. Landlord may accept Rent or
performance of Tenant's obligations from any person other than Tenant pending
approval or disapproval of an assignment. Neither a delay in the approval or
disapproval of such assignment nor the acceptance of Rent or of performance
shall constitute a waiver or estoppel of Landlord's right to exercise its
remedies for Tenant's default.

        (e)     Landlord's Recapture Rights. At any time prior to ten (10)
business days after Landlord's receipt of all (but not less than all) of the
information and documents described in subparagraph 16(c) above, Landlord may,
at its option by written notice to Tenant, elect to: (a) sublease the Premises
or the portion thereof proposed to be sublet by Tenant upon the same terms as
those offered to the proposed subtenant; (b) take an assignment of the Lease
upon the same terms as those offered to the proposed assignee; or (c) in the
event that any portion of the

                                      28
<PAGE>

Premises is proposed to be subleased or assigned for the remainder of the Term,
terminate the Lease as to the portion of the Premises proposed to be assigned or
sublet, with a proportionate adjustment in the Rent payable hereunder if the
Lease is terminated as to less than all of the Premises. If Landlord does not
exercise any of the options described in the preceding sentence, then, during
the ten (10) business day period after Landlord's receipt of all of the
information and documents described in subparagraph 16(c), Landlord shall either
consent or deny its consent to the proposed assignment or subletting. Failure to
deny consent during such ten (10) day period shall be deemed consent.

        (f)     Standards. Landlord's consent to a proposed assignment or
subletting shall be deemed reasonably withheld if, in Landlord's good faith and
reasonably exercised judgment: (i) the proposed assignee or subtenant, in
conjunction with the financial responsibility of Tenant hereunder, does not have
the financial strength to perform its obligations under this Lease or any
proposed sublease; (ii) the proposed assignee or sublessee intends to use any
part of the Premises for a purpose not permitted under this Lease; (iii) the
proposed assignee or sublessee is disreputable; (iv) either the proposed
assignee or sublessee, or any person which directly or indirectly controls, is
controlled by, or is under common control with the proposed assignee or
sublessee, occupies space in the Building or the Project which is owned or
managed by Hewson Properties, Inc. or The Guardian Life Insurance Company of
America (collectively "Hewson") or an entity controlled by Hewson, or is
negotiating with Landlord to lease space in the Building or the Project which is
owned or managed by Hewson or an entity controlled by Hewson; (v) the use of the
Premises or the Building by the proposed assignee or sublessee would, in
Landlord's reasonable judgment, require material alterations to the Building to
comply with applicable laws or which would impact the Building in a material and
adverse manner; (vi) the proposed assignee or sublessee is a government (or
agency or instrumentality thereof); or (vii) Tenant has failed to cure a default
at the time Tenant requests consent to the proposed assignment or subletting.

        (g)     Excess Sublease Rental. If for any sublease or assignment,
Tenant receives rent or other consideration in lieu of rent either initially, or
over the Term of the sublease or assignment in excess of the Fixed Rent,
Adjustments and additional rent called for hereunder (or, in the case of the
sublease or assignment of a portion of the Premises, in excess of such Fixed
Rent, Adjustments and additional rent fairly allocable to such portion),
excluding from such excess, without limitation, any consideration paid for
Tenant's stock, assets or business in any transaction contemplated in
subparagraph 16(i) hereof, or any amounts reasonably paid to Tenant for rent or
purchase of Tenant's assets, or recovery by Tenant of any amounts paid by Tenant
for alterations or improvements that are not Tenant Improvements (such excess
collectively "Bonus Rent"), Tenant shall pay to Landlord, at the same time as
Fixed Rent is due hereunder, fifty percent (50%) of such Bonus Rent to the
extent actually received by Tenant; provided, however, that Tenant shall first
be permitted to subtract from such Bonus Rent Tenant's reasonable costs incurred
in subleasing all or any portion of the Premises or assigning this Lease,
including broker's commissions, attorneys' fees and costs for any improvements
installed at Tenant's cost for such sublessee or assignee.

        (h)     Release. Whenever Landlord conveys its interest in the Premises,
Landlord shall be automatically released from the further performance of
covenants on the part of Landlord herein contained, and from any and all further
liability, obligations, costs and expenses, demands, causes of action, claims or
judgments arising from or growing out of, or connected

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<PAGE>

with this Lease after the effective date of said release. The effective date of
said release shall be the date the assignee executes an assumption of such an
assignment whereby the assignee expressly agrees to assume all of Landlord's
obligations, duties, responsibilities and liabilities with respect to this
Lease. If requested, Tenant shall execute a form of release and such other
documentation as may be required to effect the provisions of this paragraph.

        (i)     Controlled Entity. Notwithstanding the provisions of this
paragraph 16, Tenant may assign or sublet the Premises, or any portion thereof,
without Landlord's consent, after written notice to Landlord, to any entity
which controls, is controlled by, or is under common ownership with Tenant, or
to any entity resulting from the merger or consolidation with Tenant, or to any
person or entity which acquires all the assets of Tenant as a going concern of
the business that is being conducted on the Premises or all or any controlling
portion of the stock of Tenant, provided that said assignee assumes, in full,
the obligations of Tenant under this Lease. Any such assignment shall not, in
any way, affect or limit the liability of Tenant under the terms of this Lease
even if after such assignment or subletting the terms of this Lease are
materially changed or altered without the consent of Tenant, the consent of whom
shall not be necessary for such change or alteration.

        (j)     Transfer Fee and Attorneys' Fees. In the event that Landlord
shall be requested to consent to a sublease or assignment under subparagraph (a)
above, Tenant shall, as a condition to Landlord's obligation to consider such
request: (i) pay to Landlord a non-refundable transfer fee in the amount of
$1,000.00 to compensate Landlord for its administrative expenses and (ii) pay to
Landlord the amount of $1,000.00 as an advance against Landlord's reasonable
attorneys' fees. The advance against attorneys' fees is only an estimate, and if
Landlord's reasonable attorneys' fees are less than the advance, the balance
shall be returned to Tenant, and if the reasonable attorneys' fees are greater
than the advance, Tenant shall pay such additional amount from time to time
during the course of the negotiations as a condition to Landlord's obligation to
continue to consider the request and/or to grant its consent.

        (k)     Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Tenant of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

                (i)     Tenant hereby assigns and transfers to Landlord all of
        Tenant's interest in all rent and other sums payable on any sublease,
        and Landlord may collect such rent and other sums and apply same toward
        Tenant's obligations under this Lease; provided, however, that until a
        default shall occur in the performance of Tenant's obligations, Tenant
        may collect said rent and other sums. Landlord shall not, by reason of
        the foregoing or any assignment of such sublease, nor by reason of the
        collection of rent and other sums be deemed liable to the sublessee for
        any failure of Tenant to perform and comply with any of Tenant's
        obligations to such sublessee. Tenant hereby irrevocably authorizes and
        directs any such sublessee, upon receipt of a written notice from
        Landlord stating that a default exists in the performance of Tenant's
        obligations under this Lease, to pay to Landlord all rent and other sums
        due and to become due under the sublease. Sublessee may rely upon any
        such notice from Landlord and shall pay all rents and other

                                      30
<PAGE>

        sums to Landlord without any obligation to inquire as to whether such
        default exists, notwithstanding any claim from Tenant to the contrary.

                (ii)    In the event of a default by Tenant, Landlord may, at
        its option, require the sublessee to attorn to Landlord, in which event
        Landlord shall undertake the obligations of the sublessor under such
        sublease from the time of the exercise of said option to the expiration
        of such sublease; provided, however, Landlord shall not be liable for
        any prepaid rents or security deposit paid by such sublessee to such
        sublessor or for any prior defaults or breaches of such sublessor.

                (iii)   Any matter requiring the consent of the sublessor under
        a sublease shall also require the consent of Landlord.

                (iv)    No sublessee shall further assign or sublet all or any
        part of the premises without Landlord's prior written consent.

                (v)     Landlord may deliver a copy of any notice of default by
        Tenant to the sublessee and shall have the right, but not the
        obligation, to accept the cure of the default of Tenant. The sublessee
        shall have a right of reimbursement and offset from and against Tenant
        for any such defaults cured by the sublessee.

        (l)     Injunctive Relief. Tenant's remedy for any breach of this
paragraph 16 by the Landlord shall be limited to injunctive relief without the
right to recover damages of any type, compensatory or otherwise, for such
breach.

        17.     Defaults; Remedies.

        (a)     Defaults.  The occurrence of any one or more of the following
events shall constitute a material default and material breach of this Lease by
Tenant:

                (i)     The abandonment of the Premises by Tenant;

                (ii)    The failure by Tenant to make any payment of Rent or any
        other payment required to be made by Tenant hereunder, as and when due,
        where such failure shall continue for a period of three (3) business
        days after written notice thereof from Landlord to Tenant, delivered in
        accordance with the overnight delivery provision set forth in
        subparagraph 18(h)(iii) hereof;

                (iii)   The failure by Tenant to observe or perform any of the
        covenants, conditions or provisions of this Lease to be observed or
        performed by Tenant, other than those described in subparagraph (ii)
        above, where such failure shall continue for a period of ten (10) days
        after written notice thereof from Landlord to Tenant; provided, however,
        that if the nature of Tenant's default is such that it is capable of
        being cured but more than ten (10) days are reasonably required for its
        cure, then Tenant shall not be deemed to be in default if Tenant
        commences such cure within such ten (10) day period and thereafter
        diligently prosecutes such cure to completion; or

                                      31
<PAGE>

                (iv)    The making by Tenant of any general assignment for the
        benefit of creditors, the filing by or against Tenant of a petition for
        order of relief in bankruptcy for the purpose of bankruptcy liquidation
        or reorganization under any law relating to bankruptcy whether now
        existing or hereafter enacted (including, without limitation, any
        petition filed by or against Tenant under any one or more of the
        following Chapters of the Bankruptcy Reform Act of 1978, 11
        U.S.C.(S)(S)101-1330 ("Bankruptcy Code") as amended: Chapter 7 or
        Chapter 9 or Chapter 11 or Chapter 12 or Chapter 13) except that, in the
        case of a filing against Tenant of such a petition, such filing shall
        not be a default if the petition is dismissed or discharged on or before
        sixty (60) days after the filing thereof; the appointment of a trustee
        or receiver to take possession of all or substantially all of Tenant's
        assets located at the Premises or of Tenant's interest in this Lease,
        where possession is not restored to Tenant within sixty (60) days; or
        the attachment, execution or other judicial seizure of substantially all
        of Tenant's assets located at the Premises or of Tenant's interest in
        this Lease, where such seizure is not discharged within sixty (60) days.
        Unless Landlord's express written consent thereto is first obtained, in
        no event shall this Lease, or any interest herein or hereunder or any
        estate created hereby, be assigned or assignable by operation of law or
        by, in or under voluntary or involuntary bankruptcy liquidation or
        reorganization proceedings or otherwise and in no event shall this Lease
        or any rights or privileges hereunder be an asset of Tenant under any
        bankruptcy liquidation or reorganization proceedings. Any purported
        assignment or transfer in violation of the provisions of this
        subparagraph (iv) shall constitute a material default and breach of this
        Lease by Tenant and in connection with any such default and breach
        Landlord shall have the rights and remedies described in subparagraph
        (b) below, including, without limitation, the election to terminate this
        Lease. As used in this subparagraph (iv) the words "bankruptcy
        liquidation or reorganization proceedings" shall include any proceedings
        under any law relating to bankruptcy whether now existing or hereafter
        enacted (including, without limitation, proceedings under any one or
        more of the Bankruptcy Code as amended: Chapter 7 or Chapter 9 or
        Chapter 11 or Chapter 12 or Chapter 13).

        (b)     Remedies.

                (i)     In the event of any default and breach by Tenant of any
         of its obligations under this Lease and notwithstanding the abandonment
         of the Premises by Tenant, this Lease shall continue in effect so long
         as Landlord does not expressly terminate Tenant's right to possession
         in any of the manners specified in this paragraph and Landlord may, at
         Landlord's option and without limiting Landlord in the exercise of any
         other rights or remedies which it may have by reason of such default
         and breach, exercise all of its rights and remedies hereunder,
         including, without limitation:

                        (A)     The right to declare the Term ended and to
                reenter the Premises and take possession thereof and remove all
                persons therefrom, and Tenant shall have no further claim in or
                to the Premises or under this Lease; or

                        (B)     The right without declaring this Lease ended to
                reenter the Premises, take possession thereof, remove all
                persons therefrom and occupy or lease the whole or any part
                thereof for and on account of Tenant and upon such

                                      32
<PAGE>

                terms and conditions and for such rent as Landlord may deem
                proper and to collect such rent or any other rent that may
                hereafter become payable and apply the same as provided in
                subparagraph (ii) below; or

                        (C)     The right, even though Landlord may have relet
                the Premises or brought an action to collect Rent and other
                charges without terminating this Lease, to thereafter elect to
                terminate this Lease and all of the rights of Tenant in or to
                the Premises; or

                        (D)     The right, without terminating this Lease, to
                bring an action or actions to collect Rent and other charges
                hereunder which are from time to time past due and unpaid or to
                enforce any other provisions of this Lease imposing obligations
                on Tenant, it being understood that the bringing of any such
                action or actions shall not terminate this Lease unless written
                notice of termination is given.

                (ii)    Should Landlord relet the Premises under the provisions
        of subparagraph (b)(i)(B) above, Landlord may execute any lease either
        in its own name or in the name of Tenant, but Tenant hereunder shall
        have no right or authority whatever to collect any rent from the new
        tenant. The proceeds of any such reletting shall first be applied to the
        payment of the costs and expenses of reletting the Premises, including
        without limitation, reasonable brokerage commissions and alterations and
        repairs which Landlord, in its sole discretion, deems reasonably
        necessary and advisable and to the payment of reasonable attorneys' fees
        incurred by Landlord in connection with the Tenant's default, the
        retaking of the Premises and such reletting and, second, to the payment
        of any indebtedness, other than Rent, due hereunder, including, without
        limitation, storage charges owing from Tenant to Landlord. When such
        costs and expenses of reletting have been paid, and if there is no such
        indebtedness or such indebtedness has been paid, Tenant shall be
        entitled to a credit for the net amount of rental received from such
        reletting each month during the unexpired balance of the Term, and
        Tenant shall pay Landlord monthly on the first day of each month as
        specified herein such sums as may be required to make up the rentals
        provided for in this Lease. Notwithstanding anything to the contrary
        herein, Landlord shall have the obligation to act reasonably to mitigate
        its damages.

                (iii)   Should Landlord elect to terminate this Lease under the
        provisions of subparagraphs (b)(i)(A) or (C) above, Landlord shall be
        entitled to recover immediately from Tenant (in addition to any other
        amounts recoverable by Landlord as provided by law), the following
        amounts:

                        (A)     The worth at the time of award of the unpaid
                rent which had been earned at the time of termination;

                        (B)     The worth at the time of award of the amount by
                which the unpaid rent which would have been earned after
                termination until the time of award exceeds the amount of such
                rental loss that Tenant proves could have been reasonably
                avoided;

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<PAGE>

                        (C)     The worth at the time of award of the amount by
                which the unpaid rent for the balance of the Term after the time
                of award exceeds the amount of such rental loss that Tenant
                proves could be reasonably avoided; and

                        (D)     Any other amount necessary to compensate
                Landlord for all the detriment proximately caused by Tenant's
                failure to perform its obligations under the Lease or which in
                the ordinary course of things would be likely to result
                therefrom.

        For purposes of computing "the worth at the time of the award" of the
        amount specified in subparagraph (b)(iii)(C) above, such amount shall be
        discounted at the discount rate of the Federal Reserve Bank of San
        Francisco at the time of award. For purposes of computing "the worth at
        the time of the award" under subparagraphs (b)(iii)(A) and (b)(iii)(B)
        above, an interest rate of ten percent (10%) per annum shall be
        utilized.

                (iv)    If Landlord shall elect to reenter the Premises as
        provided above, Landlord shall not be liable for damages by reason of
        any reentry unless caused by Landlord's willful misconduct or
        negligence. Except to the extent caused by Landlord's willful misconduct
        or negligence, Tenant hereby waives all claims and demands against
        Landlord for damages or loss arising out of or in connection with any
        reentering and taking possession of the Premises and waives all claims
        for damages or loss arising out of or in connection with any destruction
        of or damage to the Premises, or for any loss of property belonging to
        Tenant or to any other person, firm or corporation which may be in or
        upon the Premises at the time of such reentry.

                (v)     Landlord shall not be deemed to have terminated this
        Lease, Tenant's right to possession of the Premises or the liability of
        Tenant to pay Rent thereafter to accrue or its liability for damages
        under any of the provisions hereof by any reentry hereunder or by any
        action in unlawful detainer or otherwise to obtain possession of the
        Premises, unless Landlord shall notify Tenant in writing that Landlord
        has so elected to terminate this Lease. Tenant agrees that the service
        by Landlord of any notice pursuant to the unlawful detainer statutes or
        comparable statutes of the state or locality in which the Premises are
        located and the surrender of possession pursuant to such notice shall
        not (unless Landlord elects to the contrary at the time of or at any
        time subsequent to the service of such notice and such election shall be
        evidenced by a written notice to Tenant) be deemed to be a termination
        of this Lease or of Tenant's obligations hereunder. No reentry or
        reletting under this paragraph shall be deemed to constitute a surrender
        or termination of this Lease, or of any of the rights, options,
        elections, powers and remedies reserved by Landlord hereunder, or a
        release of Tenant from any of its obligations hereunder, unless Landlord
        shall specifically notify Tenant, in writing, to that effect. No such
        reletting shall preclude Landlord from thereafter at any time
        terminating this Lease as herein provided.

                (vi)    All fixtures, furnishings, goods, equipment, chattels or
        other personal property of Tenant remaining on the Premises at the time
        that Landlord takes possession thereof may at Landlord's election be
        stored at Tenant's expense or sold or otherwise disposed of by Landlord
        in any manner permitted by applicable law.

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<PAGE>

                (vii)   All rights, options, elections, powers and remedies of
        Landlord under the provisions of this Lease are cumulative of each other
        and of every other right, option, election, power or remedy which
        Landlord may otherwise have at law or in equity and all or any of which
        Landlord is hereby authorized to exercise. The exercise of one or more
        rights, options, elections, powers or remedies shall not prejudice or
        impair the concurrent or subsequent exercise of other rights or remedies
        Landlord may have upon a breach and default under this Lease and shall
        not be deemed to be a waiver of Landlord's rights or remedies thereupon
        or to be a release of Tenant from Tenant's obligations thereon unless
        such waiver or release is expressed in writing and signed by Landlord.

                (viii)  In the event of the exercise by Landlord of any one or
        more of its rights and remedies hereunder, Tenant hereby expressly
        waives any and all rights of redemption, if any, granted by or under any
        present or future laws.

        (c)     Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of Rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Landlord by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Tenant shall
not be received by Landlord or Landlord's designee within ten (10) days after
such amount shall be due, Tenant shall pay to Landlord a late charge equal to
ten percent (10%) of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Landlord will
incur by reason of late payment by Tenant. Acceptance of such late charge by
Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.

        (d)     Payment or Performance by Landlord. Landlord may, at Landlord's
option and without any obligation to do so, after ten (10) days advance written
notice to Tenant (except in the case of an emergency), pay any sum or do any act
which Tenant has failed to pay or do at the time Tenant was obligated to make
such payment or perform such act and Landlord shall be entitled to recover from
Tenant, upon demand, all reasonable sums expended by Landlord in making such
payment or performing such act, together with interest thereon at the rate
provided in subparagraph 18(d) from the date of expenditure until repaid by
Tenant. Such sum and interest shall be deemed additional rent under this Lease.

        (e)     Landlord's Default. Except as set forth in subparagraph 8(c),
and subject to subparagraph 12(b), and otherwise notwithstanding anything to the
contrary herein, in the event Landlord fails to perform any of its obligations
under this Lease and (except in the case of emergency posing an immediate threat
to persons or property, in which case no prior notice shall be required) fails
to cure such default within thirty (30) days after written notice from Tenant
specifying the nature of such default, where such default could reasonably be
cured within said thirty (30) day period, and thereafter continuously with due
diligence prosecute such cure to completion where such default could not be
reasonably cured within said thirty (30) day period, then Tenant may: (i)
proceed in equity or at law to compel Landlord to perform its obligations and/or
to recover actual damages (but not incidental or consequential damages or lost
profits)

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<PAGE>

proximately caused by such failure to perform, or (ii) cure any default of
Landlord (which Landlord has failed to cure as above provided) at Landlord's
cost and deduct the cost of such cure from Rent (which deduction shall in no
event exceed $2000.00 per event of default) but in no event shall Tenant deduct
any such costs more than three (3) times in any twelve (12) month period.

     18.  Miscellaneous.

     (a)  Estoppel Certificate.

          (i)    Tenant shall at any time upon not less than ten (10) days prior
     written notice from Landlord execute, acknowledge, and deliver to Landlord
     a statement in writing certifying that this Lease is unmodified and in full
     force and effect (or, if modified, stating the nature of such modification
     and certifying that this Lease, as so modified, is in full force and
     effect) and the date to which the Rent and other charges are paid in
     advance, if any, and acknowledging that there are not, to Tenant's
     knowledge, any uncured defaults on the part of Landlord hereunder, or
     specifying such defaults if any are claimed, and to such other matters as
     Landlord shall reasonably request. Any such statement may be conclusively
     relied upon by any person to whom it shall be delivered by Landlord
     including any prospective purchaser or encumbrancer of the Premises, the
     Building, the Property, or any part thereof.

          (ii)   Tenant's failure to deliver such statement within such time
     shall be conclusive upon Tenant that this Lease is in full force and
     effect, without modification except as may be represented by Landlord; that
     there are no uncured defaults in Landlord's performance; and that not more
     than one month's Rent has been paid in advance.

          (iii)  If Landlord desires to sell, finance or refinance the Premises,
     the Building, the Property, or any part thereof, Tenant hereby agrees to
     deliver to any prospective buyer or lender designated by Landlord such
     financial statements of Tenant as may be reasonably required by such
     prospective buyer or lender. Such statements shall include the past three
     years financial statements of Tenant. All such financial statements shall
     be received by Landlord in confidence and shall be used only for the
     purposes herein set forth.

     (b)  Landlord's Liability. The term "Landlord" as used herein shall mean
only the owner or owners at the time in question of the fee title (or the
lessee's interest in any ground or master lease) to the Premises and in the
event of any transfer of such title, Landlord herein named (and in case of any
subsequent transfers, the then grantor) shall be relieved from and after the
date of such transfer of all liability as respects Landlord's obligations
thereafter to be performed, provided that any funds in the hands of Landlord or
the then grantor at the time of such transfer in which Tenant has an interest
shall be delivered to the grantee. The obligations contained in this Lease to be
performed by Landlord shall, subject as aforesaid, be binding on Landlord's
successors and assigns only to the extent existing during their respective
periods of ownership.

                                      36
<PAGE>

        (c)    Construction. Paragraph captions are solely for the convenience
of the parties and shall not be deemed to or be used to define, construe, or
limit the terms hereof. As used in this Lease, the masculine, feminine and
neuter genders shall be deemed to include the others, and the singular number
shall be deemed to include the plural, whenever the context so requires. The
invalidity of any provisions of this Lease as determined by a court of competent
jurisdiction shall in no way affect the validity of any other provision hereof.
This Lease shall be governed by the laws of the state in which the Premises are
located.

        (d)    Interest on Past-Due Obligations. Except as expressly herein
provided, any amount due to Landlord or Tenant not paid when due shall bear
interest at the lesser of (i) eighteen percent (18%) per annum or (ii) the
maximum rate permitted by law, from the date due until the date such amount is
paid. Payment of such interest shall be made when such amount is paid. Payment
of such interest shall not excuse or cure any default by Tenant under this
Lease.

        (e)    Time of Essence. Time is of the essence of this Lease and all of
the covenants and obligations hereof.

        (f)    Counterparts. This Lease may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same Lease.

        (g)    Incorporation of Prior Agreements; Amendments. This Lease
contains all agreements of the parties with respect to any matter mentioned
herein. No prior agreement or understanding pertaining to any such matter shall
be effective. This Lease may be modified in writing only, which writing shall be
signed by the parties in interest at the time of the modification.

        (h)    Notices. Any notices, approvals, agreements, certificates, other
documents or communications between the parties hereto required or permitted
under this Lease shall be in writing. Any such communications shall be deemed to
have been duly given or served (i) that same day if delivered in hand by 5:00
p.m., (ii) the second business day after deposit in the United States mail,
certified or registered, postage and fees prepaid, return receipt requested, or
(iii) the next business day after deposit with a reputable overnight courier
service, addressed to the parties at the addresses set forth in paragraph 1 of
this Lease. The address to which any such communications shall be sent may be
changed by either party hereto from time to time by a notice mailed as
aforesaid.

        (i)    Waivers. No waiver by Landlord of any provision hereof shall be
deemed a waiver of any other provision hereof or of any subsequent breach by
Tenant of the same or any other provision. Landlord's consent to or approval of
any act shall not be deemed to render unnecessary the obtaining of Landlord's
consent to or approval of any subsequent act by Tenant. The acceptance of Rent
hereunder by Landlord shall not be a waiver of any preceding breach by Tenant of
any provision hereof, other than the failure of Tenant to pay the particular
Rent so accepted, regardless of Landlord's knowledge of such preceding breach at
the time of acceptance of such Rent.

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<PAGE>

        (j)    Recording. Tenant shall not record this Lease without Landlord's
prior written consent and such recordation shall, at the option of Landlord,
constitute a noncurable default of Tenant hereunder. Landlord and Tenant shall,
upon the request of either party, execute, acknowledge and deliver to the other
a "short form" memorandum of this Lease for recording purposes.

        (k)    Holding Over. If Tenant remains in possession of the Premises or
any part thereof after the expiration of the Term or sooner termination of this
Lease with or without the express written consent of Landlord and without
executing a new lease, such occupancy shall be construed as a tenancy from
month-to-month at a rental equal to one hundred forty percent (140%) of the last
monthly Rent plus all other charges payable hereunder, and upon all the terms
hereof insofar as the same are applicable to a month-to-month tenancy. Tenant
shall not hold over, and nothing contained in this subparagraph shall be
construed to grant Tenant the right to hold over without the express written
consent of Landlord.

        (l)    Covenants and Conditions. Each provision of this Lease
performable by Tenant shall be deemed both a covenant and a condition.

        (m)    Binding Effect. Subject to any provisions hereof restricting
assignment or subletting by Tenant and subject to the provision of subparagraph
(b) above, this Lease shall bind the parties and their personal representatives,
successors and assigns.

        (n)    Subordination.

               (i)       This Lease, at Landlord's option, shall be subordinate
        to any ground lease, mortgage, deed of trust, or any other hypothecation
        for security now or hereafter placed upon the Premises, the Building or
        the Property, or any part or parts thereof, and to any and all advances
        made on the security thereof and to all renewals, modifications,
        consolidations, replacements and extensions thereof. If any present or
        future mortgagee, trustee or ground lessor shall at any time elect to
        have this Lease prior to the lien of its mortgage, deed of trust or
        ground lease, and written notice of such election shall be given to
        Tenant, this Lease shall be deemed prior to such mortgage, deed of
        trust, or ground lease, whether this Lease is dated prior or subsequent
        to the date of said mortgage, deed of trust or ground lease or the date
        of recording thereof.

               (ii)      Tenant agrees to execute any documents required to
         effectuate such subordination or to make this Lease prior to the lien
         of any mortgage, deed of trust or ground lease, as the case may be, and
         failing to do so within ten (10) days after written demand, does hereby
         make, constitute and irrevocably appoint Landlord as Tenant's attorney
         in fact and in Tenant's name, place and stead, to do so.

Notwithstanding anything to the contrary herein, this Lease shall not be subject
or subordinate to any ground lease, mortgage, deed of trust, or any other
hypothecation for security now or hereafter placed upon the Premises, the
Building or the Project, or any part or parts thereof, and to any advances made
on the security thereof and to any renewals, modifications, consolidations,
replacements or extensions thereof, nor shall Tenant be required to execute any
documents subordinating this Lease, unless the ground lessor, lender or other
holder of the interest to which

                                      38
<PAGE>

this Lease shall be subordinated contemporaneously executes a recognition and
non-disturbance agreement which (x) provides that this Lease shall not be
terminated so long as Tenant is not in default under this Lease, and (y)
recognizes all of Tenant's rights hereunder, except that such successor to
Landlord's interest shall not be:

               (I)       Liable for any act or omission of any prior landlord
                         (including Landlord), excluding, however, any ongoing
                         repair, maintenance and replacement obligations of any
                         prior landlord (including Landlord);
               (II)      Bound by any rent or additional rent or advance rent
                         that Tenant might have paid for more than the current
                         month to any prior landlord (including Landlord) and
                         all such rent shall remain due and owing
                         notwithstanding such advance payment;
               (III)     Bound by any amendment or modification of the Lease
                         which would decrease Tenant's monetary obligations
                         hereunder made without its consent and written
                         approval; or
               (IV)      Bound to commence or complete any construction or to
                         make any contribution toward construction or
                         installation of any improvements upon the Premises
                         required under the Lease or any expansion or
                         rehabilitation of existing improvements thereon, or for
                         restoration of improvements following any casualty not
                         required to be insured under the Lease or for the costs
                         of any restoration in excess of any proceeds recovered
                         under any insurance required to be carried under the
                         Lease.

        (o)    Attorneys' Fee. If either party brings an action to enforce the
terms hereof or declare rights under this Lease, the prevailing party in the
final adjudication of any such action, on trial or appeal, shall be entitled to
its costs and expenses of suit, including, without limitation, its actual
attorneys' fees, to be paid by the losing party as fixed by the court. In any
situation in which a dispute is settled other than by action or proceeding,
Tenant shall pay all Landlord's costs and attorneys' fees relating thereto.

        (p)    Landlord's Access. Upon twenty-four (24) hour advance telephonic
or written notice to Tenant (except in case of an emergency when no such notice
shall be required), and subject to Tenant's reasonable security requirements,
Landlord and Landlord's agents shall have the right to enter the Premises at
reasonable times for the purpose of inspecting the same, showing the same to
prospective purchasers or lenders, and making such alterations, repairs,
improvements or additions to the Premises or the improvements as Landlord may
deem necessary or desirable. Landlord may at any time place on or about the
Premises any ordinary "For Sale" signs and Landlord may at any time during the
last one hundred twenty (120) days of the Term place on or about the Premises
any ordinary "For Lease" signs, all without rebate of rent or liability to
Tenant.

        (q)    Auctions. Tenant shall not conduct any auction on the Premises
without Landlord's prior written consent.

        (r)    Merger. The voluntary or other surrender of this Lease by Tenant,
or a mutual cancellation thereof, shall not work a merger, and shall, at the
option of Landlord, terminate all or any existing subtenancies or may, at the
option of Landlord, operate as an assignment to

                                      39
<PAGE>

Landlord of any or all of such subtenancies. During any period while Tenant is
in default under this Lease, Landlord, in addition to any other rights and
remedies it may have under this Lease, shall have the right to collect directly
from any subtenant all rentals owing to Tenant under any subtenancy and to apply
such rentals to any amounts owing to Landlord by Tenant and the payment of such
amounts by the subtenant directly to Landlord shall not be a default under the
subtenancy.

        (s)    Joint and Several Liability. Each party signing this Lease as
Tenant shall be jointly and severally liable for the failure on the part of
Tenant to pay any sums due under the terms of this Lease or for the breach by
Tenant or any of the covenants or obligations of Tenant contained herein.

        (t)    Individual Liability. The obligations of Landlord under this
Lease do not constitute personal obligations of the individual partners,
directors, officers, or shareholders of Landlord, and Tenant shall look solely
to the real estate that is the subject of this Lease and to no other assets of
Landlord for satisfaction of any liability in respect of this Lease and will not
seek recourse against the individual partners, directors, officers or
shareholders of Landlord or any of their personal assets for such satisfaction.

        (u)    Attornment. Tenant shall, in the event any proceedings are
brought for the foreclosure of, or in the event of exercise of the power of sale
under any mortgage or deed of trust made by the Landlord, its successors or
assigns, encumbering the Premises, or any part thereof, or in the event of
termination of the ground lease, if any, and if so requested, attorn to the
purchaser upon such foreclosure or sale or upon any grant of a deed in lieu of
foreclosure and shall recognize such purchaser as the Landlord under this Lease.
However, such purchaser shall not: (i) be liable for any act or omission of any
prior landlord or with respect to events occurring prior to the time such
purchaser acquired ownership of the Premises (excluding, however, any ongoing
services, maintenance, restoration and repair obligations of Landlord); (ii) be
subject to any offsets or defenses which the Tenant might have against any prior
landlord; or (iii) be bound by prepayment of more than one month's Rent.

        (v)    Lenders Right to Cure. Tenant agrees to give the holder of any
mortgage or trust deed encumbering the Premises, by registered mail, a copy of
any notice of default or nonperformance served upon Landlord, provided that
prior to such notice, Tenant has been notified in writing (by way of Assignment
of Rents and Leases or otherwise) of the address of such mortgagee or trust deed
holder. Tenant further agrees that Landlord shall not be in default under this
Lease unless (i) Tenant has given a written notice to Landlord stating that
Landlord has failed to perform Landlord's obligations under this Lease and (ii)
specifying with particularity the obligations which Landlord has failed to
perform, and Landlord thereafter fails to perform any of its obligations so
specified within a reasonable time after Landlord's receipt of such notice. If
Landlord shall fail to cure such nonperformance in a timely manner, then such
mortgagee or trust deed holder shall have an additional thirty (30) days within
which to cure the default, or, if such default cannot be cured within that time,
then such additional time as may be necessary if within such thirty (30) days
such mortgagee or trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings, if necessary to effect such cure), in
which event this Lease shall not be terminated by Tenant while such remedies are
being so diligently pursued.

                                      40
<PAGE>

        (w)    Revisions to Lease. Tenant hereby agrees to make any reasonable
revisions to this Lease which may be required in good faith by a bona fide
construction, interim or permanent lender in connection with the financing of
the Premises.

        (x)    Administrative Charge. In addition to Fixed Rent, Adjustments and
other charges hereunder, Tenant shall pay to Landlord an overall administrative
charge of five percent (5%) of any charge which is Tenant's responsibility to
pay, is not paid by Tenant as required hereunder, and which Landlord pays on
behalf of Tenant and for which Landlord subsequently bills Tenant.

        (y)    Reasonable Expenditures. Any expenditure by a party permitted or
required under the Lease, for which such party is entitled to demand and does
demand reimbursement from the other party, shall be limited to the fair market
value of the goods and services involved, shall be reasonably incurred, and
shall be substantiated by documentary evidence available for inspection and
review by the other party or its representative during normal business hours.

        19.    Toxic Materials.

        (a)    Definitions.

               (i)      As used in this Lease, the term "Hazardous Material[s]"
        means any oil, flammable items, explosives, radioactive materials,
        hazardous or toxic substances, material or waste or related materials
        including, without limitation, any substances that pose a hazard to the
        Premises or to persons on or about the Premises and any substances
        defined as or included in the definition of "hazardous substance,"
        "hazardous waste," "hazardous material," "toxic substance," "extremely
        hazardous waste," "restricted hazardous waste" or words of similar
        import, now or subsequently regulated in any way under applicable
        federal, state or local laws or regulations, including without
        limitation, petroleum-based products, paints, solvents, lead, cyanide,
        DDT, printing inks, acids, pesticides, ammonia compounds and other
        chemical products, asbestos, PCBs, urea formaldehyde foam insulation,
        transformers or other equipment containing dielectric fluid, levels of
        polychlorinated biphenyls, or radon gas, and similar compounds, and
        including any different products and materials which are subsequently
        found to have adverse effects on the environment or the health and
        safety of persons.

               (ii)     As used herein, the term "Environmental Law[s]" means
        any one or all of the following: the Comprehensive Environmental
        Response, Compensation and Liability Act, as amended by the Superfund
        Amendments and Reauthorization Act of 1986 (42 U.S.C.(S)(S) 9601 et
                                                                         --
        seq.); the Resource Conservation and Recovery Act as amended (42
        ---
        U.S.C.(S)(S) 6901 et seq.); the Safe Drinking Water Act as amended (42
                          -- ---
        U.S.C.(S)(S) 300f et seq.); the Clean Water Act as amended (33
                          -- ---
        U.S.C.(S)(S) 1251 et seq.); the Clean Air Act as amended (42
                          -- ---
        U.S.C.(S)(S) 7401 et seq.); the Toxic Substances Control Act as amended
                          -- ---
        (15 U.S.C.(S)(S) 136 et seq.); the Solid Waste Disposal Act as amended
                             -- ---
        (42 U.S.C.(S)(S) 3251 et seq.); the Hazardous Materials Transportation
                              -- ---
        Act (49 U.S.C.(S)(S)1801 et seq.); the regulations promulgated under any
                                 -- ---
        of the foregoing; and all other laws, regulations, ordinances,
        standards, policies, and guidelines now in effect or hereinafter enacted
        by any governmental entity (whether local, state or federal) having
        jurisdiction or regulatory

                                      41
<PAGE>

        authority over the Premises or the Project or over activities conducted
        therein and which deal with the regulation or protection of human
        health, industrial hygiene or the environment, including the soil,
        subsurface soil, ambient air, groundwater, surface water, and land use.

               (iii)    As used herein, the term "Environmental Activity[ies]"
        means any generation, manufacture, production, pumping, bringing upon,
        use, storage, treatment, release, discharge, escaping, emitting,
        leaching, disposal or transportation of Hazardous Materials.

        (b)    Prohibition on Hazardous Materials. Except as specifically
provided in subparagraph (c) below, Tenant shall not cause or permit any
Environmental Activities in, on or about the Premises by Tenant or Tenant's
agents, employees, contractors, assignees, sublessees or invitees (hereinafter
cumulatively referred to as "Tenant's Agents") without the prior written consent
of Landlord. Landlord shall be entitled to take into account such factors or
facts as Landlord may reasonably determine to be relevant in determining whether
to consent to Tenant's proposed Environmental Activity and Landlord may attach
conditions to any such consent if such conditions are reasonably necessary to
protect Landlord's interests in avoiding potential liability upon Landlord or
damage to Landlord's property arising from any Environmental Activity by Tenant
or Tenant's Agents. In no event shall Landlord be required to consent to the
installation or use of any underground storage tanks on the Premises.

        (c)    Exception to Prohibition. Notwithstanding the prohibition set
forth in subparagraph (b) above, but subject to Tenant's covenant to comply with
all Environmental Laws and with the other provisions of this paragraph 19,
Tenant may bring upon, keep and use in the Improvements (but not outside the
Improvements) (i) general office supplies typically used in an office or
warehouse in the ordinary course of business, such as copier toner, liquid
paper, glue, ink and janitorial supplies, so long as such supplies are used in
the manner for which they were designed and in such amounts as may be normal for
the business operations conducted by Tenant in the Premises, (ii) those
Hazardous Materials, if any, described on Exhibit D attached hereto and by this
reference made a part hereof so long as Tenant has delivered to Landlord a
description of the handling, storage, use and disposal procedures to be utilized
by Tenant with respect thereto and (iii) any other Hazardous Materials so long
as Tenant provides Landlord with (x) a list of such Hazardous Materials, (y) a
copy of all applications, plans or permits submitted by Tenant to the fire
department, or any other state, local or federal agency or department, which
copies shall be submitted to Landlord at the same time as their submission to
the fire department, or any other state, local or federal agency or department;
and (z) a copy of all approvals received from the fire department, or any other
state, local or federal agency or department, for use of such Hazardous
Materials (if required) and copies of all permits issued by the fire department,
or any other state, local or federal agency or department, for the use of such
Hazardous Materials (if required) within twenty-four (24) hours following the
receipt of any such approval or the issuance of any such permit.

        (d)    Compliance with Environmental Laws. Tenant shall keep and
maintain the Premises in compliance with, and shall not cause or permit the
Premises to be in violation of, any Environmental Laws (except to the extent
that such non-compliance or violation (x) exists on the Premises as of the
Commencement Date or results from Hazardous Materials brought onto

                                      42
<PAGE>

the Premises by Landlord or its agents or representatives, or (y) results from
migration of contamination to the Premises from other properties). All Tenant's
activities at the Premises shall be in accordance with all Environmental Laws.
Additionally, Tenant shall obtain any and all necessary permits for Tenant's
activities at the Premises. Tenant's obligations and liabilities under this
paragraph 19 shall continue so long as Landlord bears or may bear any liability
or responsibility under the Environmental Laws for any action that occurs on the
Premises during the term of this Lease and so long as Landlord's interest in the
Premises may be adversely affected.

        (e)    Environmental Notices. Tenant shall immediately notify Landlord
of, and upon Landlord's request shall provide Landlord with copies of, the
following:

               (i)      Notices of violation (including notices of any potential
        violation, or any event which, if left uncured, could result in a
        violation), notices to comply and citations;

               (ii)     Any Hazardous Materials Business Plans or similar
        filings and copies of any environmental assessments of the Premises;

               (iii)    All material permits and permit applications under
        Environmental Laws;

               (iv)     Any material change in Tenant's operations on the
         Premises that will change or has the potential to change Tenant's or
         Landlord's obligations or liabilities under Environmental Laws.

Tenant shall also notify the Landlord of the release of any Hazardous Material
in, on, under, about or above the Premises or the Project in violation of
Environmental Laws or that causes contamination to the Premises.

        (f)    Environmental Indemnity. Tenant shall protect, indemnify, defend
(with counsel satisfactory to Landlord) and hold harmless Landlord and its
directors, officers, partners, employees, agents, lenders, and ground lessees,
if any, and their respective successors and assigns for, from and against any
and all losses, damages, claims, costs, expenses, penalties, fines and
liabilities of any kind (including, without limitation, the cost of any
investigation, remediation and cleanup, and attorneys' fees) which, in
Landlord's reasonable opinion, are attributable to (i) any Environmental
Activity on the Premises undertaken or committed by Tenant or Tenant's Agents or
caused by the negligence of such persons during the Term of this Lease, (ii) any
remedial or clean-up work undertaken by or for Tenant in connection with
Tenant's Environmental Activities or Tenant's compliance with Environmental
Laws, or (iii) the breach by Tenant of any of its obligations and covenants set
forth in this paragraph 19. Landlord shall have the right but not the obligation
to join and participate in, and reasonably control, if it so elects, any legal
proceedings initiated in connection with the Environmental Activities of Tenant
or Tenant's Agents. Landlord may also negotiate, defend, approve and appeal any
action taken or issued by any applicable governmental authority with regard to
contamination of the Premises or the Project by a Hazardous Material.
Notwithstanding anything to the contrary herein, (i) Landlord will use its best
efforts to cooperate with Tenant if Landlord elects to join in, participate in
or take control in any such legal proceeding, or to negotiate, defend, approve
or appeal any such action as set forth above; (ii) Landlord shall not have the
right to settle any

                                      43
<PAGE>

matter to the extent involving injunctive relief that would adversely effect the
operations of Tenant on the Premises without the written consent of Tenant
(which consent shall not be unreasonably withheld); and (iii) any reasonable
costs or expenses incurred by Landlord for which Tenant is responsible under
this paragraph 19 or for which Tenant has indemnified Landlord and which are
required to be incurred pursuant to applicable Environmental Laws shall be
reimbursed by Tenant on demand, as additional rent and with interest thereon, as
provided by subparagraph 17(d) of this Lease. This indemnity shall survive the
termination of this Lease.

        (g)    Remedial Work. If (i) any Environmental Activity undertaken by
Tenant or Tenant's Agents results in contamination of the Premises or Project or
any portion thereof, or the soil or groundwater thereunder, or (ii) any
investigation, site monitoring, containment, cleanup, removal, restoration or
other remedial work of any kind or nature ("Remedial Work") is necessary or
appropriate due to or in connection with Tenant's use or occupancy of the
Premises, then, subject to Landlord's prior written approval and any conditions
imposed by Landlord, Tenant shall promptly perform all Remedial Work, at
Tenant's sole expense and without abatement of rent, as is necessary to return
the affected portion of the Premises and/or Project and the soil and groundwater
to the condition required to comply with all applicable Environmental Laws.
Landlord's approval of such Remedial Work shall not be unreasonably withheld so
long as such actions will not cause a material adverse effect on the Premises or
the Project during or after expiration of the Lease Term. Landlord shall also
have the right to approve any and all contractors hired by Tenant to perform
such Remedial Work. All such Remedial Work shall be performed in compliance with
all applicable laws, ordinances and regulations and in such a manner as to
minimize any interference with the use and enjoyment of the Premises and
Project. All costs and expenses of such Remedial Work shall be paid by Tenant
including, without limitation, the charges of such contractor(s), and the
reasonable fees and costs of the attorneys and consultants for Landlord incurred
in connection with monitoring or review of such Remedial Work.

        (h)    Landlord's Option. Landlord may elect, at Landlord's sole
discretion, to perform any Remedial Work. Upon reasonable advance written notice
to Tenant, Landlord and Landlord's agents shall have the right to enter the
Premises at all reasonable times to inspect, monitor and/or perform Remedial
Work. All reasonable expenses incurred by Landlord in connection with performing
Remedial Work, to the extent required by Environmental Laws, are payable by
Tenant, upon Landlord's demand, with interest thereon, as provided by
subparagraph 17(d).

        (i)    Injunctive Relief. Tenant's failure to abide by the terms of this
paragraph 19 shall be restrainable by injunction.

        (j)    Self-Help. Landlord shall have the right of "self-help" or
similar remedy in order to minimize any damages, expenses, penalties and related
fees or costs arising from or related to a violation of any Environmental Law
with respect to the Premises or the Project.

        (k)    Other Tenants. Other tenants of the Project may be using,
handling or storing certain Hazardous Materials in connection with such tenants'
use of their premises. The failure of another tenant to comply with applicable
laws and procedures could result in a release of Hazardous Materials and
contamination to improvements within the Project or the soil and

                                      44
<PAGE>

groundwater thereunder. In the event of such a release, the tenant responsible
for the release, and not Landlord, shall be responsible for any claim, damage or
expense incurred by Tenant by reason of such contamination and Tenant shall
exhaust all its remedies against such other tenant without any right to seek any
recovery against Landlord, unless Landlord is aware of the release, and
intentionally or negligently fails to notify Tenant of such release.

        (l)    Environmental Inspection. In the event Landlord reasonably
suspects a release causing contamination of the Premises has occurred, Tenant
shall, if reasonably required by Landlord, retain a recognized environmental
consultant (the "Consultant") acceptable to Landlord to conduct an investigation
of the Premises and of other portions of the Project deemed appropriate by
Landlord ("Environmental Assessment") (i) for Hazardous Materials contamination
in, about or beneath the Premises or the Project as a result of such activities
and (ii) to assess all Environmental Activities of Tenant and Tenant's Agents on
the Premises or the Project for compliance with all applicable laws, ordinances
and regulations and for the use of procedures intended to reasonably reduce the
risk of a release of Hazardous Materials. The Environmental Assessment shall be
performed in a manner reasonably calculated to discover the presence of
Hazardous Materials contamination and shall be of a scope and intensity
reflective of the general standards of professional environmental consultants
who regularly provide environmental assessment services in connection with the
transfer or leasing of real property. Additionally, the Environmental Assessment
shall take into full consideration the past and present uses of the Premises and
Project and other factors unique to the Premises and Project. If Landlord
obtains the Environmental Assessment because of the activities of Tenant or
Tenant's Agents, Tenant shall pay Landlord on demand the reasonable cost of the
Environmental Assessment, with interest thereon, as additional rent and in
accordance with subparagraph 17(d). Otherwise, such costs shall be paid for by
Landlord. If Landlord so requires, Tenant shall comply, at its sole cost and
expense, with all reasonable recommendations contained in the Environmental
Assessment, including any recommendation with respect to the precautions which
should be taken with respect to Environmental Activities on the Premises or the
Project or any recommendations for additional testing and studies to detect the
presence of Hazardous Materials. Tenant covenants to reasonably cooperate with
the Consultant and to allow entry and reasonable access to all portions of the
Premises for the purpose of Consultant's investigation.

        (m)    Surrender of Premises - Environmental Considerations. Prior to or
after the expiration or termination of the Lease Term, Landlord may have an
Environmental Assessment of the Premises performed in accordance with
subparagraph (l) above. Tenant shall perform, at its sole cost and expense, any
Remedial Work recommended by the Consultant which is necessary to remove,
mitigate or remediate any Hazardous Materials contamination of the Premises or
Project in connection with any Environmental Activities of Tenant or Tenant's
Agents. Prior to surrendering possession of the Premises, Tenant shall also,
unless otherwise directed by Landlord, remove any personal property, equipment,
fixture (except for any fixture installed by Landlord) and/or storage device or
vessel on or about the Premises and/or Project which is contaminated by or
contains Hazardous Materials as a result of the activities of Tenant or Tenant's
Agents and repair all damage to the Premises and the Project caused by such
removal.

        (n)    Landlord's Indemnity For Environmental Matters. Landlord shall
indemnify, defend with counsel reasonably acceptable to Tenant, protect, and
hold harmless Tenant, and

                                      45
<PAGE>

Tenant's Agents, successors, parents and subsidiaries, from and against all
claims, actions, suits, proceedings, judgments, losses, costs, personal
injuries, damages, liabilities, deficiencies, fines, penalties, damages,
attorneys' fees, consultants' fees, investigations, detoxifications,
remediations, removals, and expenses of every type and nature, directly or
indirectly arising out of or in connection with any Hazardous Material present
at any time on or about the Premises, or the soil, air, improvements,
groundwater or surface water thereof, or the violation of any Environmental Law
relating to any such Hazardous Material, the Premises or the use of the Premises
by any person other than Tenant, or Tenant's Agents to the extent that any of
the foregoing actually results from any Environmental Activity on the Premises
undertaken or committed by Landlord or Landlord's agents, employees, managers,
contractors or representatives. Notwithstanding anything to the contrary herein,
Landlord hereby agrees to release Tenant, and Tenant's Agents, successors,
parents and subsidiaries, from and against all claims, actions, suits,
proceedings, judgments, losses, costs, personal injuries, damages, liabilities,
deficiencies, fines, penalties, damages, attorneys' fees, consultants' fees,
investigations, detoxifications, remediations, removals, and expenses of every
type and nature, directly or indirectly arising out of or in connection with any
Hazardous Material present on or about the Premises, or the soil, air,
improvements, groundwater or surface water thereof prior to the Commencement
Date or any Hazardous Materials which migrate to the Premises after the
Commencement Date, and which is not attributable to the Environmental Activities
of Tenant or Tenant's Agents.

        20.    Option to Purchase. Tenant shall have an option to purchase the
Premises on the terms and conditions of the Option to Purchase attached hereto
as Exhibit H.
   ---------

        21.    Options to Renew. Tenant shall have two five (5) year options to
renew this Lease under the terms and conditions of the options to renew attached
hereto as Exhibit I.
          ---------

                                      46
<PAGE>

         IN WITNESS WHEREOF, the undersigned have executed this Lease as of the
date and year first above written.

                              GH TECH I L.L.C., a Delaware limited liability
                              company

                              By:  THE GUARDIAN LIFE INSURANCE
                                   COMPANY OF AMERICA, a New York
                                   corporation, a Member

                                   By: /s/ Keith E. Duane
                                      ------------------------------------------
                                   Name: Keith E. Duane
                                        ----------------------------------------
                                   Title: Director, Real Estate Asset Management
                                         ---------------------------------------

                                   Witness:_____________________________________

                                   By:__________________________________________
                                           Gary J. Hewson, a Member

                              CATALYTICA ENERGY SYSTEMS, INC., a
                              Delaware corporation

                              By: /s/ Craig N. Kitchen
                                 ---------------------------------------------
                              Its: CEO
                                  --------------------------------------------

                                      47
<PAGE>

STATE OF NEW YORK   )
                    ) ss.
County of New York  )

         The foregoing instrument was acknowledged before me this _____ day of
____________________, 2001, by _____________________________________________,
the __________________________ of The Guardian Life Insurance Company of
America, a New York corporation, as a Member of GH TECH I L.L.C., a Delaware
limited liability company, on behalf of the company.

                                             ________________________________
                                             Notary Public

My commission expires:

__________________________________

STATE OF ARIZONA    )
                    ) ss.
County of Maricopa  )

         The foregoing instrument was acknowledged before me this _____ day of
_____________________, 2001, by Gary J. Hewson, as a Member of GH Tech I L.L.C.,
a Delaware limited liability company, on behalf of the company.

                                             ________________________________
                                             Notary Public

My commission expires:

__________________________________
<PAGE>

State of California

County of Maricopa

On _________________________ , before me Patricia L. Miller, Notary Public,
personally appeared Craig N. Kitchen, [_] personally known to me - OR - [X]
proved to me on the basis of satisfactory evidence to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

Signature: Patricia L. Miller   (Seal)
           --------------------
               Notary Public

         [SEAL]

                                       2
<PAGE>

                                   EXHIBIT B
                                   ---------

                             BUILDING SHELL PLANS
                             --------------------

                                       3
<PAGE>

                                   EXHIBIT C
                                   ---------

                      DESCRIPTION OF TENANT IMPROVEMENTS
                      ----------------------------------

                                       4
<PAGE>

                                   EXHIBIT D
                                   ---------

                            HOLD HARMLESS AGREEMENT
                            -----------------------

         THIS AGREEMENT made this ____ day of _________, 2001, by and between GH
TECH I L.L.C., a Delaware limited liability company ("Owner"), and CATALYTICA
ENERGY SYSTEMS, INC., a Delaware corporation ("Tenant").

         In consideration of the mutual covenants and agreements herein
contained, the parties do hereby agree as follows:

         1.    This Agreement is being executed in connection with that certain
Standard Form Industrial Lease, dated __ ___________, 2001 between Owner, as
Landlord, and Tenant, as Tenant (the "Lease"). The term "Cost and Expenses" when
used in this Agreement means all costs, expenses, and fees of every kind and
nature, including without limitation reasonable attorney's fees and all other
expenses arising from or connected with threatened or pending actions, suits,
claims, demands, or proceedings, including without limitation, court costs and
costs of depositions, transcripts, expert witnesses and printing. The term
"Premises" when used in this Agreement means the real property which is to be
leased by Owner to Tenant pursuant to the Lease and with respect to which
Tenant's occupancy rights commence at some time after expiration of the early
occupancy period described in Section 2 below. The term "Term" when used in this
Agreement means the Term of the Lease.

         2.    Subject to Tenant's compliance with all of the provisions of
paragraph 3( ) of the Lease, Owner does hereby grant to Tenant, commencing on
the ____ day of _________, 2001, and continuing until further notice of
termination by either of the parties hereto, the right to enter the Premises,
with its agents, employees and contractors, prior to commencement of the Term in
order for Tenant to install Tenant's trade fixtures and equipment so long as
such entry does not unreasonably interfere with or delay in any manner work
being done on the Premises by Owner's authorized construction representatives.

         3.    Owner shall not in any manner or for any cause be liable or
responsible to Tenant for any injury (including death) or damage to Tenant or
its agents, employees or contractors or to any goods or property brought upon
the Premises by Tenant or its agents, employees or contractors, and Tenant
hereby waives as against Owner any and all suits, claims, damages, losses, Costs
and Expenses which may be incurred by Tenant in connection with such injuries
(including death) or damages; provided, however, such non-responsibility and
waiver shall not apply to injuries to person caused by the negligence or other
willful misconduct of Owner. Tenant has inspected the Premises and equipment,
and assumes the risk of all conditions (dangerous or not) in and about the
Premises and the equipment.

         4.    Tenant agrees to indemnify and hold and save Owner harmless for,
from and against all suits, claims, liabilities, losses, damage, Costs and
Expenses arising from any of the following: (a) the acts (whether negligent or
not) or omissions (whether negligent or not) of Tenant, its agents, employees,
or contractors, (b) from the breach of any duty or obligation which is to be
performed by Tenant hereunder, and (c) the exercise of the entry rights granted
hereunder, except to the extent any such suit, claim, liability, loss, damage or
Cost and Expense

                                       5
<PAGE>

is based on any injury to persons and is caused by the negligence or other
willful misconduct of Owner. This indemnity shall survive the expiration or
termination of this Agreement.

         5.    Tenant, shall not, in the performance of its obligations and
rights hereunder, violate any governmental law, ordinance, regulation, rule or
order, or any regulation, rule or order of any local Board of Fire Underwriters.

         6.    Tenant, in carrying on its activities in and about the Premises,
shall not create or permit a nuisance thereon or act, perform or demonstrate in
any manner considered objectionable to Owner's employees, customers or lessees
or which shall in any manner be dangerous or calculated or likely to cause
injury to any person or property or result in fire or any other damage to the
property of Owner or other lessees of Owner.

         7.    Until commencement of the Term of the Lease, Tenant shall not
engage in any activities on the Premises except those directly related to the
installation of Tenant's trade fixtures and equipment as permitted by Section 2
above. Owner also reserves the right to prohibit any and all activities on the
Premises which, in its reasonable opinion, are unsafe, unreasonably interfere
with the work on the Premises being performed by Owner's construction
representatives or may cause labor disturbances or unrest and to coordinate the
scheduling of work to be done by Tenant with Owner's activities on the Premises.

         8.    This Agreement may be amended, waived, or discharged only by
an instrument in writing signed by the party against which enforcement of such
amendment or modification is sought.

         9.    In the event of any action or proceeding to compel compliance
with, or for a breach of, the terms and conditions of this Agreement, the
prevailing party shall be entitled to recover from the losing party all
reasonable costs and expenses of such action or proceeding including, but not
limited to, the reasonable attorney's fees of the prevailing party.

         10.   This Agreement shall bind the respective parties, their heirs,
executors, administrators, successors and assigns.

         IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
the day and year above written.

OWNER:

GH TECH I L.L.C., a Delaware limited liability company

BY:      HEWSON DEVELOPMENT CORPORATION, an Arizona corporation, its Manager

         By:____________________________
         Its:___________________________

                                       6
<PAGE>

TENANT:

CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation

         By:____________________________
         Its:___________________________

                                       7
<PAGE>

                                   EXHIBIT E
                                   ---------

                                     NONE

                                       8
<PAGE>

                                   EXHIBIT F
                                   ---------

                         LETTER OF CREDIT REQUIREMENTS

         1.    Letter of Credit Provisions. Except as hereinafter provided,
               ---------------------------
Tenant shall keep in full force and effect, from the date of execution of this
Lease until sixty (60) days after the expiration of the Term of this Lease, an
unconditional and irrevocable letter of credit in favor of and for the account
of Landlord which satisfies all of the following requirements (the "Letter of
Credit"):

         (a)   The Letter of Credit have a term expiring not less than
thirty (30) days after the scheduled expiration of the Term of this Lease;
provided, however, the Letter of Credit may have a term of not less than one (1)
year if the Letter of Credit provides that it will automatically renew on an
annual basis throughout the above specified period and that Landlord will be
given a notice of renewal or non-renewal of the Letter of Credit by the issuer
on or before thirty (30) days prior to the expiration of the then current term
of the Letter of Credit. If such a notice of renewal is not given to Landlord,
Landlord may, at any time during the period commencing twenty-five (25) days
prior to the expiration of the Letter of Credit until the expiration of the
Letter of Credit, draw upon the Letter of Credit and treat the proceeds as a
cash Security Deposit under this Lease unless Tenant, on or before such drawing
by Landlord, delivers to Landlord a substitute Letter of Credit complying with
all of the requirements of this Exhibit F.

         (b)   The Letter of Credit shall be in an amount not less than
$300,000.00; provided, however, such maximum amount may be reduced by Tenant in
accordance with the provisions of subparagraph 6(b) of the Lease.

         (c)   The Letter of Credit shall be transferable by Landlord and
by any subsequent Landlord under this Lease in connection with any assignment of
this Lease to a new owner of the Premises so long as the Landlord and new owner
agree, in writing, that only the new owner may draw upon the Letter of Credit
and the new owner has assumed all of the Landlord's obligations under this Lease
to be performed after the date of such assignment (except that such written
agreement and assumption shall not be necessary if the new owner has acquired
the Premises as a result of the exercise of a lienholder's rights under a
mortgage, deed of trust, assignment of leases or other instrument of
hypothecation or as a result of a transfer or deed in lieu of the exercise of
such rights).

         (d)   The Letter of Credit shall be issued by Silicon Valley Bank
or other financial institution incorporated or chartered under the laws of the
United States or any state thereof and approved by Landlord, which approval
shall not be unreasonably withheld or delayed so long as Tenant furnishes to
Landlord such information concerning the creditworthiness and financial
stability of such institution as Landlord shall reasonably request, and shall
otherwise be in form and substance satisfactory to Landlord.

         (e)   The Letter of Credit may be drawn upon from time to time by
Landlord upon presentations by the Landlord of the Letter of Credit and a
written statement signed by Landlord certifying, under penalty of perjury, (i)
that the Tenant has failed to perform any one or more of

                                       9
<PAGE>

the obligations required to be performed by Tenant under the Lease, and has not
cured such failure, that such default has continued beyond all applicable notice
and cure periods, that the amount drawn on the Letter of Credit is the amount
due to Landlord on account of the Tenant's default, and that Landlord is
therefore entitled to draw upon the Letter of Credit in the amount requested; or
(ii) that Landlord is specifically entitled under the Lease to draw thereon.

         2.    Letter of Credit Conditions.
               ---------------------------

         (a)   The Letter of Credit shall be security for the faithful
performance and observance by Tenant of the terms, covenants, conditions and
provisions of this Lease. If there is a default or breach of this Lease under
subparagraph 17(a) of this Lease (which breach of default occurs under
subparagraph 17(a) only after the expiration of any notice and/or cure period if
a notice and/or cure period is applicable) (including, but not limited to,
Tenant's obligation to have the Letter of Credit in effect as provided in this
Exhibit F), , Landlord may at its option and from time to time draw upon and
apply amounts received under the Letter of Credit to remedy Tenant's default of
any of its obligations and/or to apply to damages incurred by Landlord as a
result of any such default. If the Lease is terminated prior to the scheduled
Term hereof, the Letter of Credit shall be returned to Tenant within thirty (30)
days after such termination less any drawings made by Landlord in accordance
with this Exhibit F and paragraph 6 of the Lease; provided, however, Landlord
may make such drawings prior to return as Landlord deems appropriate to have
security for damages to which Landlord will be entitled as a result of such
early termination.

         (b)   If Tenant fails to have on deposit with Landlord at any time
required hereunder as Letter of Credit or cash fully satisfying the requirements
of paragraph 6 of the Lease and this Exhibit F, and such failure continues for
ten (10) business days after Tenant's receipt of written notice of such failure,
such failure shall constitute a default under the Lease. Landlord shall have all
remedies under paragraph 17 of the Lease in the event any such default occurs.
If the financial institution issuing the Letter of Credit for any reason
indicates that the Letter of Credit will be dishonored or terminated or expire
prior to the date specified in subparagraph 1.(a) of this Exhibit F, even if
such a dishonor, termination or expiration would be wrongful, Landlord may, in
addition to any other rights and remedies it may have under this Lease or the
Letter of Credit, draw upon the Letter of Credit, treat the entire amount of the
proceeds of such drawing as a cash Security Deposit under this Lease, and retain
and/or apply such proceeds in the same manner as provided for a cash Security
Deposit; provided, however, if such termination or expiration will not occur for
a period of more than fifty-nine (59) days after Landlord acquires knowledge
that the Letter of Credit may so terminate or expire, Landlord will not draw
upon such Letter of Credit for the reasons specified in this sentence sooner
than thirty (30) days prior to such expiration or termination unless Landlord
reasonably believes that a delay in drawing may result in its inability to
effectively draw upon the Letter of Credit at a later date.

         (c)   If Tenant shall fully and faithfully comply with all of the
terms, provisions, covenants and conditions of this Lease, then the Letter of
Credit shall be returned to Tenant upon or prior to the expiration of the Letter
of Credit. If a sale or leasing of the Property or the Building occurs, then
Landlord shall have the right to transfer the Letter of Credit to the vendee or
lessee (subject to the limitations set forth in clause (c) above) and Landlord
shall thereupon be

                                      10
<PAGE>

released by Tenant from all liability for the return of the Letter of Credit and
Tenant shall cause the bank which issued the Letter of Credit to issue an
amendment to the Letter of Credit, or to issue a new Letter of Credit, naming
the vendee or lessee as the beneficiary thereunder. In the event of such a
transfer of the Letter of Credit, Tenant shall look solely to the new landlord
for the return of the Letter of Credit, so long as the new landlord expressly
assumes in writing all of Landlord's obligations with respect to the Letter of
Credit.

         (d)   If Landlord draws upon the full amount of the Letter of Credit
for any reason under this Exhibit F or paragraph 6 of the Lease and holds in
cash as a Security Deposit proceeds from such Letter of Credit, Tenant may, at
any time thereafter that such cash is being held, substitute for such a new
Letter of Credit so long as the Letter of Credit is in the amount of the
Security Deposit required at such time under this Lease and otherwise complies
with all of the requirements of paragraph 6 of the Lease and with this Exhibit
F, except that Landlord shall not have any obligation to accept the letter of
credit from Silicon Valley Bank.

         (e)   In addition, if Landlord, in its reasonable discretion, becomes
dissatisfied with the financial condition or financial reputation of the
financial institution which has issued a Letter of Credit then serving as the
Security Deposit hereunder, Landlord may give notice to Tenant that Landlord
will draw upon the Letter of Credit not earlier than thirty (30) days after the
giving of such notice, and Landlord may so draw upon the full amount of the
Letter of Credit after such period of time and treat the proceeds as a cash
Security Deposit hereunder unless Tenant furnishes to Landlord within such
thirty (30) day period a substitute Letter of Credit from a financial
institution approved by Landlord, which approval shall not be unreasonably
withheld, delayed or conditioned, in the full amount of the Letter of Credit
required at such time under this Lease and which otherwise complies with all of
the requirements of paragraph 6 of the Lease and this Exhibit F; provided,
however, if a replacement Letter of Credit is required by Landlord solely
pursuant to this last paragraph of Exhibit F, Landlord shall be responsible for
paying all issuance and renewal fees under such replacement Letter of Credit
(but only for the first year in which such replacement Letter of Credit is
required by Landlord) which are in excess of the fees which would otherwise be
payable by Tenant for the Letter of Credit which is being replaced.

                                      11
<PAGE>

                                   EXHIBIT G
                                   ---------

                              CONTRACTOR PRICING

                                      12
<PAGE>

                                   EXHIBIT H
                                   ---------

                              OPTION TO PURCHASE

         1.    Grant of Option. Provided that there is not on the date of
               ---------------
the Exercise Notice (defined below) or the date of the closing a default or
breach of the Lease and that no event shall have occurred or state of facts
exist which, if continued uncured will, with the lapse of time or the delivery
of notice, or both, constitute a default or breach of the Lease, Tenant shall
have, and is hereby granted, the option (the "Purchase Option") to purchase the
Premises, as is, where is, without any representations or warranties of any kind
or nature whatsoever, including but not limited to any representation or
warranty relating to the Premises or the use or occupation thereof or income
therefrom, in accordance with the provisions of this Exhibit H.

         2.    Exercise of Option. In order to exercise the Purchase
               ------------------
Option, Tenant shall deliver to Landlord, not later than December 31, 2001, a
written notice of its election to exercise the Purchase Option (the "Exercise
Notice"), together with a non-refundable earnest money deposit in the amount of
$100,000.00 in currently available funds (the "Deposit"). Interest earned on the
Deposit shall belong to the party entitled to the Deposit. If Tenant fails to
consummate the purchase of the Premises, Landlord shall be entitled to retain
the Deposit as its only remedy. Tenant's purchase of the Premises from Landlord
pursuant to the Purchase Option shall close, unless Landlord and Tenant agree
otherwise in writing, on January 31, 2002.

         3.    Closing. Landlord and Tenant shall consummate the purchase
               -------
and sale of the Premises through an escrow with a title company reasonably
selected by Tenant (the "Title Company"). The purchase price for the Premises
shall be $4,096,750.00 (the "Purchase Price") and shall be payable in cash at
the closing, subject to no financing or other contingency. Landlord shall
convey, at the closing, title to the Premises by special warranty deed free and
clear of consensual liens and encumbrances (except that taxes and improvement
assessments shall be prorated, but only to the extent that Tenant was not
otherwise responsible for same pursuant to the Lease), subject to such matters
as may then appear of record. Landlord and Tenant shall cause the Title Company
to deliver to Tenant, at the closing, an ALTA standard coverage owner's policy
of title insurance insuring Tenant that title to the Premises is vested in
Tenant. Landlord shall pay only the premium for a standard coverage owner's
policy of title insurance, and Tenant shall pay all additional costs including
survey work and the cost of any endorsements and additional coverages desired by
Tenant. Closing costs, escrow fees, recording fees and other usual and customary
items shall be shared by Lessor and Lessee in accordance with local custom.

         4.    Eminent Domain. If, prior to closing, Landlord receives
               --------------
notice of the commencement or threatened commencement of eminent domain or other
like proceedings ("Taking") against the Premises or any portion thereof,
Landlord shall immediately give notice thereof to Tenant. Tenant shall elect
within fifteen (15) days after receipt by Buyer of all information reasonably
required from Landlord to assess the effect of the Taking (Landlord hereby
agreeing to cooperate with Tenant in providing such information to the extent
available to Landlord) by notice to Landlord either (i) to terminate the
Purchase Option and receive a refund

                                      13
<PAGE>

in full of the Deposit or (ii) the close the transaction contemplated hereby in
accordance with its terms but subject to such proceedings, in which event the
Purchase Price shall not be reduced but Landlord shall assign to Tenant without
recourse Landlord's rights in any condemnation award or proceeds. If Tenant does
not give notice timely, Tenant shall be deemed to have elected to close the
transaction contemplated hereby in accordance with clause (ii) above.

         5.    Destruction. If all or any Material Part (as hereinafter defined)
               -----------
of the Premises are destroyed or damaged prior to closing, Landlord shall give
notice to Tenant of such damage or destruction. Tenant shall elect within
fifteen (15) days after receipt by Tenant of all information reasonably required
from Landlord to assess the effect of the damage or destruction (Landlord hereby
agreeing to cooperate with Tenant in providing such information to the extent
available to Landlord), by notice to Landlord, either (i) to terminate the
Purchase Option and receive a refund in full of the Deposit or (ii) to close the
transaction contemplated hereby, in which event the Purchase Price shall not be
reduced and Landlord shall assign to Tenant Landlord's rights in any insurance
proceeds paid or payable to Landlord in connection with such damage or
destruction. A "Material Part" of the Premises shall have been damaged if the
cost to repair such damage will exceed Two Hundred Thousand Dollars
($200,000.00). If Tenant does not give notice timely, Tenant shall be deemed to
have elected to close the transaction contemplated hereby in accordance with
clause (ii) of this paragraph.

         6.    Restrictions. The Purchase Option may be exercised only by
               ------------
Tenant named in this Lease and may not be exercised by any assignee, sublessee,
successor or transferee of Tenant or by any other person or entity. The Purchase
Option may not be transferred in connection with a transfer or assignment of the
Lease, or separate and apart from a transfer or assignment of the Lease, whether
by operation of law or otherwise. The Purchase Option shall automatically become
null and void and of no further force or effect if Tenant defaults or commits a
breach under the Lease that is not cured within the time periods provided for
cure, even if Landlord chooses to accept an untimely cure.

         7.    Time of the Essence. Time is of the essence with respect to
               -------------------
Tenant's rights and obligations under the Purchase Option. Tenant's failure to
strictly and timely exercise the Purchase Option, or the failure of any other
conditions to the exercise of the Purchase Option, shall render the Purchase
Option automatically null and void and of no further force or effect.
Notwithstanding the automatic nature of the loss of the Purchase Option, Tenant
shall execute, have acknowledged and deliver to Landlord all documents and
instruments reasonably requested by Landlord to evidence the fact that the
Purchase Option is null and void and of no further force and effect. Tenant's
failure to execute and deliver to Landlord all such documents and instruments
within five (5) days after a written request therefor shall be deemed a material
default and breach of the Lease, and no further notice shall be required in
order for Landlord to exercise its remedies under the Lease.

         8.    This Exhibit H shall constitute the only agreement between
Landlord and Tenant for the purchase and sale of the Premises.

                                      14
<PAGE>

                                   EXHIBIT I
                                   ---------

                          OPTION TO EXTEND LEASE TERM

1.       First Extended Term
         -------------------

         Provided that (a) at the time of exercise and at the commencement of
the First Extended Term (as hereinafter defined) Tenant is not in default under
any term or provision of this Lease beyond expiration of an applicable cure
period; (b) the Lease has not been assigned other than to a controlled entity as
set forth in subparagraph 16(i) of the Lease; and (c) Tenant is not subletting
more than twenty-five percent (25%) of the Premises at the commencement of the
First Extended Term other than to a controlled entity as set forth in
subparagraph 16(i) of the Lease, then Tenant shall have the option to extend the
term of this Lease (the "First Option to Extend") for an additional period of
five (5) years (the "First Extended Term") upon the same terms and conditions
set forth in this Lease, so far as applicable; except that the rental for the
First Extended Term shall be the market rent as hereinafter determined for the
consummation, at the time of the exercise of such option, of similar lease
transactions for comparable properties located in the general geographical area
in which the Premises are located; provided, however, the monthly amount of the
Fixed Rent during the First Extended Term shall not be less than the monthly
amount of the Fixed Rent payable during the last year of the initial Term. In
the event that Tenant wishes to exercise this First Option to Extend, Tenant
shall give Landlord written notice of such election not later than one hundred
eighty (180) days prior to expiration of the initial Term.

2.       Second Extended Term
         --------------------

         Provided that (a) at the time of exercise and at the commencement of
the Second Extended Term (as hereinafter defined) Tenant is not in default under
any term or provision of this Lease beyond expiration of any applicable cure
period; and (b) Tenant has previously exercised its option for the First
Extended Term; (c) the Lease has not been assigned other than to a controlled
entity, as set forth in subparagraph 16(i) of the Lease; and (d) Tenant is not
subletting more than twenty-five percent (25%) of the Premises at the
commencement of the First Extended Term other than to a controlled entity as set
forth in subparagraph 16(i) of the Lease, then Tenant shall have the option to
extend the term of this Lease (the "Second Option to Extend", each of the First
Option to Extend and the Second Option to Extend being referred to herein from
time to time as an "Option to Extend") for one (1) additional period of five (5)
years after the First Extended Term (the "Second Extended Term") upon the same
terms and conditions set forth in this Lease, so far as applicable, except that
Tenant shall have no additional option to extend the Term hereof (beyond the
Second Extended Term) and the rental rate for the Second Extended Term shall be
the market rent for the consummation, at the time of the exercise of such
option, of similar lease transactions for comparable properties located in the
general geographical area in which the Premises are located; provided, however,
the monthly amount of the Fixed Rent during the Second Extended Term shall not
be less than the monthly amount of the Fixed Rent payable during the last year
of the First Extended Term. In the event the Tenant wishes to exercise this
Second Option to Extend, Tenant shall give Landlord written notice of

                                      15
<PAGE>

such election not later than one hundred eighty (180) days prior to expiration
of the First Extended Term.

3.       Market Rental
         -------------

         (a)   Upon receipt by Landlord of a notice that Tenant is
exercising an Option to Extend, Landlord and Tenant shall attempt to determine
the market rent for the First or Second Extended Term, as applicable, with the
market rent to reflect both a Fixed Rent as provided in subparagraph 5(a) of the
Lease and those adjustments to Fixed Rent during the Extended Term which are of
a type then typical in the rental market and to be based on the market rental
for new leases being executed as of six (6) months prior to the expiration of
the Initial Term or of the First Extended Term, as applicable (the "Valuation
Date"). In determining the market rent for an Extended Term, due consideration
shall be given, among other things, to the length of the Extended Term; the
amount of the Fixed Rent; whether or not such Fixed Rent should be subject to
periodic Consumer Price Index or other adjustments; the level of improvements
(excluding from such valuation the value of improvements or alterations made at
Tenant's cost or expense, except for the Tenant Improvements); liability of
tenants for reimbursable expenses; and the respective maintenance
responsibilities of landlords and tenants; provided, however, the effect of all
such considerations shall be reflected in the Fixed Rent and periodic
Adjustments to Fixed Rent, no other provisions of this Lease shall be modified,
and Landlord shall have no tenant improvement construction obligations.

         (b)   If Tenant has exercised an Option to Extend, Landlord, within
thirty (30) days after the Valuation Date, shall present Tenant in writing with
the proposed market rental. If Tenant is dissatisfied with the proposed market
rental presented by Landlord, Tenant may, by delivery to Landlord of notice
within ten (10) days thereafter, elect to rescind Tenant's exercise of the
Option to Extend, in which event all rights of Tenant under this Exhibit I shall
terminate. If Tenant does not so rescind Tenant's notice of exercise, then
Tenant shall, within twenty (20) days after receipt of Landlord's proposed
market rental, either accept the market rental proposed by the Landlord or
present Landlord in writing with its proposed market rental. Within ten (10)
days thereafter, Landlord shall either accept the market rental or notify Tenant
that the proposed market rental is unacceptable. If the proposed market rental
is unacceptable to Landlord, and/or if Landlord and Tenant are unable to agree
as to the renewal fair market rental at least four (4) months prior to the
Expiration Date of the Initial Term or the First Extended Term, as applicable,
then the matter shall be submitted to arbitration in accordance with the
following: within five (5) days after the date that is four (4) months prior to
the expiration of the Initial Term or the First Extended Term as applicable,
Landlord and Tenant shall each appoint a Qualified Appraiser. "Qualified
Appraiser" shall mean a person who is (i) not an affiliate of either Tenant or
Landlord; (ii) qualified to appraise commercial real estate in the Phoenix
metropolitan area; and (iii) a member of the American Institute of Real Estate
Appraisers, the Society of Real Estate Appraisers or any successor associations.
Landlord and Tenant shall be entitled to provide such Qualified Appraisers such
information as each party deems relevant. Each of the Qualified Appraisers
appointed by Landlord and Tenant (the "Original Qualified Appraisers") shall,
within fifteen (15) days after the date on which he or she is appointed,
independently determine the new Fixed Rent (taking into account all of the
factors set forth above) and give written notice thereof to Landlord and Tenant.
In the event of the failure, refusal or inability of either of the Original

                                      16
<PAGE>

Qualified Appraisers to act, a new Original Qualified Appraiser shall be
appointed by the party that appointed the non-acting Original Qualified
Appraiser. If the lower of the two Fixed Rent determinations as determined by
the Original Qualified Appraisers is equal to or greater than ninety-five
percent (95%) of the Fixed Rent determination as determined by the other
Original Qualified Appraiser, then the two determinations shall be averaged to
determine the Fixed Rent for the Extended Term. If the lower of the two values
is less than ninety-five percent (95%) of the value as determined by the other
Original Qualified Appraiser, then each of the Original Qualified Appraisers
shall, within five (5) days after the last of the two reports of the Original
Qualified Appraisers is delivered to Landlord and Tenant, agreed upon a third
qualified appraiser (the "Third Qualified Appraiser"). If the two Original
Qualified Appraisers are unable to agree upon a Third Qualified Appraiser, then
the Presiding Judge of the Maricopa County Superior Court shall select the Third
Qualified Appraiser. Within fifteen (15) days after the selection of the Third
Qualified Appraiser, the Third Qualified Appraiser shall independently determine
the Fixed Rent on the basis set forth above. Thereafter, all three values as
determined by the Qualified Appraisers shall be compared and the two Fixed Rents
with the least variation between them shall be averaged to determine the Fixed
Rent. Landlord and Tenant shall share equally the fees of all Qualified
Appraisers. If no determination is made prior to the commencement of an Extended
Term, Tenant will continue to pay to Landlord the Fixed Rent plus Adjustments as
in effect at the end of the term immediately preceding such Extended Term and,
upon such fair market rental being determined, Tenant will pay to Landlord the
difference between the rent already paid by Tenant for the Extended Term and the
actual amount of rent attributable to the Extended Term through the date of such
determination. Upon the determination of the fair market rental as aforesaid,
the parties will enter into an amendment to the Lease stating the Fixed Rent and
any Adjustments for the Extended Term.

                                      17

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