Document:

<PAGE>

                                                                    EXHIBIT 10.3

                                     LEASE
                     7600-A North Capital of Texas Highway
                                 Austin, Texas
<PAGE>

<TABLE>

<C>               <S>                                                                    <C>
     Article 1    Reference Data.......................................................  1
             1.1  Introduction and Subjects Referred To................................  1
             1.2  Exhibits.............................................................  2
     Article 2    Premises and Term....................................................  3
             2.1  Premises.............................................................  3
             2.2  Term.................................................................  3
             2.3  Extension Option.....................................................  3
             2.4  Measurement of the Premises..........................................  5
     Article 3    Condition............................................................  5
             3.1  Condition............................................................  5
             3.2  Preparation of the Premises..........................................  5
     Article 4    Rent, Additional Rent, Insurance and Other Charges...................  6
             4.1  The Annual Fixed Rent................................................  6
             4.2  Additional Rent......................................................  6
           4.2.1  Real Estate Taxes....................................................  7
           4.2.2  Operating Costs......................................................  8
             4.3  Personal Property and Sales Taxes.................................... 11
             4.4  Insurance............................................................ 11
             4.5  Utilities............................................................ 12
             4.6  Late Payment of Rent................................................. 13
             4.7  Security Deposit..................................................... 13
     Article 5    Landlord's Covenants................................................. 15
             5.1  Affirmative Covenants................................................ 15
           5.1.1  Heat and Air-Conditioning............................................ 15
           5.1.2  Electricity.......................................................... 15
           5.1.3  Cleaning; Water...................................................... 15
           5.1.4  Elevator and Lighting................................................ 15
           5.1.5  Repairs and Maintenance.............................................. 15
           5.1.6  Landlord Indemnity................................................... 16
           5.1.7  Landlord's Insurance................................................. 16
             5.2  Interruption......................................................... 16
             5.3  Outside Services..................................................... 17
             5.4  Parking.............................................................. 17
     Article 6    Tenant's Additional Covenants........................................ 18
             6.1  Affirmative Covenants................................................ 18
           6.1.1  Perform Obligations.................................................. 18
           6.1.2  Use.................................................................. 18
           6.1.3  Repair and Maintenance............................................... 18
           6.1.4  Compliance with Law.................................................. 18
           6.1.5  Indemnification...................................................... 18
           6.1.6  Landlord's Right to Enter............................................ 19
           6.1.7  Personal Property at Tenant's Risk................................... 19
           6.1.8  Payment of Landlord's Cost of Enforcement............................ 19
           6.1.9  Yield Up............................................................. 19
          6.1.10  Rules and Regulations................................................ 20
          6.1.11  Estoppel Certificate................................................. 20

</TABLE>
                                       i
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<TABLE>
<C>      <S>                                                                         <C>
               6.1.12  Landlord's Expenses For Consents............................. 20
               6.1.13  Financial Information........................................ 20
         6.2   Negative Covenants................................................... 20
               6.2.1  Assignment and Subletting..................................... 20
               6.2.2  Nuisance...................................................... 24
               6.2.3  Floor Load; Heavy Equipment................................... 24
               6.2.4  Electricity................................................... 24
               6.2.5  Installation, Alterations or Additions........................ 25
               6.2.6  Abandonment................................................... 26
               6.2.7  Signs......................................................... 26
               6.2.8  Oil and Hazardous Materials................................... 26
Article  7     Casualty or Taking................................................... 27
         7.1   Termination.......................................................... 27
         7.2   Restoration.......................................................... 28
         7.3   Award................................................................ 28
Article  8     Defaults............................................................. 28
         8.1   Default of Tenant.................................................... 28
         8.2   Remedies............................................................. 29
         8.3   Other Remedies....................................................... 30
         8.4   Remedies Cumulative.................................................. 31
         8.5   Landlord's Right to Cure Defaults.................................... 31
         8.6   Holding Over......................................................... 32
         8.7   Effect of Waivers of Default......................................... 32
         8.8   No Waiver, Etc....................................................... 32
         8.9   No Accord and Satisfaction........................................... 32
Article  9     Rights of Holders.................................................... 32
         9.1   Rights of Mortgagees or Ground Lessor................................ 32
         9.2   Modifications........................................................ 33
Article 10     Miscellaneous Provisions............................................. 34
        10.1   Notices.............................................................. 34
        10.2   Quiet Enjoyment; Landlord's Right to Make Alterations, Etc........... 34
        10.3   Lease not to be Recorded............................................. 35
        10.4   Assignment of Rents and Transfer of Title; Limitation of Landlord's
                  Liability......................................................... 35
        10.5   Landlord's Default................................................... 36
        10.6   Notice to Mortgagee and Ground Lessor................................ 36
        10.7   Brokerage............................................................ 36
        10.8   Applicable Law and Construction...................................... 36
</TABLE>
                                      ii
<PAGE>

                                                                    EXHIBIT 10.3
                                     LEASE
                     7600-A North Capital of Texas Highway
                                 Austin, Texas

                                   Article 1

                                 Reference Data
                                 --------------

     1.1  Introduction and Subjects Referred To.  This is a lease (this "Lease")
          -------------------------------------                          -----
entered into by and between Hub Properties Trust, a Maryland real estate
investment trust ("Landlord") and Netpliance, Inc., a Delaware corporation
                   --------
("Tenant").
--------

     Each reference in this Lease to any of the following terms or phrases shall
be construed to incorporate the corresponding definition stated in this Section
1.1.

     Date of
     this Lease:     May 30, 2000.

     Property:       The three buildings known as Lakewood on the Park, 7600 A,
                     B and C located at 7600 North Capital of Texas Highway,
                     Austin, Texas, and the land parcels on which they are
                     located and the sidewalks adjacent thereto, as further
                     described on Exhibit A-1.

     Premises:       The entire rentable areas of the building known as Building
                     A, 7600 North Capital of Texas Highway, Austin, Texas (the
                     "Building"), excluding the areas described in Section 2.1,
                     --------
                     as further shown on Exhibit A hereto.

     Premises
     Rentable Area:  30,000 square feet.

     Original Term:  Commencing as of April 1, 2001 (the "Commencement Date")
                                                          -----------------
                     and expiring on June 30, 2005; provided however Tenant may
                     extend the Original Term to a date not later than
                     August 30, 2005 by notice to Landlord not later than
                     July 1, 2000.

     Annual
     Fixed Rent:     The sum of (i) for the period April 1, 2001 through March
                     31, 2002, $585,000, (ii) for the period April 1, 2002
                     through March 31, 2003, $600,000, (iii) for the period
                     April 1, 2003 through March 31, 2004, $615,000, (iv) for
                     the period April 1, 2004 through June 30, 2005, $630,000
                     per annum, and (if applicable) (v) for any additional
                     period during the Original Term, $660,000 per annum.

                                       1
<PAGE>

     Permitted
     Uses:                General office purposes, subject to the provisions of
                          Subsection 6.1.2.

     Security
     Deposit:             From the Date of this Lease through the day preceding
                          the first anniversary of the Commencement Date, the
                          Security Deposit shall be $589,050; during the second
                          twelve months of the Original Term, the Security
                          Deposit shall be $471,240; during the third twelve
                          months, the Security Deposit shall be $353,430; and
                          during the remainder of the Original Term, the
                          Security Deposit shall be $235,620; and the Security
                          Deposit shall be eliminated as of the date Tenant
                          shall have and shall have maintained for at least one
                          (1) continuous calendar year at any time from the Date
                          of this Lease a tangible net worth computed in
                          accordance with generally accepted accounting
                          principles of at least $75,000,000, and shall have
                          given Landlord evidence reasonably satisfactory to
                          Landlord thereof, provided, however, no reduction or
                          elimination in the amount of the Security Deposit
                          shall occur if there shall have existed a Default of
                          Tenant at any time prior to the date such reduction or
                          elimination would otherwise have occurred. In lieu of
                          a cash Security Deposit, Tenant may deposit with
                          Landlord an irrevocable letter of credit, as further
                          provided in Section 4.7.

     Commercial General
     Liability Insurance
     Limits:              $5,000,000 per occurrence (combined single limit) for
                          property damage, bodily and personal injury and death.

     Original
     Address of
     Landlord:            c/o REIT Management & Research, Inc. 6300 Bridgepoint
                          Parkway, Suite 125 Austin, TX 78730-5073

     1.2  Exhibits.  The Exhibits listed below in this section are incorporated
          --------
in this Lease by reference and are to be construed as a part of this Lease.

     EXHIBIT A.    Plan showing the Premises.
     EXHIBIT A-1.  Description of the Property.
     EXHIBIT B.    Rules and Regulations.
     EXHIBIT C.    Alterations Requirements.
     EXHIBIT D.    Contractor's Insurance Requirements.
     EXHIBIT E.    Clerk's Certificate.

                                       2
<PAGE>

                                   Article 2

                               Premises and Term
                               -----------------

     2.1  Premises.  Landlord hereby leases to Tenant and Tenant hereby leases
          --------
from Landlord, subject to and with the benefit of the terms, covenants,
conditions and provisions of this Lease, the Premises, excluding exterior faces
of exterior walls, the roof, elevator shafts and other areas used by Landlord to
perform its obligations with this Lease, the elevators, pipes, ducts, conduits,
wires and appurtenant fixtures and other common facilities serving the common
areas of the Property.

     2.2  Term.  The term of this Lease shall be for a period beginning on the
          ----
Commencement Date (as defined in Section 3.1) and continuing for the Original
Term and any extension thereof in accordance with the provision of this Lease,
unless sooner terminated as hereinafter provided.  When the dates of the
beginning and end of the Original Term have been determined such dates shall be
evidenced by a document executed by Landlord and Tenant and delivered each to
the other, but the failure of Landlord and Tenant to execute or deliver such
document shall have no effect upon such dates.  The Original Term and any
extension thereof in accordance with the provisions of this Lease are
hereinafter referred to as the "term" of this Lease.
                                ----

     2.3  Extension Option. So long as this Lease is still in full force and
          ----------------
effect, and the named Tenant as set forth in Section 1.1 (or any successor by
merger, or any Affiliate) shall actually occupy the entire Premises, Tenant
shall have the right to extend the term of this Lease for one (1) additional
period (the "Extended Term") of five (5) years. The Extended Term shall commence
             -------------
on the day succeeding the expiration of the Original Term and shall end on the
day immediately preceding the fifth anniversary of the commencement of the
Extended Term. All of the terms, covenants and provisions of this Lease
applicable immediately prior to the expiration of the Original Term shall apply
to the Extended Term except that (i) the Annual Fixed Rent for the Extended Term
shall be greater of (a) the Annual Fixed Rent in effect on the day preceding the
commencement of such Extended Term without giving effect to any abatements,
setoffs or concession then in effect, or (b) the Market Rate (as hereinafter
defined) for the Premises determined as of the commencement of such Extended
Term, which shall be designated by Landlord by notice to Tenant ("Landlord's
                                                                  ----------
Notice"), but which shall be subject to Tenant's right to dispute as hereinafter
------
provided, Landlord agreeing to provide Landlord's Notice to Tenant within thirty
(30) days after receipt by Landlord of Tenant's notice of its election to extend
the term provided such notice from Tenant requests that the determination be
made within such 30-day period; and (ii) Tenant shall have no further right to
extend the term of this Lease beyond the Extended Term hereinabove provided. If
Tenant shall elect to exercise the aforesaid option, it shall do so by giving
Landlord notice of its election not later than one year, nor sooner than
fourteen (14) months, prior to the expiration of the Original Term. If Tenant
fails to give such notice to Landlord, the term of this Lease shall
automatically terminate no later than the end of the Original Term, and Tenant
shall have no further option to extend the term of this Lease, it being agreed
that time is of the essence with respect to the giving of any such notice. If
Tenant shall extend the term hereof pursuant to the provisions of this Section
2.3, such extension shall be automatically effected without the execution of any
additional documents, but Tenant shall, at

                                       3
<PAGE>

Landlord's request, execute an agreement confirming the Annual Fixed Rent for
the applicable Extended Term.

     "Market Rate" shall mean the then annual rental rate and terms for the
      -----------
Premises for the Extended Term (determined as set forth below).  If Tenant
disagrees with Landlord's designation of the Market Rate, and the parties cannot
agree upon the Market Rate by the date that is thirty (30) days following
Landlord's Notice, then the Market Rate shall be submitted to appraisal as
follows:  Within fifteen (15) days after the expiration of such thirty (30) day
period, Landlord and Tenant shall each give notice to the other specifying the
name and address of the appraiser each has chosen.  The two appraisers so chosen
shall meet within ten (10) days after the second appraiser is appointed and if,
within twenty (20) days after the second appraiser is appointed, the two
appraisers shall not agree upon a determination of the Market Rate in accordance
with the following provisions of this Section 2.3 they shall together appoint a
third appraiser.  If only one appraiser shall be chosen whose name and address
shall have been given to the other party within such fifteen (15) day period and
who shall have the qualifications hereinafter set forth, that sole appraiser
shall render the decision which would otherwise have been made as hereinabove
provided.

     If said two appraisers cannot agree upon the appointment of a third
appraiser within ten (10) days after the expiration of such twenty (20) day
period, then either party, on behalf of both and on notice to the other, may
request such appointment by the then President of the American Arbitration
Association (or any successor organization) in accordance with its then
prevailing rules.  In the event that all three appraisers cannot agree upon such
Market Rate within ten (10) days after the third appraiser shall have been
selected, then each appraiser shall submit his or her designation of such Market
Rate to the other two appraisers in writing; and Market Rate shall be determined
by calculating the average of the two numerically closest (or, if the values are
equidistant, all three) values so determined.

     Each of the appraisers selected as herein provided shall have at least ten
(10) years experience as a commercial real estate broker in the City of Austin,
Texas  area dealing with properties of the same type and quality as the
Building.  Each party shall pay the fees and expenses of the appraiser it has
selected and the fees of its own counsel.  Each party shall pay one half (1/2)
of the fees and expenses of the third appraiser (or the sole appraiser, if
applicable) and all other expenses of the appraisal.  The decision and award of
the appraiser(s) shall be in writing and shall be final and conclusive on all
parties, and counterpart copies thereof shall be delivered to both Landlord and
Tenant.  Judgment upon the award of the appraiser(s) may be entered in any court
of competent jurisdiction.

     Both appraisers or a majority of them (or the sole appraiser, if
applicable) shall determine the Market Rate of the Premises for the applicable
period as of the commencement of the applicable Extended Term and render a
decision and award as to their determination to both Landlord and Tenant (a)
within twenty (20) days after the appointment of the second appraiser, (b)
within twenty (20) days after the appointment of the third appraiser or (c)
within fifteen (15) days after the appointment of the sole appraiser, as the
case may be.  In rendering such decision and award, the appraiser(s) shall
assume (i) that the Premises are available in the then rental market, (ii) that
Landlord has had a reasonable time to locate a tenant, (iii) that neither
Landlord nor the prospective tenant is under a compulsion to rent, (iv) that
Landlord and Tenant are

                                       4
<PAGE>

typically motivated, well-informed and well-advised, and each is acting in what
it considers its own best interest, (v) the Premises (w) are fit for immediate
occupancy and use "as is", (x) require no additional work by Landlord or Tenant,
(y) are appropriate and desired for immediate occupancy by Tenant, and (z)
contain no work that has been carried out thereon by Tenant, its subtenant(s),
or its or their successors-in-interest during the Term of this Lease which has
diminished the rental value of the Premises, and (vi) that in the event the
Premises are destroyed or damaged by fire or other casualty prior to the
commencement of the Extended Term, they have been fully restored. The appraisers
shall also take into consideration any increases or possible increases in rent
then being included in leases for comparable space in the Building or in
comparable buildings based on changes in price indices, cost of living or other
similar increases, or periodic market rental adjustments. In rendering such
decision and award, the appraiser(s) shall consider the market fixed annual
rents then being charged for comparable space in comparable buildings in the
greater Austin, Texas area, but shall not modify the provisions of this Lease.

     If the dispute between the parties as to the Market Rate has not been
resolved before the commencement of Tenant's obligation to pay the Annual Fixed
Rent based upon determination of such Market Rate, then Tenant shall pay the
Annual Fixed Rent under the Lease based upon the Market Rate designated by
Landlord in Landlord's Notice until either the agreement of the parties as to
the Market Rate, or the decision of the appraiser(s), as the case may be, at
which time Tenant shall pay any underpayment of the Annual Fixed Rent to
Landlord, or Landlord shall refund any overpayment of the Annual Fixed Rent to
Tenant.

     Landlord and Tenant hereby waive the right to an evidentiary hearing before
the appraiser(s) and agree that the appraisal shall not be an arbitration nor be
subject to state or federal law relating to arbitrations.

     2.4  Measurement of the Premises. Landlord and Tenant agree that the
          ---------------------------
Premises Rentable Area identified in Section 1.1 is recited for Landlord's
administrative purposes only and that, although the Annual Fixed Rent has been
determined by reference to such square footage (regardless of the possibility
that the actual measurement of the Premises may be more or less than the number
identified, irrespective of measurement method used), Annual Fixed Rent .

                                   Article 3

                                   Condition
                                   ---------

     3.1  Condition. Tenant acknowledges that it has occupied the entire
          ---------
Premises prior to the Date of this Lease and is fully familiar therewith and is
leasing the Premises in "as is" condition without warranty or representation by
Landlord.

     3.2  Preparation of the Premises. Tenant acknowledges that it shall perform
          ---------------------------
certain leasehold improvements ("Tenant's Work") in the Premises. Tenant shall,
                                 -------------
promptly and expeditiously, prepare and complete plans and specifications
necessary for Tenant's Work (collectively, "Tenant's Plans") which shall be in
                                            --------------
accordance with Landlord's plan and submission standards set forth in Exhibit C
attached hereto and made a part hereof, and submit

                                       5
<PAGE>

the same to Landlord for Landlord's approval, and promptly prepare and resubmit
any revisions thereof necessary as a result of Landlord's disapproval, and
perform Tenant's Work, all in accordance with the requirements specified in
Section 6.2.4 and Exhibit C. Tenant shall substantially complete Tenant's Work,
at Tenant's sole cost and expense (except to the extent of Landlord's
Contribution, as hereinafter defined). Although Landlord may withhold approval
to Tenant's Plans for any good faith reason, failure by Landlord to disapprove
any of Tenant's Plans within fifteen (15) Business Days after the date of
Landlord's receipt of Tenant's submission or resubmission shall constitute
approval thereof.

     The Premises shall be deemed substantially completed on the first day of
which (i) Tenant's Work has been completed except for items of work (and, if
applicable, adjustment of equipment and fixtures) which can be completed after
occupancy has been taken without causing undue interference with Tenant's
business; and (ii) Tenant has obtained a certificate of occupancy for the
Premises.  Within thirty (30) days following receipt by Landlord of invoices for
Tenant's Work from Tenant's contractor(s) and lien waivers from such
contractors, and provided the Premises are substantially completed as aforesaid
and there shall then exist no Default of Tenant, Landlord shall remit to Tenant
that amount ("Landlord's Contribution") being the lesser of the cost of Tenant's
              -----------------------
Work (excluding any Removables, as defined in Section 6.2.5) shown by such
invoices and $150,000.  To avoid any dispute between Landlord and Tenant as to
the applicability for any invoice for Tenant's Work as opposed to other work
performed in the Premises, Tenant agrees that Landlord shall not be required to
apply Landlord's Contribution toward any invoice submitted later than  six (6)
months after Commencement Date; but Landlord agrees that Tenant's Work may be
performed prior to the Commencement Date, provided Tenant is lawfully in
possession of the Premises at such time.

                                   Article 4

               Rent, Additional Rent, Insurance and Other Charges
               --------------------------------------------------

     4.1  The Annual Fixed Rent. Tenant agrees to pay to Landlord, or as
          ---------------------
otherwise directed by Landlord, commencing on the Commencement Date, without
offset, abatement (except as provided in Section 5.2 and Article 7), deduction
or demand, the Annual Fixed Rent. Annual Fixed Rent shall be payable in equal
monthly installments, in advance, on the first day of each and every calendar
month during the term of this Lease, at the Original Address of Landlord, or at
such other place as Landlord shall from time to time designate by notice, by
check drawn on a domestic bank.

     Annual Fixed Rent for any partial month shall be prorated on a daily basis,
and if Annual Fixed Rent commences on a day other than the first day of a
calendar month, the first payment which Tenant shall make to Landlord shall be
payable on the date Annual Fixed Rent commences and shall be equal to a
proportionate part of the monthly installment of Annual Fixed Rent for the
partial month in which Annual Fixed Rent commences plus the installment of
Annual Fixed Rent for the succeeding calendar month.

     4.2  Additional Rent.  Tenant covenants and agrees to pay all Taxes and
          ---------------
Operating Costs as provided in Sections 4.2.1 and 4.2.2, and all other charges
and amounts payable by or

                                       6
<PAGE>

due from Tenant to Landlord (all such amounts referred to in this sentence being
"Additional Rent").
 ---------------

          4.2.1 Real Estate Taxes. Tenant shall pay to Landlord, as Additional
                -----------------
Rent, the Building's share (as reasonably determined by Landlord) of Taxes (as
hereinafter defined) assessed against the Property (or estimated to be due by
governmental authority) for any fiscal tax period (a "Tax Year") during the term
                                                      --------
of this Lease "Tenant's Tax Obligation"). If the Building and/or land on which
               -----------------------
it is located is separately assessed from other buildings and land, the
Building's share of building or land Taxes (as applicable) shall be the amount
so separately assessed. Except as otherwise provided in the immediately
following paragraph, Tenant shall pay Tenant's Tax Obligation to Landlord at
least ten (10) days prior to the date or dates within any year during the term
hereof that the same, or any fractional share thereof, shall be due and payable
to any governmental authority responsible for collection of same (as stated in a
notice to Tenant given at least twenty (20) days prior to the date or dates any
such payment shall be due, which notice shall set forth the manner of
computation of Tenant's Tax Obligation due from Tenant), except that such
payment shall be made to Landlord not later than ten (10) days after such notice
to Tenant, if such notice is given subsequent to the date twenty (20) days prior
to the date the same is due and payable as aforesaid.

     Tenant shall pay to Landlord, as Additional Rent on the first day of each
calendar month during the term but otherwise in the manner provided for the
payment of Annual Fixed Rent, reasonably estimated payments on account of the
Tenant's Tax Obligation, such monthly amounts to be sufficient to provide
Landlord by the time Tax payments are due or are to be made by Landlord a sum
equal to the Tenant's Tax Obligation, as reasonably estimated by Landlord from
time to time on account of Taxes for the then current Tax Year.  If the total of
such monthly remittances for any Tax Year is greater than the actual Taxes for
such Tax Year, Landlord shall credit such overpayment against Tenant's
subsequent obligations on account of Taxes (or promptly refund such overpayment
if the term of this Lease has ended and Tenant has no further obligations to
Landlord); if the total of such remittances is less than the Tenant's Tax
Obligation for such Tax Year, Tenant shall pay the difference to Landlord within
ten (10) days after being so notified by Landlord.

     If, after Tenant shall have made all payments due to Landlord pursuant to
this subsection 4.2.1, Landlord shall receive a refund of any portion of Taxes
as a result of an abatement of such Taxes by legal proceedings, settlement or
otherwise (without either party having any obligation to undertake any such
proceedings), Landlord shall pay or credit to Tenant that percentage of the
refund (after first deducting any expenses, including attorneys', consultants'
and appraisers' fees, incurred in connection with obtaining any such refund)
which equals the percentage of the applicable Tax Year included in the term
hereof, provided however, in no event shall Tenant be entitled to receive more
than the sum of payments actually made by Tenant on account of Taxes with
respect to such Tax Year.

     In the event that the Commencement Date shall occur or the term of this
Lease shall expire or be terminated during any Tax Year, or should the Tax Year
or period of assessment of real estate taxes be changed or be more or less than
one (1) year, then the amount of Tenant's Tax Obligation which may be otherwise
payable by Tenant as provided in this subsection 4.2.1 shall be appropriately
apportioned and adjusted.

                                       7
<PAGE>

     "Taxes" shall mean all taxes, assessments, excises and other charges and
      -----
impositions which are general or special, ordinary or extraordinary, foreseen or
unforeseen, of any kind or nature which are levied, assessed or imposed at any
time during the term by any governmental authority upon or against the Property,
or taxes in lieu thereof, and additional types of taxes to supplement real
estate taxes due to legal limits imposed thereon.  If, at any time during the
term of this Lease, any tax or excise on rents or other taxes, however
described, are levied or assessed against Landlord with respect to the rent
reserved hereunder, either wholly or partially in substitution for, or in
addition to, real estate taxes assessed or levied on the Property, such tax or
excise on rents shall be included in Taxes; however, Taxes shall not include
franchise, estate, inheritance, succession, capital levy, income or excess
profits taxes assessed on Landlord.  Taxes also shall include all court costs,
attorneys', consultants' and accountants' fees, and other expenses reasonably
incurred by Landlord contesting Taxes through and including all appeals.  Taxes
shall include any estimated payment made by Landlord on account of a fiscal tax
period for which the actual and final amount of taxes for such period has not
been determined by the governmental authority as of the date of any such
estimated payment.

          4.2.2  Operating Costs. Tenant shall pay to Landlord, as Additional
                 ---------------
Rent, all costs and expenses of every kind and nature paid or incurred by
Landlord with respect to the Property in any twelve-month period established by
Landlord (an "Operating Year") during the term of this Lease (such costs and
              -------------
expenses being "Operating Costs", as hereinafter more fully described). Except
                ---------------
as otherwise provided in the immediately following paragraph Tenant shall pay
such Operating Costs ("Tenant's Operating Cost Obligation") to Landlord within
                       ----------------------------------
twenty (20) days from the date Landlord shall furnish to Tenant an itemized
statement thereof, prepared, allocated and computed in accordance with then
prevailing customs and practices of the real estate industry in the greater
Austin area, consistently applied. Any year-end statement by Landlord relating
to Operating Costs (other than an invoice for a monthly estimate) shall be final
and binding upon Landlord and Tenant unless either party within six (6) months
after Tenant's receipt thereof, shall contest any items therein by giving notice
to the other specifying each item contested and the reasons therefor.

     Tenant shall pay to Landlord, as Additional Rent on the first day of each
calendar month during the term in the manner provided for the payment of Annual
Fixed Rent, estimated payments on account of Tenant's Operating Cost Obligation,
such monthly amounts to be sufficient to provide to Landlord, by the end of each
Operating Year, a sum equal to the Tenant's Operating Cost Obligation for such
Operating Year, as estimated by Landlord from time to time during such Operating
Year.  If, at the expiration of each Operating Year in respect of which monthly
installments of Operating Cost Excess shall have been made as aforesaid, the
total of such monthly remittances is greater than the Tenant's Operating Cost
Obligation for such Operating Year, Landlord shall credit such overpayment
against Tenant's subsequent obligations on account of Operating Costs (or
promptly refund such overpayment if the term of this Lease has ended and Tenant
has no further obligation to Landlord); if the total of such remittances is less
than the Operating Cost Excess for such Operating Year, Tenant shall pay the
difference to Landlord within ten (10) days after being so notified by Landlord.

     In the event that the Commencement Date shall occur or the term of this
Lease shall expire or be terminated during any Operating Year, then the amount
of Tenant's Operating Cost

                                       8
<PAGE>

Obligation which may be payable by Tenant as provided in this subsection 4.2.2
shall be appropriately apportioned and adjusted.

     "Operating Costs" shall include, without limitation, all costs and expenses
      ---------------
paid or incurred for the operation, cleaning, management, maintenance, repair,
upkeep and security of the Building and, in addition, the Building's share (as
determined by Landlord) of such costs and expenses incurred for the benefit of
the Property as a whole, including, without limitation:

     .    all salaries, wages, fringe benefits, payroll taxes and workmen's
          compensation insurance premiums related thereto and all other costs
          paid or incurred with respect to employment of personnel engaged in
          operation, administration, cleaning, maintenance, repair, upkeep and
          security of the Property including, without limitation, supervisors,
          property managers, accountants, bookkeepers, janitors, carpenters,
          engineers, mechanics, electricians and plumbers;

     .    all utilities and other costs related to provision of heat (including
          oil, steam and/or gas), electricity, air conditioning, and water
          (including sewer charges) and other utilities to the Building or
          Property (exclusive of reimbursement to Landlord for any of same
          received as a result of direct billing to any tenant of the Property
          and excluding the cost of any utilities paid for directly by Tenant
          under Section 4.5 of this Lease);

     .    all costs, including supplies, material and equipment costs, for
          cleaning and janitorial services to the Property, the Building and, if
          applicable, adjacent walks and ways (including, without limitation,
          trash removal and interior and exterior window cleaning), and interior
          and exterior landscaping and pest control;

     .    the cost of replacements for tools and other similar equipment used in
          the repair, maintenance, cleaning and protection of the Property;

     .    all costs and premiums for fire, casualty, rental income, liability
          and such other insurance as may be maintained from time to time by
          Landlord relating to the Property and premiums for fidelity bonds
          covering persons having custody or control over funds or other
          property of Landlord relating to the Property;

     .    all costs of maintaining, repairing, decorating, operating,
          administering, inspecting and protecting the Building and the Property
          (including, without limitation, lighting, installation, maintenance,
          repair and alteration of signs, snow removal on the Property and
          adjacent walks and ways, paving, patching and restriping of parking
          areas and operation, maintenance, replacement and repair of heating,
          ventilating and air conditioning equipment, fire protection and
          security systems, elevators, roofs, parking areas and any other common
          equipment, systems or facilities) and all costs of structural and
          other repairs and replacements (other than repairs for which Landlord
          has received full reimbursement from contractors, other tenants of the
          Property or from others) necessary to keep the Property in good
          working order, repair, appearance and condition (including, without
          limitation, fees, if any, imposed upon Landlord, or charged to the
          Property, by the state or municipality in which the Property is
          located

                                       9
<PAGE>

          on account of the need of the Property for increased or augmented
          public safety services);

     .    all costs incurred in connection with the administration and
          supervision of all matters referred to in items (a) through (f) hereof
          and in performing Landlord's obligations under Article 5, including
          Landlord's office overhead costs provided that, if any such
          administrative or supervisory personnel are also employed on other
          property of Landlord, such cost of compensation shall be suitably
          prorated among the Property and such other properties;

     .    payments under all service contracts relating to matters referred to
          in Items (a) through (g) hereof;

     .    a management fee of four (4) percent of gross rents payable by Tenant
          hereunder; and

     .    attorney's fees and disbursements incurred for the general benefit of
          Tenant or other tenants of the Property (and excluding any fees and
          disbursements incurred in tax abatement proceedings or in the
          preparation of leases) and auditing and other professional fees and
          expenses.

     Furthermore, if, during the term of this Lease, Landlord shall make any
capital expenditure, the total cost of which is not included in Operating Costs
for the Operating Year in which it was made, Landlord may include in Operating
Costs for such Operating Year in which such expenditure was made and in
Operating Costs for each succeeding Operating Year an annual charge-off of such
capital expenditure.  Annual charge-offs shall be determined by dividing the
original capital expenditure plus an interest factor, reasonably determined by
Landlord as being the interest rate then being charged for long-term mortgages
by institutional lenders on like properties within the locality in which the
Property is located, by the number of years of useful life of the improvement,
repair, alteration or replacement made with the capital expenditure; and the
useful life shall be determined reasonably by Landlord in accordance with then
prevailing customs and practices of the real estate industry in the greater
Austin area, consistently applied.

     Provided Tenant shall have timely paid all amounts invoiced by Landlord on
account of Operating Costs for the applicable Operating Year, Landlord shall
permit Tenant, at Tenant's expense except as otherwise hereinafter provided, to
review, at Landlord's home office or other location containing such records, any
of Landlord's invoices and statements relating to Operating Costs for such
Operating Year, provided that such review is commenced within six (6) months of
Tenant's receipt of Landlord's final statement of Operating Costs for the
applicable Operating Year (the "Final Statement") and thereafter undertaken by
Tenant (and not by any third party, including any third party compensated by
Tenant on a contingency fee arrangement) with due diligence.  If Tenant objects
to Landlord's accounting of any Operating Costs, Tenant shall, on or before the
date ten (10) months following receipt of the Final Statement, notify Landlord
that Tenant disputes the correctness of such accounting, specifying the
particular line items in which the accounting is claimed to be incorrect.  If
such dispute has not been settled by agreement within two (2) months thereafter,
either party may submit the dispute to arbitration in accordance with the
commercial arbitration rules of the American Arbitration Association.  The
decision of

                                      10
<PAGE>

the arbitrators shall be final and binding on Landlord and Tenant and judgment
thereon may be entered in any court of competent jurisdiction.

     If it should be agreed or decided that Operating Costs were overstated by
five percent (5%) or more, then Landlord shall promptly reimburse Tenant for the
reasonable costs incurred by Tenant in reviewing Landlord's invoices and
statements, Tenant's reasonable arbitration costs plus any excess amount paid by
Tenant on account of overstated Operating Costs and interest at the Default
Rate.  If it should be agreed or decided that Operating Costs were not
overstated at all, then Tenant shall, as Additional Rent, promptly reimburse
Landlord for its costs incurred in the arbitration and in preparing for Tenant's
review of invoices and statements, and if Operating Costs shall have been
understated or Tenant shall not have paid the Operating Cost Excess in full,
Tenant shall, as Additional Rent, promptly pay any deficiency in the payments
theretofore made on account of Operating Cost Excess.  In the event of an
overstatement which is less than five percent (5%), Landlord shall promptly
reimburse Tenant any excess amount paid by Tenant on account of overstated
Operating Costs, with interest at the Default Rate, and each party shall be
responsible for its own costs incurred in connection with such dispute.

     Tenant keep confidential shall (and shall cause any third party assisting
Tenant with any such audit to keep confidential) all information obtained during
the audit process including any settlements or arbitration awards made.
Landlord may require Tenant to execute and deliver a separate confidentiality
agreement further specifying Tenant's obligations and Landlord's remedies for
breach, as a condition to commencement of the audit

     4.3  Personal Property and Sales Taxes. Tenant shall pay all taxes charged,
          ---------------------------------
assessed or imposed upon the personal property of Tenant and all taxes on the
sales of inventory, merchandise and any other goods by Tenant in or upon the
Premises.

     4.4  Insurance. Tenant shall, at its expense, take out and maintain,
          ---------
throughout the term of this Lease, the following insurance:

          4.4.1  Commercial general liability insurance (on an occurrence basis
and on a 1988 ISO CGL form or its equivalent, including without limitation,
broad form contractual liability, bodily injury, property damage, fire legal
liability, and products and completed operations coverage) under which Tenant is
named as an insured and Landlord (and the holder of any mortgage on the Premises
or Property, as set out in a notice from time to time) are named (on an ISO Form
2026 or as otherwise acceptable to Landlord) as additional insureds as their
interests may appear, in an amount which shall, at the beginning of the term, be
at least equal to the Commercial General Liability Insurance Limits, and, which,
from time to time during the term, shall be for such higher limits, if any, as
Landlord shall determine to be customarily carried in the area in which the
Premises are located at property comparable to the Premises and used for similar
purposes;

     Worker's compensation insurance with statutory limits covering all of
Tenant's employees working on the Premises; and

     So-called "all-risk" property insurance on a "replacement cost" basis with
an agreed value endorsement covering all furniture, furnishings, fixtures and
equipment and other personal

                                      11
<PAGE>

property brought to the Premises by Tenant and all improvements and betterments
to the Premises performed at Tenant's expense.

          4.4.2 All such policies shall contain a clause confirming that such
policy and the coverage evidenced thereby shall be primary with respect to any
insurance policies carried by Landlord and shall be obtained from responsible
companies qualified to do business and in good standing in the state or district
in which the Property is located, which companies shall have a general policy
holder's rating in Best's of at least A+ X or otherwise be acceptable to
Landlord. A copy of each paid-up policy evidencing such insurance (appropriately
authenticated by the insurer) or a certificate (on ACORD Form 27 or its
equivalent) of the insurer, certifying that such policy has been issued and paid
in full, providing the coverage required by this Section and containing
provisions specified herein, shall be delivered to Landlord prior to the
commencement of the term of this Lease and, upon renewals, not less than thirty
(30) days prior to the expiration of such coverage. Each such policy shall be
non-cancelable and not materially changed with respect to the interest of
Landlord and such mortgagees of the Property (and others that are in privity of
estate with Landlord of which Landlord provides notice to Tenant from time to
time) without at least thirty (30) days' prior written notice thereto. Any
insurance required of Tenant under this Lease may be furnished by Tenant under a
blanket policy carried by it provided that such blanket policy shall reference
the Premises, and shall guarantee a minimum limit available for the Premises
equal to the insurance amounts required in this Lease. Landlord may, at any
time, and from time to time, inspect and/or copy any and all insurance policies
required to be procured by Tenant hereunder.

          4.4.3 Landlord and Tenant shall each endeavor to secure an appropriate
clause in, or an endorsement upon, each property damage insurance policy
obtained by it and covering the Building, the Premises or the personal property,
fixtures and equipment located therein or thereon, pursuant to which the
respective insurance companies waive subrogation and permit the insured, prior
to any loss, to agree with a third party to waive any claim it might have
against said third party. The waiver of subrogation or permission for waiver of
any claim hereinbefore referred to shall extend to the agents of each party and
its employees and, in the case of Tenant, shall also extend to all other persons
and entities occupying or using the Premises by, through or under Tenant. If and
to the extent that such waiver or permission can be obtained only upon payment
of an additional charge then the party benefiting from the waiver or permission
shall pay such charge upon demand, or shall be deemed to have agreed that the
party obtaining the insurance coverage in question shall be free of any further
obligations under the provisions hereof relating to such waiver or permission
from such insurance companies.

     Subject to the foregoing provisions of this Subsection 4.4.3, and insofar
as may be permitted by the terms of the insurance policies carried by it, each
party hereby releases the other with respect to any claim which it might
otherwise have against the other party for loss, damage or destruction of or to
its property to the extent such damage is or would be covered by policies of
insurance required by this Lease to be carried by the respective parties
hereunder.  In addition, Tenant agrees to exhaust any and all claims against its
insurer(s) prior to commencing an action against Landlord for any property loss.

     4.5  Utilities.  Tenant shall pay all charges for telephone and other
          ---------
utilities or services not supplied by Landlord pursuant to Subsections 5.1.1 and
5.1.2, whether designated as a

                                      12
<PAGE>

charge, tax, assessment, fee or otherwise, all such charges to be paid as the
same from time to time become due. Except as otherwise provided in this
Subsection 4.5 or in Article 5, it is understood and agreed that Tenant shall
make its own arrangements for the installation or provision of all utilities and
services and that Landlord shall be under no obligation to furnish any utilities
to the Premises.

     If permitted by law, Landlord shall have the right at any time, and from
time to time during the term of this Lease, to contract for electric services
from the company of Landlord's choice, whether the company is the provider
currently providing electric service to the Property ("Current Provider") or a
                                                       ----------------
different company or companies ("Alternate Provider").  Tenant shall cooperate
                                 ------------------
with Landlord and Current Provider or Alternate Provider at all times, and, as
reasonably necessary, shall allow Landlord and Current Provider or Alternate
Provider reasonable access to the electric lines, feeders, risers, wiring, and
any other equipment within the Premises.  To the extent Tenant has with
Landlord's approval (and subject to the provisions of Sections 5.3, 6.1.12,
6.2.4 and 6.2.5) made its own arrangement for the installation or provision of
electrical services, Landlord shall use reasonable efforts to cooperate with the
Alternate Provider, as reasonably necessary, and shall allow Tenant and the
Alternate Provider reasonable access to the electric lines, feeders, risers,
wiring and any other equipment within the Premises.

     4.6  Late Payment of Rent.  If any installment of Annual Fixed Rent or
          --------------------
Additional Rent is not paid on or before the date the same is due, it shall bear
interest (as Additional Rent) from the date due until the date paid at the
Default Rate (as defined in Section 8.4).  In addition, if any installment of
Annual Fixed Rent or Additional Rent is unpaid for more than five (5) days after
the date due, Tenant shall pay to Landlord a late charge equal to the greater of
One Hundred Dollars ($100) or three percent (3%) of the delinquent amount
provided however such late charge shall not apply to the first late payment made
in any twelve-month period provided it is paid in full within seven (7) days
after notice of default.  The parties agree that the amount of such late charge
represents a reasonable estimate of the cost and expense that would be incurred
by Landlord in processing and administration of each delinquent payment by
Tenant, but the payment of such late charges shall not excuse or cure any
default by Tenant under this Lease. Absent specific provision to the contrary,
all Additional Rent shall be due and payable in full ten (10) days after demand
by Landlord.

     4.7  Security Deposit. Upon execution of this Lease, Tenant shall deposit
          ----------------
with Landlord the Security Deposit. The Security Deposit shall be held by
Landlord as security for the faithful performance of all the terms of this Lease
to be observed and performed by Tenant. The Security Deposit shall not be
mortgaged, assigned, transferred or encumbered by Tenant and any such act on the
part of Tenant shall be without force and effect and shall not be binding upon
Landlord.

     Tenant shall have the right to post the Security Deposit (as the same may
have been reduced in accordance with Article I hereof) in the form of a letter
of credit (the "Letter of Credit"), which shall (a) be unconditional and
                ----------------
irrevocable and otherwise in form and substance reasonably satisfactory to
Landlord; (b) be at all times in the amount of the Security Deposit, and shall
permit multiple draws without a corresponding reduction in the amount of the
Letter of Credit; (c) be issued by a commercial bank reasonably acceptable to
Landlord from time to time; (d) be made payable to, and expressly transferable
and assignable at no charge by, Landlord; (e)

                                      13
<PAGE>

be payable at sight upon presentment to a branch of the issuer in the City of
Austin, Texas of a simple sight draft accompanied by a certificate of Landlord
stating either that Tenant is in default under this Lease or that Landlord is
otherwise permitted to draw upon such Letter of Credit under the express terms
of this Lease, and the amount that Landlord is owed (or is permitted to draw) in
connection therewith; and (f) shall either expire thirty (30) days following the
expiration of the term of this Lease, or be replaced not less than thirty (30)
days prior to the expiration of the then current Letter of Credit so that the
original Letter of Credit or a replacement thereof shall be in full force and
effect throughout the term of this Lease and for a period of thirty (30) days
thereafter. Tenant shall deliver to Landlord any replacement Letter of Credit
not less than thirty (30) days prior to the expiration of the then current
Letter of Credit. Notwithstanding anything in this Lease to the contrary, any
grace period or cure periods which are otherwise applicable under Section 8.1
hereof, shall not apply if Tenant fails to comply with the requirements of
subsection (f) above, in which event, Landlord shall have the immediate right to
draw upon the Letter of Credit in full and hold the proceeds thereof as a cash
security deposit, provided, Tenant shall have the right, at any time during the
Term, to deliver a replacement Letter of Credit to Landlord meeting the
requirements of this paragraph, and upon receipt of such replacement Letter of
Credit, Landlord shall return promptly to Tenant the amount of cash security
deposit then being held by Landlord. Each Letter of Credit shall be issued by a
commercial bank that (i) has a credit rating with respect to certificates of
deposit, short term deposits or commercial paper of at least P-2 (or equivalent)
by Moody's Investor Service, Inc., or at least A-2 (or equivalent) by Standard &
Poor's Corporation and (ii) maintains an office in the City of Austin at which
such Letter of Credit may be presented for payment (an "Austin Office"). If the
                                                        -------------
issuer's credit rating is reduced below P-2 (or equivalent) by Moody's Investor
Service, Inc., or at least A-2 (or equivalent) by Standard & Poor's Corporation,
or if the financial condition of the issuer changes in any other materially
adverse way or if the issuer ceases to maintain an Austin Office, then Landlord
shall have the right to require that Tenant obtain from a different issuer a
substitute Letter of Credit that complies in all respects with the requirements
of this Section, and Tenant's failure to obtain such substitute Letter of Credit
within ten (10) days after Landlord's written demand therefor (with no other
notice, or grace or cure period being applicable thereto) shall entitle Landlord
immediately to draw upon the existing Letter of Credit in full, without any
further notice to Tenant.

     If the Annual Fixed Rent or Additional Rent payable hereunder shall be
overdue and unpaid or should Landlord make any payment on behalf of the Tenant,
or Tenant shall fail to perform any of the terms of this Lease, then Landlord
may, at its option and without notice or prejudice to any other remedy which
Landlord may have on account thereof, appropriate and apply the entire Security
Deposit or so much thereof as may be necessary to compensate Landlord toward the
payment of Annual Fixed Rent, Additional Rent or other sums or loss or damage
sustained by Landlord due to such breach by Tenant; and Tenant shall forthwith
upon demand restore the Security Deposit to the original sum deposited.  So long
as Tenant shall not be in default of its obligations under this Lease, Landlord
shall return the Security Deposit, or so much thereof as shall have not
theretofore been applied in accordance with the terms of this Section 4.7, to
Tenant promptly following the expiration or earlier termination of the term of
this Lease and the surrender of possession of the Premises by Tenant to Landlord
in accordance with the terms of this Lease.  While Landlord holds the Security
Deposit, Landlord shall have no obligation to pay interest on the same and shall
have the right to commingle the same with Landlord's other funds.  If Landlord
conveys Landlord's interest under this Lease, the Security

                                      14
<PAGE>

Deposit, or any part thereof not previously applied, shall be turned over by
Landlord to Landlord's grantee, and Tenant shall look solely to such grantee for
proper application of the Security Deposit in accordance with the terms of this
Section 4.7 and the return thereof in accordance herewith. The holder of a
mortgage on the Property shall not be responsible to Tenant for the return or
application of the Security Deposit, whether or not it succeeds to the position
of Landlord hereunder, unless such holder actually receives the Security
Deposit.

                                   Article 5

                              Landlord's Covenants
                              --------------------

     5.1  Affirmative Covenants.  Landlord shall, during the term of this Lease
          ---------------------
provide the following:

          5.1.1 Heat and Air-Conditioning. Landlord shall furnish heat,
                -------------------------
ventilation and air-conditioning ("HVAC") to the Premises sufficient to maintain
                                   ----
the Premises at comfortable temperatures for general office use, subject to all
federal, state and municipal regulations. If Tenant shall require HVAC service
outside the hours and days above specified, Landlord may furnish such service
and Tenant shall pay therefor such charges as may from time to time be in
effect. In the event Tenant locates an excessive number of persons or heat-
generating equipment in the Premises which overloads the capacity of the
Building HVAC systems or in any other way interferes with such system's ability
to perform adequately its proper functions, supplementary systems may, if and as
needed, at Landlord's option, be provided by Landlord, at Tenant's expense.
Landlord shall have no responsibility for providing any service from separate
HVAC Equipment, as defined in Section 6.1.3.

          5.1.2  Electricity. Landlord shall cause the Premises to be connected
                 -----------
to a source for the provision of electrical current.

          5.1.3  Cleaning; Water.  Landlord shall provide cleaning, maintenance
                 ---------------
and landscaping to the Premises (including snow removal to the extent necessary
to maintain reasonable access to the Building) in accordance with standards
generally prevailing throughout the term hereof in comparable office buildings
in the greater Austin, Texas area; and furnish water for ordinary drinking,
lavatory and toilet facilities and cause the Premises to be cleaned in
accordance with standards of comparable office buildings in the greater Austin,
Texas area.

          5.1.4  Elevator and Lighting. Landlord shall furnish passenger
                 ---------------------
elevator service from the lobby to the Premises; purchase and install all
building standard lamps, tubes, bulbs, starters and ballasts for lighting
fixtures in the Premises; and provide lighting to public and common areas of the
Property.

          5.1.5  Repairs and Maintenance. Except as otherwise expressly provided
                 -----------------------
herein, Landlord shall make such repairs and replacements to the roof, exterior
walls, floor slabs and other structural components of the Building, and to the
base building plumbing, electrical and HVAC equipment and elevators as may be
necessary to keep them in good repair and condition and in material compliance
with applicable law (exclusive of equipment installed by Tenant and except for
those repairs required to be made by Tenant pursuant to Subsection 6.1.3 hereof
and

                                      15
<PAGE>

repairs or replacements occasioned by any act or negligence of Tenant, its
servants, agents, customers, contractors, employees, invitees, or licensees).
Landlord shall provide maintenance and landscaping to the exterior common areas
of the Building in accordance with standards generally prevailing throughout the
term hereof in comparable office buildings in the Austin, Texas area.

          5.1.6  Landlord Indemnity. Subject to all limitations, waivers,
                 ------------------
exclusions and conditions contained in this Lease (each of which shall control
in the event of any conflict or inconsistent with this Section 5.1.6), Landlord
shall indemnify Tenant from and against any and all claims asserted by or on
behalf of any third party on account of personal injury or death arising out of
the negligence or other wrongful conduct of Landlord or its agents, contractors
or employees during the term of this Lease. In respect of the foregoing,
Landlord shall indemnify Tenant from and against all costs, expenses (including
reasonable attorneys' fees), and liabilities incurred in or in connection with
any such claim, action or proceeding brought thereon; and, in case of any action
or proceeding brought against Tenant by reason of any such claim, Landlord, upon
notice from Tenant and at Landlord's expense, shall resist or defend such action
or proceeding and employ counsel therefor reasonably satisfactory to Tenant.

          5.1.7  Landlord's Insurance. At all times during the term, Landlord,
                 --------------------
as part of the Operating Costs, shall, so long as available at commercially
reasonable rates and terms keep in full force and effect the following
insurance:

                 (1)  standard form so-called extended coverage property
                      insurance on the Building, in an amount not less than the
                      full replacement value thereof (subject to the deductibles
                      and excluding any leasehold improvements performed by
                      Tenant); and

                 (2)  any combination of commercial general liability insurance
                      (or an equivalent), excess liability and/or umbrella
                      liability insurance in the amount of Five Million Dollars
                      ($5,000,000), combined single limit, for injury to, or
                      death of, one or more persons in an occurrence, and for
                      damage to tangible property (including loss of use) in an
                      occurrence.

     5.2  Interruption.  Landlord shall be under no responsibility or liability
          ------------
for failure, interruption or unavailability of any services, facilities,
utilities, repairs or replacements or inability to provide access or inability
to perform any other obligation under this Lease caused by breakage, accident,
fire, flood or other casualty, strikes or other labor trouble, order or
regulation of or by any governmental authority, inclement weather, repairs,
inability to obtain or shortages of supplies, labor or materials, war, civil
commotion or other emergency, transportation difficulties or due to any act or
neglect of Tenant or Tenant's servants, agents, employees or licensees or for
any other cause beyond the reasonable control of Landlord, and in no event for
any indirect or consequential damages to Tenant; and failure or omission on the
part of Landlord to furnish any of same for any of the reasons set forth in this
paragraph shall not be construed as an eviction of Tenant, actual or
constructive, nor entitle Tenant to an abatement of rent, nor render the
Landlord liable in damages, nor release Tenant from prompt fulfillment of any of
its covenants under this Lease, except as provided in Article 7.

                                      16
<PAGE>

     Landlord shall use all reasonable efforts to minimize the duration of any
interruption of services to be provided by Landlord.  Notwithstanding the
foregoing, if due to Landlord's default, negligence or other wrongful conduct,
(i) the Premises or any portion thereof are unusable by Tenant as a result of
the lack, for a period of more than five (5) consecutive Business Days following
notices form Tenant of (a) water, sewer, elevator service, access or electricity
or (b) the performance of repairs which Landlord is obligated to perform
pursuant to Section 5.1.5, and (ii) Tenant shall, concurrently with the giving
of such notice, discontinue use of the Premises or the portion thereof which is
unusable as a result (other than for sporadic purposes such as salvage, security
or retrieval of property), then the Annual Fixed Rent and Additional Rent on
account of Taxes and Operating Costs shall be equitably abated for such portion
of the Premises rendered unusable for the period commencing on the expiration of
such five Business Day period and ending  on the date that the Premises (or such
portion) is rendered usable.  If more than fifty percent (50%) of the Premises
is rendered unusable and if Tenant shall vacate the entire Premises, then the
aforesaid abatement shall be a full abatement.  Any notice from Tenant pursuant
to the first sentence of this paragraph shall expressly state that the failure
of Landlord to cure any claimed default timely shall give rise to Tenant's
rights of rent abatement.

     Landlord reserves the right temporarily (up to twenty-four (24) hours) to
stop the services of the HVAC, plumbing, electrical or other mechanical systems
or facilities in the Building when necessary from time to time by reason of
accident or emergency, or for repairs, alterations, replacements or improvements
which in the reasonable judgment of Landlord are desirable or necessary, until
such repairs, alterations, replacements or improvements shall have been
completed.  Landlord shall use reasonable efforts to give to Tenant at least
three (3) days' notice if service is to be stopped, except in cases of
emergency.

     5.3  Outside Services. In the event Tenant wishes to obtain services or to
          ----------------
hire vendors relating to the Premises, Tenant shall first obtain the prior
approval of Landlord (which approval shall not be unreasonably withheld or
delayed) for the installation and/or utilization of such services or vendors.
("Outside services" shall include, but shall not be limited to, utility
  ----------------
providers, security services, moving facilities, equipment installers, catering
services and the like). Notwithstanding any Landlord approval of the
installation and/or utilization of such services or vendors, such installation
and utilization shall be at Tenant's sole cost, risk and expense.

     5.4  Parking.  Tenant shall be entitled at no additional cost to Tenant to
          -------
the use, in common with other tenants of the Property of a total of one hundred
twenty (120) parking spaces in the parking lot and garage designated by Landlord
for use by Tenant. All parking spaces which Tenant is permitted to use shall be
on an unreserved, first-come, first-serve basis. Tenant shall, and shall cause
its employees to, comply with all rules and regulations imposed from time to
time by Landlord with respect to such parking. Furthermore, Tenant shall
indemnify and hold Landlord harmless from and against all loss, cost, damage or
expense arising out of the use by Tenant and any Tenant Entities (as defined in
Section 6.2.8) of such parking paces.

                                      17
<PAGE>

                                   Article 6

                         Tenant's Additional Covenants
                         -----------------------------

     6.1  Affirmative Covenants.  Tenant shall do the following:
          ---------------------

          6.1.1  Perform Obligations.  Tenant shall perform promptly all of the
                 -------------------
obligations of Tenant set forth in this Lease; and pay when due the Annual Fixed
Rent and Additional Rent and all other amounts which by the terms of this Lease
are to be paid by Tenant.

          6.1.2 Use. Tenant shall, during the term of this Lease, use the
                ---
Premises only for the Permitted Uses and from time to time to procure and
maintain all licenses and permits necessary therefor and for any other use or
activity conducted at the Premises, at Tenant's sole expense. The Permitted Uses
shall expressly exclude use for utility company offices, or employment agency or
governmental or quasi-governmental offices.

          6.1.3 Repair and Maintenance. Tenant shall, during the term of this
                ----------------------
Lease, maintain the Premises in neat and clean order and condition and perform
all repairs to the Premises and all fixtures, systems, and equipment therein
(including Tenant's equipment and other personal property and any HVAC equipment
serving all or any portion of the Premises to the exclusion of any other space
in the Building ("Separate HVAC Equipment")) as are necessary to keep them in
                  -----------------------
good and clean working order, appearance and condition, reasonable use and wear
thereof and damage by fire or by unavoidable casualty only excepted and shall
replace any damaged or broken glass in windows and doors of the Premises (except
glass in the exterior walls of the Building) with glass of the same quality as
that damaged or broken.

          6.1.4 Compliance with Law. Tenant shall, during the term of this
                -------------------
Lease, make all repairs, alterations, additions or replacements to the Premises
required by any law or ordinance or any order or regulation of any public
authority; keep the Premises safe and equipped with all safety appliances so
required; and comply with, and perform all repairs, alterations, additions or
replacements required by, the orders and regulations of all governmental
authorities with respect to zoning, building, fire, health and other codes,
regulations, ordinances or laws applicable to the Premises and arising out of
any use being conducted in or on the Premises or arising out of any work
performed by Tenant, except that Tenant may (but only so long as (i) Landlord
shall not be subject to any fine or charge, (ii) neither the Premises nor any
portion thereof shall be subject to being condemned or vacated and (iii) neither
the Premises nor any portion thereof shall be subject to any lien or
encumbrance) defer compliance so long as the validity of any such law,
ordinance, order or regulation shall be contested by Tenant in good faith and by
appropriate legal proceedings, if Tenant first gives Landlord assurance or
security against any loss, cost or expense on account thereof in form and amount
acceptable to Landlord.

          6.1.5 Indemnification. Tenant shall hold Landlord harmless, and
                ---------------
exonerate and indemnify Landlord from and against (i) any and all claims,
liabilities or penalties asserted by or on behalf of any person, firm,
corporation or public authority on account of nuisance or injury, death, damage
or loss to person or property in or upon the Premises and/or the Property and
(ii) any loss, cost, damage or expense incurred by Landlord (a) arising out of
the use or occupancy of the Premises by Tenant or by any person claiming by,
through or under Tenant (including,

                                      18
<PAGE>

without limitation, all patrons, employees, contractors, vendors, suppliers,
invitees and customers of Tenant), (b) arising out of labor disputes with
Tenant's employees or strikes, picketing or other similar actions, or (c) on
account of or based upon anything whatsoever done on or occurring in the
Premises during the term of this Lease except (and then only to the extent not
subject to the provisions of the last paragraph of Subsection 4.4.3) if the same
were caused by the gross negligence or willful misconduct of Landlord, its
agents, servants or employees. In respect of the matters set forth in clause
(i), Tenant shall indemnify Landlord (and such others as are in privity of
estate with Landlord) from and against all costs, expenses (including reasonable
attorneys' fees), and liabilities incurred in or in connection with any such
claim, action or proceeding brought thereon; and, in case of any action or
proceeding brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord and at Tenant's expense, shall resist or defend such action
or proceeding and employ counsel therefor reasonably satisfactory to Landlord.

          6.1.6 Landlord's Right to Enter. Tenant shall, during the term of this
                -------------------------
Lease, permit Landlord and its agents and invitees to enter into and examine the
Premises at reasonable times and to show the Premises to prospective lessees,
lenders, partners and purchasers and others having a bonafide interest in the
Premises, and to make such repairs, alterations and improvements and to perform
such testing and investigation as Landlord shall reasonably determine to make or
perform, and, during the last six (6) months prior to the expiration of this
Lease, to keep affixed in suitable places notices of availability of the
Premises. Except in instances posing an imminent threat to life or property, and
except as otherwise provided herein, Landlord shall endeavor to comply with
Tenant's reasonable security requirements of which Tenant shall have given
Landlord prior notice, to give Tenant reasonable notice (not less than twenty-
four hours in advance) prior to making any unscheduled entry onto the Premises
and to allow Tenant to accompany Landlord at any such entry provided, however,
notwithstanding Section 10.1 to the contrary, such notice may be made orally to
any employee or agent of Tenant.

          6.1.7 Personal Property at Tenant's Risk. Tenant shall, during the
                ----------------------------------
term of this Lease keep, at the sole risk and hazard of Tenant, all of the
furnishings, fixtures, equipment, effects and property of every kind, nature and
description of Tenant and of all persons claiming by, through or under Tenant
which may be on the Premises, and if the whole or any part thereof shall be
destroyed or damaged by fire, water or otherwise, or by the leakage or bursting
of water pipes, steam pipes, or other pipes, by theft or from any other cause,
Tenant shall hold harmless and indemnify Landlord from and against any and all
injury, loss, damage or liability to Tenant or to any other person or entity
arising out of said loss or damage.

          6.1.8 Payment of Landlord's Cost of Enforcement. Tenant shall pay on
                -----------------------------------------
demand Landlord's expenses, including reasonable attorneys' fees, incurred in
enforcing any obligation of Tenant under this Lease or in curing any default by
Tenant under this Lease as provided in Section 8.5.

          6.1.9 Yield Up. Tenant shall, at the expiration or earlier termination
                --------
of the term of this Lease, surrender all keys to the Premises; remove all of its
trade fixtures and personal property (including all Removables) in the Premises;
remove such installations made (or if applicable, restore any items removed) by
it as Landlord may request and all Tenant's signs wherever located; repair all
damage caused by such removal and yield up the Premises

                                      19
<PAGE>

(including all installations and improvements made by Tenant except for trade
fixtures and such of said installations or improvements as Landlord shall
request Tenant to remove), broom clean and in the same good order and repair in
which Tenant is obliged to keep and maintain the Premises by the provisions of
this Lease. Any property not so removed shall be deemed abandoned and may be
removed and disposed of by Landlord in such manner as Landlord shall determine
and Tenant shall pay Landlord the entire cost and expense incurred by it in
effecting such removal and disposition and in making any incidental repairs and
replacements to the Premises and for use and occupancy during the period after
the expiration or earlier termination of the term of this Lease and prior to the
performance by Tenant of its obligations under this subsection 6.1.9. Tenant
shall further indemnify Landlord against all loss, cost and damage resulting
from Tenant's failure or delay in surrendering the Premises as above provided.

          6.1.10 Rules and Regulations. Tenant shall, during the term of this
                 ---------------------
Lease, observe and abide by the Rules and Regulations of the Building set forth
as Exhibit B, as the same may from time to time be amended, revised or
supplemented (the "Rules and Regulations"). Tenant shall further be responsible
                   ---------------------
for compliance with the Rules and Regulations by the employees, servants, agents
and visitors of Tenant.

          6.1.11 Estoppel Certificate. Tenant shall, within ten (10) days'
                 --------------------
following written request by Landlord, execute, acknowledge and deliver to
Landlord a statement in form satisfactory to Landlord in writing certifying that
this Lease is unmodified and in full force and effect and that Tenant has no
defenses, offsets or counterclaims against its obligations to pay the Annual
Fixed Rent and Additional Rent and any other charges and to perform its other
covenants under this Lease (or, if there have been any modifications, that the
Lease is in full force and effect as modified and stating the modifications and,
if there are any defenses, offsets or counterclaims, setting them forth in
reasonable detail), the dates to which the Annual Fixed Rent and Additional Rent
and other charges have been paid, and any other matter pertaining to this Lease.
Any such statement delivered pursuant to this subsection 6.1.11 may be relied
upon by any prospective purchaser or mortgagee of the Property, or any
prospective assignee of such mortgage.

          6.1.12 Landlord's Expenses For Consents. Tenant shall reimburse
                 --------------------------------
Landlord, as Additional Rent, promptly on demand for all reasonable legal,
engineering and other professional services expenses incurred by Landlord in
connection with all requests by Tenant for consent or approval hereunder.

          6.1.13 Financial Information. Tenant shall, from and after the Date of
                 ---------------------
this Lease and thereafter throughout the term of this Lease, provide Landlord
with such information as to Tenant's financial condition and/or organizational
structure as Landlord or the holder of any mortgage of the Property requires,
within fifteen days of request.

     6.2  Negative Covenants.  Tenant shall not do the following.
          ------------------

          6.2.1  Assignment and Subletting.  Tenant shall not, without obtaining
                 -------------------------
Landlord's consent, which consent may be withheld in its sole discretion except
as hereinafter provided, assign, mortgage, pledge, hypothecate, encumber or
otherwise transfer this Lease or sublease (which term shall be deemed to include
the granting of concessions and licenses and the

                                      20
<PAGE>

like) all or any part of the Premises or suffer or permit this Lease or the
leasehold estate hereby created or any other rights arising under this Lease to
be assigned, transferred, mortgaged, pledged, hypothecated or encumbered, in
whole or in part, whether voluntarily, involuntarily or by operation of law, or
permit the use or occupancy of the Premises by anyone other than Tenant, or the
Premises to be offered or advertised for assignment or subletting. Any transfer
of the stock or partnership or beneficial interests or other evidences of
ownership of Tenant or the issuance of additional stock or partnership or
beneficial interests or other indicia of ownership in Tenant or any transactions
pursuant to which Tenant is merged or consolidated with another entity or
pursuant to which all or substantially all of Tenant's assets are transferred to
any other entity shall be deemed to be an assignment of this Lease; provided,
however, that any transaction pursuant to which Tenant is merged or consolidated
with another entity or pursuant to which all or substantially all of Tenant's
assets are transferred shall not require Landlord's consent, if (w) after any
such transaction or transfer, the successor to Tenant or the transferee of or
successor to any of Tenant's rights hereunder has a tangible net worth computed
in accordance with generally accepted accounting principles at least equal to
the greater of (1) the net worth of Tenant immediately prior to such merger,
consolidation or transfer, or (2) the net worth of Tenant herein named on the
Date of this Lease, (x) proof satisfactory to Landlord of such net worth shall
have been delivered to Landlord at least ten (10) days prior to the effective
date of any such transaction, (y) in the case of a sale of assets, proof
satisfactory to Landlord shall have been delivered to Landlord at least ten (10)
days prior to the effective date of any such transfer that substantially all of
Tenant's assets shall be sold to such transferee, and (z) the assignee,
transferee or successor agrees directly with Landlord, by written instrument in
form satisfactory to Landlord, to be bound by all the terms of this Lease
including, without limitation, the covenants contained in this Subsection. In
addition, Tenant may, upon not less than ten (10) days prior notice to Landlord,
sublease all or any portion of the Premises to any entity which controls, is
controlled by or is under common control with the Tenant identified in Section
1.1 (such entity being an "Affiliate"). Any sublease to an Affiliate shall, at
                           ---------
Landlord's election, be terminated if the subtenant shall cease to be an
Affiliate, and any sublease shall so provide. The term "control" shall mean the
                                                        -------
ownership, directly or indirectly, of more than seventy-five percent (75%) of
the outstanding voting stock of a corporation or other equity interest if Tenant
is not a corporation.

     In the event that Tenant shall intend to enter into a sublease which is not
to an Affiliate, then Tenant shall, not sooner than one hundred twenty (120)
days, and not later than forty-five (45) days, prior to the proposed effective
date of such sublease, give Landlord notice of such intent, identifying the
proposed subtenant, all of the terms and conditions of the proposed sublease and
such other information as the Landlord may reasonably request.  Landlord may
elect (i) to terminate the term of this Lease  if Tenant intends to sublease
more than fifty percent (50%) of the Premises or (ii) to exclude from the
Premises the portion thereof to be sublet by giving notice to Tenant of either
such election not later than thirty (30) days after receiving notice of such
intent from Tenant.  If Landlord shall give such notice within such thirty (30)
day period, upon the later to occur of (a) the proposed date of commencement of
such proposed sublease, or (b) the date which is ten (10) days after Landlord's
notice, the term of this Lease shall terminate or (as applicable),  the Premises
shall be reduced to exclude the portion of the Premises intended for subletting,
in which case Annual Fixed Rent and Tenant's Percentage shall be correspondingly
reduced.  Tenant shall pay, as Additional Rent, all costs of separating the area
to be excluded from the remainder of the Premises (including all demising costs
and any

                                      21
<PAGE>

separation of utilities). Tenant shall only be required to pay its pro-rata
share (measured by the remaining rentable area of the Premises divided by 30,000
square feet) of Operating Costs and Taxes for the Premises as initially demised,
and all areas and facilities of the Premises as initially demised which would be
considered "common areas and facilities" of a multi-tenanted property including
but without limitation lobbies, loading docks and hallways shall thereafter no
longer be leased to Tenant for its exclusive use, but shall only be used by
Tenant in common with the other tenant(s) of the Building. In furtherance of the
foregoing, Tenant shall only have the right to use its pro-rata share of the
parking spaces in the parking lot of the Building. If Landlord shall give its
consent, Tenant may enter into such sublease on the terms and conditions set
forth in such notice from Tenant within the following thirty (30) days. If
Tenant shall not enter into such sublease within such following thirty (30) day
period and shall still desire to enter into any sublease, or if Tenant shall
change the terms and conditions thereof following the date of Tenant's notice to
Landlord, the first sentence of this paragraph shall again become applicable.

     If Landlord shall not elect to exclude from the Premises the area to be
sublet or to terminate the term of this Lease pursuant to the preceding
paragraph, then Landlord shall not unreasonably withhold its consent to up to
two (2) subtenants of the Premises at any time, provided that the proposed
subtenant(s) (i) have a credit worthiness and reputation reasonably acceptable
to Landlord, and (ii) shall use the Premises for the Permitted Uses, (iii) shall
not use the Premises for a purpose or in a manner which is inconsistent with
Landlord's commitments to other tenants of the Property.

     If this Lease is assigned or if the Premises or any part thereof are sublet
(or occupied by any party other than Tenant and its employees) Landlord, after
default by Tenant hereunder, may collect the rents from such assignee, subtenant
or occupant, as the case may be, and apply the net amount collected to the
Annual Fixed Rent and Additional Rent herein reserved, but no such collection
shall be deemed a waiver of the provisions set forth in the first paragraph of
this Subsection 6.2.1, the acceptance by Landlord of such assignee, subtenant or
occupant, as the case may be, as a tenant, or a release of Tenant from the
future performance by Tenant of its covenants, agreements or obligations
contained in this Lease.

     Any sublease of all or any portion of the Premises shall provide that it is
subject and subordinate to this Lease and to the matters to which this Lease is
or shall be subject or subordinate, and that in the event of termination of this
Lease or reentry or dispossession of Tenant by Landlord under this Lease,
Landlord may, at its option, take over all of the right, title and interest of
Tenant, as sublessor under such sublease, and such subtenant shall, at
Landlord's option, attorn to Landlord pursuant to the then executory provisions
of such sublease, except that neither Landlord nor any mortgagee of the
Property, as holder of a mortgage or as Landlord under this Lease if such
mortgagee succeeds to that position, shall (a) be liable for any act or omission
of Tenant under such sublease, (b) be subject to any credit, counterclaim,
offset or defense which theretofore accrued to such subtenant against Tenant, or
(c) be bound by any previous modification of such sublease or by any previous
prepayment of more than one (1) month's rent, (d) be bound by any covenant of
Tenant to undertake or complete any construction of the Premises or any portion
thereof, (e) be required to account for any security deposit of the subtenant
other than any security deposit actually received by Landlord, (f) be bound by
any obligation to make any payment to such subtenant or grant any credits, (g)
be responsible for any monies owing by Landlord to the credit of Tenant or (h)
be required to remove any person

                                      22
<PAGE>

occupying the Premises or any part thereof; and such sublease shall provide that
the subtenant thereunder shall, at the request of Landlord, execute a suitable
instrument in confirmation of such agreement to attorn. The provisions of this
paragraph shall not be deemed a waiver of the provisions set forth in the first
paragraph of this Subsection 6.2.1.

     Tenant shall not enter into, nor shall it permit any person having an
interest in the possession, use, occupancy or utilization of any part of the
Premises to enter into, any sublease, license, concession, assignment or other
agreement for use, occupancy or utilization of the Premises (i) which provides
for rental or other compensation based on the income or profits derived by any
person or on any other formula such that any portion of such sublease rental, or
other consideration for a license, concession, assignment or other occupancy
agreement, would fail to qualify as "rents from real property" within the
meaning of Section 856(d) of the Internal Revenue Code or any similar or
successor provision thereto, or would otherwise disqualify Landlord for
treatment as a real estate investment trust under Sections 856-869 of the
Internal Revenue Code, (ii) under which fifty percent (50%) or more of the total
rent or other compensation received by Tenant is attributable to personal
property or (iii) which would otherwise be subject to the prohibitions of
Section 406 of ERISA or result in imposition of any tax pursuant to Section 511
or Section 4975 of the Internal Revenue Code; and any such purported lease,
sublease, license, concession or other agreement shall be absolutely void and
ineffectual as a conveyance of any right or interest in the possession, use,
occupancy or utilization of such part of the Premises.

     No subletting or assignment shall in any way impair the continuing primary
liability of Tenant hereunder, and no consent to any subletting or assignment in
a particular instance shall be deemed to be a waiver of the obligation to obtain
the Landlord's written approval in the case of any other subletting or
assignment.  The joint and several liability of Tenant named herein and any
immediate and remote successor in interest of Tenant (by assignment or
otherwise), and the due performance of the obligations of this Lease on Tenant's
part to be performed or observed, shall not in any way be discharged, released
or impaired by any (a) agreement which modifies any of the rights or obligations
of the parties under this Lease, (b) stipulation which extends the time within
which an obligation under this Lease is to be performed, (c) waiver of the
performance of an obligation required under this Lease, or (d) failure to
enforce any of the obligations set forth in this Lease.  No assignment,
subletting or occupancy shall affect the Permitted Uses.  Any subletting,
assignment or other transfer of Tenant's interest in this Lease in contravention
of this Subsection 6.2.1 shall be voidable at Landlord's option.

     If the rent and other sums (including, without limitation, all monetary
payments plus the reasonable value of any services performed or any other thing
of value given by any assignee or subtenant in consideration of such assignment
or sublease), either initially or over the term of any assignment or sublease,
payable by such assignee or subtenant (other than an Affiliate) on account of an
assignment or sublease of all or any portion of the Premises exceed the sum of
(i) Annual Fixed Rent plus Additional Rent called for hereunder plus (ii) such
reasonable amounts (amortized over the term of such sublease) as shall have been
expended by Tenant for brokerage and legal fees and construction costs to the
space to be sublet or assigned, called for hereunder with respect to the space
assigned or sublet, Tenant shall pay to Landlord as Additional Rent one hundred
percent (100%) of such excess payable monthly at the time for payment of Annual
Fixed Rent.  Nothing in this paragraph shall be deemed to abrogate the
provisions of this

                                      23
<PAGE>

Subsection 6.2.1 and Landlord's acceptance of any sums pursuant to this
paragraph shall not be deemed a granting of consent to any assignment of the
Lease or sublease of all or any portion of the Premises.

          6.2.2 Nuisance. Tenant shall not injure, deface or otherwise harm the
                --------
Premises; nor commit any nuisance; nor permit in the Premises any vending
machine (except such as is used for the sale of merchandise to employees of
Tenant) or inflammable fluids or chemicals (except such as are customarily used
in connection with standard office equipment); nor permit any cooking to such
extent as requires special exhaust venting; nor permit the emission of any
objectionable noise or odor; nor make, allow or suffer any waste; nor make any
use of the Premises which is improper, offensive or contrary to any law or
ordinance or which will invalidate or increase the premiums for any of
Landlord's insurance or which is liable to render necessary any alteration or
addition to the Building; nor conduct any auction, fire, "going out of business"
or bankruptcy sales.

          6.2.3 Floor Load; Heavy Equipment. Tenant shall not place a load upon
                ---------------------------
any floor of the Premises exceeding the lesser of the floor load capacity which
such floor was designed to carry or which is allowed by law. Landlord reserves
the right to prescribe the weight and position of all heavy business machines
and equipment, including safes, which shall be placed so as to distribute the
weight. Business machines and mechanical equipment which cause vibration or
noise shall be placed and maintained by Tenant at Tenant's expense in settings
sufficient to absorb and prevent vibration, noise and annoyance. Tenant shall
not move any safe, heavy machinery, heavy equipment, freight or fixtures into or
out of the Premises without Landlord's prior consent which consent may include a
requirement to provide insurance naming Landlord, and the holder of any mortgage
affecting the Property, as additional insureds, in such amount as Landlord
reasonably requires. If any such safe, machinery, heavy equipment, freight, or
fixtures requires special handling, Tenant agrees to employ only persons holding
a master rigger's license to do said work, and that all work in connection
therewith shall comply with applicable laws and regulations. Any such moving
shall be at the sole risk and hazard of Tenant and Tenant hereby agrees to
exonerate, indemnify and save Landlord harmless against and from any liability,
loss, injury, claim or suit resulting directly or indirectly from such moving.
Tenant shall schedule such moving at such times as Landlord shall reasonably
designate.

          6.2.4 Electricity. Tenant shall not connect to the electrical
                -----------
distribution system serving the Premises (i) a total load exceeding the lesser
of the capacity of such system or the maximum load permitted from time to time
under applicable governmental regulations or (ii) any fixtures, appliances or
equipment other than telephone systems, dictation and transcription machines,
photocopy, facsimile and shredding machines, personal computers, file servers,
printers, scanners, modems and other customary computer peripherals, small
office refrigerators, coffee makers, toasters, toaster ovens and microwave
ovens, typewriters, calculators, adding machines, desk lamps, pencil sharpeners,
clocks, and radios. The capacity of the electrical distribution system serving
the Premises shall be the lesser of (a) the capacity of the branch of the system
serving the Premises exclusively or (b) the allocation to the Premises of the
capacity of the system serving the entire Building, Landlord and Tenant agreeing
that such capacity shall be allocated equally over the entire rentable area of
the Building.

                                      24
<PAGE>

          6.2.5 Installation, Alterations or Additions. Tenant shall not make
                --------------------------------------
any installations, alterations or additions in, to or on the Premises nor to
permit the making of any holes in the walls, partitions, ceilings or floors
without on each occasion obtaining the prior consent of Landlord, and then only
pursuant to plans and specifications approved by Landlord in advance in each
instance. All installations, alterations and additions to the Premises by Tenant
shall (i) be performed in a good and workmanlike manner by contractors approved
in advance by Landlord and in compliance with the provisions of Exhibit C and
all applicable zoning, building, fire, health and other codes, regulations,
ordinances and laws, (ii) be made at Tenant's sole cost and expense and at such
times and in such a manner as Landlord may from time to time designate, and
(iii) except as provided herein, become part of the Premises and the property of
Landlord without being deemed additional rent for tax purposes, Landlord and
Tenant agreeing that Tenant shall be treated as the owner for tax purposes until
the expiration or earlier termination of the term hereof, subject to Landlord's
rights pursuant to Section 6.1.7 to require Tenant to remove the same at or
prior to the expiration or earlier termination of the term hereof.
Notwithstanding the foregoing, the installation, addition and subsequent
alteration of self-contained HVAC systems, back-up power supply systems,
satellite dishes, servers, and related readily removable improvements, to the
extent paid for by Tenant and not reimbursed as part of Landlord's Contribution
(herein referred to as "Removables") shall not become part of the Premises and
                        ----------
the property of Landlord, but shall remain the property of Tenant. Tenant shall
pay promptly when due the entire cost of any work to the Premises so that the
Premises, Building and Property shall at all times be free of liens for labor
and materials, and, at Landlord's request, Tenant shall furnish to Landlord a
bond or other security acceptable to Landlord assuring that any such work will
be completed in accordance with the plans and specifications theretofore
approved by Landlord and assuring that the Premises will remain free of any
mechanics' lien or other encumbrances that may arise out of such work. Prior to
the commencement of any such work, and throughout and until completion thereof,
Tenant shall maintain, or cause to be maintained, the insurance required by
Exhibit D, all with coverage limits as stated therein or such higher limits as
shall be reasonably required by Landlord. In addition, Tenant shall save
Landlord harmless and indemnified from all injury, loss, claims or damage to any
person or property occasioned by or arising out of such work. Whenever and as
often as any mechanic's or materialmen's lien shall have been filed against the
Property based upon any act of Tenant or of anyone claiming through Tenant,
Tenant shall within three (3) days of notice from Landlord to Tenant take such
action by bonding, deposit or payment as will remove or satisfy the lien.

     In the event that, at Tenant's request, Landlord or any of its agents,
employees or contractors provide advice, assistance or otherwise become involved
with any installations, alterations or additions in, to or on the Premises,
Tenant shall pay to Landlord, promptly upon the completion of such work, an
administrative fee (the "Administrative Fee") in an amount equal to ten percent
                         ------------------
(10%) of the entire cost of such work.

     Tenant shall not, at any time, directly or indirectly, employ or permit the
employment of any contractor, mechanic or laborer in the Premises, if such
employment will interfere or cause any conflict with other contractors,
mechanics or laborers engaged in the construction, maintenance or operation of
the Building by Landlord, Tenant or others.  In the event of any such
interference or conflict, Tenant, upon demand of Landlord, shall cause all
contractors, mechanics or laborers causing such interference or conflict to
leave the Building immediately.

                                      25
<PAGE>

          6.2.6 Abandonment. Tenant shall not abandon or vacate the Premises
                -----------
during the term.

          6.2.7 Signs. Tenant shall not paint or place any signs or place any
                -----
curtains, blinds, shades, awnings, aerials, or the like, visible from outside
the Premises.

          6.2.8 Oil and Hazardous Materials. Tenant shall not introduce on or
                ---------------------------
transfer to the Premises or Property, any Hazardous Materials (as hereinafter
defined); nor dump, flush or otherwise dispose of any Hazardous Materials into
the drainage, sewage or waste disposal systems serving the Premises or Property;
nor generate, store, use, release, spill or dispose of any Hazardous Materials
in or on the Premises or the Property, or to transfer any Hazardous Materials
from the Premises to any other location; and Tenant shall not commit or suffer
to be committed in or on the Premises or Property any act which would require
any reporting or filing of any notice with any governmental agency pursuant to
any statutes, laws, codes, ordinances, rules or regulations, present or future,
applicable to the Property or to Hazardous Materials.

     Tenant agrees that if it or any subtenant or any of its subtenants,
employees, contractors agents or invitees (collectively, "Tenant Entities")
                                                          ---------------
shall store, release, spill, dispose of or transfer to the Premises or Property
any Hazardous Materials, it shall forthwith remove the same, at its sole cost
and expense, in the manner provided by all applicable Environmental Laws (as
hereinafter defined), regardless of when such Hazardous Materials shall be
discovered.  Furthermore, Tenant shall pay any fines, penalties or other
assessments imposed by any governmental agency with respect to any such
Hazardous Materials and shall forthwith repair and restore any portion of the
Premises or Property which it shall disturb in so removing any such Hazardous
Materials to the condition which existed prior to Tenant's disturbance thereof
by any Tenant Entities.

     Tenant agrees to deliver promptly to Landlord any notices, orders or
similar documents received from any governmental agency or official concerning
any violation of any Environmental Laws or with respect to any Hazardous
Materials affecting the Premises or Property.  In addition, Tenant shall, within
ten (10) days of receipt, accurately complete any questionnaires from Landlord
or other informational requests relating to Tenant's use of the Premises and, in
particular, to Tenant's use, generation, storage and/or disposal of Hazardous
Materials at, to, or from the Premises.

     Tenant shall indemnify, defend (by counsel satisfactory to Landlord),
protect, and hold Landlord free and harmless from and against any and all
claims, or threatened claims, including without limitation, claims for death of
or injury to any person or damage to any property, actions, administrative
proceedings, whether formal or informal, judgments, damages, punitive damages,
liabilities, penalties, fines, costs, taxes, assessments, forfeitures, losses,
expenses, attorneys' fees and expenses, consultant fees, and expert fees that
arise from or are caused in whole or in party, directly or indirectly, by (i) as
a result of the act or failure to act of the Tenant Entities, the presence or
suspected presence in, on, under or about the Premises or discharge in or from
the Premises of any Hazardous Materials, or Tenant's use, analysis, storage,
transportation, disposal, release, threatened release, discharge or generation
of Hazardous Materials to, in, on, under, about or from the Premises, or (ii)
Tenant's failure to comply with any Environmental Laws.  Tenant's obligations
hereunder shall include, without limitation, and whether foreseeable or

                                      26
<PAGE>

unforeseeable, all costs (including, without limitation, capital, operating and
maintenance costs) incurred in connection with any investigation or monitoring
of site conditions, repair, cleanup, containment, remedial, removal or
restoration work, or detoxification or decontamination of the Premises, and the
preparation and implementation of any closure, remedial action or other required
plans in connection therewith.  For purposes of this Section 6.2.8, any acts or
omissions of Tenant, or by employees, agents, assignees, contractors or
subcontractors of Tenant or others acting for or on behalf of Tenant (whether or
not they are negligent, intentional, willful or unlawful) shall be attributable
to Tenant.

     The term "Hazardous Materials" shall mean and include any oils, petroleum
               -------------------
products, asbestos, radioactive, biological, medical or infectious wastes or
materials, and any other toxic or hazardous wastes, materials and substances
which are defined, determined or identified as such in any Environmental Laws,
or in any judicial or administrative interpretation of Environmental Laws.

     "Environmental Laws" shall mean any and all federal, state and municipal
      ------------------
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
codes, plans, injunctions, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, medical, biological, infectious, toxic or hazardous
substances or wastes into the environment including, without limitation, ambient
air, surface water, ground water or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, petroleum or petroleum
products, medical, biological, infectious, toxic or hazardous substances or
wastes or the cleanup or other remediation thereof.

                                   Article 7

                              Casualty or Taking
                              ------------------

     7.1 Termination. In the event that the Premises, or any material part
         -----------
thereof shall be destroyed or damaged by fire or casualty, shall be taken by any
public authority or for any public use or shall be condemned by the action of
any public authority, then this Lease may be terminated at the election of
Landlord. Such election, which may be made notwithstanding the fact that
Landlord's entire interest may have been divested, shall be made by the giving
of notice by Landlord to Tenant within sixty (60) days after the date of the
taking or casualty.

     In the event that (i) at least twenty-five percent (25%) of the Premises is
damaged by fire or other casualty to such an extent that the repairs required to
be made by Landlord pursuant to Section 7.2 could not reasonably be expected to
be completed in the ordinary course, or are not actually substantially
completed, within nine (9) months of the fire or other casualty, or (ii) at
least twenty-five percent (25%) of the Premises is taken by any exercise of
eminent domain for all or substantially all of the remaining term of this Lease,
then in either case Tenant shall have the right to terminate the term of this
Lease by giving notice of its desire to do so to Landlord within thirty (30)
days after such damage or taking or the expiration of such nine-month period (as
applicable); and in the event that at least twenty-five percent (25%) of the
Premises is damaged by fire or other casualty in the last year of the term of
this Lease (as the same may have

                                      27
<PAGE>

been extended pursuant to Section 2.3) to such an extent that the repairs
required to be made by Landlord pursuant to Section 7.2 could not reasonably be
expected to be completed within the lesser of three (3) months or half of the
remaining term from the date of fire or other casualty, Tenant may elect to
terminate the term of this Lease by notice to Landlord within ten (10) days
after the date of fire or other casualty, whereupon in any such case on the date
thirty (30) days after the giving of such notice, the term of this Lease shall
terminate with the same force and effect as if such date were the date on which
the term of this Lease were scheduled to expire by effluxion of time.
Notwithstanding the foregoing to the contrary, Tenant shall have no right to
terminate the term of this Lease due to a fire or other casualty if the cause
thereof was due to the gross negligence or other willful conduct of any Tenant
Entity or any other occupant permitted on the Premises by Tenant.

     7.2 Restoration. If neither Landlord nor Tenant shall elect to so
         -----------
terminate, this Lease shall continue in force and (so long as the damage is not
caused by the negligence or other wrongful act of Tenant or its employees,
agents, contractors or invitees) a just proportion of the Annual Fixed Rent
reserved, according to the nature and extent of the damages sustained by the
Premises, shall be suspended or abated until the Premises (excluding any
improvements to the Premises made at Tenant's expense), or what may remain
thereof, shall be put by Landlord in proper condition for use, which Landlord
covenants to do with reasonable diligence to the extent permitted by the net
proceeds of insurance recovered or damages awarded for such destruction, taking,
or condemnation and subject to zoning and building laws or ordinances then in
existence. "Net proceeds of insurance recovered or damages awarded" refers to
            ------------------------------------------------------
the gross amount of such insurance or damages actually made available to
Landlord (and not retained by any Superior Lessor or Superior Mortgagee) less
the reasonable expenses of Landlord incurred in connection with the collection
of the same, including without limitation, fees and expenses for legal and
appraisal services.

     7.3 Award. Irrespective of the form in which recovery may be had by law,
         -----
all rights to damages or compensation shall belong to Landlord in all cases.
Tenant hereby grants to Landlord all of Tenant's rights to such damages and
covenants to deliver such further assignments thereof as Landlord may from time
to time request. Nothing contained herein shall be construed to prevent Tenant
from prosecuting in any condemnation proceedings a claim for relocation
expenses, provided that such action shall not affect the amount of compensation
otherwise recoverable by Landlord from the taking authority.

                                   Article 8

                                   Defaults
                                   --------

     8.1 Default of Tenant. (a) (I) If Tenant shall default in its obligations
         -----------------
to pay the Annual Fixed Rent or Additional Rent or any other charges under this
Lease when due or shall default in complying with its obligations under
Subsection 6.1.11 of this Lease and if any such default shall continue for ten
(10) days after notice from Landlord designating such default, or (II) if as
promptly as possible but in any event within thirty (30) days after notice from
Landlord to Tenant specifying any default or defaults other than those set forth
in clause (I) Tenant has not cured the default or defaults so specified; or (b)
if any assignment shall be made by Tenant or any guarantor of Tenant for the
benefit of creditors; or (c) if Tenant's leasehold interest shall be

                                      28
<PAGE>

taken on execution; or (d) if an involuntary encumbrance shall be filed against
Tenant's leasehold interest and shall not be discharged within ten (10) days
thereafter; or (e) if a petition shall be filed by Tenant or any guarantor of
Tenant for liquidation, or for reorganization or an arrangement under any
provision of any bankruptcy law or code as then in force and effect; or (f) if
an involuntary petition under any of the provisions of any bankruptcy law or
code shall be filed against Tenant or any guarantor of Tenant and such
involuntary petition shall not be dismissed within thirty (30) days thereafter;
or (g) if a custodian or similar agent shall be authorized or appointed to take
charge of all or substantially all of the assets of Tenant or any guarantor of
Tenant; or (h) if Tenant or any guarantor of Tenant dissolves or shall be
dissolved or shall liquidate or shall adopt any plan or commence any proceeding,
the result of which is intended to include dissolution or liquidation; or (i) if
any order shall be entered in any proceeding by or against Tenant or any
guarantor of Tenant decreeing or permitting the dissolution of Tenant or any
guarantor of Tenant or the winding up of its affairs; or (j) if Tenant shall
fail to pay any installment of Annual Fixed Rent or Additional Rent when due,
Tenant shall cure such default within the grace period provided in clause (a)
(I) above (or with Landlord's approval after the expiration of such grace
period) and Tenant shall, within the next year following the date such initial
defaulted payment was first due, fail more than twice to pay any installment of
Annual Fixed Rent or Additional Rent when due, then, and in any of such cases
indicated in clauses (a) through (j) hereof (collectively and individually, a
"Default of Tenant"), Landlord may, in addition to and not in derogation of any
 -----------------
remedies for any preceding breach of covenant, immediately or at any time
thereafter give notice to Tenant terminating this Lease and the term hereof,
which notice shall specify the date of termination, whereupon on the date so
specified, the term of this Lease and all of Tenant's rights and privileges
under this Lease shall expire and terminate but Tenant shall remain liable as
hereinafter provided.

     8.2 Remedies. In the event of any termination pursuant to Section 8.1,
         --------
Tenant shall pay the Annual Fixed Rent, Additional Rent and other charges
payable hereunder up to the time of such termination. Thereafter, whether or not
the Premises shall have been re-let, Tenant shall be liable to Landlord for, and
shall pay to Landlord the Annual Fixed Rent, Additional Rent and other charges
which would be payable hereunder for the remainder of the term of this Lease had
such termination not occurred, less the net proceeds, if any, of any reletting
of the Premises, after deducting all expenses in connection with such reletting,
including, without limitation, all repossession costs, brokerage commissions,
attorneys' fees and expenses, advertising costs, administration expenses,
alteration costs, the value of any tenant inducements (including but without
limitation free rent, moving costs, and contributions toward leasehold
improvements) and any other expenses incurred in preparation for such reletting.
Tenant shall pay such damages to Landlord monthly on the days on which the
Annual Fixed Rent, Additional Rent or other charges would have been payable
hereunder if the term of this Lease had not been so terminated.

     At any time after such termination, in lieu of recovering damages pursuant
to the provisions of such immediately preceding paragraph with respect to any
period after the date of demand therefor, at Landlord's election, Tenant shall
pay to Landlord the greater of (i) the amount, if any, by which (A) the Annual
Fixed Rent, Additional Rent and other charges which would be payable hereunder
from the date of such demand to the end of what would be the then unexpired term
of this Lease had such termination not occurred, shall exceed (B) the then fair
rental value of the Premises for the same period or (ii) an amount equal to the
lesser of (x) the Annual Fixed Rent, Additional Rent and other charges that
would have been payable for the

                                      29
<PAGE>

remainder of the term of this Lease had such termination not occurred or (y) the
aggregate of the Annual Fixed Rent, Additional Rent and other charges accrued in
the twelve (12) months ended next prior to such termination (without reduction
for any free rent or other concession or abatement) except that in the event the
term of this Lease is so terminated prior to the expiration of the first full
year of the term of this Lease, the damages which Landlord may elect to recover
pursuant to clause (ii) (y) of this paragraph shall be calculated as if such
termination had occurred on the first anniversary of the Commencement Date and
there had been no so-called free rent or other rental concession or any rental
abatement.

     Nothing contained in this Lease shall, however, limit or prejudice the
right of Landlord to prove for and obtain in proceedings for bankruptcy or
insolvency by reason of the termination of this Lease, an amount equal to the
maximum allowed by any statute or rule of law in effect at the time when, and
governing the proceedings in which, the damages are to be proved, whether or not
the amount be greater than, equal to, or less than the amount of the loss or
damages referred to above.

     In case of any Default of Tenant, re-entry, expiration and repossession by
summary proceedings or otherwise, Landlord may (i) relet the Premises or any
part or parts thereof, either in the name of Landlord or otherwise, for a term
or terms which may at Landlord's option be equal to or less than or exceed the
period which would otherwise have constituted the balance of the term of this
Lease and may grant concessions or free rent to the extent that Landlord
considers advisable and necessary to relet the same and (ii) may make such
alterations, repairs and decorations in the Premises as Landlord in its sole
judgment considers advisable and necessary for the purpose of reletting the
Premises; and the making of such alterations, repairs and decorations shall not
operate or be construed to release Tenant from liability hereunder as aforesaid.
Landlord shall in no event be liable in any way whatsoever for failure to relet
the Premises, or, in the event that the Premises are relet, for failure to
collect the rent under such reletting.

     To the fullest extent permitted by law, Tenant hereby expressly waives any
and all rights of redemption granted under any present or future laws in the
event of Tenant being evicted or dispossessed, or in the event of Landlord
obtaining possession of the Premises, by reason of the violation by Tenant of
any of the covenants and conditions of this Lease.

     8.3 Other Remedies. In the event of any Default of Tenant and at any time
         --------------
prior to Landlord's election to terminate the term of this Lease, Landlord may
change the locks of the Premises without Tenant's consent, whereupon Landlord
shall post a notice on the door of the Premises informing Tenant where a new key
may be obtained. Landlord shall, however, be under no obligation to furnish
Tenant with a new key for the Premises unless and until Tenant has cured the
Default of Tenant and Tenant waives any and all duties and/or liabilities
imposed upon Landlord by Section 93.002 of the Texas Property Code. In the event
of any Default of Tenant at any time prior to Landlord's election to terminate
the term of this Lease, Landlord may terminate Tenant's right to possession of
the Premises, enter upon and take possession of the Premises and expel or remove
Tenant and any other person who may be occupying any portion of the Premises, by
force if necessary, without being liable for prosecution or any claim for
damages therefor, and without terminating the Lease. Landlord shall be under no
obligation to, but may relet the Premises and receive the rent therefor under
terms and conditions acceptable to

                                      30
<PAGE>

Landlord in its sole discretion and judgment. In the event of such election by
Landlord, Tenant shall pay to Landlord within ten (10) days after written notice
by Landlord sums equivalent to the Annual Fixed Rent and Additional Rent
reserved hereunder less the avails of reletting, if any, or, at Landlord's
option, upon notice to Tenant, Landlord may demand and Tenant shall become
immediately liable to Landlord for the amount by which the Annual Fixed Rent and
Additional Rent that would be payable by Tenant during the unexpired balance of
the term of this Lease exceeds the fair market value of the Premises as of the
time of the Default of Tenant for such balance of the term of this Lease. Tenant
shall also pay within ten (10) days after notice, any amounts expended or
incurred by Landlord for costs of reletting the Premises or any portion thereof,
including, but without limitation, all repossession costs, brokerage
commissions, legal expenses, attorneys' fees, advertising, expenses of
employees, alterations costs and the value of any tenant inducements (including
but without limitation free rent, moving costs and contributions toward
leasehold improvements). If Tenant's right to possession of the Premises is
terminated, Tenant shall nonetheless remain liable (in addition to accrued
liabilities) to the extent legally permissible for the Annual Fixed Rent and
Additional Rent and all other charges Tenant would have been required to pay
until the date this Lease would have expired had such termination of Tenant's
right to possession of the Premises not occurred. Landlord shall have the right,
at its option, to recover sums due hereunder through litigation or otherwise
from time to time on one or more occasions without being obligated to wait until
the expiration of the term of this Lease before filing suit. Notwithstanding
Landlord's exercise of the remedy set forth in this Section 8.3, Landlord shall
have the continuing right, at its option, to terminate the term of this Lease in
accordance with Section 8.1 and to recover any amounts provided in Section 8.2.

     8.4 Remedies Cumulative. Except as expressly provided otherwise in Section
         -------------------
8.2, any and all rights and remedies which Landlord may have under this Lease,
and at law and equity (including without limitation actions at law for direct,
indirect, special and consequential (foreseeable and unforeseeable) damages, for
Tenant's failure to comply with its obligations under this Lease shall be
cumulative and shall not be deemed inconsistent with each other, and any two or
more of all such rights and remedies may be exercised at the same time insofar
as permitted by law.

     8.5 Landlord's Right to Cure Defaults. Landlord shall have the right, but
         ---------------------------------
shall not be required, to pay such sums or do any act which requires the
expenditure of monies which may be necessary or appropriate by reason of the
failure or neglect of Tenant to comply with any of its obligations under this
Lease (irrespective of whether the same shall have ripened into a Default of
Tenant), and in the event of the exercise of such right by Landlord, Tenant
agrees to pay to Landlord forthwith upon demand, as Additional Rent, all such
sums including reasonable attorneys fees, together with interest thereon at a
rate (the "Default Rate") equal to the lesser of 6% over the Prime Rate or the
           ------------
maximum rate allowed by law. Landlord shall not exercise such right unless
either a Default of Tenant has occurred or the breach by Tenant has resulted in
an imminent threat to life or property or exposure of Landlord to actual or
potential liability. "Prime Rate" shall mean the annual floating rate of
                      ----------
interest, determined daily and expressed as a percentage from time to time
announced by the largest national or state-chartered banking institution then
having its principal office in the City of Austin, Texas and announcing such a
rate. If the largest national or state-chartered banking institution having its
principal offices in the City of Austin, Texas is announcing such a floating
rate, "Prime Rate" shall mean a rate of
       ----------
                                      31
<PAGE>

interest, determined daily, which is two (2) percentage points above the 14-day
moving average closing trading price of 90-day Treasury Bills.

     8.6 Holding Over. Any holding over by Tenant after the expiration or early
         ------------
termination of the term of this Lease shall be treated as a daily tenancy at
sufferance at a rate equal to one and three quarters times the greater of the
fair market rental value for the Premises on a month-to-month basis or the
Annual Fixed Rent in effect immediately prior to the expiration or earlier
termination of the term plus Additional Rent and other charges herein provided
(prorated on a daily basis). Tenant shall also pay to Landlord all damages,
direct and/or consequential (foreseeable and unforeseeable), sustained by reason
of any such holding over. Otherwise, all of the covenants, agreements and
obligations of Tenant applicable during the term of this Lease shall apply and
be performed by Tenant during such period of holding over as if such period were
part of the term of this Lease.

     8.7 Effect of Waivers of Default. Any consent or permission by Landlord to
         ----------------------------
any act or omission by Tenant shall not be deemed to be consent or permission by
Landlord to any other similar or dissimilar act or omission and any such consent
or permission in one instance shall not be deemed to be consent or permission in
any other instance.

     8.8 No Waiver, Etc. The failure of Landlord or Tenant to seek redress for
         --------------
violation of, or to insist upon the strict performance of, any covenant or
condition of this Lease shall not be deemed a waiver of such violation nor
prevent a subsequent act, which would have originally constituted a violation,
from having all the force and effect of an original violation. The receipt by
Landlord of rent with knowledge of the breach of any covenant of this Lease
shall not be deemed to have been a waiver of such breach by Landlord, or by
Tenant, unless such waiver be in writing signed by the party to be charged. No
consent or waiver, express or implied, by Landlord or Tenant to or of any breach
of any agreement or duty shall be construed as a waiver or consent to or of any
other breach of the same or any other agreement or duty.

     8.9 No Accord and Satisfaction. No acceptance by Landlord of a lesser sum
         --------------------------
than the Annual Fixed Rent, Additional Rent or any other charge then due shall
be deemed to be other than on account of the earliest installment of such rent
or charge due, nor shall any endorsement or statement on any check or any letter
accompanying any check or payment as rent or other charge be deemed an accord
and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
pursue any other remedy in this Lease provided.

                                   Article 9

                               Rights of Holders
                               -----------------

     9.1  Rights of Mortgagees or Ground Lessor.  This Lease, and all rights of
          -------------------------------------
Tenant hereunder, are and shall be subject and subordinate to any ground or
master lease, and all renewals, extensions, modifications and replacements
thereof, and to all mortgages, which may now or hereafter affect the Premises or
the Property and/or any such lease, whether or not such mortgages shall also
cover other lands and/or buildings and/or leases, to each and every advance made
or hereafter to be made under such mortgages, and to all renewals,
modifications,

                                      32
<PAGE>

replacements and extensions of such leases and such mortgages and all
consolidations of such mortgages provided that as a condition of such
subordination Tenant shall receive from the lessor or holder thereof a so-called
nondisturbance agreement which agreement may be in the form customarily used by
such lessor or holder, or if no such form exists, in any commercially reasonable
form, subject to the conditions and limitations of Sections 9.1 and 9.2. This
Section shall be self-operative and no further instrument of subordination shall
be required. In confirmation of such subordination, Tenant shall promptly
execute, acknowledge and deliver any instrument that Landlord, the lessor under
any such lease or the holder of any such mortgage or any of their respective
successors in interest may reasonably request to evidence such subordination.
Any lease to which this Lease is subject and subordinate is herein called
"Superior Lease" and the lessor of a Superior Lease or its successor in
 --------------
interest, at the time referred to, is herein called "Superior Lessor"; and any
                                                     ---------------
mortgage to which this Lease is subject and subordinate, is herein called
"Superior Mortgage" and the holder of a Superior Mortgage is herein called
 -----------------
"Superior Mortgagee". Landlord represents that as of the Date of this Lease it
 ------------------
holds fee title to the Property and no Superior Mortgage affects the Property.

     If any Superior Lessor or Superior Mortgagee or the nominee or designee of
any Superior Lessor or Superior Mortgagee shall succeed to the rights of
Landlord under this Lease, whether through possession or foreclosure action or
delivery of a new lease or deed, or otherwise, then at the request of such party
so succeeding to Landlord's rights (herein called "Successor Landlord") and upon
                                                   ------------------
such Successor Landlord's written agreement to accept Tenant's attornment,
Tenant shall attorn to and recognize such Successor Landlord as Tenant's
landlord under this Lease and shall promptly execute and deliver any instrument
that such Successor Landlord may reasonably request to evidence such attornment.
Upon such attornment, this Lease shall continue in full force and effect as a
direct lease between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Lease, except that the
Successor Landlord (unless formerly the landlord under this Lease) shall not be
(a) liable in any way to Tenant for any act or omission, neglect or default on
the part of Landlord under this Lease occurring prior to such attornment, (b)
responsible for any monies owing by or on deposit with Landlord (which shall not
be deemed to include any letter of credit against which no draws have been made)
to the credit of Tenant prior to such attornment, (c) subject to any
counterclaim or setoff which accrued to Tenant against Landlord prior to such
attornment, (d) bound by any modification of this Lease subsequent to such
Superior Lease or Superior Mortgage, or by any previous prepayment of Annual
Fixed Rent or Additional Rent for more than one (1) month, which was not
approved in writing by the Successor Landlord, (e) liable to the Tenant beyond
the Successor Landlord's interest in the Premises, or (f) responsible for the
performance of any work to be done by Landlord under this Lease to render the
Premises ready for occupancy by the Tenant.  Tenant agrees at any time and from
time to time to execute a reasonable instrument in confirmation of Tenant's
agreement to attorn, as aforesaid.

     9.2 Modifications. If any Superior Lessor or Superior Mortgagee shall
require any modification(s) of this Lease, Tenant shall, at Landlord's request,
promptly execute and deliver to Landlord such instruments effecting such
modification(s) as Landlord shall require, provided that such modification(s) do
not adversely affect in any material respect any of Tenant's rights under this
Lease. In addition, and notwithstanding Section 9.1 to the contrary, any
Superior Lessor or Superior Mortgagee may, at its option, subordinate the
Superior Lease or Superior Mortgage of which it is the lessor or holder to this
Lease by giving Tenant ten (10) days prior

                                      33
<PAGE>

written notice of such election, whereupon this Lease shall, irrespective of
dates of execution, delivery and recording, be superior to such Superior Lease
or Superior Mortgage and no other documentation shall be necessary to effect
such change.

                                  Article 10

                           Miscellaneous Provisions
                           ------------------------

     10.1 Notices. All notices, requests, demands, consents, approvals or other
          -------
communications to or upon the respective parties hereto shall be in writing and
delivered by hand or mailed by certified or registered mail, return receipt
requested, or a nationally recognized courier service that provides a receipt
for delivery such as Federal Express, United Parcel Service or U.S. Postal
Service Express Mail and shall be effective on the date delivered (or the first
date such delivery is attempted and refused) in writing to the party to which
such notice, request, demand, consent, approval or other communication is
required or permitted to be given or made under this Lease, addressed if
intended for Landlord, to the Original Address of Landlord set forth in Section
1.1 of this Lease with a copy by regular mail to Jennifer B. Clark, REIT
Management Research, Inc., 400 Centre Street, Newton, Massachusetts 02458 (or to
such other address or addresses as may from time to time hereafter be designed
by Landlord by like notice); and if intended for Tenant, addressed to Tenant at
the Property (or to such other address or addresses as may from time to time
hereafter be designated by Tenant by like notice). Notices from Landlord may be
given by Landlord's attorney.

     10.2 Quiet Enjoyment; Landlord's Right to Make Alterations, Etc. Landlord
          ----------------------------------------------------------
agrees that upon Tenant's paying the rent and performing and observing the
agreements, conditions and other provisions on its part to be performed and
observed, Tenant shall and may peaceably and quietly have, hold and enjoy the
Premises during the term hereof without any manner of hindrance or molestation
from Landlord or anyone claiming under Landlord, subject, however, to the terms
of this Lease; provided, however, Landlord reserves the right at any time and
from time to time, without the same constituting breach of Landlord's covenant
of quiet enjoyment or an actual or constructive eviction, and without Landlord
incurring any liability to Tenant or otherwise affecting Tenant's obligations
under this Lease, to make such changes, alterations, improvements, repairs or
replacements in or to the interior and exterior of the Building (including the
Premises) and the fixtures and equipment thereof, and in or to the Property, or
properties adjacent thereto, as Landlord may deem necessary or desirable, and to
change (provided that there be no unreasonable obstruction of the right of
access to the Premises by Tenant and that Landlord use commercially reasonable
efforts to minimize, to the extent practical, any interference with the conduct
of business at the Premises) the arrangement and/or location of entrances or
passageways, doors and doorways, corridors, elevators, or other common areas of
the Building and Property.

     Without incurring any liability to Tenant, Landlord may permit access to
the Premises and open the same, whether or not Tenant shall be present, upon any
demand of any receiver, trustee, assignee for the benefit of creditors, sheriff,
marshal or court officer Landlord reasonably believes is entitled to such access
for the purpose of taking possession of, or removing, Tenant's property or for
any other lawful purpose (but this provision and any action by Landlord
hereunder shall not be deemed a recognition by Landlord that the person or
official making such

                                      34
<PAGE>

demand has any right or interest in or to this Lease, or in or to the Premises),
or upon demand of any representative of the fire, police, building, sanitation
or other department of the city, state or federal governments.

     10.3 Lease not to be Recorded.  Tenant agrees that it will not record this
          ------------------------
Lease.  Both parties shall, upon the request of either (and at the expense of
the requesting party), execute and deliver a notice or short form of this Lease
in such form, if any, as may be acceptable for recording with the land records
of the governmental entity responsible for keeping such records for the City of
Austin, Texas.  In no event shall such document set forth the rent or other
charges payable by Tenant pursuant to this Lease; and any such document shall
expressly state that it is executed pursuant to the provisions contained in this
Lease and is not intended to vary the terms and conditions of this Lease.

     10.4 Assignment of Rents and Transfer of Title; Limitation of Landlord's
          -------------------------------------------------------------------
Liability.  Tenant agrees that the assignment by Landlord of Landlord's interest
---------
in this Lease, or the rents payable hereunder, whether absolute or conditional
in nature or otherwise, which assignment is made to the holder of a mortgage on
property which includes the Premises, shall never be treated as an assumption by
such holder of any of the obligations of Landlord hereunder unless such holder
shall, by notice sent to Tenant, specifically otherwise elect and that, except
as aforesaid, such holder shall be treated as having assumed Landlord's
obligations hereunder (subject to the limitations set forth in Section 9.1) only
upon foreclosure of such holder's mortgage and the taking of possession of the
Premises.

     The term "Landlord", so far as covenants or obligations to be performed by
               --------
Landlord are concerned, shall be limited to mean and include only the owner or
owners at the time in question of Landlord's interest in the Property, and in
the event of any transfer or transfers of such title to said property, Landlord
(and in case of any subsequent transfers or conveyances, the then grantor) shall
be concurrently freed and relieved from and after the date of such transfer or
conveyance, without any further instrument or agreement, of all liability with
respect to the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed, it being intended
hereby that the covenants and obligations contained in this Lease on the part of
Landlord, shall, subject as aforesaid, be binding on Landlord, its successors
and assigns, only during and in respect of their respective period of ownership
of such interest in the Property.  Notwithstanding the foregoing, in no event
shall the acquisition of Landlord's interest in the Property by a purchaser
which, simultaneously therewith, leases Landlord's entire interest in the
Property back to Landlord or the seller thereof be treated as an assumption by
operation of law or otherwise, of Landlord's obligations hereunder.  Tenant
shall look solely to such seller-lessee, and its successors from time to time in
title, for performance of Landlord's obligations hereunder.  The seller-lessee,
and its successors in title, shall be the Landlord hereunder unless and until
such purchaser expressly assumes in writing the Landlord's obligations
hereunder.

     Tenant, its successors and assigns, shall not assert nor seek to enforce
any claim for breach of this Lease against any of Landlord's assets other than
Landlord's interest in the Property, and Tenant agrees to look solely to such
interest for the satisfaction of any liability or claim against Landlord under
this Lease, it being specifically agreed that in no event whatsoever shall
Landlord ever be personally liable for any such liability.  In addition,
Landlord hereby

                                      35
<PAGE>

notifies Tenant that the Declaration of Trust of Hub Properties Trust provides,
and Tenant agrees, that no trustee, officer, director, general or limited
partner, member, shareholder, beneficiary, employee or agent (including any
person or entity from time to time engaged to supervise and/or manage the
operation of Landlord) of Landlord shall be held to any liability, jointly or
severally, for any debt, claim, demand, judgment, decree, liability or
obligation of any kind (in tort, contract or otherwise) of, against or with
respect to Landlord or arising out of any action taken or omitted for or on
behalf of Landlord.

     10.5 Landlord's Default. Landlord shall not be deemed to be in default in
          ------------------
the performance of any of its obligations hereunder unless it shall fail to
perform such obligations and such failure shall continue for a period of thirty
(30) days or such additional time as is reasonably required to correct any such
default after written notice has been given by Tenant to Landlord specifying the
nature of Landlord's alleged default. Tenant shall have no right to terminate
this Lease for any default by Landlord hereunder and no right, for any such
default, to offset or counterclaim against any rent due hereunder. In no event
shall Landlord ever be liable to Tenant for any punitive damages or for any loss
of business or any other indirect, special or consequential damages suffered by
Tenant from whatever cause.

     Where provision is made in this Lease for Landlord's consent and Tenant
shall request such consent and Landlord shall fail or refuse to give such
consent, Tenant shall not be entitled to any damages for any withholding by
Landlord of its consent, it being intended that Tenant's sole remedy shall be an
action for specific performance or injunction, and that such remedy shall be
available only in those cases where Landlord is expressly required not to
withhold its consent unreasonably.

     10.6 Notice to Mortgagee and Ground Lessor. After receiving notice from any
          -------------------------------------
party that it holds a mortgage which includes the Premises as part of the
mortgaged premises, or that it is the ground lessor under a lease with Landlord,
as ground lessee, which includes the Premises as part of the demised premises,
no notice from Tenant to Landlord shall be effective unless and until a copy of
the same is given to such holder or ground lessor, and the curing of any of
Landlord's defaults by such holder or ground lessor shall be treated as
performance by Landlord.

     10.7 Brokerage. Tenant warrants and represents that it has dealt with no
          ---------
broker in connection with the consummation of this Lease, other than Hill
Partners and Leonard Rodell, and in the event of any brokerage claims or liens,
other than by Hill Partners or Leonard Rodell, against Landlord or the Property
predicated upon or arising out of prior dealings with Tenant, Tenant agrees to
defend the same and indemnify and hold Landlord harmless against any such claim,
and to discharge any such lien.

     10.8 Applicable Law and Construction.  This Lease shall be governed by and
          -------------------------------
construed in accordance with the laws of the state or district in which the
Property is located and if any provisions of this Lease shall to any extent be
invalid, the remainder of this Lease shall not be affected thereby.  Tenant
expressly acknowledges and agrees that Landlord has not made and is not making,
and Tenant, in executing and delivering this Lease, is not relying upon, any
warranties, representations, promises or statements, except to the extent that
the same are expressly set forth in this Lease or in any other written agreement
which may be made between the parties concurrently with the execution and
delivery of this Lease and which shall expressly

                                      36
<PAGE>

refer to this Lease. All understandings and agreements heretofore made between
the parties are merged in this Lease and any other such written agreement(s)
made concurrently herewith, which alone fully and completely express the
agreement of the parties and which are entered into after full investigation,
neither party relying upon any statement or representation not embodied in this
Lease or any other such written agreement(s) made concurrently herewith. This
Lease may be amended, and the provisions hereof may be waived or modified, only
by instruments in writing executed by Landlord and Tenant. The titles of the
several Articles and Sections contained herein are for convenience only and
shall not be considered in construing this Lease. The submission of this
document for examination and negotiation does not constitute an offer to lease,
or a reservation of, or option for, the Premises, and Tenant shall have no right
to the Premises hereunder until the execution and delivery hereof by both
Landlord and Tenant. Except as herein otherwise provided, the terms hereof shall
be binding upon and shall inure to the benefit of the successors and assigns,
respectively, of Landlord and Tenant and, if Tenant shall be an individual, upon
and to his heirs, executors, administrators, successors and assigns. If two or
more persons or parties are named as Tenant herein, each of such persons or
parties shall be jointly and severally liable for the obligations of the Tenant
hereunder, and Landlord may proceed against any one without first having
commenced proceedings against any other of them. Each term and each provision of
this Lease to be performed by Tenant shall be construed to be both an
independent covenant and a condition and time is of the essence with respect to
the exercise of any of Tenant's rights under this Lease. The reference contained
to successors and assigns of Tenant is not intended to constitute a consent to
assignment of Tenant. Except as otherwise set forth in this Lease, any
obligations of Tenant (including, without limitation, rental and other monetary
obligations, repair obligations and obligations to indemnify Landlord) and
(subject to the provisions of Section 10.4) Landlord's indemnification
obligation, shall survive the expiration or earlier termination of this Lease,
and Tenant shall immediately reimburse Landlord for any expense incurred by
Landlord in curing Tenant's failure to satisfy any such obligation
(notwithstanding the fact that such cure might be effected by Landlord following
the expiration or earlier termination of this Lease).

                                      37
<PAGE>

     WITNESS the execution hereof under seal on the day and year first above
written.

                              LANDLORD:

                              HUB PROPERTIES TRUST

                              By:   /s/ JENNIFER B. CLARK
                                    ---------------------
                                    Name:  Jennifer B. Clark
                                    Title: Senior Vice President

                              TENANT:

                              NETPLIANCE INC.

                              By:   /s/JOHN F. McHALE
                                    -----------------
                                    Its Chairman and CEO

                              By:   /s/ BARBARA A. KACZYNSKI
                                    ------------------------
                                    Its Chief Financial Officer

                                      38
<PAGE>

                                   EXHIBIT B
                                   ---------

                             RULES AND REGULATIONS
                             ---------------------

1.   The sidewalks, entrances, passages, corridors, vestibules, halls, elevators
     or stairways in or about the Building shall not be obstructed by Tenant.

2.   Tenant shall not place objects against glass partitions, doors or windows
     which would be unsightly from the Building corridor or from the exterior of
     the Building. No sign, advertisement, notice or other lettering shall be
     exhibited, inscribed, painted or fixed by Tenant on any window or part of
     the outside or inside of the Building without prior consent of Landlord.

3.   Tenant shall not place a load upon any floor of the Building exceeding the
     lesser of the floor load which such floor was designed to carry or that
     allowed by law.

4.   Tenant shall not waste electricity or water in the Building and shall
     cooperate fully with Landlord to assure the most effective operation of the
     Building HVAC system. All regulating and adjusting of HVAC equipment shall
     be done by the Landlord's agents or employees.

5.   No additional or different locks or bolts shall be affixed on doors by
     Tenant. Tenant shall return all keys to Landlord upon termination of
     Tenant's lease. Tenant shall not allow peddlers, solicitors or beggars in
     the Building and shall report such persons to the Landlord.

6.   Tenant shall not use the Premises so as to cause any increase above normal
     insurance premiums on the Building.

7.   No bicycles, vehicles or animals of any kind shall be brought into or kept
     in or about the Premises. No space in the Building shall be used for
     manufacturing or for the sale of merchandise of any kind at auction or for
     storage thereof preliminary to such sale.

8.   Tenant shall not engage or pay any employees of the Building without
     approval from the Landlord. Tenant shall not employ any persons other than
     the janitor or employees of Landlord for the purpose of cleaning Premises
     without the prior written consent of Landlord.

9.   All removals from the Building or the carrying in or out of the Building or
     the Premises of any freight, furniture or bulky matter of any description
     must take place at such time and in such manner as Landlord may determine
     from time to time. Landlord reserves the right to inspect all freight to be
     brought into the Building and to exclude from the Building all freight
     which violates any of the rules and regulations or provisions of Tenant's
     lease.

10.  Tenant shall cooperate with Landlord in minimizing loss and risk thereof
     from fire and associated perils.
<PAGE>

11.  Tenant shall, at Tenant's expense, provide artificial light and electric
     current for the Landlord and/or its contractors, agents and employees
     during the making of repairs, alterations, additions or improvements in or
     to the demised premises.

12.  The water and wash closets and other plumbing fixtures shall not be used
     for any purposes other than those for which they were designed and
     constructed and no sweepings, rubbish, rags, acid or like substance shall
     be deposited therein. All damages resulting from any misuse of the fixtures
     shall be borne by Tenant.

13.  Tenant may request a change in HVAC service by submitting a request in
     writing to the Building Manager's office by noon of the preceding workday.

14.  Landlord reserves the right to establish, modify and enforce parking rules
     and regulations.

15.  All refuse from the Premises shall be disposed of in accordance with the
     requirements established therefor by Landlord and no dumpster shall be
     overloaded by Tenant.

16.  Landlord reserves the right at any time to rescind, alter or waive any rule
     or regulation at any time prescribed for the Building and to impose
     additional rules and regulations when in its judgment Landlord deems it
     necessary, desirable or proper for its best interest and for the best
     interest of tenants and other occupants and invitees thereof.

                                       2
<PAGE>

                                   EXHIBIT C
                                   ---------

                            ALTERATIONS REQUIREMENTS
                            ------------------------

A.   General
     -------

     1.   All alterations, installations or improvements ("Alterations") to be
                                                           -----------
          made by Tenant in, to or about the Premises shall be made in
          accordance with the requirements of this Exhibit and by contractors or
          mechanics approved by Landlord.

     2.   Tenant shall, prior to the commencement of any Alterations, submit for
          Landlord's written approval, complete plans of the Premises, or of the
          floor on which the Alterations are to occur, including mechanical,
          electrical, plumbing and architectural drawings. Drawings are to be
          complete with full details and specifications for all of the
          Alterations and shall be stamped by an architect licensed in the state
          or district in which the Property is located certifying compliance
          with building codes.

     3.   The proposed Alterations must comply with the building code in effect
          for the City of Austin and the requirements, rules and regulations and
          any governmental agencies having jurisdiction.

     4.   No work shall be permitted to commence without the Landlord being
          furnished with a valid permit from the building department and/or
          other agencies having jurisdiction in the City of Austin.

     5.   All inquiries, submissions, approvals and all other matters shall be
          processed through the Building manager.

B.   Prior to Commencement of Work
     -----------------------------

     1.   Tenant shall submit to the Building manager a request to perform the
          Alterations. The request shall include the following enclosures:

          (i)       A list of Tenant's contractors and/or subcontractors for
                    Landlord's approval.

          (ii)      Four complete sets of plans and specifications properly
                    stamped by a registered architect or professional engineer
                    certifying compliance with applicable building codes.

          (iii)     A properly executed building permit application form.

          (iv)      Four executed copies of the Insurance Requirements agreement
                    in the form set forth in Exhibit D from Tenant's contractor
                    and if requested by Landlord, from the contractor's
                    subcontractors.
<PAGE>

          (v)       Contractor's and subcontractor's insurance certificates
                    including an indemnity in accordance with the Insurance
                    Requirements agreement.

     2.   Landlord will return the following to Tenant:

          (i)       Plans approved or returned with comments (Such approval or
                    comments shall not constitute a waiver of Building
                    Department approval or approval of other governmental
                    agencies).

          (ii)      Two fully executed copies of the Insurance Requirements
                    agreement.

     3.   Tenant shall obtain a building permit from the building department and
          necessary permits from other governmental agencies. Tenant shall be
          responsible for keeping current all permits. Tenant shall submit
          copies of all approved plans and permits to Landlord and shall post
          the original building permit on the Premises prior to the commencement
          of any work. All Alterations shall be subject to reasonable
          supervision and inspection by Landlord's representative. Such
          supervision and inspection shall be at Tenant's sole expense and
          Tenant shall pay Landlord's reasonable charges for such supervision
          and inspection.

C.   Requirements and Procedures
     ---------------------------

     1.   All structural and floor loading requirements shall be subject to the
          prior approval of Landlord's structural engineer.

     2.   All mechanical (HVAC, plumbing and sprinkler) and electrical
          requirements shall be subject to the approval of Landlord's mechanical
          and electrical engineers. When necessary, Landlord will require
          engineering and shop drawings, which drawings must be approved by
          Landlord before work is started. Drawings are to be prepared by Tenant
          and all approvals shall be obtained by Tenant.

     3.   Prior arrangements for elevator use shall be made with Building
          manager by Tenant. No material or equipment shall be carried under or
          on top of elevators. If an operating engineer is required by any union
          regulations, such engineer shall be paid for by Tenant.

     4.   If shutdown of risers and mains for electrical, HVAC, sprinkler and
          plumbing work is required, such work shall be supervised by Landlord's
          representative. No work will be performed in Building mechanical
          equipment rooms without Landlord's approval and under Landlord's
          supervision.

     5.   Tenant's contractor shall:

          (i)       have a superintendent or foreman on the Premises at all
                    times;

          (ii)      police the job at all times, continually keeping the
                    Premises orderly;

                                       2
<PAGE>

          (iii)     maintain cleanliness and protection of all areas, including
                    elevators and lobbies;

          (iv)      protect the front and top of all peripheral HVAC units and
                    thoroughly clean them at the completion of work; and

          (v)       block off supply and return grills, diffusers and ducts to
                    keep dust from entering into the Building HVAC system; and

     6.   If Tenant's contractor is negligent in any of its responsibilities,
          Tenant shall be charged for corrective work.

     7.   All equipment and installations must be equal to the overall quality
          found in the Building. Any deviation from such standards will be
          permitted only if indicated or specified on the plans and
          specifications and approved by Landlord pursuant to Section 6.2.5 of
          the Lease.

     8.   A properly executed air balancing report signed by a professional
          engineer shall be submitted to Landlord upon the completion of all
          HVAC work.

     9.   Upon completion of the Alterations, Tenant shall submit to Landlord a
          permanent certificate of occupancy and final approval by the other
          governmental agencies having jurisdiction.

     10.  Tenant shall submit to Landlord a final "as-built" set of sepia
          drawings showing all items of Alterations in full detail.

     11.  Additional and differing provisions in the Lease, if any, will be
          applicable and will take precedence.

                                       3
<PAGE>

                                   EXHIBIT D
                                   ---------

                      CONTRACTOR'S INSURANCE REQUIREMENTS
                      -----------------------------------

Building:

Tenant:

Premises:

     The undersigned contractor or subcontractor ("Contractor") has been hired
                                                   ----------
by the tenant or occupant (hereinafter called "Tenant") of the Building named
                                               ------
above or by Tenant's contractor to perform certain work ("Work") for Tenant in
                                                          ----
the Premises identified above.  Contractor and Tenant have requested the
undersigned landlord ("Landlord") to grant Contractor access to the Building and
                       --------
its facilities in connection with the performance of the Work and Landlord
agrees to grant such access to Contractor upon and subject to the following
terms and conditions:

     1.   Contractor agrees to indemnify and save harmless the Landlord, and if
Landlord is a general or limited partnership each of the partners thereof, and
if Landlord is a nominee trust the trustee(s) and all beneficiaries thereof, and
all of their respective officers, employees and agents, from and against any
claims, demands, suits, liabilities, losses and expenses, including reasonable
attorneys' fees, arising out of or in connection with the Work (and/or imposed
by law upon any or all of them) because of personal injuries, including death,
at any time resulting therefrom and loss of or damage to property, including
consequential damages, whether such injuries to person or property are claimed
to be due to negligence of the Contractor, Tenant, Landlord or any other party
entitled to be indemnified as aforesaid except to the extent specifically
prohibited by law (and any such prohibition shall not void this agreement but
shall be applied only to the minimum extent required by law).

     2.   Contractor shall provide and maintain at its own expense, until
completion of the Work, the following insurance:

          (a) Workmen's Compensation and Employers Liability Insurance covering
     each and every workman employed in, about or upon the Work, as provided for
     in each and every statute applicable to Workmen's Compensation and
     Employers' Liability Insurance.

          (b) Commercial General Liability Insurance including coverages for
     Protective and Contractual Liability (to specifically include coverage for
     the indemnification clause of this agreement) for not less than the
     following limits:

     Bodily Injury:    $5,000,000 per person
                       $5,000,000 per occurrence

     Property Damage:  $5,000,000 per occurrence
                       $5,000,000 aggregate
<PAGE>

          (c) Commercial Automobile Liability Insurance (covering all owned,
     non-owned and/or hired motor vehicles to be used in connection with the
     Work) for not less than the following limits:

     Bodily Injury:    $5,000,000 per person
                       $5,000,000 per occurrence

     Property Damage:  $5,000,000 per occurrence.

     Contractor shall furnish a certificate from its insurance carrier or
carriers to the Building office before commencing the Work, showing that it has
complied with the above requirements regarding insurance and providing that the
insurer will give Landlord ten (10) days' prior written notice of the
cancellation of any of the foregoing policies.

     3.   Contractor shall require all of its subcontractors engaged in the Work
to provide the following insurance:

          (a) Commercial General Liability Insurance including Protective and
     Contractual Liability coverages with limits of liability at least equal to
     the limits stated in paragraph 2(b).

          (b) Commercial Automobile Liability Insurance (covering all owned,
     non-owned and/or hired motor vehicles to be used in connection with the
     Work) with limits of liability at least equal to the limits stated in
     paragraph 2(c).

     Upon the request of Landlord, Contractor shall require all of its
subcontractors engaged in the Work to execute an Insurance Requirements
agreement in the same form as this Agreement.

     Agreed to and executed this        day of,                  2000.
                                 ------         ----------------

Contractor:                         Landlord:

By:                                 By:
   -------------------------------     -------------------------------

By:                                 By:
   -------------------------------     -------------------------------

                                       2
<PAGE>

                                   EXHIBIT E
                                   ---------

                              CLERK'S CERTIFICATE
                              -------------------

     I,                                   , the duly elected and acting
        ----------------------------------
[Secretary/Clerk] of                       , a            corporation (the
                     ----------------------    ----------
"Corporation"), hereby certify that:
 -----------
     (A) at a meeting of the board of directors of the Corporation held on
                in accordance with law and the Bylaws of the Corporation the
---------------
following resolutions were duly adopted:

     VOTED:    a.   To approve a lease of approximately        square feet of
                                                        ------
     space for terms of      years with respect to      in the building commonly
                        ----                      ------
     known as           in            , which lease grants the Corporation an
              ---------    -----------
     option to extend the term for     terms of    years each, substantially in
                                  -----        ----
     the form of the draft presented at this meeting, a copy of which shall be
     placed on file in the office of the [Secretary/Clerk] and be incorporated
     by reference in this vote;

               b. To authorize                     and                   , or
                               -------------------     ------------------
     any one of them (each hereinafter referred to as a "Signatory"), to execute
                                                         ---------
     and deliver in the name and on behalf of the Corporation the above-
     described lease and to execute and deliver all other documents, agreements
     and instruments, including, without limitation, notices of lease, and to
     take all other actions with respect to the foregoing which any Signatory,
     in such Signatory's discretion, shall determine to be necessary or
     appropriate to effect or secure the transactions contemplated herein, the
     execution and delivery of any of the foregoing or the taking of any such
     action to be conclusive evidence of such Signatory's determination and of
     the Signatory's authority so to do granted by this vote;

     (B) as of this date the following individuals are duly elected and
qualified officers of the Corporation holding at this date, the offices
specified next to their names and the signature next to each such name is such
individual's true signature.

<TABLE>
<CAPTION>
<S>                             <C>                              <C>
NAME                            OFFICE                           SIGNATURE
----                            ------                           ---------

------------------------------  -------------------------------  -------------------------------

------------------------------  -------------------------------  -------------------------------
</TABLE>

     (C) The form of lease attached to this Certificate is the form referred to
in the foregoing vote.
<PAGE>

     (D) The resolutions set forth above are unmodified and continue to be in
full force and effect and the Corporation has adopted no other resolutions in
respect of the subject matter thereof.

     In witness whereof, I have hereunto set my hand and affixed the seal of the
Corporation this         day of                 , 2000.
                 -------        ---------------

                                   -----------------------------------
                                   [Secretary/Clerk]

                                       2<PAGE>

                             Pure Resources, Inc.

                                 Exhibit 10.5
                                 ------------

Form of executive officer letter agreement, dated May 25, 2000 between Pure
Resources I, Inc. (formerly named Titan Resources I, Inc.) and each of certain
officers
<PAGE>

                                                                    Exhibit 10.5
                            Titan Resources I, Inc.
                            500 W. Texas, Suite 200
                             Midland, Texas  79701

                                  May 25, 2000

[See Schedule I attached]
[Address]

Dear [See Schedule I attached]:

     You ("Officer") and Titan Resources I, Inc. ("Resources") are parties to
that certain Officer Severance and Retention Bonus Agreement (the "Severance
Agreement") dated June 10, 1999, which provides you with certain compensation
and benefit arrangements upon a "Change of Control" (as defined in the Severance
Agreement) of Resources' parent, Titan Exploration, Inc. ("Titan").

     As you know, Titan has signed an Agreement and Plan of Merger (the "Merger
Agreement") dated December 13, 1999 with Union Oil Company of California, Pure
Resources, Inc. (formerly Titan Resources Holdings, Inc.) (the "Company") and
TRH, Inc., pursuant to which Titan will become a wholly-owned subsidiary of the
Company.  The transactions contemplated in the Merger Agreement (the "Merger")
will constitute a "Change of Control" under the Severance Agreement. You are
willing to enter into this letter agreement in order to resolve any
uncertainties and ensure that you receive the Payment (as defined below) at the
closing of the Merger.

     In consideration the promises, covenants and obligations contained herein,
notwithstanding anything to the contrary in the Severance Agreement, Officer and
Resources agree as follows:

     1.   Payment and Release.  On the closing date of the Merger, if it occurs:

     (a)  Officer shall execute and deliver to Resources the General Release
attached hereto as Exhibit A and the Confidentiality and Non-Compete Agreement
attached hereto as Exhibit B; and

     (b)  In consideration of Officer's execution of the General Release and the
Confidentiality and Non-Compete Agreement, Resources shall pay to Officer [See
Schedule I attached] (the "Payment"), which shall constitute the "Payment" as
that term is used in the General Release, on or after the eighth day following
Officer's execution of the General Release and Confidentiality and Non-Compete
Agreement.  Notwithstanding the foregoing, in the event Officer has any
outstanding indebtedness (the "Indebtedness") to Resources or Titan on the
closing date of the Merger, the Payment shall be paid as follows:

          (i)  to Resources, upon execution of the General Release, to remit any
               estimated federal income and excise taxes and any related payroll
               tax obligations of Officer as a result of the Payment;
<PAGE>

[See Schedule I attached]
May 25, 2000
Page 2

          (ii)  to Titan, to the extent necessary, to repay the Indebtedness;
                and

          (iii) after the repayment of the Indebtedness referred to in clause
                (ii) above, the remaining portion of the Payment, if any, will
                be paid to Officer.

     (c)  Officer agrees that he or she has had at least 21 days to consider
whether to accept the terms of this Letter Agreement.

     2.   No Consummation of Merger.  If the stockholders of Titan approve the
Merger Agreement and the Merger is consummated, a "Change of Control" under the
Severance Agreement will occur.  Officer agrees that in the event the Merger
does not occur, neither the execution of the Merger Agreement nor the approval
of the Merger Agreement by the Titan stockholders shall constitute a "Change of
Control" under the Severance Agreement or otherwise entitle the Officer to any
other benefit thereunder.

     3.   Termination of Severance Agreement.  If the Merger is consummated,
then, except as provided in paragraph 3 of the General Release, Officer agrees
that the Severance Agreement shall terminate effective seven days after Officer
executes the General Release.

     4.   Entire Agreement/Severability.  This letter agreement and the
Severance Agreement constitute the entire agreement between the parties with
respect to the subject matter hereto and may not be modified or amended in any
way except as agreed in writing by both parties.  In the event that any of the
provisions contained in this letter agreement shall be determined to be invalid,
illegal or unenforceable in any respect, the remaining portions of this letter
agreement shall continue in full force and effect.

     5.   Binding Agreement; Assignment.  This letter agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, heirs and permitted assigns. Neither this letter agreement nor any
of the rights, interests, or obligations hereunder shall be assigned by either
of the parties hereto without the prior written consent of the other party.

     6.   Third Party Rights.  Except for Titan, which the parties expressly
agree is a third party beneficiary with respect to this letter agreement,
nothing in this letter agreement, express or implied, is intended to or shall
confer upon any person other than the parties hereto, and their respective
successors and permitted assigns, any rights, benefits, or remedies of any
nature whatsoever under or by reason of this letter agreement.

     Please confirm your agreement with the foregoing by signing and returning
one copy of this letter agreement to the undersigned, whereupon this letter
agreement shall become a binding agreement between you and Resources.
<PAGE>

[See Schedule I attached]
May 25, 2000
Page 3
                                            Very truly yours,

                                            TITAN RESOURCES I, INC.

                                            By:/s/ Jack Hightower*
                                               -------------------------
                                               Name: Jack Hightower
                                               Title: President

Accepted and agreed as of                   [*Note: agreement of Jack Hightower
the date first written above:                 was signed on behalf of Titan
                                              Resources I, Inc. by William
                                              White, Vice President]

/s/ [See Schedule I attached]
-----------------------------
[See Schedule I attached]
<PAGE>

                                                                       EXHIBIT A
                                                                       ---------

                                 GENERAL RELEASE AGREEMENT
                                 -------------------------

1.   GENERAL RELEASE OF CLAIMS UNDER AGE DISCRIMINATION IN EMPLOYMENT ACT. In
consideration of that portion of the payment (the "Payment") to be made to me
pursuant to the Letter Agreement to which this General Release is attached which
relates to the Officer Severance and Retention Bonus Agreement (the
"Agreement"), I hereby release, acquit, and forever discharge (i) Titan
Resources I, Inc. and any parent, subsidiary, affiliated entity, successors or
assigns (the "Company"), and (ii) the stockholders, officers, directors,
employees, agents, representatives, and fiduciaries of the Company (collectively
the "Released Parties"), from any and all claims, liabilities, demands, and
causes of action of whatever kind or character, whether vicarious, derivative,
or direct, that I now have or claim against them arising under the Age
Discrimination in Employment Act.  This General Release does not waive rights or
claims that may arise after the date this General Release is executed. Further
in consideration of the Payment, I acknowledge and agree that the Released
Parties may recover from me any loss, including attorney's fees and costs of
defending against any claim brought by me, they may incur arising out of my
breach of this General Release.

     I understand that I may revoke my acceptance of paragraph 1 of  this
General Release by so notifying the Company within seven days of the date I
execute this General Release.  I further understand that if I do not timely
revoke my acceptance of paragraph 1, paragraph 1 of this General Release is
final and binding, and I agree not to challenge its enforceability.  If I do
challenge its enforceability, I agree initially to tender to the Company the
Payment, and invite the Company to retain such money and agree with me to cancel
this General Release.  In the event the Company accepts my offer, the Company
shall retain such money and paragraph 1 of this General Release will be void.
In the event the Company does not accept my offer, the Company shall place such
money in an escrow account pending the resolution of any dispute as to whether
paragraph 1 of this General Release shall be set aside and/or otherwise rendered
unenforceable.

2.   GENERAL RELEASE OF CLAIMS OTHER THAN UNDER AGE DISCRIMINATION IN EMPLOYMENT
ACT.  In consideration of the Payment to be made to me, I hereby release,
acquit, and forever discharge (i) the Company, and (ii) the Released Parties,
from any and all claims, liabilities, demands, and causes of action of whatever
kind or character, whether vicarious, derivative, or direct, that I now have or
claim against them connected in any way to the Agreement or any claim for
benefits under the Agreement (other than as described in paragraph 3 below), or
my employment, continuation of employment, or, if applicable, termination of
employment with any of the Released Parties, or with any other act, conduct, or
omission of any of the Released Parties, including but not limited to claims
arising under any federal, state, or local laws relating to the employment
relationship, other than claims, liabilities, demands, and causes of action
under the Age Discrimination in Employment Act.  This General Release does not
waive rights or claims that may arise after the date this General Release is
executed. Further in consideration of the Payment to be made to me, I
acknowledge and agree that the Released Parties may recover from me any loss,
including attorney's fees and costs of defending against any claim brought by
me, they may incur arising out of my breach of this General Release.

3.   NO RELEASE OF COMPANY'S OBLIGATION TO MAKE TAX GROSS-UP PAYMENT UNDER THE
AGREEMENT.  Any provision of this General Release or the Letter Agreement
between the Company and myself dated of even date herewith to the contrary
notwithstanding, my execution of this General Release does not constitute a
release of the Company's obligation under the Agreement
<PAGE>

to make additional payments to me if it shall be determined that I am subject to
additional excise tax under Section 4999 of the Internal Revenue Code of 1986,
as amended, as a result of any payments made or benefits provided to me pursuant
to the Agreement (or the Letter Agreement) or otherwise in connection with a
Change of Control (as defined in the Agreement).

     I understand that I may not revoke my acceptance of paragraph 2 of this
General Release and that it is binding upon me whether or not I revoke my
acceptance of paragraph 1 of this General Release.

     I have read and fully understand all of the provisions of this General
Release.  I acknowledge that none of the Released Parties has made any promise
or representation to me in consideration for my agreement to execute this
General Release that is not set out in this General Release, and that in
executing this General Release I am not relying on any such promise or
representation but instead am relying solely on my own judgment.  I further
acknowledge that my execution of this General Release is knowing and voluntary,
that I have had a reasonable time to consider its terms, and that I have been
advised to consult with an attorney about this General Release.

Date signed:  May 25, 2000              /s/ [See Schedule I]
                                        ---------------------------------------
                                        Signature of [See Schedule I attached]

Date signed:  May 25, 2000              /s/ [witness]
                                        ---------------------------------------
                                        Witness
<PAGE>

                                                                       EXHIBIT B
                                                                       ---------

                   CONFIDENTIALITY AND NON-COMPETE AGREEMENT

     This CONFIDENTIALITY AND NON-COMPETE AGREEMENT (the "Agreement") is made by
and between Pure Resources, Inc., Titan Exploration, Inc., and Titan Resources
I, Inc., (collectively, along with its or their subsidiaries, successors, and
assigns, the "Related Parties"), and [See Schedule I attached] ("Employee").

     WHEREAS, pursuant to the terms of the Agreement and Plan of Merger (the
"Merger Agreement") dated December 13, 1999, by and among Union Oil Company of
California, Pure Resources, Inc. ("Pure"), TRH, Inc. ("TRH"), and Titan
Exploration, Inc. ("Titan"), TRH will be merged with and into Titan, which will
be the surviving corporation and become a wholly-owned subsidiary of Pure; and

     WHEREAS, Titan Resources I, Inc. ("Employer"), a wholly-owned subsidiary of
Titan, currently employs and desires to continue to employ Employee after the
consummation of the transactions contemplated by the Merger Agreement, and
Employee desires to continue his employment with Employer;

     WHEREAS, Employee acknowledges that, as a result of the consummation of the
transactions contemplated by the Merger Agreement, he will become privy to
various business opportunities, economic and trade secrets, and confidential and
proprietary business information of the Related Parties, his knowledge of and
access to which are essential to the performance of his job duties;

     NOW, THEREFORE, in consideration of Employee's access to various business
opportunities, economic and trade secrets, and confidential and proprietary
business information of the Related Parties, and the letter agreement between
Employee and Employer of even date herewith, the Related Parties and Employee,
intending to be legally bound, agree as follows:

     1.   Contingency of Agreement; Effective Date of Agreement.  This Agreement
          -----------------------------------------------------
will become effective on the date of consummation of the transactions
contemplated by the Merger Agreement (the "merger") and shall be contingent upon
the consummation of the merger (the "Effective Date").

     2.   Business Opportunities and Intellectual Property.
          ------------------------------------------------

     (a)  Employee shall promptly disclose to Employer, its successors, assigns,
or designees, all "Business Opportunities" and "Intellectual Property" (as
defined below).

     (b)  Employee hereby assigns and agrees to assign to Employer, its
successors, assigns, or designees, all of Employee's right, title, and interest
in and to all Business Opportunities and Intellectual Property, and further
acknowledges and agrees that all Business Opportunities and Intellectual
Property constitute the exclusive property of the Related Parties.
<PAGE>

     (c)  For purposes hereof "Business Opportunities" shall mean all business
ideas, prospects, proposals or other opportunities pertaining to the lease,
acquisition, exploration, production, gathering or marketing of hydrocarbons and
related products and the exploration potential of geographical areas on which
hydrocarbon exploration prospects are located, which are developed by Employee
during any period that Employee is or was employed by Employer or one of the
other Related Parties (the "Employment Term") or originated by any third party
and brought to the attention of Employee, together with information relating
thereto (including, without limitation, geological and seismic data and
interpretations thereof, whether in the form of maps, charts, logs,
seismographs, calculations, summaries, memoranda, opinions or other written or
charted means).

     (d)  For purposes hereof "Intellectual Property" shall mean all ideas,
inventions, discoveries, processes, designs, methods, substances, articles,
computer programs, and improvements (including, without limitation, enhancements
to, or further interpretation or processing of, information that was in the
possession of Employee prior to the date of this Agreement), whether or not
patentable or copyrightable, which do not fall within the definition of Business
Opportunities, which Employee discovers, conceives, invents, creates, or
develops, alone or with others, during any Employment Term, if such discovery,
conception, invention, creation, or development (i) occurs or occurred in the
course of Employee's employment with Employer or one of the other Related
Parties, (ii) occurs or occurred with the use of any of the Related Parties'
time, materials, or facilities, or (iii) in the opinion of the Board of
Directors of Employer, relates or pertains in any way to Employer's or one of
the other Related Parties' purposes, activities, or affairs.

     3.   Non-Compete Obligations During Employment Term.  Employee agrees that
          ----------------------------------------------
during any Employment Term, Employee will not, other than through Employer or
one of the other Related Parties, engage or participate in any manner, whether
directly or indirectly through any family member or as an employee, employer,
consultant, agent, principal, partner, more than one percent shareholder,
officer, director, licensor, lender, lessor or in any other individual or
representative capacity, in any business or activity which is engaged in
leasing, acquiring, exploring, producing, gathering or marketing hydrocarbons
and related products; provided that this Section 3 shall not apply to personal
oil and gas investments owned by Employee, his family members, or his controlled
affiliates as of the date this Agreement is executed and of which Employer is
aware.

     4.   Confidentiality Obligations.
          ---------------------------

     (a)  Employee hereby acknowledges that all trade secrets and confidential
and proprietary business information of the Related Parties (collectively
referred to herein as "Confidential Information") constitutes valuable, special
and unique assets of the Related Parties' business, and that access to and
knowledge of such Confidential Information is essential to the performance of
Employee's job duties.  Employee agrees that during any Employment Term and
during the two-year period following the date of termination of Employee's
employment with Employer or one of the other Related Parties (the "Termination
Date"), Employee will hold the Confidential Information in strict confidence and
will not publish, disseminate or otherwise disclose, directly or indirectly, to
any person other than the Related Parties and their respective officers,
directors and employees or otherwise in proper performance of Employee's job
duties, any Confidential Information or use any
<PAGE>

Confidential Information for Employee's own personal benefit or for the benefit
of anyone other than the Related Parties.

     (b)  For purposes of this Section 4, it is agreed that Confidential
Information includes, without limitation, any information heretofore or
hereafter acquired, developed or used by any of the Related Parties relating to
Business Opportunities or Intellectual Property or other geological,
geophysical, economic, financial or management aspects of the business,
operations, properties or prospects of the Related Parties, whether oral or in
written form in a "Related Parties' Business Records" (as defined in Section 6
below), but shall exclude any information which has become part of the common
knowledge or understanding in the oil and gas industry or otherwise in the
public domain (other than from disclosure by Employee in violation of this
Agreement) and provided further that this Section 4 shall not be applicable to
the extent Employee is required to testify in a judicial or regulatory
proceeding pursuant to the order of a judge or administrative law judge after
Employee requests that such Confidential Information be preserved and after
prior notice to the Related Parties.

     5.   Post Employment Non-Compete And Non-Solicitation Obligations.
          ------------------------------------------------------------

     (a)  Employee agrees that during the two-year period following the
Termination Date, he will not compete, either directly or indirectly with any of
the Related Parties for any acquisition, prospect, or project that any of the
Related Parties was pursuing prior to the Termination Date.

     (b)  Employee agrees that during the two-year period following the
Termination Date, he will not solicit, entice, persuade or induce, directly or
indirectly, any employee (or person who within the preceding ninety (90) days
was an employee) of any of the Related Parties or any other person who is under
contract with or rendering services to any of the Related Parties, to (i)
terminate his or her employment by, or contractual relationship with, such
person, (ii) refrain from extending or renewing the same (upon the same or new
terms), (iii) refrain from rendering services to or for such person, (iv) become
employed by or to enter into contractual relations with any persons other than
such person, or (v) enter into a relationship with a competitor of any of the
Related Parties.

     6 .  Business Records.
          ----------------

     (a)  Employee agrees to promptly deliver to Employer or its designee, upon
termination of his employment by Employer or any of the Related Parties, or at
any other time when any of the Related Parties so requests, all documents
relating to the business of the Related Parties, including, without limitation:
all geological and geophysical reports and related data such as maps, charts,
logs, seismographs, seismic records and other reports and related data,
calculations, summaries, memoranda and opinions relating to the foregoing,
production records, electric logs, core data, pressure data, lease files, well
files and records, land files, abstracts, title opinions, title or curative
matters, contract files, notes, records, drawings, manuals, correspondence,
financial and accounting information, customer lists, statistical data and
compilations, patents, copyrights, trademarks, trade names, inventions,
formulae, methods, processes, agreements, contracts, manuals or any other
documents relating to the business of the Related Parties (collectively, the
"Related Parties' Business Records"), and all copies thereof and therefrom.
<PAGE>

     (b)  Employee confirms that all of the Related Parties' Business Records
(and all copies thereof and therefrom) which are required to be delivered to
Employer or its designee pursuant to this Section constitute the exclusive
property of Employer and the other Related Parties.

     (c)  The obligation of confidentiality set forth in Section 4 shall
continue notwithstanding Employee's delivery of any such documents to Employer
and its designee.

     (d)  Notwithstanding the foregoing provisions of this Section 6 or any
other provision of this Agreement, Employee shall be entitled to retain any
written materials received by Employee in the capacity as a shareholder of Pure.

     7.   Miscellaneous.
          -------------

     (a)  The invalidity or non-enforceability of any provision of this
Agreement in any respect shall not affect the validity or enforceability of this
Agreement in any other respect or of any other provision of this Agreement. In
the event that any provision of this Agreement shall be held invalid or
unenforceable by a court of competent jurisdiction by reason of the geographic
or business scope or the duration thereof, such invalidity or unenforceability
shall attach only to the scope or duration of such provision and shall not
affect or render invalid or unenforceable any other provision of this Agreement,
and, to the fullest extent permitted by law, this Agreement shall be construed
as if the geographic or business scope or the duration of such provision had
been more narrowly drafted so as not to be invalid or unenforceable.

     (b)  Employee acknowledges that the Related Parties' remedy at law for any
breach of the provisions of this Agreement is and will be insufficient and
inadequate and that the Related Parties shall be entitled to equitable relief,
including by way of temporary and permanent injunction, in addition to any
remedies the Related Parties may have at law.

     (c)  The existence of any claim or cause of action of Employee against any
of the Related Parties or any officer, director, or shareholder of any of the
other Related Parties, whether predicated on Employee's employment or otherwise,
shall not constitute a defense to the enforcement by any of the Related Parties
of the covenants of Employee contained in this Agreement.  In addition, the
provisions of this Agreement shall continue to be binding upon Employee in
accordance with their terms, notwithstanding the termination of Employee's
employment with Employer or any of the other Related Parties for any reason.

     (d)  The parties to this Agreement agree that the limitations contained in
Section 5 with respect to time, geographical area, and scope of activity are
reasonable.  However, if any court shall determine that the time, geographical
area, or scope of activity of any restriction contained in Section 5 is
unenforceable, it is the intention of the parties that such restrictive covenant
set forth herein shall not thereby be terminated but shall be deemed amended to
the extent required to render it valid and enforceable.

     (e)  This Agreement may be assigned or transferred by any of the Related
Parties, and shall inure to the benefit of the successors and assigns of any of
the Related Parties.
<PAGE>

     (f)  This Agreement is not intended to be and does not constitute a
contract or promise of employment or continued employment for any specified term
or other than at will.

     (g)  This Agreement may not be altered or amended except by a writing, duly
executed by the party against whom such alteration or amendment is sought to be
enforced.

     (h)  This Agreement may be executed in counterparts, each of which shall be
an original and all of which together shall constitute one and the same
instrument.

                  (Remainder of Page Intentionally Left Blank)
<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
in multiple counterparts on the 25th day of May, 2000.

                             PURE RESOURCES, INC.

                              By:__________________________________________
                                 Name:_____________________________________
                                 Title:____________________________________

                              TITAN EXPLORATION, INC.

                              By:__________________________________________
                                 Name:_____________________________________
                                 Title:____________________________________

                              TITAN RESOURCES I, INC.

                              By:__________________________________________
                                 Name:_____________________________________
                                 Title:____________________________________

                              EMPLOYEE

                              __________________________________________
                              [See Schedule I attached]
<PAGE>

                                  Schedule I

Name of Officer                     Payment Amount
---------------                     --------------

John L. Benfatti                     $  493,815.00
Dan P. Colwell                       $  660,000.00
Jack D. Hightower                    $1,200,000.00
Darin Holderness                     $  530,887.39
Thomas H. Moore                      $  660,000.00
Susan D. Rowland                     $  515,432.38
George G. Staley                     $  975,000.00
William K. White                     $  783,750.00
Rodney L. Woodard                    $  660,000.00

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