Document:

LEASE AGREEMENT

                                     between

                       DOVE VALLEY BUSINESS CENTER, LLLP,
                                   as Landlord

                                       and

                               KOALA CORPORATION,
                                    as Tenant

                                 March 16, 2000

<PAGE>
                                TABLE OF CONTENTS
                                   (continued)

                                TABLE OF CONTENTS
                                                                      Page

1.       PREMISES, TERM, RENEWAL OPTIONS AND CONSTRUCTION...............1

2.       RENT AND SECURITY DEPOSIT......................................3

3.       USE AND COMPLIANCE.............................................4

4.       TAXES AND OTHER ASSESSMENTS....................................4

5.       REPAIRS AND MAINTENANCE........................................4

6.       ALTERATIONS....................................................5

7.       SIGNS..........................................................5

8.       INSPECTION.....................................................5

9.       UTILITIES......................................................5

10.      ASSIGNMENT AND SUBLETTING......................................5

11.      INSURANCE:  FIRE AND CASUALTY DAMAGE...........................6

12.      LIABILITY......................................................7

13.      CONDEMNATION...................................................7

14.      HOLDING OVER...................................................8

15.      QUIET ENJOYMENT................................................8

16.      EVENTS OF DEFAULT..............................................8

17.      REMEDIES.......................................................9

18.      MORTGAGES.....................................................10

19.      LANDLORD'S DEFAULT............................................11

20.      ASSIGNMENT BY LANDLORD........................................11

21.      FORCE MAJEURE.................................................11

22.      MECHANIC'S LIENS..............................................11

23.      NOTICES.......................................................11

24.      MISCELLANEOUS.................................................12

25.      HAZARDOUS MATERIALS...........................................13

26.      BROKERAGE.....................................................14

27.      SECURITY......................................................14

28.      WARRANTIES....................................................14

29.      SATELLITE DISH................................................14

30.      CONFIDENTIALITY...............................................14

31.      EXPANSION OPTION..............................................15

32.      PURCHASE AND LEASE OF SOUTHERN LAND...........................16

EXHIBIT "A" Legal Description of the Land.............................A-1

EXHIBIT "B" Preliminary Plans.........................................B-1
<PAGE>

                                 LEASE AGREEMENT

STATE OF COLORADO, COUNTY OF ARAPAHOE

THIS LEASE AGREEMENT,  made and entered into by and between DOVE VALLEY BUSINESS
CENTER,  LLLP, a Colorado limited  liability  limited  partnership,  hereinafter
referred  to as  "Landlord",  and KOALA  CORPORATION,  a  Colorado  corporation,
hereinafter referred to as "Tenant";

                                   WITNESSETH:

1.       PREMISES, TERM, RENEWAL OPTIONS AND CONSTRUCTION.
         ------------------------------------------------

(a) In consideration of the obligation of Tenant to pay rent as herein provided,
and in consideration of the other terms, provisions and covenants hereof, and in
accordance  with  such  terms,  provisions  and  covenants,  Landlord  agrees to
construct   an   industrial   office   manufacturing/warehouse   building   (the
"Building"),  consisting of approximately  one hundred and twenty-nine  thousand
square feet (129,000) square feet, on the land consisting of approximately 6.936
acres located in the Dove Valley Business Park in Arapahoe County, Colorado, and
more  particularly  described  on Exhibit "A" attached  hereto and  incorporated
herein by reference  (the "Land," the Building and the Land,  together  with all
rights, privileges,  easements,  appurtenances and immunities belonging to or in
any way pertaining thereto and together with any other improvements  situated or
to be situated upon said Land are hereinafter collectively referred to herein as
the "Premises"),  and Landlord hereby leases to Tenant, and Tenant hereby leases
from  Landlord,  the Premises for the term  described  below and upon all of the
terms, provisions and conditions set forth herein.

         The  Premises  shall be improved  and include  the  features  generally
described  in the plans  identified  in,  and the  specifications  set forth on,
Exhibit  "B"  attached  hereto  and   incorporated   herein  by  reference  (the
"Preliminary Plans").

         TO HAVE AND TO HOLD the same for a term commencing on the "Commencement
Date",  as hereinafter  defined,  and ending one hundred and twenty (120) months
thereafter, provided, however, that in the event the Commencement Date is a date
other than the first day of a calendar  month,  said term shall  extend for said
number of months in addition to the  remainder of the calendar  month  following
the Commencement  Date (and rent will be payable for such partial month in which
the Commencement Date occurs at the same rate per month,  prorated on a per diem
basis,  as will be payable  for the first full month of the term as set forth in
Paragraph  2(a) below).  Tenant will have two options to extend the term of this
Lease for five (5) years each,  first at the end of one hundred and twenty (120)
months and, if Tenant elects to extend the term of this Lease for the first such
five-year renewal period,  then again at the end of one hundred and eighty (180)
months,  provided that if Tenant  desires to so extend the term of this Lease at
either such time, Tenant will notify Landlord in writing of Tenant's election to
do so at least twelve (12) months prior to the  expiration  of the  then-current
termination date. Either of such five-year renewal periods with respect to which
Tenant  exercises  its  renewal  option  hereunder  will be deemed a part of the
"term" of this Lease for all purposes hereunder.

(b)  Based  upon the  Preliminary  Plans,  Landlord  shall  prepare  and  submit
architectural  and engineering  plans sufficient for permitting and construction
of the Building and other improvements to the Premises ("Final Plans") to Tenant
for  approval  as soon as  practical.  Tenant  shall have ten (10) days from its
receipt of Final  Plans to approve or, in good faith,  disapprove  of same.  Any
disapproval  must be limited to a failure of the Final Plans to conform with the
Preliminary Plans in any material respect, and must specify in reasonable detail
the reasons for the disapproval. If Tenant fails to approve or disapprove of the
Final Plans, as applicable,  in writing within said ten (10) day period,  Tenant
will be deemed to have approved such plans in all respects.  Landlord and Tenant
agree to work  together in good faith to finalize the Final Plans.  In the event
of any dispute  over whether the Final Plans  conform in all  material  respects
with the  Preliminary  Plans,  the  parties  shall  submit  such  dispute  to an
architect,  the identity of whom shall be jointly  agreed by the  parties.  Said
architect shall determine whether or not the Final Plans conform in all material
respects  with  the  Preliminary  Plans.  The  Building  and  all of  the  other
improvements to be constructed on the Land are hereinafter collectively referred
to as the "Improvements".

         Landlord  agrees to  construct  the  Improvements  at its sole cost and
expense,  provided that Tenant will be responsible  for the additional  cost, if
any,  resulting  from any changes to the Final  Plans  requested  by Tenant,  as
evidenced by written  change order or work order  approved by Tenant (unless the
change was necessary to make the Final Plans conform to the Preliminary Plans or
unless  necessitated by the error of Landlord or its  architect).  Within thirty
(30) days after the Commencement  Date (as defined below),  Landlord will submit
to Tenant a detailed statement,  certified as true and complete by an officer of
Landlord,  setting forth a Landlord's  total cost of designing and  constructing
the Improvements and acquiring the Land.

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                        2
<PAGE>
         Landlord  shall be  responsible  for the  procurement,  payment for and
delivery of all materials required, necessary or appropriate for construction of
the Improvements, and Landlord shall cause the Improvements to be constructed in
a good and workmanlike  manner,  in accordance with the Final Plans and free and
clear of any mechanics' liens or claims therefor.

(c) Landlord and Tenant  acknowledge  that in order for Landlord to complete its
acquisition  of the Land and  construction  of the  Improvements,  Landlord must
obtain the approval of the required  officials of Arapahoe  County,  Colorado of
(i) a subdivision plat creating the Land and the "Expansion Area" (as defined in
Paragraph 31(b) below) as two lawfully subdivided lots (the "Plat");  and (ii) a
site improvement plan or other  appropriate  zoning document causing the Land to
be  properly  zoned  for  the  construction  and  use  of  the  Improvements  as
contemplated by this Lease (the "Zoning").  Landlord will notify Tenant promptly
upon  obtaining  the Plat and promptly upon  obtaining the Zoning.  In the event
Landlord  has not  obtained  the Plat and the Zoning by  December  31, 2000 (and
notwithstanding  any delays  caused by force  majeure as  described in Paragraph
21),  Tenant will have the right to  terminate  this Lease by notice to Landlord
given at any time  thereafter  until Landlord has notified  Tenant that Landlord
has  obtained  both the Plat and the  Zoning,  at which time Tenant will have no
further  right to  terminate  this Lease  pursuant to this  sentence.  If Tenant
terminates  this Lease  pursuant to the preceding  sentence,  then Landlord will
refund to Tenant the first month's rent paid pursuant to Paragraph  2(a) and the
deposit  paid  pursuant to  Paragraph  2(b) and any other  amounts  then paid by
Tenant  under  this  Lease and both  parties  will be  relieved  of any  further
obligations  hereunder.  If the Plat and the Zoning  have not been  obtained  by
December 31, 2000 and Tenant does not terminate  this Lease in  accordance  with
this Paragraph 1(c), then (A) the "Projected  Commencement  Date" (as defined in
Paragraph 1(e) below) will be automatically  extended from August 1, 2001 by the
number of days from and after  December 31, 2000 to the day on which the Plat is
recorded; and (B) the two additional deadlines set forth in Paragraph 1(e) below
(i.e., August 31, 2001 and January 31, 2002) will also be automatically extended
by the same number of days.  Notwithstanding any other provisions hereof, if the
Zoning and the Plat have not been obtained by June 1, 2001, then this Lease will
terminate,  Landlord  will refund to Tenant the first month's rent paid pursuant
to Paragraph  2(a) and the deposit paid pursuant to Paragraph 2(b) and any other
amounts  then paid by Tenant  under this Lease and both parties will be relieved
of any further  obligations  hereunder.  Upon  recording of the Plat,  the legal
descriptions set forth in this Lease for the Land and the Expansion Area will be
deemed replaced with the legal  descriptions for the Land and the Expansion Area
made by  reference  to their  respective  lot numbers on the  recorded  Plat and
either party will, upon the other's request,  execute a memorandum and amendment
to this Lease in  recordable  form giving  notice  hereof and setting forth such
substituted legal descriptions.

     (d) As used  herein  the terms  "Substantially  Completed,"  "Substantially
Complete," or "Substantial Completion" means that:

                1.  Landlord's  architect has certified that the construction of
                    the   Improvements   has  been   completed  in   substantial
                    accordance with the Final Plans,  subject only to completion
                    of the Punchlist (hereafter defined).

                2.  The  Premises,  including  all  Improvements  necessary  for
                    Tenant's occupancy (e.g., HVAC systems, lobbies,  stairways,
                    parking areas), are in good and operational condition.

                3.  A certificate of occupancy or temporary approval for
                    occupancy has been issued.

                4.  The Building is broom-clean and free from debris,

         No less than thirty (30) days prior to the date Landlord estimates that
the Improvements will be Substantially Complete,  Landlord will notify Tenant of
the  estimated  date  the  Improvements  will be  Substantially  Completed,  and
schedule with the Tenant a  walk-through  inspection  of the Premises.  Upon the
occurrence of  Substantial  Completion,  representatives  of Landlord and Tenant
shall conduct a  walk-through  inspection of the Premises to mutually  determine
what items of construction  require completion or repair (the "Punchlist") to be
completed  or  repaired by  Landlord  within  thirty (30) days after the date of
Substantial Completion. At the conclusion of the walk-through inspection, Tenant
will be deemed to have  acknowledged that subject to completion of the Punchlist
that Tenant has inspected and accepts the Premises, and Tenant agrees to execute
an Acceptance of Premises Memorandum,  whereupon possession of the Premises will
be delivered to Tenant.  Upon Tenant's  acceptance  of the Premises,  and to the
extent  assignable,  Landlord  will  assign to Tenant the right to  enforce  all
warranties  Landlord receives in connection  therewith on a non-exclusive  basis
(i.e. Landlord will also have the right to enforce such warranties).

         The  "Commencement  Date" shall be the date upon which the Improvements
have been Substantially Completed as defined above, in accordance with the Final
Plans,  or the date on which the  Improvements  would  have  been  Substantially
Completed but for any Tenant Delays. As used herein,  "Tenant Delays" shall mean
any  delay in the  completion  of the  Improvements  to the  Premises  caused by
Tenant, its agents, employees,  officers or contractors,  provided however, that
(i) any delays caused by changes requested by Tenant necessary to make the Final
Plans conform to the Preliminary  Plans or necessitated by the error of Landlord
or its architect or contractor  will not constitute  Tenant Delays;  and (ii) in
order to claim any

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                        3
<PAGE>
act or occurrence as a Tenant Delay,  Landlord must notify Tenant thereof within
ten (10) days after such act or occurrence and any period of delay  attributable
to an act or occurrence of which Landlord so notified  Tenant but which occurred
before such ten (10) day notice period will not  constitute a Tenant Delay.  The
Acceptance of Premises Memorandum  described above will also confirm the date on
which the Commencement Date occurs.

(e) The  "Projected  Commencement  Date" shall mean August 1, 2001.  The term of
this Lease and Tenant's obligation to pay rent hereunder will not commence until
the  Commencement  Date.  If  Landlord  fails  to  Substantially   Complete  the
Improvements by thirty (30) days after the Projected Commencement Date (i.e., if
the Commencement Date does not occur by August 31, 2001), then (i) Landlord will
pay to Tenant  delay  damages in an amount equal to $946.30 per day for each day
of the period after August 31, 2001 to the actual  Commencement  Date,  less any
portion of that period attributable to Tenant Delays or a force majeure event as
described  in  Paragraph  21 (which  delay  damages  will be  payable in monthly
installments  due on the thirtieth  (30th) of each month until the  Commencement
Date, with any damages  outstanding on the Commencement  Date due on such date);
and (ii) if Landlord  does not tender  possession of the Premises to Tenant with
the Improvements Substantially Completed on or before January 31, 2002, plus any
period of delay  caused by Tenant  Delays but without  extension  for any delays
caused by any other  force  majeure  event as  described  in  Paragraph  21 (the
"Tender  Deadline"),  Tenant  will have the  right to  terminate  this  Lease by
delivering  written  notice of termination to Landlord not more than thirty (30)
days after the Tender  Deadline.  Upon a  termination  under  clause (ii) above,
Landlord will pay to Tenant an amount equal to any outstanding delay damages due
pursuant to clause (i) above; each party will, upon the other's request, execute
and deliver an agreement in recordable  form  containing a release and surrender
of all right,  title and interest in and to this Lease;  all Improvements to the
Premises  will become and remain the property of Landlord;  Landlord will refund
to Tenant  any sums paid to  Landlord  by Tenant in  connection  with this Lease
(such as the deposit and first month's  rent);  and the parties will be relieved
of any further  obligations  hereunder.  If Landlord delivers  possession of the
Premises with the  Improvements  Substantially  Completed prior to the Projected
Commencement  Date,  then Tenant will accept such delivery (and the date of such
delivery will be the  Commencement  Date  hereunder),  but Tenant's rent for the
period from the  Commencement  Date to the Projected  Commencement  Date will be
reduced as provided in  Paragraph  2(a).  Tenant's  remedies set forth above for
Landlord's  delay in  tendering  the  Premises to Tenant  with the  Improvements
Substantially  Completed are in lieu of any other remedies which might otherwise
be available to Tenant at law or in equity.

2.       RENT AND SECURITY DEPOSIT.
         -------------------------

(a) As part of the  consideration  for the execution of this Lease,  and for the
Lease and use of the Premises,  Tenant  covenants and agrees and promises to pay
as rental to Landlord, or Landlord's assignees, the following monthly amounts:
<TABLE>
<CAPTION>

                                                              First Renewal Term     Second Renewal Term
<S>              <C>        <C>         <C>        <C>        <C>         <C>        <C>         <C>
    Months:      1-30       31-60       61-90      91-120     121-150     151-180    181-210     211-240
    ------       ----       -----       -----      ------     -------     -------    -------     -------
    Rent:       $50,111    $52,491     $54,984    $57,596     $60,332     $63,198    $66,200     $69,345
</TABLE>

         One such  monthly  installment  of fifty  thousand  one hundred  eleven
dollars ($50,111.00), constituting rent for the first full calendar month of the
term,  shall  be due and  payable  on the date  hereof  and  subsequent  monthly
installments  for an amount as indicated in above in this Paragraph 2(a),  shall
be due and payable in advance,  without demand,  deduction or set off (except as
expressly provided to the contrary in this Lease), on or before the first day of
each  calendar  month  succeeding  the  Commencement  Date,  except  that if the
Commencement Date occurs on other than the first day of a month, payment due for
the  month in which the  Commencement  Date  occurs  will be  prorated  and such
prorated amount will be due on the Commencement Date.

         Notwithstanding  the  foregoing,  in the  event the  Commencement  Date
occurs prior to the Projected  Commencement Date, then the rent payable pursuant
to this Paragraph 2(a) for each month or portion  thereof during the period from
the Commencement  Date until the Projected  Commencement Date will be reduced by
the amount that Tenant is obligated  to pay, for such month or portion  thereof,
for the lease of its three existing  premises located at 11600 East 53rd Avenue,
Denver,  Colorado  80239,  4500 Havana,  Denver,  Colorado 80239 and 5275 Quebec
Street, Commerce City, Colorado 80222; provided,  however, that the total amount
of such offset does not exceed $14,194.50 per month.

(b) In  addition,  Tenant  agrees  to  deposit  with  Landlord  the sum of Fifty
thousand  one  hundred  eleven  dollars  ($50,111.00),  which  shall  be held by
Landlord,  without  obligation for interest,  as security for the performance of
Tenant's  covenants  and  obligations  under  this  Lease,  it  being  expressly
understood  and agreed that such deposit is not an advance  rental  deposit or a
measure of Landlord's damages in case of Tenant's default.  Upon each occurrence
of an "Event of Default" (as defined in Paragraph  16) by Tenant,  Landlord may,
from time to time,  without  prejudice  to any other remedy  provided  herein or
provided by law, use such fund to the extent  necessary to make good any arrears
of rent or other payments due Landlord hereunder,  and any other damage, injury,
expense or liability  caused by such Event of Default.  On demand,  Tenant shall
pay to  Landlord  the  amount  that will  restore  the  security  deposit to its
original  amount.  Any  remaining  balance of such deposit  shall be returned by
Landlord to Tenant within thirty (30) days after termination of this Lease.

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                        4
<PAGE>
(c) In addition to the rent described  above,  Tenant agrees to directly pay for
all of the  following  to the  extent  the same  accrue  during the term of this
Lease: (i) Taxes  (hereinafter  defined)  pursuant to Paragraph 4(a) below, (ii)
the cost of insurance  required to be maintained by Tenant pursuant to Paragraph
11(a)  below,  (iii) the cost of all  repairs  and  maintenance  required  to be
performed by Tenant pursuant to Paragraphs 5(a) and (b) below, and (iv) the cost
of all utilities consumed at the Premises pursuant to Paragraph 9 below.

3.       USE AND COMPLIANCE.
         ------------------

(a) The Premises may be used for any lawful use including,  without  limitation,
the following  intended  uses by Tenant  ("Tenant's  Intended  Use") (i) general
office  use;  (ii)  light  manufacturing,  including,  without  limitation,  the
molding,  painting,  and assembly of plastic products;  and (iii) warehouse use.
Tenant  shall,  at its own cost and  expense,  obtain any and all  licenses  and
permits  necessary for such use. Landlord warrants that Tenant's Intended Use is
permitted under the zoning laws and any private restrictive covenants applicable
to the Premises.

(b) Tenant at its expense shall at all times comply with all governmental  laws,
codes, ordinances and regulations,  including, without limitation, the Americans
with Disabilities Act, 42 U.S.C.  12101 et seq.,  applicable to Tenant's use and
occupancy of Premises and shall keep those portions of the Premises which Tenant
is  obligated to maintain and repair  pursuant to  Paragraphs  5(a) and (b) in a
condition  that  complies  with  all  applicable  laws,  codes,   ordinance  and
regulations, including, without limitation, the Americans with Disabilities Act,
42 U.S.C.  12101 et seq. Tenant shall be responsible,  at Tenant's sole expense,
for the  correction,  prevention  and  abatement  of  nuisances  in or upon  the
Premises.  Tenant will not permit the Premises to be used for any purpose  which
would render the property or liability insurance thereon void.

(c)  Landlord at its expense  shall keep those  portions of the  Premises  which
Landlord is  obligated to maintain  and repair  pursuant to Paragraph  5(c) in a
condition that complies with all applicable governmental laws, codes, ordinances
and regulations,  including, without limitation, the Americans with Disabilities
Act, 42 U.S.C. 12101 et seq.

4.       TAXES AND OTHER ASSESSMENTS.
         ---------------------------

(a) Tenant agrees to pay all taxes,  assessments or governmental  charges of any
kind and nature whatsoever levied or assessed against the Premises,  the Land or
Improvements  (hereinafter  collectively referred to as "Taxes") during the term
of this  Lease.  Taxes for the years in which the lease term  commences  and end
shall be prorated between Landlord and Tenant.  Tenant may contest the amount of
Taxes levied against the Property at its own expense. Landlord shall not finance
the  Improvements  through a tax increment or similar  scheme  pursuant to which
Tenant  will be  required  to pay for such  Improvements  through the payment of
additional taxes, and taxes resulting from such a scheme will not be included in
Taxes.

(b) If at any  time  during  the term of this  Lease,  there  shall  be  levied,
assessed  or imposed on  Landlord a capital  levy or other tax  directly  on the
rents received from the Premises,  the Land or  Improvements  and/or a franchise
tax, assessment,  levy or charge measured by or based, in whole or in part, upon
such rents,  then all such taxes,  assessments,  levies or charges,  or the part
thereof so  measured or based,  shall be deemed to be  included  within the term
"Taxes" for the purposes  hereof,  provided that (i) in such event, for purposes
of  determining  the  amount  of Taxes  for which  Tenant  is  responsible,  the
Premises,  Land and Improvements shall be deemed to be Landlord's only property;
and (ii) in no event will Taxes include the income taxes of Landlord.

(c) Tenant shall be liable for all taxes levied or assessed against any personal
property or fixtures placed in the Premises.

5.       REPAIRS AND MAINTENANCE.
         -----------------------

(a)  Subject  to  Paragraphs  11, 13 and 28, and  except  with  respect to those
portions of the Premises  which  Landlord is  obligated to maintain,  repair and
replace pursuant to Paragraph 5(c) below,  Tenant,  at its own cost and expense,
shall (i) maintain all parts of the Premises in good  condition,  (ii)  promptly
make all  necessary  repairs and  replacements,  including,  but not limited to,
windows,  glass and plate  glass,  exterior  doors,  nonstructural  portions  of
interior and exterior walls and finish work,  interior doors and floor covering,
utility connections,  downspouts,  heating and air conditioning  systems,  light
bulbs and  ballasts,  truck  doors,  dock  bumpers,  paving,  plumbing  work and
fixtures,  termite and pest extermination,  regular removal of trash and debris,
and  maintenance  of dedicated  sewer lines,  and (iii) keep the parking  areas,
driveways, truck aprons, and grounds of the Premises surrounding the Building in
a clean and sanitary condition.

(b) Tenant  shall,  at its own cost and  expense,  provide  regularly  scheduled
preventive  maintenance/service  for all hot water, heating and air conditioning
systems and equipment  within the  Premises.  The  maintenance  must include all
services    suggested    by    the    equipment    manufacturer    within    the
operation/maintenance manual.

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                        5
<PAGE>
(c)  Landlord  agrees,  at its  expense,  to  maintain,  repair  and  replace as
necessary,  throughout the term of this Lease, the roof,  gutters and structural
elements  of the  Building,  including,  without  limitation,  the  foundations,
structural  columns and beams and load-bearing  walls.  However,  if Tenant,  in
making any  alterations  pursuant to Paragraph 6 or installing  equipment on the
roof  pursuant  to  Paragraph  29 or  otherwise,  takes any action  that  causes
Landlord's  warranty on the roof to become void or unenforceable with respect to
any required  repairs,  then Tenant will be required to make such repairs at its
expense.

6. ALTERATIONS. Tenant shall not make alterations,  additions or improvements to
the Premises (i) that affect the Building's structure or exterior appearance, or
(ii) that would change any of the leasehold  improvements  installed by Landlord
at Landlord's expense for Tenant (the "Initial  Leasehold  Improvements") in any
manner  that  would  materially  reduce  their  value,  without  in either  case
obtaining  the prior  written  consent of  Landlord,  which  consent will not be
unreasonably  withheld.  If Landlord consents to Tenant's  contractors doing any
alteration exceeding $100,000 in cost, Landlord may require that Tenant provide,
at Tenant's  expense,  a lien and completion  bond in an amount equal to 115% of
the estimated costs of improvements, additions or alterations in the Premises to
insure  Landlord  against any liability or mechanic's  and  materialmen's  liens
which may arise in  accordance  with  Paragraph  23 of this  Lease and to insure
completion  of the work.  Tenant may,  with prior notice to Landlord but without
obtaining  Landlord's  consent,  at  its  own  cost  and  expense  and in a good
workmanlike  manner,  (i) make  such  nonstructural  alterations,  additions  or
improvements that do not affect the Building's exterior appearance and that will
not  change  any  Initial  Leasehold  Improvements  in  any  manner  that  would
materially  reduce their value, or (ii) erect,  remove or alter such partitions,
or erect such shelves, bins, machinery and trade fixtures it may deem advisable,
without altering the basic character of the building or improvements and without
overloading  or  damaging  such  building  or  improvements,  and in  each  case
complying with all applicable  governmental laws, ordinances,  regulations,  and
other  requirements.  All  alterations,  additions,  improvements and partitions
erected by Tenant (i.e., excluding the Initial Leasehold  Improvements) shall be
and remain the property of Tenant provided,  however,  that, subject to the next
paragraph,  Tenant shall,  if Landlord so elects,  remove all such  alterations,
additions,  improvements, and partitions erected by Tenant and repair any damage
caused by such removal by the date of termination of this Lease;  otherwise such
improvements shall become the property of the Landlord as of the date of the end
of the  term of this  Lease  (as  such  term  may be  extended  pursuant  to any
renewals,  extensions  or  holdover  period)  and shall be  delivered  up to the
Landlord  with the Premises.  All shelves,  bins,  machinery and trade  fixtures
installed  by Tenant may be removed by Tenant prior to the  termination  of this
tease if Tenant so elects,  and shall be removed if required by  Landlord;  upon
any such removal Tenant shall repair any damage caused by such removal. All such
removals and restoration shall be accomplished in good workmanlike  manner so as
not to damage the primary structure or structural  qualities of the building and
other improvements situated on the Premises.

         Notwithstanding  the  foregoing,  if  Tenant  asks  Landlord,  prior to
installing any alterations, if Tenant will be required to remove the same at the
end of the lease  term,  then  Tenant  will only be  required  to so remove such
alterations if Landlord so states within 30 days after the request.

7. SIGNS. Tenant shall have the right to install a sign upon the exterior of the
building only when first approved in writing by Landlord, not to be unreasonably
withheld.  Such signage shall be subject to any  applicable  governmental  laws,
ordinances,   regulations,   deed  restrictions  and   architectural   standards
reasonably  set forth by  Landlord.  Tenant shall remove all such signs upon the
termination of this Lease. Such installations and removals shall be made in such
manner  as  to  avoid  injury  to  or  defacement  of  the  building  and  other
improvements.  Tenant  shall  repair  any  injury or  defacement  caused by such
installation and/or removal, if so required by Landlord.

8. INSPECTION. Landlord and Landlord's agents and representatives shall have the
right to enter and inspect the Premises at any reasonable  time during  business
hours,  for the purpose of  ascertaining  the condition of the  Premises,  after
reasonable  prior  notice to Tenant.  Tenant may have a  representative  present
during  any   inspection  by  the   Landlord,   and  may  require  a  reasonable
confidentiality  agreement be signed for access to areas where trade secrets are
readily  apparent.  During the period that is six (6) months prior to the end of
the term hereof,  Landlord and Landlord's agents and representatives  shall have
the right to enter the Premises at any reasonable time during business hours for
the  purpose of showing  the  Premises  and shall have the right to erect on the
Premises a suitable  sign  indicating  that the Premises are  available.  Tenant
shall  give  written  notice to  Landlord  at least  thirty  (30) days  prior to
vacating  the  Premises  and shall  arrange  to meet with  Landlord  for a joint
inspection  of the  Premises  prior to vacating  for the purpose of  determining
Tenant's responsibility for repairs and restoration.

9. UTILITIES. Landlord agrees to provide the water, sewer, electricity,  natural
gas,  and  telephone  service  connections  to the  Premises  called  for by the
Preliminary  Plans upon the Commencement  Date hereof,  which  connections shall
thereafter be maintained by Tenant.  Tenant shall pay for all water,  gas, heat,
light,  power,  telephone,  sewer,  sprinkler  charges and other  utilities  and
services  used on or at the Premises  during the term,  and any  maintenance  or
inspection  charges  for  utilities.  Landlord  shall  not  be  liable  for  any
interruption  or failure of utility  services on the Premises,  unless caused by
Landlord.

10. ASSIGNMENT AND SUBLETTING.  Tenant shall have the right to assign this Lease
or to sublet the whole or any part of the  Premises  upon notice to Landlord but
without  the  consent  of  the  Landlord,   provided  that  notwithstanding  any
assignment or subletting,  Tenant shall at all times remain directly,  primarily
and fully  responsible  and liable for the payment of the rent herein  specified
and for  compliance  with all of  Tenant's  other  obligations  under the terms,
provisions  and  covenants of this Lease (except that Tenant shall not remain so
responsible and liable in the event Tenant assigns this lease to the surviving

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                        6
<PAGE>
entity in a merger or consolidation transaction with Tenant and Tenant ceases to
exist following such  transaction).  Upon the occurrence of an Event of Default,
if the Premises or any part thereof are then  assigned or sublet,  Landlord,  in
addition to any other  remedies  herein  provided or provided by law, may at its
option  collect  directly from such assignee or subtenant all rents becoming due
to Tenant under such assignment or sublease and apply such rent against any sums
due to Landlord from Tenant hereunder, and no such collection shall be construed
to constitute a novation or a release of Tenant from the further  performance of
Tenant's obligations hereunder. Tenant may upon an assignment of Tenant's rights
under this Lease request that Landlord (and Landlord's mortgagee, if applicable)
release Tenant from all of its obligations  arising hereunder from and after the
assignment in which event Landlord (and its mortgagee,  if applicable)  will not
unreasonably  withhold  such  release,  provided  that the  assignee  assumes in
writing  all of  Tenant's  obligations  arising  hereunder  from and  after  the
assignment and provided  further that the assignee has a credit  rating,  in the
case of a publicly-traded  assignee,  or a  credit-worthiness,  in the case of a
privately-held  assignee,  equal to the better of Tenant's  credit rating (i) at
the time of execution of this Lease; or (ii) at the time of the assignment.

11.      INSURANCE:  FIRE AND CASUALTY DAMAGE.
         ------------------------------------

(a)  Tenant  agrees  to  maintain  property  insurance  covering  the  Building,
Improvements and all alterations, additions, partitions and improvements erected
by, or on behalf of,  Tenant in, on or about the  Premises in an amount not less
than 100% of the  "replacement  cost"  thereof  as such term is  defined  in the
Replacement Cost Endorsement to be attached thereto (but excluding  excavations,
foundations  and  footings),  insuring  against  the perils of Fire,  Lightning,
Vandalism  and  Malicious  Mischief,   extended  by  Special  Extended  Coverage
Endorsement  to insure  against all other risks of direct  physical  loss,  such
coverages  and  endorsements  to be as  defined,  provided  and  limited  in the
standard bureau forms prescribed by the insurance  regulatory  authority for the
State of Colorado  for use by insurance  companies  admitted in Colorado for the
writing of such insurance on risks located within Colorado. Such insurance shall
cover those risks of loss that a reasonable and prudent property owner of a like
or similar building located in Denver, Colorado would insure against,  including
liability and loss of rents  coverage.  Landlord and its mortgagee will be named
as  loss  payees  in  the  policy  providing  such  property  insurance  on  the
Improvements.  All such  policies  shall be procured by Tenant from  responsible
insurance  companies  reasonably  satisfactory  to Landlord  and licensed in the
State of  Colorado.  Certificates  of  Insurance  for each  such  policy of such
insurance,  together with receipt  evidencing payment of the premiums thereof or
shall be delivered to Landlord prior to the Commencement Date of this Lease. Not
less than fifteen (15) days prior to the  expiration  date of any such policies,
new  Certificates  of Insurance  (bearing  notations  evidencing  the payment of
renewal  premiums)  shall be delivered to Landlord.  Such policies shall further
provide  that not less than thirty (30) days  written  notice  shall be given to
Landlord  before  such  policy may be  canceled  or changed to reduce  insurance
provided  thereby.  If requested by the holder of any indebtedness  secured by a
mortgage  or Deed of  Trust  covering  the  Premises,  certified  copies  of the
insurance  policies  will need to be  furnished in lieu of the  certificates  of
insurance.

(b) If the  Improvements  are damaged or destroyed by fire or other  casualty at
any time subsequent to the ninth (9th)  anniversary of the Commencement  Date to
such an extent that a contractor  selected by Tenant and reasonably  approved by
Landlord reasonably  determines that it will take longer than one hundred eighty
(180)  days from the date of damage to  complete  the  repairs  and  restoration
necessary to return the Premises to their condition  immediately  preceding such
casualty,  then  provided  Tenant  has  maintained  the  insurance  required  by
Paragraph  11(a) and there will be no diminution in proceeds  payable under such
insurance  as a result of  Tenant's  election  not to  repair  and  restore  the
Improvements,  Tenant may elect to  terminate  this Lease by notice to  Landlord
given not later than  forty-five (45) days after the date on which such casualty
occurs.  If Tenant so elects to terminate  this Lease,  then (A) this Lease will
terminate  on a date  selected  by  Tenant  and  set  forth  in such  notice  of
termination,  which date must be no earlier than twenty (20) days after,  and no
later than sixty (60) days  after,  the date of such  notice;  (B) prior to such
termination date,  Tenant will demolish the Building and all other  Improvements
that cannot  function  properly  without the  Building  and return the Land to a
level, safe and sightly condition that complies with all applicable laws, unless
Landlord,  within 10 days  after  receipt  of  Tenant's  notice  of  termination
notifies Tenant that Landlord desires that Tenant not demolish the Building,  in
which case Tenant will not demolish the Building; (C) all rent and other charges
payable  hereunder by Tenant will be prorated to such termination  date; and (D)
all proceeds of the insurance  required to be  maintained  pursuant to Paragraph
11(a) that are payable as a result of such  casualty  will be paid to and become
the  sole  property  of  Landlord,  except  that  Tenant  will  be  entitled  to
reimbursement  from  Landlord  out of such  proceeds  for the  reasonable  costs
incurred by Tenant in performing such  demolition and for all personal  property
that is located on the  Premises at the time of such  casualty  that is owned by
Tenant and that is covered by such property insurance.

(c) If the  Improvements  are damaged or destroyed by fire or other casualty and
Tenant does not terminate this Lease pursuant to Paragraph  11(b) or Tenant does
not have the right to terminate  this Lease  pursuant to Paragraph  11(b),  then
this Lease will remain in full force and effect,  Tenant will,  at Tenant's cost
and expense,  proceed with reasonable  promptness and diligence to carry out any
necessary demolition and to repair and restore the Improvements to the condition
thereof  that existed  immediately  prior to such  casualty,  and Tenant will be
entitled to an  abatement of rent from the date of damage until such repairs and
restoration  are  substantially  completed  (but in no event will such abatement
exceed the proceeds of the loss of rents insurance to which Landlord is entitled
as a result of such casualty).

(d) Except as  provided  in  Paragraph  11(b),  the  proceeds  of the  insurance
required to be maintained by Tenant  pursuant to Paragraph 11(a) will be used by
Tenant  to  repair  and  restore  the  Improvements  following  a fire or  other
casualty.  If such  proceeds  are $50,000 or less,  Landlord  will  execute such
endorsements or other instruments as may be necessary to cause

                                                 Initials: __________ __________
                                                            Landlord    Tenant

                                        7
<PAGE>
the same to be paid to Tenant.  If such proceeds  exceed  $50,000,  they will be
paid to a trustee  reasonably  satisfactory  to  Landlord  (Landlord  and Tenant
acknowledge  that a title  insurance  company of good  reputation and reasonable
financial  strength or  Landlord's  mortgagee  will be  acceptable as a trustee)
under  instructions  to disburse the same to Tenant in progress  payments as the
repairs  and  restoration  proceed  upon  application  by  Tenant  for  payment,
accompanying by (i) an architect's  certificate (or other reasonably  acceptable
evidence)  that all labor for which payment is sought has been performed and all
materials for which payment is sought have been delivered to or  incorporated in
the Premises; (ii) a waiver of mechanics' liens for all labor and materials paid
by the prior  disbursement,  if any;  and  (iii)  reasonable  evidence  that the
remaining insurance proceeds will be sufficient to pay for the remaining work to
be completed (and if there are insufficient  proceeds,  then Tenant will pay for
all costs of repair and restoration until the remaining  insurance proceeds will
cover the remaining costs, at which time progress payments may resume).

(e)  Tenant  and  Landlord  each  hereby  releases  the  other  from any and all
liability or  responsibility to the releaser or anyone claiming through or under
them by way of  subrogation  or  otherwise  for any loss or damage  to  property
caused by fire or any other  perils  insured in policies of  insurance  covering
such  property,  even if such loss or damage shall have been caused by the fault
or  negligence  of Tenant or  Landlord,  or  anyone  for whom such  party may be
responsible,  provided,  however,  that this release shall be applicable  and in
force and effect only with respect to loss or damage occurring during such times
as the  policy(ies)  covering the releaser's  property shall contain a clause or
endorsement  to the effect that any such release shall not  adversely  affect or
impair  said  policy(ies)  or  prejudice  the right of the  releaser  to recover
thereunder and then only to the extent of the insurance  proceeds  payable under
such policy(ies).  Tenant agrees that it will request its insurance  carriers to
include in its policies such a clause or endorsement.

12.  LIABILITY.  Landlord  shall not be liable to Tenant or Tenant's  employees,
agents,  patrons or visitors, or to any other person whomsoever,  for any injury
to  person  or  damage  to  property  on or about  the  Premises,  caused by the
negligence or misconduct of Tenant, its agents, servants or employees, or of any
other person  entering upon the Premises under express or implied  invitation of
Tenant,  or caused by the  buildings  and  improvements  located on the Premises
becoming out of repair,  or caused by leakage of gas, oil,  water or steam or by
electricity emanating from the Premises, or due to any cause whatsoever,  unless
such injury or damage results from the  negligence or willful  misconduct of, or
breach of this Lease by, Landlord,  and Tenant agrees to indemnify  Landlord and
hold it harmless from any loss,  expense or claims  including  attorneys'  fees,
arising  out of any such  damage  or injury to the  extent  caused by  Tenant' s
negligence,  misconduct  or breach  of this  Lease.  Tenant  shall  procure  and
maintain  throughout  the  term of this  Lease a  general  liability  policy  or
policies of insurance, at its sole cost and expense,  insuring both Landlord (as
an additional insured as respects Tenant's liability under the Lease) and Tenant
against all claims,  demands,  or actions arising out of or in connection  with:
(i) the  Premises;  (ii) the  condition  of the  Premises;  and  (iii)  Tenant's
operations in and maintenance and use of the Premises. The limits of such policy
or policies  should have a combined single limit of not less than $1,000,000 per
person and per occurrence in respect of injury to persons  (including death) and
not less  than  $500,000  per  occurrence  in  respect  of  property  damage  or
destruction,  including loss of use thereof. All such policies shall be procured
by Tenant  from  responsible  insurance  companies  reasonably  satisfactory  to
Landlord.  Certificates  of  Insurance  for each such  policies,  together  with
receipts evidencing payment of premiums therefor, shall be delivered to Landlord
prior to the  Commencement  Date of this Lease,  not less than fifteen (15) days
prior to the expiration date of any such policies, new Certificates of Insurance
(bearing  notations  evidencing  the  payment  of  renewal  premiums)  shall  be
delivered to Landlord.  Such policies  shall further  provide that not less than
thirty (30) days written  notice  shall be given to Landlord  before such policy
may be canceled or changed to reduce insurance provided thereby. If requested by
the holder of any  indebtedness  secured by a mortgage or deed of trust covering
the  Premises,  certified  copies  of the  insurance  policies  will  need to be
furnished in lieu of the Certificates of Insurance.

         From and after the Commencement  Date,  Tenant  specifically  agrees to
look solely to  Landlord's  interest  in the  Premises  for the  recovery of any
judgment  from  Landlord,  it being  agreed  that  Landlord  or any of the joint
venture  partners,  including any successor or assignee of Landlord or the joint
venture partners, shall never be personally liable for any such judgment.

13.      CONDEMNATION.
         ------------

(a) If the whole of the Premises  should be taken for any public or quasi-public
use under  governmental  law,  ordinance or  regulation,  or by right of eminent
domain,  or by private purchase in lieu thereof,  this Lease shall terminate and
the rent shall be abated during the unexpired  portion of this Lease,  effective
when the physical taking of said Premises shall occur. In addition, if more than
ten percent (10%) of the Building or more than twenty-five  percent (25%) of the
paved area available on the Premises for use by Tenant should be so taken,  then
Tenant will have the right to terminate  this Lease by notice to Landlord  given
within thirty (30) days after the physical  taking of said Premises shall occur,
in which case this Lease shall terminate as provided above.

(b) If any portion of the Premises shall be taken for any public or quasi-public
use under any governmental law, ordinance or regulation,  or by right of Eminent
Domain, or by private purchase in lieu thereof, and this Lease is not terminated

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                        8
<PAGE>
pursuant to  Paragraph  13(a),  then this Lease  shall  remain in full force and
effect,  but the rent payable  hereunder  during the  unexpired  portion of this
Lease  shall be reduced  by an amount  proportional  to the  amount of  building
square  footage  taken,  in the case of a taking  affecting  the  Building,  and
proportional  to the reduction in the fair market value of the Land, in the case
of a taking affecting any portion of the Land outside of the Building.

(c) All  compensation  awarded in  connection  with or as a result of any of the
foregoing  proceedings  shall be the  property  of  Landlord  and Tenant  hereby
assigns any interest in any such award to Landlord;  provided, however, Landlord
shall  have no  interest  in any award made to Tenant  for loss of  business  or
goodwill,  the  granting  of a moving  allowance,  or for the taking of Tenant's
fixtures  and  improvements,  if a  separate  award  for  such  items is made to
Landlord.  If the Premises are subject to any of the foregoing  proceedings  and
this Lease is not terminated,  Landlord shall restore the Premises to the extent
practicable  to  their  condition  existing  immediately  prior  to the  taking,
provided  that Landlord will not be required to expend more in doing so than the
amounts granted in the award for restoration of the Premises.

14.  HOLDING OVER. At the  termination of this Lease by expiration or otherwise,
Tenant  immediately  shall  deliver  possession to Landlord with all repairs and
maintenance  required  herein to be performed by Tenant  completed.  If, for any
reason,  Tenant  retains  possession  of the Premises  after the  expiration  or
termination of this Lease, unless the parties hereto otherwise agree in writing,
such possession  shall be subject to termination by either Landlord or Tenant at
any time upon not less than ten (10) days advance written notice, and all of the
other terms and provisions of this Lease shall be applicable during such period,
except that Tenant shall pay Landlord from time to time, upon demand,  as rental
for the period of any hold over,  an amount  equal to 125% of the rent in effect
on the expiration or termination date, computed on a daily basis for each day of
the hold over period. No holding over by Tenant, whether with or without consent
of Landlord,  shall  operate to extend this Lease except as otherwise  expressly
provided.  The preceding  provisions of this Paragraph 14 shall not be construed
as Landlord's consent for Tenant to hold over.

15. QUIET ENJOYMENT.  Landlord covenants that it now has, or will acquire before
Tenant takes  possession of the Premises,  good title to the Premises,  free and
clear of all liens and  encumbrances,  excepting only the lien for current taxes
not yet due,  such  mortgage or mortgages as are  permitted by the terms of this
Lease, zoning ordinances and other building and fire ordinances and governmental
regulations  relating to the use of such property,  and easements,  restrictions
and other  conditions of record.  Landlord  represents  and warrants that it has
full right and  authority  to enter into this Lease and that  Tenant upon paying
the rental herein set forth and  performing  its other  covenants and agreements
herein set forth,  shall  peaceably  and quietly enjoy the Premises for the term
hereof, subject to the terms and provisions of this Lease.

16.      EVENTS OF DEFAULT.  The following events shall be deemed to be "Events
         -----------------   of Default" by Tenant under this Lease:

(a) Tenant shall fail to pay any  installment  of the rent hereby  reserved when
due, or any other payment or reimbursement to Landlord required herein, and such
failure  shall  continue for a period of ten (10) days after the date of written
notice.

(b)  Tenant  shall  become  insolvent,  or  shall  make a  transfer  in fraud of
creditors, or shall make an assignment for the benefit of creditors.

(c) Tenant shall file a voluntary  petition  under any section or chapter of the
National  Bankruptcy Act, as amended, or under any similar law or statute of the
United States or any State thereof,  or a petition shall be filed against Tenant
in any proceedings thereunder and shall not be discharged within sixty (60) days
or Tenant shall be adjudged bankrupt,  or insolvent in proceedings filed against
Tenant thereunder.

(d) A receiver or trustee shall be appointed for all or substantially all of the
assets of Tenant and such  receiver  shall not be  discharged  within sixty (60)
days after his or her appointment.

(e) Tenant  shall fail to comply  with any term,  provision  or covenant of this
Lease (other than the foregoing in this  Paragraph  16), and shall not cure such
failure within thirty (30) days after written notice thereof to Tenant,  or such
longer time as may be reasonably  necessary,  provided that Tenant  commences to
cure the same within ten (10) days after notice and diligently  prosecutes  such
curing to completion.

17.      REMEDIES.  Upon the  occurrence of an Event of Default  described in
         --------   Paragraph 16  hereof,  Landlord shall have the option to
pursue any one or more of the following remedies without any notice or demand:

(a) Terminate this Lease, in which event Tenant shall immediately  surrender the
Premises to Landlord,  and if Tenant fails so to do,  Landlord may, with process
of law but without prejudice to any other remedy which it may have for

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                        8
<PAGE>
possession or arrearages in rent, enter upon and take possession of the Premises
and  expel or  remove  Tenant  or any other  person  who may be  occupying  such
Premises or any part thereof,  without being liable for prosecution or any claim
of damages  therefor;  and Tenant agrees to pay to Landlord on demand the amount
of any loss and damage which Landlord may suffer by reason of such  termination,
whether  through  inability  to relet  the  Premises  on  satisfactory  terms or
otherwise.

(b) With  process of law,  enter upon and take  possession  of the  Premises and
expel or remove  Tenant and any other person who may be occupying  such Premises
or any part  thereof,  without  being  liable  for  prosecution  or any claim of
damages  therefor;  and relet the  Premises and receive the rent  therefor;  and
Tenant agrees to pay to the Landlord on demand any deficiency  that may arise by
reason of such reletting (provided that in determining any such deficiency,  all
costs incurred by Landlord to put the replacement  tenant into possession,  such
as brokerage fees or the costs of alterations to the Premises, will be amortized
on a straight-line  basis over the term of the new lease). In the event Landlord
is  successful in reletting the Premises at a rental in excess of that agreed to
be paid by Tenant pursuant to the terms of this Lease,  Landlord and Tenant each
mutually agree that Tenant shall not be entitled,  under any  circumstances,  to
such excess rental, and Tenant does hereby  specifically waive any claim to such
excess rental.

(c)  Terminate  this Lease and treat the Event of Default as an entire breach of
this Lease and Tenant  immediately  shall become  liable to Landlord for damages
for the entire breach in the amount equal to the amount by which the total rent,
as  adjusted by the amount of  additional  rent which would be payable by Tenant
during the unexpired  balance of their term of this Lease and all other payments
due for the  balance of the term is in excess of the fair  market  rent value of
the  Premises  for the  balance  of the  term as of the  time of  default,  both
discounted to the then present value on a monthly basis at a discount rate equal
the rate of the U.S. Treasury securities offered at the time of the award having
a  maturity  closest  to the date on which the term would have ended but for the
early  termination.  Such amount shall be due and payable upon landlord's notice
to Tenant of  termination of the Lease and shall bear interest until paid at the
rate provided by law for interest on judgments.

(d) Enter upon the Premises,  without being liable for  prosecution or any claim
of damages  therefor,  and do whatever Tenant is obligated to do under the terms
of this  Lease;  and  Tenant  agrees to  reimburse  Landlord  on demand  for any
expenses  which Landlord may incur in thus  effecting  compliance  with Tenant's
obligations  under this Lease, and Tenant further agrees that Landlord shall not
be liable for any  damages  resulting  to the Tenant from such  action,  whether
caused by the negligence of Landlord or otherwise.

(e) Receive  payment  from  Tenant,  in addition to any sum  provided to be paid
above,  for any and all of the  following  expenses  for which  Tenant  shall be
considered  liable  (provided that in the case of any of the costs  described in
items 1 and 3 below that are  incurred in  connection  with a  reletting  of the
Premises,  such  costs  shall be  amortized  over the life of the new lease on a
straight-line basis and Tenant shall only be responsible for the portion of such
costs  attributable  to the  portion  of such new term  that  falls  within  the
original  term of this Lease and then only to the  extent  that in any month the
rent received from such  reletting is less than the sum of such  amortized  cost
for such  month and the amount of rent that would have been due under this Lease
for such month):

                1   Broker's fees incurred by Landlord in connection with
                    reletting the whole or any part of the Premises;

                2   The cost of removing and storing Tenant's or other
                    occupant's property;

                3.  The cost of repairing, altering, remodeling or otherwise
                    putting the Premises into condition, acceptable to a new
                    tenant or tenants, plus a reasonable charge to cover
                    Landlord's overhead; and

                4.  All reasonable expenses incurred by Landlord in enforcing
                    Landlord's remedies.

         In the  event  Tenant  fails  to pay any  installment  of rent or other
payment due hereunder  within five (5) days as and when such installment is due,
to help defray the additional cost to Landlord for processing such late payments
Tenant  shall pay to Landlord on demand a late charge in an amount equal to five
percent  (5%) of such  installment;  and the  failure  to pay such late  charges
within  ten (10)  days  after  demand  therefor  shall  be an  Event of  Default
hereunder; provided, however, that no such late charge will be due for the first
such late  payment  made by Tenant  within any  twelve  (12)  consecutive  month
period.  The  provision  for such late  charge  shall be in  addition  to all of
Landlord's  other  rights  and  remedies  hereunder  or at law and  shall not be
construed  as  liquidated  damages or as  limiting  Landlord's  remedies  in any
manner.

         Pursuit of any of the foregoing  remedies shall not preclude pursuit of
any of the other remedies herein provided or any other remedies provided by law,
nor shall  pursuit of any remedy  herein  provided  constitute a  forfeiture  or
waiver of any rent due to  Landlord  hereunder  or of any  damages  accruing  to
Landlord  by  reason  of the  violation  of any of  the  terms,  provisions  and
covenants herein  contained.  No act or thing done by the Landlord or its agents
during the term hereby granted shall be deemed a termination of this Lease or an
acceptance of the surrender of the Premises,  and no agreement to terminate this
Lease or to accept

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                        9
<PAGE>
a  surrender  of said  Premises  shall be valid  unless in writing and signed by
Landlord,  no waiver by Landlord of any violation or breach of any of the terms,
provisions  and  covenants  herein  contained  shall be deemed or  construed  to
constitute a waiver of any other  violation or breach of any of the other terms,
provisions and covenants herein contained.  Landlord's acceptance of the payment
of rental  or other  payments  hereunder  after  the  occurrence  of an Event of
Default shall not be construed as a waiver of such default,  unless  Landlord so
notifies  Tenant in writing or unless the default was a failure to pay such rent
or other payment. Forbearance by Landlord to enforce one or more of the remedies
herein  provided  upon an Event of Default  shall not be deemed or  construed to
constitute a waiver of such default or of any subsequent  default.  In the event
of any litigation  between Landlord and Tenant  concerning either party's rights
or obligations  under this Lease,  the prevailing  party (meaning the party that
obtains  substantially  all of the relief it is seeking)  will be  entitled,  in
addition to such  relief,  to an award for its  reasonable  attorneys'  fees and
expenses incurred in connection with such litigation.

18.      MORTGAGES.
         ---------

(a) This Lease shall be  subordinate  to any deed of trust,  mortgage,  or other
security instrument (a "Mortgage"), that now or hereafter covers all or any part
of the Premises, provided that the holder of such Mortgage agrees, within in the
Mortgage or in a separate  agreement  with Tenant,  that, so long as no Event of
Default has occurred and is continuing hereunder, no foreclosure or deed in lieu
of foreclosure  with respect to such Mortgage will result in termination of this
Lease or  disturbance  of Tenant's  rights  hereunder.  The mortgagee  under any
Mortgage is referred to herein as "Landlord's Mortgagee".

(b) Tenant shall attorn to any party  succeeding to  Landlord's  interest in the
Premises, whether by purchase,  foreclosure, deed in lieu of foreclosure,  power
of sale,  termination of lease,  or otherwise,  upon such party's  request,  and
shall  execute such  agreements  confirming  such  attornment  as such party may
reasonably request. In the event of such request and upon Tenant's attornment as
aforesaid,  Tenant  will  automatically  become the tenant of the  successor  to
Landlord's  interest  without  change in the terms or  provisions of this Lease;
provided, however, that such successor to Landlord's interest shall not be bound
by (i) an payment of Rent for more than one month in advance (except prepayments
for security  deposits,  if any), (ii) any amendments or  modifications  of this
Lease made without the prior written  consent of Landlord's  Mortgagee if Tenant
was advised on the interest of the same, or (iii) any credits, offsets, defenses
or claims which Tenant may have  against  Landlord,  except for matters that are
continuing.

(c) Tenant  shall not seek to enforce  any remedy it may have for any default on
the part of the Landlord  without first giving written notice by certified mail,
return receipt  requested,  specifying the default in reasonable  detail, to any
Landlord's Mortgagee, whose address has been given to Tenant, and affording such
Landlord's Mortgagee a reasonable  opportunity to perform Landlord's obligations
hereunder.  Subject to the provisions of Paragraph 12 hereof,  Landlord reserves
the right,  without  notice to or consent of the  Tenant,  to assign  this Lease
and/or any and all rents hereunder as security for the payment of any Mortgage.

(d) Tenant and Landlord  agree at any time and from time to time during the Term
to execute,  acknowledge  and deliver to the other party within ten (10) days of
any  request  by the  other  party,  a  statement  or  statements,  in  writing,
certifying (if such be true) that a copy of this Lease and any amendments hereto
are true and correct  copies,  this Lease is unmodified and in good standing (or
if modified, then in good standing as modified,  stating the modification),  the
date to which all rent and other  charges  hereunder  have been paid in advance,
and any  other  items  reasonably  requested.  From time to time,  Tenant  shall
furnish  to any  Landlord's  Mortgagee,  within  ten (10)  days  after a request
therefor,  such  estoppel  certificates,   subordination,   non-disturbance  and
attornment  agreements,  or  other  certificates  as  Landlord's  Mortgagee  may
reasonably request.

(e) Landlord  acknowledges  that Tenant has acquired  equipment,  inventory  and
other  personal  property and may acquire  additional  equipment,  inventory and
other personal property  (collectively,  the "Equipment") under the terms of one
or more  credit  agreements  with one or more  lenders  pursuant  to which  such
lenders finance Tenant's purchase of all or a portion of the Equipment. Landlord
further  acknowledges  that a portion of the  Equipment  will be installed in or
located  at  the  Premises.  Landlord  hereby  disclaims  any  interest  in  the
Equipment.  Landlord  further (i) waives,  disclaims  and  releases any claim of
ownership  of or  lien  on or  security  interest  in  all or  any  part  of the
Equipment,  whether  consensual,  statutory  or  otherwise;  (ii) to the fullest
extent  permitted by law,  waives all rights  granted by or under any present or
future law to levy or distraint on the Equipment,  for any sums due to Landlord;
(iii) acknowledges that, regardless of the mode or manner of installation of the
Equipment,  the Equipment is and will continue to be personal property of Tenant
or the vendor of the Equipment,  as the case may be; (iv)  acknowledges that the
lenders  under  the  credit  agreements  have (or may  have)  financed  Tenant's
purchase  of all or portion f the  Equipment  and, to the extent that any of the
Equipment  has been so financed,  the lenders  have a security  interest in such
Equipment;  and (v) agrees that the lenders and their  agents may,  form time to
time in  accordance  with the  credit  agreements,  enter the  Premises  for the
purposes of inspection, repairing, removing and/or conducting a sale or sales of
the Equipment.

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       10
<PAGE>
19.      LANDLORD'S DEFAULT.
         ------------------

(a) In the event Landlord  should default in any of its  obligations  hereunder,
Tenant shall  simultaneously  give  Landlord and  Landlord's  Mortgagee  written
notice  specifying  such default and Landlord  shall  thereupon have thirty (30)
days (plus an additional reasonable period as may be required in the exercise by
Landlord  of due  diligence)  in which to cure any such  default.  In  addition,
Landlord's  Mortgagee  shall have the right (but not the  obligation) to cure or
remedy such  default  during the period of thirty (30) days (plus an  additional
reasonable period as may be required in the exercise by Landlord's  Mortgagee of
due diligence)  following  Landlord's  Mortgagee's  receipt of written notice of
default,  and Tenant  will accept such  curative  or  remedial  action  taken by
Landlord's  Mortgagee  with the same  effect as if such action had been taken by
Landlord.

(b) Upon the failure of Landlord or Landlord's Mortgagee to cure such default in
accordance  with the  provisions  of  Paragraph  19(a)  hereof,  Tenant shall be
authorized  and  empowered  to take such action as may be  necessary to cure the
default,  and the amount paid by Tenant in curing such default for and on behalf
of Landlord,  together with interest thereon at the rate of twelve percent (12%)
per annum from the date paid by Tenant until the date  reimbursed to Tenant with
interest, shall be payable on demand by Landlord to Tenant. If Landlord fails to
pay any such amount  within ten (10) days after  notice,  then Tenant may offset
the amount due from Landlord to Tenant against the next ensuing  installments of
rent due  hereunder;  provided,  however,  that Tenant will only be permitted to
offset against each monthly  installment  rent hereunder an amount not exceeding
twenty-five percent (25%) of the amount of such installment of rent and, if such
monthly  offset does not total the aggregate  amount of Tenant's  expenses which
are allowable for offset,  the remaining  balance thereof may be carried forward
and offset against future installments of rent, but Tenant may never offset more
than twenty-five percent (25%) of any monthly installment of rent.

(c) Pursuit of any of the foregoing  remedies shall not preclude  pursuit of any
of the other remedies herein provided or any other remedies provided by law, nor
shall pursuit of any remedy herein provided constitute a forfeiture or waiver of
any damages  accruing to Tenant by reason of the  violation of any of the terms,
provisions and covenants herein contained.  No waiver by Tenant of any violation
or breach of any of the terms,  provisions and covenants  herein contained shall
be deemed or construed to  constitute a waiver of any other  violation or breach
of  any  of  the  other  terms,   provisions  and  covenants  herein  contained.
Forbearance  by Tenant to enforce one or more of the  remedies  herein  provided
upon an Event of  Default  by  Landlord  shall  not be deemed  or  construed  to
constitute a waiver of such default or of any subsequent  default.  In the event
of any litigation  between Landlord and Tenant  concerning either party's rights
or obligations  under this Lease,  the prevailing  party (meaning the party that
obtains  substantially  all of the relief it is seeking)  will be  entitled,  in
addition to such  relief,  to an award for its  reasonable  attorneys'  fees and
expenses incurred in connection with such litigation.

20. ASSIGNMENT BY LANDLORD. Landlord shall have the right to assign or transfer,
in whole or in part every  feature of its rights and  obligations  hereunder and
the Premises  provided such assignee or transferee  recognizes  and agrees to be
bound by the terms of this Lease. Such assignments or transfers may be made to a
corporation,  trust,  trust  company,  individual or group of  individuals,  and
howsoever made shall be in all things respected and recognized by Tenant.  Prior
to the Commencement  Date,  Landlord may assign or transfer its rights hereunder
only to entities in which InSite  Realty  Partners  L.P. and Urban  Construction
have a  controlling  interest  and are  serving  as the  developer  and  general
contractor.

21. FORCE MAJEURE.  Whenever a period of time is herein prescribed for action to
be taken by either party,  such party will not be liable or responsible for, and
there will be excluded  from the  computation  of any such  period of time,  any
delays due to strikes, riots, acts of God, shortages of labor or materials, war,
governmental  laws,  regulations or restrictions or any other causes of any kind
whatsoever  which are beyond the reasonable  control of such party.  Nothing set
forth  herein  will in any event  excuse  the late  payment of any rent or other
charges due from one party to the other pursuant to this Lease.

22. MECHANIC'S  LIENS.  Tenant shall have no authority,  express or implied,  to
create or place any lien or encumbrance, of any kind or nature whatsoever, upon,
or in any manner to bind, the interest of Landlord in the Premises for any claim
in favor of any person  dealing  with  Tenant,  including  those who may furnish
materials or perform labor for any construction or repairs,  and each such claim
shall affect and each such lien shall attach to, if at all,  only the  leasehold
interest granted to Tenant by this instrument.  Tenant covenants and agrees that
it will  pay or  cause to be paid all  sums  legally  due and  payable  by it on
account of any labor  performed or materials  furnished in  connection  with any
work  performed  on the  Premises  on which  any lien is or can be  validly  and
legally  asserted  against  its  leasehold  interest  in  the  Premises  or  the
improvements  thereon, and that it will save and hold Landlord harmless from any
and all loss,  cost or expense  based on or arising  out of  asserted  claims or
liens against the leasehold estate, or against the right,  title and interest of
the Landlord in the Premises or under the terms of this Lease.

23. NOTICES. Each provision of this instrument or of any applicable governmental
laws,  ordinances,  regulations  and other  requirements  with  reference to the
sending,  mailing,  or  delivery  by courier or  otherwise  of any notice or the
making of any payment by Landlord to Tenant or with  reference  to the  sending,
mailing or  delivery  of any  notice or the  making of any  payment by Tenant to
Landlord shall be deemed to be complied with when and if the following steps are
taken:

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       11
<PAGE>
(a) All rent and  other  payments  required  to be made by  Tenant  to  Landlord
hereunder  shall be payable to Landlord at the address  hereinbelow set forth or
at such  other  address as  Landlord  may  specify  from time to time by written
notice delivered in accordance herewith. Tenant's obligation to pay rent and any
other  amounts to  Landlord  under the terms of this  Lease  shall not be deemed
satisfied until rent and other amounts have been actually received by Landlord.

(b) All payments  required to be made by Landlord to Tenant  hereunder  shall be
payable to Tenant at the address hereinbelow set forth, or at such other address
within the continental  United States as Tenant may specify from time to time by
written notice delivered in accordance herewith.

(c) Any notice or document required or permitted to be delivered hereunder shall
be  deemed  to be  delivered  whether  actually  received  or not (i)  three (3)
business  days after  deposited  in the United  States  Mail,  postage  prepaid,
Certified or Registered  Mail, or (ii) one (1) business day after  deposited for
next business day delivery with Federal Express or another nationally-recognized
overnight  courier  service that  provides  evidence or receipt,  in either case
addressed to the parties hereto at the respective addresses set out below, or at
such  other  address  as they  have  theretofore  specified  by  written  notice
delivered in accordance herewith:

               LANDLORD:                                   TENANT:
      DOVE VALLEY BUSINESS CENTER, LLLP          KOALA CORPORATION
      c/o InSite Realty Partners L.P.            11600 East 53rd Avenue, Unit D
      1502 Augusta, Suite 100                    Denver, Colorado  80239-2312
      Houston, Texas  77057                      Attention:  Mark Betker
      Attention:  Alan S. Ratterree                          and Jim Zazenski

         If and  when  included  within  the  term  "Landlord",  as used in this
instrument,  there  are more than one  person,  firm or  corporation,  all shall
jointly  arrange  among  themselves  for their joint  execution of such a notice
specifying some  individual at some specific  address for the receipt of notices
and payments to Landlord; if and when included within the term "Tenant", as used
in this  instrument,  there are more than one person,  firm or corporation,  all
shall  jointly  arrange  among  themselves  for their joint  execution of such a
notice   specifying  some  individual  at  some  specific   address  within  the
continental United States for the receipt of notices and payments to Tenant. All
parties included within the terms "Landlord" and "Tenant",  respectively,  shall
be bound by notices given in accordance with the provisions of this Paragraph to
the same effect as if each had received such notice.

24.      MISCELLANEOUS.
         -------------

(a)  Words of any  gender  used in this  Lease  shall be held and  construed  to
include  any other  gender  and words in the  singular  number  shall be held to
include the plural, unless the context otherwise requires.

(b) The terms,  provisions,  covenants  and  conditions  contained in this Lease
shall apply to, inure to the benefit of, and be binding upon, the parties hereto
and upon their respective heirs, legal representatives, successors and permitted
assigns except as otherwise herein expressly provided.

(c) This Lease shall be treated as an offer with the Premises  being  subject to
prior lease and such offer subject to withdrawal or  non-acceptance  by Landlord
or to other use of the  Premises  without  notice,  and this Lease  shall not be
valid or binding  unless and until  accepted  by Landlord in writing and a fully
executed copy delivered to both parties.

(d) The captions  inserted in this Lease are for convenience  only and in no way
define,  limit or otherwise  describe the scope or intent of this Lease,  or any
provision hereof, or in any way affect the interpretation of this Lease.

(e) All obligations of Tenant  hereunder not fully performed upon the expiration
or earlier termination of the term of this Lease shall survive the expiration or
earlier  termination  of the term hereof,  including,  without  limitation,  all
payment  obligations  with respect to taxes and  insurance  and all  obligations
concerning  the  condition  of the  Premises.  Upon the  expiration  or  earlier
termination  of the term  hereof,  and prior to Tenant  vacating  the  Premises,
Tenant  shall pay to Landlord  any amount  reasonably  estimated  by Landlord as
necessary to put the Premises,  including,  without limitation,  all heating and
air conditioning  systems and equipment  therein,  in good condition and repair.
Tenant shall also,  prior to vacating the Premises,  pay to Landlord the amount,
as estimated by Landlord, of Tenant's obligation hereunder for real estate taxes
and insurance premiums for the portion of the year in which the Lease expires or
terminates  that falls within the term.  All such amounts shall be used and held
by Landlord for payment of such  obligations  of Tenant  hereunder,  with Tenant
being liable for any additional costs therefor upon demand by Landlord,  or with
any  excess to be  returned  to  Tenant  after  all such  obligations  have been
determined  and  satisfied,  as the case may be. Any  security  deposit  held by
Landlord  shall be  credited  against  the amount  payable by Tenant  under this
Paragraph 24(e).

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       12
<PAGE>
(f)  If  any  clause  or  provision  of  this  Lease  is  illegal,   invalid  or
unenforceable  under  present or future laws  effective  during the term of this
Lease,  then and in that event,  it is the intention of the parties  hereto that
the  remainder of this Lease shall not be affected  thereby,  and it is also the
intention of the parties to this Lease that, in lieu of each clause or provision
of this Lease that is  illegal,  invalid or  unenforceable,  there be added as a
part of this Lease  contract a clause or  provision  as similar in terms to such
illegal,  invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.

(g) All  references  in this Lease to "the date  hereof"  or similar  references
shall  be  deemed  to refer to the last  date,  in point of time,  on which  all
parties hereto have executed this Lease.

(h) This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.

(i)  Landlord  and  Tenant  acknowledge  and  agree  that  this  Lease  shall be
interpreted and enforced in accordance with the laws of the State of Colorado.

(j) Each party agrees to furnish to the other, promptly upon demand, a corporate
resolution,  proof  of due  authorization  by  partners,  or  other  appropriate
documentation  evidencing the due authorization of such party to enter into this
Lease.

(k) This Lease may be signed in any number of counterparts,  each of which shall
be an  original  for  all  purposes,  but  all of  which  taken  together  shall
constitute  only one agreement.  The  production of any executed  counterpart of
this Lease shall be sufficient for all purposes without  producing or accounting
for the other counterparts hereof.

25.      HAZARDOUS MATERIALS.
         -------------------

(a) At all times during the term of this Lease, Tenant covenants and agrees that
Tenant shall not cause or permit any Hazardous Material (hereinafter defined) to
be brought upon,  kept, or used in or about the Premises by Tenant,  its agents,
employees,  customers,  clients, invitees, licensees, or contractors without the
express prior written  consent of Landlord,  except that Tenant may transport to
and from and  store  and use on the  Premises  normal  quantities  of  Hazardous
Material  customarily used for Tenant's  Intended Use, provided that all of such
transportation,  storage  and use  shall  be  accomplished  in  accordance  with
Environmental  Law (hereinafter  defined) . As used herein,  the term "Hazardous
Material"  means any pollutant,  toxic  substance,  hazardous  waste,  hazardous
material,  hazardous substance, or oil as defined in or pursuant to the Resource
Conservation  and  Recovery  Act, as amended,  the  Comprehensive  Environmental
Response,  Compensation,  and Liability Act, as amended, the Federal Clean Water
Act,  as  amended,  or any  other  federal,  state,  or local  environment  law,
regulation,  ordinance,  rule, or bylaw, whether existing as of the date hereof,
previously in force, or subsequently enacted governing the transportation,  use,
generation or storage of such materials ("Environmental Law").

(b) Tenant  shall  indemnify,  defend and hold the Premises  and  Landlord,  its
directors,  officers,  employees,  agents,  partners,  assigns and successors to
Landlord's interest in the Premises,  free and harmless from and against any and
all loss, cost,  damage,  expense (including  attorney's fees),  claim, cause of
action,  judgment,  penalty,  fine or liability  (including,  without limitation
diminution in the value of the Premises or any portion thereof,  damages for the
loss or restriction on use of rentable or usable space within the Premises),  or
of any amenity of the  Premises and damages  arising from any adverse  impact on
the  marketing of space within the Premises,  arising from the use,  generation,
storage,  transportation,  handling or disposal of Hazardous Materials by Tenant
or any of Tenant's agents,  in, on or about the Premises during the term of this
Lease or any extension thereof.  Tenant's  obligations pursuant to the foregoing
indemnity  shall survive the expiration or sooner  termination of this Lease and
shall  bind  Tenant's  successors  and  assigns  and  insure to the  benefit  of
Landlord's  successors and assigns.  Tenant's  indemnification shall include and
cover  without by way of  limitation,  any and all costs  incurred in connection
with any  investigation of site conditions or any clean-up,  remedial removal or
restoration  work  required  by  federal,  state or local  government  agency or
political subdivision because of the use, generating,  storage,  transportation,
handling or disposal of Hazardous  Materials by Tenant or Tenant's agents in, on
or about the  Premises.  Any costs or expenses  incurred  by Landlord  for which
Tenant is  responsible  or for which Tenant has  indemnified  Landlord  shall be
reimbursed by Tenant upon demand as additional rent.

(c)  Landlord  represents  to Tenant  that,  except as  disclosed in the Phase I
environmental  assessment  report concerning the Land obtained by Landlord and a
copy of which has been delivered to Tenant ("Landlord's Phase I Report"), to the
best of  Landlord's  knowledge  the  Land has not  been  used  for the  storage,
generation or use of Hazardous  Materials  and there are no Hazardous  Materials
present on the Land in any  quantity  or matter  that  violates or gives rise to
liability  under any  Environmental  Law.  Landlord  covenants  that it will not
incorporate  any  Hazardous  Materials  into  the  Improvements  constructed  by
Landlord  pursuant to this Lease  (other than such  Hazardous  Materials  as are
customarily  incorporated  into improvements of the same type as the Building as
of the time of  construction  thereof and, in any event,  in compliance with all
Environmental

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       13
<PAGE>
Law). Landlord will indemnity,  defend and hold Tenant harmless from and against
any all loss, cost, damage, expense (including attorney's fees), claim, cause of
action, judgment, penalty, fine or liability arising from the breach by Landlord
of its  representations  and  covenants  set  forth  in  this  Paragraph  25(c).
Landlord's  obligations  pursuant to the foregoing  indemnity  shall survive the
expiration  or  sooner  termination  of this  Lease and  shall  bind  Landlord's
successors  and assigns and insure to the  benefit of  Tenant's  successors  and
assigns.

(d) At  Tenant's  sole cost and  expense,  Tenant may  conduct an  environmental
assessment  of  the  Premises  in  order  to  establish  a  "base-line"  of  the
environmental condition of the Premises as of Tenant's commencement of occupancy
of the  Premises  ("Tenant's  Phase I  Report").  Tenant  agrees to  deliver  to
Landlord a written copy of Tenant's  Phase I Report within  fifteen (15) days of
Tenant's  receipt  of same.  Tenant  agrees  to  maintain  the  results  of such
environmental  assessment in confidentiality  and not to disclose or release the
results of such  environmental  assessment to any third parties or  governmental
agencies  without  Landlord's  prior written  consent unless such  disclosure is
required by applicable  law or  regulation or in the event of a dispute  between
Landlord and Tenant  relating to the  environmental  condition of the  Premises;
provided,  however,  Tenant shall notify Landlord of such disclosure at the time
of such disclosure.  If Tenant does not elect to obtain Tenant's Phase I Report,
then  Landlord's  Phase I Report will serve as such a "base-line,"  except as to
any Hazardous Materials introduced by Landlord prior to the Commencement Date.

26.  BROKERAGE.  Tenant and Landlord  represent and warrant that they have dealt
with no broker,  agent or other person in connection  with this  transaction and
that no broker, agent or other person brought about this transaction, other than
James Gruber of CB Richard  Ellis,  and each party agrees to indemnify  and hold
the other  harmless  from and against any claims by any other  broker,  agent or
other person  claiming a commission or other form of  compensation  by virtue of
having  dealt  with  the   indemnifying   party  with  regard  to  this  leasing
transaction.  The provisions of this Paragraph  shall survive the termination of
this Lease.

27.  SECURITY.  Any and all  security of any kind for Tenant,  Tenant's  agents,
employees  or  invitees,   the  Premises,   or  any  personal  property  thereon
(including, without limitation, any personal property of any sublessee) shall be
the sole  responsibility  and  obligation  of Tenant,  and shall be  provided by
Tenant at Tenant's sole cost and expense.  Tenant  acknowledges  and agrees that
Landlord  shall have no obligation or liability  whatsoever  with respect to the
same. Tenant shall indemnify and hold Landlord harmless from and against any and
all loss,  cost,  damage or other liability  arising directly or indirectly from
security  measures or the absence  thereof  with respect to the Premises and the
building of which the Premises are a part. Tenant may, at Tenant's sole cost and
expense,  install  alarm  systems in the  Premises  provided  such  installation
complies  with the  provisions  of  Paragraph  6 hereof.  Removal  of such alarm
systems  shall be Tenant's  sole  responsibility  and, at Tenant's sole cost and
expense, shall be completed prior to Lease termination and all affected areas of
the Premises shall be repaired and/or restored in a good and workmanlike  manner
to the condition that existed prior to such installation.

28.  WARRANTIES.  Landlord shall correct or complete all punchlist items as soon
as  reasonably  possible,  but  in  no  event  longer  than  60  days  from  the
Commencement  Date (subject to extension for force majeure).  Landlord agrees to
correct,  at its expense,  any and all latent  defects of which Tenant  notifies
Landlord within one year from the Commencement Date.  Landlord warrants that the
building and all leasehold improvements installed by Landlord for Tenant will be
completed in a good and  workmanlike  manner,  in compliance with the applicable
permitting  agencies  requirements,  including  the  ADA,  in  effect  as of the
commencement  date.  Landlord warrants that the natural gas service installed by
Landlord to serve the  Premises  will have  capacity  equal to at least 2.0 lbs.
pressure for 60,000 C.F.H. load.

29. SATELLITE DISH.  Tenant shall have the right to install,  at its expense and
in  compliance  with all  applicable  laws, a satellite  dish or similar type of
antenna on or about the roof of the Building.  Landlord  shall not charge Tenant
any additional fees for said dish or antenna. Tenant shall be solely responsible
and pay for any damage as a result of said installation and/or removal. Prior to
installation,  Tenant will obtain  Landlord's  approval as to the  location  and
manner  of  installation,  which  approval  will not be  unreasonably  withheld,
provided  that  neither  the  proposed  location  nor  the  proposed  manner  of
installation  would in any way void or make  unenforceable the warranty covering
the roof.

30.      CONFIDENTIALITY. Landlord and Tenant each agrees that it will not issue
         ---------------  any public  statements  or issue any press  releases
concerning the  transaction  contemplated  by this Lease without first obtaining
the other party's written approval.

31.      EXPANSION OPTION.
         ----------------

(a)  Landlord  grants  Tenant an option  (the  "Expansion  Option") to cause the
Building  to be  expanded  by  between  50,000  and  100,000  square  feet  (the
"Expansion")  in accordance  with the provisions of this Paragraph 31. If at any
time  during the first  sixteen  (16) full  calendar  months of the term of this
Lease,  Tenant desires the Expansion,  Tenant will notify Landlord in writing of
such desire (the  "Expansion  Notice").  Tenant's  Expansion  Notice must (i) be
given prior to the expiration of the sixteenth (16th) full calendar month of the
term; (ii) be given before the termination of the Expansion Option pursuant to

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       14
<PAGE>
Paragraph  31(b)  below;  (iii)  describe  in  reasonable  detail the  Expansion
requested by Tenant,  including the size in square feet and proposed use of each
type of space to be  included  in the  Expansion  (such as, for  example,  5,000
square feet of office  space and 60,000  square feet of  warehouse/manufacturing
space),  the  level of  finish  required  in each  type of  space,  and any site
improvements  or  other  special  requirements  that are to be  included  in the
Expansion; and (iv) call for an Expansion having at least 50,000 square feet and
not more than 100,000 square feet.

(b) The parties  acknowledge that Landlord has an option to purchase a parcel of
land  consisting  of  approximately  4.63 acres that is located  adjacent to and
north of the Land (the  "Expansion  Area").  If Tenant  exercises  its Expansion
Option,  the Expansion will be constructed on the Expansion Area. Such option to
purchase the Expansion Area will expire one year from the date on which Landlord
closes on its  acquisition  of the Land (the "Land  Acquisition  Date"),  unless
prior to the first  anniversary of the Land Acquisition  Date,  Landlord extends
such option for a one-year period by paying an extension  payment of $9,148 (the
"First Extension Payment"),  in which case such option will expire on the second
anniversary  of the Land  Acquisition  Date unless,  prior to such  anniversary,
Landlord  extends  such option for an  additional  one-year  period by paying an
additional  extension  payment of $9,148 (the "Second  Extension  Payment"),  in
which  case  such  option  will  expire  on the  third  anniversary  of the Land
Acquisition  Date. If the "Expansion  Amendment" (as defined below) has not then
been signed, at least sixty (60) days prior to the first anniversary of the Land
Acquisition  Date,  Landlord  will notify Tenant of the date on which such first
anniversary  will occur and  Tenant,  if Tenant  desires  to keep its  Expansion
Option in effect, must pay to Landlord the amount of the First Extension Payment
at least thirty (30) days prior to the first anniversary of the Land Acquisition
Date.  If Tenant  fails to do so,  then  Tenant's  Expansion  Option  under this
Paragraph 31 will terminate. If the Expansion Amendment has not then been signed
and Tenant's  Expansion Option is still then in effect, at least sixty (60) days
prior to the second  anniversary  of the Land  Acquisition  Date,  Landlord will
notify  Tenant  of the date on which  such  second  anniversary  will  occur and
Tenant,  if Tenant desires to keep its Expansion  Option in effect,  must pay to
Landlord  the amount of the Second  Extension  Payment at least thirty (30) days
prior to the second anniversary of the Land Acquisition Date. If Tenant fails to
do so, then Tenant's Expansion Option under this Paragraph 31 will terminate.

(c) Within two (2) weeks after  timely  delivery of Tenant's  Expansion  Notice,
Landlord will prepare and deliver to Tenant sketch plans and  specifications for
the  proposed  Expansion  and a proposed  budget for all costs of its design and
construction  (including  the cost of acquiring the Expansion Area and financing
the  construction  of the Expansion).  During the two (2) week period  following
Landlord's delivery of such sketch plans and specifications and budget, Landlord
will  cooperate with Tenant to refine such plans and  specifications  to produce
preliminary  plans  and  specifications  for  the  Expansion  (the  "Preliminary
Expansion Plans") that are acceptable to Tenant and of a level of detail similar
to the  Preliminary  Plans for the Building  attached  hereto as Exhibit "B" and
develop a final budget for the Expansion,  as shown on the Preliminary Expansion
Plans (the  "Expansion  Budget").  If Tenant  fails to  approve  in writing  the
Preliminary  Expansion Plans and the Expansion Budget within two (2) weeks after
Landlord's delivery of the sketch plans and proposed budget, then Tenant will be
deemed to have withdrawn its Expansion  Notice and the same will have no further
force or effect.  If Tenant does so approve the Preliminary  Expansion Plans and
the Expansion Budget,  then,  within one (1) month thereafter,  the parties will
execute an amendment to this Lease (the "Expansion Amendment") that provides for
the following:

                1.  Landlord will prepare  construction plans and specifications
                    for the Expansion  which will be subject to Tenant's  review
                    and  approval,  which will not be  unreasonably  withheld or
                    delayed and will be limited in scope to confirming  that the
                    same conform to the Preliminary Expansion Plans;

                2.  Landlord will construct the Expansion in accordance with the
                    construction  plans and  specifications  approved  by Tenant
                    within  a  reasonable   construction   period  projected  by
                    Landlord  at the  time the  Expansion  Amendment  is  signed
                    (subject to delays caused by force majeure);

                3.  Upon Substantial  Completion of the Expansion,  Landlord and
                    Tenant will  prepare a punchlist  of items in the  Expansion
                    requiring   completion  or  correction   and  Landlord  will
                    complete or correct the same within thirty (30) days;

                4.  Landlord  will  provide  a  warranty  with  respect  to  the
                    Expansion  for a  period  of one year  from its  Substantial
                    Completion  like the warranty  provided  with respect to the
                    original Building pursuant to this Lease; and

                                                 Initials: __________ __________
                                                            Landlord    Tenant

                                       15
<PAGE>
                5.  Upon  Substantial  Completion  of  the  Expansion,  (a)  the
                    Premises  will be deemed  amended to include  the  Expansion
                    Area and the  Expansion;  (b) the term of this Lease will be
                    extended  to be a full ten (10)  years from the date of such
                    Substantial  Completion  (plus,  if the date of  Substantial
                    Completion  is other  than  the  first  day of a month,  the
                    period  from such date to the first day of the next  month);
                    (c) the rent for the original  Premises will continue on the
                    schedule  set forth in  Paragraph  2(a) and for the extended
                    portion of the term (i.e.,  the extension  necessary to make
                    the term a full ten (10) years from  Substantial  Completion
                    of the Expansion) the rent for the original Premises will be
                    payable at the same  amount per month as is payable  for the
                    original  Premises during months 91 through 120, as shown in
                    such schedule (and the rent for the renewal terms, if Tenant
                    should  exercise the same,  will remain  unchanged as to the
                    original  Premises);  (d) the  rent  for the  Expansion  and
                    Expansion Area for each of the first full thirty (30) months
                    following the Substantial Completion thereof (with proration
                    of any partial month from the Substantial Completion date to
                    the next month) will be equal to  one-twelfth  (1/12) of the
                    amount obtained by multiplying  the total  Expansion  Budget
                    approved by Tenant by (i) 10.5%, if the Expansion  Amendment
                    is signed  during the first  twelve  (12)  months  following
                    execution  of this  Lease;  (ii)  10.65%,  if the  Expansion
                    Amendment  is signed  during the second  twelve  (12) months
                    following the execution of this Lease;  and (iii) 10.8%,  if
                    the   Expansion   Amendment   is  signed   after  the  first
                    twenty-four  (24) months  following  the  execution  of this
                    Lease; and (e) the rent for the Expansion and Expansion Area
                    will increase by 4.75% every thirty (30) months  thereafter,
                    including the renewal  terms if Tenant  exercises its option
                    with respect thereto.

32.  PURCHASE AND LEASE OF SOUTHERN LAND.  Landlord has disclosed to Tenant that
the owner of the land consisting of approximately two (2) acres located adjacent
to and south of the Land (the  "Southern  Land"),  may offer to sell the same to
Landlord.  Landlord  agrees  to  immediately  deliver  to  Tenant  a copy of any
correspondence  received by Landlord  concerning  the Southern  Land and to keep
Tenant informed of any  communications  Landlord has concerning the availability
or sale of the  Southern  Land.  If the  Southern  Land  becomes  available  for
purchase  within one (1) year after the  Commencement  Date, and if the purchase
price  which the owner  thereof is willing to accept  does not exceed  $100,000,
then Landlord will, upon written notice from Tenant  instructing  Landlord to do
so, purchase the Southern Land for the price set forth in Tenant's notice.  Upon
delivery of such notice,  the parties will enter into an amendment to this Lease
that (a) adds the Southern Land to the Land demised  hereunder as of the date of
Landlord's  acquisition of title thereto;  and (b) as of such acquisition  date,
increases the monthly rent payable hereunder during the remainder of the initial
ten (10) year term by an amount sufficient to amortize Landlord's  out-of-pocket
cost of acquiring  the Southern  Land over such period,  together  with interest
thereon at the rate of eleven percent (11%) per annum.

         EXECUTED as of March 16, 2000.

LANDLORD:                           TENANT:

DOVE VALLEY BUSINESS CENTER, LLLP   KOALA CORPORATION

BY:     /s/ Alan S. Ratterree       BY:   /s/  Mark A. Betker
     ----------------------------       ------------------------------------

NAME:       Alan S. Ratterree       NAME:      Mark A. Betker
     ----------------------------       ------------------------------------
TITLE:       General Partner        TITLE: Chairman and Chief Executive Officer

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       16
<PAGE>
                                   EXHIBIT "A"
                          Legal Description of the Land

Approximately  6.936 acres of land located at South  Wheeling  Court on Lot 23 &
Lot 24 of the  Dove  Valley  Business  Park in  Arapahoe  County,  Colorado,  as
depicted on the Preliminary Plans.

                                                 Initials: __________ __________
                                                            Landlord    Tenant

                                       A-1

<PAGE>
                                   EXHIBIT "B"
                                Preliminary Plans

The  Preliminary  Plans  consist of the  specifications  set forth below and the
following-described  plans:  Five (5) plan  sheets  entitled  "Koala Dove Valley
Business  Center" and prepared by Robert  Hooper,  consisting  of (1) floor plan
dated  9/22/99;  (2)  enlarged  floor  plan dated  9/22/99;  (3) site plan dated
1/24/00; (4) landscape plan dated 1/24/00; and (5) elevations dated 1/19/00.

The  following  are the  construction  specifications  for the  office/warehouse
building to be constructed for the Tenant. Industrial buildings may vary in some
details as indicated on the specific working drawings. The Landlord reserves the
right to change these specifications with written notice and Tenant approval.

PROJECT DATA:
------------

1.01     Land Area:  Approximately 6.936 acres

1.02             Building Size:
                 Office           15,000 square feet
                 Mezzanine        15,000 square feet (unfinished above office)
                 Warehouse        99,000 square feet
                 ------------------------------------
                 TOTAL            129,000 square feet

1.03     Clear Height:     2   4' clear minimum to bottom bar joists.

1.04     Building Description:  Conventionally framed building structural system
         utilizing tube columns,  open web joists and girders,  metal roof deck,
         and site cast concrete tilt wall panels.  Roof system shall be modified
         bitumen  roof  including  all  cants  and  base  flashings  over  rigid
         insulation  on  22  gauge   painted,   rolled  metal  deck.   All  site
         improvements, such as sidewalks, auto and truck parking are as shown on
         the accompanying schematic site plan.

GENERAL REQUIREMENTS:
--------------------

1.05     Construction  shall meet all  applicable  building  codes,  ordinances,
         rules and  regulations  of the  County  of  Arapahoe,  and  restrictive
         covenants of the Dove Valley Business Park.

SITEWORK:

2.01     Pavement:

         A.    Asphalt paving to be installed in accordance with soil and civil
               engineering design.

         B.    Concrete paving to be 6" thick, 4000 PSI, and otherwise per soil
               engineer's recommendations.

         C.    Expansion joints located per soil engineer's recommendations. All
               joints to be sealed with hot pour sealant.

2.02     Miscellaneous Site

         A.    4" steel painted pipe bollards 42" above pavement and set 2'-6"
               below pavement.

         B.    Striping to be 4" yellow or white to divide parking spaces.
               Handicap symbols and signs to meet ADA requirements.

         C.    Pipe rails at exterior stairs and ramps to be 1-1/2 steel pipe
               red oxide primed and painted in compliance with ADA.

         D.    Dock bumpers, 2 each per overhead door opening standard rubber
               tread type. (Approximately 14" x 10" in size).

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       B-1
<PAGE>
2.04     Site Walks

         All  sidewalks  to be 4" thick  with  3000 PSI  concrete  and wire mesh
reinforcing. Finish to be light broom finish.

2.05     Testing

         All soil and material  testing will be done by an  independent  testing
lab, cost of which is included in proposal.

2.06     Landscape and Irrigation

         Complete  landscaping  and  automatic  irrigation  system  to meet  all
Arapahoe County and deed requirements.

FOUNDATION:

3.01     Structural Foundation

         A.       Drilled Piers

                  Reinforced  concrete  drilled  piers,  sized and  excavated to
                  proper bearing strata in accordance  with  recommendations  of
                  soil investigation report.

         B.       Slab on Grade

                  Building slab on 6" thick  concrete with 4000 PSI concrete and
                  reinforcing per structural engineer's recommendations. Control
                  joints or  construction  joints to be located  at column  grid
                  lines and at mid points of all bays.

3.02     Miscellaneous Foundation

         Stair pans to be concrete filled at an interior stair.

STRUCTURES:

4.01     Slab on Metal Deck Concrete

         Mezzanine floor slab shall be 3" concrete on galvanized steel deck with
wire mesh, 6 x 6 - W4 x W4 weld flat sheet.

4.02     Structural Steel

         A.    Structural  steel system to be conventional  design with round or
               tubular  columns,  I-beams  and bar  joists to  support  the main
               structure of the building.  Mezzanine floor structural  system is
               based on  columns,  beams and bar joist  systems.  All  tilt-wall
               panel embeds, miscellaneous angle supports have been included.

         B.    The color of all Structural Steel shall be manufacturer's gray.

4.03     Exterior Walls

         A.    Tilt-wall panels based on a minimum 7" thick smooth panels with
               Painted exterior finish.

         B.    Reinforcing at wall panels will be a minimum of #4 at 12" O.C. as
               designed by structural engineer.

ENCLOSURES:

5.01     Modified Bitumen Roof

         A.    TAMKO modified  bitumen roof system  including all cants and base
               flashings  over ridged  insulation  on 22 gauge  painted,  rolled
               metal deck. Color of deck shall be manufacturer's white.

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       B-2
<PAGE>
         B.    Furnish twelve (12) year full value manufacturer's warranty on
               roofing system (labor and material).

         C.    Coping, downspouts, collector heads and scuppers will be
               galvanized.

         D.    Steel downspout guards will be provided as required on
               downspouts.

5.02     Caulk and Waterproofing

         A.    Caulking of tilt-wall panels with backer rod sealants.

         B.    Caulking of roofing, glazing related items - by the individual
               trades.

5.03     Roof Blocking

         A.    All roof blocking at perimeter of building to be pressure treated
               material.

5.04     Glass and Glazing, Entry Doors and Framing

         A.    One (1) double 6' x 7' medium style Clear Aluminum storefront
               doors with related hardware and weather-stripping.

         B.    Storefront frame system to be clear anodized 1-3/4 x 4" with
               tinted Gray Insulated Glass.

         C.    Interior Glazing: 1/4" thick clear. (if required.)

5.05     Paint

         Exterior  painting consist of the tilt-wall panels around the building,
         pipe bollard,  pipe rails,  and exterior hollow metal doors and frames.
         Tilt-wall panel will be of highest quality elastomeric finish system.

5.06     Exterior Hollow Metal Doors and Frames

         Based on 14 gauge frames and 16 gauge doors galvanized.

5.07     Threshold & Weather-Stripping/Finish Hardware

         A.    All exterior doors to receive aluminum threshold and
               weather-stripping.

         B.    Finish hardware at personnel doors to receive cylinder passage
               set, dead bolt, closure and panic alarms as required by code.

5.08     Building Insulation

         A.       R-19 Insulation at the roof deck.

         B.       Sound batts located at restroom walls and ceilings.

         C.    All perimeter walls of the office area, etc. to be insulated with
               3-1/2" unfaced batt insulation to achieve a thermal envelope
               around the A/C areas.

5.09     Overhead Sectional Doors

         8' x 9' and 10' x 14' insulated  sectional doors, 24 gauge steel. Doors
         will have a weather  seal  across the  bottom of the door and  equipped
         with side lock. Manual operated.

                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       B-3
<PAGE>
INTERIOR FINISHES:
-----------------

6.01     Drywall Partitions

         A.    Exterior  perimeter walls - 2-1/2" 25 gauge metal studs 16" O.C.,
               from floor to deck, one layer 5/8" gypsum board on one side, batt
               insulation  from floor to  ceiling,  tape,  float and prepare for
               finishes scheduled.

         B.    Interior walls - 2-1/2" 25 gauge metal studs 16" O.C., from floor
               to ceiling one layer 5/8" gypsum board on each side,  tape, float
               and prepare for finishes scheduled each side. A sound attenuation
               blanket is to be provided in between the gypsum board.

         C.    Provide full height separation walls to separate production and
               warehouse areas from the office.

6.02     Door Units

         A.    Interior - full height flush 3' x 9' x 1-3/4",  plastic  laminate
               solid core doors,  with brushed aluminum finish  hardware,  lever
               handle,  cylindrical  passage  latches  and  hinges,  closers  at
               restrooms,  wall stops at all  doors,  in  pre-finished  aluminum
               frames by "Raco" or equal.

         B.    Exterior - flush door 3' x 7' x 1-3/4",  galvanized  hollow metal
               door 18 gauge,  with brush aluminum finish hardware,  cylindrical
               keyed lockset, closer, weather-stripping,  in hollow metal frame,
               galvanized 16 gauge.

6.03     Resilient Floor

         Vinyl  composition  tile  will  be 12" x 12" x  1/8"  equal  to  Azrock
Architectural Series.

6.04     Carpet

         Carpeting shall be level looped Olefin/Nylon, 28 oz. pile weight,
         ActionBac, direct glue down.

6.05     Wall Base

         Rubber base,  4" high with topset cove.  Location - Areas  scheduled to
receive resilient floor and carpet.

6.06     Painting

         A.    Painted drywall surfaces shall be covered with one coat of primer
               and two finish  coats of flat latex equal to  Pittsburg  Paint's,
               with a smooth  finish.  Ferrous  metal shall be covered  with two
               coats  semi-gloss  enamel finish over primer,  with tool dry film
               thickness not less than 2.5 mils.

         B.    Location Drywall - office areas only.

6.07     Acoustical Ceiling

         A.    Ceilings  shall be equal to  Armstrong  Class "A" 2' x 4' Cortega
               fissured  lay-in  tiles laid into an exposed  pre-finished  white
               T-bar 15/16" suspension grid.

         B.    Location - office area.

6.08     Millwork

         A.    Lavatory counter at restrooms, 3/4": plywood substrates, plastic
               laminate finish, 4" high back and side splashes.

         B.    Base and upper cabinets to be plastic laminate exterior with
               white melamine interior finish, (standard colors by Wilson-Art.)
                                                 Initials: __________ __________
                                                            Landlord    Tenant
                                       B-4
<PAGE>
DOCK EQUIPMENT:
--------------

7.01     Dock Levelers

         SERCO "W" Series, Mechanical pit style dock levelers, standard capacity
         (25,000  lbs.).  High tensile  50,000 p.s.i.  deck, lip plat and beams.
         Torsionally capable box beams; unlimited float Posi-Trac hold-down.

SPECIALTIES:

9.03     Toilet room accessories equal to Bradley.

9.04     Fire Extinguisher

         Fire extinguisher equal to J.L. Industries #1015-FIL with 10 lb. fire
         extinguisher multi-purpose.

FIRE PROTECTION SPRINKLER SYSTEM:
--------------------------------

10.01    A.    Provide fire department connections at exterior points per local
               requirements.

         B.    A Class IV wet, ESFR sprinkler system will be installed.

         C.    Chrome pendant heads with chrome escutcheon in finished spaces,
               brass upright heads in unfinished areas.

HVAC:

11.01          A. Provisions for roof mounted fans are included to provided make
               up air at four (4) air changes per hour. Heaters and package roof
               top air conditioning units and associated gas piping shall be
               part of Tenant Improvements.

         B.    Materials: The following equipment manufacturers shall be
               utilized.

                  Roof Top Units - Carrier, Trane, Lennox or equal.

                       Heating Units - Cambridge or equal

ELECTRICAL:

12.01    Power  Distribution:  Provide a complete building  power  distribution
         system  from a utility  furnished  480/277V,  3 phase service.

LIGHTING:

13.01    A.    Office fixture shall be 2' x 4', fluorescent lay in troffers with
               acrylic lenses.

         B.    Warehouse/manufacturing area shall be 400W metal halide fixtures
               to maintain 30 f.c. on average in the warehouse. Light fixtures
               are to be mounted to the bottom of the joist. All fixture will be
               provided initially with lamps and ballasts as required to meet
               energy code requirements.

         C.    Parking: Auto areas will have metal halide wall mounted fixtures.

                                                 Initials: __________ __________
                                                            Landlord    Tenant

                                       B-5AMENDED AND RESTATED PLAN OF RECAPITALIZATION

     Amended and Restated Plan of Recapitalization  dated as of July 31, 2000 by
and  between  Energy  Systems  Investors,  L.L.C.  ("ESI"),  a Delaware  limited
liability  company,  Lawrence I. Schneider ("L.  Schneider") and Henry Schneider
("H.  Schneider") (H. Schneider and L. Schneider being collectively  referred to
herein  as  the  "Schneiders"),  and  U.S.  Energy  Systems,  Inc.,  a  Delaware
corporation (the "Corporation").

                                 R E C I T A L S

     The parties  hereto  hereby amend and restate (as so amended and  restated,
the "Plan of Recapitalization") the plan of recapitalization entered into by the
parties hereto as of July 31, 2000 (the "Initial Plan").  Subject to, and on the
terms and conditions set forth herein,  this Plan of  Recapitalization  provides
that  the  (i)  1,138,888  outstanding  shares  of the  Corporation's  Series  A
Convertible  Preferred  Stock  (the  "Series A  Stock")  will be  exchanged  for
1,138,888 shares of the Corporation's Series D Convertible  Preferred Stock (the
"Series D Stock"),  (ii) interest  payable with respect to the limited  recourse
promissory note issued by ESI in the original  principal amount of $7,741,378.90
and bearing interest at the rate of 9.25% per annum (the "Note") will be reduced
to 6.25% per annum,  and (iii) Series B Warrants,  in the form annexed hereto as
Exhibit A (the  "Warrants"),  to acquire  1,500,000 shares of the  Corporation's
Common  Stock at an  exercise  price of $4.00  per  share  will be issued to the
persons   identified  in  accordance  with  Section  1(b)  hereof.  The  rights,
preferences,  limitations  and other terms and  conditions of the Series D Stock
would be as set forth in the  Certificate  of  Designation  in the form  annexed
hereto as Exhibit B (the "Certificate of Designation"). To effect the foregoing,
the parties hereto hereby agrees as follows:

1.   Exchange  of Series D Stock for Series A Stock;  Interest  Rate  Reduction;
     Issuance of Warrants.

     (a) The  parties  hereto  agree  that  commencing  as of the  date  all the
conditions  set forth in Section 2(b) herein have been waived by all the parties
hereto or satisfied (the  "Effective  Date"),  the 1,138,888  shares of Series A
Stock  will be  exchanged  for a like  number of  shares of Series D Stock  (the
"Exchange")  and the  interest  rate on the Note shall be reduced from 9.25% per
annum to 6.25% per annum (i.e.,  the interest  payable through and including the
day  immediately  preceding the  Effective  Date shall be calculated at the rate
provided  for in the  Note  and  thereafter,  shall  be  calculated  at the rate
provided  for herein and the  allonge to the Note to be issued  pursuant  hereto
(the  "Allonge")).  (The  rate of  default  interest  on the Note  shall  not be
effected by this Plan of  Recapitalization).  The Corporation agrees that on the
Effective Date and  notwithstanding  that it may not be a Dividend  Payment Date
(as defined in the Certificate of Designation  governing the Series A Stock (the
"Series A Certificate of Designation")),  or related record date, it will pay to
the holders of the Series A Stock the pro rata portion of the dividends  thereon
that accrue from the Dividend Payment Date  immediately  preceding the Effective
Date  through  the day  immediately  preceding  the  Effective  Date at the rate
provided for in the Series A Certificate of Designation.

<PAGE>

     (b) The  Warrants  have been  committed  for issuance and will be issued as
follows:  300,000 to L. Schneider,  65,854 to H. Schneider and 1,134,146 to ESI;
provided however that up to 580,500 of the Warrants allocated to ESI may be sold
by  the  Corporation  to  certain   stockholders  of  Zahren  Alternative  Power
Corporation (the "Zapco  Stockholders")  for $0.80 per Warrant in which case the
purchase  price  paid by ESI for its shares of Series A Stock will be reduced by
the aggregate amount paid to the Corporation by the Zapco  Stockholders and as a
result the principal amount of the Note will be reduced by such amount.

     (c) The parties hereto agree to execute such  instruments  and documents in
connection with the Exchange (including without  limitation,  the Allonge) as is
customary in similar transactions.

2.   Conditions  to  Effectiveness  of the Plan;  Covenants  with Respect to the
     Plan.

     (a) The parties hereto covenant and agree to cooperate and use commercially
reasonable  efforts  to  cause  the  satisfaction  (but not the  waiver)  of the
conditions set forth in Section 2(b).

     (b) The effectiveness of the Plan of  Recapitalization  shall be subject to
the satisfaction by all of the parties hereto of the following conditions:

          (i) the  Certificate  of  Designation  will have been  filed  with the
     appropriate authorities in the State of Delaware;

          (ii) a  private  letter  ruling  shall  have  been  obtained  from the
     Internal Revenue Service to the effect that the consummation of the Plan of
     Recapitalization will not have an adverse tax effect on the parties hereto;
     and

          (iii)  the  Plan  of   Recapitalization   has  been  approved  by  the
     stockholders of the Corporation to the extent required by Nasdaq.

     (c) In the event such  conditions  have not been  satisfied by December 31,
2001, this Plan of  Recapitalization  shall terminate and be of no further force
or  effect  and this Plan of  Recapitalization  shall be  deemed  abandoned  and
terminated (and the Warrants will be of no further force or effect).

3.   Miscellaneous.

     (a) The Schneiders  and ESI jointly and severally  represent and warrant to
the Corporation that (i) immediately  prior to the execution of the Initial Plan
they   owned  and   immediately   prior  to  the   execution   of  the  Plan  of
Recapitalization,  they own, in the aggregate, all of the issued and outstanding
shares  of  Series A Stock  free  and  clear of any and all  liens,  claims  and
encumbrances,  other  than  the  encumbrances  imposed  pursuant  to the  Pledge
Agreement dated as of July 31, 2000 by and between ESI and the  Corporation,  as
amended  from time to time and (ii)  there are no  outstanding  options or other
rights to acquire such shares of Series A Stock.

                                       2
<PAGE>

     (b) For the convenience of the parties,  any number of counterparts of this
Plan of  Recapitalization  may be executed  by the parties  hereto and each such
executed  counterpart  shall  be,  and  shall  be  deemed  to  be,  an  original
instrument.

     (c) All  notices,  requests,  demands  and other  communications  which are
required  or may be given  under this Plan of  Recapitalization  (including  all
legal process in regard  hereto) shall be in writing and shall be deemed to have
been duly given or made: if by hand,  immediately  upon  delivery;  if by telex,
telecopier,  telegram or similar  electronic  device,  immediately upon sending,
provided it is sent on a business  day, but if not,  then  immediately  upon the
beginning  of the first  business day after being sent;  if by Federal  Express,
Express Mail or any other overnight delivery service,  on the first business day
after dispatch; and if mailed by certified mail, return receipt requested, three
(3) business  days after  mailing.  All notices,  requests and demands are to be
given or made to the parties at the  addresses set forth below (or to such other
address as a party may designate by notice in accordance  with the provisions of
this Section 3(c)):

     If to the Corporation:                  U.S. Energy Systems, Inc.
                                             515 N. Flagler Drive, Suite 702
                                             West Palm Beach, Florida  33401
                                             Att: President

     If to any of ESI or the Schneiders:     Lawrence I. Schneider
                                             Henry Schneider
                                             Energy Systems Investors, L.L.C.
                                             920 Park Avenue, Apt. 4D
                                             New York, New York 10028

     (d) This Plan of Recapitalization shall be governed by and construed and

                                        3
<PAGE>

enforced  in  accordance  with the laws of the State of Delaware  applicable  to
contracts made and to be performed therein.

                                           U.S. Energy Systems, Inc.

                                           By: /s/ GORAN MORNHED
                                               ---------------------------------
                                               Goran Mornhed, President

                                           Energy Systems Investors, L.L.C.

                                           By: /s/ HENRY SCHNEIDER
                                               ---------------------------------
                                               Henry Schneider, Manager

                                           /s/ HENRY SCHNEIDER
                                           -------------------------------------
                                           Henry Schneider

                                           /s/ LAWRENCE I. SCHNEIDER
                                           -------------------------------------
                                           Lawrence I. Schneider

                                        4

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