Document:

<PAGE>

                                                                   Exhibit 10.11

<TABLE>
<S>                                  <C>                                   <C>
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AWARD/CONTRACT                        | 1. THIS CONTRACT IS A RATED ORDER                     RATING              PAGE OF PAGES
                  U                   |    UNDER DPAS (15 CFR 350)                            DO-C9                 1       12
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2. CONTRACT (Proc. Inst. Ident.) NO.  | 3. EFFECTIVE DATE                | 4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
   N00173-01-C-2018                   |     06/25/01                     |    63-8021-01
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5. ISSUED BY                    CODE N00173                              | 6. ADMINISTERED BY (If other than Item 5)  CODE | S0513A
                                     ------------------------------------|                                                  --------
   CONTRACTING OFFICER                                                   | DCMC SANTA ANA
   NAVAL RESEARCH LABORATORY                                             | 34 CIVIC CENTER PLZ
   4555 OVERLOOK AVE, SW                                                 | PO BOX C-12700
   WASHINGTON DC 20375-5326                                              | SANTA ANA CA 92712-2700                       SCD: C
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7. NAME AND ADDRESS OF CONTRACTOR  (No., street, city, county,           | 8. DELIVERY
                                   State and Zip Code)                   |    |_| FOB ORIGIN  |X| OTHER (See below)
                                                                         |
   IRVINE SENSORS CORPORATION                                            | ---------------------------------------------------------
   3001 REDHILL AVENUE                                                   | 9. DISCOUNT FOR PROMPT PAYMENT
   BUILDING 3                                                            |
   COSTA MESA CA 92626                                                   |   NET 30
                                                                         | ---------------------------------------------------------
                                                                         | 10. SUBMIT INVOICES                       | ITEM
                                                                         |     (4 copies unless otherwise specified) |
-------------------------------------------------------------------------|     TO THE ADDRESS SHOWN IN:              | SEE SECTION G
CODE 54266                            |  FACILITY CODE                   |                                           |
                                      |                                  |                                           |
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11. SHIP TO/MARK FOR            CODE  |  N00173                          | 12. PAYMENT WILL BE MADE BY         CODE       | HQ0339
                                      -----------------------------------|                                                 ---------
    SEE SECTION F - DELIVERIES OR PERFORMANCE                            | DFAS C0/WEST ENTITLEMENT OPERATIONS
                                                                         | PO BOX 182381
                                                                         | COLUMBUS OH 43218-2381
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13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION:            | 14. ACCOUNTING AND APPROPRIATION DATA
                                                                         |
    |_| 10 U.S.C. 2304(c) (    )  |_| 41 U.S.C. 253(c) (    )            |     SEE ATTACHED
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15A. ITEM NO.   |               15B. SUPPLIES/SERVICES                   | 15C. QUANTITY | 15D. UNIT | 15E. UNIT PRICE | 15F. AMOUNT
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                |        SEE PAGE 2                                      |               |           |                 |
                |                                                        |               |           |                 |
                |        Attn: EVANGELINA TOLEDO 3220.AT                 |               |           |                 |
                |              202/767-202                               |               |           |                 |
                |        TOLEDO@CONTRACTS.NRL.NAVY.MIL                   |               |           |                 |
                |                                                        |               |           |                 |
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                                                                           15G. TOTAL AMOUNT OF CONTRACT               $1,999,980.00
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                                                    16. TABLE OF CONTENTS
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(X) SEC.         DESCRIPTION                        | PAGE(S) | (X) | SEC.  |                     DESCRIPTION                PAGE(S)
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            PART I - THE SCHEDULE                   |         |     |       |             PART II - CONTRACT CLAUSES
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     A  SOLICITATION/CONTRACT FORM                  |         |     |  I    |   CONTRACT CLAUSES
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     B  SUPPLIES OR SERVICES AND PRICES/COSTS       |         |     |       |     PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER
                                                    |         |     |       |                ATTACH.
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     C  DESCRIPTION/SPECS./WORK STATEMENT           |         |     |  J    |   LIST OF ATTACHMENTS
------------------------------------------------------------------------------------------------------------------------------------
     D  PACKAGING AND MARKING                       |         |     |       |        PART IV - REPRESENTATIONS AND INSTRUCTIONS
------------------------------------------------------------------------------------------------------------------------------------
     E  INSPECTION AND ACCEPTANCE                   |         |     |  K    |   REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS
                                                    |         |     |       |   OF OFFERORS
--------------------------------------------------------------------|       |
     F  DELIVERIES OR PERFORMANCE                   |         |     |       |
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     G  CONTRACT ADMINISTRATION DATA                |         |     |  L    |   INSTRS., CONDS., AND NOTICES TO OFFERORS
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     H  SPECIAL CONTRACT REQUIREMENTS               |         |     |  M    |   EVALUATION FACTORS FOR AWARD
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                                       CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
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17. |X| CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is          |  18. |_| AWARD (Contractor is not required to sign this
required to sign this document and return 2 copies to issuing     |  document.) Your offer on
office.) Contractor agrees to furnish and deliver all items or    |
perform all the services set forth or otherwise identified        |  Solicitation Number_________________________________
above and on any continuation sheets for the consideration        |
stated herein. The rights and obligations of the parties to       |  including the additions or changes made by you which additions
this contract shall be subject to and governed by the             |  or changes are set forth in full above, is hereby accepted as
following documents: (a) this award/contract, (b) the             |  to the items listed above and on any continuation sheets. This
solicitation, if any, and (c) such provisions,                    |  award consummates the contract which consists of the following
representations, certifications, and specifications, as are       |  documents: (a) the Government's solicitation and your offer,
attached or incorporated by reference herein. (Attachments are    |  and (b) this award/contract. No further contractual document
listed herein.)                                                   |  is necessary.
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19A. NAME AND TITLE OF SIGNER (Type or print)                     |         20A. NAME OF CONTRACTING OFFICER
                                                                  |
                                                                  |         WAYNE CARRINGTON
   JOHN C. CARSON - CTO                                           |         CONTRACTING OFFICER
------------------------------------------------------------------|-----------------------------------------------------------------
19B. NAME OF CONTRACTOR                     | 19C. DATE SIGNED    |         20B. UNITED STATES OF AMERICA        | 20C. DATE SIGNED
                                            |                     |                                              |
BY /s/ John C. Carson                       |      6/27/01        |         By /s/ Wayne Carrington              |   [ILLEGIBLE]/01
   ---------------------------------------- |                     |            ----------------------------------|
   (Signature of person authorized to sign) |                     |            (Signature of Contracting Officer)|
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NSN 7540-01-152-8069                                                26-107                          STANDARD FORM 26 (REV. 4-85)

[ILLEGIBLE]                                                  [ILLEGIBLE]                                           Prescribed by GSA
                                                                                                                         [ILLEGIBLE]
</TABLE>

<PAGE>

                                                                   Attachment: 1
                                                                          Page 1
                                                                N00173-O1-C-2018

      ACCOUNTING AND APPROPRIATION DATA

1.    The following accounting and appropriation data is applicable.

      The following data indicates Navy Funding:

    APPROPRIATION OBJ               AUTHRN
ACRN AND SUBHEAD CLAS BCN       SA ACCT A TT PAA      COST CODE        AMOUNT

AA 9710400.WAAV  255 RA904      0 068342 2D 000000   16601000B104    $500,000.00
           FUNDING DOCUMENT - N0001401WX40144

<PAGE>

                                               CONTRACT NUMBER: N00173-O1-C-2018
                                                                          PAGE 2

                              PART I - THE SCHEDULE
                                    SECTION B
                      SUPPLIES OR SERVICES AND PRICES/COSTS

B-1 SUPPLIES/SERVICES AND COSTS

ITEM           SUPPLIES/SERVICES      ESTIMATED      FIXED     ESTIMATED COST
NUMBER                                COST           FEE       PLUS FIXED FEE

0001        The Contractor shall      $1,918,430     $81,550   $1,999,980
            conduct research as
            described in Section C
            which shall be completed
            within 24 months of the
            date of award.

0002        Data in accordance with   * NSP          * NSP      * NSP
            Exhibit A (DD 1423)

TOTAL ESTIMATED
COST PLUS FIXED FEE                   $1,918,430     $81,550    $1,999,980

      o     Not Separately Priced

                                    SECTION C
                  DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

C-1 STATEMENT OF WORK

The research to be performed hereunder shall be subject to the contractor's
proposal entitled, ""Stacked High-Capacity High-Speed Serial 10 K Superconductor
Memory Modules"", pages 17 through 19 ,dated 20 February 2001, which is
incorporated herein by reference, Exhibit A, Contract Data Requirements List,
and the Attachment cited in Section J.

<PAGE>

                                               CONTRACT NUMBER: N00173-01-C-2018
                                                                          PAGE 3

                                    SECTION D
                              PACKAGING AND MARKING

D-1 PACKAGING AND MARKING

Preservation, packaging, packing and marking of all deliverable contract line
items must conform to normal commercial packing standards to assure safe
delivery at destination.

                                    SECTION E
                            INSPECTION AND ACCEPTANCE

E-1 INSPECTION AND ACCEPTANCE CLAUSES INCORPORATED BY REFERENCE

FAR CLAUSE    TITLE
-------------------
52.246-9    - Inspection Of Research And Development (Short Form) (APR 1984)

DFARS CLAUSE  TITLE
-------------------
252.246-7000 - Material Inspection And Receiving Report (DEC 1991)

E-2 INSPECTION AND ACCEPTANCE

Inspection and acceptance of the final delivery will be accomplished by the
Technical Manager (TM) or Contracting Officer Representative (COR) designated in
Section G of this contract. Inspection and acceptance will be performed at the
Naval Research Laboratory, Washington DC 20375-5320.

                                    SECTION F
                            DELIVERIES OR PERFORMANCE

F-1 DELIVERIES OR PERFORMANCE CLAUSES INCORPORATED BY REFERENCE:

FAR CLAUSE    TITLE
-------------------
52.242-15  -  Stop-Work Order (AUG 1989) - Alternate I (APR 1984)
52.247-34  -  F.O.B. Destination (NOV 1991)

F-2 PERIOD AND PLACE OF PERFORMANCE

(a) The work under this contract shall commence on date of contract award and be
completed no later than 24 months thereafter.
(b) The principal place of performance of this contract shall be at the
contractor's facility.

<PAGE>

                                               CONTRACT NUMBER: N00173-O1-C-2018
                                                                          PAGE 4

                                    SECTION G
                          CONTRACT ADMINISTRATION DATA

G-1   PROCURING OFFICE REPRESENTATIVE

In order to expedite administration of the contract, the Administrative
Contracting Officer (ACO) will direct inquiries to the appropriate office listed
below. Please do not direct routine inquiries to the person listed in Item 20A
on Standard Form 26.

Contract Matters- Evangelina R. Toledo, Code 3220.AT, (202) 767-2021, DSN
297-2021, or FAX (202)767-5896, email: toledo@contracts.nrl.navy.mil

Security Matters- Ms. Tina Smallwood, Code 1221, (202) 767-2240, DSN 297-2240,
email tina@code1200.nrl.navy.mil

Safety Matters- Mr. Stuart Burns, Code 1240, (202) 767-2232, DSN 297-2232, email
burns@code1200.nrl.navy.mil

Patent Matters- Mr. John J. Karasek, Code 1008.2, (202) 404-1552, DSN 297-1552,
email Karasek@nrl.navy.mil

Release of Data- Mr. Richard L. Thompson, Code 1030 (202) 767-2541, DSN
297-2541, email rthompso@ccf.nrl.navy.mil

The ACO will forward invention disclosures and reports directly to the Associate
Counsel for Patents, Code 1008.2, Naval Research Laboratory, Washington DC
20375-5320. The Associate Counsel for Patents will return the reports along with
a recommendation to the Administrative Contracting Officer. The Associate
Counsel for Patents will represent the Contracting Officer with regard to
invention reporting matters arising under this contract.

G-2   CONTRACTING OFFICER'S REPRESENTATIVE (COR) - FUNCTIONS AND LIMITATIONS

Dr. Santiago Sanday, Code 6303, Phone: (202) 767-2264, email:
sanday@anvil.nrl.navy.mil, is hereby designated the cognizant COR who will
represent the Contracting Officer in the administration of technical details
within the scope of this contract and inspection and acceptance. The COR is not
otherwise authorized to make any representations or commitments of any kind on
behalf of the Contracting Officer or the Government. The COR does not have the
authority to alter the Contractor's obligations or change the specifications in
the contract. If, as a result of technical discussions, it is desirable to alter
contract obligations or statements of work, a modification must be issued in
writing and signed by the Contracting Officer. The COR is responsible for
reviewing the bills and charges submitted by the Contractor and informing the
ACO of areas where exceptions are to be taken.

G-3   ONR 5252.242-9718 - TECHNICAL DIRECTION (DEC 88)

(a) Performance of the work hereunder is subject to the technical direction of
the Scientific Officer/COR designated in this contract or his duly authorized
representative. For the purposes of

<PAGE>

                                               CONTRACT NUMBER: N00173-O1-C-2018
                                                                          PAGE 5

this clause, technical direction includes the following:

      (1)   Direction to the Contractor which shifts work emphasis between work
            areas or tasks, requires pursuit of certain lines of inquiry, fills
            in details or otherwise serves to accomplish the objectives
            described in the statement of work;
      (2)   Guidelines to the Contractor which assist in the interpretation of
            drawings, specifications or technical portions of work description.
(b) Technical direction must be within the general scope of work stated in the
contract. Technical instructions may not be used to:

      (1)   Assign additional work under the contract
      (2)   Direct a change as defined in the contract clause entitled
            "Changes";
      (3)   Increase or decrease the estimated contract cost, the fixed fee, or
            the time required for contract performance; or
      (4)   Change any of the terms, conditions or specifications of the
            contract.
(c) The only individual authorized to in any way amend or modify any of the
terms of this contract shall be the Contracting Officer. When, in the opinion of
the Contractor, any technical instruction calls for effort outside the scope of
the contract or inconsistent with this special provision, the Contractor shall
notify the Contracting Officer in writing within ten working days after its
receipt. The Contractor shall not proceed with the work affected by the
technical direction until the Contractor is notified by the Contracting Officer
that the technical direction is within the scope of the contract.
(d) Nothing in the foregoing paragraphs may be construed to excuse the
Contractor from performing that portion of work statement which is not affected
by the disputed technical instruction.

G-4   SUBCONTRACTORS/CONSULTANTS

(a) Advance notification or requests for consent pursuant to the contract clause
entitled "Subcontracts" (FAR 52.244-2) shall be directed to the cognizant
administrative contracting officer (ACO).
(b) The following subcontractors/consultants have been identified in the
Contractor's proposal as necessary for performance of this contract:

       Subcontractor                             Estimated Cost
       TRW, Inc.                                 $748,744

G-5   NAPS 5252.232-9001 - SUBMISSION OF INVOICES (COST-REIMBURSEMENT,
      TIME-AND-MATERIALS, LABOR-HOUR, OR FIXED PRICE INCENTIVE (JUL 1992)

(a) "Invoice" as used in this clause includes contractor requests for interim
payments using public vouchers (SF 1034) but does not include contractor
requests for progress payments under fixed price incentive contracts.
(b) The Contractor shall submit invoices and any necessary supporting
documentation, in an original and 4 copies, to the contract auditor at the
following address:

                         DCAA Santa Ana Branch Office
                         3 Hutton Centre Drive, Suite 750
                         Santa ana, CA 92707

<PAGE>

                                               CONTRACT NUMBER: N00173-O1-C-2018
                                                                          PAGE 6

unless delivery orders are applicable, in which case invoices will be segregated
by individual order and submitted to the address specified in the order. In
addition, an information copy shall be submitted to [See Section G for
designated COR]. Following verification, the contract auditor will forward the
invoice to the designated payment office for payment in the amount determined to
be owing, in accordance with the applicable payment (and fee) clause(s) of this
contract. (c) Invoices requesting interim payments shall be submitted no more
than once every two weeks, unless another time period is specified in the
Payments clause of this contract. For indefinite delivery type contracts,
interim payment invoices shall be submitted no more than once every two weeks
for each delivery orders. There shall be a lapse of no more than 30 calendar
days between performance and submission of an interim payment invoice.
(d) In addition to the information identified in the Prompt Payment clause
herein, each invoice shall contain the following information, as applicable:
      (1)   Contract line item number (CLIN)
      (2)   Subline item number (SLIN)
      (3)   Accounting Classification Reference Number (ACRN)
      (4)   Payment terms
      (5)   Procuring activity
      (6)   Date supplies provided or services performed
      (7)   Costs incurred and allowable under the contract
      (8)   Vessel (eg., ship, submarine or other craft) or system for which
            supply/service is provided
(e)   A DD Form 250, "Material Inspection and Receiving Report",
            |_|   is required with each invoice submittal.
            |X|   is required only with the final invoice.
            |_|   is not required.
 (f)    A Certificate of Performance
            |_|   shall be provided with each invoice submittal.
            |X|   is not required.
(g) The Contractor's final invoice shall be identified as such, and shall list
all other invoices (if any) previously tendered under this contract.
(h) Cost of performance shall be segregated, accumulated and invoiced to the
appropriate ACRN categories to the extent possible. When such segregation of
costs by ACRN is not possible for invoices submitted with CLIN/SLINS with more
than one ACRN, an allocation ratio shall be established in the same ratio as the
obligations cited in the accounting data so that costs are allocated on a
proportional basis.

G-6   PAYMENT OF FIXED FEE (COMPLETION FORM)

The fixed fee set forth in Section B of this contract shall be payable on
completion of the work and services required under each CLIN of this contract
and their acceptance on behalf of the Government. However, the contractor may
bill on each voucher the amount of the fixed fee bearing the same percentage to
the amount of cost billed as the total fixed fee bears to the total estimated
cost set forth in Section B, subject to the contract clause entitled "Fixed Fee"
(FAR 52.216-8). If the fixed fee is reduced pursuant to any clause or
requirement of this contract and the reduced fee is less than the sum of all fee
payments made to the contractor under this contract, the contractor shall repay
the difference to the Government. The total fee paid the contractor shall not
exceed the fixed fee set forth in Section B.

<PAGE>

                                               CONTRACT NUMBER: N00173-O1-C-2018
                                                                          PAGE 7

G-7   INCREMENTAL FUNDING

Pursuant to the Limitation of Funds clause (FAR 52.232-22), the total amount
allotted to this contract is $500,000 and it is estimated that this amount is
sufficient for contract performance through 25 November 2001.

                                    SECTION H
                          SPECIAL CONTRACT REQUIREMENTS

H-1   TYPE OF CONTRACT

This is a Cost Plus Fixed Fee Completion contract.

H-2   ONR 5252.237-9705 - KEY PERSONNEL (DEC 88)

(a) The Contractor agrees to assign to the contract tasks those persons whose
resumes were submitted with its proposal and who are necessary to fulfill the
requirements of the contract as "key personnel". No substitutions may be made
except in accordance with this clause.
(b) The Contractor understands that during the first ninety (90) days of the
contract performance period, no personnel substitutions will be permitted unless
these substitutions are unavoidable because of the incumbent's sudden illness,
death or termination of employment. In any of these events, the Contractor shall
promptly notify the Contracting Officer and provide the information described in
paragraph (c) below. After the initial ninety (90) day period the Contractor
must submit to the Contracting Officer all proposed substitutions, in writing,
at least fifteen (15) days in advance (thirty (30) days if security clearance
must be obtained) of any proposed substitution and provide the information
required by paragraph (c) below.
(c) Any request for substitution must include a detailed explanation of the
circumstances necessitating the proposed substitution, a resume for the proposed
substitute, and any other information requested by the Contracting Officer. Any
proposed substitute must have qualifications equal to or superior to the
qualifications of the incumbent. The Contracting Officer or his/her authorized
representative will evaluate such requests and promptly notify the Contractor of
his/her approval or disapproval thereof.
(d) In the event that any of the identified key personnel cease to perform under
the contract and the substitute is disapproved, the contract may be immediately
terminated in accordance with the Termination clause of the contract.

The following are identified as key personnel:

VOLKAN H. OZGUZ
DAVID E. LUDWIG

H-3   ONR 5252.235-9714 - REPORT PREPARATION (FEB 97)

Scientific or technical reports prepared by the Contractor and deliverable under
the terms of this contract will be prepared in accordance with format
requirements contained in ANSI/NISO Z39.18-

<PAGE>

                                               CONTRACT NUMBER: N00173-O1-C-2018
                                                                          PAGE 8

1995, Scientific and Technical Reports: Elements, Organization, and Design.
"[NOTE: ANSI Z39.18 may be obtained from NISO Press Fulfillment Center, P.O.
Box 338, Oxon Hill, MD. 20750-0338.Telephone 1-800-282-6476]

H-4   ELECTRONIC AND INFORMATION TECHNOLOGY (EIT)

In accordance with Section 508 of the Rehabilitation Act of 1973 (29 U.S.C.
794d), all EIT supplies and services provided under this contract must comply
with the applicable accessibility standards issued by the Architectural and
Transportation Barriers Compliance Board at 36 CFR part 1194 (see FAR Subpart
39.2). Electronic and information technology (EIT) is defined at FAR 2.101.

H-5   RESEARCH AND ANALYTICAL WORK

For Phase II a minimum of one-half of the research and/or analytical effort must
be performed by the proposing firm, unless otherwise approved in writing by the
contracting officer.

H-6   PRINCIPAL INVESTIGATOR PRIMARY EMPLOYMENT

The primary employment of the principal investigator shall be with the
contractor during the conduct of this contract. Primary employment means that
more than one-half of the principal investigator's time is spent with the
contractor.

H-7   REPRESENTATIONS AND CERTIFICATIONS

The Contractor's completed Representations, Certifications, and Other Statements
of Offerors or Respondents is incorporated herein by reference in any resultant
award.

                            PART II- CONTRACT CLAUSES
                                    SECTION I
                                CONTRACT CLAUSES

I-1   52.252-2 - CLAUSES INCORPORATED BY REFERENCE (FEB 1998)

This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available. Also, the full text of a clause may
be accessed electronically at this/these address(es):

                            http://www.arnet.gov/far
                  http://heron.nrl.navy.mil/contracts/home.htm

a.    FEDERAL ACQUISITION REGULATION CLAUSES

FAR CLAUSE       TITLE
---------------------------
52.202-1    -    Definitions (MAR 2001)
52.203-3    -    Gratuities (APR 1984)
52.203-5    -    Covenant Against Contingent Fees (APR 1984)

<PAGE>

                                               CONTRACT NUMBER: N00173-O1-C-2018
                                                                          PAGE 9

<TABLE>
<S>              <C>
52.203-6      -  Restrictions On Subcontractor Sales To The Government (JUL 1995)
52.203-7      -  Anti-Kickback Procedures (JUL 1995)
52-203-8      -  Cancellation, Rescission, And Recovery Of Funds For Illegal Or Improper Activity
                 (JAN 1997)
52.203-10     -  Price Or Fee Adjustment For Illegal Or Improper Activity (JAN 1997)
52.203-12     -  Limitation On Payments To Influence Certain Federal Transactions (JUN 1997)
52.204-4      -  Printed Or Copied Double-Sided On Recycled Paper (AUG 2000)
52.209-6      -  Protecting The Government's Interest When Subcontracting With Contractors
                 Debarred, Suspended, Or Proposed For Debarment (JUL 1995)
52.211-15     -  Defense Priority And Allocation Requirements (SEP 1990)
52.215-2      -  Audit And Records-Negotiation (JUNE 1999)
52.215-8      -  Order Of Precedence - Uniform Contract Format (OCT 1997)
52.215-10     -  Price Reduction For Defective Cost Or Pricing Data (OCT 1997)
52.215-11     -  Price Reduction For Defective Cost Or Pricing Data - Modifications (OCT 1997)
52.215-12     -  Subcontractor Cost Or Pricing Data (OCT 1997)
52.215-13     -  Subcontractor Cost Or Pricing Data Modifications (OCT 1997)
52.215-14     -  Integrity Of Unit Prices (OCT 1997)
52.215-15     -  Pension Adjustments And Asset Reversions (DEC 1998)
52.215-17     -  Waiver Of Facilities Capital Cost Of Money (OCT 1997)
                 (will be included if the successful offeror does not propose facilities capital cost of
                 money)
52.215-18     -  Reversion Or Adjustment Of Plans For Post-Retirement Benefits (PRB) Other Than
                 Pensions (OCT 1997)
52.215-19     -  Notification Of Ownership Changes (OCT 1997)
52.215-21     -  Requirements For Cost Or Pricing Data Or Information Other Than Cost or Pricing
                 Data -Modifications (OCT 1997)
52.216-7      -  Allowable Cost And Payment (MAR 2000) (If the contract is with an educational
                 institution, modify the clause by deleting from paragraph (a) "Subpart 31.2" and
                 substitute "Subpart 31.3". If the contract is with a state or local government, delete
                 from paragraph (a) "Subpart 31.2" and substitute "Subpart 31.6". If the contract is
                 with a nonprofit other than an educational institution, a state or local government, or
                 a nonprofit organization exempted under 0MB Circular A-122, modify the clause by
                 deleting from paragraph (a) "Subpart 31.2" and substituting "Subpart 31.7".)
52.216-8      -  Fixed-Fee (MAR 1997)
52.219-4      -  Notice Of Price Evaluation Preference For HUBZone Small Business Concerns (JAN 1999)
                 |_| Offeror elects to waive the evaluation preference.
52.219-8      -  Utilization Of Small Business Concerns (OCT 2000)
52.219-9      -  Small Business Subcontracting Plan (OCT 2000) - Alternate II (JAN 1999)
52.219-16     -  Liquidated Damages-Subcontracting Plan (JAN 1999)
52.222-1      -  Notice To The Government Of Labor Disputes (FEB 1997)
52.222-2      -  Payment For Overtime Premiums (JUL 1990) - The Use Of Overtime Is Authorized
                 Under This Contract If The Overtime Premium Does Not Exceed "0"
52.222-3      -  Convict Labor (AUG 1996)
52.222-19     -  Child Labor -- Cooperation With Authorities And Remedies (FEB 2001)
52.222-21     -  Prohibition of Segregated Facilities (FEB 1999)
52.222-26     -  Equal Opportunity (FEB 1999)
</TABLE>

<PAGE>

                                               CONTRACT NUMBER: N00173-O1-C-2018
                                                                         PAGE 10

<TABLE>
<S>              <C>
52.222-35     -  Affirmative Action For Disabled Veterans And Veterans Of The Vietnam Era (APR
                 1998)
52.222-36     -  Affirmative Action For Workers With Disabilities (JUN 1998)
52.222-37     -  Employment Reports On Disabled Veterans And Veterans Of The Vietnam Era
                 (JAN 1999)
52.223-5      -  Pollution Prevention And Right-To-Know Information (APR 1998)
52.223-6      -  Drug-Free Workplace (MAR 2001)
52.223-10     -  Waste Reduction Program (AUG 2000)
52.223-14     -  Toxic Chemical Release Reporting (OCT 2000)
52.225-13     -  Restrictions On Certain Foreign Purchases (JUL 2000)
52.226-1      -  Utilization Of Indian Organizations And Indian-Owned Economic Enterprises (JUN
                 2000)
52.227-1      -  Authorization And Consent (JUL 1995) - Alternate I (APR 1984)
52.227-2      -  Notice And Assistance Regarding Patent And Copyright Infringement (AUG 1996)
52.227-10     -  Filing Of Patent Application- Classified Subject Matter (APR 1984)
52 227-11     -  Patent Rights - Retention By The Contractor (Short Form) (JUN 1997)
                 (will be included if the successful offeror is a small business or a non-profit
                 organization)
52.228-7      -  Insurance - Liability To Third Persons (MAR 1996)
52.232-9      -  Limitation On Withholding Of Payments (APR 1984)
52.232-17     -  Interest (JUN 1996)
52.232-20     -  Limitation Of Cost (APR 1984) (Applicable when the contract or task order is fully
                 funded)
52.232-22     -  Limitation Of Funds (APR 1984) (Applicable when the contract or task order is not
                 fully funded)
52.232-23     -  Assignment Of Claims (JAN 1986) Alternate I (APR 1984)
52.232-25     -  Prompt Payment (MAR 2001)
52.232-33     -  Payment By Electronic Funds Transfer-Central Contractor Registration (MAY 1999)
52.233-1      -  Disputes (DEC 1998)
52.233-3      -  Protest After Award (AUG 1996) -Alternate I (JUN 1985)
52.237-3      -  Continuity Of Services (JAN 1991)
52.237-10     -  Identification of Uncompensated Overtime (OCT 1997)
52.242-1      -  Notice Of Intent To Disallow Costs (APR 1984)
52.242-3      -  Penalties For Unallowable Costs (MAR 2001)
52.242-13     -  Bankruptcy (JUL 1995)
52.243-2      -  Changes - Cost-Reimbursement (AUG 1987) - Alternate V (APR 1984)
52.243-6      -  Change Order Accounting (APR 1984)
52.243-7      -  Notification Of Changes (APR 1984)flll in 30
52.244-2      -  Subcontracts (AUG 1998) - Alternate I (AUG 1998)
52.244-5      -  Competition In Subcontracting (DEC 1996)
52.245-5      -  Government Property (Cost-Reimbursement, Time-And-Material, Or Labor-Hour
                 Contracts) (JAN 1986) (DEVIATION)
52.246-23     -  Limitation Of Liability (FEB 1997)
52.247-1      -  Commercial Bill Of Lading Notations (APR 1984)
52.247-63     -  Preference For U.S. Flag Carriers (JAN 1997)
52.249-6      -  Termination (Cost-Reimbursement) (SEP 1996)
</TABLE>

<PAGE>

                                               CONTRACT NUMBER: N00173-01-C-2018
                                                                         PAGE 11

<TABLE>
<S>              <C>
52.249-14     -  Excusable Delays (APR 1984)
52.251-1      -  Government Supply Sources (APR 1984)
52.252-6      -  Authorized Deviations in Clauses (APR 1984) (fill in Defense Federal
                 Acquisition Regulation Supplement (48 CFR Chapter 2))
52.253-1      -  Computer Generated Forms (JAN 1991)

b.    DEPARTMENT OF DEFENSE FEDERAL ACQUISITION REGULATION CLAUSES

DFARS CLAUSE        TITLE
---------------------
252.201-7000     -  Contracting Officer's Representative (DEC 1991)
252.203-7001     -  Prohibition On Persons Convicted Of Fraud Or Other Defense Contract Related
                    Felonies (MAR 1999)
252.204-7000     -  Disclosure Of Information (DEC 1991)
252.204-7003     -  Control Of Government Personnel Work Product (APR 1992)
252.204-7004     -  Required Central Contractor Registration (MAR 2000)
252.205-7000     -  Provision Of Information To Cooperative Agreement Holders (DEC 1991)
252.209-7000     -  Acquisition From Subcontractors Subject To On-Site Inspection Under The
                    Intermediate-Range Nuclear Forces (INF) Treaty (NOV 1995)
252.209-7004     -  Subcontracting With Firms That Are Owned Or Controlled By The Government
                    Of A Terrorist Country (MAR 1998)
252.215-7000     -  Pricing Adjustments (DEC 1991)
252.215-7002     -  Cost Estimating System Requirements (OCT 1998)
252.219-7003     -  Small Business And Small Disadvantaged Business Subcontracting Plan (DoD
                    Contracts) (APR 1996)
252.223-7004     -  Drug-Free Work Force (SEP 1988)
252.225-7012     -  Preference For Certain Domestic Commodities (AUG 2000)
252.225-7026     -  Reporting Of Contract Performance Outside The United States (JUN 2000)
252.225-7031     -  Secondary Arab Boycott Of Israel (JUN 1992)
252.227-7000     -  Non Estoppel (OCT 1966)
252.227-7001     -  Release Of Past Infringement (AUG 1984)
252.227-7016     -  Rights In Bid Or Proposal Information (JUN 1995)
252.227-7018     -  Rights In Noncommercial Technical Data And Computer Software--Small Business
                    Innovative Research (SBIR) Program (JUN 1995)
252.227-7025     -  Limitations On The Use Or Disclosure Of Government-Furnished Information
                    Marked With Restrictive Legends (JUN 1995)
252.227-7030     -  Technical Data--Withholding Of Payment (MAR 2000)
252.227-7034     -  Patents--Subcontracts (APR 1984)
252.227-7036     -  Declaration Of Technical Data Conformity (JAN 1997)
252.227-7037     -  Validation Of Restrictive Markings On Technical Data (SEP 1999)
252.227-7039     -  Patents--Reporting Of Subject Inventions (APR 1990)

252.235-7010     -  Acknowledgment Of Support And Disclaimer (MAY 1995)
252.235-7011     -  Final Scientific Or Technical Report (SEP 1999)
252.242-7000     -  Post Award Conference (DEC 1991)
252.243-7002     -  Requests For Equitable Adjustment (MAR 1998)
252.244-7000     -  Subcontracts For Commercial Items And Commercial Components (DOD
</TABLE>

<PAGE>

                                               CONTRACT NUMBER: N00173-01-C-2018
                                                                         PAGE 12

<TABLE>
<S>                 <C>
                    Contracts) (MAR 2000)
252.245-7001     -  Reports Of Government Property (MAY 1994)
252.247-7023     -  Transportation Of Supplies By Sea (MAR 2000)
252.247-7024     -  Notification Of Transportation Of Supplies By Sea (MAR 2000)
                    (will be included if the successful offeror made a negative response to the inquiry
                    at DFARS 252.247-7022)
252.251-7000     -  Ordering From Government Supply Sources (MAY 1995)
</TABLE>

I-2 FAR 52.223-11 - OZONE-DEPLETING SUBSTANCES (MAR 2001)

      (a) Definitions. "Ozone-depleting substance", as used in this clause,
means any substance the Environmental Protection Agency designates in 40 CFR
Part 82 as --

      (1)   Class I, including, but not limited to, chlorofluorocarbons, halons,
            carbon tetrachloride, and methyl chloroform; or
      (2)   Class II, including, but not limited to, hydrochlorofluorocarbons.

      (b) The Contractor shall label products which contain or are manufactured
with ozone-depleting substances in the manner and to the extent required by 42
U.S.C. 7671j (b), (c), and (d) and 40 CFR Part 82, Subpart E, as follows:

                                     WARNING

      Contains (or manufactured with, if applicable)* _________________, a
      substance(s) which harm(s) public health and environment by destroying
      ozone in the upper atmosphere.

           *The Contractor shall insert the name of the substance(s).

          PART III - LIST OF DOCUMENTS, EXHIBITS, AND OTHER ATTACHMENTS
                                    SECTION J
                               LIST OF ATTACHMENTS

J-1   Exhibit A - DD Form 1423, Contract Data Requirements List - 1 page, with
      Attachment - 2 pages.

J-2   Attachment (1)--Accounting and Appropriation Data - 1 page.

<PAGE>

<TABLE>
<S>                                                                                     <C>
CONTRACT DATA REQUIREMENTS LIST                                                         Form Approved
                                                                                        OMB No. 0704-0188
-----------------------------------------------------------------------------------------------------------------------------
The public reporting burden for this collection of information is estimated to average 440 hours per response, including the time
for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing
the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information,
including suggestions for reducing the burden, to Department of Defense, Washington Headquarters Services, Directorate for
Information Operations and Reports (0704-0188), 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302. Respondents
should be aware that notwithstanding any other provision of law, no person shall be subject to any penalty for failing to comply
with a collection of information if it does not display a currently valid OMB control number. Please DO NOT RETURN your form to the
above address. Send completed form to the Government Issuing Contracting Officer for the Contract/PR No. listed in Block E.
-----------------------------------------------------------------------------------------------------------------------------
A. CONTRACT LINE ITEM NO.                     B. EXHIBIT                            C. CATEGORY:

           0002                                    A                                TDP ______    TM- ______     OTHER  |X|
-----------------------------------------------------------------------------------------------------------------------------
D. SYSTEM/ITEM                                    E. CONTRACT/PR NO.                F. CONTRACTOR

        Research
-------------------------------------------------------------------------------------------------------------------  ---------------
1. DATA ITEM NO.               2. TITLE OF DATA ITEM                                3. SUBTITLE                      17. PRICE GROUP
                                                                                                                     ---------------
           A001                    Progress Report                                                                   18. ESTIMATED
-------------------------------------------------------------------------------------------------------------------  TOTAL PRICE
4. AUTHORITY (Data Acquisition Document No.)      5. CONTRACT REFERENCE             6. REQUESTING OFFICE
                                                                                                                     ---------------
                                                                                                    Code 6303
-----------------------------------------------------------------------------------------------------------------------------
7. DD 250 REQ    9. DIST STATEMENT    10. FREQUENCY      12. DATE OF FIRST SUBMISSION       14.      DISTRIBUTIONS
                    REQUIRED                                                                ---------------------------------
     LT                                   SEMIA              See Block 16                                      b. COPIES
-------------                         ----------------------------------------------------                 ------------------
8. APP CODE                           11. AS OF DATE     13. DATE OF SUBSEQUENT SUBMISSION    a. ADDRESEE           Final
                                                                                                          Draft -------------
                                           N/A               Every 6 months                                       Reg   Repro
-----------------------------------------------------------------------------------------------------------------------------
15. REMARKS                                                                                  Code 6303             1
                                                                                            ---------------------------------
The contractor shall submit semi-annual reports of progress which shall describe             Code 6300             1
the progress made during the last six months. First submission shall be 30 days             ---------------------------------
after the first 6 months.                                                                    BMDO                  2
                                                                                            ---------------------------------
                                                                                            15. TOTAL  --------->  4
=============================================================================================================================
1. DATA ITEM NO.               2. TITLE OF DATA ITEM                                3. SUBTITLE
                                                                                                                    ---------------
           A002                    Cost Report                                                                      17. PRICE GROUP
------------------------------------------------------------------------------------------------------------------- ---------------
4. AUTHORITY (Data Acquisition Document No.)      5. CONTRACT REFERENCE             6. REQUESTING OFFICE            18. ESTIMATED
                                                                                                                    TOTAL PRICE
                                                                                                         6303
                                                                                                                    ---------------
-----------------------------------------------------------------------------------------------------------------------------
7. DD 250 REQ    9. DIST STATEMENT    10. FREQUENCY      12. DATE OF FIRST SUBMISSION       14.      DISTRIBUTIONS
                    REQUIRED                                                                ---------------------------------
   LT                                     QRTLY              See Block 16                                      b. COPIES
-------------                         ----------------------------------------------------                 ------------------
8. APP CODE                           11. AS OF DATE     13. DATE OF SUBSEQUENT SUBMISSION    a. ADDRESEE           Final
                                                                                                          Draft -------------
                                           N/A               Every 3 months                                       Reg   Repro
-----------------------------------------------------------------------------------------------------------------------------
15. REMARKS                                                                                  Code 6303             1
                                                                                            ---------------------------------
The contractor shall submit a quarterly cost report to include labor expenditures,           BMDO                  1
materials, and travel. First submission shall be 3 months after date of contract            ---------------------------------
award.
                                                                                            ---------------------------------
                                                                                            15. TOTAL  --------->  2
=============================================================================================================================
1. DATA ITEM NO.               2. TITLE OF DATA ITEM                                3. SUBTITLE                      ---------------
                                                                                                                     17. PRICE GROUP
           A003                                                                                                      ---------------
-------------------------------------------------------------------------------------------------------------------  18. ESTIMATED
4. AUTHORITY (Data Acquisition Document No.)      5. CONTRACT REFERENCE             6. REQUESTING OFFICE             TOTAL PRICE

   Final Report                                                                                                      ---------------
-----------------------------------------------------------------------------------------------------------------------------
7. DD 250 REQ    9. DIST STATEMENT    10. FREQUENCY      12. DATE OF FIRST SUBMISSION       14.      DISTRIBUTIONS
                    REQUIRED                                                                ---------------------------------
   LT                                     OTIME              See Block 16                                      b. COPIES
-------------                         ----------------------------------------------------                 ------------------
8. APP CODE                           11. AS OF DATE     13. DATE OF SUBSEQUENT SUBMISSION    a. ADDRESEE           Final
                                                                                                          Draft -------------
                                           N/A               N/A                                                  Reg   Repro
-----------------------------------------------------------------------------------------------------------------------------
15. REMARKS                                                                                  Code 6303             1
                                                                                            ---------------------------------
The contractor shall submit to the COR a final technical report within 30 days of            Code 6300             2
completion of this contract.                                                                ---------------------------------
                                                                                             BMDO                  7
                                                                                            ---------------------------------
                                                                                            15. TOTAL  ---------> 10
=============================================================================================================================
1. DATA ITEM NO.               2. TITLE OF DATA ITEM                                3. SUBTITLE                      ---------------
                                                                                                                     17. PRICE GROUP
                                                                                                                     ---------------
-------------------------------------------------------------------------------------------------------------------  18. ESTIMATED
4. AUTHORITY (Data Acquisition Document No.)      5. CONTRACT REFERENCE             6. REQUESTING OFFICE             TOTAL PRICE

                                                                                                                     ---------------
-----------------------------------------------------------------------------------------------------------------------------
7. DD 250 REQ    9. DIST STATEMENT    10. FREQUENCY      12. DATE OF FIRST SUBMISSION       14.      DISTRIBUTIONS
                    REQUIRED                                                                ---------------------------------
                                                                                                               b. COPIES
-------------                         ----------------------------------------------------                 ------------------
8. APP CODE                           11. AS OF DATE     13. DATE OF SUBSEQUENT SUBMISSION    a. ADDRESEE           Final
                                                                                                          Draft -------------
                                                                                                                  Reg   Repro
-----------------------------------------------------------------------------------------------------------------------------
15. REMARKS
                                                                                            ---------------------------------

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

                                                                                            ---------------------------------
                                                                                            15. TOTAL  --------->
-----------------------------------------------------------------------------------------------------------------------------
G. PREPARED BY                         H. DATE                 I. APPROVED BY               J. DATE

Evangelina R. Toledo                         6/20/01
-----------------------------------------------------------------------------------------------------------------------------
DD Form 1423, AUG 96                              Previous edition may be used                              Page 1 of 1 Pages
</TABLE>

<PAGE>

Minimum Distribution List for all SBIR/STTR Technical/Final Reports (1 Copy to
Each)

PEO, AIR AND MISSILE DEFENSE (AMD)
THAAD, MEADS, PAC-3
     James Jordan
     ATTN: SFAE-AMD
     P.O. Box 1500
     Huntsville, AL 35807-3801
     (256) 313-3479
     FAX: (256) 313-3460
     jim.jordan@md.redstone.army.mil

PEO, THEATER SURFACE COMBATANTS (TSC)
Navy Theater Wide
     Dr. Pashang Esfandiari
     2231 Csystal Drive, Suite 204
     Arlington, VA 22202
     (703) 271-6763
     FAX: (703) 413-4697
     esfandiarip@navsea.navy.mil

PEO, THEATER SURFACE COMBATANTS (TSC)
Navy Area Theater Ballistic Missile Defense
    Mr. Mario Miranda
    2231 Crystal Drive, Suite 515
    Arlington, VA 22202
    (703) 271-6773
    FAX: (703) 521-1027
    mirandajm@navsea.navy.mil

JOINT PROGRAM OFFICE for NATIONAL MISSILE DEFENSE
    Dr. Erwin Myrick and Mr. Keith Englander
    ATTN: BMDO/JN
    1725 Jefferson Davis Highway, Suite 809
    Arlington, VA 22202
    (703) 604-2092
    FAX: (703) 604-0690
    erwin.myrick@bmdo.osd.mil

Ballistic Missile Defense Organization
    Thomas J. Bond
    BMDO SBIR/STTR Program Manager
    ATTN: ST/SBIR (Bond)
    7100 Defense Pentagon
    Washington, D.C. 20301-7100
    (703) 697-3699
    jeff.bond@bmdo.osd.mil

    Dr. Charles Infosino
    BMDO Chief Scientist
    ATTN: ST
    7100 Defense Pentagon
    Washington, D.C. 20301-7100
    (703) 697-3583

<PAGE>

    charles.infosino@bmdo.osd.mil

Defense Technical Information Center
     ATTN: DTIC (Pat Mawby)
     8725 John J. Kingman Road, Suite 0944
     Fort Belvoir, VA 22060-6218
     (703) 767-9038

<PAGE>

<TABLE>
<CAPTION>
============================================================================================================================
                                                                                    1. CONTRACT ID CODE  | PAGE  OF PAGES
AMENDMENT OF SOLICITATION/MODIFICATION OF CONTRACT                                        U              |   1   |    3
----------------------------------------------------------------------------------------------------------------------------
<S>                              <C>                  <C>                                   <C>
2. AMENDMENT/MODIFICATION NO.    | 3. EFFECTIVE DATE  | 4. REQUISITION/PURCHASE REQ. NO.  | 5. PROJECT NO. (If applicable)
                                 |                    |                                   |
  P00001                         |    SEE BLOCK 16C   |    63-8047-01                     |
----------------------------------------------------------------------------------------------------------------------------
6. ISSUED BY               CODE  |    N00173          | 7. ADMINISTERED BY (If other than Item 6)       CODE  | S0513A
                                  --------------      |                                                        -------------
  CONTRACTING OFFICER                                 |    DCMC SANTA ANA
  NAVAL RESEARCH LABORATORY                           |    34 CIVIC CENTER PLZ
  WASHINGTON DC 20375-5326                            |    PO BOX C-12700
                                                      |    SANTA ANA CA 92712-2700                      SCD: C
----------------------------------------------------------------------------------------------------------------------------
8. NAME AND ADDRESS OF CONTRACTOR (No., street, county, State and ZIP Code) | |X|  | 9A. AMENDMENT OF SOLICITATION NO.
                                                                            |------|
   IRVINE SENSORS CORPORATION                                               |      | ---------------------------------------
   3001 REDHILL AVENUE                                                      |      | 9B. DATED (SEE ITEM 11)
   BUILDING 3                                                               |      |
   COSTA MESA CA 92626                                                      |------|----------------------------------------
                                                                            |      | 10A. MODIFICATION OF CONTRACT/ORDER NO.
                                                                            |      |
                                                                            |      |      N00173-01-C-2018
----------------------------------------------------------------------------|      | ---------------------------------------
CODE                                                    FACILITY CODE       |  |X| | 10B. DATED (SEE ITEM 13)
      54266                                                                 |      |         01 JUN 28
============================================================================================================================
           11. THIS ITEM ONLY APPLIES TO AMENDMENTS OF SOLICITATIONS
----------------------------------------------------------------------------------------------------------------------------
|_|   The above numbered solicitation is amended as set forth in Item 14. The
      hour and date specified for receipt of Offers |_| is extended, |_| is not
      extended.

Offers must acknowledge receipt of this amendment prior to the hour and date
specified in the solicitation or as amended, by one of the following methods:

(a) By completing Items 8 and 15, and returning ________ copies of the
amendment; (b) By acknowledging receipt of this amendment on each copy of the
offer submitted; or (c) By separate letter or telegram which includes a
reference to the solicitation and amendment numbers. FAILURE OF YOUR
ACKNOWLEDGEMENT TO BE RECEIVED AT THE PLACE DESIGNATED FOR THE RECEIPT OF OFFERS
PRIOR TO THE HOUR AND DATE SPECIFIED MAY RESULT IN REJECTION OF YOUR OFFER. If
by virtue of this amendment you desire to change an offer already submitted,
such change may be made by telegram or letter, provided each telegram or letter
makes reference to the solicitation and this amendment, and is received prior to
the opening hour and date specified.
--------------------------------------------------------------------------------
12. ACCOUNTING AND APPROPRIATION DATA (If required)

SEE CONTINUATION PAGE
--------------------------------------------------------------------------------
13. THIS ITEM APPLIES ONLY TO MODIFICATIONS OF CONTRACTS/ORDERS, IT MODIFIES THE
                  CONTRACT/ORDER NO. AS DESCRIBED IN ITEM 14.
--------------------------------------------------------------------------------
|X| A. THIS CHANGE ORDER IS ISSUED PURSUANT TO: (Specify authority) THE CHANGES
       SET FORTH IN ITEM 14 ARE MADE IN THE CONTRACT ORDER NO. IN ITEM 10A.
--------------------------------------------------------------------------------
    B. THE ABOVE NUMBERED CONTRACT/ORDER IS MODIFIED TO REFLECT THE
       ADMINISTRATIVE CHANGES (such as changes in paying office, appropriation
       date, etc.) SET FORTH IN ITEM 14, PURSUANT TO THE AUTHORITY OF FAR
       43.103(b).

--------------------------------------------------------------------------------
    C. THIS SUPPLEMENTAL AGREEMENT IS ENTERED INTO PURSUANT TO AUTHORITY OF:

--------------------------------------------------------------------------------
    D. OTHER (Specify type of modification and authority)

|X| LIMITATION OF COST CLAUSE (FAR 52-232-20) (APR 84)
--------------------------------------------------------------------------------

E. IMPORTANT: Contractor |X| is not, |_| is required to sign this document and
   return ______ copies to the issuing office.
--------------------------------------------------------------------------------
14. DESCRIPTION OF AMENDMENT/MODIFICATION (Organized by UCF section headings,
    including solicitation/contract subject matter where feasible.)

    Any questions concerning this modification should be directed to:

    MARGARET A. FOX  Code: 3220.PF 202/767-4595
    FOX@CONTRACTS.NRL.NAVY.MIL
    Continued on page 2.

Except as provided herein, all terms and conditions of the document referenced
in item 9A or 10A, as heretofore changed, remains unchanged and in full force
and effect.
-----------------------------------------------------------------------------------------------------------------
15A. NAME AND TITLE OF SIGNER (Type or print)   |  16A. NAME AND TITLE OF CONTRACTING OFFICER (Type or print)
                                                |
                                                |       WAYNE A CARRINGTON
                                                |       CONTRACTING OFFICER
-----------------------------------------------------------------------------------------------------------------
15B. CONTRACTOR/OFFEROR                 |15C. DATE SIGNED|16B. UNITED STATES OF AMERICA       |16C. DATE SIGNED
                                        |                |                                    |
                                        |                |By                                  |
----------------------------------------|                |  --------------------------------- |     9/12/01
(Signature of person authorized to sign)|                |  (Signature of Contracting Officer)|
=================================================================================================================
</TABLE>

                                                    STANDARD FORM 30 (REV.10-83)
NSN 7540-01-152-8070                30-105          Prescribed by GSA
PREVIOUS EDITION UNUSABLE                           FAR (48 CFR) 53.243

<PAGE>

                                                  CONTRACTS NO.:N0O173-01-C-2018
                                                        MODIFICATION NO.: P00001
                                                                          Page 2

The purpose of this modification is to provide an increment of funds in the
amount of $1,499,980.00 to fully fund the contract..

<PAGE>

                                                                         Page 03
                                                                N00173-01-C-2018
                                                                          P00001

      ACCOUNTING AND APPROPRIATION DATA

      The following accounting and appropriation data is applicable to this
modification.

      The following data indicates Navy Funding:

      APPROPRIATION OBJ         AUTHRN
ACRN AND SUBHEAD   CLAS BCN  SA  ACCT A  TT  PAA    COST CODE      AMOUNT
 AA 9710400.WAAV   255 RA904  0 068342   2D 000000 16601000B104  $1,499,980.00
        FUNDING DOCUMENT - N0001401WX40144<PAGE>

                                                                   EXHIBIT 10.13

                                     [LOGO]                           BUILDING 3

                         STANDARD INDUSTRIAL/COMMERCIAL
                           MULTI-TENANT LEASE - GROSS
                  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

1. Basic Provisions ("Basic Provisions").

      1.1 Parties: This Lease ("Lease"), dated for reference purposes only
October 1, 2001, is made by and between The Esplanade on Redhill LLC, a
California limited liability company ("Lessor") and Irvine Sensors Corporation,
a Delaware corporation ("Lessee"), (collectively the "Parties", or individually
a "Party").

      1.2(a) Premises: That certain portion of the Project (as defined below),
including all improvements therein or to be provided by Lessor under the terms
of this Lease, commonly known by the street address of 3001 Redhill Avenue,
Building 3, located in the City of Costa Mesa, County of Orange, State of
California, with zip code 92626, as outlined on Exhibit ___ attached hereto
("Premises") and generally described as (describe briefly the nature of the
Premises): 20,534 square feet, comprising all of Building 3 in the Project known
as the Esplanade

In addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the building
containing the Premises ("Building") or to any other buildings in the Project.
The Premises, the Building, the Common Areas, the land upon which they are
located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "Project." (See also Paragraph 2.)

      1.2(b) Parking: in common unreserved vehicle parking spaces ("Unreserved
Parking Spaces"); and -0- reserved vehicle parking spaces ("Reserved Parking
Spaces"). (See also Paragraph 2.6.)

      1.3 Term: Five (5 years and ___ months ("Original Term") commencing
October 1, 2001 ("Commencement Date") and ending September 30, 2006 ("Expiration
Date"). (See also Paragraph 3.)

      1.4 Early Possession: N/A ("Early Possession Date"). (See also Paragraphs
3.2 and 3.3.)

      1.5 Base Rent: $25,668.00 per month ("Base Rent"), payable on the first
(1st) day of each month commencing October 1, 2001. (See also Paragraph 4.)

|X| If this box is checked, there are provisions in this Lease for the Base Rent
    to be adjusted. See Addendum Paragraphs 50 and 51.

      1.6 Lessee's Share of Common Area Operating Expenses: N/A percent (N/A%)
("Lessee's Share").

      1.7 Base Rent and Other Monies Paid Upon Execution: See Addendum
Paragraphs 50 and 51.

      (a)   Base Rent: $25,668.00 for the period October 1 through October 31,
            2001.

      (b)   Common Area Operating Expenses: $N/A for the period N/A.

      (c)   Security Deposit: $27,500.00 ("Security Deposit"). (See also
            Paragraph 5.)

      (d)   Other: $616.00 for Common Area Maintenance Charge ("CAM Charge").

      (e)   Total Due Upon Execution of this Lease: $53,784.00

      1.8 Agreed Use: General office/Clean Rooms and
Laboratories/Warehouse/Mezzanines. (See also Paragraph 6.)

      1.9 Insuring Party. Lessor is the "Insuring Party". (See also Paragraph
8.)

      1.10 Real Estate Brokers: (See also Paragraph 15.)

            (a) Representation: The following real estate brokers (the
"Brokers") and brokerage relationships exist in this transaction (check
applicable boxes).

|X|   CIP/SMYTH represents Lessor exclusively ("Lessor's Broker");

|_|   _________ represents Lessee exclusively ("Lessee's Broker"); or

|_|   _________ represents both Lessor and Lessee ("Dual Agency").

            (b) Payment to Brokers: Upon execution and delivery of this Lease by
both Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a
separate written agreement (or if there is no such agreement, the sum of per
agreement or N/A% of the total Base Rent for the brokerage services rendered by
the Brokers).

      1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by N/A ("Guarantor"). (See also Paragraph 37.)

      1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 68 and Exhibits A through C, all of which
constitute a part of this Lease.

2. Premises.

      2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of size set forth in this Lease, or that may have been
used in calculating Rent, is an approximation which the Parties agree is
reasonable and any payments based thereon are not subject to revision whether or
not the actual size is more or less.

      2.2 Condition. See Paragraph 2.5. Lessor shall deliver that portion of the
Premises contained within the Building ("Unit") to Lessee broom clean and free
of debris on the Commencement Date or the Early Possession Date, whichever first
occurs ("Start Date"), and, so long as the required service contracts described
in Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty
days following the Start Date, warrants that the existing electrical, plumbing,
fire sprinkler, lighting, heating, ventilating and air conditioning systems
("HVAC"), loading doors, if any, and all other such elements in the Unit, other
than those constructed by Lessee, shall be in good operating condition on said
date and that the structural elements of the roof, bearing walls and foundation
of the Unit shall be free of material defects. If a non-compliance with such
warranty exists as of the Start Date, or if one of such systems or elements
should malfunction or fail within the appropriate warranty period, Lessor shall,
as Lessor's sole obligation with respect to such matter, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance,
malfunction or failure, rectify same at Lessor's expense. The warranty periods
shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to
the remaining systems and other elements of the Unit. If Lessee does not give
Lessor the required notice within the appropriate warranty period, correction of
any such non-compliance, malfunction or failure shall be

/s/ [ILLEGIBLE]                                                /s/ [ILLEGIBLE]
---------------                                                -----------------
                                                               /s/ [ILLEGIBLE]
---------------                                                -----------------
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[ILLEGIBLE] sprinkler systems, roof, foundations, and/or bearing walls - see
Paragraph 7).

      2.3 Compliance. See Paragraph 2.5. Lessor warrants that the improvements
on the Premises and the Common Areas comply with the building codes that were in
effect at the time that each such improvement, or portion thereof, was
constructed, and also with all applicable laws, covenants or restrictions of
record, regulations, and ordinances in effect on the Start Date ("Applicable
Requirements"). Said warranty does not apply to the use to which Lessee will put
the Premises or to any Alterations or Utility Installations (as defined in
Paragraph 7.3(a).) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the zoning is appropriate for Lessee's intended use,
and acknowledges that past uses of the Premises may no longer be allowed. If the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within 6 months following the Start Date,
correction of that non-compliance shall be the obligation of Lessee at Lessee's
sole cost and expense. If the Applicable Requirements are hereafter changed so
as to require during the term of this Lease the construction of an addition to
or an alteration of the Unit, Premises and/or Building, the remediation of any
Hazardous Substance, or the reinforcement or other physical modification of the
Unit, Premises and/or Building ("Capital Expenditure"), Lessor and Lessee shall
allocate the cost of such work as follows:

            (a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures
are required as a result of the specific and unique use of the Premises by
Lessee as compared with uses by tenants in general, Lessee shall be fully
responsible for the cost thereof, provided, however, that if such Capital
Expenditure is required during the last 2 years of this Lease and the cost
thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease
unless Lessor notifies Lessee, in writing, within 10 days after receipt of
Lessee's termination notice that Lessor has elected to pay the difference
between the actual cost thereof and the amount equal to 6 months' Base Rent. If
Lessee elects termination, Lessee shall immediately cease the use of the
Premises which requires such Capital Expenditure and deliver to Lessor written
notice specifying a termination date at least 90 days thereafter. Such
termination date shall, however, in no event be earlier than the last day that
Lessee could legally utilize the Premises without commencing such Capital
Expenditure.

            (b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally mandated
seismic modifications), then Lessor and Lessee shall allocate the obligation to
pay for the portion of such costs reasonably attributable to the Premises
pursuant to the formula set out in Paragraph 7.1(d); provided, however, that if
such Capital Expenditure is required during the last 2 years of this Lease or if
Lessor reasonably determines that it is not economically feasible to pay its
share thereof, Lessor shall have the option to terminate this Lease upon 90 days
prior written notice to Lessee unless Lessee notifies Lessor, in writing, within
10 days after receipt of Lessor's termination notice that Lessee will pay for
such Capital Expenditure. If Lessor does not elect to terminate, and fails to
tender its share of any such Capital Expenditure, Lessee may advance such funds
and deduct same, with interest, from Rent until Lessor's share of such costs
have been fully paid. If Lessee is unable to finance Lessor's share, or if the
balance of the Rent due and payable for the remainder of this Lease is not
sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.

            (c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.

      2.4 Acknowledgements. Lessee acknowledges that: (a) it has been advised by
Lessor and/or Brokers to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with Applicable
Requirements and the Americans with Disabilities Act), and their suitability for
Lessee's intended use, (b) Lessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same relate to its occupancy of the Premises, and (c) neither Lessor,
Lessor's agents, nor Brokers have made any oral or written representations or
warranties with respect to said matters other than as set forth in this Lease.

      2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work. The Lessee is the Lessee
and occupant of the Premises on the Start Date and this Paragraph 2.5 is
operable. See also Addendum Paragraphs 52, 53, 54, 55 and 56.

      2.6 Vehicle Parking. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Lessor may regulate the loading and unloading of vehicles by adopting
Rules and Regulations as provided in Paragraph 2.9. No vehicles other than
Permitted Size Vehicles may be parked in the Common Area without the prior
written permission of Lessor.

      (a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.

      (b) Lessee shall not service or store any vehicles in the Common Areas.

      (c) If Lessee permits or allows any of the prohibited activities described
in this Paragraph 2.6, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

      2.7 Common Areas - Definition. The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Project and interior utility raceways and installations within the Unit
that are provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other tenants of the Project and their
respective employees, suppliers, shippers, customers, contractors and invitees,
including parking areas, loading and unloading areas, trash areas, roadways,
walkways, driveways and landscaped areas.

      2.8 Common Areas - Lessee's Rights. Lessor grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Project. Under no circumstances shall the
right herein granted to use the Common Areas be deemed to include the right to
store any property, temporarily or permanently, in the Common Areas. Any such
storage shall be permitted only by the prior written consent of Lessor or
Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur, then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

      2.9 Common Areas - Rules and Regulations. Lessor or such other person(s)
as Lessor may appoint shall have the exclusive control and management of the
Common Areas and shall have the right, from time to time, to establish, modify,
amend and enforce reasonable rules and regulations ("Rules and Regulations") for
the management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of the Building and the Project and
their invitees. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said Rules and Regulations by
other tenants of the Project.

      2.10 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:

      (a) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances, parking
spaces, parking areas, loading and unloading areas, ingress, egress, direction
of traffic, landscaped areas, walkways and utility raceways;

      (b) To close temporarily any of the Common Areas for maintenance purposes
so long as reasonable access to the Premises remains available;

      (c) To designate other land outside the boundaries of the Project to be a
part of the Common Areas;

      (d) To add additional buildings and improvements to the Common Areas;

      (e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any portion thereof; and

      (f) To do and perform such other acts and make such other changes in, to
or with respect to the Common Areas and Project as Lessor may, in the exercise
of sound business judgment, deem to be appropriate.

3. Term.

      3.1 Term. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.

      3.2 Early Possession. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease
(including but not limited to the obligations to pay Lessee's Share of Common
Area Operating Expenses, Real Property Taxes and insurance premiums and to
maintain the Premises) shall, however, be in effect during such period. Any such
early possession shall not affect the Expiration Date.

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[ILLEGIBLE] obligation to provide evidence of insurance (Paragraph 8.5). Pending
delivery of such evidence, Lessee shall be required to perform all of its
obligations under this Lease from and after the Start Date, including the
payment of Rent, notwithstanding Lessor's election to withhold possession
pending receipt of such evidence of insurance. Further, if Lessee is required to
perform any other conditions prior to or concurrent with the Start Date, the
Start Date shall occur but Lessor may elect to withhold possession until such
conditions are satisfied.

4. Rent.

      4.1. Rent Defined. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent"). See Addendum Paragraphs 50 and 51.

      4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor
in lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one full
calendar month shall be prorated based upon the actual number of days of said
month. Payment of Rent shall be made to Lessor at its address stated herein or
to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating. In the event that any check,
draft, or other instrument of payment given by Lessee to Lessor is dishonored
for any reason, Lessee agrees to pay to Lessor the sum of $25.

5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of the Security Deposit, Lessee shall within 10 days after written request
therefor deposit monies with Lessor sufficient to restore said Security Deposit
to the full amount required by this Lease. If the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor so that the total amount of the Security Deposit
shall at all times bear the same proportion to the increased Base Rent as the
initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be
amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor's reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on such change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within 14 days after the expiration or termination of this
Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and
otherwise within 30 days after the Premises have been vacated pursuant to
Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit
not used or applied by Lessor. No part of the Security Deposit shall be
considered to be held in trust, to bear interest or to be prepayment for any
monies to be paid by Lessee under this Lease.

6. Use.

      6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of
or causes damage to neighboring premises or properties. Lessor shall not
unreasonably withhold or delay its consent to any written request for a
modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, and/or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after
such request give written notification of same, which notice shall include an
explanation of Lessor's objections to the change in the Agreed Use.

      6.2 Hazardous Substances. See Addendum Paragraph 55.

            (a) Reportable Uses Require Consent. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, or waste whose
presence, use, manufacture, disposal, transportation, or release, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration or termination) of protective
modifications (such as concrete encasements) and/or increasing the Security
Deposit.

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[ILLEGIBLE] Premises, other than as previously consented to by Lessor, Lessee
shall immediately give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.

            (c) Lessee Remediation. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.

            (d) Lessee Indemnification. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from areas outside of the Project). Lessee's obligations
shall include, but not be limited to, the effects of any contamination or injury
to person, property or the environment created or suffered by Lessee, and the
cost of investigation, removal, remediation, restoration and/or abatement, and
shall survive the expiration or termination of this Lease. No termination,
cancellation or release agreement entered into by Lessor and Lessee shall
release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of
such agreement.

            (e) Lessor Indemnification. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to Lessee's original occupancy of the Premises (unless caused by
Lessee, its agents or employees) or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees. Lessor's obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.

            (f) Investigations and Remediations. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to Lessee's original occupancy of
such Premises or portions thereof or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees, unless such remediation
measure is required as a result of Lessee's use (including "Alterations", as
defined in paragraph 7.3(a) below) of the Premises, under the Old Lease or this
Lease, in which event Lessee shall be responsible for such payment. Lessee shall
cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at
reasonable times in order to carry out Lessor's investigative and remedial
responsibilities.

            (g) Lessor Termination Option. If a Hazardous Substance Condition
(see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is
legally responsible therefor (in which case Lessee shall make the investigation
and remediation thereof required by the Applicable Requirements and this Lease
shall continue in full force and effect, but subject to Lessor's rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds 12 times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee, within 30 days after
receipt by Lessor of knowledge of the occurrence of such Hazardous Substance
Condition, of Lessor's desire to terminate this Lease as of the date 60 days
following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within 10 days thereafter, give written notice
to Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to 12
times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with said funds or satisfactory assurance thereof within 30 days
following such commitment. In such event, this Lease shall continue in full
force and effect, and Lessor shall proceed to make such remediation as soon as
reasonably possible after the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within the
time provided, this Lease shall terminate as of the date specified in Lessor's
notice of termination.

     6.3  Lessee's Compliance with Applicable Requirements. Except as otherwise
provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within 10 days after receipt of Lessor's written request, provide Lessor
with copies of all permits and other documents, and other information evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving the failure of Lessee or
the Premises to comply with any Applicable Requirements.

     6.4  Inspection; Compliance. Lessor and Lessor's "Lender" (as defined in
Paragraph 30) and consultants shall have the right to enter into Premises at any
time, in the case of an emergency, and otherwise at reasonable times, for the
purpose of inspecting the condition of the Premises and for verifying compliance
by Lessee with this Lease. The cost of any such inspections shall be paid by
Lessor, unless a violation of Applicable Requirements, or a contamination is
found to exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor
for the cost of such inspection, so long as such inspection is reasonably
related to the violation or contamination.

7. Maintenance; Repairs; Utility Installations; Trade Fixtures and Alterations.
   See Addendum Paragraph 56.

      7.1 Lessee's Obligations.

            (a) In General. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises,
Utility Installations (intended for Lessee's exclusive use, no matter where
located), and Alterations in good order, condition and repair (whether or not
the portion of the Premises requiring repairs, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not the
need for such repairs occurs as a result of Lessee's use, any prior use, the
elements or the age of such portion of the Premises), including, but not limited
to, all equipment or facilities, such as plumbing, HVAC equipment, electrical,
lighting facilities, boilers, pressure vessels, fixtures, interior walls,
interior surfaces of exterior walls, ceilings, floors, windows, doors, plate
glass, and skylights but excluding any items which are the responsibility of
Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order,
condition and repair, shall exercise and perform good maintenance practices,
specifically including the procurement and maintenance of the service contracts
required by Paragraph 7.1(b) below. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
repair.

            (b) Service Contracts. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements, if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure vessels,
(iii) clarifiers, and (iv) any other equipment, if reasonably required by
Lessor. However, Lessor reserves the right, upon notice to Lessee, to procure
and maintain any or all of such service contracts, and if Lessor so elects,
Lessee shall reimburse Lessor, upon demand, for the cost thereof.

            (c) Failure to Perform. If Lessee fails to perform Lessee's
obligations under this Paragraph 7.1, Lessor may enter upon the Premises after
10 days' prior written notice to Lessee (except in the case of an emergency, in
which case no notice shall be required), perform such obligations on Lessee's
behalf, and put the Premises in good order, condition and repair, and Lessee
shall promptly reimburse Lessor for the cost thereof.

            (d) Replacement. Subject to Lessee's indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if an item described in Paragraph 7.1(b) cannot be repaired other
than at a cost which is in excess of 50% of the cost of replacing such item,
then such item shall be replaced by Lessor, and the cost thereof shall be
prorated between the Parties and Lessee shall only be obligated to pay, each
month during the remainder of the term of this Lease, on the date on which Base
Rent is due, an amount equal to the product of multiplying the cost of such
replacement by a fraction, the numerator of which is one, and the denominator of
which is 144 (ie. 1/144th of the cost per month). Lessee shall pay interest on
the unamortized balance at a rate that is commercially reasonable in the
judgment of Lessor's accountants. Lessee may, however, prepay its obligation at
any time.

      7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler system,
Common Area fire alarm and/or smoke detection systems, fire hydrants, parking
lots, walkways, parkways, driveways, landscaping, fences, signs and utility
systems serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls, nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease.

      7.3 Utility Installations; Trade Fixtures; Alterations.

            (a) Definitions. The term "Utility Installations" refers to all
floor and window coverings, air lines, power panels, electrical distribution,
security and fire protection systems, communication systems, lighting fixtures,
HVAC equipment, plumbing, and fencing in or on the Premises. The term "Trade
Fixtures" shall mean Lessee's machinery and equipment that can be removed
without doing material damage to the Premises. The term "Alterations" shall mean
any modification of the improvements, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. "Lessee Owned Alterations and/or
Utility Installations" are defined as Alterations and/or Utility Installations
made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

            (b) Consent. Lessee shall not make any Alterations or Utility
Installations to the Premises without Lessor's prior written consent. Lessee
may, however, make non-structural Utility Installations to the interior of the
Premises (excluding the roof) without such consent but upon notice to Lessor, as
long as they

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are not visible from the outside, do not involve puncturing, relocating or
removing the roof or any existing walls, and the cumulative cost thereof during
this Lease as extended does not exceed a sum equal to 3 month's Base Rent in the
aggregate or a sum equal to one month's Base Rent in any one year.
Notwithstanding the foregoing, Lessee shall not make or permit any roof
penetrations and/or install anything on the roof without the prior written
approval of Lessor. Lessor may, as a precondition to granting such approval,
require Lessee to utilize a contractor chosen and/or approved by Lessor. Any
Alterations or Utility Installations that Lessee shall desire to make and which
require the consent of the Lessor shall be presented to Lessor in written form
with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i)
acquiring all applicable governmental permits, (ii) furnishing Lessor with
copies of both the permits and the plans and specifications prior to
commencement of the work, and (iii) compliance with all conditions of said
permits and other Applicable Requirements in a prompt and expeditious manner.
Any Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials. Lessee shall promptly upon completion
furnish Lessor with as-built plans and specifications. For work which costs an
amount in excess of one month's Base Rent, Lessor may condition its consent upon
Lessee providing a lien and completion bond in an amount equal to 150% of the
estimated cost of such Alteration or Utility Installation and/or upon Lessee's
posting an additional Security Deposit with Lessor.

            (c) Indemnification. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any interest therein.
Lessee shall give Lessor not less than 10 days notice prior to the commencement
of any work in, on or about the Premises, and Lessor shall have the right to
post notices of non-responsibility. If Lessee shall contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense defend and
protect itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond
in an amount equal to 150% of the amount of such contested lien, claim or
demand, indemnifying Lessor against liability for the same. If Lessor elects to
participate in any such action, Lessee shall pay Lessor's attorneys' fees and
costs.

      7.4 Ownership; Removal; Surrender; and Restoration. See Addendum Paragraph
56.

            (a) Ownership. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be the owner of all or
any specified part of the Lessee Owned Alterations and Utility Installations.
Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrendered by Lessee with the
Premises.

            (b) Removal. By delivery to Lessee of written notice from Lessor not
earlier than 90 and not later than 30 days prior to the end of the term of this
Lease, Lessor may require that any or all Lessee Owned Alterations or Utility
Installations be removed by the expiration or termination of this Lease. Lessor
may require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.

            (c) Surrender; Restoration. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Notwithstanding the
foregoing, if this Lease is for 12 months or less, then Lessee shall surrender
the Premises in the same condition as delivered to Lessee on the Start Date with
NO allowance for ordinary wear and tear. Lessee shall repair any damage
occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee
owned Alterations and/or Utility Installations, furnishings, and equipment as
well as the removal of any storage tank installed by or for Lessee. Lessee shall
also completely remove from the Premises any and all Hazardous Substances
brought onto the Premises by or for Lessee, or any third party (except Hazardous
Substances which were deposited via underground migration from areas outside of
the Project) even if such removal would require Lessee to perform or pay for
work that exceeds statutory requirements. Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee. The failure by Lessee to
timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express
written consent of Lessor shall constitute a holdover under the provisions of
Paragraph 26 below.

8. Insurance; Indemnity.

      8.1 Payment of Premium Increases.

            (a) As used herein, the term "Insurance Cost Increase" is defined as
any increase in the actual cost of the insurance applicable to the Building
and/or the Project and required to be carried by Lessor, pursuant to Paragraphs
8.2(b), 8.3(a) and 8.3(b), ("Required Insurance"), over and above the Base
Premium, as hereinafter defined, calculated on an annual basis. Insurance Cost
Increase shall include, but not be limited to, requirements of the holder of a
mortgage or deed of trust covering the Premises, Building and/or Project,
increased valuation of the Premises, Building and/or Project, and/or a general
premium rate increase. The term Insurance Cost Increase shall not, however,
include any premium increases resulting from the nature of the occupancy of any
other tenant of the Building. If the parties insert a dollar amount in Paragraph
1.9, such amount shall be considered the "Base Premium." The Base Premium shall
be the annual premium applicable to the 12 month period immediately preceding
the Start Date. If, however, the Project was not insured for the entirety of
such 12 month period, then the Base Premium shall be the lowest annual premium
reasonably obtainable for the Required Insurance as of the Start Date, assuming
the most nominal use possible of the Building. In no event, however, shall
Lessee be responsible for any portion of the premium cost attributable to
liability insurance coverage in excess of $2,000,000 procured under Paragraph
8.2(b).

            (b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant
to Paragraph 4.2. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the
corresponding Start Date or Expiration Date.

      8.2 Liability Insurance.

            (a) Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor as
an additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence with an annual aggregate of not less than
$2,000,000, an "Additional Insured-Managers or Lessors of Premises Endorsement"
and contain the "Amendment of the Pollution Exclusion Endorsement" for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease. The limits of said insurance shall not, however, limit the liability of
Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by
Lessee shall be primary to and not contributory with any similar insurance
carried by Lessor, whose insurance shall be considered excess insurance only.

            (b) Carried by Lessor. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.

      8.3 Property Insurance - Building, Improvements and Rental Value.

            (a) Building and Improvements. Lessor shall obtain and keep in force
a policy or policies of insurance in the name of Lessor, with loss payable to
Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by any Lender, but in no event more than the commercially reasonable
and available insurable value thereof. Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee's personal property shall be insured
by Lessee under Paragraph 8.4. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for debris removal and the enforcement
of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for all Urban Consumers for the city nearest to where
the Premises are located. If such insurance coverage has a deductible clause,
the deductible amount shall not exceed $1,000 per occurrence.

            (b) Rental Value. Lessor shall also obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one year with an extended period
of indemnity for an additional 180 days ("Rental Value Insurance"). Said
insurance shall contain an agreed valuation provision in lieu of any coinsurance
clause, and the amount of coverage shall be adjusted annually to reflect the
projected Rent otherwise payable by Lessee, for the next 12 month period.

            (c) Adjacent Premises. Lessee shall pay for any increase in the
premium for the property insurance of the Building and for the Common Areas or
other buildings in the Project if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.

            (d) Lessee's Improvements. Since Lessor is the insuring Party,
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.

      8.4 Lessee's Property; Business Interruption Insurance.

            (a) Property Damage. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.

            (b) Business Interruption. Lessee shall obtain and maintain loss of
income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.

            (c) No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.

      8.5 Insurance Policies. Insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the Premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, as set forth in the most current issue of "Best's
Insurance Guide", or such other rating as may be required by a Lender. Lessee
shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates evidencing the
existence and amounts of

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[ILLEGIBLE] to Lessor. Lessee shall, at least 30 days prior to the expiration of
such policies, furnish Lessor with evidence of renewals or "insurance binders"
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand. Such policies shall be for a term of at least one year, or the length of
the remaining term of this Lease, whichever is less. If either Party shall fail
to procure and maintain the insurance required to be carried by it, the other
Party may, but shall not be required to, procure and maintain the same.

      8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out or incident to the perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The
Parties agree to have their respective property damage insurance carriers waive
any right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.

      8.7 Indemnity. Except for Lessor's gross negligence or willful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor
and its agents, Lessor's master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damages, liens, judgments,
penalties, attorneys' and consultants' fees, expenses and/or liabilities arising
out of, involving, or in connection with, the use and/or occupancy of the
Premises by Lessee. If any action or proceeding is brought against Lessor by
reason of any of the foregoing matters, Lessee shall upon notice defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be defended or indemnified.

      8.8 Exemption of Lessor from Liability. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building, or from other sources or
places. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant of Lessor nor from the failure of Lessor to enforce
the provisions of any other lease in the Project. Notwithstanding Lessor's
negligence or breach of this Lease, Lessor shall under no circumstances be
liable for injury to Lessee's business or for any loss of income or profit
therefrom.

9. Damage or Destruction.

      9.1 Definitions.

            (a) "Premises Partial Damage" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, which can reasonably be repaired in 3 months or less from
the date of the damage or destruction, and the cost thereof does not exceed a
sum equal to 6 month's Base Rent. Lessor shall notify Lessee in writing within
30 days from the date of the damage or destruction as to whether or not the
damage is Partial or Total.

            (b) "Premises Total Destruction" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations and Trade Fixtures, which cannot reasonably be repaired in
3 months or less from the date of the damage or destruction and/or the cost
thereof exceeds a sum equal to 6 month's Base Rent. Lessor shall notify Lessee
in writing within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.

            (c) "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.

            (d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.

            (e) "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.

      9.2 Partial Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $5,000 or less, and, in such event, Lessor shall make any applicable
insurance proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within 10 days following
receipt of written notice of such shortage and request therefor. If Lessor
receives said funds or adequate assurance thereof within said 10 day period, the
party responsible for making the repairs shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
such funds or assurance are not received, Lessor may nevertheless elect by
written notice to Lessee within 10 days thereafter to: (i) make such restoration
and repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect, or
(ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled
to reimbursement of any funds contributed by Lessee to repair any such damage or
destruction. Premises Partial Damage due to flood or earthquake shall be subject
to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such insurance shall be made available for the repairs
if made by either Party.

      9.3 Partial Damage - Uninsured Loss. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
30 days after receipt by Lessor of knowledge of the occurrence of such damage.
Such termination shall be effective 60 days following the date of such notice.
In the event Lessor elects to terminate this Lease, Lessee shall have the right
within 10 days after receipt of the termination notice to give written notice to
Lessor of Lessee's commitment to pay for the repair of such damage without
reimbursement from Lessor. Lessee shall provide Lessor with said funds or
satisfactory assurance thereof within 30 days after making such commitment. In
such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible after the required
funds are available. If Lessee does not make the required commitment, this Lease
shall terminate as of the date specified in the termination notice.

      9.4 Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate 60 days following
such Destruction. If the damage or destruction was caused by the gross
negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.

      9.5 Damage Near End of Term. If at any time during the last 6 months of
this Lease there is damage for which the cost to repair exceeds one month's Base
Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective
60 days following the date of occurrence of such damage by giving a written
termination notice to Lessee within 30 days after the date of occurrence of such
damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable
option to extend this Lease or to purchase the Premises, then Lessee may
preserve this Lease by, (a) exercising such option and (b) providing Lessor with
any shortage in insurance proceeds (or adequate assurance thereof) needed to
make the repairs on or before the earlier of (i) the date which is 10 days after
Lessee's receipt of Lessor's written notice purporting to terminate this Lease,
or (ii) the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor's commercially reasonable expense, repair such damage as soon
as reasonably possible and this Lease shall continue in full force and effect.
If Lessee fails to exercise such option and provide such funds or assurance
during such period, then this Lease shall terminate on the date specified in the
termination notice and Lessee's option shall be extinguished.

      9.6 Abatement of Rent; Lessee's Remedies.

            (a) Abatement. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, but
not to exceed the proceeds received from the Rental Value Insurance. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.

            (b) Remedies. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within 90 days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give written
notice to Lessor and to any Lenders of which Lessee has actual notice, of
Lessee's election to terminate this Lease on a date not less than 60 days
following the giving of such notice. If Lessee gives such notice and such repair
or restoration is not commenced within 30 days thereafter, this Lease shall
terminate as of the date specified in said notice. If the repair or restoration
is commenced within such 30 days, this Lease shall continue in full force and
effect. "Commence" shall mean either the unconditional authorization of the
preparation of the required plans, or the beginning of the actual work on the
Premises, whichever first occurs.

      9.7 Termination; Advance Payments. Upon termination of this Lease pursuant
to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security
Deposit as has not been, or is not then required to be, used by Lessor.

      9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.

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      10.1 Definitions.

            (a) "Real Property Taxes." As used herein, the term "Real Property
Taxes" shall include any form of assessment; real estate, general, special,
ordinary or extraordinary, or rental levy or tax (other than inheritance,
personal income or estate taxes); improvement bond; and/or license fee imposed
upon or levied against any legal or equitable interest of Lessor in the Project,
Lessor's right to other income therefrom, and/or Lessor's business of leasing,
by any authority having the direct or indirect power to tax and where the funds
are generated with reference to the Project address and where the proceeds so
generated are to be applied by the city, county or other local taxing authority
of a jurisdiction within which the Project is located. The term "Real Property
Taxes" shall also include any tax, fee, levy, assessment or charge, or any
increase therein, imposed by reason of events occurring during the term of this
Lease, including but not limited to, a change in the ownership of the Project or
any portion thereof or a change in the improvements thereon.

            (b) "Base Real Property Taxes." As used herein, the term "Base Real
Property Taxes" shall be the amount of Real Property Taxes, which are assessed
against the Premises, Building, Project or Common Areas in the calendar year
during which the Lease is executed. In calculating Real Property Taxes for any
calendar year, the Real Property Taxes for any real estate tax year shall be
included in the calculation of Real Property Taxes for such calendar year based
upon the number of days which such calendar year and tax year have in common.

      10.2 Payment of Taxes. Lessor shall pay the Real Property Taxes applicable
to the Project, and except as otherwise provided in Paragraph 10.3, any
increases in such amounts over the Base Real Property Taxes shall be included in
the calculation of Common Area Operating Expenses in accordance with the
provisions of Paragraph 4.2.

      10.3 Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's record and work
sheets as being caused by additional improvements placed upon the Project by
other lessees or by Lessor for the exclusive enjoyment of such other lessees.
Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at
the time Common Area Operating Expenses are payable under Paragraph 4.2, the
entirety of any increase in Real Property Taxes if assessed solely by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises by
Lessee or at Lessee's request.

      10.4 Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.

      10.5 Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises. When possible, Lessee shall cause its
Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Lessor. If any of Lessee's said property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee's property within 10 days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.

11. Utilities. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. Notwithstanding the provisions of
Paragraph 4.2, if at any time in Lessor's sole judgment, Lessor determines that
Lessee is using a disproportionate amount of water, electricity or other
commonly metered utilities, or that Lessee is generating such a large volume of
trash as to require an increase in the size of the dumpster and/or an increase
in the number of times per month that the dumpster is emptied, then Lessor may
increase Lessee's Base Rent by an amount equal to such increased costs. See
Addendum Paragraph 56.

12. Assignment and Subletting.

      12.1 Lessor's Consent Required.

            (a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "assign or assignment") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent.

            (b) A change in the control of Lessee shall constitute an assignment
requiring consent. The transfer, on a cumulative basis, of 25% or more of the
voting control of Lessee shall constitute a change in control for this purpose.

            (c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than 25%
of such Net Worth as it was represented at the time of the execution of this
Lease or at the time of the most recent assignment to which Lessor has
consented, or as it exists immediately prior to said transaction or transactions
constituting such reduction, whichever was or is greater, shall be considered an
assignment of this Lease to which Lessor may withhold its consent. "Net Worth of
Lessee" shall mean the net worth of Lessee (excluding any guarantors)
established under generally accepted accounting principles.

            (d) An assignment or subletting without consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable
Breach without the necessity of any notice and grace period. If Lessor elects to
treat such unapproved assignment or subletting as a noncurable Breach, Lessor
may either: (i) terminate this Lease, or (ii) upon 30 days written notice,
increase the monthly Base Rent to 110% of the Base Rent then in effect. Further,
in the event of such Breach and rental adjustment, (i) the purchase price of any
option to purchase the Premises held by Lessee shall be subject to similar
adjustment to 110% of the price previously in effect, and (ii) all fixed and
non-fixed rental adjustments scheduled during the remainder of the Lease term
shall be increased to 110% of the scheduled adjusted rent.

            (e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or injunctive relief.

      12.2 Terms and Conditions Applicable to Assignment and Subletting.

            (a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) alter the primary
liability of Lessee for the payment of Rent or for the performance of any other
obligations to be performed by Lessee.

            (b) Lessor may accept Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or estoppel
of Lessor's right to exercise its remedies for Lessee's Default or Breach.

            (c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.

            (d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible for
the performance of Lessee's obligations under this Lease, including any assignee
or sublessee, without first exhausting Lessor's remedies against any other
person or entity responsible therefore to Lessor, or any security held by
Lessor.

            (e) Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $1,000 or
10% of the current monthly Base Rent applicable to the portion of the Premises
which is the subject of the proposed assignment or sublease, whichever is
greater, as consideration for Lessor's considering and processing said request.
Lessee agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested.

            (f) Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment or entering into such sublease, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.

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

            (a) Lessee hereby assigns and transfers to Lessor all of Lessee's
Interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach shall occur in the performance of Lessee's obligations,
Lessee may collect said Rent. Lessor shall not, by reason of the foregoing or
any assignment of such sublease, nor by reason of the collection of Rent, be
deemed liable to the sublessee for any failure of Lessee to perform and comply
with any of Lessee's obligations to such sublessee. Lessee hereby irrevocably
authorizes and directs any such sublessee, upon receipt of a written notice from
Lessor stating that a Breach exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor all Rent due and to become due under the
sublease. Sublessee shall rely upon any such notice from Lessor and shall pay
all Rents to Lessor without any obligation or right to inquire as to whether
such Breach exists, notwithstanding any claim from Lessee to the contrary.

            (b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.

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

            (d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.

            (e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.

13. Default; Breach; Remedies.

      13.1 Default; Breach. A "Default" is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or Rules and
Regulations under this Lease. A "Breach" is defined as the occurrence of one or
more of the following Defaults, and the failure of Lessee to cure such Default

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            (a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism.

            (b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to Lessor or
to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of 3
business days following written notice to Lessee.

            (c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) service contracts, (iii) the
rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate, (v) a requested subordination, (vi) evidence concerning any
guaranty and/or Guarantor, (vii) any document requested under Paragraph 41
(easements), or (viii) any other documentation or information which Lessor may
reasonably require of Lessee under the terms of this Lease, where any such
failure continues for a period of 10 days following written notice to Lessee.

            (d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under paragraph 2.9
hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above,
where such Default continues for a period of 30 days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
30 days are reasonably required for its cure, then it shall not be deemed to be
a Breach if Lessee commences such cure within said 30 day period and
thereafter diligently prosecutes such cure to completion.

            (e) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "debtor" as defined in 11 U.S.C. ss. 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within 60 days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where possession is not restored to
Lessee within 30 days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within 30
days; provided, however, in the event that any provision of this subparagraph
(e) is contrary to any applicable law, such provision shall be of no force or
effect, and not affect the validity of the remaining provisions.

            (f) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.

            (g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory basis, and
Lessee's failure, within 60 days following written notice of any such event, to
provide written alternative assurance or security, which, when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.

      13.2 Remedies. If Lessee fails to perform any of its affirmative duties or
obligations, within 10 days after written notice (or in case of an emergency,
without notice), Lessor may, at its option, perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee upon receipt of invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:

            (a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent. Efforts by Lessor to mitigate damages
caused by Lessee's Breach of this Lease shall not waive Lessor's right to
recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.

            (b) Continue the Lease and Lessee's right to possession and recover
the Rent as it becomes due, in which event Lessee may sublet or assign, subject
only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
the appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.

            (c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.

      13.3 Inducement Recapture. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement Provisions",
shall be deemed conditioned upon Lessee's full and faithful performance of all
of the terms, covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an Inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee.
The acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.

      13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within 5 days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
one-time late charge equal to 10% of each such overdue amount or $100, whichever
is greater. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected,
for 3 consecutive installments of Base Rent, then notwithstanding any provision
of this Lease to the contrary, Base Rent shall, at Lessor's option, become due
and payable quarterly in advance.

      13.5 Interest. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within 30 days following the date on which it was due for non-scheduled
payment, shall bear interest from the date when due, as to scheduled payments,
or the 31st day after it was due as to non-scheduled payments. The interest
("Interest") charged shall be equal to the prime rate reported in the Wall
Street Journal as published closest prior to the date when due plus 4%, but
shall not exceed the maximum rate allowed by law. Interest is payable in
addition to the potential late charge provided for in Paragraph 13.4.

      13.6 Breach by Lessor.

            (a) Notice of Breach. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than 30 days after receipt by Lessor, and any
Lender whose name and address shall have been furnished Lessee in writing for
such purpose, of written notice specifying wherein such obligation of Lessor has
not been performed; provided, however, that if the nature of Lessor's obligation
is such that more than 30 days are reasonably required for its performance, then
Lessor shall not be in breach if performance is commenced within such 30 day
period and thereafter diligently pursued to completion.

            (b) Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within 30 days after receipt of said
notice, or if having commenced said cure they do not diligently pursue it to
completion, then Lessee may elect to cure said breach at Lessee's expense and
offset from Rent an amount equal to the greater of one month's Base Rent or the
Security Deposit, and to pay an excess of such expense under protest, reserving
Lessee's right to reimbursement from Lessor. Lessee shall document the cost of
said cure and supply said documentation to Lessor.

14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "Condemnation"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than 10% of the floor area of the Unit, or more than 25%
of Lessee's Reserved Parking Spaces, is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing within 10 days after Lessor shall
have given Lessee written notice of such taking (or in the absence of such
notice, within 10 days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance

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[ILLEGIBLE] to any compensation for Lessee's relocation expenses, loss of
business goodwill and/or Trade Fixtures, without regard to whether or not this
Lease is terminated pursuant to the provisions of this Paragraph. All
Alterations and Utility Installations made to the Premises by Lessee, for
purposes of Condemnation only, shall be considered the property of the Lessee
and Lessee shall be entitled to any and all compensation which is payable
therefor. In the event that this Lease is not terminated by reason of the
Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.

15. Brokerage Fees.

      15.3 Representations and Indemnities of Broker Relationships. Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.

16. Estoppel Certificates.

            (a) Each Party (as "Responding Party") shall within 10 days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Estoppel Certificate" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

            (b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such 10 day period, the Requesting Party may execute
an Estoppel Certificate stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party's performance, and (iii)
if Lessor is the Requesting Party, not more than one month's rent has been paid
in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.

            (c) If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past 3 years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.

17. Definition of Lessor. The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, and subject to the provisions of Paragraph
20 below, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6.2 above.

18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.

19. Days. Unless otherwise specifically indicated to the contrary, the word
"days" as used in this Lease shall mean and refer to calendar days.

20. Limitation on Liability. Subject to the provisions of Paragraph 17 above,
the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.

21. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.

22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the use, nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and attorneys'
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker's liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.

23. Notices.

      23.1 Notice Requirements. All notices required or permitted by this Lease
or applicable law shall be in writing and may be delivered in person (by hand or
by courier) or may be sent by regular, certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, or by facsimile transmission,
and shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease
shall be that Party's address for delivery or mailing of notices. Either Party
may by written notice to the other specify a different address for notice,
except that upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.

      23.2 Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail the notice shall be deemed given 48 hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantee next day
delivery shall be deemed given 24 hours after delivery of the same to the Postal
Service or courier. Notices transmitted by facsimile transmission or similar
means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.

24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant
or condition hereof by Lessee, shall be deemed a waiver of any other term,
covenant or condition hereof, or of any subsequent Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or approval of, any act shall not be deemed to render unnecessary the
obtaining of Lessor's consent to, or approval of, any subsequent or similar act
by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. The acceptance of Rent by
Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by
Lessee may be accepted by Lessor on account of monies or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.

25. Disclosures Regarding The Nature of a Real Estate Agency Relationship.

      (a) When entering into a discussion with a real estate agent regarding a
real estate transaction, a Lessor or Lessee should from the outset understand
what type of agency relationship or representation it has with the agent or
agents in the transaction. Lessor and Lessee acknowledge being advised by the
Brokers in this transaction, as follows:

            (i) Lessor's Agent. A Lessor's agent under a listing agreement with
the Lessor acts as the agent for the Lessor only. A Lessor's agent or subagent
has the following affirmative obligations: To the Lessor: A fiduciary duty of
utmost care, integrity, honesty, and loyalty in dealings with the Lessor. To the
Lessee and the Lessor: a. Diligent exercise of reasonable skills and care in
performance of the agent's duties. b. A duty of honest and fair dealing and good

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[ILLEGIBLE] the property that are not known to, or within the diligent attention
and observation of, the Parties. An agent is not obligated to reveal to either
Party any confidential information obtained from the other Party which does not
involve the affirmative duties set forth above.

            (ii) Lessee's Agent. An agent can agree to act as agent for the
Lessee only. In these situations, the agent is not the Lessor's agent, even if
by agreement the agent may receive compensation for services rendered, either in
full or in part from the Lessor. An agent acting only for a Lessee has the
following affirmative obligations. To the Lessee: A fiduciary duty of utmost
care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee
and the Lessor: a. Diligent exercise of reasonable skills and care in
performance of the agent's duties. b. A duty of honest and fair dealing and good
faith. c. A duty to disclose all facts known to the agent materially affecting
the value or desirability of the property that are not known to, or within the
diligent attention and observation of, the Parties. An agent is not obligated to
reveal to either Party any confidential information obtained from any other
Party which does not involve the affirmative duties set forth above.

            (iii) Agent Representing Both Lessor and Lessee. A real estate
agent, either acting directly or through one or more associate licenses, can
legally be the agent of both the Lessor and the Lessee in a transaction, but
only with the knowledge and consent of both the Lessor and the Lessee. In a dual
agency situation, the agent has the following affirmative obligations to both
the Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity,
honesty and loyalty in the dealings with either Lessor or the Lessee. b. Other
duties to the Lessor and the Lessee as stated above in subparagraphs (i) or
(ii). In representing both Lessor and Lessee, the agent may not without the
express permission of the respective Party, disclose to the other Party that the
Lessor will accept rent in an amount less than that indicated in the listing or
that the Lessee is willing to pay a higher rent than that offered. The above
duties of the agent in a real estate transaction do not relieve a Lessor or
Lessee from the responsibility to protect their own interests. Lessor and Lessee
should carefully read all agreements to assure that they adequately express
their understanding of the transaction. A real estate agent is a person
qualified to advise about real estate. If legal or tax advice is desired,
consult a competent professional.

      (b) Brokers have no responsibility with respect to any default or breach
hereof by either Party. The liability (including court costs and attorneys'
fees), of any Broker with respect to any breach of duty, error or omission
relating to this Lease shall not exceed the fee received by such Broker pursuant
to this Lease; provided, however, that the foregoing limitation on each Broker's
liability shall not be applicable to any gross negligence or willful misconduct
of such Broker.

      (c) Buyer and Seller agree to identify to Brokers as "Confidential" any
communication or information given Brokers that is considered by such Party to
be confidential.

26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
150% of the Base Rent applicable immediately preceding the expiration or
termination. Nothing contained herein shall be construed as consent by Lessor to
any holding over by Lessee.

27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.

28. Covenants and Conditions; Construction of Agreement. All provisions of this
Lease to be observed or performed by Lessee are both covenants and conditions.
In construing this Lease, all headings and titles are for the convenience of the
Parties only and shall not be considered a part of this Lease. Whenever required
by the context, the singular shall include the plural and vice versa. This Lease
shall not be construed as if prepared by one of the Parties, but rather
according to its fair meaning as a whole, as if both Parties had prepared it.

29. Binding Effect; Choice of Law. This Lease shall be binding upon the parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.

30. Subordination; Attornment; Non-Disturbance.

      30.1 Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender") shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.

      30.2 Attornment. Subject to the non-disturbance provisions of Paragraph
30.3; Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (a) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (b) be subject to any offsets or defenses
which Lessee might have against any prior lessor, (c) be bound by prepayment of
more than one month's rent, or (d) be liable for the return of any security
deposit paid to any prior lessor.

      30.3 Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within 60 days after the execution of this Lease, Lessor
shall use its commercially reasonable efforts to obtain a Non-Disturbance
Agreement from the holder of any pre-existing Security Device which is secured
by the Premises. In the event that Lessor is unable to provide the
Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's
option, directly contact Lender and attempt to negotiate for the execution and
delivery of a Non-Disturbance Agreement.

      30.4 Self-Executing. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.

31. Attorneys' Fees. If any Party brings an action or proceeding involving the
Premises whether founded in tort, contract or equity, or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such
fees may be awarded in the same suit or recovered in a separate suit, whether or
not such action or proceeding is pursued to decision or judgment. The term,
"Prevailing Party" shall include, without limitation, a Party who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party of its claim or
defense. The attorneys' fees award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred. In addition, Lessor shall be entitled to attorneys' fees,
costs and expenses incurred in the preparation and service of notices of Default
and consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach ($200
is a reasonable minimum per occurrence for such services and consultation).

32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time, in the case of an emergency,
and otherwise at reasonable times for the purpose of showing the same to
prospective purchasers, lenders, or tenants, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary "For Sale" signs and
Lessor may during the last 6 months of the term hereof place on the Premises any
ordinary "For Lease" signs. Lessee may at any time place on the Premises any
ordinary "For Sublease" sign.

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor's prior written consent. Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether to
permit an auction.

34. Signs. Except for ordinary "For Sublease" signs which may be placed only on
the Premises, Lessee shall not place any sign upon the Project without Lessor's
prior written consent. All signs must comply with all Applicable Requirements.

35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within 10 days following any such event
to elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.

36. Consents. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including but not limited to architects', attorneys', engineers'
and other consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent, including but not limited to consents
to an assignment, a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessor's consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor

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[ILLEGIBLE] except as may be otherwise specifically stated in writing by Lessor
at the time of such consent. The failure to specify herein any particular
condition to Lessor's consent shall not preclude the imposition by Lessor at the
time of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within 10 business days following such request.

37. Guarantor.

      37.1 Execution. The Guarantors, if any, shall each execute a guaranty in
the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.

      37.2 Default. It shall constitute a Default of the Lessee if any Guarantor
fails or refuses, upon request to provide: (a) evidence of the execution of the
guaranty, including the authority of the party signing on Guarantor's behalf to
obligate Guarantor, and in the case of a corporate Guarantor, a certified copy
of a resolution of its board of directors authorizing the making of such
guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d)
written confirmation that the guaranty is still in effect.

38. Quiet Possession. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.

39. Options. If Lessee is granted an option, as defined below, then the
following provisions shall apply.

      39.1 Definition. "Option" shall mean: (a) the right to extend the term of
or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.

      39.2 Options Personal To Original Lessee. Any Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.

      39.3 Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.

      39.4 Effect of Default on Options.

            (a) Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has
been given 3 or more notices of separate Default, whether or not the Defaults
are cured, during the 12 month period immediately preceding the exercise of the
Option.

            (b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).

            (c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term, (i) Lessee fails to
pay Rent for a period of 30 days after such Rent becomes due (without any
necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee 3 or
more notices of separate Default during any 12 month period, whether or not the
Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.

40. Security Measures. Lessee hereby acknowledges that the Rent payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

41. Reservations. Lessor reserves the right: (i) to grant, without the consent
or joinder of Lessee, such easements, rights and dedications that Lessor deems
necessary, (ii) to cause the recordation of parcel maps and restrictions, and
(iii) to create and/or install new utility raceways, so long as such easements,
rights, dedications, maps, restrictions, and utility raceways do not
unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate such rights.

42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay.

43. Authority. If either Party hereto is a corporation, trust, limited liability
company, partnership, or similar entity, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is duly authorized
to execute and deliver this Lease on its behalf. Each party shall, within 30
days after request, deliver to the other party satisfactory evidence of such
authority.

44. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.

45. Offer. Preparation of this Lease by either party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.

46. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.

47. Multiple Parties. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.

48. Waiver of Jury Trial. The Parties hereby waive their respective rights to
trial by jury in any action or proceeding involving the Property or arising out
of this Agreement.

49. Mediation and Arbitration of Disputes. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease |_| is |X| is not attached to this Lease.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:

1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL
INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE
AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S
INTENDED USE.

WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES ARE LOCATED.

The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

Executed at: Irvine, CA                    Executed at: Costa Mesa, CA
            --------------------------                 ------------------------
on:  10/19/01                              on:
   -----------------------------------        ----------------------------------

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By LESSOR:                                By LESSEE:

The Esplanade on Redhill LLC              Irvine Sensors Corporation
----------------------------------------  --------------------------------------
a California limited liability company    a Delaware Corporation
----------------------------------------  --------------------------------------

By: /s/ Eric C. Smyth                     By: /s/ Robert Richards
   -------------------------------------     -----------------------------------
Name Printed: Eric C. Smyth               Name Printed: Robert Richards
             ---------------------------               -------------------------
Title: Authorized signator                Title: President
       ---------------------------------         -------------------------------

By:                                       By: /s/ John Stuart
   -------------------------------------     -----------------------------------
Name Printed:                             Name Printed: John Stuart
             ---------------------------               -------------------------
Title:                                    Title: Chief Financial Officer
      ----------------------------------        --------------------------------
Address: 2402 Michelson Drive, Suite 270  Address: 3001 Redhill Avenue
        --------------------------------          ------------------------------
Irvine, CA 92612                          Costa Mesa, CA 92626
----------------------------------------  --------------------------------------

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

Telephone: (949) 474-7030                 Telephone: (714) 444-8788
          ------------------------------            ----------------------------
Facsimile: (949) 474-2101                 Facsimile: (   )
          ------------------------------            ----------------------------
Federal ID No.                            Federal ID No.
              --------------------------                ------------------------

These forms are often modified to meet changing requirements of law and needs of
the industry. Always write or call to make sure you are utilizing the most
current form: American Industrial Real Estate Association, 700 South Flower
Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777.

       (c) Copyright 1998 By American Industrial Real Estate Association.
                             All rights reserved.
             No part of these works may be reproduced in any form
                        without permission in writing.

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                                 Page 12 of 12
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                   ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
                           MULTI-TENANT LEASE - GROSS

                          Dated for Reference Purposes
                                 October 1, 2001

                                 By and Between

                          THE ESPLANADE ON REDHILL LLC,
                a California limited liability company ("Lessor")

                                       and

                           IRVINE SENSORS CORPORATION,
                        a Delaware corporation ("Lessee")

50.   Base Rent and Adjustments. The Base Rent defined in Paragraph 1.5 of the
      lease shall be increased annually by three percent (3%) cumulatively at
      the beginning of each year of the Lease in accordance with the following
      schedule:

            ------------------------------------------------------------
                          Months                   Base Rent
            ============================================================
                     10/01/01-09/30/02            $25,668.00
            ------------------------------------------------------------
                     10/01/02-09/30/03            $26,438.00
            ------------------------------------------------------------
                     10/01/03-09/30/04            $27,231.00
            ------------------------------------------------------------
                     10/01/04-09/30/05            $28,048.00
            ------------------------------------------------------------
                     10/01/05-09/30/06            $28,889.00
            ------------------------------------------------------------

      Note: Rate per square foot rounded.

51.   CAM Charge. In lieu of Lessee paying Lessee's Share of Common Area
      Operating Expenses as defined in Section 1.6 of the Lease, Lessee shall
      pay, as Rent, the Common Area Maintenance charge ("CAM Charge") specified
      in Section 1.7(d) of the Lease. Such CAM Charge is calculated as $0.03 per
      rentable square foot (20,534 sq/ft) of the Premises or $616 for the first
      year of the Term. The CAM Charge will be increased annually by $0.01 per
      rentable square foot cumulatively at the beginning of each year of the
      Lease as follows:

            ------------------------------------------------------------
                          MONTHS                 CAM CHARGE
            ============================================================
                     10/01/0l-9/30/02            $  616.00
            ------------------------------------------------------------
                     10/01/02-9/30/03            $  821.00
            ------------------------------------------------------------
                     10/01/03-9/30/04            $1,027.00
            ------------------------------------------------------------
                     10/01/04-9/30/05            $1,232.00
            ------------------------------------------------------------
                     l0/01/05-9/30/06            $1,437.00
            ------------------------------------------------------------

      References in Paragraph 7 and elsewhere in the Lease to Paragraph 4.2
      ("Common Area Operating Expenses"), shall be deemed to reference Addendum
      Paragraph 51 ("CAM Charge").

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<PAGE>

52.   Lessee's Occupancy and Obligations Prior to Start Date. Lessee is
      currently the Lessee and the sole occupant of the Premises pursuant to a
      Lease dated August 1, 1994, as amended ("Old Lease"). For the benefit of
      Lessor, Lessee acknowledges its obligations under the Old Lease,
      including, without limitation, Lessee's obligations with respect to the
      condition of the Premises at the end of the term of the Old Lease.

53.   Lessee's Occupancy on the Start Date. Lessor and Lessee acknowledge
      Lessee's occupancy of the Premises on and as of the Start Date. Lessor
      shall be deemed to have delivered the Premises to Lessee as of the Start
      Date "as is, where is" in the condition of the Premises on that date
      subject to Lessee's obligations to Lessor under the Old Lease. Lessor and
      Lessee further acknowledge that Paragraph 2.5, Lessee as Prior
      Owner/Occupant, of this Lease is applicable and reflects the agreement of
      the Parties.

54.   Termination of the Old Lease. Subject to any continuing obligations of
      Lessee under the Old Lease as set forth in Paragraphs 52 and 53 above, the
      Old Lease and Lessee's occupancy thereunder shall be deemed to have been
      terminated on September 30, 2001, and the provisions of this Lease shall
      govern Lessee's Lease and occupancy of the Premises from and after
      October 1, 2001.

55.   Hazardous Substances/Disclosure Certificate. Lessee acknowledges its
      obligations under Paragraph 6.2 of the Lease and affirms that Lessee's
      Reportable Use of Hazardous Substances under the Lease has and will at all
      times be done with timely compliance (at Lessee's expense) with all
      Applicable Requirements as more fully contemplated by Paragraph 6.2 of the
      Lease. In accordance with and as contemplated by Paragraph 6.2(b) of this
      Lease and not by way of limitation, Lessee shall promptly notify Lessor in
      writing and provide Lessor copies of any comments, notices or reports
      concerning Lessee's use of Hazardous Substances received by Lessee from or
      by any governmental agency. Prior to executing this Lease, Lessee has
      completed, executed and delivered to Lessor Lessee's initial Hazardous
      Substances Disclosure Certificate ("Initial HazMat Certificate") a copy of
      which is attached hereto as Exhibit C and incorporated herein by this
      reference. Lessee covenants, represents and warrants to Lessor that the
      information on the Initial HazMat Certificate is true and correct and
      accurately describes the use(s) of Hazardous Substances which are and/or
      will be made and/or used on the Premises by Lessee. Lessee shall
      commencing with the date which is one year from the Commencement Date and
      continuing every year thereafter or at any other time upon reasonable
      request of Lessor, complete, execute, and deliver to Lessor, a Hazardous
      Substances Disclosure Certificate (the "HazMat Certificate") substantially
      in the form of Exhibit C describing Lessee's then present use of Hazardous
      Substances on the Premises, and any other reasonably necessary documents
      as required by Lessor.

56.   Lessee's Alterations. Lessor and Lessee acknowledge that Lessee has
      substantially altered the Premises, especially the ground floor thereof
      since the Premises were delivered by Lessor to Lessee under the Old Lease.
      Such alterations included, without limitation, clean rooms, additional
      HVAC, office improvements, corridors and the like (collectively "Lessee's
      Alterations"). Such Lessee's Alterations are deemed to be "Lessee Owned
      Alterations and/or Utility Installations" under Paragraph 7 of this Lease.
      In the event that Lessor elects to require removal of the Lessee's
      Alterations or any portion thereof pursuant to Lessor's right to do so
      under Paragraph 7.4 of this Lease, Lessee shall restore the affected
      Premises to its condition as of the Commencement Date of the Old Lease,
      normal wear and tear excepted. The floor plans of the first and second
      floors of the Premises attached hereto as Exhibits B-2 and B-3
      respectively reflect generally the layout of the Premises on the
      Commencement Date of the Old Lease.

57.   Exterior Storage. Lessee shall neither store nor permit to be stored any
      vehicles, boats, RVs, goods, machinery, merchandise, equipment or any
      other items whatsoever on the Premises other than wholly within a closed
      building without the prior written approval of the Lessor. Any item left
      unattended for 96 hours is subject to removal at owner's expense.

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                                       2

<PAGE>

58.   Fire Sprinkler Upgrade. Lessee acknowledges that any tenant improvements
      made by Lessee will include bringing the existing fire sprinkler system up
      to city code as made necessary by the build-out.

59.   Dumping/Trash. Lessee acknowledges that there shall be no dumping of
      carpet, cement, concrete, rock, wood products, or any other such heavy
      materials into the trash bins or anywhere else on the Premises. Lessee
      shall not dispose of rubbish from off-site operations in the trash areas
      or elsewhere in the Project, nor shall Lessee permit or allow Lessee's
      employees, suppliers, shippers, customers, contractors and invitees to do
      so.

60.   Parking. Any vehicle left unattended for 96 hours is subject to tow at
      vehicle owner's expense. In addition, no Lessee shall use, or cause to be
      used, more parking that the parking ratio established by the City of Costa
      Mesa for their given space.

61.   Window Coverings. All window coverings must be approved in writing by
      Lessor. Failure to obtain written approval for window coverings shall be
      considered a violation of this Lease.

62.   Tenant Information is attached as Exhibit "A".

63.   Site Plan/Space Plans (Premises) are attached as Exhibits "B-1", B-2 and
      "B-3".

64.   Rekeying. In the event that Lessee wants to rekey the access doors to the
      Premises, Lessee must retain the approved contractor for the Project (see
      below) and any rekeying must conform to the Project's "Master Key System".
      Any rekeying will be Lessee's sole cost and responsibility.

      Approved Contractor:

      Airport Lock & Safe Co.
      4251 Martingale Way, Suite D
      Newport Beach, CA 92660
      Telephone: (949) 833-2034

65.   Pets. No pets are allowed on the Premises or at the project without
      Lessor's prior written consent.

66.   Miscellaneous. Lessee shall not cook or prepare meals on the Premises.
      Lessee shall not use Premises for a "residence" for itself or any employee
      of Lessee.

67.   Confidentiality. The terms of this Lease have been negotiated between
      Lessor and Lessee and are not for publication to other parties. Lessee
      agrees to keep the terms of this Lease confidential.

68.   General Rules and Regulations. Lessor may from time to time establish
      and/or modify reasonable rules and regulations in addition to those
      contained herein governing the use and occupancy of the Premises, the
      Building and the Project.

                                                        Initials /s/ [ILLEGIBLE]
                                                                 ---------------
                                                        Initials /s/ [ILLEGIBLE]
                                                                 ---------------

                                       3

<PAGE>

                                    EXHIBIT A

                               TENANT INFORMATION
                          THE ESPLANADE ON REDHILL LLC

1.    Your new mailing address will be:

      3001 Redhill Avenue, Building 3
      Costa Mesa, CA 92626

2.    If you are new in Costa Mesa, you must go to the City Hall to apply for a
      business license. The address is:

      City of Costa Mesa
      Business License Division
      77 Fair Drive
      Costa Mesa, CA 92626
      (714) 754-5234

3.    Utilities providing service to The Esplanade:

      PAC Bell
      (800) 300-8899

      Southern California Edison
      P.O. Box 600
      Rosemead, CA 9177l-001
      (800) 950-2356

4.    The nearest Post Office is:

      1590 Adams Avenue
      Costa Mesa, CA 92626
      (800) 275-8777

5.    Please make checks payable to:

      CIP/Smyth

6.    Mail check to:

      CIP/SMYTH
      2402 Michelson Drive, Suite 270
      Irvine, CA 92612
      Attn: Accounting

7.    As per your lease, the owner is required to be listed as an additional
      insured on the "Certificate of Insurance". Please list as follows:

      The Esplanade on Redhill LLC, C/O CIP/SMYTH CIP/Smyth

8.    Property Management Company:

      CIP/Smyth
      Telephone:           (949) 474-7030
      Facsimile:           (949) 474-2101
      Contact Person:      Eric C. Smyth - Principal

                                                        Initials /s/ [ILLEGIBLE]
                                                                 ---------------
                                                        Initials /s/ [ILLEGIBLE]
                                                                 ---------------

<PAGE>

                                    EXHIBIT B

                          THE ESPLANADE ON REDHILL LLC

                             SITE PLAN/SPACE PLANS

                             (SEE FOLLOWING PAGES)

                                                        Initials /s/ [ILLEGIBLE]
                                                                 ---------------
                                                        Initials /s/ [ILLEGIBLE]
                                                                 ---------------

<PAGE>

                                 [MAP OMITTED]

                          THE ESPLANADE BUSINESS PARK
                  3001 Red Hill Avenue o Costa Mesa California
                                  EXHIBIT B-1

<PAGE>

                                 [MAP OMITTED]

                          THE ESPLANADE BUSINESS PARK
                            Building 3 - First Floor
                                  EXHIBIT B-2

<PAGE>

                                 [MAP OMITTED]

                                  THE ESPLANADE
                     3001 RED HILL, COSTA MESA, BUILDING 3
                                  SECOND FLOOR

                                  EXHIBIT B-3

<PAGE>

                                    EXHIBIT C

          LESSEE'S INITIAL HAZARDOUS SUBSTANCES DISCLOSURE CERTIFICATE

Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Substances Disclosure Certificate is necessary
for the Lessor (identified below) to evaluate and finalize a Lease with you as
Lessee. After a Lease is signed by you and the Lessor (the "Lease"), on an
annual basis in accordance with the provisions of Addendum Paragraph 55 of the
signed Lease, you are to provide an update to the information initially provided
by you in this certificate. Capitalized terms in this certificate not otherwise
defined shall have the meanings given them in the Lease. The information
contained in the Initial Hazardous Substances Disclosure Certificate and each
annual certificate provided by you thereafter will be maintained in
confidentiality by Lessor subject to release and disclosure as required by (i)
any lenders and owners and their respective environmental consultants, (ii) any
prospective purchaser(s) of all or any portion of the property on which the
Premises are located, (iii) Lessor to defend itself or its lenders, partners or
representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease. Any questions regarding this certificate should be directed
to, and when completed, the certificate should be delivered to:

Lessor:     THE ESPLANADE ON REDHILL LLC
            c/o CIP/SMYTH,
            2402 Michelson Drive, Suite 270
            Irvine, California 92612
            Attn: Eric C. Smyth
            Phone: (949) 474-7030

Name of Lessee: IRVINE SENSORS CORPORATION, a Delaware corporation

Mailing Address: 3001 Redhill Avenue, Building 3, Costa Mesa, CA 92626

Contact Person, Title and Telephone Number(s): Robert Richards, President (714)
444-8788

Contact Person for Hazardous Waste Substances Management and Manifests and
Telephone Number(s): Robert Richards, President, (714) 444-8788

Address of Premises: 3001 Redhill Avenue, Building 3, Costa Mesa, CA 92626

Length of Initial Term: Five (5) years commencing October 1, 2001

1.    GENERAL INFORMATION:

      Describe the initial proposed operations to take place in, on, or about
the Premises, including, without limitation, principal products processed,
manufactured or assembled services and activities to be provided or otherwise
conducted. Existing lessees should describe any proposed changes to on-going
operations.

2.    USE, STORAGE AND DISPOSAL OF HAZARDOUS SUBSTANCES

      2.1   Will any Hazardous Substances be used, generated, stored or disposed
            of in, on or about the Premises? Existing lessees should describe
            any Hazardous Substances which continue to be used, generated,
            stored or disposed of in, on or about the Premises.

<PAGE>

            Wastes                 Yes?(circled)      No?
            Chemical Products      Yes?(circled)      No?
            Other                  Yes?               No?

If Yes is marked, please explain:

Cleaning & processing chemicals commonly used in semiconductor industry
--------------------------------------------------------------------------------

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

      2.2   If yes is marked in Section 2.1, attach a list of any Hazardous
            Substances to be used, generated, stored or disposed of in, on or
            about the Premises, including the applicable hazard class and an
            estimate of the quantities of such Hazardous Substances at any given
            time; estimated annual throughput; the proposed location(s) and
            method of storage (excluding nominal amounts of ordinary household
            cleaners and janitorial supplies which are not regulated by any
            Applicable Requirements); and the proposed location(s) and method of
            disposal for each Hazardous Substance, including, the estimated
            frequency, and the proposed contractors and subcontractors. Existing
            lessees should attach a list setting forth the information requested
            above and such list should include actual data from on-going
            operations and the identification of any variations in such
            information from the prior year's certificate.

3.    STORAGE TANKS AND SUMPS

      3.1   Is any above or below ground storage of gasoline, diesel, petroleum,
            or other Hazardous Substances in tanks or sumps proposed in, on or
            about the Premises? Existing lessees should describe any such actual
            or proposed activities.

            Yes |X|      No |_|

      If yes, please explain:

55 Gal. Drum containing residual solvents.
--------------------------------------------------------------------------------

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

4.    WASTE MANAGEMENT

      4.1   Has your company been issued an EPA Hazardous Waste Generator I.D.
            Number? CAD 038058038
            Existing lessees should describe any additional identification
            numbers issued since the previous certificate.

            Yes |_|      No |X|

      4.2   Has your company filed a biennial or quarterly reports as a
            hazardous waste generator?
            Existing lessees should describe any new reports filed.

            Yes |_|      No |X| not req'd

5.    WASTEWATER TREATMENT AND DISCHARGE

      5.1   Will your company discharge wastewater or other wastes to:

                                       2

<PAGE>

            |_| storm drain?        |X| sewer?
            |_| surface water?      |_| no wastewater or other wastes
                                        discharged

            Existing lessees should indicate any actual discharges. If so,
            describe the nature of any proposed or actual discharge(s).

Discharges are made from a neutralization system into the sewer
--------------------------------------------------------------------------------

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

      5.2   Will any such wastewater or waste be treated before discharge?

            Yes |X|      No |_|

            If yes, describe the type of treatment proposed to be conducted.
            Existing lessees should describe the actual treatment conducted.

Automatic neutralization using acid or base materials through control of pH.
--------------------------------------------------------------------------------

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

6.    AIR DISCHARGES

      6.1   Do you plan for any air filtration systems or stacks to be used in
            your company's Operations in, on or about the Premises that will
            discharge into the air; and will such air emissions be monitored?
            Existing lessees should indicate whether or not there are any such
            air filtration systems or stacks in use in, on or about the Premises
            which discharge into the air and whether such air emissions are
            being monitored.

            Yes |X|      No |_|

            If yes, please describe:

Discharge from clean room stations. Not monitored.
--------------------------------------------------------------------------------

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

      6.2   Do you propose to operate any of the following types of equipment,
            or any other equipment requiring an air emissions permit? Existing
            lessees should specify any such equipment being operated in, on or
            about the Premises.

            |_| Spray booth(s)      |_| Incinerator
            |_| Dip tank(s)         |_| Other (Please describe)
            |_| Drying oven(s)      |X| No Equipment Requiring Air Permits

            If yes, please describe:

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

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

7.    HAZARDOUS SUBSTANCES DISCLOSURES

      7.1   Has your company prepared or will it be required to prepare a
            Hazardous Substances Management Plan ("Management Plan") pursuant to
            Fire Department or other governmental or regulatory agencies'
            requirements? Existing lessees should indicate whether or not a
            Management Plan is required and has been prepared.

                                       3

<PAGE>

            Yes |X|      No |_|

            If yes, attach a copy of the Management Plan. Existing lessees
            should attach a copy of any required updates to the Management Plan.

      7.2   Are any of the Hazardous Substances, and in particular chemicals,
            proposed to be used in your operations in, on or about the Premises
            regulated under Proposition 65?
            Existing lessees should indicate whether or not there are any new
            Hazardous Substances being so used which are regulated under
            Proposition 65.

            Yes |X|      No |_|

      If yes, please explain:

--------------------------------------------------------------------------------
            See attached List
--------------------------------------------------------------------------------

8.    ENFORCEMENT ACTIONS AND COMPLAINTS

      8.1   With respect to Hazardous Substances or Applicable Requirements, has
            your company ever been subject to any agency enforcement actions,
            administrative orders, or consent decrees or has your company
            received requests for information, notice or demand letters, or any
            other inquiries regarding its operations? Existing lessees should
            indicate whether or not any such actions, orders or decrees have
            been, or are in the process of being, undertaken or if any such
            requests have been received.

            Yes |_|      No |X|

            If yes, describe the actions, orders or decrees and any continuing
            compliance obligations imposed as a result of these actions, orders
            or decrees and also describe any requests, notices or demands, and
            attach a copy of all such documents. Existing lessees should
            describe and attach a copy of any new actions, orders, decrees,
            requests, notices or demands not already delivered to Lessor
            pursuant to the provisions of Paragraph 6.2 of the signed Lease.

      8.2   Have there ever been, or are there now pending, any lawsuits against
            your company regarding any environmental or health concerns?

            Yes |_|      No |X|

            If yes, describe any such lawsuits and attach copies of the
            complaint(s), cross-complaint(s), pleadings and all other documents
            related thereto as requested by Lessor complaint(s), pleadings and
            other related documents not already delivered to Lessor pursuant to
            the provisions of Section 29 of the signed Lease.

      8.3   Have there been any problems or complaints from adjacent lessees,
            owners or other neighbors at your company's current facility with
            regard to environmental or health and safety concerns? Existing
            lessees should indicate whether or not there have been any such
            problems or complaints from adjacent lessees, owners or other
            neighbors at, about or near the Premises.

            Yes |_|      No |X|

            If yes, please describe. Existing lessees should describe any such
            problems or Complaints not already disclosed to Lessor under the
            provisions of the signed Lease.

                                       4

<PAGE>

9.    PERMITS AND LICENSES

      9.1   Attach copies of all Hazardous Substances permits and licenses
            including a Transporter Permit number issued to your company with
            respect to its proposed operations in, on or about the Premises,
            including, without limitation, any wastewater discharge permits, air
            emissions permits, and use permits or approvals. Existing lessees
            should attach copies of any new permits and licenses as well as any
            renewals of permits or licenses previously issued.

The undersigned hereby acknowledges and agrees that (A) this Hazardous
Substances Disclosure Certificate is being delivered in connection with, and as
required by, Lessor in connection with the evaluation and finalization of a
Lease and will be attached thereto as an exhibit; (B) that this Hazardous
Substances Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Paragraph 6.2 and Addendum Paragraph 55 of the
Lease; and (C) that Lessee shall have and retain full and complete
responsibility and liability with respect to any of the Hazardous Substances
disclosed in the HazMat Certificate notwithstanding Lessor's/Lessee's receipt
and/or approval of such certificate. Lessee further agrees that none of the
following described acts or events shall be construed or otherwise interpreted
as either (a) excusing, diminishing or otherwise limiting Lessee from the
requirement to fully and faithfully perform its obligations under the Lease with
respect to Hazardous Substances, including, without limitation, Lessee's
indemnification of the Indemnitees and compliance with all Applicable
Requirements, or (b) imposing upon Lessor, directly or indirectly, any duty or
liability with respect to any such Hazardous Substances, including, without
limitation, any duty on Lessor to investigate or otherwise verify the accuracy
of the representations and statements made therein or to ensure that Lessee is
in compliance with all Applicable Requirements; (i) the delivery of such
certificate to Lessor and/or Lessor's acceptance of such certificate, (ii)
Lessor's review and approval of such certificate, (iii) Lessor's failure to
obtain such certificate from Lessee at any time, or (iv) Lessor's actual or
constructive knowledge of the types and quantities of Hazardous Substances being
used, stored, generated, disposed of or transported on or about the Premises by
Lessee or Lessee's Representatives. Notwithstanding the foregoing or anything to
the contrary contained herein, the undersigned acknowledges and agrees that
Lessor and its partners, lenders and representatives may, and will, rely upon
the statements, representations, warranties, and certifications made herein and
the truthfulness thereof in entering into the Lease and the continuance thereof
throughout the term, and any renewals thereof, of the Lease.

I Robert Richards and John Stuart acting with full authority to bind the
(proposed) Lessee and on behalf of the (proposed) Lessee, certify, represent and
warrant that the information contained in this certificate is true and correct.

Date: 10/15/01
     -----------

                                        LESSEE:

                                        IRVINE SENSORS CORPORATION
                                        a Delaware Corporation

                                        By: /s/ Robert Richards
                                            ------------------------------------
                                            Robert Richards
                                            President

                                        By: /s/ John Stuart
                                            ------------------------------------
                                            John Stuart
                                            Chief Financial Officer

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