Document:

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                                 OFFICE LEASE

                          PARK CENTRAL MALL, L.L.C.,
                     an Arizona limited liability company

                                  "Landlord"

                                      and

                           PAC-WEST TELECOMM, INC.,
                           a California corporation

                                   "Tenant"

                                  Dated as of

                                ______________

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<PAGE>

                               TABLE OF CONTENTS

                                                                  Page
                                                                  ----

BASIC LEASE PROVISIONS.........................................      1
ARTICLE 1. TERM AND POSSESSION.................................      2
           1.1 Term............................................      2
           1.2 Surrender.......................................      3
           1.3 Holdover........................................      3
           1.4 Option to Extend................................      3
ARTICLE 2. RENT................................................      3
           2.1 Base Rent.......................................      3
           2.2 Adjustments.....................................      3
           2.3 Late Charges and Interest.......................      3
           2.4 Nature of Payments..............................      3
ARTICLE 3. SECURITY DEPOSIT AND GUARANTY.......................      4
ARTICLE 4. USE.................................................      4
           4.1 Permitted Use...................................      4
           4.2 Restrictions....................................      4
           4.3 Compliance with Law.............................      4
           4.4 Environmental Matters...........................      5
ARTICLE 5. TAXES...............................................      6
           5.1 Tenant's Taxes..................................      6
           5.2 Rental Taxes....................................      6
ARTICLE 6. PARKING AND COMMON USE AREAS........................      7
           6.1 Common Facilities...............................      7
           6.2 Parking.........................................      7
ARTICLE 7. OPERATING COSTS, REAL PROPERTY TAXES AND UTILITIES..      8
           7.1 Payment.........................................      8
           7.2 Allocation......................................      8
           7.3 Gross-up........................................      9
ARTICLE 8. CONSTRUCTION........................................      9
           8.1 Delivery........................................      9
           8.2 Condition.......................................      9
           8.3 Tenant's Work...................................     10
           8.4 Alterations and Approval........................     10
           8.5 Approval Conditions.............................     10
           8.6 Performance of Tenant's Work....................     11
           8.7 Liens...........................................     11
           8.8 Additional Installations........................     11
           8.9 Provisions Concerning Installations on and
               Access to Roof..................................     12
ARTICLE 9. REPAIR/MAINTENANCE/UTILITIES........................     13

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                               TABLE OF CONTENTS
                                  (continued)

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           9.1 Landlord's Responsibilities.....................     13
           9.2 Tenant's Obligations............................     13
           9.3 Janitorial Services.............................     13
           9.4 Utilities.......................................     13
ARTICLE 10. TENANT'S WORK, ALTERATIONS AND PERSONAL PROPERTY...     14
ARTICLE 11. CERTAIN RIGHTS RESERVED BY LANDLORD................     14
ARTICLE 12. DAMAGE TO PROPERTY; INJURY TO PERSONS; INSURANCE...     15
           12.1 Tenant's Responsibility........................     15
           12.2 Tenant's Insurance.............................     16
ARTICLE 13. FIRE AND CASUALTY..................................     16
ARTICLE 14. CONDEMNATION.......................................     17
ARTICLE 15. ASSIGNMENT AND SUBLETTING; SALE BY LANDLORD........     17
           15.1 Transfer by Tenant.............................     17
           15.2 Splitting Profits..............................     18
           15.3 Sale of Property...............................     18
ARTICLE 16. ESTOPPEL CERTIFICATE...............................     18
           16.1 Certification..................................     18
           16.2 Failure to Provide.............................     18
ARTICLE 17. LANDLORD'S REMEDIES................................     19
           17.1 Events of Default..............................     19
           17.2 Remedies.......................................     19
           17.3 Subleases......................................     20
ARTICLE 18. NOTICES............................................     20
ARTICLE 19. SUBORDINATION/QUIET ENJOYMENT......................     20
           19.1 Subordination..................................     20
           19.2 Quiet Enjoyment................................     21
           19.3 Waiver of Landlord's Lien......................     21
ARTICLE 20. BROKERS............................................     21
ARTICLE 21. RELOCATION.........................................     22
ARTICLE 22. SIGNAGE............................................     22
ARTICLE 23. GENERAL PROVISIONS.................................     22
           23.1 Force Majeure..................................     22
           23.2 Rules..........................................     22
           23.3 Captions.......................................     22
           23.4 Integration....................................     22
           23.5 No Offer.......................................     22
           23.6 No Waiver......................................     22
           23.7 Deadlines......................................     23
           23.8 No Accord or Satisfaction......................     23
           23.9 Non-Recourse Liability.........................     23

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                               TABLE OF CONTENTS
                                  (continued)

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           23.10 Governing Law; Choice of Forum................     23
           23.11 Exhibit.......................................     23
           23.12 Successors and Assigns........................     23
ARTICLE 24. CO-LOCATION AND RIGHT TO SERVE OTHER TENANTS.......     24
           24.1 Co-location....................................     24
           24.2 Right to Serve Other Tenants...................     24
EXHIBIT A - FLOOR PLAN OF THE PREMISES.........................     25
EXHIBIT B - SITE PLAN OF THE PROJECT...........................     26
EXHIBIT C - LANDLORD'S IMPROVEMENTS............................     27
EXHIBIT D - RULES AND REGULATIONS..............................     29
EXHIBIT E - GUARANTY...........................................     32
EXHIBIT F - LICENSE AGREEMENT..................................     33
EXHIBIT G......................................................     41
EXHIBIT H - PARKING............................................     42
EXHIBIT I - HVAC, GENERATOR, AND ANTENNA LOCATIONS.............     43
EXHIBIT J - FORM OF LANDLORD'S WAIVER..........................     44
RIDER 1........................................................     45

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                                 OFFICE LEASE

                  (Multitenant Project - Large Office Space)

     THIS LEASE is made this _____ day of January, 2000, by and between PARK
CENTRAL MALL, L.L.C., an Arizona limited liability company ("Landlord"), and
PAC-WEST TELECOMM, INC., a  California corporation ("Tenant").

     Landlord hereby leases to Tenant and Tenant leases from Landlord for the
term and upon the conditions and agreements set forth in this Lease
approximately 12,321 rentable square feet (the "Premises"), as illustrated by
cross-hatching on the plan attached as Exhibit A, known as Suite 50 in Park
Central (the "Project"). The address of the Premises is 3110 North Central
Avenue, Phoenix, Arizona 85012.

                            BASIC LEASE PROVISIONS
                            ----------------------

A.   The Premises:  Suite 50 in Building 2, consisting of approximately 12,321
     square feet of rentable area as illustrated on the attached Exhibit A.

B.   The Building:  The building or group of buildings located at Park Central.

C.   Project:  The buildings and common facilities used in connection with the
     Building and Premises as reasonably determined from time to time by
     Landlord.  A site plan for the Project in its current configuration is
     attached as Exhibit B.

D.   Names of Guarantors:  NONE

E.   Security Deposit:     NONE

F.   The Initial Term:  Ten years, beginning on the Commencement Date and ending
     on the Expiration Date.

G.   Commencement and Expiration Dates:  Approximately May 1, 2000 and April 30,
     2010.

H.   Base Rent:

     ---------------------------------------------------------------------------
               Period                   Annual Base Rent     Monthly Payment
     ---------------------------------------------------------------------------
          Commencement Date               $ 110,889.00          $ 9,240.75
           through Year 5
     ---------------------------------------------------------------------------
       Year 6 through Year 10             $ 147,852.00          $12,321.00
     ---------------------------------------------------------------------------

                                       1
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I.   Renewal Terms:  Two renewal options of five years each, subject to Section
     2.5 and Rider 1.

J.   Description of Tenant's Business:  Telecommunications equipment and
     services.

K.   Tenant Improvement Allowance:  [INTENTIONALLY OMITTED]

L.   Tenant's Notice Address:

          Pac-West Telecomm, Inc.
          4210 Coronado Avenue
          Stockton, CA 95204
          Attn: Dennis V. Myer, V.P.

M.   Landlord's Notice Address:

          Park Central
          3121 N. 3rd Avenue, Suite 200
          Phoenix, Arizona 85013

N.   Tenant's Designated Broker:  Partners National Real Estate Group, Inc.
     (Kane Dossett)

O.   Landlord's Designated Broker:  Cushman & Wakefield of Arizona, Inc. (Keith
     Lambeth)

P.   Exhibits:

          Exhibit A, Floor Plan of the Premises
          Exhibit B, Site Plan of the Project
          Exhibit C, Landlord's Improvements
          Exhibit D, Rules and Regulations
          Exhibit E, [INTENTIONALLY OMITTED]
          Exhibit F, License Agreement
          Exhibit G, List of Equipment
          Exhibit H, Parking
          Exhibit I, HVAC and Generator Locations
          Exhibit J, Form of Landlord Waiver.

ARTICLE 1.  TERM AND POSSESSION

     1.1  Term. The Term of this Lease, and Tenant's obligation to pay rent,
          ----
shall commence on the earliest of:  (i) 120 days after the date on which (A)
Landlord has approved Tenant's plans and specifications for the Tenant
Improvements to be installed in the Premises, and (B) possession is tendered by
written notice to Tenant (the "Delivery Date") or (ii) May 1, 2000, whichever
shall first occur (the "Commencement Date") and shall expire on the tenth
anniversary of the Commencement Date.  The Delivery Date will occur following
approval by

                                       2
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Landlord of Tenant's plans and specifications for Tenant's Improvements in the
Premises. Upon request of either party after the Term has commenced, Landlord
and Tenant shall jointly execute a memorandum confirming the Commencement Date.

     1.2  Surrender.  Upon the termination or expiration of this Lease or upon
          ---------
the termination of Tenant's right of possession, whether by lapse of time or
otherwise, Tenant shall at once surrender possession of the Premises to Landlord
and remove all of Tenant's property as provided in Article 10.

     1.3  Holdover. Tenant shall have no right to hold over after the expiration
          --------
of the Term of this Lease without Landlord's consent.  If, with Landlord's
consent, Tenant holds over after the expiration of this Lease, Tenant shall
become a tenant from month to month only, upon all of the terms of this Lease
except that the amount of the Base Rent shall be increased to an amount equal to
200% of the Base Rent in effect immediately prior to the expiration.

     1.4  Option to Extend. [SEE RIDER 1]
          ----------------

ARTICLE 2. RENT

     2.1  Base Rent. Tenant shall pay to Landlord during the Term of this Lease
          ---------
at the office of Landlord or at such other place as Landlord may designate,
without notice, demand, deduction or set-off, base annual rent in the amount of
(i) for the first 5 years of the term, $110,889.00 per annum, subject to
adjustment as provided in Article 2.2, in equal monthly installments of
$9,240.75 and (ii) for the 6th through 10th years of the term, $147,852.00 per
annum in equal monthly installments of $12,321.00 in advance on the first day of
each calendar month.  In the event the Commencement Date does not occur on the
first day of a calendar month, Tenant shall pay rent on the Commencement Date
for the actual days of the fractional month on a pro rata basis.

     2.2  Adjustments. The Base Rent shall be adjusted based on the actual
          -----------
rentable square feet of space in the Premises as determined by the approved
plans and specifications, and as approved by Landlord's and Tenant's architects
on or before the Commencement Date.  All references to "rentable" or "useable"
square feet shall be deemed measured in accordance with the American National
Standard Z65.1-1996, as published by BOMA International.

     2.3  Late Charges and Interest. Any amount due from Tenant to Landlord
          -------------------------
which is not paid within ten business days from the date when due shall bear
interest at three percent in excess of the prime rate as established from time
to time by Wells Fargo Bank from the due date until paid, but the payment of
such interest shall not excuse or cure any default by Tenant under this Lease.
In addition, any rent or other payment not paid within ten business days of its
due date shall be subject to three percent late charge representing the
additional costs and burdens of special handling.

     2.4  Nature of Payments. All sums required to be paid by Tenant under this
          ------------------
Lease, whether or not so designated, are rent.

                                       3
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ARTICLE 3. SECURITY DEPOSIT AND GUARANTY [INTENTIONALLY OMITTED]

ARTICLE 4. USE

     4.1  Permitted Use. Tenant shall continuously use and occupy the Premises
          -------------
for the use set forth in Basic Lease Provisions Paragraph J and shall use them
for no other purpose whatsoever without Landlord's prior written consent, and in
no event for customer service or sales of wireless cellular equipment or as call
center for servicing of an HMO, a group of hospitals or an entity performing
similar services and operations.

     4.2  Restrictions. Tenant shall:
          ------------

          (a)  Not use or permit upon the Premises anything that would
invalidate any policies of insurance now or hereafter carried on the Premises or
that will increase the rate of insurance on the Premises or the Project;

          (b)  Pay all additional insurance premiums which may be caused by the
use which Tenant shall make of the Premises;

          (c)  Not in any manner deface or injure the Premises;

          (d)  Not do anything or permit anything to be done upon the Premises
in any way tending to create a nuisance, or tending to disturb any other lessee
in the Project or tending to injure the reputation of the Project, including,
without limitation, any of the following: the playing of music audible outside
the Premises, the placement of signs in or displayed through any window or door;
the creation of a nuisance; the releasing of offensive odors to the exterior of
the Premises, lodging, or manufacturing;

          (e)  Not commit or suffer to be committed any waste upon the Premises;

          (f)  Not violate any recorded restriction or covenant affecting the
Project, nor use the Premises for any purpose which would be in violation of any
exclusive rights or use granted to other tenants or occupants in the Project;

          (g)  Not install business machines or other machinery which cause
noise or vibration that may be transmitted to the structure of the Building.

     4.3  Compliance with Law.
          -------------------

          (a)  Tenant, at Tenant's expense (except as set forth in 4.3(b) as
Landlord's responsibility), shall comply with all present and future federal,
state and local laws, ordinances, orders, rules and regulations, including,
without limitation the Americans with Disabilities Act (collectively, "Laws"),
and shall procure all permits, certificates, licenses and other authorizations
required by applicable Law relating to Tenant's business or Tenant's use or
occupancy of the Premises or Tenant's activities on the Premises. Tenant shall
make all

                                       4
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reports and filings required by applicable Laws. Tenant shall defend, indemnify
and hold harmless Landlord and Landlord's present and future officers,
directors, employees, partners and agents from and against all claims, demands,
liabilities, fines, penalties, losses, costs and expenses, including but not
limited to costs of compliance, remedial costs, and reasonable attorneys' fees,
arising out of or relating to any failure of Tenant to comply with applicable
Laws.

          (b)  Landlord represents that as of the Delivery Date, the Premises,
the common facilities (as defined in Section 6 below) and the parking areas of
the Project will be in compliance with applicable Laws. Landlord shall
thereafter be responsible, at Landlord's expense, for compliance of the common
facilities and the parking areas of the Project with applicable Laws concerning
physical condition of, access to, or occupancy of such areas. So long as
Tenant's Improvements in the Premises are designed and constructed by Tenant in
accordance with all applicable laws, Landlord shall be responsible for
compliance of the Premises with applicable law concerning access, physical
condition (including but not limited to asbestos removal and other environmental
matters), or occupancy not related to (i) Tenant's specific use of the Premises
or (ii) Tenant's Improvements or any alterations made by Tenant.

     4.4  Environmental Matters.
          ---------------------

          (a)  Hazardous Materials. Tenant shall not cause, or permit or allow
any of Tenant's employees, agents, customers, visitors, invitees, licensees,
contractors, assignees or subtenants (collectively, "Tenant's Parties") to cause
or permit any Hazardous Materials to be brought upon, stored, manufactured,
generated, blended, handled, recycled, treated, disposed or used on, under or
about the Premises, the Building, the common facilities, or the Project, except
for routine office and janitorial supplies in usual and customary quantities
stored, used, and disposed of in accordance with all applicable Environmental
Laws. As used herein, "Hazardous Materials" means any chemical, substance,
material, controlled substance, object, condition, waste, living organism or
combination thereof which is or may be hazardous to human health or safety or to
the environment due to its radioactivity, ignitability, corrosivity, reactivity,
explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity,
infectiousness or other harmful or potentially harmful properties or effects,
including, without limitation, petroleum and petroleum products, asbestos,
radon, polychlorinated biphenyls (PCBs) and all of those chemicals, substances,
materials, controlled substances, objects, conditions, wastes, living organisms
or combinations thereof which are now or become in the future listed, defined or
regulated in any manner by an Environmental Law based upon, directly, or
indirectly , such properties or effects. As used herein, "Environmental Laws"
means any and all federal, state or local environmental, health or safety-
related laws, regulations, standards, decisions of courts, ordinances, rules,
codes, orders, decrees, directives, guidelines, permits or permit conditions,
currently existing and as amended, enacted, issued or adopted in the future
which are or become applicable to Tenant, the Premises, the Building, the common
facilities or the Project. Tenant and Tenant's Parties shall comply with all
Environmental Laws and promptly notify Landlord of the violation of any
Environmental Law or presence of any Hazardous Materials, other than office and
janitorial supplies as permitted above, on the Premises.

                                       5
<PAGE>

          (b)  Environmental Audit. At any time and from time to time Landlord
may retain an environmental consultant or engineer to conduct an audit or
environmental assessment of the Premises and Tenant's compliance with applicable
laws, rules and regulations. Tenant shall extend its full cooperation with the
audit or investigation. If Tenant is found not to be substantially in compliance
with applicable law, the entire cost of the audit or assessment shall be paid by
Tenant to Landlord upon demand; otherwise the cost shall be borne by Landlord.

          (c)  Indemnification. Tenant shall indemnify, protect, defend (by
counsel acceptable to Landlord) and hold harmless Landlord and its partners,
directors, officers, employees, shareholders, lenders, agents, contractors and
each of their respective successors and assigns (individually and collectively,
"Indemnitees") from and against any and all claims judgments, causes of action,
damages, penalties, fines, taxes, costs, liabilities, losses and expense arising
at any time during or after the Term as a result (directly or indirectly) of or
in connection with (i) Tenant's or Tenant's Parties' breach of any prohibition
or provision of this Article, or (ii) the presence of Hazardous Materials on,
under or about the Premises or other property as a result (directly or
indirectly) of Tenant's or Tenant's Parties' activities, or failure to act, in
connection with the Premises. This indemnity shall include the cost of any
required or necessary repair, cleanup or detoxification, and the preparation and
implementation of any closure, monitoring or other required plans, whether such
action is required or necessary prior to or following the termination of this
Lease. Neither the written consent by Landlord to the presence of Hazardous
Materials on, under or about the Premises, nor the strict compliance by Tenant
with all Environmental Laws, shall excuse Tenant from Tenant's obligation of
indemnification pursuant hereto. Landlord shall indemnify, defend, and hold
harmless Tenant, its officers, directors, shareholders, employees, agents and
contractors and each of their respective successor and assigns from and against
any and all claims, liabilities, losses, judgments, causes of action, damages,
penalties, fines, taxes, costs, liabilities and expenses arising at any time
during or after the Term as a result of Landlord's use at any time of Hazardous
Materials in the Common Areas or activities of prior owners or tenants, unless
and to the extent caused by any breach of Tenant's obligations hereunder.
Landlord's and Tenant's obligations pursuant to the foregoing indemnity shall
survive the termination of this Lease.

ARTICLE 5. TAXES

     5.1  Tenant's Taxes. Tenant shall pay, prior to delinquency, all taxes
          --------------
assessed against or levied upon Tenant's trade fixtures, furnishings, equipment
and other personal property located in or upon the Premises.  Tenant shall cause
the trade fixtures, furnishings, equipment and other personal property to be
assessed and billed separately from the real property of which the Premises form
a part.  In the event any or all of Tenant's trade fixtures, furnishings,
equipment and other personal property shall be assessed and taxed with the real
property, Tenant shall pay to Landlord Tenant's share of the taxes within ten
days after delivery to Tenant by Landlord of a statement in writing setting
forth the amount of the taxes applicable thereto.

                                       6
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     5.2  Rental Taxes. Tenant shall, simultaneously with the payment of any
          ------------
sums required to be paid under this Lease as rent, additional rent or otherwise,
reimburse Landlord for any sales, use, rental, transaction privilege or other
excise tax imposed or levied on, or measured by, the amount paid.  In the event
any tax, surcharge or regulatory fee is imposed by any governmental authority
upon or with respect to parking, parking fees paid or received, parking spaces
or vehicles parking in the parking spaces in the common facilities, Tenant shall
pay the same as additional rent hereunder with the monthly installments of Base
Rent or as otherwise required from time to time by Landlord.  The reimbursement
required hereunder is not intended in any event to allow or require
reimbursement of Landlord's income taxes or franchise taxes.

ARTICLE 6. PARKING AND COMMON USE AREAS

     6.1  Common Facilities. All parking areas, access roads, driveways,
          -----------------
pedestrian sidewalks and ramps, landscaped areas, drainage facilities, exterior
lighting, signs, courtyards, corridors, elevators (if any), entryways, public
restrooms, and other areas and improvements (all of which are referred to as
"common facilities") provided by Landlord for the general use in common of
tenants, their officers, agents, employees, customers and other invitees shall
at all times be subject to the exclusive control and management of Landlord, and
Landlord shall have the right from time to time to modify, enlarge or eliminate
the same and to establish, modify and enforce reasonable rules and regulations
with respect thereto.  Tenant's right to use the Premises includes the non-
exclusive right to use the common facilities.

     6.2  Parking. Landlord shall provide, operate and maintain parking
          -------
accommodations in the Project, together with necessary access thereto.  Tenant
shall be entitled to use 5 parking spaces, unreserved, in common with all other
tenants of the Project, within the parking field delineated on Exhibit H.  In
addition, subject to availability, Tenant may have the right to use an
additional 25 unreserved parking spaces in common with other tenants, in an area
designated by Landlord, at a charge per space to be reasonably determined by
Landlord as the market rate for such spaces.  No storage of vehicles or parking
for more than twenty-four (24) hours shall be allowed without Landlord's prior
written consent, except that Tenant may park up to 5 service trucks or vans,
each not in excess of 20 feet long, overnight in the areas designated on Exhibit
H.  Tenant acknowledges and agrees that Landlord shall not be liable for damage,
loss or theft of property or injury to persons in, upon or about the parking
area from any cause whatsoever.  Landlord shall have the right to establish, and
from time to time change (including relocating reserved covered parking spaces),
alter and amend, and to enforce against all users of the parking area such
reasonable requirements and restrictions as Landlord deems necessary and
advisable for the proper operation and maintenance of the parking area.
Landlord shall have the right from time to time to designate an area or areas
within the common facilities for purposes of parking vehicles of Tenant's
employees (collectively, "Authorized Parkers"), and its agents, representatives
and invitees.  Tenant shall within fifteen days after the Commencement Date
deliver to Landlord the license plate numbers of its Authorized Parkers and
thereafter, within ten days after there are changes in the list of Authorized
Parkers.  Tenant hereby authorizes Landlord to tow from the Project, at Tenant's
expense, any vehicle parking in an unauthorized parking space belonging to an
Authorized Parker and/or to attach violation stickers or notices thereto.  Each
vehicle shall, at

                                       7
<PAGE>

Landlord's option to be exercised from time to time, bear a permanently affixed
and visible identification sticker or vehicle tag to be provided by Landlord.

ARTICLE 7. OPERATING COSTS, REAL PROPERTY TAXES AND UTILITIES

     7.1  Payment. Tenant shall pay Tenant's pro rata share of all of: (i) the
          -------
Building's operating cost and (ii) the Project's operating cost, but only to the
extent the annual aggregate of those two amounts exceeds the actual Project's
operating cost and Building operating cost for the calendar year 2000 (the
"Expense Stop").  The Building's operating cost consists of those costs and
expenses directly associated with managing, operating, maintaining and repairing
the office building (or associated group of buildings designated by Landlord)
containing the Premises, including all electrical, heating, ventilating, air
conditioning, plumbing and other building systems (but not the cost for the
supply and use of such utilities by tenants), and the roof, any skylights and
interior and exterior walls; service and maintenance contracts; fire sprinkler
monitoring charges; energy management costs; and a management fee of 10% of the
other Building operating costs.  The Project's operating cost consists of the
total cost and expense incurred in managing, operating, maintaining and
repairing the Project and its common facilities excluding costs categorized as
Building operating cost, but including, without limitation, real property taxes
and general and special assessments; wages, salaries and employee benefits of
persons performing services in connection with the Project; utilities; parking
lot sweeping, sealing, patching and restriping; public liability and property
damage insurance, fire and extended coverage insurance, and rent interruption
insurance; supplies, materials, tools, parts, and equipment; equipment rental
charges; bookkeeping, accounting, legal and other professional charges and
expenses; fees for permits and licenses; administrative expenses; taxes other
than real property taxes; service and maintenance contracts; signage;
landscaping; and a management fee of 10% of the other Project operating costs.
The cost of capital improvements incurred by Landlord to comply with the
Americans with Disabilities Act or other law shall be amortized over its useful
life and the amortization amount included in operating costs.  Neither the
Building's operating cost nor the Project's operating cost shall include the
replacement of or structural repairs to the roof or the exterior walls, repairs
to the extent covered by warranty or insurance proceeds, alterations within
leased premises of other tenants for their sole or principal benefit, legal or
professional fees incurred by Landlord incurred in negotiating or enforcing
leases of other tenants or incurred for purposes not benefiting all tenants of
the Project.  On the first day of each month Tenant shall pay a monthly advance
charge on account of Tenant's pro rata share of the Building's operating cost
and of the Project's operating cost in excess of the Expense Stop.  The amount
of the monthly charge shall be established by Landlord and may be adjusted from
time to time by Landlord to reflect the actual cost.  Within 120 days after the
end of each fiscal year as established for the Project by Landlord, Landlord
shall provide to Tenant a reasonably detailed summary of the actual operating
costs showing Tenant's actual share and the amount by which Tenant has overpaid
or underpaid.  Any overpayment shall be credited to Tenant's operating costs
account no later than the beginning of the next monthly period.  Any deficiency
shall be payable within ten days after receipt of the statement.  In the
alternative, Landlord may, at its option during all or part of the Term of the
Lease, bill Tenant for its pro rata share of operating cost in excess of the
Expense Stop, in arrears, based on actual costs as they are incurred, in which
case Tenant shall pay the invoice within ten days after receipt.

                                       8
<PAGE>

     7.2  Allocation. Landlord may allocate the Project's operating cost on the
          ----------
basis of floor area throughout the entire Project, in which case Tenant's pro
rata share shall be the proportion that the rentable area of the Premises bears
to the total rentable area of all rentable space in the Project, or Landlord may
first allocate portions of the Project's operating cost, in a manner selected by
Landlord in good faith in its reasonable discretion, among different buildings
or groups of buildings in the Project, in which case Tenant's pro rata share of
the Project's operating costs shall be the proportion that the rentable area of
the Premises bears to the total rentable area of the building or group of
buildings in which the Premises is located and to which the portion of the
operating costs of the Project has been allocated. In the latter case, Tenant
shall be liable only for its share of the Project's operating costs allocated to
the building or group of buildings that includes the Premises. Tenant's pro rata
share of the Building's operating costs shall be that proportion that the
rentable area of the Premises bears to the total rentable area of all rentable
area in the office building or associated group of buildings in which the
Premises are located. The operating cost for the fiscal year in which this Lease
commences or terminates shall be apportioned so that Tenant shall not be
responsible for costs that relate to periods prior to or subsequent to the Term
of this Lease except any period of holding over. Landlord and Tenant agree that
as of the date of this Lease Tenant's pro rata share is 5.26% (calculated on the
basis of 12,321 rentable square feet in the Premises and 233,821 rentable square
feet in the Project at the date of execution of this Lease).

     7.3  Gross-up. The Building's operating cost shall be adjusted to reflect
          --------
level of occupancy such that the cost of services provided to tenants, if any,
which are not provided to vacant space or are provided to vacant space to a
reduced degree, are distributed among those tenants enjoying the services.  The
adjustment shall be made based upon sound accounting principles to project costs
at a 95% occupancy level whenever the actual occupancy rate is less than 95%.
In no event shall the adjustment result in reimbursement to Landlord of an
amount in excess of actual costs incurred by Landlord.

ARTICLE 8. CONSTRUCTION

     8.1  Delivery. If delivery of possession of the Premises to Tenant is
          --------
delayed beyond the anticipated Commencement Date because of a delay in the
completion of Landlord's Work or because of a failure of an existing tenant to
surrender possession of the Premises to Landlord, then this Lease shall remain
in full force and effect, Landlord shall not be liable to Tenant for any damage
occasioned by the delay, and the Commencement Date shall be changed to the date
actual delivery of possession to Tenant is effected. Notwithstanding the
foregoing, if delivery of possession is delayed more than 60 days after the
anticipated Commencement Date as set forth in Section 1.1, Tenant, by written
notice to Landlord, may terminate this Lease prior to taking possession, and
upon such termination any Security Deposit shall be refunded and both Landlord
and Tenant shall be released of all further obligation hereunder.

     8.2  Condition. Landlord, at Landlord's sole cost and expense shall
          ---------
construct in a workmanlike manner and in accordance with all applicable Laws the
work ("Landlord's

                                       9
<PAGE>

Improvements") described on Exhibit C. Landlord has no obligation to design or
construct improvements or to make alterations in the Premises except as
specifically set forth in Exhibit C. Any changes in Exhibit C shall be subject
to approval by both Landlord and Tenant. Any defects in the alterations or
additions constructed by Landlord in accordance with Exhibit C shall
automatically be waived unless specified in a written punchlist delivered to
Landlord within ten days after Tenant takes possession. Landlord shall promptly
correct all defects set forth in the punchlist.

     8.3  Tenant's Work. Landlord shall permit Tenant and Tenant's
          -------------
representatives and contractors to enter the Premises prior to the Commencement
Date in order that Tenant may do such work as may be required by Tenant make the
Premises ready for Tenant's use and occupancy (excluding Landlord's Work)
("Tenant's Work").  Such permission is conditioned upon Tenant and its agents,
contractors, employees and invitees not interfering with Landlord's work in the
Premises, if any, and shall be subject to all the terms of this Lease except
Tenant's obligation to pay Base Rent.  Tenant acknowledges and agrees that
Landlord shall not be liable in any way for any injury, loss or damage which may
occur to Tenant, its agents, contractors, employees or invitees or to Tenant's
work and installations made in the Premises, all of the same being at Tenant's
sole risk.  Landlord and Tenant agree to reasonably cooperate in accomplishing
Landlord's and Tenant's Work concurrently and will coordinate all Work so as to
minimize interference with one another.  All costs of construction of Tenant's
Work are to be borne by Tenant, including, without limitation, the costs of
moving curbs, driveways, landscaping, and sidewalks necessitated by the design
of Tenant's equipment yard.

     8.4  Alterations and Approval. Promptly after delivery of the Premises,
          ------------------------
Tenant shall commence construction of Tenant's Work, at Tenant's sole cost and
expense, by delivering to Landlord plans and specifications (the "Design Plans")
for such work, for Landlord's approval and consent, which shall not be
unreasonably withheld or delayed, except that Landlord reserves the right to
withhold consent in Landlord's sole discretion for Tenant's Work affecting the
structure, safety, efficiency or security of the Building in which the Premises
is located, the systems ("Systems") and equipment ("Equipment") which affect the
Premises and other space in the Building or Project, or the appearance of the
Premises from any common or public areas.  At the time Tenant submits the Design
Plans to Landlord, Tenant shall provide Landlord with notice of whether Tenant's
Work will involve or affect any Hazardous Materials, whether such materials are
customary and usual based on standard industry practices, and all other
reasonable details relating thereto.

     8.5  Approval Conditions. Landlord reserves the right to impose
          -------------------
requirements as a condition of such consent or otherwise in connection with
Tenant's Work, including requirements that Tenant: (i) submit for Landlord's
information the names, addresses and background information concerning all of
the major architects, engineers, contractors, subcontractors and suppliers
Tenant proposes to use, (ii) obtain and post permits, (iii) submit conditional
and final lien waivers in compliance with Arizona law for all architects,
engineers, contractors, subcontractors, and suppliers performing the Work or
Tenant Work, (iv) permit Landlord or its representatives, upon reasonable
notice, to inspect Tenant's Work or the Work at reasonable times, and (v) comply
with such other reasonable requirements as Landlord may

                                       10
<PAGE>

impose concerning the manner and times in which Tenant's Work shall be done.
Landlord reserves the right to designate and supervise as Landlord sees fit, the
architects, engineers, contractors, subcontractors, and suppliers who will
design and perform Tenant's Work and supply materials affecting the operation of
Building systems and equipment, floor slabs or other load-bearing structural
elements. If requested in writing by Landlord, Tenant shall provide Landlord
with a copy of the complete construction drawings for the build-out and
installation of the Premises.

     8.6  Performance of Tenant's Work. Tenant shall use Tenant's best efforts
          ----------------------------
not to unreasonably disrupt other tenants of the Building during the build-out
and installation of Tenant's Work.  Tenant's Work shall be performed: (i) in a
thoroughly first class, professional and workmanlike manner, (ii) only with
materials that are new, high quality, and free of material defects, (iii)
strictly in accordance with Design Plans approved by Landlord in advance in
writing, (iv) so as not to adversely affect the Systems and Equipment or the
structure of the Building or the Project, (v) diligently to completion and so as
to avoid any unreasonable disturbance, disruption or inconvenience to other
tenants and the operation of the Project, and (vi) in compliance with all laws,
the Code and other provisions of this Lease, and such other reasonable
requirements as Landlord may impose concerning the manner and times in which
such Tenant's Work shall be done.  Any floor, wall or ceiling coring work or
penetrations or use of noisy or heavy equipment which may unreasonably interfere
with the conduct of business by other tenants at the Project shall, at
Landlord's option, be performed at times other than Landlord's normal business
hours at Tenant's sole cost.  If Tenant fails to perform Tenant's Work as
required herein or the materials supplied fail to comply herewith or with the
specifications approved by Landlord, and Tenant fails to cure such failure
within five (5) business days after notice by Landlord (except notice shall not
be required in emergencies), Landlord shall have the right to stop Tenant's Work
until such failure is cured (which shall not be in limitation of Landlord's
other remedies).

     8.7  Liens. Tenant shall pay all costs for Tenant's Work when due. Tenant
          -----
shall keep the Project and Premises free from any mechanic's, materialmen's,
architect's, engineer's or similar liens or encumbrances, and any claims
therefor, in connection with any of Tenant's Work.  Tenant shall remove any
claim, lien, or encumbrance of record relating to, caused by or resulting from
Tenant's Work, by bond or otherwise within fifteen (15) days after notice by
Landlord.  If Tenant fails to do so, Landlord may pay the amount (or any portion
thereof) or take such other action as Landlord deems necessary to remove such
claim, lien, or encumbrance, without being responsible for investigating the
validity thereof.  The amount so paid and costs incurred by Landlord shall be
deemed additional rent under this Lease payable within 30 days after demand,
without limitation as to other remedies available to Landlord.  Nothing
contained in this Lease shall authorize Tenant to do any act which shall subject
Landlord's title to, or any lender's interest in, the Project or Premises to any
such claims, liens, or encumbrances, whether claimed pursuant to statute or
other law or express or implied contract.

     8.8  Additional Installations. Tenant shall have the right, subject to the
          ------------------------
provisions of this Article 8 except section 8.3, and with prior written notice
to Landlord and Landlord's written permission, which shall not be unreasonably
withheld, to install, operate, maintain,

                                       11
<PAGE>

repair, and test the following equipment. Installation, operation, maintenance,
repair, and testing of the below equipment will be at Tenant's sole expense and
in compliance with all applicable laws. The equipment (with the exception of the
equipment described in subsection 8.8(d), which will be in locations to be
determined in the future) may be installed only in the locations set forth in
Exhibit I attached hereto. Installation of the equipment shall not be commenced
until Tenant has received Landlord's written approval of the location of each
piece of equipment and the screening of each piece of equipment from view, as
well as approval by any governmental planning or building authority with
jurisdiction over the Project ("Governmental Approval"). Tenant will submit all
documents and applications necessary to obtain the Governmental Approval within
2 weeks after the date this Lease is executed. If, despite diligent efforts,
Tenant is unable to obtain the Governmental Approval within 60 days after the
date of this Lease, Tenant may, upon 10 days' notice to Landlord, terminate this
Lease, in which case neither party shall have any further obligation hereunder.
If Tenant does not give notice to Landlord under this provision within 10 days
after expiration of the 60 day period, Tenant will be deemed to have waived the
foregoing right of termination.

               (a) Rooftop air conditioning and ventilation units and two
     refrigeration chilling towers and associated pipes, conduits, and ductwork
     outside the Premises in the Project.

               (b) Backup generator (1250 kw/480 volts), fuel tank, and
     associated electrical components outside the Premises in the Project. Until
     a permanent generator is installed, Tenant shall have the right to install
     and operate a temporary generator in an area adjacent to the Premises to
     protect Tenant's business from risks attendant to power failure in the
     Building.

               (c) One GPS antenna, one local 2 way antenna, and no more than 2
     satellite disks or dishes, each not more than 39" in diameter, on the roof
     of the Building.

               (d) Tenant may install two service vaults, on the side of the
     Building, by trenching in areas as required for such installation,
     including parking lots, sidewalks, curbing, and other common areas, so long
     as Tenant refills the trenches and replaces or repairs concrete or paving
     after completing the installation. Tenant will have the right to connect
     its conduit into the Building and the Premises through penetrations in the
     exterior of the Building in locations selected by Tenant (subject to
     Landlord approval). Landlord will allow Tenant underground and any other
     necessary access in, to, and about the Building to the public rights of way
     for installation of Tenant's telecommunications conduit to the Premises.
     Tenant may install conduit to construct Tenant's fiber optic system and
     Tenant may install two diverse paths for up to two four inch conduits from
     the Premises to two separate penetrations in the foundation of the Building
     and then to the property line, but in any instance where trenching is
     required outside the Premises Tenant will wherever reasonably feasible use
     a common trench with other tenants and occupants of the Project so as to
     minimize trenching in the Project, and Tenant will in good faith cooperate
     with Landlord and such other tenants or occupants in planning for and using
     a common trench.

                                       12
<PAGE>

     8.9  Provisions Concerning Installations on and Access to Roof.  The weight
          ---------------------------------------------------------
and size of any installations on the roof of the Building are subject to
Landlord's reasonable approval. All costs of installation and maintenance of
installations on the roof shall be borne by Tenant. Any such installation shall:
(i) be done in a manner that does not affect coverage or protection afforded by
any roof warranty or maintenance contract; (ii) not result in any penetration of
the roof membrane; (iii) be consistent with structural support requirements, as
reasonably reviewed and approved by Landlord; (iv) be performed under Landlord's
supervision in accordance with approved plans; (v) be screened from view at
ground level from any portion of the Project common areas or neighboring
properties by screening approved by Landlord; and (vi) be maintained, serviced,
powered, and repaired at Tenant's sole cost and expense. Landlord shall be
entitled to establish reasonable restrictions on roof access as necessary to
protect coverage or protection afforded by any roof warranty or maintenance
contract. Notwithstanding anything to the contrary in this Lease, Landlord shall
be released of all liability and responsibility for, and Tenant shall be solely
responsible for, all costs and expenses, including but not limited to, those
arising from roof leaks, resulting from the installation, maintenance, use or
operation of the satellite dish or related equipment.

ARTICLE 9. REPAIR/MAINTENANCE/UTILITIES

     9.1  Landlord's Responsibilities.  Landlord shall maintain, at its sole
          ---------------------------
cost and expense, the plate glass, doors, and all heating, air conditioning,
ventilation, electrical and plumbing systems serving the Premises, in good
condition and repair. Landlord shall, at its sole cost and expense, repair and
maintain the common facilities, the roof and structural elements of the
Premises, and all utility lines below grade or in the common facilities.
Landlord shall not be responsible to make any non-routine repairs or perform any
non-routine maintenance unless written notice of the need for such repairs or
maintenance is given by Tenant. In the event Tenant or Tenant Parties misuse or
intentionally damage the Premises or improvements contained therein, Landlord
shall be reimbursed by Tenant for the costs thereof, including a ten percent
administrative fee for such work, within ten days after written request
therefor, accompanied by evidence reasonably supporting such costs. Except in
the case of a fire or casualty as provided in Article 13, there shall be no
abatement of rent and no liability of Landlord by reason of any entry to the
Premises, interruption of services or facilities, temporary closure of common
facilities, or temporary interference with Tenant's business arising from the
making of any repairs or maintenance.

     9.2  Tenant's Obligations.  Tenant shall maintain the interior of the
          --------------------
Premises and the improvements installed therein by Tenant in good condition and
repair. If Tenant does not comply with its obligations under this Article,
Landlord may, but need not, make such repairs and replacements or obtain
maintenance and service contracts, and Tenant shall pay Landlord the cost upon
demand. Tenant may test Tenant's generator only at times reasonably approved in
advance, in writing, by Landlord.

     9.3  Janitorial Services.  Tenant shall be responsible for providing
          -------------------
janitorial services for the Premises consistent with that provided for
comparable office space located in the Phoenix metropolitan area.

                                       13
<PAGE>

     9.4  Utilities.  All utility charges for the Premises shall be separately
          ---------
metered or submetered. Tenant shall pay directly to any public utility for any
utility which it uses in the Premises that is separately metered by such utility
and shall pay to Landlord, prior to delinquency, for any utilities supplied to
the Premises that are measured by a submeter, which is part of a Master Meter
for the Project, or portion thereof. The foregoing allocation shall not include
amounts attributable to special rates or factors not applicable to Tenant. With
any invoice for payment of Tenant's share of submetered utilities, Landlord
shall include a copy of the bill from the utility for the time period for which
Tenant is being invoiced.

ARTICLE 10.  TENANT'S WORK, ALTERATIONS AND PERSONAL PROPERTY

     Tenant shall not commence Tenant's Work or any alterations, additions or
improvements to the Premises, including signs, without the prior written consent
of Landlord, which shall not be unreasonably conditioned, withheld, or delayed.
All such Tenant's Work, alterations, additions, or improvements shall be made or
done in accordance with plans and specifications approved by Landlord. Landlord
may, if in Landlord's reasonable judgment the circumstances require it,
condition its consent upon provision of a payment bond, in amount and form
reasonably satisfactory to Landlord, covering the work to be done by Tenant's
contractor. Any part of Tenant's Work, alterations, additions or improvements to
the Premises, including signs, but not including movable furniture, trade
fixtures, equipment, and co-located equipment and specifically excluding the
items described on Exhibit G hereto, shall, at Landlord's option, at the
termination or expiration of this Lease or of Tenant's right to possession,
become a part of the realty and belong to Landlord. Except as specifically set
forth in Article 8 above, Tenant shall not install any antenna, satellite dish
or other fixture or equipment on the roof or in the common facilities. In the
event Landlord consents to the making of any alterations, additions or
improvements to the Premises by Tenant, they shall be made by Tenant at Tenant's
sole cost and expense. Any contractor or person selected by Tenant to perform
work within the Premises must first be approved in writing by Landlord. Tenant
shall not permit any mechanic's or materialmen's lien to stand against the
Premises for any labor or materials provided to the Premises by any contractor
or other person hired or retained by Tenant. Tenant shall cause any such lien to
be discharged (by bonding or otherwise) within ten days after demand by
Landlord, and if it is not discharged within ten days, Landlord may pay or
otherwise discharge the lien and immediately recover all amounts (including
attorney's fees and costs) so expended from Tenant as additional rent. Tenant's
Work and all alterations and improvements shall be constructed of new materials,
in a good workmanlike manner, in accordance with applicable laws and codes,
including without limitation the Americans with Disabilities Act. Upon the
expiration or sooner termination of the Term of this Lease or of Tenant's right
to possession, Tenant shall, upon demand by Landlord, at Tenant's sole cost and
expense, forthwith remove any alterations, additions or improvements made by
Tenant, designated by Landlord to be removed, and Tenant shall, forthwith at its
sole cost and expense, repair any damage to the Premises caused by such removal
and restore the Premises to a condition reasonably comparable to their condition
at the commencement of the Lease (reasonable wear and tear excluded).

ARTICLE 11.  CERTAIN RIGHTS RESERVED BY LANDLORD

                                       14
<PAGE>

     Landlord shall have the right:

          (a) To change the Project's name or street address;

          (b) To enter the Premises either personally or by a designated
representative upon 24 hours prior notice to Tenant for the purpose of
examination or inspection (except in the event of an emergency when no notice
shall be required) and in showing the Premises to prospective lenders or
purchasers;

          (c) To enter the Premises either personally or by a designated
representative upon 24 hours prior notice to Tenant during the last six months
of the Initial Term or Renewal Period, as the case may be, (if Tenant has not
elected to exercise its renewal rights), for purposes of showing the Premises to
prospective tenants;

          (d) To grant to anyone the exclusive right to conduct any business or
render any service in or to the Project, provided such exclusive right shall not
operate to exclude Tenant from the use expressly permitted under Article 4;

          (e) To retain at all times and to use, subject to the foregoing
limitations, keys to all doors within and into the Premises. No locks shall be
changed without the prior written consent of Landlord except that Tenant may
install an encoded key card security and lock system so long as Tenant provides
Landlord with an entry key for use in accordance with Landlord's rights and
obligations under this Lease. This provision shall not apply to Tenant's safes,
or other areas maintained by Tenant for the safety and security of monies,
securities, negotiable instruments or like items; and

          (f) To restrict or prohibit vending or dispensing machines of any kind
in or about the Premises, except to the extent such machines are used solely for
the personal use of Tenant, its employees, licensees and agents and are not
visible from the common facilities.

ARTICLE 12.  DAMAGE TO PROPERTY; INJURY TO PERSONS; INSURANCE

     12.1  Tenant's Responsibility.  Tenant shall defend, indemnify and hold
           -----------------------
Landlord harmless from any and all claims arising from Tenant's use of the
Premises or the conduct of its business or from any activity, work, or thing
done, permitted or suffered by Tenant in or about the Premises, regardless of
fault or negligence which is imputed to Landlord as the owner of the Project but
which involves a condition of the Premises within the control of Tenant, its
employees or contractors. Tenant shall further defend, indemnify and hold
Landlord harmless from any and all claims arising from any breach or default in
the performance of this Lease by Tenant, or arising from any act or negligence
of Tenant, or of its agents or employees, and from all costs, attorneys' fees,
expenses and liabilities incurred as a result of any such claim. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to persons, in, upon, or about the Premises from
any cause, and Tenant hereby waives all claims in respect thereof against
Landlord, unless caused by active negligence of Landlord, its agents or
employees. Landlord shall not be liable for loss of or damage to any property by
theft or otherwise, or for any injury or

                                       15
<PAGE>

damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water or rain which may leak from any part of any
building or from the pipes, appliances or plumbing works therein, or from the
roof, street or subsurface, or from any other place resulting from dampness or
any other cause whatsoever. Landlord shall not be liable for interference with
the natural light. Tenant shall give immediate notice to Landlord of any fire,
accident or defect discovered with the Premises or the Building. Tenant
acknowledges that it can protect itself against any or all of the foregoing
risks by procuring appropriate insurance.

     12.2  Tenant's Insurance.  Throughout the Term of this Lease Tenant shall
           ------------------
maintain ISO Special Form property insurance, including building and machinery
comprehensive form, in an amount equal to one hundred percent of the replacement
value of Tenant's trade fixtures, equipment, and other personal property located
on the Premises together with such other insurance as may be reasonably required
by Landlord's lender or by any government agency. All proceeds of Tenant's
policy of property insurance shall be payable to Tenant, and all proceeds of
policies of insurance procured by Landlord shall be payable to Landlord. Tenant
hereby waives any right to recovery from Landlord and Landlord hereby waives any
right of recovery from Tenant for any loss or damage (including consequential
loss) resulting from any of the perils insured against in the special form
property insurance policy with extended coverage endorsement. During the Term of
this Lease, Tenant shall, at Tenant's expense, maintain commercial general
liability insurance against claims for personal injury, death or property damage
occurring in, upon or about the Premises in an amount not less than $5,000,000
per occurrence and $5,000,000 annual aggregate (with a separate general
aggregate limit for the Premises), automobile liability insurance with a
combined single limit or equivalent in an amount not less than $2,000,000, and
workers' compensation insurance as provided by law. Tenant's policies of
liability insurance shall name Landlord as an additional insured, shall provide
coverage for blanket contractual liability, premises, products/completed
operations, and personal and advertising injury coverage. Tenant's policies of
insurance shall be primary and not contributory as to other insurance purchased
by or available to Landlord. A certificate of the insurance required to be
carried by Tenant under this Article 12 shall be delivered to Landlord prior to
the Commencement Date and thereafter at least thirty days prior to the
expiration of the then current policies. Upon the written request of Landlord,
copies of such policies shall also be delivered to Landlord. Each policy shall
contain an endorsement prohibiting cancellation or non-renewal without at least
thirty days prior notice to Landlord.

ARTICLE 13.  FIRE AND CASUALTY

     Except as hereafter provided, if the Premises are wholly or partially
destroyed or damaged by fire or other casualty, Landlord shall restore the
Premises with reasonable diligence; provided, however, that Landlord shall have
no obligation to restore improvements not originally provided by Landlord or to
replace any of Tenant's fixtures, furnishings, equipment or personal property.
Landlord need not commence repairs until insurance proceeds are available.
Proceeds of insurance payable with respect to a fire or other casualty shall be
received and held by Landlord. In the event the Premises are destroyed or
damaged by any fire or casualty not covered by the insurance maintained by
Landlord or to the extent of not less than twenty-five percent of the
replacement cost thereof, or if the fire or casualty

                                       16
<PAGE>

occurs within the last year of the Term of the Lease, then Landlord or Tenant
shall have the option to terminate this Lease by giving notice to the other
party within sixty days after the occurrence of such damage or destruction, in
which case Landlord shall retain all insurance proceeds with respect to the
Premises as its own property. If Landlord does not terminate this Lease as
provided above, this Lease shall continue in full force and effect, but Base
Rent shall be equitably abated as determined in Landlord's reasonable discretion
until the restoration is substantially complete. The provisions of this Lease
shall govern when this Lease shall be terminable as a result of a fire or
casualty, and no other rule or statute on the subject shall apply.
Notwithstanding anything in this Article 13, if, due to fire or other casualty,
Tenant is unable to use the Premises for conduct of Tenant's business and the
fire or casualty damage, in the parties' reasonable estimation, cannot be
repaired and the Premises restored to Tenant within 60 days after the date of
the casualty, Tenant may terminate this Lease by notice to Landlord within 30
days after the date of the casualty.

ARTICLE 14.  CONDEMNATION

     In the event any portion of the Premises shall be appropriated or taken
under the power of eminent domain which Tenant determines in its reasonable
judgment renders the Premises unusable by Tenant, either Landlord or Tenant
shall have the right to terminate this Lease, as of the date Tenant is required
to vacate a portion of the Premises, by giving notice in writing of such
election within thirty days after receipt by Tenant from Landlord of written
notice that Tenant's Premises have been or will be so appropriated or taken. If
neither Landlord nor Tenant elects to so terminate this Lease, or in the event
no portion of the Premises shall be appropriated under the power of eminent
domain by any public or quasi-public authority, then Landlord shall restore the
Premises to the extent practicable to their condition prior to the taking, and
thereafter the Base Rent shall be reduced on an equitable basis, taking into
account the relative value of the portion taken as compared to the portion
remaining. All awards or compensation for any taking of any part of the
Premises, whether payable to Landlord or Tenant, shall be the sole property of
Landlord. Notwithstanding anything to the contrary contained herein, Tenant
shall be entitled to receive any portion of an award of compensation relating to
damage to or loss of trade fixtures or other personal property belonging to
Tenant. Landlord shall be under no obligation to restore or replace Tenant's
furnishings, trade fixtures, equipment and personal property. For the purposes
of this Article 14, a voluntary sale or conveyance in lieu of condemnation shall
be deemed an appropriation or a taking under the power of eminent domain.

ARTICLE 15.  ASSIGNMENT AND SUBLETTING; SALE BY LANDLORD

     15.1  Transfer by Tenant.  Tenant shall not, either voluntarily or by
           ------------------
operation of law, assign, hypothecate or transfer this Lease, or sublet the
Premises or any part thereof, or permit the Premises or any part thereof to be
occupied by anyone other than Tenant or Tenant's employees, without Landlord's
prior written consent, which shall not be unreasonably withheld, provided the
proposed assignee or sublessee is reasonably satisfactory to Landlord as to
credit and character and will occupy the Premises for purposes not inconsistent
with Tenant's purposes as stated in Article 4. Landlord shall be under no
obligation to give or withhold consent until after all information reasonably
required by Landlord with respect to

                                       17
<PAGE>

the identity, background, experience and financial worth of the proposed
assignee, transferee, or subtenant has been provided to Landlord. In the event
Landlord fails to respond to Tenant's request to make an assignment or sublease
of its interest hereunder within thirty days after receipt of all the reasonably
requested information has been delivered to Landlord, it shall be deemed that
Landlord has not consented to the assignment or sublease. No hypothecation,
assignment, sublease or other transfer to which Landlord has consented shall be
effective for any purpose until such time as fully executed documents of such
transaction have been provided to Landlord, and, in the case of an assignment,
the assignee has attorned directly to Landlord, and in the case of a sublease,
the sublessee has acknowledged that the sublease is subject to all of the terms
and conditions of this Lease. Any assignment, mortgage, transfer or subletting
of this Lease which is not in compliance with the provisions of this Article 15
shall be voidable and shall, at the option of Landlord, terminate this Lease.
The consent by Landlord to an assignment or subletting shall not be construed as
relieving Tenant from obtaining the express written consent of Landlord to any
further assignment or subletting or as releasing Tenant from any liability or
obligation hereunder, whether or not then accrued. Except as provided in this
Article, this Lease shall be binding upon and inure to the benefit of the
successors and assigns of the parties.

     15.2  Splitting Profits.  In the event Landlord has approved an assignment
           -----------------
or sublease of this leases as hereinabove provided, then Tenant shall pay to
Landlord when and as received by Tenant one half of any consideration received
by Tenant on account of any assignment or sublease to which Landlord's consent
is required hereunder. Such payment to Landlord shall be equal to fifty percent
of any consideration received by Tenant in excess of the Base Rent and other
charges then payable by Tenant hereunder, after Tenant has recovered in full
Tenant's reasonable costs, fees and expenses incurred in connection with such
assignment or sublease, but limited to reasonable brokerage commissions,
reasonable costs of architectural and engineering fees, and leasehold
improvements required by the assignee or sublessee.

     15.3  Sale of Property.  In the event of a sale or conveyance by Landlord
           ----------------
of the Premises, Landlord shall be relieved of all future liability for the
covenants or conditions, express or implied, in favor of Tenant, and Tenant
shall look solely to Landlord's successor in interest. This Lease shall not be
affected by any sale, and Tenant shall attorn to the successor-in-interest. If
any Security Deposit has been made by Tenant, the successor-in-interest shall be
obligated to return it in accordance with the terms hereof and Landlord shall be
discharged from any further liability in reference thereto.

ARTICLE 16.  ESTOPPEL CERTIFICATE

     16.1  Certification.  Tenant shall at any time and from time to time upon
           -------------
not less than fifteen days' prior written notice from Landlord execute,
acknowledge and deliver to Landlord a statement in writing (i) certifying that
this Lease is unmodified and in full force and effect (or if modified, stating
the nature of such modification and certifying that this Lease, as so modified,
is in full force and effect) and the dates to which the rental and other charges
are paid in advance, if any; (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults if they are claimed; and (iii) certifying such other matters
relating to this Lease as Landlord may

                                       18
<PAGE>

reasonably request. Any such statement may be relied upon by any prospective
purchaser or encumbrancer of all or any portion of the real property of which
the Premises are a part.

     16.2  Failure to Provide.  Tenant's failure to deliver a statement within
           ------------------
the fifteen day time period prescribed above shall be conclusive upon Tenant (i)
that this Lease is in full force and effect, without modification except as may
be represented by Landlord, (ii) that there are no uncured defaults in
Landlord's performance, and (iii) that not more than one month's rental has been
paid in advance.

ARTICLE 17.  LANDLORD'S REMEDIES

     17.1  Events of Default.  The following shall constitute events of default:
           -----------------

           (a)  Tenant's failure to pay rent or any other amount due under this
     Lease within five days after receipt of a notice of nonpayment.

           (b)  Tenant's failure to execute, acknowledge and return an estoppel
     certificate which complies with the requirements of Article 16 or a
     subordination agreement which complies with the requirements of Article 19,
     within fifteen days after receipt of written request.

           (c)  Tenant's failure to perform any other obligation under this
     Lease within fifteen days after notice of nonperformance; provided,
     however, that if the breach is of such a nature that it cannot be cured
     within fifteen days after receipt of written request, Tenant shall be
     deemed to have cured if cure is commenced promptly (which, in no event
     shall be later than fifteen days following notice of nonperformance) and
     diligently pursued to completion; and provided further, that in the event
     of a breach involving an imminent threat to health or safety, Landlord may
     in its notice of breach reduce the period for cure to such shorter period
     as may be reasonable under the circumstances.

     17.2  Remedies.  Upon the occurrence of an event of default, Landlord, at
           --------
any time thereafter without further notice or demand, may exercise any one or
more of the following remedies concurrently or in succession:

          (a)  Terminate Tenant's right to possession of the Premises by legal
     process or otherwise, with or without terminating this Lease, and retake
     exclusive possession of the Premises.

          (b)  From time to time relet all or portions of the Premises, using
     reasonable efforts to mitigate Landlord's damages. In connection with any
     reletting, Landlord may relet for a period less than or extending beyond
     the Term of this Lease and may make alterations or improvements to the
     Premises without releasing Tenant of any liability. Upon a reletting of all
     or substantially all of the Premises, Landlord shall be entitled to recover
     all of its then prospective damages for the balance of the Term of the
     Lease measured by the difference between amounts payable under this Lease
     and the anticipated net proceeds of reletting. In no

                                       19
<PAGE>

     event shall Tenant be entitled to receive any amount representing the
     excess of avails of reletting over amounts payable hereunder.

          (c)  From time to time recover accrued and unpaid rent and damages
     arising from Tenant's breach of the Lease, regardless of whether the Lease
     has been terminated, together with applicable late charges and interest at
     the rate of 18% per annum or the highest lawful rate, whichever is less.

          (d)  Recover all reasonable attorneys' fees and other expenses
     incurred by Landlord in connection with enforcing this Lease, recovering
     possession and collecting amounts owed.

          (e)  Perform the obligation on Tenant's behalf and recover from
     Tenant, upon demand, the entire amount expended by Landlord plus 15% for
     handling, supervision, and overhead.

          (f)  Terminate this Lease for any breach and recover from Tenant all
     reasonable damages it may incur by reason of such breach, including the
     reasonable cost of recovering the Premises, and including the worth at the
     time of such termination of the excess, if any, of the amount of Base Rent
     and charges equivalent to rent reserved in this Lease for the remainder of
     the stated Term over the then reasonable rental value of the Premises for
     the remainder of the stated Term, all of which amounts shall be immediately
     due and payable from Tenant to Landlord.

          (g) Pursue any other remedies available at law or in equity.

     17.3  Subleases.  Upon a termination of Tenant's right to possession,
           ---------
whether or not this Lease is terminated, subtenancies and other rights of
persons claiming under or through Tenant: (i) shall be terminated or (ii)
Tenant's interest shall be assigned to Landlord, except that this provision
shall not affect or alter any rights of Tenant's asset based lender pursuant to
an executed and recorded Landlord Waiver. Landlord may separately elect
termination or assignment with respect to each such subtenancy or other matter.

ARTICLE 18.  NOTICES

     Notices required or permitted hereunder shall be given in writing,
personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, or by a nationally recognized overnight courier
service (e.g., Federal Express, DHL) at the addresses set forth in Sections L
and M of the Basic Lease Provisions or at any other address designated by
Landlord or Tenant, in writing, and any such notice of communication shall be
deemed to have been given as of the date of delivery, if hand- or courier-
delivered (including Federal Express or other established overnight service
which obtains a signed receipt upon delivery), or as of three days after the
date of mailing if mailed certified, return receipt requested, postage prepaid.

ARTICLE 19.  SUBORDINATION/QUIET ENJOYMENT

                                       20
<PAGE>

     19.1 Subordination. Landlord expressly reserves the right at any time to
          -------------
place liens and encumbrances on and against the Premises and the Project,
superior in lien and effect to this Lease and the estate created hereby, and
Tenant shall execute upon request subordination agreements to that effect;
provided however, that the subordination agreement shall provide that the holder
of the encumbrance will recognize Tenant's rights, notwithstanding any
foreclosure of the lien or encumbrance and also provided that any subordination
will not affect the rights of Tenant's asset based lender pursuant to a
previously executed and recorded Landlord Waiver.  Landlord shall obtain a non-
disturbance agreement in favor of Tenant from Landlord's lenders, in
substantially the lender's standard form, within 30 days after execution of this
Lease by Tenant.

     19.2 Quiet Enjoyment. Subject to the other provisions of this Lease and so
          ---------------
long as Tenant faithfully pays all rent and additional rent and other amounts
owed under this Lease and performs and complies with the obligations and
conditions to be performed and complied with by Tenant under this Lease, Tenant
shall enjoy and have throughout the Term of the Lease the quiet and undisturbed
possession of the Premises.  Tenant acknowledges that Landlord may conduct a
remodeling of portions of the Project during the Term of this Lease, including
among other things the construction of upper level mall areas, the possible
enclosing of some of the mall areas, the demolition of certain buildings, the
construction of a new parking structure and other buildings, the realignment of
interior roadways and access routes to the Project.  Tenant agrees that provided
Tenant continues to have parking available in the Project, access to the Project
and Premises, and use of the Premises that such activities shall not be deemed a
breach of the foregoing covenant.

     19.3 Waiver of Landlord's Lien. Landlord hereby expressly waives any lien
          -------------------------
under ARS (S)(S)33-361 and 362, and any other liens Landlord may have under law
or otherwise, in any of Tenant's furniture, fixtures, equipment, or other
personal property located in the Premises including all items described on
Exhibit G.  Within 20 days after written request, Landlord will confirm its
waiver and use Landlord's best efforts to cause the owner of any superior
leasehold to Landlord or any secured lender to confirm its waiver in writing in
substantially Tenant's lender's standard form.  Simultaneously with the
execution of this Lease, Landlord shall execute, acknowledge for recording, and
deliver to Tenant, a Landlord Waiver in substantially the form attached hereto
as Exhibit J, which has been joined in recordable form by any ground or other
lessor with respect to the Premises, together with a nondisturbance agreement in
recordable form satisfactory to Tenant from any ground or other lessor.
Simultaneously with execution of this Lease, Landlord shall deliver a recordable
joinder to such Landlord Waiver and a recordable Non-Disturbance Agreement
executed by any lender holding a secured interest superior to that of Tenant in
the Premises.

ARTICLE 20. BROKERS

     Both Landlord and Tenant represent that they have dealt with no other
broker than as set forth in Sections N and O of the Basic Lease Provisions in
connection with the negotiation, execution and delivery of this Lease (the
"Broker"). Landlord agrees to pay a reasonable commission to the Broker, subject
to the terms of a separate agreement between Landlord and

                                       21
<PAGE>

Broker. If any person other than the Broker shall assert a claim to a finder's
fee, brokerage commission or other compensation on account of alleged employment
as finder or broker or performance of services as a finder or broker in
connection with this transaction, the party against whom the finder or broker is
claiming shall indemnify and hold the other party harmless from and against any
such claim and all costs, expenses and liabilities incurred in connection with
such claim or any action or proceeding brought thereon, including but not
limited to attorneys' fees and court costs in defending such claim.

ARTICLE 21. RELOCATION {INTENTIONALLY OMITTED]

ARTICLE 22. SIGNAGE

     Landlord shall retain control over the exterior appearance of the Building
and the Premises as viewed from the public. Tenant shall not install or permit
to be installed any drapes, shutters, signs, lettering, decoration, advertising
or any items on the outside of the Premises or in the interior of the Premises
which are visible from the outside of the Premises and in any way adversely
alter the exterior appearance of the Building or the Premises. Notwithstanding
the foregoing, Tenant shall have the right at its sole cost and expense to
install signage on the south face of Building 3, provided Tenant obtains the
Landlord's prior written consent as to its size, color, design and location. All
letters or numerals on such signage shall be in accordance with the criteria
established by Landlord for the Project.

ARTICLE 23. GENERAL PROVISIONS

     23.1 Force Majeure. This Lease and the obligations of Tenant hereunder
          -------------
shall not be affected or impaired because Landlord is unable to fulfill any of
its obligations hereunder or is delayed in doing so if such inability or delay
is caused by reason of any strike, lockout, civil commotion, war-like
operations, invasion, rebellion, hostilities, military or usurped power,
sabotage, governmental regulations or controls, inability to obtain any
material, service or financing, Act of God or other cause beyond the control of
the Landlord.

     23.2 Rules. Tenant and its officers, agents, employees, and customers shall
          -----
comply with the rules and regulations established by Landlord and attached
hereto as Exhibit D and with such modifications and additions as Landlord may
hereafter make for the Project; provided, however, that such rules and
regulations shall not materially abrogate any right or privilege expressly
granted to Tenant in this Lease. Any violation of the rules and regulations
shall constitute a breach of this Lease.

     23.3 Captions. The article captions contained in this Lease are for
          --------
convenience only and shall not be considered in the construction or
interpretation of any provision.

     23.4 Integration. This Lease contains all of the agreements of the parties
          -----------
hereto with respect to any matter covered or mentioned in this Lease, and no
prior agreement or understanding pertaining to any matter shall be effective for
any purpose.  No provision of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.

                                       22
<PAGE>

     23.5  No Offer. Submission of this instrument for examination shall not
           --------
bind Landlord in any manner, and no lease or obligations of Landlord shall arise
until this instrument is signed and delivered by Landlord and Tenant.

     23.6  No Waiver. No waiver by Landlord of any provision of this Lease or
           ---------
any breach by Tenant hereunder shall be deemed to be a waiver of any other
provision hereof, or of any subsequent breach by Tenant of the same or any other
provision.  Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to render unnecessary the
obtaining of Landlord's consent to or approval of any subsequent act of Tenant,
whether or not similar to the act so consented to or approved.  No act or thing
done by Landlord or Landlord's agent during the Term of this Lease shall be
deemed an acceptance of a surrender of the Premises, and no agreement to accept
a surrender shall be valid unless in writing and signed by Landlord.  No
employee of Landlord or of Landlord's agents shall have any power to accept the
keys to the Premises prior to the termination of this Lease, and the delivery of
the keys to any employee shall not operate as a termination of the Lease or a
surrender of the Premises.

     23.7  Deadlines. Time is of the essence of this Lease.
           ---------

     23.8  No Accord or Satisfaction. No payment by Tenant or receipt by
           -------------------------
Landlord of a lesser amount than the rent and other sums due hereunder shall be
deemed to be other than on account of the earliest rent or other sums due, nor
shall any endorsement or statement on any check or accompanying any check or
payment be deemed an accord and satisfaction; and Landlord may accept such check
or payment without prejudice to Landlord's right to recover the balance of such
rental or other sum and the pursue any other remedy provided in this Lease.

     23.9  Non-Recourse Liability. If Landlord fails to perform any of its
           ----------------------
obligations under this Lease and, as a consequence of such nonperformance,
Tenant recovers a money judgment against Landlord, such judgment shall be
satisfied only out of Landlord's interest in the Project.  Landlord, its
affiliates, heirs, personal representatives, successors or assigns, shall have
no liability whatsoever for any deficiency, and no other assets of Landlord, its
affiliates, heirs, personal representatives, successors or assigns, shall be
subject to levy, execution or other enforcement procedures as a result of such
judgment.

     23.10 Governing Law; Choice of Forum. This Lease shall be deemed to be made
           ------------------------------
under, shall be construed in accordance with, and shall be governed by the
internal, substantive laws of the State of Arizona (without reference to choice
of law principles).  Any action brought to interpret, enforce, or construe any
provision of this Lease shall be commenced and maintained in the Superior Court
of the State of Arizona in and for the County of Maricopa (or, as may be
appropriate, in the Justice Courts of Maricopa County or in the United States
District Court for the District of Arizona if, but only if, the superior court
lacks or declines jurisdiction over such action).  The parties irrevocably
consent to jurisdiction and venue in such courts for such purposes and agree not
to seek transfer or removal of any action commenced in accordance with the terms
of this paragraph.

                                       23
<PAGE>

     23.11 Exhibit. All Exhibits and Riders referred to herein and attached
           -------
hereto are a part hereof.

     23.12 Successors and Assigns. This Lease shall be binding upon and inure to
           ----------------------
the benefit of the parties and their respective successors in interest and
permitted assigns, provided, however, Tenant may not assign this Lease except as
provided herein.

ARTICLE 24.  CO-LOCATION AND RIGHT TO SERVE OTHER TENANTS

     24.1  Co-location.  Tenant shall have the right to co-locate certain
           -----------
customer equipment in the Premises for the purpose of connecting such customer
equipment to Tenant's facilities in the provision of Tenant's telecommunication
services to customers.  Tenant shall defend, indemnify, and hold Landlord
harmless from, for, and against any and all claims of and from such customers
relating to such co-location.  So long as such co-location does not overburden
the Premises, by, for example, stressing or straining any Building mechanical,
structural, or electrical component, Tenant shall not be required to pay to or
share with Landlord any profits or co-location fees or charges Tenant receives
from the customers whose equipment is co-located.  No tenancy or subtenancy
shall be created by co-location of equipment allowed under this Article, nor
shall co-location under this provision be considered an assignment or transfer
under Article 15 of this Lease.

     24.2  Right to Serve Other Tenants.  Subject to the provisions of a License
           ----------------------------
Agreement in substantially the form attached hereto as Exhibit F, Tenant shall
have the right to provide telecommunications services to other Tenants of the
Building and the Project.  Tenant shall be permitted reasonable access to the
Premises, the Building, and the Project for the purpose of installing,
operating, repairing, and maintaining the facilities and equipment
(collectively, the "System") connecting Tenant's network to the Project's
tenants.  Tenant may offer its services through its network to tenants in the
Project in the same manner as any third party vendor.  Prior to any System
installation, Tenant will consult with the Landlord to determine an appropriate
entrance plan and Tenant will not proceed with installation until Landlord's
written approval has been obtained.  Tenant will perform any installation in
accordance with Article 10 above and in such a manner as to not interrupt
Building or Project operations.  Tenant will restore the Building or the Project
to its original condition, and bear all costs for rearrangements or restoration,
as necessary.

LANDLORD:                                    TENANT:

PARK CENTRAL MALL, L.L.C.                    PAC-WEST TELECOMM, INC.,
an Arizona limited liability company         a California corporation

By: Pensus  Park Central, L.L.C.,
    an Arizona limited liability             By: ______________________________
    company, its Authorized Member           Name: ____________________________
                                             Title: ___________________________

                                       24
<PAGE>

By: ______________________________
Name: ____________________________
Title: ___________________________

                                       25
<PAGE>

                                   EXHIBIT A

                          FLOOR PLAN OF THE PREMISES

                                       26
<PAGE>

                                   EXHIBIT B

                           SITE PLAN OF THE PROJECT

                                       27
<PAGE>

                                   EXHIBIT C

                            LANDLORD'S IMPROVEMENTS

The following is a description of the construction and limitations of same,
which shall be provided by Landlord.  As to all building materials and equipment
which Landlord may be obligated to supply under the "Description of Landlord's
Work (Building Shell)", Landlord has employed qualified architects, engineers,
and contractors and their work shall be supervised to provide Tenant with
construction, by standard methods, of good and workmanlike quality.  Perfection
beyond this quality will be Tenant's responsibility and at Tenant's expense.

     A.   Structure
          ---------

          1.   Construction shall not be less than Type IIN sprinkled (or
sprinkler mains provided) in accordance with the building codes of the City of
Phoenix (the "Code").

          2.   Landlord shall perform any demolition work necessary and may in
the course of remodeling structurally reinforce columns or other building
components as may be required.

          3.   Tenant's Premises shall have substantially the measurements
provided in this Lease, said measurements to be from the outside of exterior
walls and from the center of interior demising partitions.

          4.   Storefront (including exterior doors) will be provided by
Landlord.

          5.   Exterior trim and other exterior work normally requiring painting
shall be painted.

          6.   Ceiling, marquees, and screens on the exterior work normally
requiring painting shall be painted.

          7.   Demising partitions constructed by Landlord shall, at Landlord's
option, be concrete, block, brick, lath, plaster, or drywall, over wood or metal
studs, or other suitable material permitted by Code.

          8.   Floor shall be unfinished concrete over 100% of the Premises.

          9.   Landlord to provide stairwells and one freight elevator. Prior to
and as part of the Premises build out, Landlord will dismantle and remove the
stairwell in the Premises at Tenant's cost, without markup by Landlord. This
removal shall be for a time period to allow Tenant to complete its construction
and build out of the Premises. During this period, Tenant's access will be by
the elevator. Upon completion of Tenant's Work in the Premises, Tenant will
notify Landlord and Landlord may then reinstall the stairwell at Tenant's
expense, without markup. Tenant shall reimburse Landlord for the cost of removal

                                       28
<PAGE>

and reinstallation of the stairwell within 30 days after Tenant's receipt of an
invoice from Landlord detailing the cost of the removal and reinstallation.

     B.   Interior Finishes
          -----------------

          Asbestos will be abated by Landlord at Landlord's sole cost in
compliance with the recommendation from a reputable Environmental Contractor.

     C.   Walkways, Emergency Exits
          -------------------------

          1.   Walkways adjacent to the Premises shall be tile, concrete or such
other materials selected by Landlord.

          2.   If an emergency exit/service door is required, such door will be
provided at a location determined by Landlord and exit signs and emergency
lighting provided.

          3.   If a new exit from the Building to the outside is required due to
Landlord's rental of space proximate to the Premises to third parties, Landlord
shall supply and install such new exit at Landlord's expense.

     D.   Utilities
          ---------

          1.   Water service (cold only) and sewer line will be provided to the
Premises at a location determined by Landlord.

          2.   Automatic sprinklers or an automatic sprinkler main shall be
installed to serve the Premises and the area between suspended ceiling and the
roof deck.

          3.   Telephone service from a central distribution point and an empty
conduit shall be provided to the Premises.

          4.   Landlord will not provide electrical service to the Premises.
Tenant, as part of Tenant's Work, will upgrade the existing electrical system
serving the Premises to the following specifications: 2000 Amps at 480 Volts.
The upgrade will be Tenant's Work, performed at Tenant's sole expense, except
that if the upgrade work costs more than $10,000.00, as established by invoices
and other evidence of cost reasonably satisfactory to Landlord, Landlord agrees
that it will bear 50% of all amounts over $10,000.00 paid by Tenant for the
upgrade work.

                                       29
<PAGE>

                                   EXHIBIT D

                             RULES AND REGULATIONS

1.   No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, printed or affixed on or to any part of the outside of the
Premises or the surrounding area without the prior written consent of the
Landlord being first obtained. If such consent is given by Landlord, Landlord
may regulate the manner of display of the sign, placard, picture, advertisement,
name or notice. Landlord shall have the right to remove any sign, placard,
picture, advertisement, name or notice which has not been approved by Landlord
or is being displayed in a non-approved manner without notice to and at the
expense of the Tenant. All approved signs or lettering on doors shall be
printed, painted, affixed or inscribed at the expense of Tenant by a person
approved by Landlord. Tenant shall not place anything or allow anything to be
placed near the glass of any window, door, partition or wall which may appear
unsightly from outside of the Building.

2.   The sidewalks, halls, passages, exits and entrances shall not be obstructed
by the Tenant or used by it for any purpose other than for ingress and egress.
The halls, passages, exits and entrances are not for the use of the general
public other than persons who are making use of the services offered by Tenant,
and the Landlord shall in all cases retain the right to the control thereof and
prevent access thereto by all persons whose presence in the judgment of the
Landlord shall be prejudicial to the safety, character, reputation and interest
of the Building or its Tenant; provided, however, that nothing herein contained
shall be construed to prevent access by persons with whom the Tenant normally
deals in the ordinary course of Tenant's business.  No Tenant and no employees
or invitees of any Tenant shall go upon the roof of the Building without
Landlord's prior consent.

3.   Tenant shall not alter any lock or install any new additional locks or any
bolts on any door of the Premises without the prior written consent of Landlord.

4.   The toilet rooms, urinals, wash bowls and other apparatus shall not be used
for any purposes other than that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown therein.  The expense of any
breakage, stoppage or damage resulting from a violation of this rule shall be
borne by the Tenant who, or whose employees or invitees, shall have caused it.

5.   Tenant shall not mark on or drive nails, screw or drill into the
partitions, woodwork or plaster (except as may be incidental to the hanging of
wall decorations), and shall not in any way deface the Premises or any part
thereof.

6.   Tenant shall not cause any unnecessary labor by reason of Tenant's
carelessness or indifference in the preservation of good order and cleanliness.
Landlord shall in no way be responsible to any Tenant for any loss of property
in the Building, however, occurring, or for any damage done to the effects of
any Tenant, by or as a result of the acts of any employee or contractor of
Landlord, or any other person.

                                       30
<PAGE>

7.   Tenant shall not use, keep or permit to be used or kept any food or noxious
gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to the Landlord or other
occupants of the Project by reason of noise, odors and/or vibrations, or
interfere in any way with other Tenants or those having business in the Project.
No animals or birds shall be brought in or kept in or about the Premises.
Tenant shall not make or permit to be made any disturbing noises or disturb or
interfere with occupants of this or the Project, or with those having business
with such occupants, by the use of any musical instrument, radio, phonograph,
unusual noise, or in any other way.

8.   No cooking shall be done or permitted by any Tenant on the Premises, except
by the Tenant with an Underwriters' Laboratory approved microwave oven or
equipment for brewing coffee, tea, hot chocolate and similar beverages provided
that such equipment and use is in accordance with all applicable federal, state
and city laws, codes, ordinances, rules and regulations.

9.   The Premises shall not be used for lodging or sleeping or for illegal
purposes.

10.  Tenant shall not use or keep within the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material or use any
method of heating or air conditioning other than that supplied by Landlord.

11.  If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions in
their installation.

12.  Landlord shall retain copies of all keys to the Building.  Tenant shall not
change locks without the consent of Landlord.

13.  Tenant shall not lay linoleum, carpet or other similar floor coverings so
that the same shall be affixed to the floor or the Premises in any manner except
as approved by the Landlord.  The expense of repairing any damage resulting from
a violation of this rule or removal of any floor covering shall be borne by the
Tenant by whom, or by whose contractors, employees or invitees, the floor
covering shall have been laid.

14.  The directory of the Building will be provided exclusively for the display
of the name and location of tenants only and Landlord reserves the right to
exclude any other names therefrom.

15.  Landlord shall not in any way be responsible to any Tenant for any loss of
property on the Premises, however occurring, or for any damage to any Tenant's
property by any employee or contractor of Landlord, or any other person.

16.  Tenant shall not place a load upon any floor which exceeds the load per
square foot which such floor was designed to carry and which is allowed by law.
Landlord shall have the right to prescribe the weight, size and position to all
equipment, materials, furniture or other property brought into the Building.
Heavy objects shall, stand on such platforms as determined by Landlord to be
necessary to properly distribute the weight.  Business machines and mechanical
equipment belonging to Tenant which cause noise or vibration that may be

                                       31
<PAGE>

transmitted to the structure of the Building or to any space in the Building to
such a degree as to be objectionable to Landlord or to any tenants shall be
placed and maintained by Tenant, at Tenant's expense, on vibration eliminators
or other devices sufficient to eliminate noise or vibration.  The persons
employed to move such equipment in or out of the Building must be acceptable to
Landlord.  Landlord will not be responsible for loss of, or damage to, any such
equipment or other property from any cause, and all damage done to the Building
by maintaining or moving such equipment or other property shall be repaired at
the expense of Tenant.

17.  Tenant shall not install any radio or television antenna, satellite dish,
loudspeaker or other device on the roof or exterior walls of the Building.
Tenant shall not interfere with radio or television broadcasting or reception
from or in the Building or elsewhere.

18.  Tenant shall store all its trash and garbage within its Premises.  Tenant
shall not place in any trash box or receptacle any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with directions
issued from time to time by Landlord.

19.  The requirements of Tenant will be attended to only upon appropriate
application to the office of the Building by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of their
regular duties unless under special instruction form Landlord, and no employee
of Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.

20.  Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of any
other tenant or tenants, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all of the tenants of the Project.

21.  These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements and conditions of any lease of premises in the Project.  Tenant shall
be responsible for the observance of all of the foregoing rules by Tenant's
employees, agents, clients, customers, invitees and guests.

                                       32
<PAGE>

                                   EXHIBIT E

                          [INTENTIONALLY LEFT BLANK]

                                       33
<PAGE>

                                   EXHIBIT F

                               LICENSE AGREEMENT

THIS LICENSE AGREEMENT (this "Agreement") is made and entered into between the
Licensor and Licensee named below.

1.   Basic Terms.
     -----------

     A.   Date of this License Agreement: ______________________.

     B.   Licensor:  Park Central Mall L.L.C.

     C.   Licensee:  PAC-WEST TELECOMM, INC., a  California corporation

     D.   Project and Address of Project:  Park Central
                                           3121 N. 3rd Avenue
                                           Phoenix, Arizona

     E.   Licensed Premises:  The Licensed Premises shall be the Raceways (as
hereinafter defined) and the Licensee's Premises, located at 3110 N. Central
Avenue, Suite 151, Phoenix, Arizona 85012, which are currently being leased to
Licensee pursuant to that Office Lease dated _____________ ___, 2000, by and
between the parties hereto (the "Lease").  "Raceway" means vertical or
horizontal space in the land and buildings in the Project used for routing
Licensee's telecommunications cables and ancillary equipment, which originates
at Licensee's Premises and which follows the land and buildings' Raceways to any
applicable tenant space.  The Raceways may consist of a vertical or horizontal
EMT conduit, generally located above the ceiling space on applicable floors of
the buildings, through which cable will be installed by Licensee to provide
telecommunications services to the applicable tenants in the buildings.  To the
extent Licensee uses Raceways installed by Landlord, Licensee shall, prior to
installing Licensee's cable or fiber in the Raceways, reimburse Landlord for
Landlord's reasonable cost of installation of the Raceways.  To the extent that
Raceways are not already in place in the Building or in the Project, Licensee
shall install the same after obtaining Landlord's prior written approval of
location, materials, and plans for installation of Raceways in accordance with
the terms of the Lease and of this Agreement.  The purpose of the Raceways is to
permit the connection of communication services to various customers of Licensee
in the Project.  Raceways do not include any connections which Licensor may
eventually permit to any rooftop antenna system.

     F.   Term: The Term of this License Agreement shall be coterminous with the
Term of the Lease. The Commencement Date is the earlier of ____________, or the
date that Licensee actually commences to use the Raceways.

     G.   Notices shall be subject to and in accordance with Article 18 of the
Lease, which by this reference is incorporated herein, and shall be given at the
place provided for Landlord and Tenant respectively under Basic Provisions
paragraphs L and M of the Lease.

                                       34
<PAGE>

     H.   Normal Business Hours (for non-emergency access): 8:00 a.m. to 5:00
p.m. Mondays through Fridays and 8:00 a.m. to 1:00 p.m. on Saturdays, exclusive
of normal business holidays.

2.   Grant of License.  Licensor grants to Licensee a non-exclusive license to
     ----------------
use the Raceways for the purpose of constructing, installing, operating,
repairing, maintaining and removing Licensee's Telecommunications Equipment (as
hereinafter defined) and providing the services to tenants in the Project, all
at Licensee's sole risk and expense.  For purposes hereof the term
"Telecommunications Equipment" shall mean equipment, cable, junction boxes,
hangers, pull boxes, grounding wiring, and related equipment installed by
Licensee outside the Premises (excluding fiber optics and conduit installed by
Licensee from the Premises to the property line of the Project).  Licensor
reserves the right to grant similar licenses to others.  Licensee accepts the
Licensed Premises "AS IS" without benefit of any improvements to be constructed
by Licensor.  Licensee has satisfied itself as to the condition of the Licensed
Premises and their suitability for Licensee's intended use.

3.   Use by Licensee.
     ---------------

     a.   Prohibited Uses.  Licensee agrees not to use or permit the use of the
          ---------------
Raceways for any purpose which is illegal, dangerous to life, limb or property,
or which, in Licensor's reasonable opinion, creates a nuisance or which would
increase the cost of insurance coverage with respect to the Project.  In
particular, no semiconductors or other electronic equipment containing
polychlorinated biphenyls (PCBs) or other environmentally hazardous materials
will either be used or stored in or around the Raceways or the Premises and no
such materials will be used in any of the Licensee's Telecommunication Equipment
installed by Licensee in the Raceways or Premises.  Nothing in this Agreement or
in the Lease shall be interpreted as allowing the owners of co-located equipment
to install or use Raceways for co-located equipment or otherwise and such use is
specifically prohibited hereunder.

     b.   Permitted Uses.  Licensee shall use the Premises and Raceways for the
          --------------
purpose of providing only tenants of the Project with telecommunications
services which Licensee is licensed to provide, including the right to install,
maintain, operate, replace, and remove Licensee's Telecommunication Equipment,
including cabinets, racks, conduits, and/or cables.  Licensor at its reasonable
discretion may permit use of existing building entrance links and existing
building wiring wheresoever Licensor has authority to allow use of such
facilities.  Licensee shall have the right, at its sole risk and expense, to
construct a new entrance link, or links, upon written approval of Licensor,
which approval shall not be unreasonably withheld or delayed.

     c.   Independent Contractor. Licensor and Licensee shall at all times act
          ----------------------
in their own capacities as independent contractors.  Nothing in this Agreement
shall be deemed to create a partnership or joint venture between Licensor and
Licensee.

4.   License Fee.  Licensee agrees to pay to Licensor during the License Term,
     -----------
without demand, setoff, or deduction, an annual License Fee of $1000.00, in
advance, on or before the

                                       35
<PAGE>

first day of each year commencing with the Commencement Date. Such payment shall
include any applicable sales, use, or other taxes or assessments.

5.   Installation, Maintenance and Repair.  All installations, improvements and
     ------------------------------------
operations by Licensee shall comply with Applicable Laws as defined in paragraph
7 at all times and Licensor's reasonable requirements as established from time
to time.  No improvements shall be made by Licensee without Licensor's prior
written consent, but no such approval shall be deemed to constitute a warranty
by Licensor as to compliance of the improvements with Applicable Laws.  All
installations and improvements shall be at Licensee's cost, by contractors and
subcontractors approved in advance by Licensor, which approval shall not be
unreasonably withheld.  All of Licensee's Telecommunication Equipment placed by
Licensee within the Licensed Premises shall be at Licensee's sole risk and
expense.  All plans, diagrams, and specifications for initial and subsequent
improvements and installations of cable detailing the location and size of
Licensee's Telecommunications Equipment will be submitted to Licensor for prior
written approval, which approval will not be unreasonably withheld or unduly
delayed.  All of Licensee's Telecommunication Equipment will be installed in a
good and workmanlike manner using generally accepted construction standards by
properly licensed personnel.  Licensee shall install Licensee's
Telecommunication Equipment in a safe and proper manner so as to pose no hazard
to safety of life or property with respect to persons and property in or about
the Project.  No electrical grounding shall be permitted to other equipment in
the Raceways without Licensor's specific written approval of the method and
location of such grounding.  Prior to commencing any work on the Raceways,
Licensee shall obtain all necessary licenses, permits and consents and provide
copies of same to Licensor.  Licensor shall have the right to monitor all such
work, at its own expense.  All activities of Licensee initially associated with
the installation of Licensee's Telecommunication Equipment shall be performed in
such a way as to reasonably minimize interference with the operation of the
Project.  No monitoring or inspection of Licensee's work by Licensor shall be
deemed supervision of Licensee's employees, nor shall it be deemed to be a
representation or warranty of any particular level of telecommunications
expertise attained by Licensor or Licensor's representatives.  Licensee shall
monitor and supervise its own employees and shall assume responsibility for the
expertise and quality of its work, and shall not rely upon Licensor for same.
Licensee shall have in its employ a sufficient number of capable employees to
enable it to properly, adequately and safely perform hereunder.  Licensee shall
not disrupt, adversely affect or interfere with other providers of services in
the Project or buildings or with any tenant's use and enjoyment of the Licensed
Premises or the common areas of the Project.  Licensee shall take immediate
action to correct such interference after receiving notice thereof.

6.   Costs/Taxes.  Licensee shall be responsible for any and all cost, damage or
     -----------
expense arising from the installation, maintenance, operation or repair to the
Raceways or Licensee's Telecommunication Equipment, and any and all cost, damage
or expense to the Project or the property of Licensor or other licensees or
tenants of the Project arising from such installation, maintenance, operation or
repairs.  Licensee shall be responsible for the declaration and payment of any
applicable taxes or assessments against the Telecommunications Equipment owned
by Licensee located in the Project.

                                       36
<PAGE>

7.   Compliance with Laws, Regulations and Project Rules.  The laws of the state
     ---------------------------------------------------
of Arizona without regard to conflict of law principles shall govern this
Agreement.  Licensee and Licensor agree to comply with all applicable laws,
ordinances, codes, rules and regulations of any governmental entity or agency
having jurisdiction with respect to the Project, including but not limited to,
Phoenix city codes, Arizona and federal statutes and regulations ("Applicable
Laws").  Licensee, its employees, contractors and agents will comply with the
rules and regulations of the Project.  Such rules are attached to the Lease,
which by this reference are incorporated herein.

8.   Protection of Equipment/Security.  Licensee acknowledges that interruptions
     --------------------------------
in utility services are not uncommon in facilities such as the Project and
Licensee acknowledges that any sensitive electronic equipment which may be used
in the Raceways or Premises will be protected by Licensee from utility service
interruptions through the use of backup power supplies, surge protectors and
other appropriate safety systems.  Licensee acknowledges that it has taken all
precautionary steps it deems necessary to protect such equipment, including the
acquisition of insurance if applicable.  Licensee agrees to indemnify and hold
Licensor harmless from any damages or losses (including indirect or
consequential damages and attorneys' fees) caused to any of Licensee's
telecommunications equipment by service interruptions.  This indemnity is in
addition to and not in substitution of any other indemnity in this license.
Licensor shall have no liability for theft or burglary, or for damage done by
unauthorized persons in the Raceways space unless caused by the gross negligence
or willful misconduct of Licensor, its agents, employees, or agents.  Licensor
shall not be required to insure against any such losses.  Licensee shall
cooperate fully in Licensor's efforts to maintain security in the Project.
Licensee agrees to surrender all keys, master entry cards or other means of
access in its possession upon the expiration or earlier termination of this
License.  Licensee shall pay Licensor for the cost of additional key(s) or
card(s) or for each replacement key(s) or card(s) for any key(s) or card(s).

9.   Warranty Against Damage and Interference. Licensee warrants that Licensee's
     ----------------------------------------
Telecommunications Equipment, and the installation, maintenance, operation and
repair thereof will not damage the Project or the buildings therein or interfere
with the use of such buildings or the operation of communications devices by
Licensee or by other lessees or licensees of Licensor.  If such damage or
interference does occur, Licensee shall take immediate action to correct same as
soon as Licensee becomes aware of such damage or interference, and in any event
within 24 hours after receipt of written notice from Licensor.  Licensor
reserves the right to disconnect power to any such Licensee's Telecommunications
Equipment which Licensee fails to correct after proper notification and cure
period.  Licensee agrees to be responsible for any damage caused to the Project,
building spaces, and/or any other property owned by Licensor or any tenant or
licensee of Licensor which may be caused by Licensee or any of its agents or
representatives.

10.  Relocation of Licensee's Telecommunication Equipment.  Licensor reserves
     ----------------------------------------------------
the right to require Licensee to relocate Licensee's Telecommunication Equipment
(other than the switch located within the Premises) to other areas within the
Project during the Term of this Agreement at Licensor's sole, reasonable
discretion.  Licensor shall reimburse Licensee for its reasonable expenses
incurred in connection with any such relocation.  If Licensor requests

                                       37
<PAGE>

such relocation, Licensor agrees to allow Licensee reasonable time to complete
the relocation, but not to exceed 30 days.

11.  Access by Licensee.  For the Term of this Agreement, Licensor shall provide
     ------------------
Licensee access to the buildings within the Project during Normal Business
Hours.  Upon prior notice, Licensee may have access after hours, but in that
event, Licensee shall compensate Licensor for reasonable trip charges and
overtime charges resulting from employees or agents of Licensor making trips to
the Project to provide after hours access.  Only authorized employees,
contractors, subcontractors, and agents of Licensee, other authorized regulatory
inspectors, or persons under their direct supervision and control will be
permitted to enter the Raceways.  Licensor may, at any time, require that
requests for access to the buildings in the Project be in writing on forms
provided by Licensor.

12.  Connections to Public Streets and Utilities.  Licensee acknowledges that
     -------------------------------------------
Licensor has no obligation to assure or guarantee Licensee the necessary
connections to public streets or utilities that may be necessary for the
operation of Licensee's Telecommunications Equipment in the Project.  It is
solely the responsibility of Licensee to negotiate agreements with public
utilities or third parties for these connections.  In the parking areas of the
Project, Licensor shall use commercially reasonable efforts to provide Licensee
access necessary for the operation of Licensee's Telecommunications Equipment,
provided the location thereof shall be subject to the prior written consent of
Landlord, which shall not be unreasonably withheld or delayed, and provided,
further that Licensee shall be required to return the area in which its
connections are located to the same condition existing prior to their
installation.

13.  Use of Electrical Services by Licensee.  Licensee shall pay for all costs
     --------------------------------------
of meters, submeters, wiring, risers, transformers, electrical panels, lighting,
air conditioning and other, if any, items required by Licensor which, in
Licensor's reasonable judgment are necessary to accommodate Licensee's design
loads and capacities, including, without limitation, the installation and
maintenance thereof.  Notwithstanding the foregoing, Licensor may withhold
consent for Licensee's installation of any wiring, risers, transformers,
electrical panels, lighting, or air conditioning if, in Licensor's reasonable
judgment, the same are not necessary or would cause damage or injury to the
buildings or cause or create a dangerous or hazardous condition or entail
excessive or unreasonable alterations or repairs to the buildings, or would
interfere with or create or constitute a disturbance to other tenants, licensees
or occupants of the Project.  Licensor shall use reasonable efforts to notify
Licensee in advance of any planned utility outages which may interfere with
Licensee's use, but in no event will Licensor be liable to Licensee for any
damages, direct or indirect, resulting from any loss of power.

14.  Licensee's Insurance.  No construction, alteration or removal operations
     --------------------
shall be initiated by Licensee unless Licensee has first obtained builders' risk
insurance in reasonable limits reasonably acceptable to Licensor.  In addition
to the builders' risk insurance required above, at all times Licensee shall
maintain in force at its expense, the required insurance as set forth in the
Lease.  If a waiver of subrogation clause is not contained in the form language
of the insurance policies, Licensee shall require that a waiver of subrogation
clause be added to its insurance policies.

                                       38
<PAGE>

15.  Hold Harmless.  Licensee shall indemnify Licensor and its respective
     -------------
subsidiaries and affiliates, directors, officers, agents, servants, employees
(the "Indemnified Parties") for and shall hold the Indemnified Parties harmless
from all fines, claims, demands, causes of action, liabilities, penalties,
judgments, orders, costs and expenses and suits (including costs and expenses of
defending against same and attorney, investigative and expert witness fee)
resulting from or asserted against the Indemnified Parties by reason of any
breach or non-performance of this Agreement by Licensee or Licensee's agents,
employees, or invitees, or any act or failure to act by Licensee hereunder.
This indemnity shall also cover injuries (and loss of life) or damages to any of
the Indemnified Parties, and damages to the Project; Licensor and Licensee shall
not be liable to the other or the other's agents or employees for any damage to
personal property resulting from any act, omission, or negligence of any other
tenant, Licensee or occupant of the Project.  The provisions of this paragraph
shall survive the termination of this Agreement.

16.  Casualty Damage.  If the Licensed Premises or any part thereof is damaged
     ---------------
by fire or other casualty, Licensee shall give prompt written notice thereof to
Licensor.  In case any of the buildings shall be damaged such that substantial
alteration or reconstruction of the shell, in Licensor's sole opinion, is
required (whether or not the Raceways or Licensee's Premises have been damaged
by such casualty) or in the event any mortgagee of Licensor's should require
that the insurance proceeds payable as a result of a casualty be applied to the
payment of the mortgage debt or in the event of any material uninsured loss to
the Project, Licensor may, at its option, terminate this Agreement by notifying
Licensee in writing of such termination within 60 days after the date of such
casualty.  If Licensor does not thus elect to terminate this Agreement Licensor
shall commence and proceed with reasonable diligence to restore the applicable
building shell, except that Licensor's obligation to restore shall not require
Licensor to spend for such work an amount in excess of the insurance proceeds
actually received by Licensor as a result of the casualty.  Licensor shall not
be liable for any inconvenience or annoyance to Licensee or injury to the
business of Licensee resulting in any way from such damage or the repair
thereof.  The provisions of this License shall govern when this License shall be
terminable as a result of fire or casualty and no other rule or statute on the
subject shall apply.

17.  Assignment, Subletting and Transfers.
     ------------------------------------

     a.   By Licensee.  Licensee shall not transfer (including transfers
          -----------
occurring by operation of law), convey, mortgage, pledge, hypothecate, or
encumber this Agreement or grant any license, concession, or other right to use
any portion of the Raceways or the Licensed Premises without the prior written
consent of Licensor, which shall not be unreasonably withheld, but shall be
conditioned upon a simultaneous assignment of the Lease to the same party
hereunder, and any such transfer or assignment shall not release Licensee from
its obligations under this Agreement. Any prohibited transfer is void and of no
effect.

     b.   By Licensor.  Licensor may transfer and assign its rights and
          -----------
obligations under this Agreement. Such transfer shall release Licensor from any
further obligations under this Agreement. If Licensor's interest in the Project
is conveyed or transferred, such conveyance

                                       39
<PAGE>

or transfer shall be deemed the assumption of the obligations of this License by
the grantee or transferee, at the sole option of the grantee or transferee.

18.  Removal of Licensee's Telecommunication Equipment and Restoration.  Except
     -----------------------------------------------------------------
with respect to the switch located in Licensor's Premises, the removal of which
shall be governed by Article 10 of the Lease, upon expiration or earlier
termination, Licensee shall at Licensor's election and at Licensee's sole
expense remove all of Licensee's Telecommunication Equipment from the Project
and restore the Licensed Premises and the Project to the condition in which it
existed prior to the installation of Licensee's Telecommunication Equipment
except for reasonable wear and tear, and damage caused by casualty.  If Licensor
so elects, Licensee's Telecommunications Equipment shall be removed within 30
days of expiration or termination.  If Licensee does not timely remove all of
Licensee's Telecommunications Equipment, Licensor may remove any or all of
Licensee's Equipment and Licensee agrees to pay to Licensor, on demand, the
reasonable cost thereof, plus a 15% administrative fee thereon.  If any of
Licensee's Telecommunications Equipment remains at the Project for more than 30
days after the expiration or earlier termination of the License, such Equipment
shall be deemed to be abandoned by Licensee and shall become the sole property
of Licensor, and Licensor shall not be required to pay Licensee any compensation
therefor.  Notwithstanding anything to the contrary in this Section 18, nothing
herein shall in any way impair Tenant's right to remove any item as described in
Article 10 or Exhibit G of the Lease, or the rights of Tenant's lender under the
Landlord Waiver described in Section 19.3 of the Lease, or any subsequent waiver
executed by Licensor.

19.  Default.
     -------

     a.   Definition of Default.  The occurrence of any of the following shall
          ---------------------
constitute a default by Licensee:  (1) failure to pay License Fees or any other
sum due by Licensee under this Agreement within 5 days after notice, (2) failure
to vacate on or before the last day of the Term of this Agreement; (3) if
Licensee is in default under the Lease beyond any applicable cure period
acquisition; or (4) failure to comply with any other provision of this Agreement
if such failure to comply is not cured as soon as reasonably possible but in no
event beyond 30 days after delivery of written notice by Licensor to Licensee.
However, Licensee shall not be in default under subclause (4) above if Licensee
promptly commences to cure such noncompliance and diligently proceeds in good
faith to cure same after receiving written notice of such default.

     b.   Remedies. If Licensee is in default as defined in subparagraph (a)
          --------
above beyond any applicable cure period, Licensor may (with or without demand
for performance) and with or without terminating this Agreement, terminate
Licensee's right of possession by giving five day's written notice to vacate or
by giving written notice terminating this Agreement. In addition, Licensor shall
have the right to any other remedy, whether in law or equity, Licensor may
recover actual damages incurred.

     c.   Attorneys' Fees, Interest, and Other Expenses. In any lawsuit
          ---------------------------------------------
enforcing rights hereunder, the prevailing party shall be entitled to recover
reasonable attorneys', investigative, and expert witness fees and costs from the
non-prevailing party, plus all out-of-pocket

                                       40
<PAGE>

expenses. All delinquent sums due by Licensor or Licensee shall bear interest at
the rate of 18% per annum from date of default until paid

20.  General Provisions.  Articles 1.3, 8.6, 8.7, 8.8, 18, 24.1, 24.3, 24.4,
     ------------------
24.6, 24.7, 24.8, 24.9 and 24.12 of the Lease are incorporated herein by
reference, provided the use in the Lease of the term Landlord shall apply to
Licensor, Tenant shall apply to Licensee, and Lease shall apply to this
Agreement.

LICENSOR:                                    LICENSEE:

PARK CENTRAL MALL, L.L.C.,                   PAC-WEST TELECOMM, INC.,
an Arizona limited liability company         a  California corporation

  By: Pensus Park Central, L.L.C.,
  an Arizona limited liability company,      By:________________________________
  its Authorized Member                      Its:_______________________________

  By:__________________________________
  Its:_________________________________

                                       41
<PAGE>

                                   EXHIBIT G

     All of Tenant's now owned or leased and hereafter owned or leased
     telecommunications equipment, telecommunications switches, antennas,
     computer hardware, cable, fibreoptic cable and other fibreoptic
     transmission facilities, transmission equipment, machinery, equipment,
     specially installed fibre suppression or air conditioning system
     components, furniture, fixtures and other tangible personal property
     including dyes, tools, jigs, and office equipment together, to the extent
     not heretofore generally described and without limiting the generality of
     the foregoing, with all:

     1.   Telecommunications transmission and switching equipment and associated
          computers, modems, and wiring installed by Tenant or Tenant's
          collocate customers.

     2.   Uninterruptable power supply system installed by Tenant.

     3.   Electrical System components installed by Tenant, excluding wiring,
          service entrance section, and main switch gear.

     4.   Generator Installed by Tenant.

     5.   Halon and or FM250 Fire Suppression Equipment installed by Tenant.

     6.   Satellite dishes, disks, and antennae installed by Tenant

     7.   Furniture and cabinets installed by Tenant or Tenant's collocate
          customers.

                                       42
<PAGE>

                                   EXHIBIT H

                                    PARKING

                                       43
<PAGE>

                                   EXHIBIT I

                    HVAC, GENERATOR, AND ANTENNA LOCATIONS

                                       44
<PAGE>

                                   EXHIBIT J

RECORDING REQUESTED BY:

AND WHEN RECORDED, RETURN TO:

MORRISON & FOERSTER LLP
425 California Street
San Francisco, California 94105
Attention: Jill Feldman, Esq.

________________________________________________________________________________
                       (Space Above for Recorder's Use)

                                LANDLORD WAIVER

     This LANDLORD WAIVER (the "Waiver") is entered into as of the _____ day of
January, 2000 by and among PARK CENTRAL MALL, L.L.C., an Arizona limited
liability Company (the "Landlord"), PAC-WEST TELECOMM, INC., a California
corporation (the "Tenant"), and UNION BANK OF CALIFORNIA, N.A., a national
banking association, in its capacity as administrative lender (the "Agent") for
itself and other financial institutions (collectively, the "Lenders").

                                   RECITALS

     A.   The Landlord and the Tenant have entered into that certain lease dated
as of _________________, 2000, (as such lease may have been amended to date, the
"Lease") covering the premises as defined and described in the Lease (the
"Premises"). The Premises are located on the real property described in Exhibit
"A" attached hereto and incorporated herein by this reference.

     B.   As partial security for Tenant's repayment and performance of its
obligations under certain credit facilities extended and to be extended in the
future to the Tenant by the Lenders, the Tenant has granted or will grant a
security interest in certain goods, inventory, and other personal property owned
by the Tenant, some of which may be located in the Premises, to the Agent.

     C.   In connection with the Tenant's granting of such security interest,
the Agent requires certain assurances from the Landlord.

                                   AGREEMENT

     For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereby agree as follows:

                                       45
<PAGE>

     1.   The Landlord agrees to send the Agent at an address designated by the
Agent a copy of any notice of default (or termination) (the "Default Notice") of
the Lease at the same time that such notice is sent to Tenant and allow the
Agent the period of time equal to the grace period already permitted under the
Lease in order to cure any such default.  Until further written notice from the
Agent, the address of the Agent for all notices is as follows:

                    Union Bank of California, N.A.
                    1800 Harrison Street, Suite 1400
                    Post Office Box 1020
                    Oakland, California 94604-1020

                    Attention: Gail Fletcher
                               Vice President - Community Banking Group

     2.   The Landlord consents to the granting of a security interest in all of
the Personal Property of Tenant to be located on the Premises (the "Personal
Property"), including any part of the Personal Property that is now or is
hereafter installed or affixed to the Premises, or that is deemed to be
"fixtures" within the meaning of the then applicable Uniform Commercial Code. As
used herein, "Personal Property" means all of Tenants now owned or leased and
hereafter owned or leased telecommunications equipment, telecommunications
switches, antennas, computer hardware, cable, fibre optic cable and other fibre
optic transmission facilities, transmission equipment, machinery, equipment,
specially installed fire suppression or air conditioning system components,
furniture, furnishings, fixtures, and other tangible personal property,
including dies, tools, jigs and office equipment. "Personal Property" does not
include Landlord's pre-existing fire suppression or air conditioning equipment
located in the Premises. The Landlord agrees that all of the Personal Property,
whether or not affixed to or located or installed on the Premises in a manner
which would classify it as a "fixture," constitutes and shall remain Personal
Property and shall not be deemed a part of the real estate.

     3.   The Landlord agrees that any and all liens, claims, demands, rights or
interests that the Landlord may now or hereafter have in or to the Personal
Property shall be and are hereby made subordinate and inferior to any now
existing or hereafter arising lien or security interest in favor of the Agent.

     4.   If the Tenant defaults on its obligations to the Agent or the Lenders
and, as a result, the Agent undertakes to enforce its security interest in the
Personal Property or if the Landlord delivers a Default Notice, as provided in
Section 1 above; provided that Agent has notified Landlord in writing of
Tenant's default and Agent's undertaking to enforce its security interest,
Landlord agrees as follows:

               (a)  the Landlord will reasonably cooperate with the Agent in its
efforts to assemble all of the Personal Property located on the Premises,
provided, however, that the Landlord shall not be obligated to incur any expense
or other obligation in connection with such cooperation;

                                       46
<PAGE>

               (b)  the Landlord will permit the Agent to remain on the Premises
for up to sixty (60) days after the Agent declares the default, provided that
the Agent, for the period of time the Agent uses the Premises, (i) pays or
causes to be paid the rental payments and all rental adjustments (excluding
default triggered rental adjustments) with respect to such period or, in the
case where the Lease has terminated, the rental payments and all rental
adjustments (excluding default triggered rental adjustments) that would have
become due under the Lease for such period if the Lease had not been terminated,
for the period of time the Agent uses the Premises; (ii) provides and retains
the liability and property insurance coverage and pays all other amounts Tenant
is required to pay under the Lease, or which would have been required if the
Lease had not been terminated under the Lease; and (iii) delivers a written
agreement to do so;

               (c)  the Agent or its representatives may enter upon the Premises
at reasonable times, and after written notice to the Landlord, for the purpose
of removing, or repossessing, the Personal Property, provided that the Agent
promptly repairs any and all physical damage to the Premises and/or the building
in which the Premises are situated caused by such removal;

               (d)  the Agent may enter the Premises for such purposes without
assuming the Lease and all obligations and all obligations contained therein.

Upon any such removal, any liens, claims, demands, rights or interests of the
Landlord in the Personal Property shall be discharged and released.
Notwithstanding anything herein to the contrary, in no event shall the Agent's
right to enter or occupy the Premises pursuant to this Waiver extend beyond
sixty (60) days from the date of termination or expiration of the term of the
Lease, and at any time thereafter the Landlord shall have the right to have any
personal property of the Tenant that may be located upon the Premises removed
from the Premises in accordance with the terms of the Lease and applicable law.

     5.   This Waiver may be amended or modified only by an instrument in
writing signed by each of the parties hereto.

     6.   This Waiver may be executed in counterparts, each of which shall be
deemed an original but all of which taken together shall constitute one and the
same instrument.

     7.   This Waiver shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, administrators, successors and
assigns or encumbrancers.

     8.   The rights and obligations of the parties to this Waiver shall be
governed by the laws of the State of Arizona. Any legal actions with respect to
this Waiver shall be brought in either the state superior court in Maricopa
County, City of Phoenix, State of Arizona, or the federal district court which
serves the City of Phoenix.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Waiver as of the date first above written.

                              LANDLORD: PARK CENTRAL MALL, L.L.C.,
                                        an Arizona limited liability company

                                       47
<PAGE>

                                        By:  PENSUS PARK CENTRAL,
                                             L.L.C., an Arizona limited
                                             liability company,
                                             Its Authorized Member

                                             By:________________________________
                                             Printed Name:______________________
                                             Title:_____________________________

                              TENANT:   PAC-WEST TELECOMM, INC.,
                                        a California corporation

                                        By:_____________________________________
                                        Printed Name:___________________________
                                        Title:__________________________________

                              AGENT:    UNION BANK OF CALIFORNIA,
                                        N.A., a national banking association,
                                        as Agent for the Lenders

                                        By:_____________________________________
                                        Printed Name:___________________________
                                        Title:__________________________________

STATE OF _____________)
                      )
COUNTY OF ____________)

     On _______________, before me, ___________________________, personally
appeared ___________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

     WITNESS my hand and official seal.

Signature:___________________________                                     (Seal)

STATE OF _____________)
                      )
COUNTY OF ____________)

                                       48
<PAGE>

     On _______________, before me, ___________________________, personally
appeared ___________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

     WITNESS my hand and official seal.

Signature:___________________________                                     (Seal)

STATE OF _____________)
                      )
COUNTY OF ____________)

     On _______________, before me, ___________________________, personally
appeared ___________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

     WITNESS my hand and official seal.

Signature:___________________________                                     (Seal)

This Instrument was prepared by:

     Robert C. Morrison, Esq.
     Neumiller & Beardslee
     509 West Weber Avenue, 5th Floor (95203)
     Post Office Box 20
     Stockton, California 95201-3020

                                    JOINDER

     This Joinder is made as of _______________________, 2000, by ___________, a

                                       49
<PAGE>

________________ ("Beneficiary") and is attached to and made a part of that
certain Landlord Waiver by and among ___________________________, a
_________________ ("Landlord"), _______________________, a
______________________ ("Tenant") and UNION BANK OF CALIFORNIA, N.A., a national
banking association, as Agent for the Lenders.

     NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Beneficiary hereby joins in the Landlord
Waiver and agrees to be bound by its terms and conditions if it should succeed
to the interests of the Landlord under the Lease.

     IN WITNESS WHEREOF, the parties hereto have executed this Joinder as of the
date set forth above.

                                                  BENEFICIARY:

                                                  ____________________________,
                                                  a _____________________

                                                  By:___________________________

                                                  Printed Name:_________________

                                                  Title:________________________

STATE OF _____________)
                      )
COUNTY OF ____________)

     On _______________, before me, ___________________________, personally
appeared ___________________________________________, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person(s) whose
name(s) is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.

     WITNESS my hand and official seal.

Signature:____________________________                                    (Seal)

                                  EXHIBIT "A"

                                       50
<PAGE>

                           REAL PROPERTY DESCRIPTION

                                       51
<PAGE>

                                    RIDER 1

     RIDER 1 to Office Lease dated _______________, 199__, (the "Lease") by and
between PARK CENTRAL MALL, L.L.C., an Arizona limited liability company
("Landlord"), and PAC-WEST TELECOMM, INC., a  California corporation ("Tenant").

     1.   Option to Extend.  Provided that Tenant is not in default of the Lease
          ----------------
beyond any applicable cure periods, and that no event shall have occurred or
state of facts exists which if continued uncured will, with the lapse of time or
the delivery of notice, or both, constitute an event of default, then Tenant
shall have, and is hereby granted, the option to extend the Initial Term for two
additional periods of five years (the "Renewal Term").  Except as set forth in
Section 2 of this Rider, Tenant's occupancy of the Premises during the Renewal
Term shall be governed by all of the terms, conditions, covenants and provisions
of the Lease to which this Rider is attached except that Tenant shall have no
further option to extend the Term after the expiration of the second Renewal
Term.  If Tenant desires to exercise its option to extend the Initial Term or
the first Renewal Term, it must give Landlord notice in writing ("Option
Notice") of its intent to do so at least one hundred eighty days, but no more
than three hundred sixty-five days, prior to the expiration of the Initial Term
or the first Renewal Term.

ANNUAL BASE RENT BASED ON FAIR MARKET RATE

     2.   Annual Base Rent During the Renewal Term.
          ----------------------------------------

          (a)  Landlord and Tenant shall have thirty days after Landlord
receives the Option Notice within which to agree on the Annual Base Rent for the
Renewal Term based upon the "then fair market rental value of the Premises" as
defined below. If the parties agree on the Base Rent for the Renewal Term within
thirty days, they shall amend this Lease by stating the Base Rent for the
Renewal Term and each subsequent year.

          (b)  If Landlord and Tenant are unable to agree on the Base Rent for
the first year of the Renewal Term within the thirty day period, then the Base
Rent shall be the "then fair market value of the Premises" as determined in
accordance with this Rider.

          (c)  The "then fair market rental value of the Premises" means what a
landlord under no compulsion to lease the Premises and a tenant under no
compulsion to lease the Premises, would determine as rent for the first year of
the Renewal Term, as of the commencement of the Renewal Term, taking into
consideration among other relevant matters, the use permitted under the Lease,
the quality, size, shape, design, and location of the Premises and the rental
rates for similar office buildings in the Phoenix metropolitan office market
area. Notwithstanding the foregoing, the then fair market rental value of the
Premises for the Renewal Term will not be less than the Base Rent payable during
the last year of the Initial Term.

                                       52
<PAGE>

          (d)  Within seven days after the expiration of the thirty day period
set forth above, Landlord and Tenant shall each appoint a real estate appraiser
with at least five full years full-time commercial appraisal experience in the
area in which the Premises are located to appraise the then fair market rental
value of the Premises. If either the Landlord or the Tenant does not appoint an
appraiser within ten days after the other has given notice of the name of its
appraiser, the single appraiser appointed shall be the sole appraiser and shall
set the then fair market rental value of the Premises. If two appraisers are
appointed pursuant to this paragraph, they shall meet promptly and attempt to
set the then fair market rental value of the Premises. If they are unable to
agree within the thirty days after the second appraiser has been appointed, they
shall attempt to elect a third appraiser meeting the qualifications stated in
this paragraph within ten days after the last day the two appraisers are given
to set the then fair market rental value of the Premises. If they are unable to
agree on the third appraiser, either the Landlord or Tenant may petition the
presiding civil court judge of the Maricopa County Superior Court for the
selection of a third appraiser who meets the qualifications stated in this
paragraph. Landlord and Tenant shall split equally the cost of appointing the
appraisers and of paying the appraiser's fees. Within thirty days after the
selection of the third appraiser, a majority of the appraisers shall set the
then fair market rental value of the Premises. If a majority of the appraisers
are unable to set the then fair market rental value of the Premises within
thirty days after selection of the third appraiser, the three appraisals shall
be averaged and the average shall be the then fair market rental value of the
Premises.

     3.   Definitions.  Capitalized terms used in this Rider without definition
          -----------
shall have the definition assigned to such terms in the Lease to which this
Rider is attached, unless the context requires otherwise.

     4.   Full Force and Effect.  Except as specifically modified by this Rider,
          ---------------------
the Lease to which this Rider is attached remains in full force and effect.

____________________________________         ___________________________________
Landlord's Initials                          Tenant's Initials

                                       53<PAGE>

                                                                    EXHIBIT 4.14

================================================================================

               SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT

                                     among

                         OUTBOARD MARINE CORPORATION,

                        QUANTUM INDUSTRIAL PARTNERS LDC

                                      and

                          GREENLAKE HOLDINGS III LLC

                        ______________________________

                                  May 1, 2000
                        ______________________________

================================================================================
<PAGE>

                               Table of Contents
                               -----------------

<TABLE>
<CAPTION>
                                                                      Page #
                                                                      ----
<S>                                                                   <C>
ARTICLE I    DEFINITIONS...............................................   1
     1.1     Definitions...............................................   1

ARTICLE II   PURCHASE AND SALE OF SUBORDINATED
             NOTES AND WARRANTS                                           7
     2.1     Purchase and Sale of Subordinated Notes and Warrants......   7
     2.2     Use of Proceeds...........................................   7
     2.3     Closing...................................................   7

ARTICLE III  REPRESENTATIONS AND WARRANTIES OF THE
             COMPANY...................................................   7
     3.1     Corporate Existence and Power.............................   7
     3.2     Authorization; No Contravention...........................   8
     3.3     Governmental Authorization; Third Party Consents..........   8
     3.4     Binding Effect............................................   8
     3.5     Compliance with Laws......................................   9
     3.6     Capitalization............................................   9
     3.7     No Default or Breach; Contractual Obligations.............  10
     3.8     Financial Statements......................................  10
     3.9     No Material Adverse Change; Ordinary Course of Business...  10
     3.10    Private Offering..........................................  10
     3.11    Intellectual Property.....................................  11
     3.12    Broker's, Finder's or Similar Fees........................  11
     3.13    Litigation; Observance of Statutes and Orders.............  11
     3.14    Taxes.....................................................  12
     3.15    Title to Property; Leases.................................  12

ARTICLE IV   REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........  12
     4.1     Existence and Power.......................................  12
     4.2     Authorization; No Contravention...........................  12
     4.3     Governmental Authorization; Third Party Consents..........  13
     4.4     Binding Effect............................................  13
     4.5     Purchase for Own Account..................................  13
     4.6     Restricted Securities.....................................  14
     4.7     Broker's, Finder's or Similar Fees........................  14
     4.8     Accredited Investor.......................................  14
     4.9     Disclosure of Information.................................  14
     4.10    Investment Experience.....................................  14
</TABLE>
<PAGE>

<TABLE>
<S>                                                                   <C>
ARTICLE V    CONDITIONS TO THE OBLIGATION OF THE PURCHASERS TO
             CLOSE.....................................................  15
     5.1     Representations and Warranties............................  15
     5.2     Secretary's Certificate...................................  15
     5.3     Subordinated Notes........................................  15
     5.4     Warrants                                                    15
     5.5     Registration Rights Agreement Amendment...................  15
     5.6     Stockholders Agreement Amendment..........................  15
     5.7     Certificate of Designation Amendment......................  16
     5.8     Opinion of Counsel........................................  16

ARTICLE VI   CONDITIONS TO THE OBLIGATION
             OF THE COMPANY TO CLOSE...................................  16
     6.1     Representations and Warranties............................  16
     6.2     Payment of Purchase Price.................................  16
     6.3     Registration Rights Agreement Amendment...................  16
     6.4     Stockholders Agreement Amendment..........................  16
     6.5     Certificate of Designation Amendment......................  16

ARTICLE VII INDEMNIFICATION............................................  17
     7.1     Indemnification...........................................  17
     7.2     Notification..............................................  17
     7.3     Limitation on Indemnification.............................  18

ARTICLE VIII AFFIRMATIVE COVENANTS.....................................  19
     8.1     Financial Statements and Other Information................  19
     8.2     Reservation of Stock......................................  20
     8.3     Books and Records.........................................  20
     8.4     Inspection................................................  20

ARTICLE IX   MISCELLANEOUS.............................................  20
     9.1     Survival of Representations and Warranties................  20
     9.2     Notices...................................................  20
     9.3     Successors and Assigns; Third Party Beneficiaries.........  22
     9.4     Amendment and Waiver......................................  22
     9.5     Counterparts..............................................  22
     9.6     Headings..................................................  23
     9.7     GOVERNING LAW.............................................  23
     9.8     Severability..............................................  23
     9.9     Rules of Construction.....................................  23
     9.10    Right to Conduct Activities...............................  23
     9.11    Entire Agreement..........................................  23
     9.12    Fees......................................................  23
     9.13    Publicity.................................................  24
     9.14    Further Assurances........................................  24
</TABLE>

                                      ii
<PAGE>

EXHIBITS

A            Form of Subordinated Note
B            Form of Warrant
C            Form of Certificate of Designations
D            Form of Registration Rights Agreement Amendment
E            Form of Stockholders Agreement Amendment
F            Form of Certificate of Designation Amendment
G            Form of OMC Opinion of Counsel

SCHEDULES

2.1          Purchased Shares, Warrant Shares and Purchase Price

                                      iii
<PAGE>

               SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT

          SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT, dated May 1, 2000
(this "Agreement"), among Outboard Marine Corporation, a Delaware corporation
       ---------
(the "Company") Quantum Industrial Partners LDC ("QIP") and Greenlake Holdings
      -------                                     ---
III LLC ("Greenlake" and together with QIP, the "Purchasers").
          ---------                              ----------

          WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell to each of the Purchasers, for the
aggregate purchase price set forth opposite such Purchaser's name on Schedule
                                                                     --------
2.1 hereto, (i) a Subordinated Note substantially in the form of Exhibit A
---                                                              ---------
hereto (each, a "Subordinated Note") in the face amount set forth opposite such
                 -----------------
Purchaser's name on Schedule 2.1 hereto, and (ii) a warrant (the "Warrant") to
                    ------------                                  -------
purchase, subject to the terms and conditions thereof, the aggregate number of
shares (subject to adjustment) of Common Stock, par value $.01 per share, of the
Company (the "Common Stock") set forth opposite such Purchaser's name on
              ------------
Schedule 2.1 hereto, at an exercise price of $.01 per share (subject to
------------
adjustment), containing the terms and conditions set forth in the form of
warrant attached hereto as Exhibit B.
                           ---------

          NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:

                                  ARTICLE I.

                                  DEFINITIONS
                                  -----------

          A.  Definitions.  As used in this Agreement, and unless the context
              -----------
requires a different meaning, the following terms have the meanings indicated:

          "Affiliate" shall mean any Person who is an "affiliate" (as defined in
           ---------
Rule 12b-2 of the General Rules and Regulations under the Exchange Act) of, and
any Person controlling, controlled by, or under common control with, any
Purchaser.  For the purposes of this Agreement, "control" includes the ability
to have investment discretion through contractual means or by operation of law.

          "Agreement" means this Agreement as the same may be amended,
           ---------
supplemented or modified in accordance with the terms hereof.

          "Audited Financial Statements" has the meaning set forth in Section
           ----------------------------
3.8 of this Agreement.
<PAGE>

                                                                               2

          "Board of Directors" means the Board of Directors of the Company.
           ------------------

          "Business Day" means any day other than a Saturday, Sunday or other
           ------------
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.

          "By-laws" means the by-laws of the Company in effect on the Closing
           -------
Date, as the same may be amended from time to time.

          "Certificate of Designation" means a Certificate of Designation with
           --------------------------
respect to the shares of Series B Preferred Stock which shall be adopted by the
Board of Directors and duly filed with the Secretary of State of the State of
Delaware on or before the Conversion Date substantially in the form attached
hereto as Exhibit C.
          ---------

          "Certificate of Designation Amendment" means a Certificate of
           ------------------------------------
Amendment to the Certificate of Designation of the Series A Preferred Stock
substantially in the form attached hereto as Exhibit F.
                                             ---------

          "Certificate of Incorporation" means the Certificate of Incorporation
           ----------------------------
of the Company, as the same may be amended from time to time.

          "Claims" has the meaning set forth in Section 7.1 of this Agreement.
           ------

          "Closing" has the meaning set forth in Section 2.3 of this Agreement.
           -------

          "Closing Date" has the meaning set forth in Section 2.3 of this
           ------------
Agreement.

          "Code" means the Internal Revenue Code of 1986, as amended, or any
           ----
successor statute thereto.

          "Commission" means the United States Securities and Exchange
           ----------
Commission or any similar agency then having jurisdiction to enforce the
Securities Act.

          "Common Stock" has the meaning set forth in the recitals to this
           ------------
Agreement.

          "Company" has the meaning set forth in the preamble to this Agreement.
           -------

          "Condition of the Company" means the assets, business, properties,
           ------------------------
prospects, operations or financial condition of the Company.

          "Contingent Obligation" means, as applied to any Person, any direct or
           ---------------------
indirect liability of that Person with respect to any Indebtedness, lease,
dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of
                ------------------
<PAGE>

                                                                               3

another Person (the "primary obligor"), whether or not contingent, (a) to
                     ---------------
purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, (b) to advance or
provide funds (i) for the payment or discharge of any such primary obligation,
or (ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or financial condition of the primary obligor, (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation, or (d) otherwise to assure or hold harmless
the owner of any such primary obligation against loss or failure or inability to
perform in respect thereof. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof.

          "Contractual Obligations" means, as to any Person, any provision of
           -----------------------
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.

          "Conversion Date" means the date on which shares of Series B Preferred
           ---------------
Stock are first issued upon conversion of the Subordinated Notes issued
hereunder.

          "Copyrights" means any foreign or United States copyright
           ----------
registrations and applications for registration thereof, and any non-registered
copyrights.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
           ------------
and the rules and regulations of the Commission thereunder.

          "GAAP" means United States generally accepted accounting principles in
           ----
effect from time to time.

          "Governmental Authority" means the government of any nation, state,
           ----------------------
city, locality or other political subdivision thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.

          "Greenlake" has the meaning set forth in the recitals to this
           ---------
Agreement.

          "Indebtedness" means, as to any Person, (a) all obligations of such
           ------------
Person for borrowed money (including, without limitation, reimbursement and all
other obligations with respect to surety bonds, letters of credit and bankers'
acceptances, whether or not matured), (b) all obligations of such Person
evidenced by notes, bonds,
<PAGE>

                                                                               4

debentures or similar instruments, (c) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
and accrued commercial or trade liabilities arising in the ordinary course of
business, (d) all interest rate and currency swaps, caps, collars and similar
agreements or hedging devices under which payments are obligated to be made by
such Person, whether periodically or upon the happening of a contingency, (e)
all indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (f)
all obligations of such Person under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (g) all indebtedness secured
by any Lien (other than Liens in favor of lessors under leases other than leases
included in clause (f)) on any property or asset owned or held by that Person
regardless of whether the indebtedness secured thereby shall have been assumed
by that Person or is non-recourse to the credit of that Person, and (h) any
Contingent Obligation of such Person.

          "Indemnified Party" has the meaning set forth in Section 7.1 of this
           -----------------
Agreement.

          "Indemnifying Party" has the meaning set forth in Section 7.1 of this
           ------------------
Agreement.

          "Intellectual Property" has the meaning set forth in Section 3.10 of
           ---------------------
this Agreement.

          "Interim Financial Statements" has the meaning set forth in Section
           ----------------------------
3.8 of this Agreement.

          "Internet Assets" means any Internet domain names and other computer
           ---------------
user identifiers and any rights in and to sites on the worldwide web, including
rights in and to any text, graphics, audio and video files and html or other
code incorporated in such sites.

          "Knowledge" means the knowledge of the Company.
           ---------

          "Lien" means any mortgage, deed of trust, pledge, hypothecation,
           ----
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences).

          "Losses" has the meaning set forth in Section 7.1 of this Agreement.
           ------

          "Material Adverse Effect" means a material adverse effect on (i) the
           -----------------------
business, operations, financial condition, assets, prospects or properties of
the Company
<PAGE>

                                                                               5

and its subsidiaries taken as a whole, or (ii) the ability of the Company to
perform its obligations under the Transaction Documents, or (iii) the validity
or enforceability of the Transaction Documents.

          "Orders" has the meaning set forth in Section 3.2 of this Agreement.
           ------

          "Patents" means any foreign or United States patents and patent
           -------
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.

          "Permits" has the meaning set forth in Section 3.5 of this Agreement.
           -------

          "Person" means any individual, firm, corporation, partnership, trust,
           ------
incorporated or unincorporated association, joint venture, joint stock company,
limited liability company, Governmental Authority or other entity of any kind,
and shall include any successor (by merger or otherwise) of such entity.

          "Purchasers" has the meaning set forth in the preamble to this
           ----------
Agreement.

          "QIP" has the meaning set forth in the recitals to this Agreement.
           ---

          "Registration Rights Agreement" means the Registration Rights
           -----------------------------
Agreement, dated January 28, 2000, among the Company, QIP and Greenlake Holdings
II LLC.

          "Registration Rights Agreement Amendment" means an amendment to
           ---------------------------------------
Registration Rights Agreement in substantially the form of Exhibit D hereto.
                                                           ---------

          "Requirements of Law" means, as to any Person, any law, statute,
           -------------------
treaty, rule, regulation, right, privilege, qualification, license or franchise
or determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.

          "Securities" means the Subordinated Note and the Warrants issuable
           ----------
hereunder, the shares of Series B Preferred Stock issuable upon conversion of
the Subordinated Notes, the shares of Common Stock issuable upon conversion of
the Series B Preferred Stock, and the Warrant Shares.

          "Securities Act" means the Securities Act of 1933, as amended, and the
           --------------
rules and regulations of the Commission thereunder.

          "Series A Preferred Stock" means the shares of Series A Convertible
           ------------------------
Preferred Stock, par value $.01 per share, of the Company having the powers,
<PAGE>

                                                                               6

designations, preferences and rights set forth in the Certificate of the Powers,
Designations, Preferences and Rights of the Series A Convertible Preferred
Stock, Par Value $.01 Per Share of the Company, as filed by the Company with the
Secretary of State of Delaware on January 28, 2000.

          "Series B Preferred Stock" means the shares of Series B Convertible
           ------------------------
Preferred Stock, par value $.01 per share, of the Company having the powers,
designations, preferences and rights set forth in the Certificate of
Designation, and issuable by the Company upon conversion of the Subordinated
Notes in accordance with the terms set forth in this Agreement and in the
Subordinated Notes.

          "Software" means any computer software programs, source code, object
           --------
code, data and documentation, including, without limitation, any computer
software programs that incorporate and run the Company's pricing models,
formulae and algorithms.

          "Stock Equivalents" means any security or obligation which is by its
           -----------------
terms convertible into or exchangeable for shares of common stock or other
capital stock or securities of the Company, and any option, warrant or other
subscription or purchase right with respect to common stock or such other
capital stock or securities.

          "Stockholders Agreement" means the Stockholders Agreement dated
           ----------------------
January 28, 2000, among the Company, QIP and Greenlake Holdings II LLC.

          "Stockholders Agreement Amendment" means an amendment to Stockholders
           --------------------------------
Agreement in substantially the form of Exhibit E hereto.
                                       ---------

          "Trade Secrets" means any trade secrets, research records, processes,
           -------------
procedures, manufacturing formulae, technical know-how, technology, blue prints,
designs, plans, inventions (whether patentable and whether reduced to practice),
invention disclosures and improvements thereto.

          "Trademarks" means any foreign or United States trademarks, service
           ----------
marks, trade dress, trade names, brand names, designs and logos, corporate
names, product or service identifiers, whether registered or unregistered, and
all registrations and applications for registration thereof.

          "Transaction Documents" means, collectively, this Agreement, the
           ---------------------
Subordinated Notes, the Warrants, the Registration Rights Agreement Amendment
and the Stockholders Agreement Amendment.

          "Warrant" has the meaning set forth in the recitals to this Agreement.
           -------
<PAGE>

                                                                               7

          "Warrant Shares" has the meaning set forth in Section 2.1 of this
           --------------
Agreement.

                                  ARTICLE II.

             PURCHASE AND SALE OF SUBORDINATED NOTES AND WARRANTS
             ----------------------------------------------------

          A.   Purchase and Sale of Subordinated Notes and Warrants.  Subject
               ----------------------------------------------------
to the terms and conditions herein set forth, the Company agrees to issue and
sell to each Purchaser, and each Purchaser agrees to purchase from the Company,
for the aggregate purchase price set forth opposite such Purchaser's name on
Schedule 2.1 hereto, on the Closing Date (a) a Subordinated Note in the face
------------
amount set forth opposite such Purchaser's name on Schedule 2.1 hereto, and (ii)
                                                   ------------
a Warrant to purchase the aggregate number of shares of Common Stock set forth
opposite such Purchaser's name on Schedule 2.1 hereto (all of the shares of
                                  ------------
Common Stock issuable upon exercise of the Warrants being purchased pursuant
hereto being referred to herein as the "Warrant Shares").
                                        --------------

          B.   Use of Proceeds.  The Company shall use the proceeds from the
               ---------------
sale of the Subordinated Notes and the Warrants to the Purchasers for general
corporate purposes, including to fund the Company's working capital and to make
capital expenditures.

          C.   Closing.  The closing of the sale and purchase of the
               -------
Subordinated Notes and Warrants (the "Closing") shall take place at the offices
                                      -------
of Paul, Weiss, Rifkind, Wharton & Garrison, at 10:00 a.m., local time, on May
1, 2000 or at such other time, place and date that the Company and the
Purchasers may agree in writing (the "Closing Date").  On the Closing Date, the
                                      ------------
Company shall deliver to each Purchaser (a) a Subordinated Note in the face
amount set forth beside such Purchaser's name in Schedule 2.1 hereto and (b) a
Warrant to purchase the number of Warrant Shares set forth beside such
Purchaser's name in Schedule 2.1 hereto against delivery by such Purchaser to
the Company of the aggregate purchase price therefor as set forth beside such
Purchaser's name in Schedule 2.1 hereto by wire transfer of immediately
available funds.

                                 ARTICLE III.

                 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
                 ---------------------------------------------

          The Company represents and warrants to each of the Purchasers as
follows:

          A.   Corporate Existence and Power.  The Company (a) is a corporation
               -----------------------------
duly organized, validly existing and in good standing under the laws of the
jurisdiction of
<PAGE>

                                                                               8

its incorporation; (b) has all requisite power and authority to own and
operate its property, to lease the property it operates as lessee and to conduct
the business in which it is currently, or is proposed to be, engaged; and (c) is
duly qualified as a foreign corporation, licensed and in good standing under the
laws of each jurisdiction in which its ownership, lease or operation of property
or the conduct of its business requires such qualification, except where the
failure to so qualify would not, individually or in the aggregate, have a
Material Adverse Effect. The Company has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents.

          B.   Authorization; No Contravention.  The execution, delivery and
               -------------------------------
performance by the Company of this Agreement and each of the other Transaction
Documents and of each of the transactions contemplated hereby and thereby,
including, without limitation, the sale, issuance and delivery of the Securities
(assuming, in the case of the issuance of the shares of Series B Preferred
Stock, the filing of the Certificate of Designation with the Secretary of State
of Delaware prior to the issuance thereof), (a) have been duly authorized by all
necessary corporate action of the Company; (b) do not contravene the terms of
the Certificate of Incorporation or the By-laws; (c) do not violate, conflict
with or result in any breach or contravention of, or the creation of any Lien
under, any Contractual Obligation of the Company or any Requirement of Law
applicable to the Company, except as would not have a Material Adverse Effect;
and (d) do not violate any judgment, injunction, writ, award, decree or order of
any nature (collectively, "Orders") of any Governmental Authority against, or
                           ------
binding upon, the Company.

          C.   Governmental Authorization; Third Party Consents.  Except for the
               ------------------------------------------------
filing with the Secretary of State of Delaware of the Certificate of Designation
prior to the issuance of any shares of Series B Preferred Stock, or with respect
to filings that are required or permitted to be made pursuant to federal or
state securities laws, no approval, consent, exemption, authorization or other
action by, or notice to, or filing with, any Governmental Authority or any other
Person, and no lapse of a waiting period under a Requirement of Law, is
necessary or required in connection with the execution, delivery or performance
(including, without limitation, the sale, issuance and delivery of the
Securities) by, or enforcement against, the Company of this Agreement and the
other Transaction Documents or the transactions contemplated hereby and thereby.

          D.   Binding Effect.  This Agreement and each of the other Transaction
               --------------
Documents have been duly executed and delivered by the Company, and constitute
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
<PAGE>

                                                                               9

          E.   Compliance with Laws.
               --------------------

               (1)  The Company is in compliance with all Requirements of Law
and all Orders issued by any court or Governmental Authority against the Company
in all material respects.

               (2)  (i) The Company has all licenses, permits and approvals of
any Governmental Authority (collectively, "Permits") that are necessary for the
                                           -------
conduct of the business of the Company; (ii) such Permits are in full force and
effect; and (iii) no violations are or have been recorded in respect of any
Permit, in each case, except as would not, individually or in the aggregate,
have a Material Adverse Effect.

          F.   Capitalization.  On the Closing Date, the authorized capital
               --------------
stock of the Company shall consist of (i) 36,000,000 shares of Common Stock, of
which 20,439,531 shares shall be issued and outstanding, (ii) 650,000 shares of
Series A Preferred Stock, all of which are issued and outstanding, and (iii)
350,000 shares of undesignated "blank check" preferred stock.  The Company has
reserved an aggregate of (1) 4,642,857 shares of Common Stock for issuance upon
conversion of the Series A Preferred Stock, (2) 5,750,000 shares of Common Stock
for issuance upon exercise of common stock purchase warrants issued under that
certain Series A Convertible Preferred Stock and Warrant Purchase Agreement,
dated January 28, 2000, among the Company, QIP and Greenlake Holdings II LLC,
(3)330,000 shares of Common Stock for issuance upon exercise of the Warrants,
and (4) an aggregate of 1,900,000 shares of Common Stock for issuance upon the
exercise of stock options issued or issuable under the Outboard Marine
Corporation Personal Rewards and Opportunities Plan.  Except as described in the
immediately preceding sentence or as provided in the Transaction Documents, on
the Closing Date, there will be no options, warrants, conversion privileges,
subscription or purchase rights or other rights outstanding to purchase or
otherwise acquire (i) any authorized but unissued, unauthorized or treasury
shares of the Company's capital stock, (ii) any Stock Equivalents or (iii) other
securities of the Company.  The issuance of the Subordinated Notes and the
Warrants has been duly authorized. Assuming the accuracy of and compliance with
each Purchaser's representations, warranties and covenants contained in Sections
4.5, 4.6, 4.8, 4.9 and 4.10 hereof and in each of Section 17 of the Warrant,
Section 13 of the Subordianted Note and Sections 2.1 through (and including) 2.4
of the Stockholders Agreement, as amended by the Stockholders Agreement
Amendment, the issuance and sale to the Purchasers of the Subordinated Notes and
Warrants, the conversion of the Subordinated Notes in accordance with the terms
hereof and thereof, and the exercise of the Warrants in accordance with the
terms thereof will be exempt from the registration requirements of the
Securities Act.  The Warrant Shares and the shares of Series B Preferred Stock
and any shares of Common Stock issuable upon conversion of the shares of Series
B Preferred Stock will be, when issued in accordance with the Transaction
Documents, duly authorized, fully paid and non-assessable and not subject to any
preemptive rights or similar rights that have not been satisfied.  The issued
and outstanding
<PAGE>

                                                                              10

shares of Common Stock are all duly authorized, validly issued, fully paid and
non-assessable.

          G.   No Default or Breach; Contractual Obligations.  The Company has
               ---------------------------------------------
not received notice of a current or pending default and is not in default under,
or with respect to, any Contractual Obligation nor, to the Company's knowledge,
does any condition exist that with notice or lapse of time or both would
constitute a default thereunder, except as would not have a Material Adverse
Effect.  All of the Contractual Obligations are valid, subsisting, in full force
and effect and binding upon the Company and, to the Company's Knowledge, the
other parties thereto. To the Knowledge of the Company, no other party to any
such Contractual Obligation is in material default thereunder, nor does any
condition exist that with notice or lapse of time or both would constitute a
material default by such other party thereunder.

          H.   Financial Statements.  The consolidated balance sheet of the
               --------------------
Company and its subsidiaries as of December 31, 1999, and the related
consolidated statements of income, stockholders equity and cash flows for the
year then ended, including the notes and schedules thereto, certified by KPMG
LLP, independent public accountants, that have been delivered by the Company to
the Purchasers fairly present the consolidated financial position of the Company
and its subsidiaries as at December 31, 1999 and the consolidated results of
operations for the Company and its subsidiaries for the period then ended, in
each case in accordance with generally accepted accounting principles
consistently applied for the period covered thereby (the foregoing consolidated
financial statements at and for the period ending December 31, 1999 are referred
to herein as the "Audited Financial Statements").  The unaudited consolidated
                  ----------------------------
balance sheet of the Company and its subsidiaries as of March 31, 2000 and the
related unaudited consolidated statements of income, stockholders equity and
cash flows for the three months then ended, that have been delivered by the
Company to the Purchasers fairly present the consolidated financial position of
the Company and its subsidiaries as at March 31, 2000 and the consolidated
results of operations for the Company and its subsidiaries for the three months
then ended, in each case in accordance with generally accepted accounting
principles applied on a basis consistent with the Audited Financials, except for
normal year-end adjustments and the absence of footnotes required by GAAP (the
foregoing unaudited consolidated financial statements at March 31, 2000 and for
the three months then ending are referred to herein as the "Interim Financial
                                                            -----------------
Statements").
----------

          I.   No Material Adverse Change; Ordinary Course of Business.  Since
               -------------------------------------------------------
December 31, 1999, there has been no change in the financial condition,
operations, business or properties of the Company or any of its subsidiaries
except (x) as disclosed in the Company's reports under the Securities Exchange
Act of 1934, as amended, as filed with the Securities and Exchange Commission
subsequent to December 31, 1999 and prior to the date hereof, (y) as disclosed
in the Interim Financial Statements or (y) changes that individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect.
<PAGE>

                                                                              11

          J.   Private Offering.  No form of general solicitation or general
               ----------------
advertising was used by the Company or its representatives in connection with
the offer or sale of the Subordinated Notes or the Warrants.

          K.   Intellectual Property.
               ---------------------

               (1)  Except as would not, individually or in the aggregate, have
a Material Adverse Effect: (i) The Company is the owner of all, or has the
license or right to use, sell and license all of, the Copyrights, Patents, Trade
Secrets, Trademarks, Internet Assets, Software and other proprietary rights
(collectively, "Intellectual Property") that are used in connection with its
                ---------------------
business as presently conducted or contemplated in its business plan, free and
clear of all Liens.

                    (ii)   None of the Intellectual Property of the Company is
subject to any outstanding Order, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
Knowledge of the Company, threatened, which challenges the validity,
enforceability, use or ownership of the item.

                    (iii)  To the knowledge of the Company, none of the
Intellectual Property currently sold or licensed by the Company to any Person or
used by or licensed to the Company by any Person infringes upon or otherwise
violates any Intellectual Property rights of others.

                    (iv)   No litigation is pending and no Claim has been made
against the Company or, to the Knowledge of the Company, is threatened,
contesting the right of the Company to sell or license to any Person or use the
Intellectual Property presently sold or licensed to such Person or used by the
Company.

               (2)  To the Knowledge of the Company, no Person is infringing
upon or otherwise violating the Intellectual Property rights of the Company.

          L.   Broker's, Finder's or Similar Fees.  There are no brokerage
               ----------------------------------
commissions, finder's fees or similar fees or commissions payable by the Company
in connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding with the Company or any action taken by the
Company.

          M.   Litigation; Observance of Statutes and Orders.
               ---------------------------------------------

               1.   There are no actions, suits or proceedings pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
subsidiary or any property of the Company or any subsidiary in any court or
before any arbitrator of any kind or before or by any governmental authority
that, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
<PAGE>

                                                                              12

               2.   Neither the Company nor any subsidiary is in default under
any order, judgment, decree or ruling of any court, arbitrator or governmental
authority or is in violation of any applicable law, ordinance, rule or
regulation (including without limitation environmental laws) of any governmental
authority, which default or violation, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect.

          N.   Taxes.  The Company and its subsidiaries have filed all income
               -----
tax returns that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all other taxes
and assessments payable by them, to the extent such taxes and assessments have
become due and payable and before they have become delinquent, except for any
taxes and assessments (x) the amount of which, or the failure to file with
respect to which, is not individually or in the aggregate material or (y) the
amount, applicability or validity of which is currently being contested in good
faith by appropriate proceedings and with respect to which the Company or a
subsidiary, as the case may be, has established adequate reserves in accordance
with generally accepted accounting principles.

          O.   Title to Property; Leases.  The Company and its subsidiaries
               -------------------------
have good title to their respective properties, including all such properties
reflected in the audited balance sheet as of December 31, 1999 or purported to
have been acquired by the Company or any subsidiary after said date (except as
sold or otherwise disposed of), in each case free and clear of liens, except for
(x) liens securing the Company's obligations under the Company's credit
facilities and in respect of the Company's borrowings, and (y) those defects in
title and liens that, individually or in the aggregate, would not have a
Material Adverse Effect.  All material leases are valid and subsisting and are
in full force and effect in all material respects except to the extent that the
failure to be so would not, individually or in the aggregate, have a Material
Adverse Effect.

                                  ARTICLE IV.

               REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
               ------------------------------------------------

          Each of the Purchasers hereby represents and warrants, severally and
not jointly, to the Company as follows:

          A.   Existence and Power.  Such Purchaser (a) is duly organized and
               -------------------
validly existing under the laws of the jurisdiction of its formation and (b) has
the requisite power and authority to execute, deliver and perform its
obligations under this Agreement and each of the other Transaction Agreements to
which it is a party.
<PAGE>

                                                                              13

          B.   Authorization; No Contravention.  The execution, delivery and
               -------------------------------
performance by such Purchaser of this Agreement and each of the other
Transaction Agreements to which it is a party and the transactions contemplated
hereby and thereby, (a) have been duly authorized by all necessary action, (b)
do not contravene the terms of such Purchaser's organizational documents, or any
amendment thereof, and (c) do not violate, conflict with or result in any breach
or contravention of, or the creation of any Lien under, any Contractual
Obligation of such Purchaser or any Requirement of Law applicable to such
Purchaser, and (d) do not violate any Orders of any Governmental Authority
against, or binding upon, such Purchaser.

          C.   Governmental Authorization; Third Party Consents.  No approval,
               ------------------------------------------------
consent, compliance, exemption, authorization or other action by, or notice to,
or filing with, any Governmental Authority or any other Person, and no lapse of
a waiting period under any Requirement of Law, is necessary or required in
connection with the execution, delivery or performance (including, without
limitation, the purchase of the Subordinated Notes and the Warrants) by, or
enforcement against, such Purchaser of this Agreement and each of the other
Transaction Agreements to which it is a party or the  transactions contemplated
hereby and thereby.

          D.   Binding Effect.  This Agreement and each of the other Transaction
               --------------
Agreements to which it is a party have been duly executed and delivered by such
Purchaser and constitutes the legal, valid and binding obligations of such
Purchaser, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).

          E.   Purchase for Own Account.  The Subordinated Notes and the
               ------------------------
Warrants to be acquired by such Purchaser pursuant to this Agreement and any
shares of Series B Preferred Stock or shares of Common Stock received upon
conversion or exercise of the Subordinated Notes, the shares of Series B
Preferred Stock or the Warrants or as a result of the ownership thereof are
being or will be acquired for investment for its own account and with no
intention of distributing, transferring, assigning or reselling or otherwise
disposing thereof or any part thereof in any transaction that would be in
violation of the securities laws of the United States of America, or any state,
without prejudice, however, to the rights of such Purchaser at all times to sell
or otherwise dispose of all or any part of such Securities under an effective
registration statement under the Securities Act, or under an exemption from such
registration available under the Securities Act, and subject, nevertheless, to
the disposition of such Purchaser's property being at all times within its
control.  If such Purchaser should in the future decide to dispose of any of the
Securities, such Purchaser understands and agrees that it may do so only once it
reasonably satisfies the Company that such transfer is in compliance with the
Securities Act and applicable state securities laws, as then in effect.  Such
Purchaser agrees to the imprinting,
<PAGE>

                                                                              14

so long as required by law, of a legend on certificates representing all of the
Securities to the following effect:

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR RECEIVABLE UPON THE
     EXERCISE OR CONVERSION THEREOF OR AS A RESULT OF THE OWNERSHIP HEREOF  HAVE
     NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
     "ACT"), OR THE SECURITIES LAWS OF ANY STATE.  THE SECURITIES MAY NOT BE
     TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
     SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
     EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS."

     "THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
     STOCKHOLDERS AGREEMENT AMONG THE COMPANY AND THE ORIGINAL PURCHASERS OF THE
     SECURITIES REPRESENTED HEREBY.  TRANSFEREES OF SUCH SECURITIES SHOULD
     REVIEW SUCH AGREEMENT TO DETERMINE THEIR RIGHTS AND OBLIGATIONS."

          F.   Restricted Securities.  Such Purchaser understands that the
               ---------------------
Securities are "restricted securities" under the Securities Act and will not be
registered at the time of their issuance under the Securities Act for the reason
that the sale provided for in this Agreement is exempt pursuant to Section 4(2)
of the Securities Act and that the reliance of the Company on such exemption is
predicated in part on such Purchaser's representations set forth herein and on
such Purchaser's agreement to comply with Section 17 of the Warrant and Section
13 of the Subordinated Note, and that such Securities may be resold without
registration under the Securities Act only in certain limited circumstances
defined therein.  Such Purchaser represents that it is reasonably familiar with
such resale restrictions in the Securities Act, Rule 144 promulgated thereunder,
and the other applicable federal and state rules and regulations.

          G.   Broker's, Finder's or Similar Fees.  There are no brokerage
               ----------------------------------
commissions, finder's fees or similar fees or commissions payable by such
Purchaser in connection with the transactions contemplated hereby based on any
agreement, arrangement or understanding with such Purchaser or any action taken
by such Purchaser.

          H.   Accredited Investor.  Such Purchaser is an "Accredited Investor"
               -------------------
within the meaning of Rule 501 of Regulation D under the Securities Act, as
presently in effect.
<PAGE>

                                                                              15

          I.   Disclosure of Information.  Such Purchaser has carefully reviewed
               -------------------------
the representations and warranties concerning the Company contained in this
Agreement and has had adequate opportunity to ask questions and receive answers
from the Company regarding the terms and conditions of the offering of the
Securities and the business, assets, prospects and financial condition of the
Company.

          J.   Investment Experience.  Such Purchaser is, or has been, an
               ---------------------
investor in securities of companies similar to the Company and has or is
represented by one who has such knowledge and experience in financial or
business matters that it is capable of evaluation of the merits and risks of an
investment in the Securities.

                                  ARTICLE V.

                         CONDITIONS TO THE OBLIGATION
                          OF THE PURCHASERS TO CLOSE
                         ----------------------------

          The obligation of the Purchasers to purchase the Subordinated Notes
and the Warrants, to pay the purchase price therefor at the Closing and to
perform any obligations hereunder shall be subject to the satisfaction as
determined by, or waiver by, the Purchasers of the following conditions on or
before the Closing Date.

          A.   Representations and Warranties.  The representations and
               ------------------------------
warranties of the Company contained in Article III hereof shall be true and
correct in all material respects at and on the Closing Date as if made at and on
such date, except to the extent that any representation and warranty expressly
speaks as of an earlier date, in which case such representation and warranty is
true and correct as of such date and except for any activities or transactions
which may have taken place after the date hereof which are contemplated by this
Agreement.

          B.   Secretary's Certificate.  The Purchasers shall have received a
               -----------------------
certificate from the Company, in form and substance satisfactory to the
Purchasers, dated the Closing Date and signed by the Secretary or an Assistant
Secretary of the Company, certifying as to the incumbency and specimen signature
of each officer of the Company executing this Agreement, each other Transaction
Document and any other document delivered in connection herewith on behalf of
the Company.

          C.   Subordinated Notes.  The Company shall have delivered to each of
               ------------------
the Purchasers a Subordinated Note in the face amount set forth opposite such
Purchaser's name on Schedule 2.1 hereto.
                    ------------

          D.   Warrants.  The Company shall have duly executed and delivered to
               --------
each of the Purchasers a Warrant to purchase that number of shares of Common
Stock set forth opposite such Purchaser's name on Schedule 2.1 hereto.
                                                  ------------
<PAGE>

                                                                              16

          E.   Registration Rights Agreement Amendment.  The Company shall have
               ---------------------------------------
duly executed and delivered the Registration Rights Agreement Amendment.

          F.   Stockholders Agreement Amendment.  The Company shall have duly
               --------------------------------
executed and delivered the Stockholders Agreement Amendment.

          G.   Certificate of Designation Amendment.  The Company shall have
               ------------------------------------
filed with the Secretary of State of Delaware the Certificate of Designation
Amendment substantially in the form of Exhibit F hereto.
                                       ---------

          H.   Opinion of Counsel.  The Purchasers shall have received an
               ------------------
opinion of Counsel for the Company, dated the Closing Date, relating to the
transactions contemplated by or referred to herein, substantially in the form
attached hereto as Exhibit G.
                   ---------

                                  ARTICLE VI.

                         CONDITIONS TO THE OBLIGATION
                            OF THE COMPANY TO CLOSE
                          ---------------------------

          The obligation of the Company to issue and sell the Subordinated Notes
and the Warrants and the obligation of the Company to perform its other
obligations hereunder shall be subject to the satisfaction as determined by, or
waiver by, the Company of the following conditions on or before the Closing
Date:

          A.   Representations and Warranties.  The representations and
               ------------------------------
warranties of the Purchasers contained in Article IV hereof shall be true and
correct on at and on the Closing Date as if made at and on such date, except to
the extent that any representation and warranty expressly speaks as of an
earlier date, in which case such representation and warranty is true and correct
as of such date and except for any activities or transactions which may have
taken place after the date hereof which are contemplated by this Agreement.

          B.   Payment of Purchase Price.  Each Purchaser shall have paid the
               -------------------------
aggregate purchase price for the Subordinated Note and the Warrant to be
purchased by such Purchaser.

          C.   Registration Rights Agreement Amendment.  Each Purchaser shall
               ---------------------------------------
have duly executed and delivered the Registration Rights Agreement Amendment.

          D.   Stockholders Agreement Amendment.  Each Purchaser have duly
               --------------------------------
executed and delivered the Stockholders Agreement Amendment.
<PAGE>

                                                                              17

          E.   Certificate of Designation Amendment.  The stockholders of the
               ------------------------------------
Company (including the holders of at least 75% of the shares of Series A
Preferred Stock voting separately as a class) shall have approved the filing by
the Company of the Certificate of Designation Amendment.

                                 ARTICLE VII.

                                INDEMNIFICATION
                                ---------------

          A.   Indemnification.  Except as otherwise provided in this Article
               ---------------
VII, the Company (the "Indemnifying Party") agrees to indemnify, defend and hold
                       ------------------
harmless each of the Purchasers and its Affiliates and their respective
officers, directors, agents, employees, subsidiaries, partners, members and
controlling persons (each, an "Indemnified Party") to the fullest extent
                               -----------------
permitted by law from and against any and all losses, actions, suits,
proceedings, claims, complaints, disputes, arbitrations or investigations
(collectively, "Claims" or written threats thereof (including, without
                ------
limitation, any Claim by a third party), damages, expenses (including reasonable
fees, disbursements and other charges of counsel incurred by the Indemnified
Party in any action between the Indemnifying Party and the Indemnified Party or
between the Indemnified Party and any third party) or other liabilities
(collectively, "Losses") resulting from or arising out of any breach of any
                ------
representation or warranty, covenant or agreement by the Company in this
Agreement or the other Transaction Documents; provided, however, that the
                                              --------  -------
Indemnifying Party shall not be liable under this Article VII to an Indemnified
Party to the extent that it is finally judicially determined that such Losses
resulted or arose from the breach by such Indemnified Party of any
representation, warranty, covenant or other agreement of such Indemnified Party
contained in this Agreement or the other Transaction Documents or the willful
misconduct or gross negligence of such Indemnified Party; and provided further,
                                                              -------- -------
that if and to the extent that such indemnification is unenforceable for any
reason, the Indemnifying Party shall make the maximum contribution to the
payment and satisfaction of such Losses which shall be permissible under
applicable laws.  The amount of any payment to any Indemnified Party herewith in
respect of any Loss shall be of sufficient amount to make such Indemnified Party
whole.  In connection with the obligation of the Indemnifying Party to indemnify
for expenses as set forth above, the Indemnifying Party shall, upon presentation
of appropriate invoices containing reasonable detail, reimburse each Indemnified
Party for all such expenses (including reasonable fees, disbursements and other
charges of counsel incurred by the Indemnified Party in any action between the
Indemnifying Party and the Indemnified Party or between the Indemnified Party
and any third party) as they are incurred by such Indemnified Party; provided,
                                                                     --------
however, that if an Indemnified Party is reimbursed under this Article VII for
-------
any expenses, such reimbursement of expenses shall be refunded to the extent it
is finally judicially determined that the Losses in question resulted primarily
from the willful misconduct or gross negligence of such Indemnified Party.
<PAGE>

                                                                              18

          B.   Notification.  Each Indemnified Party under this Article VII
               ------------
shall, promptly after the receipt of notice of the commencement of any Claim
against such Indemnified Party in respect of which indemnity may be sought from
the Indemnifying Party under this Article VII, notify the Indemnifying Party in
writing of the commencement thereof.  The omission of any Indemnified Party to
so notify the Indemnifying Party of any such action shall not relieve the
Indemnifying Party from any liability which it may have to such Indemnified
Party (a) other than pursuant to this Article VII or (b) under this Article VII
unless, and only to the extent that, such omission results in the Indemnifying
Party's forfeiture of substantive rights or defenses.  In case any such Claim
shall be brought against any Indemnified Party, and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
                                                                   --------
however, that any Indemnified Party may, at its own expense, retain separate
-------
counsel to participate in such defense at its own expense.  Notwithstanding the
foregoing, in any Claim in which both the Indemnifying Party, on the one hand,
and an Indemnified Party, on the other hand, are, or are reasonably likely to
become, a party, such Indemnified Party shall have the right to employ separate
counsel and to control its own defense of such Claim if, in the reasonable
opinion of counsel to such Indemnified Party, a conflict or potential conflict
exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable; provided, however, that the Indemnifying Party (i) shall not be
           --------  -------
liable for the fees and expenses of more than one counsel to all Indemnified
Parties and (ii) shall reimburse the Indemnified Parties for all of such fees
and expenses of such counsel incurred in any action between the Indemnifying
Party and the Indemnified Parties or between the Indemnified Parties and any
third party, as such expenses are incurred.  The Indemnifying Party agrees that
it will not, without the prior written consent of the Purchasers, settle,
compromise or consent to the entry of any judgment in any pending or threatened
Claim relating to the matters contemplated hereby (if any Indemnified Party is a
party thereto or has been actually threatened to be made a party thereto) unless
such settlement, compromise or consent includes an unconditional release of each
Indemnified Party from all liability arising or that may arise out of such
Claim.  The Indemnifying Party shall not be liable for any settlement of any
Claim effected against an Indemnified Party without its written consent, which
consent shall not be unreasonably withheld.  The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the
--------  -------
contrary contained in this Agreement, nothing in this Article VII shall restrict
or limit any rights that any Indemnified Party may have to seek equitable
relief.

          C.   Limitation on Indemnification.  Anything in this Agreement to the
               -----------------------------
contrary notwithstanding, no payment shall be made to an Indemnified Party
pursuant to Section 7.1 of this Agreement until the amounts which the Purchasers
would otherwise be entitled to receive as indemnification under this Agreement
aggregate at least $115,000, at which time the Purchaser shall be entitled to
receive any such payments and any
<PAGE>

                                                                              19

subsequent payments in full. Anything in this Agreement to the contrary
notwithstanding, the liability of the Company under this Article shall in no
event exceed the total purchase price paid for the Subordinated Notes and the
Warrants received by the Company pursuant to this Agreement.

                                 ARTICLE VIII.

                             AFFIRMATIVE COVENANTS
                             ---------------------

          The Company hereby covenants and agrees with each Purchaser that so
long as such Purchaser holds any Subordinated Note, shares of Series B Preferred
Stock or Warrant:

          A.   Financial Statements and Other Information.  The Company shall
               ------------------------------------------
deliver to such Purchaser, in form and substance reasonably satisfactory to such
Purchaser:

               3.   as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited balance
sheet of the Company as of the end of such fiscal year and the related
statements of operations and cash flows for such fiscal year, setting forth in
each case in comparative form the figures for the previous year, all in
reasonable detail and accompanied by a management summary and analysis of the
operations of the Company for such fiscal year and by the opinion of a
nationally recognized independent certified public accounting firm which report
shall state without qualification that such financial statements present fairly
the financial condition as of such date and results of operations and cash flows
for the periods indicated in conformity with GAAP applied on a consistent basis;

               4.   commencing with the quarterly fiscal period ending on June
30, 2000, as soon as available, but in any event not later than forty-five (45)
days after the end of each of the first three fiscal quarters of each fiscal
year, the unaudited balance sheet of the Company, and the related statements of
operations and cash flows for such quarter and for the period commencing on the
first day of the fiscal year and ending on the last day of such quarter, all
certified by an appropriate officer of the Company as presenting fairly the
financial condition as of such date and results of operations and cash flows for
the periods indicated in conformity with GAAP applied on a consistent basis,
subject to normal year-end adjustments and the absence of footnotes required by
GAAP; and

               5.   commencing with the month ending on May 31, 2000, as soon as
available, but in any event not later than thirty (30) days after the end of the
first eleven months of each fiscal year, the unaudited balance sheet of the
Company, and the related statements of operations and cash flows for such month
and for the period commencing on the first day of the fiscal year and ending on
the last day of such month, all certified by an appropriate officer of the
Company as presenting fairly the financial condition as of such date and results
of operations and cash flows for the periods indicated in conformity with
<PAGE>

                                                                              20

GAAP applied on a consistent basis, subject to normal year-end adjustments and
the absence of footnotes required by GAAP.

          B.   Reservation of Stock.  The Company shall at all times reserve
               --------------------
and keep available out of its authorized shares of preferred stock the maximum
number of shares of preferred stock that may be required to be designated as
shares of Series B Preferred Stock and issued upon conversion of the
Subordinated Notes. The Company shall at all times reserve and keep available
out of its authorized shares of Common Stock, solely for the purpose of issuing
and delivering such shares upon conversion of the shares of Series B Preferred
Stock, as provided in the Certificate of Designations, and the exercise of the
Warrants, the maximum number of shares of Common Stock that may be issuable or
deliverable upon such conversion or exercise.

          C.   Books and Records.  The Company shall keep proper books of
               -----------------
record and account, in which full and correct entries shall be made of all
financial transactions and the assets and business of the Company in accordance
with GAAP consistently applied.

          D.   Inspection.  The Company shall permit representatives of the
               ----------
Purchasers to visit and inspect any of its properties, to examine its corporate,
financial and operating records and make copies thereof or abstracts therefrom,
to discuss its affairs, finances and accounts with their respective directors,
officers and independent public accountants, and shall provide the Purchasers
and their representatives with reasonable access to its officers and employees,
all at such reasonable times during normal business hours and as often as may be
reasonably requested upon reasonable advance notice to the Company.

                                  ARTICLE IX.

                                 MISCELLANEOUS
                                 -------------

          A.   Survival of Representations and Warranties.  All of the
               ------------------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement until the first anniversary of the Closing Date.

          B.   Notices.  All notices, demands and other communications provided
               -------
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:

               if to the Company:

               Outboard Marine Corporation
<PAGE>

                                                                              21

               100 Sea Horse Drive
               Waukegan, IL 60085
               Telecopy: (847) 689-6200
               Attention: General Counsel

               with a copy to:

               Davis Polk & Wardwell
               450 Lexington Avenue
               New York, NY 10017
               Telecopy:  (212) 450-4800
               Attention: Julia K. Cowles, Esq.

               (i)   if to Quantum Industrial Partners LDC.:

                     Kaya Flamboyan 9,
                     Villemstad
                     Curacao
                     Netherlands-Antilles
                     with a copy to:

                     Soros Fund Management LLC
                     888 Seventh Avenue
                     New York, NY 10016
                     Telecopy:  (212) 664-0544
                     Attention: Michael Neus, Esq.

                     and a copy to:

                     Paul, Weiss, Rifkind, Wharton & Garrison
                     1285 Avenue of the Americas
                     New York, New York 10019-6064
                     Telecopy:  (212) 757-3990
                     Attention: Richard S. Borisoff, Esq.

               (ii)  If to Greenlake:

                     Greenlake Holdings III LLC
                     c/o Greenway Partners, L.P.
                     277 Park Avenue
                     New York, NY 10016
                     Telecopy:  (212) 350-5253
                     Attention: Gary Duberstein
<PAGE>

                                                                              22
               with a copy to:

               Weil, Gotshal & Manges
               767 Fifth Avenue
               New York, New York 10153
               Telecopy:  (212) 310-8007
               Attention: David Blittner, Esq.

          All such notices, demands and other communications shall be deemed to
have been duly given when delivered by hand, if personally delivered; when
delivered by courier, if delivered by commercial courier service; five (5)
Business Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is mechanically acknowledged, if telecopied.

          C.   Successors and Assigns; Third Party Beneficiaries.  This
               -------------------------------------------------
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto.  Subject to applicable securities laws
and the terms and conditions thereof, the Purchasers may assign any of their
rights under this Agreement or the other Transaction Documents to any of their
respective Affiliates.  The Company may not assign any of its rights under this
Agreement without the written consent of the Purchasers.  Except as provided in
Article VII, no Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement.

          D.   Amendment and Waiver.
               --------------------

               6.   No failure or delay on the part of the Company or the
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or the Purchasers at law, in equity or otherwise.

               7.   Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Purchasers from the terms of
any provision of this Agreement, shall be effective (i) only if it is made or
given in writing and signed by the Company and the Purchasers purchasing 75% in
principal amount of the Subordinated Notes, and (ii) only in the specific
instance and for the specific purpose for which made or given. Except where
notice is specifically required by this Agreement, no notice to or demand on the
Company in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances.
<PAGE>

                                                                              23

          E.   Counterparts.  This Agreement may be executed in any number of
               ------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

          F.   Headings.  The headings in this Agreement are for convenience of
               --------
reference only and shall not limit or otherwise affect the meaning hereof.

          G.   GOVERNING LAW.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
               -------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.

          H.   Severability.  If any one or more of the provisions contained
               ------------
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.

          I.   Rules of Construction.  Unless the context otherwise requires,
               ---------------------
"or" is not exclusive and references to sections or subsections refer to
sections or subsections of this Agreement.

          J.   Right to Conduct Activities.  The Company and each Purchaser
               ---------------------------
hereby acknowledges that some or all of the Purchasers are professional
investment funds, and as such, invest in numerous portfolio companies, some of
which may be competitive with the Company's business.  No Purchaser shall be
liable to the Company or to any other Purchaser for any claim arising out of, or
based upon, the investment activities of such Purchaser, including without
limitation, any claim arising out of, or based upon, (i) the investment by
Purchaser in an entity competitive to the Company, or (ii) actions taken by any
partner, officer or other representative of any Purchaser to assist any such
competitive company, or otherwise, and whether or not such action has a
detrimental effect of the Company.

          K.   Entire Agreement.  This Agreement, together with the exhibits
               ----------------
and schedules hereto, and the other Transaction Documents are intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein and therein.  There are no
restrictions, promises, representations, warranties or undertakings, other than
those set forth or referred to herein or therein.  This Agreement, together with
the exhibits and schedules hereto, and the other Transaction Documents supersede
all prior agreements and understandings between the parties with respect to such
subject matter.
<PAGE>

                                                                              24

          L.   Fees.  Upon the Closing, the Company shall reimburse each of the
               ----
Purchasers for all expenses incurred by each such Purchaser in the course of
conducting such Purchaser's due diligence investigation of the Company
(including any fees and expenses of outside consultants to such Purchaser) and
for the fees, disbursements and other charges of counsel incurred in connection
with the transactions contemplated by this Agreement.

          M.   Publicity.
               ---------

               (a)  Except as may be required by applicable Requirements of Law,
none of the parties hereto shall issue a publicity release or public
announcement or otherwise make any disclosure concerning this Agreement and the
transactions contemplated hereby without prior approval by the other parties
hereto. If any announcement is required by law or the rules of any securities
exchange or market on which shares of Common Stock are traded to be made by any
party hereto, prior to making such announcement such party will deliver a draft
of such announcement to the other parties and shall give the other parties
reasonable opportunity to comment thereon.

               (b)  For so long as QIP or any of its Affiliates owns any
Securities, QIP shall have the opportunity to review and modify any provision of
any public release, public announcement or government filing which is to be
released to the public, which provision mentions QIP or any of its Affiliates,
prior to the release of such document to the public, it being understood and
agreed that Soros Private Equity Partners LLC will be identified as making
investments on behalf of QIP.

          N.   Further Assurances.  Each of the parties shall execute such
               ------------------
documents and use reasonable efforts to perform such further acts (including,
without limitation, obtaining any consents, exemptions, authorizations or other
actions by, or giving any notices to, or making any filings with, any
Governmental Authority or any other Person) as may be reasonably required or
desirable to carry out or to perform the provisions of this Agreement.

                 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>

          IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Subordinated Note and Warrant Purchase Agreement on the date
first written above.

                              OUTBOARD MARINE CORPORATION

                              By:/s/ Eric T. Martinez
                                 ------------------------------------
                                 Name:  Eric T. Martinez
                                 Title: Interim CFO and Vice President
                                          and Treasurer

                              QUANTUM INDUSTRIAL PARTNERS LDC

                              By: /s/ Michael C. Neus
                                 ------------------------------------
                                 Name:  Michael C. Neus
                                 Title: Attorney-In-Fact

                              GREENLAKE HOLDINGS III LLC

                              By: /s/ Gary K. Duberstein
                                 ------------------------------------
                                 Name:  Gary K. Duberstein
                                 Title: Vice President
<PAGE>

                                                                    SCHEDULE 2.1
                                                                    ------------

            PURCHASED SHARES AND WARRANT SHARES AND PURCHASE PRICE
            ------------------------------------------------------

<TABLE>
<CAPTION>
 ---------------------------------------------------------------------------------------------------------
        Purchaser/1/               Face Amount of            Warrant Shares           Purchase Price
                                 Subordinated Note
<S>                              <C>                         <C>                      <C>
Quantum Industrial                   $15,000,000                 330,000                $15,000,000
 Partners LDC

Greenlake Holdings III LLC           ___________                 _______                ___________
</TABLE>

___________________
/1/  Subsequent to the Closing, QIP may sell a portion of the Subordinated Notes
     and Warrants purchased at the Closing to Greenlake or its Affiliate on such
     terms as QIP and Greenlake may agree.

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