Document:

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                          2000 EQUITY INCENTIVE PLAN
                                      OF
                             TECH DATA CORPORATION

1.   PURPOSE.

     The purposes of the 2000 Equity Incentive Plan (the "Plan") of Tech Data
Corporation (the "Company") are to advance the interests of the Company and its
shareholders by strengthening the ability of the Company to attract, retain and
reward highly qualified officers and other employees, to motivate officers and
other selected employees to achieve business objectives established to promote
the long-term growth, profitability and success of the Company, and to encourage
ownership of the Common Stock of the Company by participating officers and other
selected employees allowing such employees to participate in the long-term
growth of the Company. The Plan authorizes performance-based stock and cash
incentive compensation in the form of stock options, restricted stock,
performance grants and awards.

2.   DEFINITIONS.

     For the purposes of the Plan, the following terms shall have the following
meanings:

     (a)  "ADJUSTED NET INCOME" means, with respect to any fiscal year of the
Company, the amount reported as "Net Income" in the audited Consolidated
Statement of Income of the Company and Subsidiaries for such year (as set forth
in the Company's Annual Report to Shareholders for such year), adjusted to
exclude any of the following items: (i) extraordinary items (as described in
Accounting Principles Board Opinion No. 30); (ii) gains or losses on the
disposition of discontinued operations; (iii) the cumulative effects of changes
in accounting principles; and (iv) any applicable adjustments for calculating
net income per diluted share in accordance with generally accepted accounting
principles.

     (b)  "ANNUAL NET INCOME PER DILUTED SHARE" means, with respect to the
fiscal year of the Company in respect of which a determination thereof is being
or to be made, the Adjusted Net Income for such year divided by the applicable
weighted average number of diluted shares of Common Stock outstanding during
such year.

     (c)  "AWARD" means any payment or settlement in respect of a grant made
pursuant to the Plan, whether in the form of shares of Common Stock or in cash,
or in any combination thereof.

     (d)  "BOARD OF DIRECTORS" means the Board of Directors of the Company.

     (e)  "CODE" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, or any successor statute thereto, together with the
published rulings, regulations and interpretations duly promulgated thereunder.

     (f)  "COMMITTEE" means the Stock Option Committee of the Board of Directors
established and constituted as provided in Section 5 of the Plan.

     (g)  "COMMON STOCK" means the common stock, par value of $.0015, of the
Company, or any security issued by the Company in substitution or exchange
therefor or in lieu thereof.
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     (h)  "COMMON STOCK EQUIVALENT" means a Unit (or fraction thereof, if
authorized by the Committee) substantially equivalent to a hypothetical share of
Common Stock, credited to a Participant and having a value at any time equal to
the Fair Market Value of a share of Common Stock (or such fraction thereof) at
such time.

     (i)  "COMPANY" means Tech Data Corporation, a Florida corporation, or any
successor corporation.

     (j)  "COVERED EMPLOYEE" means any person who is a "covered employee" within
the meaning of Section 162(m) of the Code.

     (k)  "CUMULATIVE NET INCOME" means, in respect of any Performance Period,
the aggregate cumulative amount of the Adjusted Net Income for the fiscal years
of the Company during such Performance Period.

     (l)  "CUMULATIVE NET INCOME PER DILUTED SHARE" means, in respect of any
Performance Period, the aggregate cumulative amount of the Annual Net Income Per
Diluted Share for the fiscal years of the Company during such Performance
Period.

     (m)  "DIVIDEND EQUIVALENT" means, in respect of a Common Stock Equivalent
and with respect to each dividend payment date for the Common Stock, an amount
equal to the cash dividend on one share of Common Stock payable on such dividend
payment date.

     (n)  "EMPLOYEE" means any individual, including any officer of the Company,
who is on the active payroll of the Company or a Subsidiary at the relevant
time.

     (o)  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, including all rules and regulations promulgated
thereunder.

     (p)  "EXECUTIVE OFFICER" means, at any time, an individual who is an
executive officer of the Company within the meaning of Exchange Act Rule 3b-7 or
who is an officer of the Company within the meaning of Exchange Act Rule 16a-
1(f).

     (q)  "FAIR MARKET VALUE" means, in respect of any date on or as of which a
determination thereof is being or to be made, the last sales price per share of
the Common Stock reported on such date on The Nasdaq National Market or on any
other national securities exchange registered under the Exchange Act upon which
the Common Stock is then listed on such date, or, if the Common Stock was not
traded on such date, on the next preceding day on which sales of shares of the
Common Stock were reported on The Nasdaq National Market or on any other
national securities exchange registered under the Exchange Act upon which the
Common Stock is then listed.

     (r)  "INCENTIVE STOCK OPTION" means any option to purchase shares of Common
Stock granted pursuant to the provisions of Section 6 of the Plan that is
intended to be and is specifically designated as an "incentive stock option"
within the meaning of Section 422A of the Code.

     (s)  "NON-QUALIFIED STOCK OPTION" means any option to purchase shares of
Common Stock granted pursuant to the provisions of Section 6 of the Plan that is
not an Incentive Stock Option.

     (t)  "PARTICIPANT" means any Employee of the Company or a Subsidiary who
receives a grant or Award under the Plan.

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     (u)  "PERFORMANCE GRANT" means a grant made pursuant to Section 8 of the
Plan, the Award of which is contingent on the achievement of specific
Performance Goals during a Performance Period, determined using a specific
Performance Measure, all as specified in the grant agreement relating thereto.

     (v)  "PERFORMANCE GOALS" mean, with respect to any applicable grant made
pursuant to the Plan, the one or more targets, goals or levels of attainment
required to be achieved in terms of the specified Performance Measure during the
specified Performance Period, all as set forth in the related grant agreement.

     (w)  "PERFORMANCE MEASURE" means, with respect to any applicable grant made
pursuant to the Plan, one or more of the criteria identified at Section 8(c) of
the Plan selected by the Committee for the purpose of establishing, and
measuring attainment of, Performance Goals for a Performance Period in respect
of such grant, as provided in the related grant agreement.

     (x)  "PERFORMANCE PERIOD" means, with respect to any applicable grant made
pursuant to the Plan, the one or more periods of time, which may be of varying
and overlapping durations, as the Committee may select during which the
attainment of one or more Performance Goals will be measured to determine
whether, and the extent to which, a Participant is entitled to receive payment
of an Award pursuant to such grant, as provided in the related grant agreement.

     (y)  "PLAN" means this 2000 Equity Incentive Plan of the Company, as set
forth herein and as hereafter amended from time to time in accordance with the
terms hereof.

     (z)  "RESTRICTED STOCK" means shares of Common Stock issued pursuant to a
Restricted Stock Grant under Section 7 of the Plan so long as such shares remain
subject to the restrictions and conditions specified in the grant agreement
pursuant to which such Restricted Stock Grant is made.

     (aa) "RESTRICTED STOCK GRANT" means a grant made pursuant to the provisions
of Section 7 of the Plan.

     (bb) "STOCK OPTION" means and includes any Non-Qualified Stock Option and
any Incentive Stock Option granted pursuant to Section 6 of the Plan.

     (cc) "SUBSIDIARY" means any corporation or entity in which the Company
directly or indirectly owns or controls 50% or more of the equity securities
issued by such corporation or entity having the power to vote for the election
of directors.

     (dd) "UNIT" means a bookkeeping entry used by the Company to record and
account for the grant, settlement or, if applicable, deferral of an Award until
such time as such Award is paid, canceled, forfeited or terminated, as the case
may be, which, except as otherwise specified by the Committee, shall be equal to
one Common Stock Equivalent.

3.   EFFECTIVE DATE; TERM.

     (a)  EFFECTIVE DATE. The Plan shall be effective on June 20, 2000, upon
approval by the shareholders of the Company at the 2000 annual meeting of
shareholders or any adjournments thereof.

     (b)  TERM. The Plan shall remain in effect until June 20, 2010, unless
sooner terminated by the Board of Directors. Termination of the Plan shall not
affect grants and Awards then outstanding.

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4.   SHARES OF COMMON STOCK SUBJECT TO PLAN.

     (a)  MAXIMUM NUMBER OF SHARES AVAILABLE FOR ISSUANCE UNDER THE PLAN. The
maximum aggregate number of shares of Common Stock which may be issued pursuant
to the Plan, subject to adjustment as provided in Section 4(b) of the Plan,
shall be three million shares (3,000,000), plus (i) any shares of Common Stock
issued under the Plan that are forfeited back to the Company or are canceled,
and (ii) any shares of Common Stock that are tendered, whether by physical
delivery or by attestation, to the Company by a Participant as full or partial
payment of the exercise price of any Stock Option granted pursuant to the Plan,
in connection with the payment or settlement of any other grant or Award made
pursuant to the Plan, or in payment of any applicable withholding for federal,
state, city, local or foreign income, payroll or other taxes incurred in
connection with the exercise of any Stock Option granted under the Plan or the
receipt or settlement of any other grant or Award under the Plan. The shares of
Common Stock which may be issued under the Plan may be authorized and unissued
shares or issued shares which have been reacquired by the Company. No fractional
share of the Common Stock shall be issued under the Plan. Awards of fractional
shares of the Common Stock, if any, shall be settled in cash.

     (b)  ADJUSTMENTS UPON CHANGES IN CAPITAL STRUCTURE. In the event of any
change in the capital structure, capitalization or Common Stock of the Company
such as a stock dividend, stock split, recapitalization, merger, consolidation,
split-up, combination or exchange of shares or other form of reorganization, or
any other change affecting the Common Stock, such proportionate adjustments, if
any, as the Board of Directors in its discretion may deem appropriate to reflect
such change shall be made with respect to: (i) the maximum number of shares of
Common Stock which may be (1) issued pursuant to the Plan, (2) the subject of
any type of grant or Award under the Plan, and (3) granted, Awarded or issued to
any Participant pursuant to any provision of the Plan; (ii) the number of shares
of Common Stock subject to any outstanding or other grant or Award made to any
Participant under the Plan; (iii) the per share exercise price in respect of any
outstanding Stock Options; (iv) the number of shares of Common Stock and the
number of Units or the value of such Units, as the case may be, which are the
subject of other grants and Awards then outstanding under the Plan; and (v) any
other term or condition of any grant affected by any such change; provided
however that no such adjustment shall be authorized to the extent that such
authority would cause the Plan to violate Section 422(b)(1) of the Code, as from
time to time amended, and with respect to any Award no such adjustment shall be
authorized to the extent that such authority would be inconsistent with the
Plan's meeting the requirements of Section 162(m) of the Code, as from time to
time amended.

5.   ADMINISTRATION.

     (a)  THE COMMITTEE. The Plan shall be administered by the Committee to be
appointed from time to time by the Board of Directors and comprised of not less
than three of the then members of the Board of Directors who qualify as "non-
employee directors" within the meaning of Rule 16(b)-3 promulgated under the
Exchange Act and as "outside directors" within the meaning of Section 162(m) of
the Code. Members of the Committee shall serve at the pleasure of the Board of
Directors. The Board of Directors may from time to time remove members from, or
add members to, the Committee. A majority of the members of the Committee shall
constitute a quorum for the transaction of business and the acts of a majority
of the members present at any meeting at which a quorum is present shall be the
acts of the Committee. Any one or more members of the Committee may participate
in a meeting by conference telephone or similar means where all persons
participating in the meeting can hear and speak to each other, which
participation shall constitute presence in person at such meeting. Action
approved in writing by a majority of the members of the Committee then serving
shall be fully as effective as if the action had been taken by unanimous vote at
a meeting duly called and held. The Company shall make grants and effect Awards
under the Plan in accordance with the terms and conditions specified by the
Committee, which terms and conditions shall be set forth in grant agreements
and/or other instruments in such forms as the Committee shall approve.

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     (b)  COMMITTEE POWERS. The Committee shall have full power and authority to
operate and administer the Plan in accordance with its terms. The powers of the
Committee include, but are not limited to, the power to: (i) select Participants
from among the Employees of the Company and Subsidiaries including establishing
guidelines, criteria and overall numbers of and limits of grants and Awards;
(ii) establish the types of, and the terms and conditions of, all grants and
Awards made under the Plan, subject to any applicable limitations set forth in,
and consistent with the express terms of, the Plan; (iii) make grants,
conditionally or unconditionally, and pay or otherwise effect Awards subject to,
and consistent with, the express provisions of the Plan; (iv) establish
Performance Goals, Performance Measures and Performance Periods, subject to, and
consistent with, the express provisions of the Plan; (v) reduce the amount of
any grant or Award; (vi) prescribe the form or forms of grant agreements and
other instruments evidencing grants and Awards under the Plan; (vii) pay and to
defer payment of Awards on such terms and conditions, not inconsistent with the
express terms of the Plan, as the Committee shall determine; (viii) direct the
Company to make conversions, accruals and payments pursuant to the Plan; (ix)
construe and interpret the Plan and make any determination of fact incident to
the operation of the Plan; (x) promulgate, amend and rescind rules and
regulations relating to the implementation, operation and administration of the
Plan; (xi) adopt such modifications, procedures and subplans as may be necessary
or appropriate to comply with the laws of other countries with respect to
Participants or prospective Participants employed in such other countries; (xii)
in its sole discretion to accelerate the date on which any option may be
exercised and may accelerate the vesting of any shares of Common Stock subject
to any option or previously acquired shares by the exercise of any option;
(xiii) the power to delegate responsibility for Plan operation, management and
administration on such terms consistent with the Plan, as the Committee may
establish; (xiv) delegate to other persons the responsibility for performing
administrative or ministerial acts in furtherance of the Plan; (xv) engage the
services of persons and firms, including banks, consultants, insurance companies
and broker-dealers in furtherance of the Plan's activities; and (xvi) make all
other determinations and take all other actions as the Committee may deem
necessary or advisable for the administration and operation of the Plan. The
Committee may, in its sole discretion, delegate to one or more Executive
Officers the power to select Participants from among the Employees of the
Company and Subsidiaries provided that at the time of such grant no recipient of
such grants shall be an Executive Officer.

     (c)  COMMITTEE'S DECISIONS FINAL. Any determination, decision or action of
the Committee in connection with the construction, interpretation,
administration or application of the Plan, and of any grant agreement, shall be
final, conclusive and binding upon all Participants, and all persons claiming
through Participants, affected thereby.

     (d)  ADMINISTRATIVE ACCOUNTS. For the purpose of accounting for Awards
deferred as to payment, the Company shall establish bookkeeping accounts
expressed in Units bearing the name of each Participant receiving such Awards.
Each account shall be unfunded, unless otherwise determined by the Committee in
accordance with Section 13(d) of the Plan.

     (e)  CERTIFICATIONS. In respect of each grant under the Plan to a Covered
Employee which the Committee intends to be "performance based compensation"
under Section 162(m) of the Code, the provisions of the Plan and the related
grant agreement shall be construed to confirm such intent, and to conform to the
requirements of Section 162(m) of the Code, and the Committee shall certify in
writing (which writing may include approved minutes of a meeting of the
Committee) that the applicable Performance Goal(s), determined using the
Performance Measure specified in the related grant agreement, was attained
during the relevant Performance Period at a level that equaled or exceeded the
level required for the payment of such Award in the amount proposed to be paid
and that such Award does not exceed any applicable Plan limitation.

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6.   STOCK OPTIONS.

     (a)  IN GENERAL. Options to purchase shares of Common Stock may be granted
under the Plan and may be Incentive Stock Options or Non-Qualified Stock
Options. All Stock Options shall be subject to the terms and conditions of this
Section 6 and shall contain such additional terms and conditions, not
inconsistent with the express provisions of the Plan, as the Committee or
designated Executive Officers shall determine in accordance with personnel
policies developed by the Company. Stock Options may be granted in addition to,
or in tandem with or independent of or other grants and Awards under the Plan.

     (b)  ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
Employee of the Company or a Subsidiary may be granted Stock Options. The
Committee shall determine, in its discretion, the Employees to whom Stock
Options will be granted, the timing of such grants, and the number of shares of
Common Stock subject to each Stock Option granted; provided (i) the maximum
number of shares of Common Stock in respect of which Stock Options may be
granted to any Employee during any fiscal year shall be three-hundred thousand
shares (300,000), and (ii) in respect of Incentive Stock Options, the aggregate
Fair Market Value (determined as of the date the Incentive Stock Option is
granted) of the shares of Common Stock with respect to which an Incentive Stock
Option becomes exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000, or such other limit as may be required
by the Code, except that, if authorized by the Committee and provided for in the
related grant agreement, any portion of any Incentive Stock Option that cannot
be exercised as such because of this limitation may be converted into and
exercised as a Non-Qualified Stock Option. In no event shall any Stock Option be
granted to a Participant in exchange for the Participant's agreement to the
cancellation of one or more Stock Options, then held by such Participant, if the
exercise price of the new grant is lower than the exercise price of the grant to
be cancelled and in no event shall any Stock Option be amended to reduce the
option price, except as contemplated by Section 4(b) of the Plan.

     (c)  OPTION EXERCISE PRICE. The per share exercise price of each Stock
Option granted under the Plan shall be determined by the Committee prior to or
at the time of grant, but in no event shall the per share exercise price of any
Stock Option be less than 100% of the Fair Market Value of the Common Stock on
the date of the grant of such Stock Option.

     (d)  OPTION TERM. The term of each Stock Option shall be fixed by the
Committee; except that in no event shall the term of any Incentive Stock Option
exceed ten years after the date such Incentive Stock Option is granted.

     (e)  EXERCISABILITY. A Stock Option shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Committee at the date of grant; provided, however, that no Stock Option shall be
exercisable during the first six months after the date such Stock Option is
granted. No Stock Option may be exercised unless the holder thereof is at the
time of such exercise an Employee and has been continuously an Employee since
the date such Stock Option was granted, except that the Committee or designated
Executive Officers may permit the exercise of any Stock Option for any period
following the Participant's termination of employment not in excess of the
original term of the Stock Option on such terms and conditions as it shall deem
appropriate and specified in the related grant agreement.

     (f)  METHOD OF EXERCISE. A Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Company specifying the number
of shares of Common Stock to be purchased. Such notice shall be accompanied by
payment in full of the purchase price, plus any required withholding taxes, in
cash or, if permitted by the terms of the related grant agreement or otherwise
approved in advance by the Committee, in shares of Common Stock already owned by
the Participant valued at the Fair Market Value of the Common Stock on the date
of exercise and delivered either by physical or constructive (attestation)
delivery. The Committee may also permit Participants, either on a selective or
aggregate basis, to simultaneously exercise Stock Options and sell the shares of
Common Stock thereby acquired pursuant to a brokerage or similar arrangement
approved in advance by the Committee and to use the proceeds from such sale to
pay the exercise price and withholding taxes.

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7.   RESTRICTED STOCK GRANTS AND AWARDS.

     (a)  IN GENERAL. A Restricted Stock Grant is the issuance of shares of
Common Stock in the name of an Employee, which issuance is subject to such terms
and conditions as the Committee shall deem appropriate, including, without
limitation, restrictions on the sale, assignment, transfer or other disposition
of such shares and the requirement that the Employee forfeit such shares back to
the Company (i) upon termination of employment for specified reasons within a
specified period of time, or (ii) if any specified Performance Goals are not
achieved during a specified Performance Period, or (iii) if such other
conditions as the Committee may specify are not satisfied.

     (b)  ELIGIBILITY AND LIMITATIONS. Any officer of the Company and any other
key Employee of the Company or a Subsidiary selected by the Committee may
receive a Restricted Stock Grant. The Committee, in its sole discretion, shall
determine whether a Restricted Stock Grant shall be made, the Employee to
receive the Restricted Stock Grant, and the conditions and restrictions imposed
on the Restricted Stock Grant. The maximum number of shares of Common Stock
which may be issued as Restricted Stock under the Plan shall be two hundred
thousand shares (200,000). The maximum number of shares of Common Stock which
may be issued to any Employee as Restricted Stock during any fiscal year shall
not exceed fifty thousand shares (50,000). The maximum amount any Employee may
receive as a Restricted Stock Grant in any fiscal year shall not exceed two and
one-half million dollars ($2,500,000), determined using the Fair Market Value of
such Restricted Stock Grant as at the date of the grant thereof.

     (c)  RESTRICTION PERIOD. Restricted Stock Grants shall provide that in
order for a Participant to receive shares of Common Stock free of restrictions,
the Participant must remain in the employment of the Company or its
Subsidiaries, subject to such exceptions as the Committee shall deem appropriate
and specify in the related grant agreement, for a period of not less than three
years commencing on the date of the grant and ending on such later date or dates
as the Committee may designate at the time of the grant (the "Restriction
Period"). The Committee, in its sole discretion, may provide for the lapse of
restrictions in installments during the Restriction Period. The Committee may
also establish one or more Performance Goals that are required to be achieved
during one or more Performance Periods within the Restriction Period as a
condition to the lapse of the restrictions.

     (d)  RESTRICTIONS. The following restrictions and conditions shall apply to
each Restricted Stock Grant during the Restriction Period: (i) the Participant
shall not be entitled to delivery of the shares of the Common Stock; (ii) the
Participant may not sell, assign, transfer, pledge, hypothecate, encumber or
otherwise dispose of or realize on the shares of Common Stock subject to the
Restricted Stock Grant; and (iii) the shares of the Common Stock issued as
Restricted Stock shall be forfeited to the Company if the Participant for any
reason ceases to be an Employee prior to the end of the Restriction Period,
except due to circumstances specified in the related grant agreement or
otherwise approved by the Committee. The Committee may, in its sole discretion,
include such other restrictions and conditions as it may deem appropriate.

     (e)  PAYMENT. Upon expiration of the Restriction Period and if all
conditions have been satisfied and any applicable Performance Goals attained,
the shares of the Restricted Stock will be made available to the Participant,
subject to satisfaction of applicable withholding tax requirements, free of all
restrictions; provided, that the Committee may, in its discretion, require (i)
the further deferral of any Restricted Stock Grant beyond the initially
specified Restriction Period, (ii) that the Restricted Stock be retained by the
Company, and (iii) that the Participant receive a cash payment in lieu of
unrestricted shares of Common Stock.

     (f)  RIGHTS AS A SHAREHOLDER. A Participant shall have, with respect to
shares of Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the shares and receive any cash dividends paid
thereon. Stock dividends distributed with respect to shares of Restricted Stock
shall be treated as additional shares under the Restricted Stock Grant and shall
be subject to the restrictions and other terms and conditions set forth therein.

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8.   PERFORMANCE GRANTS AND AWARDS.

     (a)  ELIGIBILITY AND TERMS. The Committee may grant to officers of the
Company and other key Employees of the Company and its Subsidiaries the
prospective contingent right, expressed in Units, to receive payments of shares
of Common Stock, cash or any combination thereof, with each Unit equivalent in
value to one share of Common Stock, or equivalent to such other value or
monetary amount as may be designated or established by the Committee
("Performance Grants"), based upon Company performance over a specified
Performance Period. The Committee shall, in its sole discretion, determine the
officers of the Company and other key Employees eligible to receive Performance
Grants. At the time each Performance Grant is made, the Committee shall
establish the Performance Period, the Performance Measure and the targets to be
attained relative to such Performance Measure (the "Performance Goals") in
respect of such Performance Grant. The number of shares of Common Stock and/or
the amount of cash earned and payable in settlement of a Performance Grant shall
be determined at the end of the Performance Period (a "Performance Award").

     (b)  LIMITATIONS ON GRANTS AND AWARDS. The maximum number of shares of
Common Stock which may be issued pursuant to Performance Grants shall be two-
hundred thousand shares (200,000). The maximum number of shares which may be the
subject of Performance Grants made to any Participant in respect of any
Performance Period or during any fiscal year shall be fifty-thousand shares
(50,000). The maximum amount any Participant may receive during any fiscal year
as Performance Awards pursuant to Performance Grants shall not exceed two and
one-half million dollars ($2,500,000), determined using the Fair Market Value of
such Performance Awards as at the last day of the applicable Performance Period
or Periods or as at date or dates of the payment thereof, whichever is higher.

     (c)  PERFORMANCE GOALS, PERFORMANCE MEASURES AND PERFORMANCE PERIODS. Each
Performance Grant shall provide that, in order for a Participant to receive an
Award of all or a portion of the Units subject to such Performance Grant, the
Company must achieve certain Performance Goals over a designated Performance
Period having a minimum duration of one year, with attainment of the Performance
Goals determined using a specific Performance Measure. The Performance Goals and
Performance Period shall be established by the Committee in its sole discretion.
The Committee shall establish a Performance Measure for each Performance Period
for determining the portion of the Performance Grant which will be earned or
forfeited based on the extent to which the Performance Goals are achieved or
exceeded. In setting Performance Goals, the Committee may use a Performance
Measure based on any one, or on any combination, of the following Company
performance factors as the Committee deems appropriate: (i) Cumulative Net
Income Per Diluted Share; (ii) Cumulative Net Income; (iii) return on sales;
(iv) total shareholder return; (v) return on assets; (vi) economic value added;
(vii) cash flow; (viii) return on equity; (ix) cumulative operating income
(which shall equal consolidated sales minus cost of goods sold and selling,
administrative and general expense) and (x) achievement of explicit strategic
objectives or milestones. Performance Goals may include minimum, maximum and
target levels of performance, with the size of Performance Award based on the
level attained. Once established by the Committee and specified in the grant
agreement, and if and to the extent provided in or required by the grant
agreement, the Performance Goals and the Performance Measure in respect of any
Performance Grant (or any Restricted Stock Grant or Stock-Based Grant that
requires the attainment of Performance Goals as a condition to the Award) shall
not be changed. The Committee may, in its discretion, eliminate or reduce (but
not increase) the amount of any Performance Award (or Restricted Stock or Stock-
Based Award) that otherwise would be payable to a Participant upon attainment of
the Performance Goal(s).

     (d)  FORM OF GRANTS. Performance Grants may be made on such terms and
conditions not inconsistent with the Plan, and in such form or forms, as the
Committee may from time to time approve. Performance Grants may be made alone,
in addition to in tandem with, or independent of other grants and Awards under
the Plan. Subject to the terms of the Plan, the Committee shall, in its
discretion, determine the number of Units subject to each Performance Grant made
to a Participant and the Committee may impose different terms and conditions on
any particular Performance Grant made to any Participant. The Performance Goals,
the Performance Period or Periods, and the Performance Measure applicable to a
Performance Grant shall be set forth in the relevant grant agreement.

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     (e)  PAYMENT OF AWARDS. Each Participant shall be entitled to receive
payment in an amount equal to the aggregate Fair Market Value (if the Unit is
equivalent to a share of Common Stock), or such other value as the Committee
shall specify, of the Units earned in respect of such Performance Award. Payment
in settlement of a Performance Award may be made in shares of Common Stock, in
cash, or in any combination of Common Stock and cash, and at such time or times,
as the Committee, in its discretion, shall determine.

9.   DEFERRALS.

     The Committee may, whether at the time of grant or at anytime thereafter
prior to payment or settlement, require a Participant to defer, or permit
(subject to such conditions as the Committee may from time to time establish) a
Participant to elect to defer, receipt of all or any portion of any payment of
cash or shares of Common Stock that would otherwise be due to such Participant
in payment or settlement of any Award under the Plan. If any such deferral is
required by the Committee (or is elected by the Participant with the permission
of the Committee), the Committee shall establish rules and procedures for such
payment deferrals. The Committee may provide for the payment or crediting of
interest, at such rate or rates as it shall in its discretion deem appropriate,
on such deferred amounts credited in cash and the payment or crediting of
dividend equivalents in respect of deferred amounts credited in Common Stock
Equivalents. Deferred amounts may be paid in a lump sum or in installments in
the manner and to the extent permitted, and in accordance with rules and
procedures established, by the Committee.

10.  NON-TRANSFERABILITY OF GRANTS AND AWARDS.

     No grant or Award under the Plan, and no right or interest therein, shall
be (i) assignable, alienable or transferable by a Participant, except by will or
the laws of descent and distribution, or (ii) subject to any obligation, or the
lien or claims of any creditor, of any Participant, or (iii) subject to any
lien, encumbrance or claim of any party made in respect of or through any
Participant, however arising. During the lifetime of a Participant, Stock
Options are exercisable only by, and shares of Common Stock issued upon the
exercise of Stock Options and or in settlement of other Awards will be issued
only to, and other payments in settlement of any Award will be payable only to,
the Participant or his or her legal representative. The Committee may, in its
sole discretion, authorize written designations of beneficiaries and authorize
Participants to designate beneficiaries with the authority to exercise Stock
Options and granted to a Participant in the event of his or her death.
Notwithstanding the foregoing, the Committee may, in its sole discretion and on
and subject to such terms and conditions as it shall deem appropriate, which
terms and conditions shall be set forth in the related grant agreement: (i)
authorize a Participant to transfer all or a portion of any Non-Qualified Stock
Option granted to such Participant; provided, that in no event shall any
transfer be made to any person or persons other than such Participant's spouse,
children or grandchildren, or a trust for the exclusive benefit of one or more
such persons, which transfer must be made as a gift and without any
consideration; and (ii) provide for the transferability of a particular grant or
Award pursuant to a qualified domestic relations order. All other transfers and
any retransfer by any permitted transferee are prohibited and any such purported
transfer shall be null and void. Each Stock Option which becomes the subject of
permitted transfer (and the Participant to whom it was granted by the Company)
shall continue to be subject to the same terms and conditions as were in effect
immediately prior to such permitted transfer. The Participant shall remain
responsible to the Company for the payment of all withholding taxes incurred as
a result of any exercise of such Stock Option. In no event shall any permitted
transfer of a Stock Option create any right in any party in respect of any Stock
Option or other grant or Award, other than the rights of the qualified
transferee in respect of such Stock Option specified in the related grant
agreement.

11.  CHANGE IN CONTROL.

     (a)  EFFECT ON GRANTS. In the event of a Change in Control (as defined
below) of the Company, except as the Board of Directors comprised of a majority
of Continuing Directors may expressly provide

                                       9
<PAGE>

otherwise, and notwithstanding any other provision of the Plan to the contrary:
(i) all Stock Options then outstanding shall become fully exercisable as of the
date of the Change in Control, whether or not then exercisable; (ii) all
restrictions and conditions in respect of all Restricted Stock Grants then
outstanding shall be deemed satisfied as of the date of the Change in Control;
and (iii) all Performance Grants and Awards shall be deemed to have been fully
earned, at the maximum amount of the award opportunity specified in the grant
agreement, as of the date of the Change in Control.

     (b)  CHANGE IN CONTROL DEFINED. A "Change in Control" of the Company shall
occur when: (i) any Acquiring Person (other than the Company, any Subsidiary,
any employee benefit plan of the Company or of any Subsidiary, or any person or
entity organized, appointed or established by the Company or a Subsidiary for or
pursuant to the terms of any such plans), alone, or together with its Affiliates
and Associates, shall become the beneficial owner of fifty percent (50%) or more
of the shares of Common Stock then outstanding and provided that the Continuing
Directors of the combined companies specifically determine that it is a "change
in control" of the Company; or (ii) the shareholders of the Company approve a
definitive agreement for a merger or consolidation involving the Company which
would result in the Common Stock outstanding immediately prior to such merger or
consolidation continuing to represent (whether by remaining outstanding or by
being converted into voting securities of the surviving entity) less than fifty
percent of the combined voting power of the Company and such other entity
outstanding immediately after such merger or consolidation; or (iii) the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or other disposition of all or
substantially all of the assets of the Company; or (iv) the Continuing Directors
no longer constitute a majority of the Board of Directors. "Acquiring Person"
means any person (any individual, firm, corporation or other entity) who or
which, together with all its Affiliates and Associates, shall be the beneficial
owner of a substantial block of Common Stock. "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule 12b-2 under the
Exchange Act. "Continuing Director" means any individual who is a member of the
Board of Directors, while such individual is a member of the Board of Directors,
who is not an Acquiring Person, or an Affiliate or Associate of an Acquiring
Person, or a representative or nominee of an Acquiring Person or of any such
Affiliate or Associate, and was a member of the Board of Directors prior to the
occurrence of a Change in Control, and any successor of a Continuing Director,
while such successor is a member of the Board of Directors, who is not an
Acquiring Person, or an Affiliate or Associate of an Acquiring Person, or
representative or nominee of an Acquiring Person or of any such Affiliate or
Associate, and is recommended or elected to succeed the Continuing Director by a
majority of the Continuing Directors.

12.  AMENDMENT AND TERMINATION.

     The Board of Directors may at any time terminate the Plan, except with
respect to grants then outstanding. The Board of Directors may amend the Plan at
any time and from time to time in such respects as the Board of Directors may
deem necessary or appropriate without approval of the shareholders, unless such
approval is necessary in order to comply with applicable laws, including the
Exchange Act and the Code. In no event may the Board of Directors amend the Plan
without the approval of the shareholders to (i) increase the maximum number of
shares of Common Stock which may be issued pursuant to the Plan, (ii) increase
any limitation set forth in the Plan on the number of shares of Common Stock
which may be issued, or the aggregate value of Awards which may be made, in
respect of any type of grant to all Participants during the term of the Plan or
to any Participant during any specified period, (iii) reduce the minimum
exercise price for Stock Options, or (iv) change the Performance Measure
criteria identified at Section 9(c) of the Plan.

13.  MISCELLANEOUS.

     (a)  WITHHOLDING TAXES. All Awards under the Plan will be made subject to
any applicable withholding for taxes of any kind. The Company shall have the
right to deduct from any amount payable under the Plan, including delivery of
shares of Common Stock to be made under the Plan, all federal, state, city,
local or foreign taxes of any kind required by law to be withheld with respect
to such payment and to take such other

                                       10
<PAGE>

actions as may be necessary in the opinion of the Company to satisfy all
obligations for the payment of such taxes. If shares of Common Stock are used to
satisfy withholding taxes, such shares shall be valued based on the Fair Market
Value thereof on the date when the withholding for taxes is required to be made.
The Company shall have the right to require a Participant to pay cash to satisfy
withholding taxes as a condition to the payment of any amount (whether in cash
or shares of Common Stock) under the Plan.

     (b)  NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the
making of any grant or Award shall confer upon any Employee any right to
continued employment with the Company or any Subsidiary, nor shall it interfere
in any way with the right of the Company or any Subsidiary to terminate the
employment of any Employee at any time, with or without cause.

     (c)  UNFUNDED PLAN. The Plan shall be unfunded and the Company shall not be
required to segregate any assets that may at any time be represented by Awards
under the Plan. Any liability of the Company to any person with respect to any
Award under the Plan shall be based solely upon any contractual obligations that
may be effected pursuant to the Plan. No such obligation of the Company shall be
deemed to be secured by any pledge of, or other encumbrance on, any property of
the Company.

     (d)  PAYMENTS TO TRUST. The Committee is authorized to cause to be
established a trust agreement or several trust agreements whereunder the
Committee may make payments of amounts due or to become due to Participants in
the Plan.

     (e)  OTHER COMPANY BENEFIT AND COMPENSATION PROGRAMS. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's regular, recurring compensation
for purposes of any termination indemnity or severance pay law of any country
and shall not be included in, nor have any effect on, the determination of
benefits under any pension or other employee benefit plan or similar arrangement
provided by the Company or any Subsidiary, unless (i) expressly so provided by
such other plan or arrangement or (ii) the Committee expressly determines that
an Award or a portion thereof should be included as recurring compensation.
Nothing contained in the Plan shall prohibit the Company or any Subsidiary from
establishing other special awards, incentive compensation plans, compensation
programs and other similar arrangements providing for the payment of
performance, incentive or other compensation to Employees. Payments and benefits
provided to any Employee under any other plan, including, without limitation,
any stock option, stock award, restricted stock, deferred compensation, savings,
retirement or other benefit plan or arrangement, shall be governed solely by the
terms of such other plan.

     (f)  SECURITIES LAW RESTRICTIONS. In no event shall the Company be
obligated to issue or deliver any shares of Common Stock if such issuance or
delivery shall constitute a violation of any provisions of any law or regulation
of any governmental authority or securities exchange. No shares of Common Stock
shall be issued under the Plan unless counsel for the Company shall be satisfied
that such issuance will be in compliance with all applicable Federal and state
securities laws and regulations and all requirements of any securities exchange
on which the Common Stock is listed.

     (g)  GRANT AGREEMENTS. Each Participant receiving a grant under the Plan
shall enter into a grant agreement with the Company in a form specified by the
Committee agreeing to the terms and conditions of the grant and such related
matters as the Committee shall, in its sole discretion, determine.

     (h)  SEVERABILITY. In the event any provision of the Plan shall be held to
be invalid or unenforceable for any reason, such invalidity or unenforceability
shall not affect the remaining provisions of the Plan.

     (i)  TRANSITION - 1990 PLAN. The Plan replaces and supersedes the 1990
Incentive and Non-Statutory Stock Option Plan (the "1990 Plan") and the 1990
Plan shall automatically terminate when the Plan

                                       11
<PAGE>

becomes effective, except that such termination shall not affect any grants or
awards then outstanding under the 1990 Plan.

     (j)  GOVERNING LAW. The Plan shall be governed by and construed in
accordance with the laws of the State of Florida.

                                       12<PAGE>   1
                                                                  EXHIBIT 10.14

                                     [LOGO]

                  AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

           STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE -- NET
                (DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)

1.      BASIC PROVISIONS ("BASIC PROVISIONS")

        1.1     PARTIES: This Lease ("LEASE"), dated for reference purposes
only January 2, 2000, is made by and between KRDS, INC., a California
corporation ("LESSOR") and LITRONIC INC. a Delaware corporation ("LESSEE"),
(collectively the "PARTIES," or individually a "PARTY").

        1.2     PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 17861 Cartwright, Irvine, located in the County of Orange, State of
California, and generally described as (describe briefly the nature of the
property and, if applicable, the "PROJECT", if the property is located within a
Project) approximately 20,702 square foot office, research and development
building on approximately 1.73 acres. ("PREMISES"). (See also Paragraph 2)

        1.3     TERM: Seven (7) years and no (0) months ("ORIGINAL TERM")
commencing February 1, 2000 ("COMMENCEMENT DATE") and ending February 28, 2007
("EXPIRATION DATE"). (See also Paragraph 3)

        1.4     EARLY POSSESSION: ______________________________________________
("EARLY POSSESSION DATE"). (See also Paragraphs 3.2 and 3.3)

        1.5     BASE RENT: $   SEE ADDENDUM    per month ("BASE RENT"), payable
on the first (1st) day  of each month commencing February 1, 2000. (See also
Paragraph 4)

[X] If this box is checked, there are provisions in this Lease for the Base Rent
    to be adjusted.

        1.6     BASE RENT PAID UPON EXECUTION: $31,674.06 as Base Rent for the
period February 1, 2000 through February 29, 2000

        1.7     SECURITY DEPOSIT: $31,674.06 ("SECURITY DEPOSIT"). (See also
Paragraph 5)

        1.8     AGREED USE: Any lawful use.  (See also Paragraph 6)

        1.9     INSURING PARTY: Lessee is the "INSURING PARTY" unless otherwise
stated herein. (See also Paragraph 8)

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

        1.12    ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs ______ through ______ and Exhibits ____________________
_________________________________, all of which constitute a part of this Lease.

2.      PREMISES.

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

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

1       (i) one (1) year as to all tenant improvement work constructed by Lessor
        on behalf of Lessee prior to the commencement of the Term; and (ii)
        forty-five (45) days as to the remaining systems and other elements of
        the Building, correction of such non-compliance shall be the obligation
        of Lessee at Lessee's sole cost and expense.

        2.3     COMPLIANCE. Lessor warrants that the improvements on the
Premises comply with all applicable laws, covenants or restrictions of record,
building codes, regulations and ordinances ("APPLICABLE REQUIREMENTS") in effect
on the Start Date. Said warranty does not apply to the use to which Lessee will
put the Premises or to any Alterations or Utility Installations (as defined in
Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the zoning is appropriate for Lessee's intended use,
and acknowledges that past uses of the Premises may no longer be allowed. If the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within forty-five (45) days following the
Start Date, correction of that non-compliance shall be the obligation of Lessee
at Lessee's sole cost and expense. If the Applicable Requirements are hereafter
changed (as opposed to being in existence at the Start Date, which is addressed
in Paragraph 6.2(e) below) so as to require during the term of this Lease the
construction of an addition to or an alteration of the Building, the remediation
of any Hazardous Substance, or the reinforcement or other physical modification
of the Building ("CAPITAL EXPENDITURE"), Lessor and Lessee shall allocate the
cost of such work as follows:

<PAGE>   2

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

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

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

2.3(d)  Lessee acknowledges that as of the execution of the Lease it will have
had an adequate opportunity to inspect the Premises and to investigate its
physical characteristics and conditions. Except as expressly provided in this
Section 2.3, as of the execution of the Lease, Lessee shall be deemed to have
waived any and all objections to the physical characteristics and conditions of
the Premises which would be disclosed by a reasonable and diligent inspection.
Lessee acknowledges that, except as specifically provided herein, neither Lessor
nor any of its employees, agents, or representatives has made any
representations, warranties or agreements to or with Lessee on behalf of Lessor
as to any matters concerning the Premises, the present use thereof, or the
suitability of Lessee's intended use of the Premises, and that Lessee accepts
the Premises in their AS-IS condition.

        Without limiting the generality of the foregoing, Lessee understands and
agrees that it leases the Premises without any representations or warranties by
Lessor, or by any official, employee or agent of Lessor, regarding the
existence, use, generation, manufacture, storage, transportation, release or
disposal of Hazardous Substances and/or oil wells and/or underground storage
tanks and/or pipelines on, under or about the Premises, or regarding that the
Premises is or may be in violation of any federal, state or local law, ordinance
or regulation relating to Hazardous Substances and/or oil wells and/or
underground storage tanks and/or pipelines on, under or about the Premises
including, without limitation, soil and ground water conditions. Lessee
acknowledges and understands that it must perform its own "due diligence" with
respect to all environmental matters relating to the Premises, inclusive of any
environmental audits or assessments, and that Lessee is not relying on any
environmental audits or assessments performed by or on behalf of Lessor.

        Lessee acknowledges that (i) asbestos containing materials ("ACMs") are
or were present in the mastic binding portions of the tile in the Building;
(ii) ACMs are or were present in a portion of the tiles in the Building; (iii)
there exists wear, settling and cracking conditions in the slab underlying the
Building; (iv) the Building may not be currently in compliance with the
requirements of the Americans with Disabilities Act; and (v) a Southern
California Edison transformer located on the Premises previously leaked oil.
Without limiting any of the foregoing provisions in this Section, Lessee
acknowledges Lessor's disclosures and agrees that Lessee shall take subject to
all such defects, assumes all loss with respect thereto and is not relying on
any information or warranties of Lessor with respect thereto, but will conduct
its own investigation regarding same.

        2.4     ACKNOWLEDGEMENTS. Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements), and their suitability for Lessee's intended use; (b)
Lessee has made such investigation as it deems necessary with reference to such
matters and assumes all responsibility therefor as the same relate to its
occupancy of the Premises; and (c) neither Lessor, Lessor's agents, nor any
Broker has made any oral or written representations or warranties with respect
to said matters other than as set forth in this Lease. In addition, Lessor
acknowledges that: (a) Broker has made no representations, promises or
warranties concerning Lessee's ability to honor the Lease or suitability to
occupy the Premises, and (b) it is Lessor's sole responsibility to investigate
the financial capability and/or suitability of all proposed tenants.

        2.5     LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.

3.      TERM.

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

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

        3.3     DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice in
writing within ten (10) days after the end of such sixty (60) day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Lessor within said ten (10)
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee. If possession of the Premises is not delivered within
four (4) months after the Commencement Date, this Lease shall terminate unless
other agreements are reached between Lessor and Lessee, in writing.

        3.4     LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its obligation
to provide evidence of insurance (Paragraph 8.5). Pending delivery of such
evidence, Lessee shall be required to perform all of its obligations under this
Lease from and after the Start Date, including the payment of Rent,
notwithstanding Lessor's election to withhold possession pending receipt of such
evidence of insurance. Further, if Lessee is required to perform any other
conditions prior to or concurrent with the Start Date, the Start Date shall
occur but Lessor may elect to withhold possession until such conditions are
satisfied.

4.      RENT.

        4.1.    RENT DEFINED. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
("RENT").

        4.2     PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due. Rent for any period during the term hereof which is for less than one (1)
full calendar month shall be prorated based upon the actual number of days of
said month. Payment of Rent shall be made to Lessor at its address stated herein
or to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating.

5.      SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. Lessor shall not be required
to keep the Security Deposit separate from its general accounts. Within fourteen
(14) days after the expiration or termination of this Lease, Lessor shall return
that portion of the Security Deposit not used or applied by Lessor. No part of
the Security Deposit shall be considered to be held in trust, to bear interest
or to be prepayment for any monies to be paid by Lessee under this Lease.

                                     PAGE 2
<PAGE>   3

6.      USE.

        6.1     USE. Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable thereto, and
for no other purpose. Lessee shall not use or permit the use of the Premises in
a manner that is unlawful, creates damage, waste or a nuisance, or that disturbs
owners and/or occupants of, or causes damage to neighboring properties. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within five (5)
business days after such request give written notification of same, which notice
shall include an explanation of Lessor's objections to the change in use.

        6.2     HAZARDOUS SUBSTANCES.

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

               (b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises in violation of any Applicable Requirements other
than as previously consented to by Lessor, Lessee shall immediately give written
notice of such fact to Lessor, and provide Lessor with a copy of any report,
notice, claim or other documentation which it has concerning the presence of
such Hazardous Substance.

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

               (d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, harmless
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance brought onto the Premises by
or for Lessee, or any third party (provided, however, that Lessee shall have no
liability under this Lease with respect to underground migration of any
Hazardous Substance under the Premises from adjacent properties). Lessee's
obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease. NO TERMINATION, CANCELLATION OR RELEASE AGREEMENT ENTERED INTO BY
LESSOR AND LESSEE SHALL RELEASE LESSEE FROM ITS OBLIGATIONS UNDER THIS LEASE
WITH RESPECT TO HAZARDOUS SUBSTANCES, UNLESS SPECIFICALLY SO AGREED BY LESSOR IN
WRITING AT THE TIME OF SUCH AGREEMENT.

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

               (f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee's use (including
"Alterations", as defined in Paragraph 7.3(a) below) of the Premises, in which
event Lessee shall be responsible for such payment. Lessee shall cooperate fully
in any such activities at the request of Lessor, including allowing Lessor and
Lessor's agents to have reasonable access to the Premises at reasonable times in
order to carry out Lessor's investigative and remedial responsibilities.

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

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

        6.4     INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined
in Paragraph 30 below) and consultants shall have the right to enter into
Premises at any time upon written notice to Lessee in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the condition
of the Premises and for verifying compliance by Lessee with this Lease. Lessee
may require that all persons entering the Premises be escorted by Lessee's
personnel.

                                     PAGE 3
<PAGE>   4

7.      MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND
        ALTERATIONS.

        7.1     LESSEE'S OBLIGATIONS.

                (a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises,
Utility Installations, and Alterations in good order, condition and repair
(whether or not the portion of the Premises requiring repairs, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises), including, but
not limited to, all equipment or facilities, such as plumbing, heating,
ventilating, air-conditioning, electrical, lighting facilities, boilers,
pressure vessels, fire protection system, fixtures, walls (interior and
exterior), foundations, ceilings, roofs, floors, windows, doors, plate glass,
skylights, landscaping, driveways, parking lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or adjacent to the Premises. Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by Paragraph 7.1(b) below.
Lessee's obligations shall include restorations, replacements or renewals when
necessary to keep the Premises and all improvements thereon or a part thereof in
good order, condition and state of repair. Lessee shall, during the term of this
Lease, keep the exterior appearance of the Building in a first-class condition
consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, the exterior
repainting of the Building.

               (b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements ("Basic Elements"), if
any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and
pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or
smoke detection, (iv) landscaping and irrigation systems, (v) roof covering and
drains, (vi) driveways and parking lots, (vii) clarifiers (viii) basic utility
feed to the perimeter of the Building, and (ix) any other equipment, if
reasonably required by Lessor.

               (c) REPLACEMENT. Subject to Lessee's indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if the Basic Elements described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing
such Basic Elements, then such Basic Elements shall be replaced by Lessor, and
the cost thereof shall be prorated between the Parties and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date on which Base Rent is due, an amount equal to the product of
multiplying the cost of such replacement by a fraction, the numerator of which
is one, and the denominator of which is the number of months of the useful life
of such replacement as such useful life is specified pursuant to Federal income
tax regulations or guidelines for depreciation thereof (including interest on
the unamortized balance as is then commercially reasonable in the judgment of
Lessor's accountants), with Lessee reserving the right to prepay its obligation
at any time.

        7.2     LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14
(Condemnation), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, or
the equipment therein, all of which obligations are intended to be that of the
Lessee. It is the intention of the Parties that the terms of this Lease govern
the respective obligations of the Parties as to maintenance and repair of the
Premises, and they expressly waive the benefit of any statute now or hereafter
in effect to the extent it is inconsistent with the terms of this Lease.

        7.3     UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.

               (a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" refers to all floor and window coverings, air lines, power
panels, electrical distribution, security and fire protection systems,
communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing
in or on the Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery
and equipment that can be removed without doing material damage to the Premises.
The term "ALTERATIONS" shall mean any modification of the improvements, other
than Utility Installations or Trade Fixtures, whether by addition or deletion.
"LESSEE OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor's prior written consent
which shall not be unreasonably withheld. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without such consent but upon notice to Lessor, as long as they are
not visible from the outside, do not involve puncturing, relocating or removing
the roof or any existing walls, and the cumulative cost thereof during this
Lease as extended does not exceed $50,000 in the aggregate or $10,000 in any one
year.

               (b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be deemed
conditioned upon Lessee's: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$50,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor.

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

        7.4     OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.

               (a) OWNERSHIP. All Alterations and Utility Installations made by
Lessee shall be the property of Lessee, but considered a part of the Premises.
Lessor may, at any time, elect in writing to be the owner of all or any
specified part of the Lessee Owned Alterations and Utility Installations. Unless
otherwise instructed per Paragraph 7.4(b) hereof, all Lessee Owned Alterations
and Utility Installations shall, at the expiration or termination of this Lease,
become the property of Lessor and be surrendered by Lessee with the Premises.

               (b) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and in
good operating order, condition and state of repair, ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Lessee shall repair
any damage occasioned by the installation, maintenance or removal of Trade
Fixtures, Lessee Owned Alterations and/or Utility Installations, furnishings,
and equipment as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee. Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate
the Premises pursuant to this Paragraph 7.4(b) without the express written
consent of Lessor shall constitute a holdover under the provisions of Paragraph
26 below.

                                     PAGE 4
<PAGE>   5

8.      INSURANCE; INDEMNITY.

        8.1     PAYMENT FOR INSURANCE. Lessee shall pay for all insurance
required under Paragraph 8 except to the extent of the cost attributable to
liability insurance carried by Lessor under Paragraph 8.2(b) in excess of
$2,000,000 per occurrence. Premiums for policy periods commencing prior to or
extending beyond the Lease term shall be prorated to correspond to the Lease
term. Payment shall be made by Lessee to Lessor within ten (10) days following
receipt of an invoice.

        8.2     LIABILITY INSURANCE.

                (a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than $2,000,000 per
occurrence with an "ADDITIONAL INSURED -- MANAGERS OR LESSORS OF PREMISES
ENDORSEMENT" and contain the "AMENDMENT OF THE POLLUTION EXCLUSION ENDORSEMENT"
for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall
not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be primary to and not contributory with any
similar insurance carried by Lessor, whose insurance shall be considered excess
insurance only.

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

        8.3     PROPERTY INSURANCE -- BUILDING, IMPROVEMENTS AND RENTAL VALUE.

                (a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain
and keep in force a policy or policies in the name of Lessor, with loss payable
to Lessor, any ground lessor, and to any Lender(s) insuring loss or damage to
the Premises. The amount of such insurance shall be equal to the full
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by any Lenders, but in no event more than the commercially
reasonable and available insurable value thereof. If Lessor is the Insuring
Party, however, Lessee Owned Alterations and Utility Installations, Trade
Fixtures, and Lessee's personal property shall be insured by Lessee under
Paragraph 8.4 rather than by Lessor. If the coverage is available and
commercially appropriate, such policy or policies shall insure against all risks
of direct physical loss or damage (except the perils of flood and/or earthquake
unless required by a Lender), including coverage for debris removal and the
enforcement of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located. If such insurance coverage has a deductible clause,
the deductible amount shall not exceed $10,000 per occurrence, and Lessee shall
be liable for such deductible amount in the event of an Insured Loss.

                (b) RENTAL VALUE. The Insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor with loss payable to Lessor
and any Lender, insuring the loss of the full Rent for one (1) year. Said
insurance shall provide that in the event the Lease is terminated by reason of
an insured loss, the period of indemnity for such coverage shall be extended
beyond the date of the completion of repairs or replacement of the Premises, to
provide for one full year's loss of Rent from the date of any such loss. Said
insurance shall contain an agreed valuation provision in lieu of any coinsurance
clause, and the amount of coverage shall be adjusted annually to reflect the
projected Rent otherwise payable by Lessee, for the next twelve (12) month
period. Lessee shall be liable for any deductible amount in the event of such
loss.

                (c) ADJACENT PREMISES. If the Premises are part of a larger
building, or of a group of buildings owned by Lessor which are adjacent to the
Premises, the Lessee shall pay for any increase in the premiums for the property
insurance of such building or buildings if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.

        8.4     LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.

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

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

                (c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.

        8.5     INSURANCE POLICIES. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in the most current issue
of "Best's Insurance Guide", or such other rating as may be required by a
Lender. Lessee shall not do or permit to be done anything which invalidates the
required insurance policies. Lessee shall, prior to the Start Date, deliver to
Lessor certified copies of policies of such insurance or certificates evidencing
the existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.

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

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

        8.8     EXEMPTION OF LESSOR FROM LIABILITY. Except to the extent caused
by the negligence or willful misconduct of Lessor, Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers, or any
other person in or about the Premises, whether such damage or injury is caused
by or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.

9.      DAMAGE OR DESTRUCTION.

        9.1     DEFINITIONS.

                (a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, which can reasonably be repaired in six (6) months or
less from the date of the damage or destruction.

                                     PAGE 5
<PAGE>   6
Lessor shall notify Lessee in writing within thirty (30) days from the date of
the damage or destruction as to whether or not the damage is Partial or Total.

                (b) "PREMISES TOTAL DESTRUCTION" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in six (6)
months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.

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

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

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

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

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

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

        9.5     DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair exceeds one
(1) month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option
needed to make the repairs on or before the earlier of (i) the date which is ten
days after Lessee's receipt of Lessor's written notice purporting to terminate
this Lease, or (ii) the day prior to the date upon which such option expires. If
Lessee duly exercises such option during such period to the extent otherwise
required by this Section 9, Lessor shall, at Lessor's and/or Lessee's, as
applicable, commercially reasonable expense, repair such damage as soon as
reasonably possible and this Lease shall continue in full force and effect. If
Lessee fails to exercise such option and provide such funds or assurance during
such period, then this Lease shall terminate on the date specified in the
termination notice and Lessee's option shall be extinguished.

        9.6     ABATEMENT OF RENT; LESSEE'S REMEDIES.

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

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

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

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

10.     REAL PROPERTY TAXES.

        10.1    DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises, Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated

                                     PAGE 6
<PAGE>   7

with reference to the Building address and where the proceeds so generated are
to be applied by the city, county or other local taxing authority of a
jurisdiction within which the Premises are located. The term "REAL PROPERTY
TAXES" shall also include any tax, fee, levy, assessment or charge, or any
increase therein, imposed by reason of events occurring during the term of this
Lease, including but not limited to, a change in the ownership of the Premises.

        10.2

                (a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes
applicable to the Premises during the term of this Lease. All such payments
shall be made at least ten (10) days prior to any delinquency date. Lessee shall
promptly furnish Lessor with satisfactory evidence that such taxes have been
paid. If any such taxes shall cover any period of time prior to or after the
expiration or termination of this Lease, Lessee's share of such taxes shall be
prorated to cover only that portion of the tax bill applicable to the period
that this Lease is in effect, and Lessor shall reimburse Lessee for any
overpayment. If Lessee shall fail to pay any required Real Property Taxes,
Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.

        10.3    JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property Taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.

        10.4    PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency,
all taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.

11.     UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.

12.     ASSIGNMENT AND SUBLETTING.

        12.1    LESSOR'S CONSENT REQUIRED.

                (a) Lessee shall have the right to assign this Lease or to
sublet the Premises in whole or in part to any entity which controls, is
controlled by, or is under common control with Lessee ("Affiliate"), provided
that Lessee provides written notice to Lessor of any such subletting and of the
identity of such assignee or sublessee and provided that the obligation of
Lessee shall not be diminished or affected in any manner by reason of such
assignment or subletting. Except for the foregoing, Lessee shall not voluntarily
or by operation of law assign, transfer, mortgage or encumber (collectively,
"ASSIGN OR ASSIGNMENT") or sublet all or any part of Lessee's interest in this
Lease or in the Premises without Lessor's prior written consent which consent
shall not be unreasonably withheld.

                (b) A sale or transfer of any stock of Lessee shall not
constitute a transfer or assignment and shall not require the consent of Lessor.

                (d) Where Lessor's consent is required hereunder, an assignment
or subletting without consent shall, at Lessor's option, be a Default curable
after notice per Paragraph 13.1(c), or a noncurable Breach without the necessity
of any notice and grace period. If Lessor elects to treat such unapproved
assignment or subletting as a noncurable Breach, Lessor may either: (i)
terminate this Lease.

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

        12.2    TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.

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

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

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

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

                (e) Each request for consent to an assignment or subletting
shall be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not limited
to the intended use and/or required modification of the Premises, if any,
together with a fee of $1,000 (which amount shall be reduced to $500.00 in the
case of any assignment or sublease to an Affiliate) as consideration for
Lessor's considering and processing said request. Lessee agrees to provide
Lessor with such other or additional information and/or documentation as may be
reasonably requested.

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

        12.3    ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

                (a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all Rent payable on any sublease, and Lessor may collect
such Rent and apply same toward Lessee's obligations under this Lease; provided,
however, that until a Breach shall occur in the performance of Lessee's
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection of
Rent, be deemed liable to the sublessee for any failure of Lessee to perform and
comply with any of Lessee's obligations to such sublessee. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice

                                     PAGE 7
<PAGE>   8

from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.

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

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

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

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

13.     DEFAULT; BREACH; REMEDIES.

        13.1    DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or
rules under this Lease. A "BREACH" is defined as the occurrence of one or more
of the following Defaults, and the failure of Lessee to cure such Default within
any applicable grace period:

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

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

                (c) The failure by Lessee to provide (i) reasonable written
evidence of compliance with Applicable Requirements, (ii) the service contracts,
(iii) the rescission of an unauthorized assignment or subletting, (iv) a
Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning
any guaranty and/or Guarantor, (vii) any document requested under Paragraph 42
(easements), or (viii) any other documentation or information which Lessor may
reasonably require of Lessee under the terms of this Lease, where any such
failure continues for a period of thirty (30) days following written notice to
Lessee.

                (d) A Default by Lessee as to the terms, covenants, conditions
or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
thirty (30) days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said thirty (30) day
period and thereafter diligently prosecutes such cure to completion.

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

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

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

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

                (a) Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Breach of this Lease shall not waive Lessor's right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.

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

                (c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability

                                     PAGE 8
<PAGE>   9
under any indemnity provisions of this Lease as to matters occurring or accruing
during the term hereof or by reason of Lessee's occupancy of the Premises.

        13.3    INTENTIONALLY OMITTED

        13.4    LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within five (5) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a one-time late charge equal to five percent (5%) of each such overdue
amount. The Parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent the exercise of any of the other rights and remedies granted hereunder.

        13.5    INTEREST. Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, within five (5) days of when due as to
scheduled payments (such as Base Rent) or within thirty (30) days following the
date on which it was due for non-scheduled payment, shall bear interest from the
date when due, as to scheduled payments, or the thirty-first (31st) day after it
was due as to non-scheduled payments. The interest ("INTEREST") charged shall be
equal to ten percent (10%) per annum.

        13.6    BREACH BY LESSOR.

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

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

14.     CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively "CONDEMNATION"), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than ten percent (10%) of any building portion of the
premises, or more than twenty-five percent (25%) of the land area portion of the
premises not occupied by any building, is taken by Condemnation, Lessee may, at
Lessee's option, to be exercised in writing within ten (10) days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within ten (10) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee's
relocation expenses, loss of business goodwill and/or Trade Fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises
by Lessee, for purposes of Condemnation only, shall be considered the property
of the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.

16.     ESTOPPEL CERTIFICATES.

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

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

                                     PAGE 9
<PAGE>   10

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

16.     INTENTIONALLY OMITTED

17.     DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or, if
this is a sublease, of the Lessee's interest in the prior lease. In the event of
a transfer of Lessor's title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. Notwithstanding the above, and subject to the provisions of Paragraph
20 below, the original Lessor under this Lease, and all subsequent holders of
the Lessor's interest in this Lease shall remain liable and responsible with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above.

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

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

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

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

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

23.     NOTICES.

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

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

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

25.     RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.

26.     NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
one hundred fifty percent (150%) of the Base Rent applicable during the month
immediately preceding the expiration or termination. Nothing contained herein
shall be construed as consent by Lessor to any holding over by Lessee.

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

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

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

30.     SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.

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

        30.2    ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new

                                    PAGE 10

<PAGE>   11

owner shall not: (i) be liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (ii) be
subject to any offsets or defenses which Lessee might have against any prior
lessor; or (iii) be bound by prepayment of more than one (1) month's rent.

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

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

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

32.     LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of making such
alterations, repairs, improvements or additions to the Premises as Lessor may
deem necessary. All such activities shall be without abatement of rent or
liability to Lessee. Lessee may at any time place on or about the Premises any
ordinary "FOR SUBLEASE" sign.

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

34.     SIGNS. Subject to compliance with all Applicable Requirements and
reasonable approval by Lessor, Lessee shall be entitled to all signage rights
on the Premises. All signs must comply with all Applicable Requirements.

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

36.     CONSENTS. Except as otherwise provided herein, wherever in this Lease
the consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including, but not limited to, architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including, but not limited to, consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor's consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given. In the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within ten (10) business days following such
request.

37.     INTENTIONALLY OMITTED.

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

39.     OPTIONS.

        39.1    DEFINITION. "OPTION" shall mean: (a) the right to extend the
term of or renew this Lease.

        39.4    EFFECT OF DEFAULT ON OPTIONS.

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

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

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

                                    PAGE 11
<PAGE>   12

the care and cleanliness of the grounds and including the parking, loading and
unloading of vehicles, and that Lessee will pay its fair share of common
expenses incurred in connection therewith.

40.     INTENTIONALLY OMITTED.

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

42.     RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.

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

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

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

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

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

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

49.     MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the
Mediation and/or the Arbitration of all disputes between the Parties and/or
Brokers arising out of this Lease [ ] IS  [ ] IS NOT attached to this Lease.

50.     See Addendum 50.

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

________________________________________________________________________________

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

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

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

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

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

Executed at:_________________________    Executed at:___________________________

on:__________________________________    on:____________________________________

By LESSOR:                               By LESSEE:

KRDS, INC.,                              LITRONIC INC.,
a California corporation                 a Delaware corporation

By:  /s/ Dilip Shah                      By:  /s/ Kris Shah

Name Printed: DILIP SHAH                 Name Printed: KRIS SHAH

Title: Partner KRDS                      Title: CEO

By:__________________________________    By:____________________________________

Name Printed:________________________    Name Printed:__________________________

Title:_______________________________    Title:_________________________________

Address:_____________________________    Address:_______________________________

        _____________________________            _______________________________

Telephone: (   )_____________________    Telephone: (   )_______________________

Facsimile: (   )_____________________    Facsimile: (   )_______________________

Federal ID No._______________________    Federal ID No._________________________

NOTE: These forms are often modified to meet the changing requirements of law
      and industry needs. Always write or call to make sure you are utilizing
      the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700
      So. Flower Street, Suite 600, Los Angeles, California 90017. (213)
      687-8777. Fax No. (213) 687-8616

                                    PAGE 12
<PAGE>   13

                   ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
                            SINGLE-TENANT LEASE - NET

        This Addendum is attached to and forms a part of that certain Standard
Industrial /Commercial Single Tenant Lease - Net dated January 2, 2000, by and
between KRDS, INC., a California corporation, as Lessor and LITRONIC INDUSTRIES,
INC., a California corporation, as Lessee, for the Premises located at 17861
Cartwright, Irvine, California (the "Lease"). This Addendum modifies and
supplements the Lease by adding the following paragraphs thereto:

1.      BASE RENT. Base Rent shall be increased each lease year in accordance
        with the following schedule and shall be further increased upon
        commencement of the Extension Term in accordance with Paragraph 2 of
        this Addendum. (In the event that the term commences on a day other than
        the first day of a calendar month, the first month in the following
        table shall be the first full calendar month following the commencement
        of the term):

               Months           Monthly Base Rent
               01 - 12              $31,674.06
               13 - 24              $32,941.02
               25 - 36              $34,258.66
               37 - 48              $35,629.01
               49 - 60              $37,054.17
               61 - 72              $38,536.34
               73 - 84              $40,077.79

2.      EXTENSION OPTION.

                (a) Provided Lessee is not in Breach or Default under this
        Lease, and no event or circumstance has occurred which, with the giving
        of notice or the passage of time, or both, would constitute a Default or
        Breach under this Lease, Lessee shall have one (1) option to extend the
        term of this Lease (the "Extension Option") for a five (5) year period
        (the "Extension Term").

                (b) The Extension Term shall commence when the Original Term
        expires. The Extension Term shall be on all of the same terms and
        conditions as applicable to the Original Term, except for the Base Rent,
        which shall be determined as provided hereinbelow.

                (c) Lessee shall exercise the Extension Option, if at all, by
        delivering to Lessor written notice of Lessee's election to exercise
        such Extension Option not less than six (6) months prior to expiration
        of the Original Term.

                (d) Effective as of commencement of the Extension Term (the
        "FMRR Adjustment Date"), the Base Rent then payable under the Lease
        shall be adjusted to an amount equal to the greater of (i) the Fair
        Market Rental Rate of the Premises ("FMRR") determined as provided
        hereinbelow; or (ii) one hundred four percent (104%) of the Base Rent
        payable immediately prior to the Extension Term. For purposes of this
        Lease, FMRR shall mean the annual current rent per rentable square foot
        that a willing lessee would pay and a willing lessor would accept,
        dealing at arm's length, for comparable space as the Premises, giving
        consideration to annual rental rates per rentable square foot,
        improvements, escalations, the quality of construction of the building
        and the Premises and other generally applicable terms and consideration
        of tenancy for the space in question at or about the time that such FMRR
        is deemed to take effect.

                (e) The FMRR and new Base Rent for the Extension Term shall be
        determined as follows:

                       (i) Lessor and Lessee shall attempt to agree upon the
               FMRR for the Extension Term within thirty (30) days after Lessee
               has exercised its Extension Option for the Extension Term.

                       (ii) If Lessor and Lessee are unable to agree on the FMRR
               within such thirty (30) day period, then Lessor and Lessee shall,
               within ten (10) days thereafter, attempt to agree upon a mutually
               acceptable Appraiser (as defined hereinbelow) to establish the
               new FMRR. As used in this Lease, the term "Appraiser" shall mean
               a real estate broker with at least five (5) years' full-time
               experience in industrial building leasing in the geographic area
               in which the Premises are located. If Lessor and Lessee agree on
               an Appraiser, they shall appoint such Appraiser within ten (10)
               days thereafter, and such sole Appraiser shall, within thirty
               (30) days thereafter, determine the FMRR in accordance with this
               Lease. The cost of the sole Appraiser shall be borne equally by
               Lessor and Lessee.

                       (iii) If Lessor and Lessee cannot agree on a mutually
               acceptable Appraiser within said ten (10) day period, then either
               party may, by giving notice to the other party, select and
               appoint the Appraiser of their choice to establish the FMRR. Each
               party shall bear the cost of the Appraiser appointed by it. If
               either party does not select an Appraiser within ten (10) days
               following receipt of written notice of the other party's
               selection of an Appraiser, then the Appraiser appointed by the
               other party shall be the sole Appraiser and shall, within thirty
               (30) days thereafter, determine the FMRR in accordance with this
               Lease.

                       (iv) If two Appraisers are appointed by the parties, then
               the two Appraisers shall attempt, within thirty (30) days after
               appointment of the latter of them, to agree on the determination
               of the FMRR in accordance with this Lease.

                       (v) If the two Appraisers cannot agree on the FMRR within
               such time period, then, within ten (10) days after expiration of
               such thirty (30) day period, then the two Appraisers shall select
               a third Appraiser, who shall have not previously acted in any
               capacity for Lessor, Lessee or either Appraiser. If the two
               Appraisers are unable to agree on the third Appraiser, either
               Lessor or Lessee, by giving ten (10) days' notice to the other
               party, can apply to the presiding judge of the Superior Court of
               Orange County, for the selection of a third Appraiser. The costs
               of the third Appraiser shall be equally borne by both Lessor and
               Lessee.

                       (vi) Within thirty (30) days after the selection of the
               third Appraiser, a majority of the Appraisers shall determine the
               FMRR. If a majority of the Appraisers are unable to agree on the
               FMRR within such thirty (30) day period, the three determinations
               of the FMRR derived by each Appraiser shall be added together
               and their total divided by three (3); the resulting quotient
               shall be the FMRR; provided, however, that if the lowest
               determination of FMRR and/or the highest determination of FMRR
               are/is more than fifteen percent (15%) lower and/or higher than
               the middle determination of FMRR, the lowest and/or the highest
               determination of FMRR shall be discarded, and the others averaged
               together to determine the FMRR (or if both the lowest and highest
               determination are both discarded, the middle determination of
               FMRR shall control).

                       (vii) Upon the establishment of the FMRR, the new Base
               Rent under the Lease shall be the greater of (i) the FMRR so
               established; or (ii) one hundred four percent (104%) of the Base
               Rent payable immediately prior to the Extension Term, which new
               Base Rent shall also be used for the purpose of calculating
               future increases in Base Rent under the Lease.

                (f) The Base Rent for the Extension Term, as determined pursuant
        to the foregoing, shall be increased annually, effective as of the
        anniversary of the commencement of the Extension Term, to one hundred
        four percent (104%) of the Base Rent payable during the prior lease
        year.

3.      PARKING. Lessee shall have exclusive use of all parking located on the
        Premises.

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