Document:

EXHIBIT 10.15.1

1.       BASIC LEASE TERMS

a.       DATE OF LEASE: MARCH 5, 2001

b.       TENANT:        NEAH POWER SYSTEMS, INC., A WASHINGTON CORPORATION
         Trade Name:    NEAH POWER SYSTEMS, INC.
         Address (Leased Premises): 22118 20TH AVENUE SE, BOTHELL, WA 98021
         Building/Unit: G/142
         Address (For Notices): 22118 20TH AVENUE SE, SUITE 142, BOTHELL, WA
         98021

         c. LANDLORD: TEACHERS INSURANCE & ANNUITY ASSOCIATION OF AMERICA, INC.,
         A NEW YORK CORPORATION
         Address (For Notices): 22118 20TH AVENUE SE, SUITE 138, BOTHELL, WA
         98021 with a copy to such other place as Landlord may from time to time
         designate by notice to Tenant.

d.       TENANT'S USE OF PREMISES: COMPANY DEVELOPING A MINIATURIZED METHANOL
         FUEL CELL AS A COMPATIBLE REPLACEMENT TO LITHIUM BATTERIES.

e.       PREMISES AREA: An agreed     6,053   Rentable Square Feet

f.       PROJECT AREA: An agreed      444,999 Rentable Square Feet

g.       TERM OF LEASE: This Lease shall commence on SEPTEMBER 1, 2001 or such
         earlier or later date as is provided in Section 3 (the "Commencement
         Date"), and shall terminate on the last day of the SIXTIETH (60th) full
         calendar month after the Commencement Date (the "Expiration Date").

h.       BASE MONTHLY RENT (months refer to period through the applicable full
         calendar month):
         Commencement Date -   Month 12         $9,080.00
         Month 13       -      Month 24         $9,584.00
         Month 25       -      Month 29         $10,088.00
         Month 30       -      Month 30         $0.00
         Month 31       -      Month 33         $10,088.00
         Month 34       -      Month 34         $0.00
         Month 35       -      Month 36         $10,088.00
         Month 37       -      Month 37         $10,593.00
         Month 38       -      Month 38         $0.00
         Month 39       -      Month 41         $10,593.00
         Month 42       -      Month 42         $0.00
         Month 43       -      Month 60         $10,593.00

i.       PREPAID RENT (for months in addition to first month's rent): NA

j.       LEASE CONSIDERATION: $41,362.00; see provision 30 of lease.

k.       SECURITY DEPOSIT: $10,593.00 NON-REFUNDABLE CLEANING FEE: $303.00

l.       BROKER(S): Tenant's Broker      AL HODGE, BRODERICK GROUP
         Landlord's Broker               Molly Brundage, CB Richard Ellis

m.       GUARANTOR(S):

n.       Exhibits
                  Exhibit A -       The Premises
                  Exhibit B -       The Project
                  Exhibit C -       Work Letter Agreement
                  Exhibit D -       Rules and Regulations
                  Exhibit E -       Tenant Sign Criteria

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2. PREMISES/COMMON AREAS/PROJECT.

a.       Premises. Landlord leases to Tenant the premises described in Section 1
and in Exhibit A (the "Premises"),  located in this project described on Exhibit
B (the "Project").  By entry on the Premises,  Tenant  acknowledges  that it has
examined  the  Premises  and accepts the  Premises in their  present  condition,
subject to any Landlord's Work required under this Lease.  Landlord's Work shall
consist  of such work,  if any,  as is  specifically  identified  as  Landlord's
responsibility  under Exhibit C. Unless  otherwise  identified in written notice
from Tenant to Landlord  prior to the dates  specified  below,  Landlord's  Work
shall be deemed  approved  by Tenant in all  respects  on the earlier of (a) the
date Tenant commences  construction or installation of any Tenant's Work, or (b)
the date Tenant begins to move its personal  property into the Premises.  Tenant
represents and warrants that it agrees with the square footage specified for the
Premises  and the  Project in Section 1 and will not  hereafter  challenge  such
determination  and agreement.

b.       Common  Areas.  As used in this Lease,  "Common  Areas"  shall mean all
portions of the  Project  not leased or demised  for lease to specific  tenants.
During  the Lease  Term,  Tenant  and its  licensees,  invitees,  customers  and
employees shall have the  non-exclusive  right to use the public portions of the
Common Areas, including all parking areas, landscaped areas, entrances, lobbies,
elevators,  stairs,  corridors,  and public  restrooms in common with  Landlord,
other Project tenants and their respective  licensees,  invitees,  customers and
employees.  Landlord shall at all times have exclusive control and management of
the Common Areas and no  diminution  thereof shall be deemed a  constructive  or
actual eviction or entitle Tenant to compensation or a reduction or abatement of
rent.  Landlord in its discretion  may increase,  decrease or change the number,
locations  and  dimensions of any Common Areas and other  improvements  shown on
Exhibit A which are not within the Premises.

c.       Project.  Landlord  reserves the right in its sole discretion to modify
or alter the configuration or number of buildings in the Project,  provided only
that upon such  modification  or  alteration,  the Project  Area as set forth in
Section 1(f) shall be adjusted to reflect such modification or alteration.

3.       TERM.  The  Commencement  Date  listed  in  Section  1  of  this  Lease
represents an estimate of the  Commencement  Date.  This Lease shall commence on
the estimated  Commencement  Date if Landlord is able to deliver the Premises to
Tenant for the purpose of constructing  tenant  improvement work at least thirty
(30) days prior to the estimated  Commencement Date. The parties acknowledge and
agree that it is unlikely  the tenant  improvement  work  described  in the Work
Letter Agreement  attached hereto will be complete by the Commencement Date, but
that  nonetheless  Tenant shall commence  payment of rent as of the Commencement
Date,  provided  that  Landlord  has  delivered  the Premises to Tenant at least
thirty (30) days prior to said date.  If Landlord  fails to deliver the Premises
to Tenant  thirty  (30)  days  prior to the  estimated  Commencement  Date,  the
Commencement  Date will be  adjusted to that date which is the first to occur of
the  following  events (i) thirty (30) days  following  the actual date on which
Landlord  delivers  the  Premises  to Tenant,  or (ii) the date on which  Tenant
commences to do business at the  Premises.  If this  Commencement  Date is later
than the Section 1 Commencement  Date, this Lease shall not be void or voidable,
nor  shall  Landlord  be  liable  to  Tenant  for any loss or  damage  resulting
therefrom.  Landlord  shall confirm the  Commencement  Date by written notice to
Tenant.  This  Lease  shall  be  for a  term  ("Lease  Term")  beginning  on the
Commencement  Date and ending on the Expiration Date,  unless extended or sooner
terminated in accordance  with the terms of this Lease.  All  provisions of this
Lease,  other than those relating to payment of Base Monthly Rent and Additional
Rent,  shall become  effective on the date that Tenant or its officers,  agents,
employees  or  contractors  is first  present on the  Premises  for  inspection,
construction or move in purposes.  Notwithstanding anything in this Section 2 to
the  contrary,  if Landlord  is unable to deliver  the  Premises to Tenant on or
before  November  30,  2001,  Tenant may elect to cancel this Lease by providing
Landlord with notice of such cancellation on or before December 10, 2001. In the
event of such cancellation, any security deposit or other amounts paid by Tenant
to Landlord  shall be returned to Tenant,  without  interest,  and neither party
shall have any further rights or obligations whatsoever under this Lease.

4.       RENT

a.       Base Monthly Rent.  Tenant shall pay Landlord  monthly base rent in the
initial  amount in Section 1 which  shall be  payable  monthly in advance on the
first day of each and every  calendar  month  ("Base  Monthly  Rent")  provided,
however,  the first month's Base Monthly Rent is due and payable upon  execution
of this Lease. If the term of this Lease contains any rental  abatement  period,
Tenant  hereby  agrees that if Tenant  breaches the Lease and fails

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to cure such breach within the applicable  cure period,  if any, and/or abandons
the  Premises  before  the  end of the  Lease  term,  or if  Tenant's  right  to
possession is terminated  by Landlord  because of Tenant's  breach of the Lease,
the rental  abatement  period shall be deemed  extinguished,  and there shall be
immediately  due from Tenant to Landlord,  in addition to any damages  otherwise
due  Landlord  under the terms and  conditions  of the Lease,  Base Monthly Rent
prorated  for the  entirety of the rental  abatement  period at the average Base
Monthly Rent for the Lease,  plus any and all other  charges  (such as Expenses)
that were abated during such rental abatement period.

         For purposes of Section 467 of the Internal  Revenue Code,  the parties
to this Lease hereby agree to allocate the stated Rents, provided herein, to the
periods which correspond to the actual Rent payments as provided under the terms
and conditions of this agreement.

b.       Expenses.  The  purpose of this  Section  4(b) is to ensure that Tenant
bears a share of all Expenses related to the use, maintenance, ownership, repair
or replacement, and insurance of the Project. Accordingly, beginning on the date
Tenant takes possession of the Premises, Tenant shall each month pay to Landlord
one-twelfth (1/12) of Tenant's Share of Expenses related to the Project. As used
in this Lease,  "Tenant's  Share"  shall mean the Premises  Area,  as defined in
Section  1(e),  divided by the Project  Area,  as defined in Section  1(f),  and
"Tenant's  Share of Expenses"  shall mean the total Expenses for the Project for
the  applicable  calendar  year  multiplied  by  Tenant's  Share.  Landlord  may
specially  allocate  individual  expenses where and in the manner necessary,  in
Landlord's  discretion,  to appropriately reflect the consumption of the expense
or service.  For  example  where some but not all  premises in the Project  have
HVAC,  Landlord  may  reallocate  Project  Expenses  for  HVAC  to all  premises
utilizing HVAC to be  apportioned on a per square foot basis,  or could allocate
to each premises  utilizing HVAC the cost of maintaining that space's individual
unit.  In the event the average  occupancy  level of the Project for any year is
less than ninety five percent (95%),  the actual Expenses for such year shall be
proportionately  adjusted to reflect those costs which Landlord  estimates would
have been  incurred,  had the Project  been ninety five percent  (95%)  occupied
during such year.

         1)       Expenses Defined. The term "Expenses" shall mean all costs and
expenses of the ownership,  operation,  maintenance,  repair or replacement, and
insurance of the Project, including without limitation, the following costs:

                  (a)      All  supplies,   materials,   labor,  equipment,  and
                  utilities used in or related to the operation and  maintenance
                  of the Project,

                  (b)      All  maintenance,   janitorial,   legal,  accounting,
                  insurance, service agreement and management (including on-site
                  management  office) costs related to operation and maintenance
                  of the Project;

                  (c)      All   maintenance,   replacement   and  repair  costs
                  relating to the areas within or around the Project, including,
                  without  limitation,  air  conditioning  systems,   sidewalks,
                  landscaping,   service   areas,   driveways,   parking   Areas
                  (including   resurfacing   and  restriping   parking   areas),
                  walkways,  building exteriors (including painting),  signs and
                  directories,  repairing and replacing roofs, walls, etc. These
                  costs may be included  either based on actual  expenditures or
                  the use of an accounting reserve based on past cost experience
                  for the  Project.  The  cost of any  repairs  or  replacements
                  which, under generally accepted accounting  principles,  would
                  be capitalized,  shall be amortized on a  straight-line  basis
                  and  taken as  Expenses  over the  useful  life of the item in
                  question.

                  (d)      Amortization   (along   with   reasonable   financing
                  charges)  of capital  additions  or  improvements  made to the
                  Project which may be required by any  government  authority or
                  which will  improve the  operating  efficiency  of the Project
                  (provided,  however,  that the amount of such amortization for
                  improvements  not mandated by government  authority  shall not
                  exceed in any year the amount of costs  reasonably  determined
                  by Landlord in its sole  discretion  to have been saved by the
                  expenditure  either through the reduction or  minimization  of
                  increases which would have otherwise occurred).

                  (e)      Real Property Taxes including all taxes,  assessments
                  (general and special) and other  impositions  or charges which
                  may be taxed, charged, levied, assessed or imposed upon all or
                  any  portion of or in  relation  to the Project or any portion
                  thereof,  any leasehold  estate in the Premises

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                  or measured by Rent from the Premises,  including any increase
                  caused by the transfer,  sale or encumbrance of the Project or
                  any portion thereof.  "Real Property Taxes" shall also include
                  any form of assessment,  levy,  penalty,  charge or tax (other
                  than estate,  inheritance,  net income,  or  franchise  taxes)
                  imposed by any authority  having a direct or indirect power to
                  tax  or  charge,  including,  without  limitation,  any  city,
                  county,  state federal or any  improvement or other  district,
                  whether such tax is (1) determined by the value of the Project
                  or the Rent or other sums payable  under this Lease;  (2) upon
                  or with respect to any legal or equitable interest of Landlord
                  in the Project or any part thereof;  (3) upon this transaction
                  or any document to which Tenant is a party creating a transfer
                  in any interest in the Project,  (4) in lieu of or as a direct
                  substitute  in whole or in part of or in  addition to any real
                  property taxes on the Project, (5) based on any parking spaces
                  or  parking  facilities   provided  in  the  Project,   6)  in
                  consideration for services,  such as police  protection,  fire
                  protection,  street, sidewalk and roadway maintenance,  refuse
                  removal  or  other  services  that  may  be  provided  by  any
                  governmental  or  quasi-governmental  agency from time to time
                  which  were  formerly  provided  without  charge  or with less
                  charge to property owners or occupants, or (7) otherwise based
                  on the operation of the Project  (such as transit,  carpooling
                  or environmental facilities.

                  (f)      Landlord  agrees that  Expenses as defined in Section
                  4(b)  shall  not  include  leasing  commissions;  payments  of
                  principal  and  interest on any  mortgages,  deeds of trust or
                  other  encumbrances  upon  the  Project;  depreciation  of the
                  capital cost of capital  additions or  improvements  except as
                  provided  at  4(b)(1)(d);   Landlord's   executive   salaries,
                  management  fees in excess of market  rates;  costs  resulting
                  from defective  design or construction  of the Project;  costs
                  incurred in connection with entering into new leases; or costs
                  of disputes under existing leases.  In no event shall Expenses
                  include any charge for which Landlord  receives  reimbursement
                  from insurance or from another  Tenant,  nor shall any item of
                  Expense be counted more than once, nor shall Landlord  collect
                  more than one hundred percent (100%) of Expenses.

         2)       Annual Estimate of Expenses.  When Tenant takes  possession of
the  Premises,  Landlord  shall  estimate  Tenant's  Share of  Expenses  for the
remainder of the calendar  year, and at the  commencement  of each calendar year
thereafter,  Landlord shall provide Tenant with an estimate of Tenant's Share of
Expenses for the ensuing calendar year.

         3)       Monthly  Payment of  Expenses.  Tenant  shall pay to Landlord,
monthly  in  advance,  as  Additional  Rent,  one-twelfth  (1/12) of the  Annual
Estimate  of  Tenant's  Share of Expenses  beginning  on the date  Tenant  takes
possession of the Premises.  As soon as practical  following each calendar year,
Landlord  shall  prepare an accounting of actual  Expenses  incurred  during the
prior  calendar  year  and  such  accounting  shall  reflect  Tenant's  Share of
Expenses.  If the  Additional  Rent paid by Tenant  under this  Section  4(b)(3)
during the  preceding  calendar year was less than the actual amount of Tenant's
Share of  Expenses,  Landlord  shall so notify  Tenant and Tenant shall pay such
amount to Landlord  within 30 days of receipt of such notice.  Such amount shall
be deemed to have accrued  during the prior  calendar  year and shall be due and
payable from Tenant even though the term of this Lease has expired or this Lease
has been terminated prior to Tenant's receipt of this notice.  Tenant shall have
thirty (30) days from receipt of such notice to contest the amount due,  failure
to so notify Landlord shall represent final  determination  of Tenant's Share of
Expenses.  If Tenant's  payments were greater than the actual amount,  then such
overpayment  shall be credited by  Landlord  to Tenant's  Share of Expenses  due
under this Section 4(b)(3).

         4)       Rent Without  Offset and Late Charge.  As used herein,  "Rent"
shall mean all monetary sums due from Tenant to Landlord.  All Base Monthly Rent
shall be paid by Tenant to Landlord without prior notice or demand in advance on
the first day of every  calendar  month,  at the address  shown in Section 1, or
such other place as Landlord may designate in writing from time to time. Whether
or not so  designated,  all other sums due from  Tenant  under this Lease  shall
constitute  Additional  Rent,  payable  without  prior  notice  or  demand  when
specified  in this  Lease,  but if not  specified,  then within ten (10) days of
demand. All Rent shall be paid without any deduction or offset  whatsoever.  All
Rent shall be paid in lawful currency of the United States of America. Proration
of Rent due for any partial  month shall be calculated by dividing the number of
days in the  month for which  Rent is due by the  actual  number of days in that
month and multiplying by the applicable  monthly rate. Tenant  acknowledges that
late  payment  by Tenant to  Landlord  of any Rent or other  sums due under this
Lease will cause  Landlord to incur costs not  contemplated  by this Lease,  the
exact  amount  of such cost  being  extremely  difficult  and  impracticable  to

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ascertain.  Such costs include, without  limitation,-processing  and -accounting
-charges  aid late  charges  that may be imposed on Landlord by the terms of any
encumbrance or note secured by the Premises. Therefore, if any Rent or other sum
due from  Tenant is not  received  when due,  Tenant  shall pay to  Landlord  an
additional sum equal to 10% of such overdue payment.  Landlord and Tenant hereby
agree that such late charge  represents  a fair and  reasonable  estimate of the
costs that  Landlord  will incur by reason of any such late payment and that the
late charge is in addition to any and all remedies available to the Landlord and
that the assessment  and/or  collection of the late charge shall not be deemed a
waiver of any other default.  Additionally,  all such  delinquent  Rent or other
sums,  plus this late charge,  shall bear interest at the rate of 18 percent per
annum.  If the  interest  rate  specified  in this Lease is higher than the rate
permitted  by law, the interest  rate is hereby  decreased to the maximum  legal
interest  rate  permitted  by  law.  Any  payments  of  any  kind  returned  for
insufficient  funds will be subject to an additional  handling charge of $25.00,
and  thereafter,  Landlord may require Tenant to pay all future payments of Rent
or other sums due by money order or cashier's check.

5        PREPAID  RENT.  Upon the  execution  of this Lease,  Tenant  shall,  in
addition to the payment of the first  month's Rent as set forth in Section 4(a),
pay to Landlord the prepaid Rent set forth in Section 1(i), and if Tenant is not
in default of any  provisions of this Lease,  such prepaid Rent shall be applied
toward Base  Monthly Rent for the months set forth in Section  1(i).  Landlord's
obligations  with respect to the prepaid Rent are those of a debtor and not of a
trustee,  and Landlord can  commingle the prepaid Rent with  Landlord's  general
funds.  Landlord  shall not be  required  to pay Tenant  interest on the prepaid
Rent.  Landlord  shall be entitled  to  immediately  endorse  and cash  Tenant's
prepaid  Rent;  however,  such  endorsement  and  cashing  shall not  constitute
Landlord's  acceptance of this Lease. In the event Landlord does not accept this
Lease, Landlord shall return said prepaid Rent.

6.       DEPOSIT.  Upon execution of this Lease, Tenant shall deposit a security
deposit and a cleaning fee as set forth in Section 1(j) with Landlord.  If twice
within  any 12 month  period,  late  charges  are  assessed  against  Tenant  by
Landlord,  Landlord  may,  by written  notice to Tenant,  require  Tenant to pay
Landlord an amount equal to one month's Base Rent as an increase in the Security
Deposit,  which  additional  amount  shall be due within 5 days  after  Tenant's
receipt of the notice.  If Tenant is in default,  Landlord  can use the Security
Deposit or any portion of it to cure the default or to  compensate  Landlord for
any damages sustained by Landlord resulting from Tenant's default.  Upon demand,
Tenant  shall  immediately  pay to  Landlord  a sum equal to the  portion of the
Security Deposit expended or applied by Landlord to restore the Security Deposit
to its full amount.  In no event will Tenant have the right to apply any part of
the Security Deposit to any Rent or other sums due under this Lease. If Landlord
transfers its interest in the  Premises,  Landlord  shall  transfer the Security
Deposit to its successor in interest,  whereupon Landlord shall be automatically
released from any liability for the return of the Security  Deposit.  If, at the
end of the Lease Term, Tenant has fully complied with all obligations under this
Lease,  then the  remaining  Security  Deposit shall be returned to Tenant after
Landlord has verified that Tenant has fully vacated the Premises, removed all of
its property and surrendered  the Premises in the condition  required under this
Lease;  provided that  Landlord may hold back a portion of the Security  Deposit
until final  determination  of Tenant's  share of Common  Expenses,  whereupon a
final  adjustment  shall be made and any  remaining  Security  Deposit  shall be
returned  to  Tenant.  The  Non-Refundable  Cleaning  Fee shall be  retained  by
Landlord.  Landlord's obligations with respect to the Security Deposit are those
of a debtor  and not of a trustee,  and  Landlord  can  commingle  the  Security
Deposit with  Landlord's  general  funds.  Landlord shall not be required to pay
Tenant  interest on the deposit.  Each time the Base Monthly Rent is  increased,
Tenant shall deposit  additional  funds with Landlord sum sufficient to increase
the  Security  Deposit to an amount  which  bears the same  relationship  to the
adjusted Base Monthly Rent as the initial  Security  Deposit bore to the initial
Base Monthly Rent.

7.       USE OF PREMISES AND PROJECT  FACILITIES.  Tenant shall use the Premises
solely  for the  purposes  set  forth  in  Section  1 and for no  other  purpose
whatsoever  without  obtaining the prior written consent of Landlord which shall
not  be  unreasonably  withheld  for  uses  consistent  with  the  then  Project
standards.  Tenant  acknowledges that neither Landlord nor any agent of Landlord
has made any  representation  or warranty  with  respect to the Premises or with
respect to the  suitability  of the  Premises  or the Project for the conduct of
Tenant's  business,  nor has  Landlord  agreed to  undertake  any  modification,
alteration or improvement to the Premises or the Project,  except as provided in
writing in this Lease.  Tenant acknowledges that Landlord may from time to time,
at its sole  discretion,  make such  modifications,  alterations,  deletions  or
improvements to the Project as Landlord may deem necessary or desirable, without
compensation  or notice to Tenant.  Tenant shall promptly  comply with all laws,
ordinances,  orders and  regulations  affecting  the  Premises  and the Project,
including,  without  limitation,  the rules and  regulations  attached hereto as
Exhibit D and any  reasonable  modifications  to these rules and  regulations as
Landlord

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may adopt from time to time.  Tenant  acknowledges  that,  except for Landlord's
obligations  pursuant to Section 13, Tenant is solely  responsible  for ensuring
that the Premises comply with any and all governmental regulations applicable to
Tenant's  conduct  of  business  on the  Premises,  and that  Tenant  is  solely
responsible  for any  alterations or  improvements  that may be required by such
regulations,  now existing or hereafter  adopted.  Tenant shall not do or permit
anything to be done in or about the  Premises  or bring or keep  anything in the
Premises.  that will in any way increase  the  premiums  paid by Landlord on its
insurance  related to the Projector  which will in any way increase the premiums
for fire or casualty  insurance carried by other tenants in the Project.  Tenant
will not perform any act or carry on any practices  that may injure the Premises
or the  Project;  that may be a  nuisance  or  menace  to other  tenants  in the
Project;  or that shall in any way  interfere  with the quiet  enjoyment of such
other tenants. Tenant shall not use the Premises for sleeping,  washing clothes,
cooking or the  preparation,  manufacture  or mixing of anything that might emit
any objectionable odor, noises, vibrations or lights onto such other tenants. If
sound insulation is required to muffle noise produced by Tenant on the Premises,
Tenant at its own cost shall provide all necessary insulation.  Tenant shall not
do anything on the premises which will overload any existing  parking or service
to the  Premises.  Pets  and/or  animals  of any type  shall  not be kept on the
Premises.

8.                HAZARDOUS SUBSTANCES; DISRUPTIVE ACTIVITIES

a.       HAZARDOUS SUBSTANCES.

         (1)      PRESENCE  AND  USE OF  HAZARDOUS  SUBSTANCES.  As used in this
Lease,  "Hazardous  Substances"  shall  mean  anything  which may be  harmful to
persons or property,  including,  but not limited to, materials  designated as a
"Hazardous Substance" pursuant to Section 101 of the Comprehensive Environmental
Response,  Compensation and Liability Act of 1980, as now or hereafter  amended,
42  USC  9601,  ET  SEQ.,  or  as a  Hazardous  Substance,  Hazardous  Household
Substance, Moderate Risk Waste or Hazardous Waste under RCW 70.105.010, or which
is  regulated  by any  federal,  state,  or local  law,  statute,  ordinance  or
regulation pertaining to health,  industrial hygiene or the environment.  Except
for those Substances  listed on Exhibit F, Tenant shall not, without  Landlord's
prior written consent, keep on or around the Premises, Common Areas or Building,
for  use,  disposal,  treatment,  generation,  storage  or sale,  any  Hazardous
Substances  except such  Hazardous  Substances  as are commonly  used in general
administrative office operations. With respect to any Hazardous Substances which
Tenant keeps on or around the Premises, Tenant shall:

                           (i)      Comply promptly, timely, and completely with
all governmental requirements for reporting,  keeping, and submitting manifests,
and obtaining and keeping current identification numbers;

                           (ii)     Submit to Landlord  true and correct  copies
of all reports,  manifests,  and identification numbers at the same time as they
are  required  to be  and/or  are  submitted  to  the  appropriate  governmental
authorities;

                           (iii)    Within five (5) days of Landlord's  request,
submit written reports to Landlord regarding  Tenant's use, storage,  treatment,
transportation, generation, disposal or sale of Hazardous Substances and provide
evidence  satisfactory  to Landlord of Tenant's  compliance  with the applicable
government regulations;

                           (iv)     Allow   Landlord  or  Landlord's   agent  or
representative  to come on the  premises  with  commercially  reasonable  notice
except in the case of an emergency  whereby no notice shall be required to check
Tenant's  compliance  with all  applicable  governmental  regulations  regarding
Hazardous Substances;

                           (v)      Comply with  minimum  levels,  standards  or
other  performance   standards  or  requirements  which  may  be  set  forth  or
established for certain Hazardous Substances (if minimum standards or levels are
applicable  to  Hazardous  Substances  present on the  Premises,  such levels or
standards  shall be  established  by an on-site  inspection  by the  appropriate
governmental  authorities  and shall be set forth in an addendum to this Lease);
and

                           (vi)     Comply  with  all  applicable   governmental
rules,  regulations and requirements  regarding the proper and lawful use, sale,
transportation, generation, treatment, and disposal of Hazardous Substances.

<PAGE>

         (2)      Any and all costs  incurred by Landlord  and  associated  with
Landlord's  monitoring of Tenant's  compliance,  where Landlord has commercially
reasonable  cause to  believe  Tenant  is not  compliant  with this  Section  8,
including  actual  reasonable  Landlord's  attorneys'  fees and costs,  shall be
Additional Rent and shall be due and payable to Landlord immediately upon demand
by Landlord.

b.       CLEANUP COSTS, DEFAULT AND INDEMNIFICATION.

         (1)      Tenant  shall be fully and  completely  liable to Landlord for
any and all cleanup costs, and any and all other charges, fees, penalties (civil
and criminal)  imposed by any  governmental  authority  with respect to Tenant's
use, disposal,  transportation,  generation and/or sale of Hazardous Substances,
in or about the Premises, Common Areas, or Building.

         (2)      Tenant  shall   indemnify,   defend  and  save   Landlord  and
Landlord's  lender,  if any,  harmless  from  any and  all of the  costs,  fees,
penalties  and charges  assessed  against or imposed  upon  Landlord (as well as
Landlord's and  Landlord's  lender's  attorneys'  fees and costs) as a result of
Tenant's  use,  disposal,  transportation,  generation  and/or sale of Hazardous
Substances.

         (3)      Upon Tenant's default under this Section 8, in addition to the
rights  and  remedies  set forth  elsewhere  in this  Lease,  Landlord  shall be
entitled to the following rights and remedies:

                           (i)      At  Landlord's  option,  to  terminate  this
Lease immediately; and/or

                           (ii)     To recover  any and all  damages  associated
with the default, including, but not limited to cleanup costs and charges, civil
and  criminal  penalties  and fees,  loss of business  and sales by Landlord and
other tenants of the Building,  any and all damages and claims asserted by third
parties and Landlord's attorneys' fees and costs.

LANDLORD'S  REPRESENTATIONS REGARDING HAZARDOUS WASTE. To the best of Landlord's
actual  knowledge,  no  Hazardous  Substances  are or  have  been  in  the  past
generated,  treated,  stored or  discharged  on or at the  Premises  or Building
except in accordance with applicable laws. Landlord shall be solely responsible,
at Landlord's expense,  for remediating any Hazardous  Substances present in the
Building as of the Commencement Date that are in violation of any federal, state
or local building law as then in effect and interpreted and shall be responsible
at its expense for defending any  governmental  action  alleging such  violation
(provided that this obligation  shall not apply to any substances  introduced to
the Building by Tenant, its agents, employees or contractors).

c.       DISPOSAL OF WASTE

         (1)      Refuse  Disposal.  Tenant  shall not keep any trash,  garbage,
waste or other refuse on the Premises  except in sanitary  containers  and shall
regularly and  frequently  remove same from the Premises.  Tenant shall keep all
incinerators, containers or other equipment used for storage or disposal of such
materials in a clean and sanitary condition.

         (2)      Sewage Disposal. Tenant shall properly dispose of all sanitary
sewage and shall not use the sewage  disposal  system  (a) for the  disposal  of
anything  except  sanitary  sewage  or (b) in excess of the  lesser  amount  (i)
reasonably contemplated by the uses permitted under this Lease or (ii) permitted
by any governmental entity. Tenant shall keep the sewage disposal system free of
all obstructions and in good operating condition.

         (3)      Disposal of Other Waste.  Tenant shall properly dispose of all
other waste or other matter  delivered to, stored upon,  located upon or within,
used on, or removed  from,  the  Premises in such a manner that it does not, and
will not,  adversely  affect  the (a)  health or  safety  of  persons,  wherever
located, whether on the Premises or elsewhere (b) condition, use or enjoyment of
the Premises or any other real or personal property,  wherever located,  whether
on the Premises or anywhere  else,  or (c)  Premises or any of the  improvements
thereto or thereon  including  buildings,  foundations,  pipes,  utility  lines,
landscaping or parking areas.

<PAGE>

d.       DISRUPTIVE ACTIVITIES. Tenant shall not:

         (1)      Produce, or permit to be produced, any intense glare, light or
heat except  within an  enclosed  or screened  area and then only in such manner
that the glare,  light or heat shall not,  outside the  Premises,  be materially
different that the light or heat from other sources outside the Premises;

         (2)      Create,  or permit to be  created,  any sound  pressure  level
which will interfere with the quiet  enjoyment of any real property  outside the
Premises, or which will create a nuisance or violate any governmental law, rule,
regulation or requirement;

         (3)      Create, or permit to be created,  any ground vibration that is
materially discernible outside the Premises;

         (4)      Transmit, receive or permit to be transmitted or received, any
electromagnetic,  microwave or other  radiation which is harmful or hazardous to
any person or property in, or about the Project; or

         (5)      Create,  or permit to be  created,  any  noxious  odor that is
disruptive to the business operations of any other tenant in the Project.

9.       SIGNAGE.  All signing shall comply with rules and regulations set forth
by Landlord as may be modified from time to time.  Current rules and regulations
relating  to signs are  described  on Exhibit E.  Tenant  shall  place no window
covering  (e.g.,  shades,  blinds,   curtains,   drapes,   screens,  or  tinting
materials),  stickers,  signs,  lettering,  banners  or  advertising  or display
material on or near exterior windows or doors if such materials are visible from
the  exterior  of  the  Premises,  without  Landlord's  prior  written  consent.
Similarly, Tenant may not install any alarm boxes, foil protection tape or other
security equipment on the Premises without Landlord's prior written consent. Any
material   violating  this  provision  may  be  destroyed  by  Landlord  without
compensation to Tenant.

10.      PERSONAL PROPERTY TAXES. Tenant shall pay before delinquency all taxes,
assessments,  license fees and public charges  levied,  assessed or imposed upon
its  business  operations  as  well  as  upon  all  trade  fixtures,   leasehold
improvements, merchandise and other personal property in or about the Premises.

11.      PARKING.  Landlord grants to Tenant and Tenant's customers,  suppliers,
employees and invitees,  a non-exclusive  license to use the designated  parking
areas in the  Project  for the use of  motor  vehicles  during  the term of this
Lease.  Landlord  reserves the right at any time to grant similar  non-exclusive
use to other tenants, to promulgate rules and regulations relating to the use of
such parking areas, including reasonable  restrictions on parking by tenants and
employees,  to  designate  specific  spaces for the use of any  tenant,  to make
changes in the parking  layout from time to time,  and to  establish  reasonable
time  limits  on  parking.  Overnight  parking  is  prohibited  and any  vehicle
violating this or any other vehicle regulation adopted by Landlord is subject to
removal at the owner's expense.

12.      UTILITIES; SERVICES.

Landlord shall furnish the Premises with  electricity for office use,  including
lighting  and low  power  usage for  office  machines  and  water  for  restroom
facilities.  Landlord shall furnish the Premises with heat and air  conditioning
services as  required,  in  Landlord's  judgment,  for the  comfortable  use and
occupancy of the Premises.  Landlord  shall provide  further  services  (such as
janitorial  services and trash  disposal)  if Landlord  and Tenant  specifically
agree to such additional services and identify such services with specificity on
Exhibit F hereto.

The mechanical system is designed to accommodate  heating loads generated by the
types and quantities of lights and equipment  commonly found in suburban  office
park general administrative  offices.  Before installing lights and equipment in
the  Premises  which in the  aggregate  exceed such amount  (e.g.  devoting  the
Premises to high density computer work station  operations) or require a voltage
other than 120 volts single phase, Tenant shall obtain the written permission of
Landlord.  Landlord may refuse to grant such permission  unless Tenant agrees to
pay  Landlord's  costs of  installing  any  supplementary  air  conditioning  or
electrical  systems  required by such equipment or lights.  In addition,  Tenant
shall pay  Landlord in advance,  as  additional  rent,  on the first day of each
month  during  the  Term,  the  amount  estimated  by  Landlord  as the  cost of
furnishing  electricity  for the  operation of such  equipment or

<PAGE>

lights  and the  amount  estimated  by  Landlord  as the cost of  operating  and
maintaining supplementary air conditioning units necessitated by Tenant's use of
such equipment or lights.  Landlord shall be entitled to install and operate, at
Tenant's cost, a monitoring/metering system in the Premises to measure the added
demands on  electricity  and the HVAC systems  resulting from such equipment and
lights,  and from Tenant's HVAC  requirements  during other than Normal Business
Hours.  Tenant shall comply with  Landlord's  instruction for the use of drapes,
blinds  and  thermostats.  Tenant  acknowledges  that  Landlord  shall have sole
control over the determination of what utility providers serve the Project,  and
Landlord shall have no obligation to give access or easement rights or otherwise
allow onto the Project any utility  providers  except those approved by Landlord
in its  discretion.  . If, for any reason,  Landlord  permits Tenant to purchase
utility services from a provider other than Landlord's  designated  compan(ies),
such  provider  shall be  considered  a  contractor  of Tenant and Tenant  shall
indemnify  defend  and hold  Landlord  harmless  from such  provider's  acts and
omissions  while in, or in  connection  with their  services to, the Building or
Project in accordance  with the terms and conditions of Article 15. In addition,
Tenant  shall allow  Landlord to purchase  such utility  service  from  Tenant's
provider  at  Tenant's  rate or at such lower rate as can be  negotiated  by the
aggregation of Landlord's tenants' requirements for such utility.

Except for the costs of  above-building  standard and/or  after-hours  services,
which shall be paid directly by Tenant,  the costs of all utilities and services
provided  pursuant to this  Section 12 shall be Expenses  allocated to Tenant as
part of Tenant's Share of Expenses pursuant to Section 4(b). above. Tenant shall
pay when  due and  directly  to the  service  provider  any  telephone  or other
services metered, chargeable or provided to the Premises and not charged as part
of Tenant's Share of Expenses.

Landlord  does not warrant  that any  utilities  or  services  will be free from
interruption   including  by  reason  of  accident,   repairs,   alterations  or
improvements  and including by reason of computer  programming  weaknesses known
generally as the "Year 2000" problem. No utility interruption shall be deemed an
eviction  or  disturbance  of Tenant,  or render  Landlord  liable to Tenant for
damages,  or relieve  Tenant from the full and  complete  performance  of all of
Tenant's obligations under this Lease.

Landlord  shall provide such  security for the Project as it deems  appropriate.
During other than Normal  Business  Hours,  Landlord may restrict  access to the
Project in accordance with the Project's security system.  Landlord shall not be
liable to Tenant for injury to its agents, employees,  customers or invitees, or
for losses due to theft or burglary, or for damages done by unauthorized persons
in the Project.

Landlord shall provide two keys for the corridor door entering the Premises, and
additional  keys at a charge by Landlord on an order signed by Tenant.  All such
keys shall remain the property of Landlord. No additional locks shall be allowed
on any door of the Premises without  Landlord's written  permission,  and Tenant
shall not make, or permit to be made, any duplicate keys, except those furnished
by Landlord.  Upon termination of this Lease, Tenant shall surrender to Landlord
all keys to the Premises.

13.      MAINTENANCE. Landlord shall maintain, in good condition, the structural
parts of the  Premises,  which shall include only the  foundations,  bearing and
exterior walls (excluding  glass),  subflooring and roof (excluding  skylights),
the  unexposed  electrical,  plumbing  and  sewerage  systems,  including  those
portions of the systems lying outside the  Premises,  gutters and  downspouts on
the Building and the heating,  ventilating and air conditioning system servicing
the  Premises;  provided,  however,  the cost of all such  maintenance  shall be
considered  "Expenses" for purposes of Section 4(b).  Except as provided  above,
Tenant  shall  maintain and repair the  Premises in good  condition,  including,
without limitation,  maintaining and repairing all walls,  storefronts,  floors,
ceilings,  interior  and  exterior  doors,  exterior  and  interior  windows and
fixtures and interior  plumbing as well as damage caused by Tenant,  its agents,
employees or invitees.  Upon  expiration or  termination  of this Lease,  Tenant
shall surrender the Premises to Landlord in the same condition as existed at the
commencement  of the term,  except for reasonable wear and tear or damage caused
by fire or other  casualty for which  Landlord has received all funds  necessary
for restoration of the Premises from insurance proceeds.

<PAGE>

14.      ALTERATIONS.  Tenant shall not make any alterations to the Premises, or
to the  Project,  including  any changes to the  existing  landscaping,  without
Landlord's prior written consent.  If Landlord gives its consent to alterations,
Landlord may post notices  in-accordance with the laws of the state in which the
premises are located.  Any alterations,  excluding specific trade fixtures which
Landlord  has  previously  approved  in  writing,  made  shall  remain on and be
surrendered  with the Premises  upon  expiration or  termination  of this Lease,
except  that  Landlord  may,  at the time of written  consent,  elect to require
Tenant to remove any alterations which Tenant may have made to the Premises.  If
Landlord so elects,  at its own cost Tenant  shall  restore the  Premises to the
condition  designated  by Landlord in its  election,  before the last day of the
term.

Should  Landlord  consent in writing to  Tenant's  alteration  of the  Premises,
Tenant  shall   contract  with  a  contractor   approved  by  Landlord  for  the
construction  of such  alterations,  shall secure all  appropriate  governmental
approvals and permits, and shall complete such alterations with due diligence in
compliance  with  plans  and  -specifications  approved  by  Landlord.  All such
construction  shall be performed in a manner which will not  interfere  with the
quiet enjoyment of other tenants of the Project.  Tenant shall pay all costs for
such  construction and shall keep the Premises and the Project free and clear of
all mechanics' liens which may result from construction by Tenant.  Tenant shall
not use any portion of the common areas in connection with an alteration without
the prior written consent of Landlord.

15.      RELEASE AND INDEMNITY.

a.       Indemnity.   Tenant  shall  indemnify,   defend  (using  legal  counsel
acceptable to Landlord) and save Landlord and its property manager harmless from
all claims, suits, losses, damages,  fines, penalties,  liabilities and expenses
(including  Landlord's personnel and overhead costs and attorneys fees and other
costs  incurred in  connection  with claims,  regardless  of whether such claims
involve  litigation)  resulting  from any  actual or alleged  injury  (including
death) of any  person or from any  actual or  alleged  loss of or damage to, any
property  arising out of or in connection with (i) Tenant's  occupation,  use or
improvement of the Premises,  or that of its employees,  agents or  contractors,
(ii) Tenant's breach of its obligations hereunder,  or (iii) any act or omission
of Tenant or any subtenant,  licensee,  assignee or concessionaire of Tenant, or
of any  officer,  agent,  employee,  guest or invitee of Tenant,  or of any such
entity in or about the  Premises.  Tenant  agrees that the  foregoing  indemnity
specifically  covers actions  brought by its own employees.  This indemnity with
respect  to acts or  omissions  during  the terra of this  Lease  shall  survive
termination or expiration of this Lease. The foregoing indemnity is specifically
and  expressly  intended  to,  constitute  a waiver of Tenant's  immunity  under
Washington's  Industrial Insurance Act, RCW Title 51, to the extent necessary to
provide  Landlord with a full and complete  indemnity from claims made by Tenant
and its employees,  to the extent provided herein.  Tenant shall promptly notify
Landlord of casualties or accidents occurring in or about the Premises. LANDLORD
AND TENANT ACKNOWLEDGE THAT THE INDEMNIFICATION PROVISIONS OF SECTION 8 AND THIS
SECTION 15 WERE SPECIFICALLY NEGOTIATED AND AGREED UPON BY THEM.

b.       Release.  Tenant  hereby fully and  completely  waives and releases all
claims against  Landlord for any losses or other damages  sustained by Tenant or
any person claiming  through Tenant resulting from any accident or occurrence in
or upon the Premises,  including but not limited to: any defect in or failure of
Project equipment;  any failure to make repairs; any defect,  failure, surge in,
or interruption of Project  facilities or services;  any defect in or failure of
Common  Areas;  broken  glass;  water  leakage;  the  collapse  of any  Building
component;  or any act,  omission or negligence of co-tenants,  licensees or any
other  persons or  occupants  of the  Building,  provided  only that the release
contained in this Section  15(b) shall not apply to claims for actual  damage to
persons or  property  (excluding  consequential  damages  such as lost  profits)
resulting directly from Landlord's breach of its express  obligations under this
Lease which  Landlord has not cured within a  reasonable  time after  receipt of
written notice of such breach from Tenant.  Notwithstanding  any other provision
of this Lease,  and to the fullest extent permitted by law, Tenant hereby agrees
that Landlord shall not be liable for injury to Tenant's business or any loss of
income  therefrom,  whether such injury or loss results from conditions  arising
upon the Premises or the  Project,  or from other  sources or places  including,
without limitation,  any interruption of services and utilities or any casualty,
or from any cause whatsoever,  including,  Landlord's negligence, and regardless
of whether the cause of such injury or loss or the means of  repairing  the same
is  inaccessible  to Landlord or Tenant.  Tenant may elect, at its sole cost and
expense,  to  obtain  business  interruption  insurance  with  respect  to  such
potential injury or loss.

c.       Limitation on Indemnity.  In compliance  with RCW 4.24.115 as in effect
on the date of this  Lease,  all  provisions  of this  Lease  pursuant  to which
Landlord  or Tenant  (the  "Indemnitor")  agrees  to  indemnify  the other  (the

<PAGE>

"Indemnitee")  against  liability  for damages  arising out of bodily  injury to
Persons or damage to property relative to the construction,  alteration, repair,
addition to, subtraction from,  improvement to, or maintenance of, any building,
road, or other structure,  project, development, or improvement attached to real
estate,  including  the  Premises,  (i) shall not apply to damages  caused by or
resulting from the sole negligence of the  Indemnitee,  its agents or employees,
and (ii) to the extent caused by or resulting from the concurrent  negligence of
(a)  the  Indemnitee  or the  Indemnitee's  agents  or  employees,  and  (b) the
Indemnitor  or the  Indemnitor's  agents or  employees,  shall apply only to the
extent of the Indemnitor's  negligence;  PROVIDED,  HOWEVER,  the limitations on
indemnity set forth in this Section shall  automatically and without further act
by  either  Landlord  or Tenant be  deemed  amended  so as to remove  any of the
restrictions  contained  in this Section no longer  required by then  applicable
law.

d.       Definitions.  As used in any Section establishing  indemnity or release
of Landlord,  "Landlord" shall include Landlord, its partners, officers, agents,
employees and  contractors,  and "Tenant" shall include Tenant and any person or
entity claiming through Tenant.

16.      INSURANCE.  Tenant  shall,  throughout  the term of this  Lease and any
renewal hereof, at its own expense,  keep and maintain in full force and effect,
a policy of commercial general liability (occurrence form) insurance,  including
contractual liability (including Tenant's indemnification obligations under this
Lease)  insuring  Tenant's  activities  upon,  in or about the  Premises  or the
Project,  against  claims of bodily  injury or death or property  damage or loss
with a combined single limit of not less than One Million  Dollars  ($1,000,000)
per occurrence and an  excess/umbrella  liability  insurance policy with minimum
limits of not less than Two Million Dollars ($2,000,000), with such increases in
limits as  Landlord  may from time to time  require  consistent  with  insurance
requirements  of  institutional  landlords in similar  projects in the area.  If
Tenant  manufactures on the Premises consumer goods using any materials supplied
by Landlord (including but not limited to water supplied as part of utilities to
the Premises),  Tenant's insurance shall include products liability insurance in
the amounts specified for the commercial general liability insurance.

Tenant shall further, throughout the term of this Lease and any renewal thereof,
at its own expense, keep and maintain in full force and effect, what is commonly
referred  to  as  "Special  Cause  of  Loss"  or  "Special"  coverage  insurance
(excluding earthquake and flood) on tenant's leasehold improvements in an amount
equal to one hundred  percent  (100%) of the  replacement  value  thereof with a
coinsurance  waiver.  The proceeds  from any such policy shall be used by Tenant
for the restoration of Tenant's  improvements  or  alterations.  As used in this
Lease, "tenant's leasehold  improvements" shall mean any alterations,  additions
or  improvements  installed  in or  about  the  Premises  by or with  Landlord's
permission or otherwise permitted by this Lease, whether or not the cost thereof
was paid for by Tenant.

All insurance  required to be provided by Tenant under this Lease:  (a) shall be
issued by Insurance  companies  authorized  to do business in the state in which
the premises  are located  with a financial  rating of at least an A+X status as
rated in the most  recent  edition  of Best's  Insurance  Reports;  (b) shall be
issued as a primary policy;  shall be on an occurrence  basis; (c) name Landlord
and Landlord's property manager as additional insured;  and (d) shall contain an
endorsement  requiring at least 30 days prior written notice of  cancellation to
Landlord and Landlord's lender, before cancellation or change in coverage, scope
or amount of any policy.  Tenant  shall  deliver a  certificate  or copy of such
policy  together  with  evidence of payment of all current  premiums to Landlord
within  30 days of  execution  of this  Lease  and at the  time of all  renewals
thereof.  If Tenant fails at any time to maintain the insurance required by this
Lease,  and fails to cure such default  within five (5) business days of written
notice from Landlord  then, in addition to all other  remedies  available  under
this Lease and applicable law,  Landlord may purchase such insurance on Tenant's
behalf and the cost of such  insurance  shall be Additional  Rent due within ten
(10) days of written invoice from Landlord to Tenant.

Tenant  hereby  releases  Landlord,  and waives its entire right of recovery for
loss or damage to property  located within or  constituting a part or all of the
Building  or the Project to the extent that the loss or damage is covered by (a)
Tenant's insurance,  or (b) the insurance Tenant is required to carry under this
Article 16, whichever is greater. This waiver applies whether or not the loss is
due to the  negligent  acts  or  omissions  of  Landlord  or  Tenant,  or  their
respective officers,  directors,  employees,  agents,  contractors, or invitees.
Tenant  shall have its insurers  endorse the  applicable  insurance  policies to
reflect the foregoing waiver of claims,  provided however,  that the endorsement
shall not be required if the  applicable  policy of insurance  permits the named
insured to waive rights of  subrogation  on a blanket  basis,  in which case the
blanket  waiver shall be acceptable.

<PAGE>

17.      DESTRUCTION.  If during the term, the Premises or Project are more than
10%  destroyed  from any cause,  or rendered  inaccessible  or unusable from any
cause, Landlord may, in its sole discretion, terminate this Lease by delivery of
notice to Tenant within 30 days of such event without compensation to Tenant. If
in  Landlord's  estimation,  the  Premises  cannot  be  restored  within 90 days
following  such  destruction,  the Landlord  shall notify  Tenant and Tenant may
terminate this Lease by delivery of notice to Landlord within 30 days of receipt
of Landlord's  notice.  If neither Landlord nor Tenant  terminates this Lease as
provided  above,  then  Landlord  shall  commence  to restore  the  Premises  in
compliance with then existing laws and shall complete such  restoration with due
diligence.  In such event, this Lease shall remain in full force and effect, but
there shall be an abatement of Base Monthly Rent and Tenant's  Share of Expenses
between the date of destruction and the date of completion of restoration, based
on the extent to which destruction interferes with Tenant's use of the Premises.

18.      CONDEMNATION.

a.       Taking. If all of the Premises are taken by Eminent Domain,  this Lease
shall terminate as of the date Tenant is required to vacate the Premises and all
Base and Additional  Rent shall be paid to that date. The term "Eminent  Domain"
shall  include  the taking or  damaging  of  property  by,  through or under any
governmental  or statutory  authority,  and any purchase or  acquisition in lieu
thereof,  whether the damaging or taking is by  government  or any other person.
If, in the reasonable judgment of Landlord, a taking of any part of the Premises
by Eminent  Domain  renders the remainder  thereof  unusable for the business of
Tenant  (or  the  cost  of  restoration  of the  Premises  is  not  commercially
reasonable),  the Lease may, at the option of either  party,  be  terminated  by
written  notice  given to the other  party not more than  thirty (30) days after
Landlord gives Tenant written notice of the taking,  and such termination  shall
be effective as of the date when Tenant is required to vacate the portion of the
Premises so taken. If this Lease is so terminated,  all Base and Additional Rent
shall be paid to the date of  termination.  Whenever any portion of the Premises
is taken by Eminent Domain and this Lease is not  terminated,  Landlord shall at
its expense  proceed with all reasonable  dispatch to restore,  to the extent of
available  proceeds  and to the  extent it is  reasonably  prudent to do so, the
remainder of the Premises to the  condition  they were in  immediately  prior to
such  taking,  and  Tenant  shall at its  expense  proceed  with all  reasonable
dispatch to restore its personal property and all improvements made by it to the
Premises to the same condition  they were in  immediately  prior to such taking.
The Base and Additional  Rent payable  hereunder  shall be reduced from the date
Tenant is required to partially  vacate the Premises in the same proportion that
the Rentable Area taken bears to the total  Rentable Area of the Premises  prior
to taking.

b.       Award.  Landlord  reserves  all  right to the  entire  damage  award or
payment for any taking by Eminent Domain, and Tenant waives all claim whatsoever
against  Landlord for damages for  termination of its leasehold  interest in the
Premises or for interference with its business. Tenant hereby grants and assigns
to Landlord any right  Tenant may now have or hereafter  acquire to such damages
and agrees to execute and deliver  such further  instruments  of  assignment  as
Landlord may from time to time request. Tenant shall, however, have the right to
claim from the condemning  authority all compensation that may be recoverable by
Tenant on account of any loss incurred by Tenant in moving Tenant's merchandise,
furniture,  trade fixtures and  equipment,  provided,  however,  that Tenant may
claim such damages  only if they are awarded  separately  in the eminent  domain
proceeding and not out of or as part of Landlord's damages.

19.      ASSIGNMENT  OR  SUBLEASE.  Tenant  shall  not  assign or  encumber  its
interest  in this  Lease  or the  Premises  or  sublease  all or any part of the
Premises  or allow  any  other  person or  entity  (except  Tenant's  authorized
representatives,  employees,  invitees,  or  guests) to occupy or use all or any
part of the Premises without first obtaining  Landlord's consent which shall not
be withheld for Tenant's meeting the then Project standards for creditworthiness
and use. No assignment or sublease  shall release  Tenant from the obligation to
perform  all  obligations  under this  Lease.  Any  assignment,  encumbrance  or
sublease without  Landlord's written consent shall be voidable and at Landlord's
election,  shall constitute a default. If Tenant is a partnership,  a withdrawal
or change, voluntary,  involuntary or by operation of law of any partner, or the
dissolution  of the  partnership,  shall be deemed a  voluntary  assignment.  If
Tenant consists of more than one person,  a purported  assignment,  voluntary or
involuntary  or by operation of law from one person to the other shall be deemed
a voluntary  assignment.  If Tenant is a corporation,  any dissolution,  merger,
consolidation or other  reorganization of Tenant, or sale or other transfer of a
controlling  percentage of the capital stock of Tenant,  or the sale of at least
25% of the value of the assets of Tenant shall be deemed a voluntary assignment.
The phrase  "controlling  percentage" means ownership of and right to vote stock
possessing  at least 25% of the total  combined  voting  power of all classes of
Tenant's capital stock issued,  outstanding and entitled to vote for election of
directors. This Section 19 shall not apply to corporations the stock of

<PAGE>

which is traded through an exchange or over the counter. Fifty (50%) of all rent
received by Tenant from its  subtenants  in excess of the Rent payable by Tenant
to Landlord  under this Lease shall be paid to Landlord,  or any sums to be paid
by an assignee to Tenant in  consideration of the assignment of this Lease shall
be paid to Landlord.  In lieu of granting  consent to any proposed  Transfer for
which Tenant is required to obtain  Landlord's  consent,  Landlord  reserves the
right to terminate this Lease or, in the case of subletting of less than all the
Premises,  to terminate this Lease with respect to such portion of the Premises,
as of the proposed effective date of such Transfer,  in which event Landlord may
enter  into  the   relationship  of  landlord  and  tenant  with  such  proposed
Transferee.  Notwithstanding the foregoing, Landlord's recapture right shall not
apply to a sublease if (a) the term of the  sublease  ends at least 1 year prior
to the end of the term of the Lease and  contains no extension  rights,  and (b)
the total area subleased, including the sublease at issue, will be less than 80%
of the Premises. If Tenant requests Landlord to consent to a proposed assignment
or  subletting,  Tenant  shall  pay  to  Landlord,  whether  or not  consent  is
ultimately  given,  $100 or Landlord's  reasonable  attorney's  fees incurred in
connection with such request, whichever is greater.

No  interest  of  Tenant  in this  Lease  shall  be  assignable  by  involuntary
assignment  through operation of law (including  without limitation the transfer
of this Lease by  testacy or  intestacy).  Each of the  following  acts shall be
considered an involuntary  assignment:  (a) if Tenant is or becomes  bankrupt or
insolvent,  makes an  assignment  for the benefit of  creditors,  or  institutes
proceedings  under the  Bankruptcy  Act in which Tenant is the  bankrupt;  or if
Tenant is a  partnership  or consists of more than one person or entity,  if any
partner of the  partnership or other person or entity is or becomes  bankrupt or
insolvent, or makes an assignment for the benefit of creditors; or (b) if a writ
of attachment or execution is levied on this Lease;  or (c) if in any proceeding
or action to which Tenant is a party,  a receiver is appointed with authority to
take possession of the Premises.  An involuntary  assignment  shall constitute a
default by Tenant and Landlord  shall have the right to elect to terminate  this
Lease, in which case this Lease shall not be treated as an asset of Tenant.

Anything in this Section 19 to the  contrary  notwithstanding,  Landlord  hereby
consents to an  assignment  of this Lease,  or to a subletting of all or part of
the  Premises,  to (a) the parent of Tenant or to a  wholly-owned  subsidiary of
Tenant or of such parent, (b) any corporation or other entity into which or with
which Tenant may be merged or  consolidated,  provided that the net worth of the
resulting entity is at least equal to Ten Million Dollars ($10,000,000),  or (c)
any  entity  to which  Tenant  sells  all or  substantially  all of its  assets,
provided  that the net worth of the  resulting  entity is at least  equal to Ten
Million Dollars ($10,000,000), and such entity expressly assumes all of Tenant's
obligations hereunder.  Transfer of all or any portion of the ownership of stock
in Tenant shall not be deemed an  assignment  of this Lease if such  transfer is
made (x) pursuant to or in  connection  with an initial  public  offering or any
offering  of the stock of  Tenant,  or (y) once the stock of Tenant is  publicly
traded on a recognized public stock exchange.

20.      DEFAULT.  The  occurrence  of any of the following  shall  constitute a
default  by  Tenant:  (a) a failure to pay Rent or other  charge  when due;  (b)
abandonment  and  vacation  of the  Premises  (failure to occupy and operate the
Premises for ten consecutive  days shall be  conclusively  deemed an abandonment
and vacation); or (c) failure to perform any other provision of this Lease.

21.      LANDLORD'S  REMEDIES.  Landlord  shall have the  following  remedies if
Tenant is in default. (These remedies are not exclusive; they are cumulative and
in addition to any remedies now or later allowed by law): Landlord may terminate
Tenant's  right to  possession  of the Premises at any time.  No act by Landlord
other  than  giving  notice  to  Tenant  shall  terminate  this  Lease.  Acts of
maintenance,  efforts to relet the Premises, or the appointment of a receiver on
Landlord's  initiative to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's right to  possession.  Upon  termination of
Tenant's right to possession, Landlord has the right to recover from Tenant: (1)
the worth of the unpaid Rent that had been earned at the time of  termination of
Tenant's  right to  possession;  (2) the worth of the amount of the unpaid  Rent
that would have been earned after the date of  termination  of Tenant's right to
possession  less the amount that Tenant proves  Landlord  should be able to earn
during such period net of all releasing costs;  (3) any other amount,  including
but not limited to, expenses incurred to relet the Premises, court, attorney and
collection costs,  necessary to compensate  Landlord for all detriment caused by
Tenant's  default.  "The Worth," as used for Item (1) in this Paragraph 21 is to
be  computed by  allowing  interest at the rate of 18 percent per annum.  If the
interest rate  specified in this Lease is higher than the rate permitted by law,
the  interest  rate is hereby  decreased  to the  maximum  legal  interest  rate
permitted by law. "The Worth" as used for Item (2) in this Paragraph 21 is to be
computed by discounting  the amount at the discount rate of the Federal  Reserve
Bank  of San  Francisco  at  the  time  of  termination  of  Tenant's  right  of
possession.

<PAGE>

22.      ENTRY ON PREMISES.  Landlord and its authorized  representatives  shall
have the  right to enter the  Premises  at all  reasonable  times for any of the
following purposes:  (a) to determine whether the Premises are in good condition
and whether Tenant is complying with its obligations under this Lease; (b) to do
any necessary  maintenance  and to make any  restoration  to the Premises or the
Project that Landlord has the right or  obligation to perform;  (c) to post "for
sale" signs at any time during the term, to post "for rent" or "for lease" signs
during the last 90 days of the term,  or during any  period  while  Tenant is in
default;  (d) to show the  Premises  to  prospective  brokers,  agents,  buyers,
tenants or persons interested in leasing or purchasing the Premises, at any time
during the term; or (e) to repair,  maintain or improve the Project and to erect
scaffolding and protective  barricades  around and about the Premises but not so
as to prevent  entry to the Premises and to do any other act or thing  necessary
for the safety or  preservation  of the Premises or the Project.  Landlord shall
not be  liable  in any  manner  for  any  inconvenience,  disturbance,  loss  of
business,  nuisance or other  damage  arising out of  Landlord's  entry onto the
Premises  as provided in this  Section  22.  Tenant  shall not be entitled to an
abatement or reduction of Rent if Landlord exercises any rights reserved in this
Section 22.  Landlord  shall conduct his  activities on the Premises as provided
herein  in a  commercially  reasonable  manner  so  as to  limit  inconvenience,
annoyance or disturbance to Tenant to the maximum extent  practicable.  For each
of these purposes,  Landlord shall at all times have and retain a key with which
to unlock  all the doors in,  upon and about the  Premises,  excluding  Tenant's
vaults and safes. Tenant shall not alter any lock or install a new or additional
lock or bolt on any  door of the  Premises  without  prior  written  consent  of
Landlord.  If Landlord gives its consent,  Tenant shall furnish  Landlord with a
key for any such lock.

23.      SUBORDINATION; ESTOPPEL CERTIFICATE.

Subordination.  Without the necessity of any additional  document being executed
by Tenant for the purpose of effecting a  subordination,  and at the election of
Landlord or any mortgagee or any  beneficiary  of a Deed of Trust with a lien on
the Project or any ground  lessor with respect to the Project,  this Lease shall
be subject and  subordinate  at all times to (a) all ground leases or underlying
leases which may now exist or hereafter be executed  affecting the Project,  and
(b) the lien of any  mortgage or deed of trust which may now exist or  hereafter
be executed in any amount for which the  Project,  ground  leases or  underlying
leases,  or  Landlord's  interest or estate in any of said items is specified as
security.  In the event that any ground lease or underlying lease terminates for
any reason or any mortgage or Deed of Trust is  foreclosed  or a  conveyance  in
lieu of foreclosure is made for any reason,  Tenant shall,  notwithstanding  any
subordination,  attorn to and become the Tenant of the  successor in interest to
Landlord,  at the option of such  successor in interest.  Tenant  covenants  and
agrees to execute and deliver, upon demand by Landlord and in the form requested
by Landlord any additional documents evidencing the priority or subordination of
this Lease with  respect to any such ground  lease or  underlying  leases or the
lien of any such mortgage or Deed of Trust.  Tenant hereby irrevocably  appoints
Landlord as attorney-in-fact  of Tenant to execute,  deliver and record any such
document in the name and on behalf of Tenant.

b.       Estoppel Certificate.  Tenant shall, within 10 days of demand,  execute
and deliver to Landlord a written statement certifying: (i) the commencement and
the  expiration  date of the Term;  (ii) the amount of Base Rent and the date to
which it has been  paid;  (iii)  that this Lease is in full force and effect and
has not been assigned or amended in any way (or specifying the date and terms of
each  agreement  so  affecting  this Lease) and that no part of the Premises has
been  sublet (or to the extent  such is not the case,  a copy of any  sublease);
(iv) that  Landlord  is not in  default  under this Lease (or if such is not the
case,  the  extent  and  nature  of  such  default);  (v) on the  date  of  such
certification, there are no existing defenses or claims which Tenant has against
Landlord (or if such is not the case, the extent and nature of such. defenses or
claims); (vi) the amount of the Security Deposit held by Landlord; and (vii) any
other fact or  representation  that a  mortgagee  or  purchaser  may  reasonably
request. It is intended that any such statement shall be binding upon Tenant and
may be relied upon by a prospective  purchaser or mortgagee.  If Tenant fails to
respond within 10 days of receipt of a written request by Landlord therefor, (a)
Tenant shall be deemed to have given a certificate  as above  provided,  without
modification,  and shall be conclusively deemed to have admitted the accuracy of
any  information  supplied by Landlord to a prospective  purchaser or mortgagee,
and (b)  Landlord  may  impose  a fee of $100  per day for  each day of delay in
providing the statement by Tenant after the 10 day period.

24.      NOTICE. Any notice, demand or request required hereunder shall be given
in writing to the  party's  facsimile  number or address  set forth in Section 1
hereof by any of the  following  means:  (a) personal  service;  (b)  electronic
communication,   whether  by  telex,   telegram  or  facsimile  with  electronic
confirmation; (c) overnight courier; or (d) registered or certified, first class
mail, return receipt  requested.  Such addresses may be changed by notice to the
other parties given in the same manner as above provided.  Any notice, demand or
request  sent  pursuant to either

<PAGE>

subsection (a) or (b) hereof shall be deemed received upon such personal service
or upon dispatch by electronic  means with  electronic  confirmation of receipt.
Any notice,  demand or request sent pursuant to  subsection  (c) hereof shall be
deemed  received on the  business  day  immediately  following  deposit with the
overnight  courier  and, if sent  pursuant to  subsection  (d),  shall be deemed
received  forty-eight  (48) hours  following  deposit in the U.S.  mail.  Tenant
hereby  appoints  as its agent to receive the  service of all  dispossessory  or
distraint  proceedings  and  notices  thereunder  the  person  in  charge  of or
occupying  the  Premises at the time,  and,  if no person  shall be in charge of
occupying  the same,  then such service may be made by attaching the same on the
main entrance of the Premises.

25.      WAIVER.  No delay or omission in the exercise of any right or remedy by
Landlord  shall impair such right or remedy or be construed as a waiver.  No act
or conduct of Landlord, including without limitation,  acceptance of the keys to
the Premises, shall constitute an acceptance of the surrender of the Premises by
Tenant before the  expiration of the term.  Only written notice from Landlord to
Tenant  shall  constitute  acceptance  of  the  surrender  of the  Premises  and
accomplish  termination of the Lease.  Landlord's  consent to or approval of any
act by Tenant  requiring  Landlord's  consent or approval shall not be deemed to
waive or render unnecessary  Landlord's consent to or approval of any subsequent
act by Tenant.  Any waiver by  Landlord  of any  default  must be in writing and
shall  not be a waiver  of any other  default  concerning  the same or any other
provision of the Lease. TENANT SPECIFICALLY  ACKNOWLEDGES AND AGREES THAT, WHERE
TENANT HAS  RECEIVED A NOTICE TO CURE DEFAULT  (WHETHER  RENT OR  NON-RENT),  NO
ACCEPTANCE  BY  LANDLORD OF RENT SHALL BE DEEMED A WAIVER OF SUCH  NOTICE,  AND,
INCLUDING  BUT WITHOUT  LIMITATION,  NO  ACCEPTANCE  BY LANDLORD OF PARTIAL RENT
SHALL  BE  DEEMED  TO  WAIVE OR CURE ANY  RENT  DEFAULT.  LANDLORD  MAY,  IN ITS
DISCRETION,  AFTER RECEIPT OF PARTIAL PAYMENT OF RENT,  REFUND SAME AND CONTINUE
ANY  PENDING  ACTION TO COLLECT THE FULL AMOUNT DUE, OR MAY MODIFY ITS DEMAND TO
THE UNPAID  PORTION.  IN EITHER EVENT THE DEFAULT SHALL BE DEEMED  UNCURED UNTIL
THE FULL AMOUNT IS PAID IN GOOD FUNDS.

26.      SURRENDER OF  PREMISES;  HOLDING  OVER.  Upon  expiration  of the term,
Tenant shall surrender to Landlord the Premises and all Tenant  improvements and
alterations in good condition, except for ordinary wear and tear and alterations
Tenant has the right or is obligated to remove under the  provisions  of Section
14  herein.  Tenant  shall  remove  all  personal  property  including,  without
limitation,  all data and phone wires, wallpaper,  paneling and other decorative
improvements or fixtures and shall perform all restoration made necessary by the
removal of any alterations or Tenant's  personal  property before the expiration
of the  term,  including  for  example,  restoring  all wall  surfaces  to their
condition prior to the commencement of this Lease.  Landlord can elect to retain
or dispose of in any manner  Tenant's  personal  property  not removed  from the
Premises by Tenant prior to the expiration of the term. Tenant waives all claims
against Landlord for any damage to Tenant resulting from Landlord's retention or
disposition of Tenant's  personal  property.  Tenant shall be liable to Landlord
for  Landlord's  cost for  storage,  removal or disposal  of  Tenant's  personal
property.

If Tenant, with Landlord's consent,  remains in possession of the Premises after
expiration or  termination of the term, or after the date in any notice given by
Landlord to Tenant  terminating  this Lease,  such possession by Tenant shall be
deemed to be a  month-to-month  tenancy  terminable as provided under Washington
law, by either party.  All provisions of this Lease,  except those pertaining to
term and Rent, shall apply to the  month-to-month  tenancy.  During any holdover
term,  Tenant  shall pay Base  Monthly  Rent in an amount  equal to 150% of Base
Monthly Rent for the last full calendar  month during the regular term plus 100%
of Tenant's share of Expenses  pursuant to Section  4(b)(3).  If Tenant fails to
surrender  possession  of the Premises  upon  termination  or expiration of this
Lease and if Tenant  does not obtain  Landlord's  written  consent  to  Tenant's
continued  occupancy,  then  Tenant  shall be deemed a  trespasser  and shall be
liable to Landlord for all damages  sustained  by Landlord as a result  thereof,
together with Base Rate at a rate double the Latest Rate.

27.      LIMITATION OF LANDLORD'S  LIABILITY.  In  consideration of the benefits
accruing  hereunder,  Tenant  agrees that, in the event of any actual or alleged
failure, breach or default of this Lease by Landlord, Landlord's liability under
this Lease shall be limited to, and Tenant shall look only to Landlord  interest
in the Project and the rents and proceeds thereof.

29.      MISCELLANEOUS PROVISIONS.

a.       Time of  Essence.  Time is of the  essence  of each  provision  of this
Lease.

<PAGE>

b.       Successor.  This Lease  shall be binding on and inure to the benefit of
the parties and their successors, except as provided in Section 19 herein.

c.       Landlord's  Consent.  Any consent required by Landlord under this Lease
must be granted in writing and may be withheld or conditioned by Landlord in its
sole and absolute discretion.

d.       Commissions.  Each party  represents  that it has not had dealings with
any real estate broker, finder or other person with respect to this Lease in any
manner,  except  for the  broker(s)  identified  in  Section  1,  who  shall  be
compensated by Landlord.  Landlord and Tenant recognize that it is possible that
they may hereafter make additional  agreements  regarding  further  extension or
renewal  of this  Lease or a new lease or leases for all or one or more parts of
the Premises or other space in the Project for a term or terms  commencing after
the  Commencement  Date of this Lease.  Landlord and Tenant recognize that it is
also possible that they may hereafter  modify this Lease to add additional space
or to  substitute  space  as  part  of  the  Premises.  If any  such  additional
agreements,  new leases or modifications to this Lease are made,  Landlord shall
not have any obligation to pay any  compensation to any real estate broker or to
any other  third  person  engaged  by Tenant  to  render  services  to Tenant in
connection  with  negotiating  such  matters,  regardless  of whether  under the
circumstances  such  person  is or is not  regarded  by the law as an  agent  of
Landlord.

e.       Other Charges.  If either party  commences any  litigation  against the
other  party or files an appeal of a decision  arising  out of or in  connection
with the Lease, the prevailing party shall be entitled to recover from the other
party  reasonable  attorney's  fees and  costs of suit.  If  Landlord  employs a
collection  agency  to  recover  delinquent  charges,  Tenant  agrees to pay all
collection  agency and attorneys'  fees charged to Landlord in addition to Rent,
late charges, interest and other sums payable under this Lease. Tenant shall pay
a charge of $75 to Landlord for preparation of a demand for delinquent Rent.

f.       Force  Majeure.  Landlord  shall not be deemed in  default  hereof  nor
liable for damages arising from its failure to perform its duties or obligations
hereunder if such is due to causes beyond its reasonable control, including, but
not  limited  to, acts of God,  acts of civil or  military  authorities,  fires,
floods, windstorms, earthquakes, strikes or labor disturbances, civil commotion,
delays in transportation, governmental delays or war.

g.       Rules and Regulations.  Tenant shall faithfully observe and comply with
the "Rules  and  Regulations",  a-copy  of-which  is  attached  hereto,  and all
reasonable and  nondiscriminatory  modifications  thereof and additions  thereto
from time to time put into effect by Landlord. Landlord shall not be responsible
to Tenant for the violation or  non-performance  by any other tenant or occupant
of the building or Project of said tenant or occupant's  lease or of any of said
Rules and Regulations.

h.       Landlord's Successors. In the event of a sale or conveyance by Landlord
of the Project,  the same shall  operate to release  Landlord from any liability
under this Lease,  and in such event  Landlord's  successor in interest shall be
solely responsible for all obligations of Landlord under this Lease.

i.       Interpretation.  This  Lease  shall be  construed  and  interpreted  in
accordance  with the laws of the state in which the premises  are located.  This
Lease  constitutes the entire agreement  between the parties with respect to the
Premises and the Project,  except for such guarantees or modifications as may be
executed  in writing by the  parties  from time to time.  When  required  by the
context of this Lease, the singular shall include the plural,  and the masculine
shall include the feminine and/or neuter. "Party" shall mean Landlord or Tenant.
If  more  than  one  person  or  entity  constitutes  Landlord  or  Tenant,  the
obligations   imposed  upon  that  party  shall  be  joint  and   several.   The
enforceability,  invalidity or illegality of any provision  shall not render the
other provisions unenforceable, invalid or illegal.

j.       Prior  Understandings.  Tenant  acknowledges  that neither Landlord nor
anyone representing Landlord has made statements of any kind whatsoever on which
Tenant has relied in entering into this Lease. Tenant further  acknowledges that
Tenant has relied solely on its independent  investigation  and its own business
judgment in entering into this Lease. Landlord and Tenant agree that: this Lease
supersedes  all prior and  contemporaneous  understandings  and  agreement;  the
provisions  of this Lease are intended by them as the final  expression of their
agreement;  this Lease  constitutes the complete and exclusive  statement of its
terms;  and no extrinsic  evidence  whatsoever may be introduced in any judicial
proceeding  involving  this  Lease.  No  provision  of this Lease may be

<PAGE>

amended  except by an agreement in writing signed by the parties hereto or their
respective successors in interest, whether or not such amendment is supported by
new consideration.

k.       Authority.  If Tenant is a corporation,  each individual executing this
Lease on behalf of said corporation  represents and warrants that he/she is duly
authorized  to execute  and  deliver  this Lease on behalf of said  corporation.
Concurrently with the execution of this Lease,  Tenant shall deliver to Landlord
a certified  copy of a resolution of the Board of Directors of said  corporation
authorizing  the  execution  of this  Lease.  If Tenant is a  partnership,  each
individual  executing  this Lease on behalf of said  partnership  represents and
warrants  that he/she is duly  authorized  to execute and deliver  this Lease on
behalf of said  partnership and that this Lease is binding upon said partnership
in accordance  with its terms,  and  concurrently  with execution of this Lease,
Tenant shall deliver to Landlord such evidence of  authorization as Landlord may
require.  If Tenant is a marital community,  or a member of a marital community,
both members of the marital community shall execute this Lease.  Where Tenant is
comprised  of more than one  person or entity,  all  covenants,  agreements  and
obligations  of  Tenant  hereunder  shall be the joint  and  several  covenants,
agreements and obligations of each person or entity comprising

1.       Clean  Air Act.  Tenant  acknowledges  that  Landlord  has not made any
portion of the Premises or the  Building  accessible  for smoking in  compliance
with WAC  296-62-12000:-  If Tenant  wishes to make any portion of the  Premises
accessible for smoking,  Tenant shall make all improvements  necessary to comply
with all applicable governmental rules and regulations. Tenant acknowledges that
the indemnity contained in Section 15 of the Lease includes,  but is not limited
to claims based on the presence of tobacco  smoke as a result of the  activities
of Tenant, its employees, agents, or guests.

30.      LEASE  CONSIDERATION:  In  consideration  of Landlord's entry into this
lease and  construction  of tenant  improvements  by  Landlord as  specified  on
Exhibit C of this Lease, Tenant shall pay Forty One Thousand Three Hundred Sixty
Two Dollars  ($41.362.00)  concurrent  with the  execution  of this Lease.  Such
consideration  shall be deemed fully earned by Landlord  with full  execution of
Lease and shall not be refundable.

31.      EARLY OCCUPANCY.  Tenant shall be entitled to occupy the Premises for a
period of thirty (30) days prior to the  Commencement  Date,  for the purpose of
construction of Tenant Improvements. If Tenant so occupies the Premises prior to
the Commencement  Date, then (i) all provisions of this Lease other than payment
of Base Monthly Rent and Tenant's Share of Expenses shall be applicable from and
after the date of Tenant's first occupancy,  and (ii) Tenant shall pay Landlord,
within  fifteen (15) days of invoice,  the cost of utility  services used during
construction  as  reasonably  estimated by Landlord.  If Tenant  commences to do
business at or from the Premises prior TO SEPTEMBER 1, 2001 (or October 1, 2001,
as the case may be, as provided in Section 32 below), then Section 1(g) shall be
deemed  amended to  establish as the  Commencement  Date the day on which Tenant
commenced to do business at or from the Premises.

32.      COMMENCEMENT  DATE. The parties agree and acknowledge that Hexos,  Inc.
currently  occupies the Premises  pursuant to a lease with Landlord that expires
August 31, 2001 (the "Hexos Lease"). Landlord and Hexos, Inc. are in the process
of negotiating  the terms of a Lease  Termination  Agreement  (the  "Termination
Agreement"),   but  the  Termination   Agreement  is  not  yet  fmal.   Landlord
anticipates,  but cannot guarantee, that Hexos, Inc. will be willing and able to
vacate the Premises as of July 31, 2001.  Tenant  agrees and  acknowledges  that
Landlord's  ability to deliver the Premises to Tenant  thirty (30) days prior to
the estimated  Commencement  Date of September 1, 2001 is expressly  conditioned
upon  Landlord  and  Hexos,  Inc.  agreeing  to the  terms  of  the  Termination
Agreement,  and Hexos, Inc. vacating the Premises on or before July 31, 2001. If
Landlord and Hexos, Inc. are unable to agree on a Termination  Agreement and the
Hexos Lease  terminates on August 31, 2001 rather than July 31, 2001, this Lease
shall  nonetheless be binding upon the parties,  and the estimated  Commencement
Date shall be October 1, 2001 rather than September 1, 2001.

33.      OPTION TO RENEW. Tenant is granted the right to extend the term of this
Lease  beyond  the  expiration  date  of the  initial  Lease  Term  for  one (1)
successive  period of sixty (60) months (the  "Extended  Term") with twelve (12)
months prior written notice.  If Tenant has defaulted in its  obligations  under
this Lease,  and failed to cure such defaults within any applicable cure period,
then  Tenant's   right  to  extend  the  Lease  for  the  Extended  Terms  shall
automatically  terminate.  Tenant's  right to extend the Lease for the  Extended
Term is personal to Tenant and may not be exercised by any subtenant or assignee
of Tenant.  Tenant's  extension  rights shall apply to all of the Property under
lease to Tenant at the time.  From and after the  commencement  of the  Extended
Term, all of the terms,

<PAGE>

covenants,  and  conditions of the Lease shall continue in full force and effect
as written,  except that  Sections 30 and 31 shall be deleted in their  entirety
and Base Rent for the  Extended  Term  shall be at the rate for new  leases  for
similarly  improved and  situated  premises in the project but not less than the
last month of current term.

Landlord:         Teachers Insurance & Annuity Association of America, Inc.

                  By:      /s/ James Garofalo
                           ------------------

                  Its:     Assistant Secretary

Tenant:           Neah Power Systems, Inc.

                  By:      /s/ Steve Tallman
                           -----------------

                  Its:     President

<PAGE>

                                    EXHIBIT A

                                 (THE PREMISES)

                                    [diagram]

<PAGE>

                                    EXHIBIT B

                                  (The Project)

LEGAL DESCRIPTION - PHASE II (BUILDINGS G-H)

THAT  PORTION OF THE WEST HALF OF SECTION 29 AND OF THE EAST HALF OF SECTION 30,
TOWNSHIP 27 NORTH, RANGE 5 EAST, W.M., SNOHOMISH COUNTY,  WASHINGTON,  DESCRIBED
AS FOLLOWS:

BEGINNING  AT A POINT ON THE NORTH LINE OF THE AMENDED  PLAT OF VILLAGE  SQUARE,
ACCORDING  TO THE PLAT  RECORDED IN VOLUME 42 OF PLATS,  PAGE 193  THROUGH  198.
INCLUSIVE,  RECORDS OF SAID COUNTY, SAID POINT BEING NORTH 88(degree)47'26" EAST
627.20 FEET FROM THE NORTHWEST CORNER OF SAID PLAT; THENCE SOUTH 88(degree)47'26
WEST  627.20 FEET ALONG SAID NORTH LINE TO SAID  NORTHWEST  CORNER OF SAID PLAT;
THENCE SOUTH 87(degree)10'04" WEST 25.02 FEET TO A POINT ON A 675.00 FOOT RADIUS
CURVE  CONCAVE  TO  THE  EAST,  A  RADIAL   THROUGH  SAID  POINT  BEARING  SOUTH
89(degree)35'07"  EAST;  THENCE  NORTHERLY  ALONG SAID CURVE AN ARC  DISTANCE OF
86.82 FEET TO A POINT OF TANGENCY;  THENCE NORTH 7(degree)47'02" EAST 51.63 FEET
TO THE  POINT OF  CURVE  OF A 725.00  FOOT  RADIUS  CURVE  TO THE  LEFT;  THENCE
NORTHERLY  ALONG SAID 725.00 FOOT RADIUS CURVE AN ARC DISTANCE OF 113.80 FEET TO
A POINT OF TANGENCY;  THENCE NORTH 1(degree)12'34" WEST 549.17 FEET TO THE POINT
OF  CURVE OF A 50.00  FOOT  RADIUS  CURVE TO THE  RIGHT;  THENCE  NORTHERLY  AND
EASTERLY  ALONG SAID CURVE AN ARC  DISTANCE  OF 78.94 FEET TO A POINT OF REVERSE
CURVE WITH A 812.58 FOOT RADIUS CURVE TO THE LEFT;  THENCE  EASTERLY  ALONG SAID
812.58 FOOT RADIUS  CURVE AN ARC DISTANCE OF 270.70 FEET TO A POINT OF TANGENCY;
THENCE NORTH  70(degree)09'29"  EAST 239.36 FEET; THENCE SOUTH  11(degree)28'14"
EAST 281.80 FEET;  THENCE SOUTH  6(degree)46'06"  EAST 258.77 FEET; THENCE SOUTH
14(degree)04'41"  EAST 278.91 FEET;  THENCE SOUTH  17(degree)06'43"  WEST 170.08
FEET TO THE POINT OF BEGINNING.

(CONTAINING  555,541 SQ. FT. OR 12.753  ACRES,  MORE OR LESS) Cross hatched area
denotes Project.

                                    [diagram]

<PAGE>

                                    EXHIBIT C
                              WORK LETTER AGREEMENT

This Work Letter  Agreement,  is entered into in  conjunction  with that certain
lease  dated  MARCH  5,  2001,  by and  between  TEACHERS  INSURANCE  &  ANNUITY
ASSOCIATION OF AMERICA, INC. ("Landlord") and NEAH POWER SYSTEMS ("Tenant").

                                    RECITALS:

         A.       Concurrently with the execution of this Work Letter Agreement,
Landlord  and Tenant have entered into a lease (the  "Lease")  covering  certain
premises (the "Premises") more particularly described in Exhibit "A" attached to
the Lease.

         B.

         C.       In order to induce  Tenant to enter  into the Lease  (which is
hereby  incorporated by reference to the extent that the provisions of this Work
Letter Agreement may apply thereto) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant hereby agree as follows:

                             1. TENANT IMPROVEMENTS.

Reference herein to "Tenant  Improvements"  shall include all work to be done in
the Premises  pursuant to the Tenant  Improvement Plans described in Paragraph 2
below,  including,  but not limited to,  partitioning,  doors,  ceilings,  floor
coverings,   wall  finishes  (including  paint  and  wallcovering),   electrical
(including lighting, switching,  telephones,  outlets, etc.), plumbing, heating,
ventilating and air conditioning, fire protection, cabinets and other millwork.

                          2. TENANT IMPROVEMENT PLANS.

Immediately  after  the  execution  of the  Lease,  Tenant  agrees  to meet with
Landlord's  architect  and/or space planner for the purpose of preparing a space
plan for the layout of the  Premises.  Based upon such  space  plan,  Landlord's
architect shall prepare final working drawings and specifications for the Tenant
Improvements.  Such final working drawings and specifications may be referred to
herein as the "Tenant  Improvement  Plans." The Tenant Improvement Plans must be
consistent with Landlord's standard  specifications (the "Standards") for tenant
improvements  for the Building,  as the same may be changed from time to time by
Landlord.

Landlord shall bid the mutually approved Tenant  Improvement Plan and select the
General Contractor based on those bids.

                                  3. BID AWARD.

No further changes to the Tenant Improvement Plans may be made without the prior
written approval from both Landlord and Tenant, and then only after agreement by
Tenant to pay any excess costs resulting from the design and/or  construction of
such changes.

                     4. CONSTRUCTION OF TENANT IMPROVEMENTS.

Landlord shall supervise the completion of the Tenant Improvement Work. The cost
of such work shall be paid as provided in Paragraph 5 hereof. Landlord shall not
be  liable  for any  direct  or  indirect  damages  as a  result  of  delays  in
construction beyond Landlord's  reasonable control,  including,  but not limited
to,  acts of  God,  inability  to  secure  governmental  approvals  or  permits,
governmental restrictions, strikes, availability of materials or labor or delays
by Tenant (or its architect or anyone performing services on behalf of Tenant).

                 5. PAYMENT OF COST OF THE TENANT IMPROVEMENTS.

a.       Landlord  hereby  grants  to  Tenant a  "Tenant  Allowance"  of  ELEVEN
THOUSAND DOLLARS ($11,000.00). Such Tenant Allowance shall be used only for:

         (1)      Payment of the cost of preparing  the space plan and the final
working drawings and specifications,  including mechanical, electrical, plumbing
and  structural  drawings  and of all other  aspects of the  Tenant  Improvement
Plans.  The Tenant  Allowance will not be used for the payment of  extraordinary
design  work not  included  within  the scope of  Landlord's  building  standard
improvements or for payments to any other  consultants,  designers or architects
other than Landlord's architect and/or space planner.

         (2)      The payment of plan check, permit and license fees relating to
construction of the Tenant Improvements.

         (3)      Construction of the Tenant  Improvements,  including,  without
limitation, the following:

                  (a)      Installation within the Premises of all partitioning,
doors,  floor  coverings,  ceilings,  wall coverings and painting,  millwork and
similar items.

<PAGE>

                  (b)      All electrical wiring, lighting fixtures, outlets and
switches, and other electrical work to be installed within the Premises.

                  (c)      The  furnishing  and  installation  of all duct work,
terminal  boxes,  diffusers and  accessories  required for the completion of the
heating,  ventilation  and air  conditioning  systems  within  the  Premises,  I
including the cost of meter and key control for after-hour air conditioning.

                  (d)      Any additional Tenant requirements including, but not
limited to, odor control,  special  heating,  ventilation and air  conditioning,
noise or vibration control or other special systems.

                  (e)      All fire and life safely control systems such as fire
walls, sprinklers,  halon, fire alarms, including piping, wiring and accessories
installed within the Premises.

                  (f)      All plumbing,  fixtures,  pipes and accessories to be
installed  within  the  Premises.

                  (g)      Testing and inspection costs.

                  (h)      Contractor's  fees,  including but not limited to any
fees based on general conditions.

         (4)      All other costs to be expended by Landlord in the construction
of the Tenant  Improvements,  including  those costs  incurred  by Landlord  for
construction of elements of the Tenant Improvements in the Premises.

b.       The cost of each item shall be charged  against  the Tenant  Allowance.
Landlord shall pay the first $11,000.00  invoiced from Contractor.  Tenant shall
pay all invoices thereafter in accordance with the invoice/payment  schedule set
forth in the contract.

c.       In the event that Tenant shall require any changes or  substitutions to
the Tenant  Improvement  Plans,  any  additional  costs thereof shall be paid by
Tenant to Landlord  within  fifteen (15) days after invoice  therefor.  Landlord
shall  have the right to  decline  Tenant's  request  for a change to the Tenant
Improvement  Plans if such changes would,  in Landlord's  opinion,  unreasonably
delay construction of the Tenant Improvements.

d.

IN WITNESS WHEREOF,  this Work Letter Agreement is executed as of the date first
above written.

<TABLE>
<S>                                                           <C>
LANDLORD:                                                     TENANT:
Teachers Insurance and Annuity Association of America         Neah Power Systems, Inc.
By:      /s/ James Garofalo                                   By:      /s/ Steve Tallman
         ------------------                                            -----------------
Its:     Assistant Secretary                                  Its:     President
</TABLE>

<PAGE>

                                    EXHIBIT D
                             (Rules and Regulations)

1.       Except as  specifically  provided in the Lease to which these Rules and
Regulations are attached,  no sign,  placard,  picture,  advertisement,  name or
notice  shall be  installed or displayed on any part of the outside or inside of
the building or Project without the prior written consent of Landlord.  Landlord
shall have the right to remove, at Tenant's expense and without notice, any sign
installed  or  displayed  in  violation  of this  rule.  All  approved  signs or
lettering on doors and walls shall be printed,  painted, affixed or inscribed at
the expense of Tenant by a person approved by Landlord.

2.       If Landlord objects in writing to any curtains, blinds, shades, screens
or hanging  plants or other  similar  objects  attached to or used in connection
with any window or door of the Premises,  or placed on any windowsill,  which is
visible from the exterior of the Premises,  Tenant shall immediately discontinue
such use.  Tenant shall not place anything  against or near glass  partitions or
doors or windows which may appear unsightly from outside the Premises.

3.       Tenant  shall not  obstruct  any  sidewalks,  halls,  passages,  exits,
entrances,  elevators,  escalators  or  stairways  of the  Project.  The  halls,
passages, exits, entrances, shopping malls, elevators,  escalators and stairways
are  not  open to the  general  public,  but are  open,  subject  to  reasonable
regulations,  to Tenant's business invitees.  Landlord shall in all cases retain
the right to control and prevent access thereto of all persons whose presence in
the  judgment  of  Landlord  would  be  prejudicial  to the  safety,  character,
reputation  and interest of the Project and its tenants;  provided  that nothing
herein  contained shall be construed to prevent such access to persons with whom
any tenant  normally deals in the ordinary  course of its business,  unless such
persons are engaged in illegal or unlawful activities. No tenant and no employee
or invitee of any tenant shall go upon the roof(s) of the Project.

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

5.       Landlord will furnish  Tenant,  free of charge,  with five keys to each
door  lock in the  Premises.  Landlord  may  make a  reasonable  charge  for any
additional keys.  Tenant shall not make or have made additional keys, and Tenant
shall not alter any lock or install a new additional lock or bolt on any door of
its Premises.  Tenant,  upon the  termination  of its tenancy,  shall deliver to
Landlord the keys of all doors which have been  furnished to Tenant,  and in the
event of loss of any keys so furnished, shall pay Landlord therefor.

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

7.       Tenant  shall not place a load  upon any  floor of the  Premises  which
exceeds  the load per square  foot which  such floor was  designed  to carry and
which is allowed by law.  Landlord shall have the right to prescribe the weight,
size and  position of all  equipment,  materials,  furniture  or other  property
brought into the building.  Heavy  objects  shall,  if  considered  necessary by
Landlord,  stand on such  platforms as determined by Landlord to be necessary to
properly  distribute the weight,  which  platforms shall be provided at Tenant's
expense.  Business machines and mechanical  equipment belonging to Tenant, which
cause  noise  or  vibration  that may be  transmitted  to the  structure  of the
building  or to any space  therein  to such a degree as to be  objectionable  to
Landlord or to any tenants in the  building,  shall be placed and  maintained by
Tenant,  at  Tenant's  expense,  on  vibration   eliminators  or  other  devices
sufficient to eliminate  noise or vibration.  The persons  employed to move such
equipment in or out of the building  must be  acceptable  to Landlord.  Landlord
will not be  responsible  for loss of, or damage to, any such equipment or other
property from any cause,  and all damage done to the building by  maintaining or
moving  such  equipment  or other  property  shall be repaired at the expense of
Tenant.

8.       Tenant shall not use or keep in the Premises any kerosene,  gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment. Tenant shall not
use or permit to be used in the Premises  any foul or noxious gas or  substance,
or permit or allow the Premises to be occupied or used in a manner  offensive or
objectionable to Landlord or other occupants of the building by reason of noise,
odors or  vibrations,  nor  shall  Tenant  bring  into or keep in or  about  the
Premises any birds or animals.

<PAGE>

9.       Tenant  shall not use any method of heating or air  conditioning  other
than that supplied by Landlord.

10.      Tenant  shall  not waste  electricity,  water or air  conditioning  and
agrees to cooperate  fully with Landlord to assure the most effective  operation
of  the  building's  heating  and  air  conditioning  and  to  comply  with  any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice, and shall refrain from attempting to adjust controls.  Tenant shall keep
corridor  doors  closed,  and shall close  window  coverings  at the end of each
business day.

11.      Landlord  reserves the right,  exercisable  without  notice and without
liability to Tenant, to change the name and street address of the building.

12.      Landlord  reserves the right to exclude  from the building  between the
hours of 6 p.m.  and 7 a.m.  the  following  day,  or such other hours as may be
established  from time to time by landlord,  and on Sundays and legal  holidays,
any person  unless  that  person is known to the person or employee in charge of
the  building  and  has a  pass  or is  properly  identified.  Tenant  shall  be
responsible  for all persons for whom it requests  passes and shall be liable to
Landlord for all acts of such persons.  Landlord shall not be liable for damages
for any error with regard to the admission to or exclusion  from the building of
any person.  Landlord  reserves  the right to prevent  access to the building in
case of invasion, mob, riot, public excitement or other commotion by closing the
doors or by other appropriate action.

13.      Tenant shall close and lock the doors of its Premises and entirely shut
off all water  faucets or other water  apparatus,  and  electricity,  gas or air
outlets  before  tenant and its employees  leave the  Premises.  Tenant shall be
responsible  for any damage or injuries  sustained by other tenants or occupants
of the building or by Landlord for noncompliance with this rule.

14.      Overnight  parking is prohibited and any vehicle  violating this or any
other  vehicle  regulation  adopted  by  Landlord  is  subject to removal at the
owner's expense.

15.      Tenant shall not obtain for use on the Premises ices,  drinking  water,
food,  beverage,  towel  or  other  similar  services  or  accept  barbering  or
bootblacking  service  upon the  Premises,  except at such  hours and under such
regulations as may be fixed by Landlord.

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

17.      Tenant  shall not sell,  or  permit  the sale at retail of  newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general  public in or on the  Premises.  Tenant shall not make any  room-to-room
solicitation of business from other tenants in the Project. Tenant shall not use
the Premises for any business or activity other than that specifically  provided
for in Tenant's Lease.

18.      Tenant shall not install any radio or television  antenna,  loudspeaker
or other  devices on the roof(s) or exterior  walls of the  building or Project.
Tenant shall not interfere  with radio or television  broadcasting  or reception
from or in the Project or elsewhere.

19.      Tenant shall not mark, drive nails, screw or drill into the partitions,
woodwork  or  plaster or in any way deface  the  Premises  or any part  thereof,
except in accordance with the provisions of the Lease pertaining to alterations.
Landlord reserves the right to direct electricians as to where and how telephone
and telegraph  wires are to be introduced to the Premises.  Tenant shall not cut
or bore holes for wires.  Tenant shall not affix any floor covering to the floor
of the  Premises  in any manner  except as approved by  Landlord.  Tenant  shall
repair any damage resulting from noncompliance with this rule.

20.      Tenant  shall not  install,  maintain or operate  upon the Premises any
vending  machines   without  the  written  consent  of  Landlord.

<PAGE>

21.      Canvassing,  soliciting  and  distribution  of  handbills  or any other
written material,  and peddling in the Project are prohibited,  and Tenant shall
cooperate to prevent such activities.

22.      Landlord  reserves  the right to exclude or expel from the  Project any
person who, in Landlord's  judgment,  is  intoxicated  or under the influence of
liquor or drugs or who is in  violation of any of the Rules and  Regulations  of
the Building.

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

24.      The Premises shall not be used for the storage of merchandise  held for
sale to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for any improper,  immoral or objectionable  purpose.
No cooking shall be done or permitted on the Premises or in the Project  without
landlord's  consent,  except  that use by  Tenant  of  Underwriters'  Laboratory
approved equipment for brewing coffee,  tea, hot chocolate and similar beverages
or use of microwave  ovens for employees  use shall be permitted,  provided that
such  equipment and use is in accordance  with all  applicable,  federal,  state
county and city laws, codes, ordinances, rules and regulations.

25.      Tenant shall not use in any space or in the public halls of the Project
any hand truck except those  equipped  with rubber tires and side guards or such
other  material-handling  equipment as Landlord  may  approve.  Tenant shall not
bring any other vehicles of any kind into the building or Project.

26.      Without the written consent of Landlord,  Tenant shall not use the name
of the building or Project in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.

27.      Tenant shall comply with all safety,  fire  protection  and  evacuation
procedures and regulations established by Landlord or any governmental agency.

28.      Tenant assumes any and all  responsibility  for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.

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

30.      Landlord may waive any one or more of these Rules and  Regulations  for
the benefit of Tenant or any other tenant,  but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, not prevent Landlord from thereafter  enforcing any suck Rules and
Regulations against any or all of the tenants of the Project.

31.      These  Rules  and  Regulations  are in  addition  to,  and shall not be
construed  to in any way  modify  or  amend,  in whole or in  part,  the  terms,
covenants, agreements and conditions of the Lease.

32.      Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment,  may from time to time be needed for safety and
security,  for care and  cleanliness of the Project and for the  preservation of
good order  therein.  Tenant  agrees to abide by all such Rules and  Regulations
hereinabove stated and any additional rules and regulations which are adopted.

33.      Tenant shall be responsible  for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and guests.

<PAGE>

                                    EXHIBIT E
                             (Tenant Sign Criteria)

                           CANYON PARK BUSINESS CENTER

The sign  criteria  have been  established  for the purpose of  maintaining  the
overall appearance of Canyon Park Business Center Buildings. It must comply with
the  covenants,  conditions  and  restrictions  of Canyon Park Business  Center.
Conformation will be strictly  enforced.  Any sign installed without approval of
the Landlord will be brought into conformity at the expense of the Tenant.

                                  REQUIREMENTS

1.       Landlord shall provide the following signage at no cost to Tenant:

         a)       Tenant's  name  and  suite  number  on  all  exterior  project
directories.

         b)       Tenant's  name and  suite  number  on front  entry  glass.

         c)       Tenant's  name and suite  number on rear  transom  glass where
applicable.

2.       Tenant shall be responsible for the 8" logo box on front window and for
coordinating  the  construction,  installation  and payment of  building-mounted
company signs. The  building-mounted  signage shall consist of individual 24" or
less high  dimensional  styrofoam  letters in a type style approved by Landlord.
Maximum line length shall not exceed 16 feet.

3.       Method of attachment,  location, color, font style and size shall be in
standard conformity and shall be approved by Landlord prior to installation.

                                 SPECIFICATIONS

1.       The Tenant sign order attached provides the window sign guidelines. The
signs will be located on the window closest to the front door.

2.       The style,  color and size of the  individual  company's  name shall be
standard and in conformity to the  Landlord's  approval.  Landlord  reserves the
right to modify window  signage  design based on Tenant's  corporate  type style
and/or format. (See attached sign order).

3.       The placement of the sign and method of attachment to the building will
be directed by the Landlord. All wall signage to be placed between panel joints.
Signs shall be placed at same height on each building.

4.       No  electrical  or audible  signs will be permitted  except those which
presently  exist in  project  or which may be  required  by the  Americans  With
Disabilities Act.

5.       Except as provided herein, no advertising placards,  banners, pennants,
names,  insignia  trademarks,  "sandwich boards" or other  descriptive  material
shall be affixed or maintained upon the glass, exterior walls, landscaped areas,
street, or parking areas.

                                    DIRECTORY

1.       Each Tenant shall be allowed a space on the building directory sign, if
applicable.

2.       Method of  attachment,  location,  color and size shall be in  standard
conformity and shall be solely up to the Landlord's approval.

<PAGE>

MEZZANINE TENANTS

1.       Each  mezzanine  Tenant  shall be  allowed  a space on the  entry  sign
located at the building entrance, if applicable, and signage on their individual
entrance  door.  The  following  is an example  of a standard  layout for window
identification  graphics for Canyon Park Business Center. NOTE: the example is a
flush-left  layout.  Your layout may not be flush left depending on the position
of your window.

                                    [diagram]

IS LOGO CAMERA READY ARTWORK PROVIDED?      YES      NO

IS LOGO TYPE CAMERA READY ARTWORK PROVIDED? YES      NO

(LOGO SYMBOL IN COLOR, ALL OTHER COPY MUST BE IN WHITE:)

(IF NO ARTWORK PROVIDED, HELVETICA MEDIUM TYPE WILL BE USED:)

REGARDING THE 11" X 36" TENANT I.D. ZONE:

IF THE TENANT'S NAME OR LOGOTYPE WILL FIT ON:

         1 LINE, THEN MAXIMUM LETTER HEIGHT ALLOWED IS 8"

         2 LINES, THEN MAXIMUM LETTER HEIGHT ALLOWED IS 5"

         3 LINES, THEN MAXIMUM LETTER HEIGHT ALLOWED IS 3"

<PAGE>

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

                          Exhibit F

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

Acuglass 111 Spin-on Glass Acetic Acid Glacial Reagent/ EG
Acetone

Ammonia, anhydrous ammonia Alpha-Terpineol

Aluminum Etch

Aluminum, Foil, 0.1 mm, 99.99% AP 115

AP 110, AP 120, AP 130

AP 121

Argon (Compressed Gas)

Ar-Dri Base Neutralizer

AZ BARLi

AZ 351 Developer

AZ(R) EXP PLP(TM) I00XT Photoresist AZ(R) 400K Developer

AZ 1512 SFD Photoresist

AZ 1518 Photoresist

AZ 300T Photoresist Stripper AZ P4620 Photoresist

AZ(R) 9260 Photoresist (520 CPS) AZ KWIK Strip Remover

AZ 1512 SFD Photoresist

AZ Developer

Barium Chloride, dihydrate Barium hydroxide, octahydrate

BOE (Buffered Oxide Etch) 10:1 SG 4x9 CS B2-C Photographic
Bleach

Calcium carbonate

Carbon Tetraflouride (CF4 - compressed gas) Chlorobenzene

Chromium Etchant, type TFD

Chromium pieces, 2-3mm, 99.995% (Metal) Conductive Silver
Paint

Copper, foil

CR4 Chromium Etchant

C-2C Clearing Bath

1,3-Diaminopropane

Di methyl polysi loxanes

Dihydrogen hexahydroxyplatinate (IV) Dry Acid Neutralizer

Dry Base Neutralizer

DE6180 Developer

D-5/ D-5C Negative Developer Emca-Remex 75-10052-57
(Sealing Glass) Ethanol

Ethylenediamine

Ethyl Cellulose

FX-33-145 Silver (ALN) Conductor Gold Etchant Type TFA

Gold, Foil, 0.5mm, 99.9985% Hexaamineruthenium(III)
chloride Hexane

Hexamethyldisiloxane

Hydrochloric Acid

Hydroflouric Acid

Hydroflouric Acid Emergency Cleanup Kit Hydrogen (Compressed)

Hydrogen Hexachloroplatinate (IV) Hydrate Hydrogen Peroxide

Isopropyl Alcohol

Leitsilber 200 Conductive Silver Liquid Acid Neutralizer

Liquid Base Neutralizer

Methanol

2-Methoxyethanol

Methyl iso-butyl ketone

Microposit 1165 Remover
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<PAGE>

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

Microstrip (R) 2001

Megaposit MF-26A Developer Megaposit S3813 Photoresist

Megaposit XP-98220 (0.7-7.0) Photoresist Methyltriflouride
(CHF3 - compressed)

Molybdenum (Metal)

Nafion 112 Membrane

Nafion 117, 5% Solution

Nickel Foil (Metal)

Nickel, Evaporation Slugs (Metal)

Nickel Plating Solution, electroless, solution A Nickel
Plating Solution, electroless, solution B Nickel (II)
Sulfamate Concentrate Niobium Foil (Metal)

Nitric Acid

Nitrogen, or LIN (in cryogenic liquid state)

OCG Resist Rinse I

Oxygen (Compressed)

PF Developer

Palladium Foil (Metal)

Palladium Slug (Metal)

Palladium (II) Chloride

Perchloric Acid, 70%, Redistilled, 99.99% Phosphoric Acid

Platium (II) 2,4-pentanedionate

Platinum 20%, Ruthenium 10% on carbon black Platinum
Wire (Metal)

Platinum Foil (Metal)

Platinum, 40% on carbon black RI1980 Polyimide Developer
PI2721 Polyimide Coating

Potassium Hydrogenphosphate, 98+%, A.C.S. Reagen Potassium
Hydroxide, 45 wt.. % solution in Water Potassium Hydroxide,
Pellets, 85+%, A.C.S Reagent Potassium Nitrate

Potassium Phosphate, 97% PSE-300

Pur-A-Gold - Base Adjusting Salt Pur-A-Gold - 401 Make Up
Pur-A-Gold - Replenisher A Pur-A-Gold - Replenisher B
Pur-A-Gold - Thallium Additive Pyrazine

Pyrocatechol

Silicone Elastomer

Sodium Hydroxide

Sulfur Hexaflouride (SF6 - compressed gas)

Sulfuric Acid

Ruthenium (III) Chloride Hydrate Ruthenium (III)
nitrosylnitrate Ruthenium (Ill) 2,4-pentanedionate Tantalum
Foil (Metal)

TechFilm T2321

Tetraamineplatinum(IV) hydroxide hydrate

Tetraethyl orthosilicate

Thinner 0804

Titanium, foil

Toluene

UBAC RI

UV Curing Adhesive

Vanadium Foil (Metal)

Vanadium (V) oxytriisopropoxide XP SU-8 Developer

Zeolite (Sodium Alumino Silicate)

-------------------------------------------------------------EXHIBIT 10.15.2

                            FIRST AMENDMENT TO LEASE

         This FIRST AMENDMENT TO LEASE (this "First Amendment") is made this 6th
day of June,  2003, by and between TEACHERS  INSURANCE & ANNUITY  ASSOCIATION OF
AMERICA, INC., a New York corporation ("Landlord") and NEAH POWER SYSTEMS, INC.,
a Washington corporation ("Tenant").

                                    RECITALS

         Landlord is the  landlord  and Tenant is the tenant  under that certain
Lease dated March 5, 2001 (the "Initial  Lease"),  for premises located at 22118
20th Avenue SE, Bothell,  Washington  98021,  Building G, Unit 142 (the "Initial
Premises").  As used herein the "Amended  Lease" shall mean the Initial Lease as
modified by the First Amendment and the "Lease" shall mean the Amended Lease.

         The parties desire to amend the Lease to add expansion premises located
at 22122 20th Avenue SE, Bothell,  Washington  98021,  Building H, Unit 161 (the
"Expansion  Premises") and to make certain other modifications all as more fully
set forth herein.

         Except as otherwise  specifically  defined herein all capitalized terms
shall have the meanings assigned in the Amended Lease.

                                    AGREEMENT

         NOW, THEREFORE, for good and valuable consideration, the parties hereto
agree as follows:

1.       This First  Amendment  shall be  effective  on July 1, 2003 (the "First
Amendment Effective Date").

2.       On the  First  Amendment  Effective  Date  there  shall be added to the
Initial Premises the Expansion Premises,  consisting of an agreed 2,016 rentable
square  feet as  shown in  Exhibit  A-1.  From and  after  the  First  Amendment
Effective  Date, the term "Premises" as used in the Lease shall include both the
Initial Premises and the Expansion Premises and shall consist of an agreed 8,069
Rentable  Square Feet, and Tenant's Share shall be  recalculated  to reflect the
increased Rentable Square Footage of the Premises.

3.       From and after the First  Amendment  Effective  Date,  the Base Monthly
Rent for the Expansion Premises shall be as follows:

Commencement Date - Month 12                $2,097.00
Month 13 - Month 24                         $2,200.00
Month 25 - Month 38                         $2,339.00

<PAGE>

         4.       From  and  after  the  First  Amendment  Effective  Date,  the
         Security Deposit and Cleaning Fee pursuant to Sections 1 j and 6 of the
         Lease shall be as follows:

j.       SECURITY DEPOSIT: $13,597.00*
                           -----------
         NON-REFUNDABLE CLEANING FEE:$603.00* *
                                 --------------
         *of which $10 593.00 has been previously deposited with Landlord
         ** of which$303.00 has been previously deposited with Landlord.

         All other  terms and  conditions  of the above  described  Lease  shall
         remain in full force and effect.

         Landlord:    Teachers Insurance & Annuity Association of
                      America, Inc., a New York corporation

                      By:      /s/ James Garofalo
                               ------------------
                               James Garofalo
                      Its:     Assistant Secretary

         Tenant:      Neah Power Systems, Inc., a Washington corporation

                      By:      /s/ David W. Dorheim
                               --------------------
                               David W. Dorheim
                      Its:     President

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