Document:

exv10w35

 

EXHIBIT 10.35

SECOND AMENDED AND RESTATED

REAL PROPERTY SUBLEASE AGREEMENT

BY AND BETWEEN

THREE-FIVE SYSTEMS, INC.

AND

BRILLIAN CORPORATION

EFFECTIVE AS OF

December 22, 2004

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page
	1. AMENDED SUBLEASE; SUBLET PREMISES; USE; CONTINGENT PAYMENT 
	 	 	2	 
	 
	 	 	 	 
	2. TERM 
	 	 	2	 
	 
	 	 	 	 
	3. RENT 
	 	 	3	 
	 
	 	 	 	 
	4. FIXTURES AND EQUIPMENT 
	 	 	3	 
	 
	 	 	 	 
	5. CONSTRUCTION; ACCEPTANCE 
	 	 	4	 
	 
	 	 	 	 
	6. REPRESENTATIONS AND SECURITY 
	 	 	4	 
	 
	 	 	 	 
	7. MASTER LEASE 
	 	 	4	 
	 
	 	 	 	 
	8. EVENTS OF DEFAULT 
	 	 	5	 
	 
	 	 	 	 
	9. REMEDIES OF TFS 
	 	 	6	 
	 
	 	 	 	 
	10. ACCESS TO SUBLET PREMISES 
	 	 	6	 
	 
	 	 	 	 
	11. WAIVERS BY BRILLIAN; HOLDOVER 
	 	 	6	 
	 
	 	 	 	 
	12. LATE PAYMENT 
	 	 	6	 
	 
	 	 	 	 
	13. INDEMNITY 
	 	 	6	 
	 
	 	 	 	 
	14. MASTER LEASE DEFAULTS 
	 	 	7	 
	 
	 	 	 	 
	15. RESTORATION 
	 	 	7	 
	 
	 	 	 	 
	16. NOTICES 
	 	 	7	 
	 
	 	 	 	 
	17. BRILLIAN’S INSURANCE 
	 	 	7	 
	 
	 	 	 	 
	18. ALTERATIONS 
	 	 	8	 
	 
	 	 	 	 
	19. CONDEMNATION 
	 	 	9	 
	 
	 	 	 	 
	20. ASSIGNMENT 
	 	 	9	 
	 
	 	 	 	 
	21. NO BROKER 
	 	 	10	 
	 
	 	 	 	 
	22. LIABILITY OF TFS
	 	 	10	 
	 
	 	 	 	 
	23. EFFECT 
	 	 	10	 
	 
	 	 	 	 
	24. DAMAGE OR DESTRUCTION 
	 	 	10	 
	 
	 	 	 	 
	25. NOTICE 
	 	 	10	 
	 
	 	 	 	 
	26. RELATIONSHIP 
	 	 	11	 
	 
	 	 	 	 
	27. WAIVERS 
	 	 	11	 
	 
	 	 	 	 
	28. FORUM 
	 	 	11	 
	 
	 	 	 	 
	29. JOINT AND SEVERAL LIABILITY; AUTHORITY 
	 	 	11	 
	 
	 	 	 	 
	30. NO OPTION; CONSENT OF MASTER LANDLORD 
	 	 	11	 
	 
	 	 	 	 
	31. FORCE MAJEURE 
	 	 	11	 

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TABLE OF
CONTENTS
(continued)

	 	 	 	 	 
	 	 	Page
	32. WAIVER OF TRIAL BY JURY 
	 	 	11	 
	 
	 	 	 	 
	33. GROUND SUBLEASE 
	 	 	11	 

ii

 

EXHIBIT INDEX

	 	 	 	 	 
	Exhibit A – Legal Description of Land 
	 	 	A-1	 
	 
	 	 	 	 
	Exhibit B – Copy of Ground Lease 
	 	 	B-1	 
	 
	 	 	 	 
	Exhibit C – Copy of Master Lease 
	 	 	C-1	 
	 
	 	 	 	 
	Exhibit D – Depiction of Sublet Premises and Common Areas 
	 	 	D-1	 
	 
	 	 	 	 
	Exhibit E – Form of Master Landlord’s Consent 
	 	 	E-1	 
	 
	 	 	 	 
	Exhibit F – Building Services 
	 	 	F-1	 
	 
	 	 	 	 
	Exhibit G – Variable Services Rent 
	 	 	G-1	 
	 
	 	 	 	 
	Exhibit H – Clean Room Equipment
	 	 	 	 
	 
	 	 	 	 
	Exhibit I –  Form of Security Agreement 
	 	 	H-1	 
	 
	 	 	 	 
	Exhibit J – Form of Ground Sublessor’s Consent 
	 	 	I-1	 

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SECOND AMENDED AND RESTATED

REAL PROPERTY SUBLEASE AGREEMENT

     This Second Amended and Restated Real Property Sublease Agreement (this “Sublease”) is
entered into as of December 22, 2004 (the “Effective Date”), by and between Three-Five
Systems, Inc., a Delaware corporation, with offices at 1600 North Desert Drive, Tempe, Arizona
85281, Tempe, Arizona (“TFS”), and Brillian Corporation, a Delaware corporation having an
address at 1600 North Desert Drive, Tempe, Arizona 85281 (“Brillian”).

RECITALS

     WHEREAS, pursuant to that certain Real Property Sublease Agreement dated September 1, 2003 by
and between TFS, as sublessor, and Brillian, as sublessee, as amended by that certain First Amended
and Restated Real Property Sublease Agreement dated as of June 1, 2004 (the “Existing
Sublease”), TFS sublet to Brillian approximately 42,524 square feet of rentable floor area (the
“Premises”) in that certain building located at 1600 North Desert Drive, Tempe, Arizona
85281 (the “Building”), which Premises are located on the real estate (the “Land”)
more fully described on Exhibit A attached hereto and made a part hereof; and

     WHEREAS, TFS subleased the Land from Papago Park Center, Inc., an Arizona corporation
(“Ground Sublessor”) pursuant to that certain Papago Park Center Ground Sublease dated
April 1, 1994, between Ground Sublessor, as Landlord, and TFS, as Tenant (the “Ground
Sublease”), a true and correct copy of the Ground Sublease being attached hereto as Exhibit
B;

     WHEREAS, on July 26, 2004, TFS acquired fee simple title in and to the Building, and, pursuant
to Section 33 of the Existing Sublease, the Existing Sublease was thereby automatically deemed a
prime lease by and between TFS, as lessor, and Brillian, as lessee; and

     WHEREAS, as of the Effective Date TFS has sold fee simple title in and to the Building and its
subleasehold interest in the Land (the Building and TFS’ subleasehold interest under the Ground
Sublease collectively, the “Master Premises”) to Papago Paragon Partners, LLC (“Master
Landlord”), and leasedback the Master Premises from the Master Landlord pursuant to that
certain lease dated of even date herewith (the “Master Lease”), a true and correct copy of
which is attached hereto as Exhibit C;

     WHEREAS, effective as of the Effective Date, TFS and Brillian desire to amend and restate in
its entirety the Existing Sublease pursuant to this Sublease, for the purpose of: (i) amending the
Sublet Premises, as such term is defined in the Existing Sublease, to 55,781 rentable square feet
in the Building (the aforesaid 55,781 rentable square feet hereinafter the “Sublet
Premises”), which Sublet Premises are more fully shown on Exhibit D attached hereto and
made a part hereof; and (ii) certain other terms and conditions, all as more fully set forth
hereinbelow;

AGREEMENT

     NOW, THEREFORE, in consideration of the mutual promises, covenants, and conditions hereinafter
set forth, and intending to be legally bound hereby, it is mutually agreed as follows:

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     1. AMENDED SUBLEASE; SUBLET PREMISES; USE; CONTINGENT PAYMENT.

          (a) Effective as of execution by Master Landlord and TFS of the Master Lease, which execution
shall be evidenced by TFS’ delivery of a fully executed copy of the Master Lease to Brillian, the
Existing Sublease shall thereby be deemed amended and restated in its entirety by this Sublease.
In the event Master Landlord and TFS fails to execute the Master Lease by December 31, 2004, the
Existing Sublease shall remain in full force and effect pursuant to the terms and conditions set
forth therein.

          (b) TFS hereby subleases the Sublet Premises to Brillian and Brillian hereby subleases 55,781
the Sublet Premises from TFS, subject to the terms and conditions hereof. Brillian shall not use
the Sublet Premises for any illegal or improper purpose which shall constitute a nuisance nor do or
suffer anything to be done in or about the Sublet Premises which will violate any term of the
Master Lease, this Sublease, or any laws, rules, regulations, or ordinances or increase the rate of
fire or other insurance or jeopardize the coverage of the same. Brillian agrees to comply with all
of Master Landlord’s rules and regulations relating to the Sublet Premises or the building in which
the Sublet Premises is located.

          (c) Brillian shall also have the right to use in common with TFS (and such other subtenants as
from time to time may occupy the Building) the facilities yard, parking areas, improvements (other
than the Building) located from time to time on the Land, and the common areas described on
Exhibit D attached hereto and made a part hereof (all of the foregoing in this Paragraph
1(c), the “Common Areas”).

     2. TERM.

          (a) Subject to the terms of Paragraphs 1(b) above and this Paragraph 2 in its entirety, the
initial term of this Sublease shall, subject to the terms set forth hereinafter in this Section
2(a), be for a period of five (5) years (the “Initial Sublease Term”) and shall commence as
of the Effective Date (the “Commencement Date”) and terminate on December 16, 2009. The
Initial Sublease Term may be extended for additional one (1) year terms (each, a “Renewal
Term”) pursuant to the terms and provisions of Paragraph 2(b) below. The Initial Sublease
Term, together with any and all Renewal Terms, is hereinafter collectively referred to as the
“Sublease Term”. Notwithstanding the foregoing provisions of this Section 2(a), as set
forth in Section 21(d) of the Master Lease, the Master Landlord has the right, upon a default by
TFS under the Master Lease, to recognize this Sublease as a direct lease between Master Landlord
and Brillian or to terminate this Sublease upon six (6) months prior written notice. Brillian
hereby expressly acknowledges and agrees that it has read the terms and provisions of Section 21(d)
of the Master Lease, that it is subject to the terms and provisions of Section 21(d) of the Master
lease, and that TFS shall not be obligated to cure any defaults under the Master Lease, whether
such defaults are made by TFS or Master Landlord, liable for any act or omission of Master Landlord
or subject to any claims, offsets or defenses which Brillian might have against TFS arising as a
result of the election by Master Landlord to terminate this Sublease in accordance with the terms
and provisions of Section 21(d).

          (b) Except as set forth in Paragraph 2(a) above or (c) below, the Sublease Term shall be
automatically extended for successive Renewal Terms unless Brillian shall give to TFS written
notice of its election to terminate this Sublease at least 180 days prior to the beginning of the
first Renewal Term or any then applicable succeeding Renewal Term.

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          (c) In the event that TFS desires to terminate this Sublease as of the expiration of the
Sublease Term, or during the Sublease Term, TFS shall give to Brillian written notice of its
election to terminate this Sublease at least 180 days prior to the date of such termination.

     3. RENT.

          (a) Base Rent. During the Term, Brillian covenants and agrees to pay to TFS, without
deduction or setoff of any kind, minimum annual base rent in an amount equal to Seven Hundred
Thirty Nine Thousand Ninety Eight and 25/100ths ($739,098.00) Dollars (such minimum annual rent
hereinafter called the “Base Rent”), payable in equal monthly installments of Sixty-One
Thousand Five Hundred Ninety One and 52/100ths ($61,591.52) Dollars. The Base Rent shall be paid
in advance on the first day of each month during the term of this Sublease.

          (b) Building Services Rent. During the Term, Brillian covenants and agrees to pay to TFS,
without deduction or setoff of any kind, annual building services rent in an amount equal to
$338,964.00 (“Building Services Rent”), payable in equal monthly installments of
$28,247.00. The particular services that are provided by TFS to Brillian and that are covered under
Building Services Rent are enumerated and described in Exhibit F to this Sublease. For
purposes of this Sublease, Building Services Rent shall include all Rent other than Base Rent,
Brillian’s Share of Taxes and Variable Services Rent. Brillian shall pay to TFS the Building
Services Rent on the first day of each month during the term of this Sublease, together with the
payment of Base Rent. No later than July 31 of each year during the term of this Sublease, TFS
shall provide Brillian with a reasonably detailed statement (the “First-Half Statement”) showing
the actual costs of the building services incurred by TFS during the calendar months of January
through and including June (the “First Half”). In the event that the Building Services Rent paid
to TFS during the First Half is less than the actual costs of the building services incurred for
the same period, as shown on the First-Half Statement, Brillian shall, no later than fifteen (15)
days from its receipt of the First-Half Statement, pay the difference to TFS. If the Building
Services Rent paid during the First Half is greater than the actual costs of the building services
for the same period, Brillian shall be entitled to offset such overpayment against the next
installment of Building Services Rent due under this Sublease. No later than January 31 of each
year during the term of this Sublease, TFS shall provide Brillian with a reasonably detailed
statement (the “Second-Half Statement”) showing the actual costs of the building services incurred
by TFS during the calendar months of July through and including December (the “Second Half”). In
the event that the Building Services Rent paid to TFS during the Second Half is less than the
actual costs of the building services incurred for the same period, as shown on the Second-Half
Statement, Brillian shall, no later than fifteen (15) days from its receipt of the Second-Half
Statement, pay the difference to TFS. If the Building Services Rent paid during the Second Half is
greater than the actual costs of the building services for the same period, Brillian shall be
entitled to offset such overpayment against the next installment of Building Services Rent due
under this Sublease.

          (c) Variable Services Rent. During the term of this Sublease, Brillian covenants and agrees
to pay to TFS, without deduction or setoff of any kind, the costs actually incurred for the items
enumerated in Exhibit G to this Sublease with respect to the Sublet Premises (“Variable
Services Rent”). Brillian shall pay to TFS on demand by TFS an amount equal to the costs
actually incurred or paid by or on behalf of TFS for the
services enumerated in Exhibit G to this Sublease with respect to the Sublet Premises. All
Variable Services Rent amounts not paid to TFS within seven (7) days of TFS’s demand for such
payment shall bear interest at the annual rate of fifteen percent (15%), from the date of TFS’s
demand for such payment until paid in full.

     4. FIXTURES AND EQUIPMENT. In the event that, during the term of this Sublease, a
building fixture or piece of maintenance or operating equipment breaks or fails to work properly,
and that fixture or piece of maintenance or operating equipment is solely used by Brillian under
the terms of this

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Sublease, then (i) TFS reserves the right to not repair or replace the said
fixture or piece of maintenance or operating equipment, or (ii) in the event that TFS chooses to
repair or replace such fixture or piece of maintenance or operating equipment, Brillian shall be
solely liable for any costs associated with such action.

     5. CONSTRUCTION; ACCEPTANCE. Brillian agrees that TFS has no construction, repair, or
replacement obligations hereunder and that Brillian will accept the Sublet Premises in “as-is”
condition. Brillian’s taking possession of the Sublet Premises shall be a conclusive
acknowledgement on Brillian’s part that the Sublet Premises are in good and tenantable condition
and that Brillian has accepted the Sublet Premises in “as is” condition as of such date.

     6. REPRESENTATIONS AND SECURITY.

          (a) TFS hereby warrants and represents that (i) the Master Lease is presently in full force
and effect; (ii) that TFS has the power and authority to enter into this Sublease; (iii) the copy
of the Master Lease attached hereto as Exhibit C is true, complete, and correct; (iv) the
Master Lease has not been modified or amended and constitutes the full and complete agreement of
the parties thereto relative to the subject matter thereof; (v) (a) to the best of TFS’ knowledge,
TFS is not in default under any of the provisions of the Master Lease, and to the best of TFS’
knowledge, no event or condition exists which with notice or the passage of time or both, would
constitute a default by TFS under the Master Lease, and (b) TFS has received no notice of any such
default, event, or condition from Master Landlord which remains uncured; (vi) TFS has received no
written notice from any applicable governmental authority of, or alleging any, violation of any
applicable law or regulation, including any environmental laws, with respect to the Sublet Premises
which remains uncured; (vii) TFS has given no written notices alleging any default which remains
uncured by the Master Landlord under the Master Lease, or that any event has occurred which, with
the passage of time, or the giving of notice, or both, would constitute an uncured default by the
Master Landlord under the Master Lease, nor to the best of TFS’s knowledge, has any event occurred
which, with the passage of time, or the giving of notice, or both, would constitute an uncured
default by Master Landlord under the Master Lease. TFS makes no other representations or warranties
and hereby disclaims same.

          (b) As security for the payment of all of Brillian’s obligations under this Sublease, Brillian
hereby grants to TFS a security interest in and to all right, title and interest of Brillian in and
to the clean room equipment described generally on Exhibit H attached to this Sublease from
time to time located at the Premises (the “Clean Room Equipment”), and, in furtherance of
Brillian’s grant to TFS of the aforesaid security interest; (i) TFS and Brillian have executed that
certain Security Agreement dated of even date herewith (the “Security Agreement”, a true
and correct copy of which is attached hereto and Exhibit I; and (ii) Brillian has executed
and filed financing statements in accordance with the Uniform
Commercial Code, as the same may from time to time be in effect in the State of Arizona (the
“UCC”). Brillian hereby authorizes TFS to file and record (in such public records offices
as TFS may determine) such financing statements, continuation statements and other related filings
as TFS may reasonably determine to perfect its security interest in the Clean Room Equipment
pursuant to the Security Agreement.

     7. MASTER LEASE.

          (a) All the rights and obligations of TFS contained in the Master Lease as they relate to the
Sublet Premises are hereby conferred and imposed upon Brillian, except as expressly modified and
amended by this Sublease. The rights and obligations of TFS in Sections 11, 16, 17 and 21 of the
Master Lease are expressly not conferred upon Brillian and Brillian expressly acknowledges that it
shall not be entitled to any of the rights or incur any of the obligations of TFS in Sections 11,
16, 17 and 21 of the

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Master Lease. Brillian covenants and agrees fully and faithfully to perform
the terms and conditions of the Master Lease as they relate to the Sublet Premises and this
Sublease on its part to be performed, including, but not limited to, all maintenance and repair
obligations and all compliance with law obligations. Brillian shall not do or cause to be done or
suffer or permit any act to be done that would or might cause the Master Lease, or the rights of
TFS as tenant under the Master Lease, to be endangered, canceled, terminated, forfeited, or
surrendered, or that would or might cause TFS to be in default thereunder or liable for any damage,
claim, or penalty. Brillian agrees, as an express inducement for TFS’s executing this Sublease,
that if there is any conflict between the provisions of this Sublease and the provisions of the
Master Lease that would permit Brillian to do or cause to be done or suffer or permit any act or
thing to be done that is prohibited by the Master Lease, then the provisions of the Master Lease
shall prevail. All rights, remedies, and indemnifications given to the Master Landlord in the
Master Lease are hereby given to TFS under this Sublease.

          (b) Except as otherwise expressly provided in this subsection 7(b), TFS shall have no duty to
perform any obligations of or provide any services to be provided by the Master Landlord and shall
under no circumstances be responsible or liable to Brillian for any default, failure, or delay on
the part of the Master Landlord in the performance of any obligations under the Master Lease, nor
shall such default of the Master Landlord affect Brillian’s obligations hereunder; provided, that
in the event of any such default or failure of performance by Master Landlord, including, without
limitation, any failure on the part of Master Landlord to maintain any structural components of the
Sublet Premises, including load bearing walls or the roof, TFS agrees, upon notice from Brillian,
to make demand upon Master Landlord to perform its obligations under the Master Lease and to
otherwise cooperate reasonably with Brillian as Brillian may reasonably request, in enforcing the
remedies provided in the Master Lease. This Sublease is intended to be a so-called triple net
lease in that Brillian shall pay to TFS and TFS shall be entitled to receive from Brillian all Base
Rent, Building Services Rent and Variable Services Rent, net of costs of repair, operating costs,
taxes, insurance, and maintenance costs, other than with respect to the building services and other
services with respect to the Variable Services Rent that TFS is obligated under this Sublease to
provide.

     8. EVENTS OF DEFAULT. The occurrence of any one of the following events shall
constitute an event of default (“Event of Default”) under this Sublease:

          (a) Brillian fails to pay Base Rent, Building Services Rent, Variable Services Rent, or any
other sum of money when due under this Sublease within three (3) business days after receipt by
Brillian of written notice from TFS that such amount is due; provided, however, that TFS shall
not be required to give more than two written notices in any twelve month period;

          (b) Brillian assigns this Sublease or sublets all or a portion of the Sublet Premises, or
attempts to do the aforementioned, in violation of Paragraph 20 hereof;

          (c) Brillian fails to perform any of its other obligations under this Sublease or the Master
Lease and such failure continues for thirty (30) days (or such shorter period of time as is granted
to TFS under the Master Lease) after the receipt by Brillian of written notice of default with
respect to such failure. Notwithstanding the foregoing, Brillian shall not be in default under this
Sublease with respect to any non-monetary breach (other than those listed in subparagraph b above)
that may be cured by the performance of affirmative acts if Brillian promptly commences the
performance of said affirmative acts and diligently prosecutes the same to completion as soon as
possible, and in any event, within not more than the time period prescribed for TFS to cure such
default under the Master Lease. Notwithstanding anything to the contrary contained in the
foregoing, if Brillian fails to maintain the insurance required in Paragraph 17 hereof, TFS may, in
addition to any other remedies herein contained, immediately upon such failure (but TFS shall not
be so obligated), at Brillian’s sole cost and expense,

5

 

procure the insurance coverage required
herein, and if Brillian shall fail to reimburse TFS for the costs and expenses it incurred in
procuring such coverage, within fifteen (15) days of notice from TFS, an Event of Default shall
have occurred hereunder.

     9. REMEDIES OF TFS. Upon the occurrence of an Event of Default, TFS shall have all of
the rights and remedies available under the Master Lease and at law or in equity. All remedies
shall be cumulative and non-exclusive.

     10. ACCESS TO SUBLET PREMISES. Except in the event of an emergency in which case no
notice shall be required, TFS or Master Landlord or any of their respective agents, contractors, or
employees may enter the Sublet Premises during normal business hours upon 24 hours advance notice
(except in the event of an emergency), to inspect the Sublet Premises, or during the last six (6)
months of the term of this Sublease to show said property to persons seeking to rent or purchase
the Sublet Premises, or to make repairs or improvements to the Sublet Premises.

     11. WAIVERS BY BRILLIAN; HOLDOVER.

          (a) Except for any notice expressly provided for in this Sublease, Brillian waives to TFS the
benefit of all laws now or hereafter in force, in this state or elsewhere, requiring notice to
vacate the Sublet Premises at the end of the term or any extensions or renewals thereof. Brillian
covenants and agrees to give up quiet and peaceful possession without further notice from TFS or
its agent at the end of the term of this Sublease. Brillian also waives to TFS the benefit of all
laws now or hereafter in force, in this state or elsewhere, exempting property from liability for
rent, or for debt.

          (b) If Brillian shall not immediately surrender the Sublet Premises on the day after the
termination or expiration of the term of this Sublease, then Brillian shall, by virtue of this
Sublease, become a sublessee at the sufferance of TFS at twice the immediately preceding Base Rent
agreed by
Brillian to be paid as aforesaid, and Brillian shall be subject to all of the other conditions
and covenants of this Sublease.

     12. LATE PAYMENT. If Brillian shall fail to pay when the same is due and payable,
Base Rent, Building Services Rent, Variable Services Rent, or any other sums due under this
Sublease, interest shall be charged on all unpaid amounts at the amount of the late charge provided
for in the Master Lease.

     13. INDEMNITY. In addition to the indemnity provided for in the Master Lease,
Brillian shall indemnify and hold TFS and Master Landlord harmless from and defend TFS and Master
Landlord with counsel reasonably satisfactory to TFS and Master Landlord against any and all
claims, liabilities, losses, damages, costs, and expenses, for any injury or damage to any person
or property whatsoever, occurring in, on, or about the Sublet Premises or other portions of the
Building or when such injury or damage shall be caused in part or in whole by the neglect, fault,
or omission of Brillian, its employees, invitees, contractors, subcontractors, licensees,
subtenants, or agents.

     TFS shall indemnify and hold Brillian harmless from and defend Brillian with counsel
reasonably satisfactory to Brillian against any and all claims, liabilities, losses, damages,
costs, and expenses caused by any representation or warranty made by TFS in Paragraph 6 hereof
being false or misleading, by any default by TFS under the Master Lease.

     Notwithstanding the foregoing, in no event shall either party be liable for consequential,
indirect, or special damages to the other party.

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     14. MASTER LEASE DEFAULTS. TFS will not cause or knowingly allow to be caused any
default under the Master Lease which shall remain uncured at the expiration of the applicable cure
period set forth therein, unless such default arises out of a failure by Brillian to perform its
obligations under this Sublease. TFS will deliver to Brillian a copy of any notice of default by
TFS under the Master Lease within five (5) days after receipt thereof by TFS. In addition, in the
event TFS is in default under the Master Lease and such default continues beyond the expiration of
the applicable grace period set forth therein (a “Master Lease Continuing Default”),
Brillian shall thereafter have the right (but not the obligation) to cure such Master Lease
Continuing Default, if Brillian’s cure of such Master Lease Continuing Default is acceptable to
Master Landlord and provided that Brillian gives TFS prior written notice of such undertaking.

     15. RESTORATION. Brillian shall immediately prior to the expiration or sooner
termination of this Sublease, surrender the Sublet Premises in the condition required under the
Master Lease and otherwise in broom clean and good condition, normal wear and tear excepted. In the
event of termination of this Sublease in any manner whatsoever, Brillian shall forthwith remove
Brillian’s goods and effects and those of any other persons claiming under Brillian or subtenancies
assigned to it, and quit and deliver the Sublet Premises to TFS peaceably and quietly. Goods and
effects not removed by Brillian on or before the date of termination of this Sublease (or within
forty-eight (48) hours after a termination by reason of Brillian’s default) shall be considered
abandoned. TFS shall give Brillian notice of right to reclaim abandoned property pursuant to
applicable local law and may thereafter dispose of the same as it deems expedient, including
storage in a public warehouse or elsewhere at the cost and for the account of Brillian, but
Brillian shall promptly upon demand reimburse TFS for any expenses incurred by TFS in
connection therewith, which obligation shall survive the termination or expiration of this
Sublease.

     16. NOTICES. All notices hereunder shall be in writing and will be effective upon
receipt if delivered personally, or by nationally recognized overnight courier service to a party’s
address set forth below or to such other address as either may give to the other in writing for
such purpose:

	 	 	 	 	 
	

	 	TFS:
	 	Three-Five Systems, Inc.
	

	 	 	 	Attn: General Counsel
	

	 	 	 	1600 North Desert Drive
	

	 	 	 	Tempe, Arizona 85281
	 
	 	 	 	 
	

	 	Brillian:
	 	Brillian Corporation
	

	 	 	 	Attn: Chief Financial Officer
	

	 	 	 	1600 North Desert Drive
	

	 	 	 	Tempe, Arizona 85281

     17. BRILLIAN’S INSURANCE.

          (a) Brillian shall, at its sole cost and expense, maintain during the term hereof all
insurance coverages required to be maintained by the tenant under the Master Lease. Furthermore,
TFS has advised Brillian that in addition to all other insurance obligations of TFS, TFS is
required under the terms of the Ground Sublease to maintain a $5 million insurance policy to cover
catastrophic damage to the building that results from Brillian’s use of the leasehold premises (the
“$5 Million Policy”). The $5 Million Policy will name TFS as a beneficiary. In addition to all
other obligations of Brillian under this Sublease, upon request by TFS (but in no event more than 5
days after TFS’s request), Brillian shall reimburse TFS for sixty percent (60%) of the premiums,
charges and costs paid or to be paid by TFS to purchase and maintain the $5 Million Policy. Copies
of all policies or certificates evidencing the insurance required to be maintained by Brillian
under this Sublease shall be delivered to TFS prior to the Commencement Date and renewals thereof
shall be delivered to TFS prior to the expiration of any such

7

 

policy. If Brillian fails to adhere
to the requirements of this Paragraph 17, TFS, in addition to any other remedies it may have, may
obtain such insurance and charge the cost thereof to Brillian, which amount shall be payable by
Brillian upon demand.

          (b) All insurance required to be carried by Brillian shall be issued in the coverages and
amounts required under the Master Lease by responsible insurance companies, qualified to do
business in the locality where the Sublet Premises are located and reasonably acceptable to TFS and
Master Landlord and shall provide (i) that no change or cancellation of said policies shall be made
without thirty (30) days prior written notice to TFS and Brillian; (ii) that any coverage of TFS or
sum payable to TFS shall be unaffected by any act or omission of Brillian or any other insured
which might otherwise result in forfeiture of said insurance; and (iii) that the insurance company
issuing the same shall not have any right of subrogation against TFS or TFS’s insurer. Each policy
and renewal shall name TFS, any mortgagee and Master Landlord as an additional insured and, in the
case of casualty insurance for other than Brillian’s personal property, shall name TFS as loss
payee. Copies of all policies or certificates evidencing the existence and amounts of said
insurance shall be delivered to TFS by Brillian upon request. Each policy shall also contain
provisions required by any mortgagee of the Sublet Premises or any portion thereof.

          (c) Copies of all policies or certificates evidencing said insurance shall be delivered to TFS
prior to the Commencement Date and renewals thereof shall be delivered to TFS prior to the
expiration of any such policy. If Brillian fails to adhere to the requirements of this Paragraph
17, TFS, in addition to any other remedies it may have, may order such insurance and charge the
cost thereof to Brillian, which amount shall be payable by Brillian upon demand.

          (d) Brillian hereby waives any and all rights of recovery against TFS and its officers,
employees, agents, and representatives for loss of or damage to Brillian or its property or the
property of others under its control, arising from any cause insured or required to be insured
against by Brillian, irrespective of whether such loss or damage is caused by negligence of TFS or
any of its employees, invitees, contractors, subcontractors, licensees, subtenants, or agents.
Brillian shall obtain and furnish evidence to TFS of the waiver by Brillian’s insurance carriers of
any right of subrogation against TFS.

     18. ALTERATIONS.

          (a) Brillian shall not make any building or leasehold alterations or additions, including
remodeling or signage, without first obtaining Master Landlord’s and without first obtaining the
prior written consent of TFS, which consent of TFS shall not be unreasonably withheld, but which
consent of Master Landlord may be withheld as provided in the Master Lease. In the event that
Master Landlord shall consent to the making of any alternations or additions by Brillian, TFS shall
agree to also give its consent, so long as the obligations and liabilities of TFS under the Master
Lease are not increased and so long as Master Landlord shall not impose any additional
requirements, limitations, or restrictions on TFS as a result of giving its consent. If any such
alterations or additions are made, Brillian agrees not to permit any mechanics’ liens to be placed
on the Sublet Premises or any portion thereof and to cause any contract for work to be done at the
Sublet Premises to contain a waiver of the contractor’s right to file a mechanics’ lien. Any
alterations of any kind to the Sublet Premises or any part thereof, except Brillian’s trade
fixtures which can be removed without damage or defacement to the Sublet Premises or any other
portion of the Building, shall be surrendered with the Sublet Premises, as a part thereof, at the
end of the Sublease Term; provided, however, that TFS may require at the time TFS
and Master Landlord consent to such alteration or fixture Brillian to remove any alterations or
fixtures made by Brillian, and to repair any damage to the Sublet Premises caused by such removal,
all at Brillian’s sole expense. Any alterations installed by Brillian shall be deemed a part of the
Sublet Premises and shall be maintained and repaired by Brillian in the same manner as that
required for all other portions of the Sublet Premises.

8

 

          (b) Brillian shall have the right to place a sign or signs on the façade of the Building,
provided, however: (i) TFS (and the Master Landlord to the extent that such consent from the Master
Landlord is required under the Master Lease) shall have the right to consent to the size, style,
and location of any such signs, which consent shall not be unreasonably withheld or delayed; (ii)
any such signs shall comply with all applicable laws, rules, regulations, and covenants,
conditions, and restrictions of record; and (iii) TFS may require that Brillian remove any such
signs at the expiration of the Term and repair any damage to the Building caused by such removal,
all at Brillian’s sole expense.

     19. CONDEMNATION. All compensation awarded or paid upon a total or partial taking of
the Sublet Premises shall belong to and be the property of TFS without any participation by
Brillian; provided, however, that nothing contained herein shall be construed to
preclude Brillian from prosecuting any claim directly against the condemning authority in such
condemnation proceedings for loss of business, and/or depreciation to, damage to, and/or cost of
removal of, and/or for the value of stock and/or trade fixtures,
furniture, and other personal property belonging to Brillian; provided,
however, that no such claim shall diminish or otherwise adversely affect TFS’s and/or
Master Landlord’s award or the award(s) of any and all ground and underlying lessor(s) and
mortgagee(s).

     20. ASSIGNMENT.

          (a) Without the written consent of TFS, which consent shall not be unreasonably withheld, and
without the consent of Master Landlord, Brillian shall not by operation of law or otherwise, assign
or mortgage this Sublease, or sublet or license the whole or any part of the Sublet Premises or
permit the Sublet Premises or any part thereof to be used or occupied by others. Notwithstanding
the foregoing, Brillian may, upon fifteen (15) days prior written notice to TFS but without TFS’s
consent, assign or sublet all or any portion of the Sublet Premises to (i) any entity controlled by
or under common control with Brillian, or (ii) any successor to Brillian by merger or acquisition
of all or substantially of Brillian’s assets or the transferee of more than fifty percent (50%) of
Brillian’s capital stock, provided that in each case (i) the proposed assignee or Brillian has a
net worth greater than or equal to the greater of (a) Brillian’s net worth on the date of this
Sublease, or (b) Brillian’s net worth on the date of such assignment or sublease, and (ii) Brillian
obtains the prior written consent of the Master Landlord to such assignment or subletting.

          (b) Regardless of TFS’s consent, no subletting or assignment shall release or alter Brillian’s
primary liability to pay Base Rent, Building Services Rent, Variable Services Rent, and to perform
all other obligations to be performed by Brillian hereunder. Upon a default hereunder by any
assignee or sublessee of Brillian, TFS may proceed directly against Brillian without the necessity
of exhausting remedies against such assignee or sublessee. TFS may consent to any subsequent
assignment or subletting of this Sublease and such action shall not relieve Brillian of liability
under this Sublease.

          (c) Each permitted assignee or transferee shall assume and be deemed to have assumed this
Sublease and shall be and remain liable jointly and severally with Brillian for the payment of the
Base Rent and Building Services Rent and Variable Services Rent, and for the due performance of all
of the provisions, covenants, conditions, and agreements herein contained on Brillian’s part to be
performed for the term of this Sublease. No otherwise permitted assignment or transfer shall be
binding on TFS unless such assignee or transferee shall deliver to TFS a counterpart of such
assignment and an instrument in recordable form which contains a covenant of assumption by the
assignee or transferee, but the failure or refusal of the assignee or transferee to execute such
instrument of assumption shall not release or discharge the assignee or transferee from its
liability as set forth above.

          (d) Any consent by TFS or Master Landlord to any act of assignment or subletting shall be held
to apply only to the specific assignment or subletting thereby authorized. Such consent shall

9

 

not
be construed as a waiver of the duty of Brillian, or the legal representatives or assigns of
Brillian, to obtain from TFS or Master Landlord consent to any other or subsequent assignment or
subletting, or as modifying or limiting the rights of TFS or Master Landlord under the foregoing
covenant by Brillian not to assign or sublet without consent.

          (e) If this Sublease is assigned or transferred, or if the Sublet Premises or any part thereof
be underlet or occupied by any person other than Brillian, or if an Event of Default has occurred
hereunder, TFS may collect rent from the successor occupant and apply the net amount collected by
it to the rent herein reserved. No such collection shall be deemed a waiver of the prohibition
against assignment, sublets, and other transfers, or the acceptance of the successor occupant as
tenant, or a release of Brillian from the further performance of the covenants herein contained on
the part of Brillian.

          (f) TFS may freely assign this Sublease at any time without consent or notice to Brillian
provided that the assignee assumes all of the liabilities and obligations of TFS under this
Sublease and under the Master Lease.

     21. NO BROKER. Brillian covenants, warrants, and represents that there was no broker
involved in consummating this Sublease, and that no conversations or prior negotiations were had
with any broker concerning the renting of the Sublet Premises. Brillian and TFS agree to defend,
indemnify, and hold the other party harmless against any claims for brokerage commission arising
out of any conversations or negotiations had by the indemnifying party with any broker.

     22. LIABILITY OF TFS. TFS shall not be liable for any injury or damage to any person
or to any property at any time on the Sublet Premises from any cause whatsoever that may at any
time exist from the use or condition of said Sublet Premises or Building, or from failure of water
supply or electric current or from steam, electricity, water, gas, or rain which leak or flow from
or into any part of the Sublet Premises, or from breakage, leakage, obstruction or from
difficulties to the pipes, lines, appliances, plumbing, or lighting fixtures, awnings, or signs in
or upon the Sublet Premises, or from any other cause, during the term of this Sublease or any
renewal or extension hereof except to the extent solely caused by the gross negligence or
intentional misconduct of TFS or its agents.

     23. EFFECT. This Sublease shall be binding upon the parties hereto, their successors
and permitted assigns, and may not be altered, amended, terminated, or modified except by written
instrument executed by each of the parties hereto.

     24. DAMAGE OR DESTRUCTION. If the Sublet Premises shall be partially damaged by fire
or other cause, repairs shall be in accordance with the terms of the Master Lease which shall also
determine to what extent, if any, the rent shall be abated. If the Sublet Premises shall be totally
destroyed by fire or other cause at any time prior to the end of the term of this Sublease,
Brillian agrees to be bound by Master Landlord’s decision made in accordance with the applicable
terms of the Master Lease, if any, as to whether or not the Sublet Premises is to be restored and
whether or not the Master Lease shall remain in effect. Brillian’s obligation to pay rent under the
Sublease shall be governed by the terms of the Master Lease, if any, applicable to abatement of
TFS’s rental under the Master Lease as it relates to the Sublet Premises.

     25. NOTICE. Brillian shall notify TFS of any damage to the Sublet Premises by fire or
other casualty and also of any dangerous or defective condition within the Sublet Premises
immediately upon the occurrence of such fire or other casualty or discovery of such condition.
Except as affected by the giving or failure to give such notice, nothing herein contained shall be
deemed to limit or enlarge the respective rights and liabilities of either party arising from the
negligent acts or conduct of the other.

10

 

     26. RELATIONSHIP. It is understood, covenanted, and agreed between the parties hereto that nothing in this
Sublease shall constitute TFS an employer, employee, principal, agent, or partner of Brillian and
the relationship hereby created between the parties hereto shall be strictly and solely that of
sublessor and sublessee.

     27. WAIVERS. No waiver of any covenant or condition by TFS shall be construed as a
waiver of a subsequent breach of the same or any other covenant or condition, and the consent or
approval by TFS to or of any act by Brillian requiring TFS’s consent or approval shall not be
construed to waive or render unnecessary TFS’s consent or approval to or of any subsequent similar
act by Brillian.

     28. FORUM. This Sublease shall be governed by the laws of the state of Arizona.

     29. JOINT AND SEVERAL LIABILITY; AUTHORITY. If two or more individuals, corporations,
partnerships, or other business associations (or any combination of two or more thereof) shall sign
this Sublease as sublessor, the liability of each such individual, corporation, partnership, or
other business association to pay rent and perform all other obligations hereunder shall be deemed
to be joint and several, and all notices, payments, and agreements given or made by, with, or to
any one of such individuals, corporations, partnerships, or other business associations shall be
deemed to have been given or made by, with, or to all of them. In like manner, if sublessor shall
be a partnership or other business association, the members of which are, by virtue of statute or
federal law, subject to personal liability, the liability of each such member shall be joint and
several.

     30. NO OPTION; CONSENT OF MASTER LANDLORD. This Sublease shall become effective only
upon execution and delivery thereof by both parties and upon Ground Sublessor’s consent to the
terms of this Sublease in substantially the form of consent attached hereto as Exhibit J
and made a part hereof. TFS shall use best efforts to obtain Ground Sublessor’s consent; provided
that in no event shall TFS be obligated to commence any legal proceeding to obtain or attempt to
obtain Ground Sublessor’s consent. Master Landlord consented generally to this Sublease under
Section 21(a) of the Master Lease.

     31. FORCE MAJEURE. Neither Brillian nor TFS shall be deemed in default under this
Sublease (excluding, however, monetary defaults) to the extent that any such failure stems from a
cause beyond the reasonable control of the respective party, including, without limitation, any act
of God, war, insurrection, applicable governmental or judicial law or regulation, zoning ordinance,
labor strike, order, or decree.

     32. WAIVER OF TRIAL BY JURY. IT IS MUTUALLY AGREED BY AND BETWEEN TFS AND BRILLIAN
THAT THE RESPECTIVE PARTIES HERETO SHALL AND DO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER (EXCEPT FOR
PERSONAL INJURY OR PROPERTY DAMAGE) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS SUBLEASE, THE RELATIONSHIP OF TFS AND BRILLIAN, AND BRILLIAN’S USE OR
OCCUPANCY OF SAID SUBLET PREMISES.

     33. GROUND SUBLEASE.

          (a) Brillian hereby expressly acknowledges that the sublease of the Sublet Premises is subject
and subordinate to the terms and conditions of the Ground Sublease.

11

 

          (b) All the obligations of TFS contained in the Ground Sublease as they relate to the Sublet
Premises are hereby conferred and imposed upon Brillian, except as expressly modified and amended
by this Sublease. Brillian covenants and agrees fully and faithfully to perform the terms and
conditions of the Ground Sublease as they relate to the Sublet Premises and this Sublease on its
part to be performed, including, but not limited to, all maintenance and repair obligations and all
compliance with law obligations. Brillian shall not do or cause to be done or suffer or permit any
act to be done that would or might cause the Ground Sublease, or the rights of TFS as tenant under
the Ground Sublease, to be endangered, canceled, terminated, forfeited, or surrendered, or that
would or might cause TFS to be in default thereunder or liable for any damage, claim, or penalty.
Brillian agrees, as an express inducement for TFS’s executing this Sublease, that if there is any
conflict between the provisions of this Sublease and the provisions of the Ground Sublease that
would permit Brillian to do or cause to be done or suffer or permit any act or thing to be done
that is prohibited by the Ground Sublease, then the provisions of the Ground Sublease shall
prevail. All rights, remedies, and indemnifications given to the Ground Lessor in the Ground
Sublease are hereby given to TFS under this Sublease.

          (c) If any event occurs that would permit TFS to terminate the Ground Sublease as it relates
to the Sublet Premises, Brillian shall notify TFS of such occurrence and of its recommendations
immediately with regard to such termination rights. TFS shall decide in its reasonable discretion
whether or not to terminate the Ground Sublease and shall give Brillian written notice of such
decision. If TFS elects to terminate the Ground Sublease as it relates to the Sublet Premises, this
Sublease shall terminate on the earlier of the date of termination of the Ground Sublease or the
date which is (30) days after Brillian’s receipt of such written notice from TFS. In the event that
TFS elects to terminate the Ground Sublease prior to providing notice to the Ground Lessor, TFS
must provide prior written notice to Brillian of its intent to terminate this Sublease, and within
five (5) days after the receipt of such notice from TFS, Brillian may notify TFS in writing that it
intends to continue possession of the Sublet Premises under the terms and conditions of this
Sublease, in which case, TFS shall not exercise its right of termination under the Ground Sublease
as it relates to the Sublet Premises.

          (d) TFS shall have no duty to perform any obligations of or provide any services to be
provided by the Ground Lessor and shall under no circumstances be responsible or liable to Brillian
for any default, failure, or delay on the part of the Ground Lessor in the performance of any
obligations under the Ground Sublease, nor shall such default of the Ground Lessor affect
Brillian’s obligations hereunder; provided, that in the event of any such default or failure of
performance by Ground Lessor, TFS agrees, upon notice from Brillian, to make demand upon Ground
Lessor to perform its obligations under the Ground Sublease and to otherwise cooperate reasonably
with Brillian as Brillian may reasonably request, in enforcing the remedies provided in the Ground
Sublease.

          (e) TFS will not cause or knowingly allow to be caused any default under the Ground Sublease
which shall remain uncured at the expiration of the applicable cure period set forth therein,
unless such default arises out of a failure by Brillian to perform its obligations under this
Sublease. TFS will deliver to Brillian a copy of any notice of default by TFS under the Ground
Sublease
within five (5) days after receipt thereof by TFS. In addition, in the event TFS is in default
under the Ground Sublease and such default continues beyond the expiration of the applicable grace
period set forth therein (a “Ground Sublease Continuing Default”), Brillian shall
thereafter have the right (but not the obligation) to cure such Ground Sublease Continuing Default,
if Brillian’s cure of such Ground Sublease Continuing Default is acceptable to Ground Lessor and
provided that Brillian gives TFS prior written notice of such undertaking.

          (f) As provided in Section 30 hereof, TFS shall use its best efforts to obtain the consent of
the Ground Sublessor to this Sublease substantially in the form of Exhibit J attached
hereto in order that Brillian have the protections of Article 16 of the Ground Sublease as a
“Permitted Sublease” (as

12

 

such term is defined in Section 17.2 of the Ground Sublease); provided,
that in no event shall TFS be obligated to commence any legal proceeding to obtain or attempt to
obtain Ground Sublessor’s consent. Furthermore, Brillian expressly acknowledges that TFS has the
right pursuant to Section 3.3 of the Ground Sublease to purchase the Land, in which event the
Master Ground Lease (as such term is defined in the Ground Sublease) shall be amended to delete the
Land as of the closing of such purchase, as more fully set forth in Section 3.3(B)(3) of the Ground
Sublease. In the event TFS purchases the Land, which event shall be evidenced by a written notice
of such purchase from TFS to Brillian, then in such event this Sublease shall be deemed a prime
lease by and between TFS, as owner of the Land, and Brillian, as tenant of the Sublet Premises.

          (g) As required by Section 17.2.B of the Ground Sublease, in the event the Ground Sublease is
terminated, Brillian will attorn to Ground Sublessor as provided in Article 16 of the Ground
Sublease.

     34. EXHIBITS. Each of the exhibits attached hereto are made a part hereof. The
following is a list of exhibits attached to this Lease:

	 	 	 	 	 	 	 
	

	 	Exhibit A
	 	–
	 	Legal Description of Land
	

	 	Exhibit B
	 	–
	 	Copy of Ground Sublease
	

	 	Exhibit C
	 	–
	 	Copy of Master Lease
	

	 	Exhibit D
	 	–
	 	Depiction of Sublet Premises and Common Areas
	

	 	Exhibit E
	 	–
	 	Reserved
	

	 	Exhibit F
	 	–
	 	Building Services
	

	 	Exhibit G
	 	–
	 	Variable Services Rent services
	

	 	Exhibit H
	 	-
	 	Description of Clean Room Equipment
	

	 	Exhibit I
	 	–
	 	Form of Security Agreement
	

	 	Exhibit J
	 	–
	 	Form of Ground Sublessor’s Consent
	 
	 	 	 	 	 	 

[Signature Page Follows]

13

 

     IN WITNESS WHEREOF, the parties have executed this Sublease as of the day and year first above
written.

	 	 	 	 	 	 	 
	TFS:	 	Brillian:
	 
	 	 	 	 	 	 
	THREE-FIVE SYSTEMS, INC., a Delaware	 	BRILLIAN CORPORATION, a Delaware
	corporation

	 	 	 	corporation	 	 
	 
	 	 	 	 	 	 
	By:

	 	  /s/ Jeffrey D. Buchanan
	 	By:
	 	     /s/ Wayne A. Pratt
	

	 	 
	 	 	 	 
	Name:

	 	  Jeffrey D. Buchanan
	 	Name:
	 	      Wayne A. Pratt
	Title:

	 	  Executive Vice President and
Chief Financial Officer
	 	Title:
	 	      Vice President and Chief Financial
Officer

14<PAGE>

                                                                   EXHIBIT 10.36

                                      LEASE

      THIS LEASE (this "LEASE") is made and entered into as of the 30th day of
December, 2004, by and between PAPAGO PARAGON PARTNERS, LLC, an Arizona limited
liability company ("LESSOR") and THREE-FIVE SYSTEMS, INC., a Delaware
corporation ("LESSEE").

                                   WITNESSETH:

      For and in consideration of the mutual agreements, covenants and promises
set forth in this Lease and for other good and valuable consideration, Lessor
and Lessee agree as follows:

      1.    LEASED PREMISES: Lessor leases to Lessee and Lessee accepts and
leases from Lessor, upon the terms and conditions set forth in this Lease, that
certain real property located in Tempe, Maricopa County, Arizona, consisting of
approximately Five and 73/100 (5.73) acres and more particularly described on
EXHIBIT "A" attached to this Lease, together with all rights, privileges,
appurtenances and hereditaments thereto (the "LAND") and the building containing
approximately ninety seven thousand two hundred ten (97,210) rentable square
feet and other improvements now or hereafter located on the Land (the
"IMPROVEMENTS"; the Land and the Improvements being collectively called the
"PREMISES"), which is that certain real property located at 1600 North Desert
Drive, Tempe, Arizona 85281.

      2.    DURATION OF LEASE This Lease shall be in effect for a period of five
(5) years (the "LEASE TERM") commencing December 31, 2004 (the "COMMENCEMENT
DATE") and expiring on the date that is the last day of the calendar month that
is five (5) years thereafter, being December 30, 2009, unless this Lease shall
be sooner terminated as hereinafter provided. At the termination of this Lease,
all items of rent, taxes, insurance, utilities and other matters shall be
adjusted and prorated as of the date of termination, and Lessee shall pay to
Lessor, or Lessor shall pay to Lessee, as the case may be, such sums as shall be
required to accomplish the proration.

      3.    MASTER LEASE: This Lease is subject and subordinate to that certain
Ground Lease dated March 6, 1989 by and between the Salt River Project
Agricultural Improvement and Power District, as lessor and Papago Park Center,
Inc., as lessee and that certain Papago Park Center Ground Sublease between
Papago Park Center, Inc., as landlord and Three-Five Systems, Inc., as Tenant, a
Non-Disturbance, Recognition and Attornment Agreement between Three-Five
Systems, Inc., Papago Park Center, Inc. and the Salt River Project Agricultural
Improvement and Power District dated April 1, 1994; as evidenced by a Memorandum
of Non-Disturbance, Recognition and Attornment Agreement dated April 1, 1994 and
recorded April 8, 1994 in the Official Records of Maricopa County, Arizona as
Instrument No. 94-0287165 (collectively, the "MASTER LEASE"), the interest
therein of Three-Five Systems, Inc. having been acquired by Lessor immediately
prior the Commencement Date. For the benefit of the lessor under the Master
Lease, Lessee acknowledges that this Lease shall be subject and subordinate to
the Master Lease and the rights of the lessor under the Master Lease. In the
event the Master Lease is terminated, Lessee will attorn to the lessor under the
Master Lease as provided in ARTICLE 16 of the Master Lease.

      4.    RENT: Lessee shall, commencing on the Commencement Date and on the
first day of each calendar month thereafter, pay to Lessor as base rent (the
"BASE RENT") the sum of One Hundred Seven Thousand Three Hundred Thirty Six and
04/100 Dollars ($107,336.04) per month (One Million Two Hundred Eighty Eight
Thousand Thirty Two and 50/100 Dollars ($1,288,032.50) per annum). For the

                                       1
<PAGE>

benefit of the lessor under the Master Lease, Lessor and Lessee confirm that the
Base Rent payable under this Lease equals or exceeds a reasonable share of the
minimum rent payable under the Master Lease.

      5.    PAYMENT OF RENT: Lessee shall pay the monthly installments of Base
Rent and all other sums due under this Lease to Lessor, without notice or
demand, and without deduction, abatement or setoff, on the first day of each
month during the Lease Term, at c/o Paragon Properties, 7202 East Carefree
Drive, Suite 200, Post Office Box 5061, Carefree, Arizona 85377, or at such
other place, or to such other person or persons as Lessor may designate in
writing. All sums due under this Lease shall be payable in current legal tender
of the United States of America. The extension of time for the payment of any
installment of Base Rent or any other sums due under this Lease, or the
acceptance by Lessor of any late payment, will not constitute the waiver of the
right of Lessor to insist on having all other payments due under this Lease made
in the manner and at the time herein specified.

      6.    LATE CHARGES: If any amount due to Lessor is not received in full by
Lessor on or before five (5) days after the date any such payment is due, then
Lessee shall pay to Lessor a late payment charge in the amount of five percent
(5%) of the delinquent payment. The parties acknowledge that the damages Lessor
will suffer in the event of late payments would be extremely difficult to
calculate and the parties agree that the foregoing late payment charge is a
reasonable estimate of Lessor's probable damages, and as such, constitutes a
reasonable charge for the expenses Lessor will suffer if Lessee fails to pay any
such sum when due, and is not a penalty. No payments need be accepted after such
five (5) day period unless accompanied by the late payment charge. This
provision shall not be construed to allow or permit Lessee to make payments
after the due date, or to waive any of Lessor's rights in connection with
delinquent payments.

      7.    ADDITIONAL RENT: In addition to Base Rent, all other amounts to be
paid by Lessee to Lessor pursuant to this Lease, if any, shall be deemed to be
Additional Rent (herein so called), whether or not designated as such and shall
be due and payable upon demand or together with the next succeeding installment
of Base Rent, whichever shall first occur. Lessor shall have the same remedies
for the failure to pay Additional Rent as for the nonpayment of Base Rent.

      8.    TAXES:

            (a) OCCUPANCY, SALES AND RENT TAXES: In addition to and together
with its payments of Base Rent and Additional Rent, Lessee shall pay to Lessor
any governmental taxes now or in the future imposed on Base Rent, Additional
Rent and other charges collected or paid pursuant to the terms of this Lease,
including, without limitation, state, county or local rental, occupancy, sales,
transaction privilege and excise taxes.

            (b) PERSONAL PROPERTY TAXES: Lessee shall pay to the appropriate
taxing authority, not later than ten (10) days prior to delinquency, all
personal property taxes assessed against any personal property of Lessee located
on or used in connection with the Premises.

            (c) REAL PROPERTY TAXES: Lessee shall pay all real property taxes
and assessments (including, but not limited to, water, irrigation project,
sewer, street, paving and other improvement lien assessments) against the
Premises commencing on the Commencement Date. Lessee shall arrange for the bill
for all real property taxes and assessments to be sent directly from the taxing
authorities to Lessee and Lessee shall pay all such real property taxes and
assessments to the appropriate taxing authorities prior to delinquency. Lessee
shall, promptly following Lessor's written request, provide to Lessor written
evidence

                                       2
<PAGE>

of timely payment. Notwithstanding the provisions of this PARAGRAPH 8(c) to the
contrary, at any time following the occurrence of an Event of Default (as
defined in PARAGRAPH 24 below) with respect to any monetary obligation of Lessee
under this Lease, Lessor may, upon written notice to Lessee, require that Lessee
pay one-twelfth (1/12) of the estimated annual amount of such real estate taxes
and assessments to Lessor, together with and at the same time that each monthly
installment of Base Rent is due pursuant to PARAGRAPHS 4 AND 5 above. In such
event, Lessor shall notify Lessee of the most current tax assessment against the
Premises, together with Lessor's computation of the monthly amount of such tax
to be paid by Lessee. At the end of each full tax year during the Lease Term and
again at the expiration or termination of this Lease, Lessor and Lessee shall
calculate the actual tax paid or owing for the Premises, and Lessee shall be
credited or charged, as the case may be, for such adjustments as may be
necessary by reason of any difference between the actual amounts determined by
Lessor to have been paid or owing for the Premises (or the pro-rata portion of
such amount notwithstanding that payment to the taxing authority may not then be
due) and the amount of such taxes actually paid by Lessee to Lessor.

      9.    USE OF LEASED PREMISES: Lessee may occupy and use the Premises
throughout the Lease Term for such purposes and uses as may be permitted from
time to time under the Master Lease and for no other purpose. Lessee shall not
use or occupy or permit the Premises to be used or occupied, nor to do or permit
anything to be done in or on the Premises, in a manner which will in any way
make void or voidable any insurance then in force with respect thereto. Further,
Lessee shall not use or occupy the Premises, nor permit anything to be done in
or on the Premises which will constitute a public or private nuisance, or which
will violate the rights of adjoining landowners and Lessee shall not use or
occupy or permit the Premises to be used or occupied in any manner which will
violate any laws. Lessee shall fully comply with the Master Lease (except the
obligation to pay minimum rent under the Master Lease) and all covenants,
conditions and restrictions imposed upon the Land. Throughout the Lease Term,
Lessee, at its sole cost and expense, shall promptly remove any violation and
shall promptly comply with all present and future laws, ordinances, orders,
rules, regulations and requirements of all federal, state, and municipal
governments, courts, departments, commissions, boards, any national or local
Insurance Rating Bureau, or any other body exercising functions similar to those
of any of the foregoing, radical, foreseen or unforeseen, ordinary as well as
extraordinary, which may be related to the Premises, or any part thereof, or to
the use or manner of use of the Premises, or any part thereof, whether or not
the correction or removal so necessitated shall have been foreseen or unforeseen
or whether the same shall involve radical, extraordinary, or capital
construction or other disposition. Lessee shall not do or suffer any waste,
damage, disfigurement or injury to the Premises or any part thereof.

      10.   DISCONTINUANCE OF BUSINESS OPERATIONS: In the event the Master Lease
is terminated and Lessee is not occupying and conducing business in at least
forty percent (40%) of the Improvements or in the event the Base Rent payable
under this Lease does not yield to the lessor under the Master Lease the net
amount of minimum rent payable under the Master Lease (after considering the
expenses incurred by the Lessor under the Master Lease to hold, operate and
manage the Premises (if any)), then notwithstanding the non-disturbance
provisions of ARTICLE 16 of the Master Lease, the Lessor under the Master Lease
shall have the right to terminate this Lease at any time after the expiration of
the first nine (9) years of the Lease Term upon providing to Lessee one (1)
year's prior written notice and by paying to Lessee a termination payment equal
to one (1) year's Base Rent then payable as of the effective date of such
termination.

      11.   ALTERATIONS AND IMPROVEMENTS: Lessee shall have the right, at
Lessee's sole cost and expense, to make interior, non-structural alterations and
improvements to the Premises without the need to seek the prior written consent
of Lessor and, as required, by the Architectural Committee of the Board of
Papago Park Center's Owner's Association, as contained in the Declaration of
Covenants, Conditions and

                                       3
<PAGE>

Restrictions for Papago Park Center (MCR 90-336258) (the "Declaration"). Any
exterior or structural alterations and improvements to the Premises shall
require the prior written consent of Lessor, which consent shall not be
unreasonably withheld, conditioned or delayed. It shall not be deemed
unreasonable for Lessor to withhold the requested consent if Lessor's lender
will not approve the proposed alterations/improvements; provided, however, that
Lessor agrees to cause Lessor's lender to agree in writing that Lessor's
lender's approval will not be unreasonably withheld, delayed or conditioned. If
Lessee wishes to make exterior or structural alterations or improvements to the
Premises, Lessee's request for consent shall be accompanied by plans and
specifications prepared by a licensed architect or a licensed structural
engineer. All improvements shall be made in a good, workmanlike and lien-free
manner, in compliance with the requirements of the Master Lease and all
applicable governmental regulations. All alterations, improvements, additions
and fixtures made or installed by Lessee shall remain upon the Premises at the
expiration or earlier termination of this Lease and shall become the property of
Lessor, unless Lessor shall, either prior to the expiration or termination of
this Lease, or within ten (10) days after the termination or expiration of this
Lease, give written notice to Lessee directing Lessee to remove the same or such
of the same as shall be specified by Lessor, and all damage occasioned in
connection with such removal shall be repaired by Lessee at its sole cost and
expense.

      12.   MAINTENANCE AND REPAIRS: Lessee, at its sole cost and expense, shall
maintain in good order and repair (making all necessary replacements, renewals,
and alterations, thereto) all portions of the Premises, interior and exterior,
glass, doors, signs, interior walls, ceilings, roof, parking areas, landscaping,
plumbing, heating, cooling, refrigeration (as to which heating and refrigeration
elements Lessee shall acquire and maintain during the term an HVAC maintenance
agreement with a licensed HVAC contractor for monthly changing of filters and
routine work, a copy of which contract shall be provided Lessor), electrical
systems, fixtures, plumbing systems and all other improvements now or hereafter
located on the Premises. Lessee hereby assumes the full and sole responsibility
for the condition, operation, repair, replacement, maintenance and management of
the Premises. Lessor and Lessee acknowledge and agree that prior to the
Commencement Date, Lessee caused the Improvements to be constructed on the land
and Lessee has been occupying the Premises since August 1, 1995. As such, Lessee
acknowledges, represents and warrants to Lessor that no representations,
inducements, understanding or anything of any nature whatsoever, made, stated or
represented by Lessor or anyone acting for or on Lessor's behalf, either orally
or in writing, have induced Lessee to enter into this Lease, and Lessee
acknowledges, represents and warrants that Lessee has entered into this Lease
under and by virtue of Lessee's own independent investigation. Lessee hereby
accepts the Premises in an "AS IS" and "WHERE IS" condition without warranty of
any kind, express or implied, including, without limitation, any warranty as to
title, physical condition or the presence or absence of Hazardous Materials, and
if the Premises are not in all respects entirely suitable for the use or uses to
which the Premises or any part thereof will be put, then it is the sole
responsibility and obligation of Lessee to take such action as may be necessary
to place the Premises in a condition entirely suitable for such use or uses. IN
CONNECTION WITH THE ABOVE, LESSEE HEREBY ACKNOWLEDGES AND REPRESENTS TO LESSOR,
THAT LESSEE CAUSED THE IMPROVEMENTS TO BE CONSTRUCTED ON THE LAND AND HAS
OCCUPIED THE IMPROVEMENTS SINCE AUGUST 1, 1995, LESSEE HAS HAD AMPLE OPPORTUNITY
TO INSPECT AND EVALUATE THE PREMISES AND THE FEASIBILITY OF THE USES AND
ACTIVITIES LESSEE IS ENTITLED TO CONDUCT THEREON; THAT LESSEE IS EXPERIENCED;
THAT LESSEE WILL RELY ENTIRELY ON LESSEE'S EXPERIENCE, EXPERTISE AND ITS OWN
INSPECTION OF THE PREMISES IN ITS CURRENT STATE IN PROCEEDING WITH THIS LEASE;
THAT LESSEE ACCEPTS THE PREMISES IN ITS PRESENT CONDITION, AND THAT, TO THE
EXTENT THAT LESSEE'S OWN EXPERIENCE WITH RESPECT TO ANY OF THE FOREGOING IS
INSUFFICIENT TO

                                       4
<PAGE>

ENABLE LESSEE TO REACH AND FORM A CONCLUSION, LESSEE HAS ENGAGED THE SERVICES OF
PERSONS QUALIFIED TO ADVISE LESSEE WITH RESPECT TO SUCH MATTERS. LESSEE IS NOT
RELYING ON ANY EXPRESS OR IMPLIED, ORAL OR WRITTEN REPRESENTATIONS, OR
WARRANTIES MADE BY LESSOR OR ITS REPRESENTATIVES, OTHER THAN THOSE EXPRESSLY SET
FORTH IN THIS LEASE.

                                                         _______________________
                                                         Lessee's Initials

      13.   ACCESS: Lessor and its authorized representatives shall have, at all
reasonable times, upon not less than forty-eight (48) hours advance notice
(except in the event of an emergency, in which event only such notice as may be
reasonable under the circumstances shall be required), the right to enter the
Premises to inspect the same.

      14.   INDEMNIFICATION AND INSURANCE:

            (a)   INDEMNIFICATION AND WAIVER

                  (i)   INDEMNITY: To the fullest extent permitted by law, from
and after the Commencement Date, Lessee shall, at Lessee's sole cost and
expense, Indemnify Lessor Parties against all Claims arising from (i) any
Personal Injury, Bodily Injury or Property Damage whatsoever occurring in or at
the Premises; (ii) any Bodily Injury to an employee of a Lessee Party arising
out of and in the course of employment of the employee and occurring anywhere in
the Property; (iii) the use or occupancy, or manner of use or occupancy, or
conduct or management of the Premises or of any business therein; (iv) subject
to the waiver of subrogation provisions of this Lease, any act, error, omission
or negligence of any of the Lessee Parties in, on or about the Premises or the
Property; (v) the conduct of Lessee's business; (vi) any alterations,
activities, work or things done, omitted, permitted or allowed by Lessee Parties
in, at or about the Premises or Property, including the violation of or failure
to comply with, or the alleged violation of or alleged failure to comply with
any applicable laws, statutes, ordinances, standards, rules, regulations,
orders, or judgments in existence on the date of the Lease or enacted,
promulgated or issued after the date of this Lease including Hazardous Materials
Laws (defined below); (vii) any breach or default by Lessee in the full and
prompt payment of any amount due under this Lease, any breach, violation or
nonperformance of any term, condition, covenant or other obligation of Lessee
under this Lease, or any misrepresentation made by Lessee or any guarantor of
Lessee's obligations in connection with this Lease; (viii) all damages sustained
by Lessor as a result of any holdover by Lessee or any Lessee Party in the
Premises including, but not limited to, any claims by another tenant resulting
from a delay by Lessor in delivering possession of the Premises to such tenant;
(ix) any liens or encumbrances arising out of any work performed or materials
furnished by or for Lessee; or (x) any matter enumerated in PARAGRAPH 14(a)(ii)
below.

                  (ii)  WAIVERS: To the fullest extent permitted by law, from
and after the execution of this Lease by Lessor and Lessee, Lessee, on behalf of
all Lessee Parties, Waives all Claims against Lessor Parties arising from the
following: (i) any Personal Injury, Bodily Injury, or Property Damage occurring
in or at the Premises; (ii) any loss of or damage to property of a Lessee Party
located in the Premises or other part of the Premises by theft or otherwise;
(iii) any Personal Injury, Bodily Injury, or Property Damage to any Lessee Party
caused by other tenants of the Premises, parties not occupying space in the
Property, occupants of property adjacent to the Premises, or the public or by
the construction of any private, public, or quasi-public work occurring either
in the Premises or elsewhere in the Premises; (iv) any

                                       5
<PAGE>

interruption or stoppage of any utility service or for any damage to persons or
property resulting from such stoppage; (v) business interruption or loss of use
of the Premises suffered by Lessee; (vi) any latent defect in construction of
the Improvements; (vii) damages or injuries or interference with Lessee's
business, loss of occupancy or quiet enjoyment and any other loss resulting from
the exercise by Lessor of any right or the performance by Lessor of Lessor's
maintenance or other obligations under this Lease, or (viii) any Bodily Injury
to an employee of a Lessee Party arising out of and in the course of employment
of the employee and occurring anywhere in the Premises.

                  (iii) DEFINITIONS: For purposes of this PARAGRAPH 14: (i) the
term "LESSEE PARTIES" means Lessee, any assignee or sublessee of Lessee and
their respective officers, directors, shareholders, members, partners,
affiliates, board members, staff, employees, members, agents, principals,
independent contractors, attorneys, accountants and representatives of the
referenced person and the predecessors, heirs, successors and assigns of any
such person (collectively, "REPRESENTATIVES"), and all persons and entities
claiming through any of these persons or entities; (ii) the term "LESSOR
PARTIES" means Lessor, Lessor's Representatives, the lessor under the Master
Lease, the fee owner of the Land and all persons and entities claiming through
any of these persons or entities; (iii) the term "INDEMNIFY" means indemnify,
defend (with counsel reasonably acceptable to Lessor) and hold free and harmless
for, from and against; (iv) the term "CLAIMS" means all liabilities, claims,
damages (including consequential damages), losses, penalties, litigation,
demands, causes of action (whether in tort or contract, in law or at equity or
otherwise), suits, proceedings, judgments, disbursements, charges, assessments,
and expenses (including attorneys' and experts' fees and expenses incurred in
investigating, defending, or prosecuting any litigation, claim, or proceeding);
(v) the term "WAIVES" means that the Lessee Parties waive and knowingly and
voluntarily assume the risk of; and (vi) the terms "BODILY INJURY", "PERSONAL
INJURY" and "PROPERTY DAMAGE" will have the same meanings as in the form of
commercial general insurance policy issued by Insurance Services Office, Inc.
most recently prior to the date of the injury or loss in question.

                  (iv)  SCOPE OF INDEMNITIES AND WAIVERS: It is the intent of
Lessor and Lessee that the indemnities and waivers contained in this PARAGRAPH
14 shall apply regardless of the active or passive negligence or sole, joint,
concurrent, or comparative negligence of any of the Lessor Parties, and
regardless of whether liability without fault or strict liability is imposed or
sought to be imposed on any of the Lessor Parties. The indemnities and waivers
contained in this PARAGRAPH 14 shall apply even if a Claim against a Lessor
Party was proximately caused by the negligence of that Lessor Party, but only to
the extent of insurance (or self insurance) maintained (or required to be
maintained) by Lessee under this Lease.

                  (v)   DUTY TO DEFEND: Lessee's duty to defend Lessor Parties
is separate and independent of Lessee's duty to Indemnify Lessor Parties.
Lessee's duty to defend includes Claims for which Lessor Parties may be liable
without fault or may be strictly liable. Lessee's duty to defend applies
regardless of whether issues of negligence, liability, fault, default or other
obligation on the part of Lessee Parties have been determined. Lessee's duty to
defend applies immediately, regardless of whether Lessor Parties have paid any
sums or incurred any detriment arising out of or relating, directly or
indirectly, to any Claims. It is the express intention of Lessor and Lessee that
Lessor Parties will be entitled to obtain summary adjudication regarding
Lessee's duty to defend Lessor Parties at any stage of any Claim within the
scope of this PARAGRAPH 14.

                  (vi)  OBLIGATIONS INDEPENDENT OF INSURANCE: The
indemnification provided in this PARAGRAPH 14 shall not be construed or
interpreted as in any way restricting, limiting or modifying Lessee's insurance
or other obligations under this Lease, and the provisions of this PARAGRAPH 14
are independent of Lessee's insurance and other obligations. Lessee's compliance
with the insurance

                                       6
<PAGE>

requirements and other obligations under this Lease does not in any way
restrict, limit or modify Lessee's indemnification obligations under this Lease.

                  (vii) SURVIVAL: The provisions of this PARAGRAPH 14 will
survive the expiration or earlier termination of this Lease until all Claims
against Lessor Parties involving any of the indemnified or waived matters are
fully and finally barred by the applicable statutes of limitations.

            (b)   WAIVER OF SUBROGATION: Lessor and Lessee each hereby waive any
rights one may have against the other and their respective Representatives, on
account of any loss or damage occasioned to Lessor or Lessee, as the case may
be, or their respective property, the Premises, or its contents arising from any
risk generally covered by a policy of "CAUSES OF LOSS - SPECIAL FORM" property
insurance and from any risk covered by any policy of property insurance (or self
insurance) then in effect. In addition, Lessor and Lessee, for themselves and on
behalf of their respective insurance companies, waive any right of subrogation
that any such insurance company may have against Lessor, Lessor's lender or
Lessee, and their respective Representatives as the case may be. It is the
intent of the parties that with respect to any loss from a named peril required
to be covered under a policy of property insurance, the parties shall look
solely to their respective insurance company for recovery. The foregoing waivers
of subrogation shall be operative only so long as available in the State of
Arizona and provided further that no policy of insurance is invalidated thereby.

            (c)   LESSEE'S INSURANCE: From and after the Commencement Date,
Lessee shall carry, at Lessee's sole cost and expense, the following types of
insurance, in the amounts specified or in such higher amounts as may be
reasonably requested by Lessor and which are customary in the Phoenix, Arizona
metropolitan area.

                  (i)   Commercial general liability insurance for personal
injury, bodily injury (including wrongful death) and damage to property with a
combined single limit of not less than Five Million and No/100 Dollars
($5,000,000.00), per occurrence, Five Million and No/100 Dollars
($5,000,000.00), annual aggregate, insuring against any and all liability of the
insured with respect to the Premises, or arising out of the maintenance, use or
occupancy thereof, including Premises operations, products and completed
operations and owned, hired and non-owned automobiles, utilizing ISO policy form
CG 0001, or its equivalent. The commercial general liability insurance policy
shall contain a contractual liability endorsement specifically deleting the
contractual liability exclusion for Personal Injury. The policy required
pursuant to the provisions of this PARAGRAPH 14(c)(i) shall not have a
deductible in excess of Ten Thousand and No/100 Dollars ($10,000.00).

                  (ii)  A policy or policies of workers' compensation insurance
with an insurance carrier and in amounts approved by the Industrial Commission
of the State of Arizona and a policy of employer's liability insurance with
limits of liability not less than One Million and No/100 Dollars
($1,000,000.00), each accident; One Million and No/100 Dollars ($1,000,000.00),
disease policy limit; and One Million and No/100 Dollars ($1,000,000.00),
disease each employee. Both such policies shall contain waivers of subrogation
in favor of Lessor.

                  (iii) "CAUSES OF LOSS-SPECIAL FORM" property insurance,
including coverage for flood, terrorism, sprinkler leakage, vandalism and
malicious mischief covering the entire Premises (Land and Improvements),
including all of Lessee's leasehold improvements, alterations, additions or
improvements made pursuant to PARAGRAPHS 10 AND 11, removable personal property
from time to time in, on or upon the Premises, in an amount not less than one
hundred percent (100%) of the full replacement cost

                                       7
<PAGE>

of the Premises without depreciation, together with insurance against sprinkler
damage, vandalism and malicious mischief, as well as the following endorsements:
boiler and machinery, difference in conditions, business income and extra
expense (with extended period of indemnity), service interruption and building
ordinance or law and against such other risks or hazards and in such amounts as
the Lessor shall reasonably require. Any policy proceeds shall be used for the
repair or replacement of the property damaged or destroyed unless this Lease
shall cease and terminate under the provisions of PARAGRAPH 16. The policy
required pursuant to this PARAGRAPH 14(c)(iii) shall not have a deductible in
excess of Twenty Five Thousand and No/100 Dollars ($25,000.00).

                  (iv)  If all or any portion of the Premises is used for the
sale of alcoholic beverages (whether for on premises or off premises
consumption), the policy of commercial general liability insurance required
pursuant to clause (i) above shall include coverage for employer's liability,
host liquor liability, liquor liability and so-called "DRAM SHOP" liability
coverage with a combined single limit of not less than Five Million and No/100
Dollars ($5,000,000.00), per occurrence.

                  (v)   Appropriate insurance coverage insuring Lessor and
Lessee against any and all liability with respect to the release, transportation
and/or use by Lessee, any sublessee or assignee of Lessee and/or their
respective agents, servants, contractors or employees of Hazardous Materials
during the Lease Term and for such additional periods of time within which
Lessor or Lessee may be liable with respect to Hazardous Materials (as defined
in PARAGRAPH 50 below) under applicable Hazardous Materials Laws (as defined in
PARAGRAPH 50 below). Such insurance shall be carried in amounts, in a form and
from carriers as Lessor shall reasonably approve and shall name Lessor as an
additional insured.

                  (vi)  During the course of construction of any Improvements on
the Land, Lessee shall procure and maintain in full force and effect "CAUSES OF
LOSS - SPECIAL FORM" builder's risk insurance, including coverage for vandalism
and malicious mischief satisfying the requirements of PARAGRAPH 14(d)(iii)
above. The policies of builder's risk insurance shall cover Improvements in
place and all material and equipment at the job site furnished under contract,
but may exclude contractors', subcontractors' and construction manager's tools
and equipment and property owned by contractors' or subcontractors' employees.

All policies of insurance to be procured by Lessee shall be issued by insurance
companies having a claims paying rating ability of not less than NAIC 1 as
established by the Securities Valuation Office of the National Association of
Insurance Commissioners (or an equivalent Standard & Poors, Moody's or Duff &
Phelps rating), qualified to do business in the State of Arizona. All property
policies shall be issued in the name of Lessee, and shall name Lessor as a "LOSS
PAYEE". All liability policies obtained by Lessee shall name Lessor, any lender
to Lessor, the lessor under the Master Lease and the fee owner of the Land as
additional insureds. In addition, Lessee's liability insurance policies shall be
endorsed as needed to provide cross-liability coverage for Lessee, Lessor, any
lender of Lessor, the lessor under the Master Lease and the fee owner of the
Land and shall provide for severability of interests. Evidence of insurance
meeting the requirements of Acord Form No. 27 (March 1993) or such other
evidence as may be reasonably acceptable to Lessor and evidence of required
additional insured endorsements on ISO Form CG 20-26 (collectively referred to
in this PARAGRAPH 14(c) as "CERTIFICATES") shall be delivered to Lessor within
ten (10) days after the Commencement Date and thereafter, executed copies of
renewal policies or Certificates thereof shall be delivered to Lessor within
thirty (30) days prior to the expiration of the term of each such policy. All
commercial general liability insurance policies shall contain a provision that
Lessor, although named as an additional insured, shall nevertheless be entitled
to recovery under the policy for any loss occasioned to

                                       8
<PAGE>

Lessor and its Representatives by reason of the negligence of Lessee. As often
as any such policy shall expire or terminate, renewal or additional policies
shall be procured and maintained by Lessee in like manner and to like extent.
All policies of insurance delivered to Lessor must contain a provision that the
company writing the policy will give Lessor twenty (20) days notice in writing
in advance of any cancellation or lapse or the effective date of any material
change in the policy, including any reduction in the amounts of insurance. All
commercial general liability, property damage and other casualty policies shall
be written as primary policies and shall provide that any insurance which Lessor
may carry is strictly excess, secondary and non-contributing with any insurance
carried by Lessee. The insurance requirements contained in this PARAGRAPH 14 are
independent of Lessee's waiver, indemnification and other obligations under this
Lease and shall not be construed or interpreted in any way to restrict, limit or
modify Lessee's waiver, indemnification or other obligations or to in any way
limit Lessee's obligations under this Lease.

            (d)   SELF INSURANCE: Lessee shall have the right to self-insure for
the liability insurance and the property insurance required by this PARAGRAPH
14, subject to the requirements of this PARAGRAPH 14(d):

                  (i)   For purposes of this PARAGRAPH 14(d), "SELF-INSURANCE"
shall mean that Lessee is itself acting as though it were the insurance company
providing the insurance required under the provisions of this PARAGRAPH 14 and
Lessee shall pay any amounts due in lieu of insurance proceeds as required under
the provisions of this Lease, which amounts shall be treated as insurance
proceeds for all purposes under this Lease.

                  (ii)  All amounts which Lessee pays or is required to pay and
all losses or damages resulting from risks for which Lessee has elected to
self-insure shall be subject to the waiver of subrogation provisions in
PARAGRAPH 14(b) above and shall not limit Lessee's indemnification obligations
set forth in PARAGRAPH 14(a) above.

                  (iii) Lessee's right to self-insure and to continue to
self-insure is conditioned upon and subject to:

                        (a)   The Lessee having a tangible net worth, calculated
            in accordance with generally accepted accounting principles,
            consistently applied, of at least Three Hundred Million Dollars
            ($300,000,000.00) and net current assets, calculated in accordance
            with generally accepted accounting principles, consistently applied,
            of at least Seventy Five Million and No/100 Dollars
            ($75,000,000.00); and

                        (b)   Upon Lessor's written request, the Lessee
            providing the most recently available audited financial statement,
            prepared in accordance with generally accepted accounting
            principles, consistently applied, to Lessor on or before the date
            which is thirty (30) days prior to the upcoming annual anniversary
            of the Rent Commencement Date which establishes and confirms that
            Lessee has the required net worth and net current assets, unless
            events occur that make it apparent that such net worth and/or net
            current assets has diminished below the required level (such as the
            bankruptcy of Lessee), in which event Lessee shall not be permitted
            to continue to self-insure.

                  (iv)  Lessee shall provide Lessor a certificate describing the
extent of self-insurance coverage maintained by Lessee.

                                       9
<PAGE>

            (e)   BLANKET POLICIES: Lessee's obligation to carry the insurance
required by this PARAGRAPH 14 may be brought within the coverage of a so-called
blanket policy or policies of insurance carried and maintained by Lessee;
provided, however, that the coverage afforded Lessor will not be reduced or
diminished by reason of use by a blanket policy of insurance and provided
further the requirements set forth in this PARAGRAPH 14 or otherwise satisfied.
If Lessee uses such a blanket policy, Lessee shall deliver to Lessor
satisfactory evidence that the Premises has been properly added to the blanket
policy and evidence that the insurance company that issued the blanket policy
has allocated to the Premises the type of insurance coverage in the amounts
required by this PARAGRAPH 14 with the limitations of liability required by this
Lease.

            (f)   ADEQUACY OF INSURANCE: Lessor makes no representation or
warranty to Lessee that the amount of insurance to be carried by Lessee under
the terms of this Lease is adequate to fully protect Lessee's interest. If
Lessee believes that the amount of any such insurance is insufficient, Lessee is
encouraged to obtain, at its sole cost and expense, such additional insurance as
Lessee may deem desirable or adequate. Lessee acknowledges that Lessor shall
not, by the fact of approving, disapproving, waiving, accepting, or obtaining
any insurance, incur any liability for or with respect to the amount of
insurance carried, the form or legal sufficiency of such insurance, the solvency
of any insurance companies or the payment or defense of any lawsuit in
connection with such insurance coverage, and Lessee hereby expressly assumes
full responsibility therefor and all liability, if any, with respect thereto.

            (g)   LESSOR'S COVERAGE: At any time during the term hereof that
Lessor shall have acquired fee title to the land underlying the Premises, Lessor
shall be entitled to procure the coverage described in (c)(iii) above and
require Lessee to reimburse Lessor for the premium cost thereof on an
installment basis.

      15.   LIENS: Lessee shall keep the Premises free and clear of all
mechanics', materialmen's and other professional service liens. If, because of
any act or omission (or alleged act or omission) of Lessee or any assignee or
sublessee of Lessee, any mechanics', materialmen's or other lien, charge or
order for the payment of money shall be filed or recorded against the Land or
Improvements thereon, or against Lessor (whether or not such lien, charge or
order is valid or enforceable as such), Lessee shall, at its sole cost and
expense, cause the same to be canceled or discharged of record within thirty
(30) days after Lessee shall have received written notice of the filing such
lien, or Lessee may, within such thirty (30) day period, furnish to Lessor, a
bond pursuant to A.R.S. Section 33-1004 and satisfactory to Lessor against the
lien, charge or order, in which case Lessee shall have the right to contest, in
good faith, the validity or amount of such lien.

      16.   DESTRUCTION OF PREMISES: If the Premises shall be wholly or
partially damaged or destroyed by fire, by the elements or by other causes,
Lessee shall, at its sole cost and expense, and whether the insurance proceeds
are sufficient for the purpose, promptly repair, restore or rebuild the Premises
so that upon completion of such repairs, restoration and/or rebuilding, the
value and the rental value of the Premises shall equal or exceed the value and
the rental value of the Premises prior to the occurrence of such casualty.
Lessee shall have a reasonable time within which to so construct or repair the
damaged Premises, provided that Lessee proceeds with due diligence. If any
damage or destruction occurs within the last twelve (12) months of the Lease
Term, Lessee shall have the right to cancel this Lease by giving written notice
to Lessee within thirty (30) days after the occurrence of such damage or
destruction, in which event all insurance proceeds payable on account of such
damage or destruction shall be paid to Lessor. There shall be no abatement of
Base Rent, Additional Rent or other charges or delay in the payment of Base
Rent, Additional Rent or other charges on account of all or any portion of the
Premises being unused because of damage or destruction. Although Lessee may have
obtained business income insurance, Lessee shall timely

                                       10
<PAGE>

make the payments of Base Rent required under this Lease even if the proceeds of
such insurance are not immediately available to Lessee. Lessee hereby waives any
statute now or in the future in effect which grants to Lessee the right to
terminate a lease or which provides for an abatement of rent on account of
damage or destruction, including without limitation A.R.S. Section 33-343.
Unless Lessee then has the right to self insure in accordance with the
provisions of PARAGRAPH 14(d), all insurance proceeds payable on account of
damage to or destruction of the Improvements by fire or other casualty shall be
deposited with a bank or trust company doing business in the State of Arizona
having assets of at least Five Hundred Million and No/100 Dollars
($500,000,000.00) (the "DEPOSITORY"), in trust for the purpose of reimbursement
of the costs of the demolition, restoration, repairs, replacements, rebuilding
or alterations to the Improvements. Insurance proceeds on deposit with the
Depository shall be advanced from time to time to Lessee for the restoration or
as such work progresses, upon certification by the architect or engineer in
charge of restoration work that the amounts requested either shall have been
paid in connection with such restoration or shall be due to contractors,
subcontractors, materialmen, architects or other persons who rendered services
or furnished materials on account of the restoration work and, upon completion
of such restoration work, the balance remaining in the Depository, if any, shall
be disbursed to Lessor. Notwithstanding the foregoing, in the event of damage to
or destruction of the Improvements by fire or other casualty as a result of
which the proceeds of insurance are less than Twenty Five Thousand and No/100
Dollars ($25,000.00), such proceeds shall be payable directly to Lessee, in
trust, to be applied against cost of restoring the Improvements and such funds
shall be used only for the purpose of restoring the Improvements until such
restoration work is complete and any excess proceeds shall be returned to
Lessor.

      17.   CONDEMNATION: If all or such portion of the Premises so as, in the
reasonable judgment of Lessee, to make the balance thereof untenantable is
condemned by eminent domain for any public or quasi-public use or purpose or is
transferred in avoidance of an exercise of the power of eminent domain (an
"APPROPRIATION"), then this Lease shall terminate as of the date that title
vests in the condemning authority. All Base Rent and Additional Rent shall be
paid up to such date of termination and Lessee shall have no further claim
against Lessor nor against the condemning authority for the value of any
unexpired term of the Lease, and the proceeds awarded on account of such
Appropriation shall be allocated as follows: (a) to Lessor, an amount
representing the Base Rent reserved under this Lease for the balance of the
Lease Term; (b) to Lessor, an amount representing the value of Lessor's
reversionary interest in the Premises; (c) to Lessee, to the extent available
after the payments described in clauses (a) and (b) above, the straight line
depreciated value of Improvements constructed by Lessee on the Land subsequent
to the Commencement Date; and (d) to Lessor, the balance of the award. If the
values of the respective interests of Lessee and Lessor shall be determined by a
court or the awarding authority according to the provisions of clauses (a), (b),
(c) and (d) above, the values so determined shall be conclusive upon Lessor and
Lessee. If such value shall not have been separately determined in the award,
such value shall be reasonably determined by the parties. In the event of an
Appropriation of a portion of the Premises which does not result in a
termination of this Lease as provided above, the Base Rent payable hereunder
shall be abated in the proportion which the land area of the portion of the
Premises so taken bears to the total land area Premises immediately prior to the
Appropriation. The entire award made by reason of any such partial Appropriation
shall belong entirely to Lessor. Lessee hereby waives any statutory and/or
common law rights of termination which may arise by reason of any Appropriation
of the Land and/or the Improvements thereon including, without limitation, the
provisions of A.R.S. Section 33-343.

      18.   SIGNS: All signs shall be installed and maintained at the expense of
Lessee and shall be in compliance with the Master Lease and the Declaration and
any sign ordinance now in effect or in the future enacted by any governmental
authority having jurisdiction over the Premises.

                                       11
<PAGE>

      19.   UTILITIES: Lessee shall pay for all fuel, gas, oil, heat,
electricity, power, water, telephone, trash removal and other utilities which
may be furnished to or used by it in the Premises during the Lease Term. Lessee
covenants to pay the charges for such utility services on or before the dates
when such payments shall be due and to keep the Premises free and clear of any
lien or encumbrance of any kind whatsoever constituting a charge against the
Premises arising from the nonpayment or a delinquency in payment for said
utility services.

      20.   INTENTIONALLY OMITTED.

      21.   ASSIGNMENT AND SUBLETTING:

            (a)   CONSENT OF LESSOR REQUIRED: Lessee shall not, directly or
indirectly, by operation of law or otherwise, assign, mortgage, or encumber this
Lease, nor sublet or mortgage the Premises or any part thereof, without the
prior written consent of Lessor under this Lease and the consent of the lessor
under the Master Lease to the extent the consent of the lessor under the Master
Lease is required by the terms of the Master Lease, which consent of the Lessor
under this Lease shall not be unreasonably withheld, conditioned or delayed,
provided that the Lessor under this Lease shall have no obligation to secure the
consent of the lessor under the Master Lease so long as the Lessor under this
Lease shall cooperate (at no or only nominal costs to Lessor) with Lessee in
attempting to obtain the consent of the lessor under the Master Lease.
Notwithstanding the provisions of the immediately preceding sentence, Lessor
hereby consents to Lessee subletting approximately sixty four thousand (64,000)
rentable square feet within the Improvements to Brillian Corporation, a Delaware
corporation and affiliate of Lessee ("BRILLIAN") in substantial accordance with
the terms, covenants and provisions of the sublease attached to this Lease as
EXHIBIT "B" (the "BRILLIAN SUBLEASE"), which shall be in substantially the form
of EXHIBIT "B." The Brillian Sublease shall be subject and subordinate to all of
the terms, covenants and provisions of this Lease. Lessee shall provide to
Lessor a true, correct and complete copy of the Brillian Sublease promptly
following the execution thereof. Any attempted transfer, mortgage, assignment or
subletting, including any involuntary transfers or assignments by operation of
law, without such consent shall be void, shall constitute an Event of Default
and shall confer no rights upon any third person. No such transfer, mortgage,
assignment or subletting (including the Brillian Sublease) shall relieve Lessee
of its liability for the full performance of all of the terms, agreements,
covenants and conditions of this Lease. A consent by Lessor to one transfer,
mortgage, assignment or subletting shall not operate as a waiver of this
paragraph as to any further transfer, mortgage, assignment or subletting and
this paragraph shall apply to any transferee, assignee or sublessee. Lessee
shall reimburse Lessor for Lessor's reasonable attorneys' fees and costs (not to
exceed, however, One Thousand and No/100 Dollars ($1,000.00)) in connection with
the processing and documentation of any such requested transfer, mortgage,
assignment or subletting.

            (b)   DOCUMENTATION OF TRANSFERS: Each transfer, mortgage,
assignment or subletting to which there has been consent shall be by an
instrument in writing in a form satisfactory to Lessor, and shall be executed by
(i) the transferor, mortgagor, assignor or sublessor, who shall affirm its
continuing liability under the Lease; (ii) the transferee, mortgagee, assignee
or sublessee, who shall agree in writing for the benefit of Lessor to assume, to
be bound by and to perform the terms, covenants and conditions of this Lease;
and (iii) by Lessor, for the purpose of acknowledging its consent. One executed
copy of such written instrument shall be delivered to Lessor. The acceptance of
Base Rent from any other person shall not be deemed to be a waiver of any of the
provisions of this Lease or a consent to the transfer, mortgage, assignment or
subletting of the Premises.

                                       12
<PAGE>

            (c)   DEEMED TRANSFERS: If Lessee (including any entity later
becoming Lessee) is a corporation (excepting a corporation whose stock is
publicly traded on a nationally recognized stock exchange or is traded Over the
Counter on the Nasdaq or NMS systems), limited liability company, partnership or
association, the transfer, assignment or hypothecation of more than forty-nine
percent (49%) of any stock or other interest in such corporation, limited
liability company, partnership or association shall be deemed an assignment or
transfer within the meaning of and subject to this Paragraph 21. Notwithstanding
the foregoing, Lessor hereby acknowledges and consents to Lessee's right,
without further approval from Lessor but only after written notice to Lessor, to
sublease the Premises or assign its interest in this Lease (i) to a corporation
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with Lessee; (ii) in the event of the
merger or consolidation of Lessee with another corporation; or (iii) in the
event of a sale or transfer of all or substantially all of the stock of Lessee
or all or substantially all of Lessee's assets in a single transaction to a
single purchaser (collectively, the "PERMITTED TRANSFERS"). No Permitted
Transfer shall relieve Lessee of its liability under this Lease and Lessee shall
remain liable to Lessor for the payment of all Base Rent and additional rent and
the performance of all covenants and conditions of this Lease applicable to
Lessee.

            (d)   STATUS OF BRILLIAN SUBLEASE: In the event Lessee shall default
under this Lease and this Lease shall be terminated, the Brillian Sublease may,
in Lessor's sole and absolute discretion, be recognized as a direct lease
between Lessor and Brillian on all of the terms and conditions of the Brillian
Sublease, together with such modifications as shall be necessary in order to
create such a direct relationship between Lessor and Brillian. In the event of
such a default/termination and in the event Lessor determines that the Brillian
Sublease shall be so recognized, Lessor shall provide written notice thereof to
Lessee and Brillian. Brillian shall bear all costs and expenses (including
reasonable attorney's fees) incurred in connection with documenting such direct
relationship and constructing and/or altering the Improvements as may be
reasonably necessary to demise the premises which is the subject of the Brillian
Sublease as a separate premises. Further, in the event of any such
default/termination, Lessor shall not be (i) obligated to cure any defaults
under the Brillian Sublease; or (ii) liable for any act or omission of Lessee;
or (iii) subject to any offsets or defenses which Brillian might have against
Lessee; or (iv) bound by any base rental or additional rental which Brillian
might have paid for more than the current month; or (v) bound to commence or
complete any construction or to make any contribution towards the construction
or installation of any improvements upon or within the premises subleased by
Brillian; and (vi) obligated to return any security or other deposit, expect to
the extent actually paid to Lessor.

      22.   SURRENDER: At the expiration of this Lease, Lessee shall peaceably
and quietly surrender the Premises to Lessor in a broom-clean and sanitary
condition and in good order, condition and repair with all building systems in
the Improvements in good working order.

      23.   TITLE TO IMPROVEMENTS: Title to the Improvements and all changes,
additions and alterations therein, and all renewals and replacements thereof,
when made, erected, constructed, installed or placed upon the Premises, shall be
and remain in Lessor during the Lease Term and Lessor alone shall be entitled to
any depreciation, credits or other tax benefits associated with the ownership of
the Improvements.

      24.   DEFAULT - GROUNDS: The occurrence of any of the following events
will constitute an Event of Default (herein so called) on the part of Lessee:

                                       13
<PAGE>

            (a)   failure to pay any installment of Base Rent, any Additional
Rent or any other sum due and payable under this Lease when such payment is due,
which failure is not cured within ten (10) days after written notice thereof by
Lessor to Lessee;

            (b)   failure in the performance of any of Lessee's agreements or
obligations under this Lease, such default (except failure in the payment of any
installment of Base Rent, any Additional Rent or any other monetary obligation
under this Lease) continuing for thirty (30) days after written notice thereof
from Lessor to Lessee, provided that if such default is other than the payment
of money and cannot be cured within such thirty (30) day period, then an Event
of Default shall not have occurred if Lessee, within such thirty (30) day
period, commences curing of such failure and diligently and in good faith
prosecutes the same to completion and furnishes evidence thereof to Lessor
within an additional one hundred eighty (180) days thereafter;

            (c)   a general assignment by Lessee for the benefit of creditors.

            (d)   the filing of a voluntary petition in bankruptcy by Lessee or
the filing of an involuntary petition by Lessee's creditors, such involuntary
petition remaining undischarged for a period of sixty (60) days;

            (e)   abandonment by Lessee of the Premises;

            (f)   the appointment of a receiver to take possession of
substantially all of Lessee's assets or of this leasehold, such receivership
remaining undissolved for a period of sixty (60) days;

            (g)   the levy of a writ of attachment or execution or other
judicial seizure of substantially all of Lessee's assets or this leasehold, such
attachment, execution or other seizure remaining undismissed or undischarged for
a period of sixty (60) days after the levy thereof; or

            (h)   the occurrence of an Event of Default under any other
provision of this Lease (any required notice having been given and any
applicable cure period having expired).

      25.   DEFAULT - REMEDIES:

            (a)   LESSOR'S RIGHT TO RE-ENTER: Upon the happening of any Event of
Default, Lessor, at any time thereafter, may:

                  (i)   with or without notice or demand, declare this Lease to
be terminated and re-enter the Premises or any part thereof (with or without
process of law) and expel or remove therefrom Lessee and all parties occupying
the same or any of them, using such force as may be necessary to do so, and
retake possession of the Premises without prejudice to any remedies that Lessor
might otherwise have by reason of such default; or

                  (ii)  re-enter the Premises at Lessor's option, without
declaring this Lease to be terminated, and relet the Premises or any part
thereof for the account of Lessee, on such terms and conditions and at such rent
as Lessor may then deem desirable, collecting such rent and applying it to the
amount due from Lessee hereunder, to the expenses of reletting and to any other
damages or expenses sustained by Lessor, recovering from Lessee the difference
between the proceeds of such reletting and the

                                       14
<PAGE>

amount of the Base Rent reserved and to be paid by Lessee under this Lease,
which sum Lessee shall pay upon demand.

                  (iii) Should Lessor terminate this Lease by reason of an Event
of Default by Lessee, Lessor may recover from Lessee the amount, at the time of
such termination, equal to the excess, if any, of the amount of Base Rent and
charges equivalent to Base Rent reserved under this Lease for the balance of the
Lease Term over the then reasonable rental value of the Premises for the same
period. Lessor will not, by any re-entry or other act, be deemed to have
terminated this Lease, or the liability of Lessee for the total Base Rent
reserved under this Lease or any installment thereof then due or thereafter
accruing or for damages, unless Lessor notifies Lessee in writing that Lessor
has so elected to terminate this Lease.

            (b)   INTEREST ON PAST DUE AMOUNTS: In addition to late charge
described in PARAGRAPH 6 above, if any installment of Base Rent, any Additional
Rent or any other payment is not paid promptly when due, which failure is not
cured within ten (10) days after written notice thereof by Lessor to Lessee, it
will bear interest at the rate of eighteen percent (18%) per annum from the date
on which it becomes due until paid; provided, however, this provision is not
intended to relieve Lessee from any default in the making of any payment at the
time and in the manner specified in this Lease. The foregoing interest, expenses
and damages will be recoverable from Lessee by the exercise of Lessor's remedies
hereinabove set forth.

            (c)   BANKRUPTCY OF LESSEE: In the event of the bankruptcy,
reorganization, liquidation, or dissolution of the Lessee, or in the event
Lessee shall make an assignment for the benefit of creditors, or in the event
Lessee shall seek similar relief under any present or future Federal or State
bankruptcy act, which relief results in a stay of the termination of this Lease,
then, the Base Rent and Additional Rent payable under this Lease shall be deemed
to be an administrative expense. In addition, the Lessee, as debtor in
possession, or if appointed, the Trustee in bankruptcy, must assume or reject
this Lease and the Brillian Sublease within sixty (60) days (or such shorter
period of time as may be permitted by law) after the filing of the petition in
bankruptcy; failing this action, Lessee agrees not to oppose Lessor's motion for
a summary ruling by the bankruptcy court that this Lease be deemed rejected.

            (d)   REMEDIES CUMULATIVE: The remedies of Lessor specified in this
Lease will be cumulative and non-exclusive as to each default to the extent
allowed by law and the exercise by Lessor of one remedy shall not preclude the
exercise by Lessor of further or additional remedies. Additionally, Lessor shall
be entitled to all rights and remedies granted to a lessor in equity, at law, or
by statute.

      26.   RIGHT TO CURE: In the event Lessor shall neglect or fail to perform
or observe any of the covenants, provisions or conditions contained in this
Lease on its part to be performed or observed, and such failure continues for
thirty (30) days after written notice of default (or if more than thirty (30)
days shall be required because of the nature of the default, if Lessor shall
fail to commence the curing of said default within the thirty (30) day period
and proceed diligently thereafter to complete the curing of the default), then
Lessor shall be responsible to Lessee for any actual damages sustained by Lessee
as a result of Lessor's breach, but not special or consequential damages.

      27.   HOLDING OVER: It is agreed that the date of the expiration of this
Lease and the right of Lessor to recover immediate possession of the Premises
upon the expiration of this Lease is an important and material matter affecting
the parties and the rights of third parties, all of which have been specifically
considered by Lessor and Lessee. In the event of any continued occupancy or
holding over of the Premises without the express written consent of Lessor
beyond the end of the Lease Term, whether in whole or in

                                       15
<PAGE>

part, or by leaving property on the Premises, which property remains on the
Premises for a period of fifteen (15) days following written notice by Lessor to
Lessee directing Lessee to remove such property, this Lease will be deemed a
monthly tenancy and Lessee will pay the greater of (a) one and one-half (1-1/2)
times the Base Rent then in effect pursuant to PARAGRAPH 4, in advance at the
beginning of each held-over month, plus any other charges or payments
contemplated in this Lease, or (b) any other costs, expenses, damages,
liabilities, and attorney's fees incurred by Lessor on account of Lessee's
holding over.

      28.   STATEMENT FROM LESSOR AND LESSEE: Lessee shall, at any time and from
time to time, within ten (10) days after written request by Lessor, without
charge, execute, acknowledge and deliver to Lessor a written statement
certifying that this Lease is unmodified and in full force and effect if such is
the fact (or, if there has been any modification to this Lease stating the
modification) and the dates to which Base Rent and Additional Rent have been
paid in advance, if any. It is understood that any such statement may be relied
upon by any prospective purchaser of Lessor, or by any mortgagee or assignee of
any mortgage of Lessor, or by the trustee or beneficiary of any deed of trust
constituting a lien upon the Premises. Lessor shall, at any time and from time
to time, within ten (10) days after written request by Lessee, without charge,
execute, acknowledge and deliver to Lessee a written statement certifying that
this Lease is unmodified and in full force and effect if such is the fact (or,
if there has been any modification to this Lease, stating the modification) and
the dates to which Base Rent and Additional Rent have been paid in advance, if
any.

      29.   NOTICES - MANNER OF GIVING: All notices required to be given
hereunder are to be in writing. Such notice shall personally be delivered or
sent by United States certified mail, return receipt requested, postage prepaid,
addressed to Lessor at c/o Paragon Properties, LLC, 7202 East Carefree Drive,
Suite 200, Post Office Box 5061, Carefree, Arizona 85377, Attn: Mr. Douglas
Dragoo, with a copy to Michael N. Widener, Bonnett, Fairbourn, Friedman &
Balint, P.C., 2901 North Central Avenue, Suite 1000, Phoenix, Arizona
85012-2730, and to Lessee at Three-Five Systems, Inc., 1600 North Desert Drive,
Tempe, Arizona 85281, Attention: Jeffrey D. Buchanan, with a copy to Greenberg
Traurig, 2375 East Camelback Road, Suite 700, Phoenix, Arizona 85016, Attention:
Kevin J. Morris, or to such other place as the respective addressee may have
desinated in a written notice to the other party. Service by mail will be deemed
to have occurred on actual receipt or refusal to accept.

      30.   LESSOR'S RIGHT TO PERFORM LESSEE'S COVENANTS: If Lessee shall at any
time fail to pay any sum in accordance with the provisions of this Lease, or
shall fail to make any other payment or perform any other act on its part to be
made or performed, then Lessor, following the expiration of any applicable cure
or grace period under this Lease (or without notice in case of emergency) and
without waiving, or releasing Lessee from any obligation of Lessee contained in
this Lease, may, but shall be under no obligation to: (a) pay any sum payable by
Lessee pursuant to the provisions of this Lease; or (b) make any other payment
or perform any other act on Lessee's part to be made or performed as in this
Lease provided; and may enter upon the Premises for any such purpose, and take
all such action as may be necessary. All sums so paid by Lessor and all costs
and expenses, including reasonable attorneys' fees, incurred by Lessor in
connection with the performance of any such act shall be paid by Lessee to
Lessor on demand, together with interest thereon at the rate of eighteen percent
(18%) per annum from the respective dates of Lessor's making of each such
payment or incurring of each such cost and expense, including reasonable
attorney's fees, until repaid by Lessee in full.

      31.   WAIVER: No waiver of any default by either party under this Lease
will be implied from any omission by either party to take action on account of
such default if such default persists or is repeated, and no express waiver will
affect any default other than the default specified in the waiver, and then such

                                       16
<PAGE>

waiver will be operative only for the time and to the extent expressly stated. A
waiver by either party of any provision of this Lease will not be construed as a
waiver of any subsequent breach of the same provision, nor will the consent or
approval by either party to or of any act by the other be deemed to waive or
render unnecessary their consent or approval to or of any subsequent similar
acts. Any waiver to be effective shall be in writing and shall be signed by the
party to be charged by such waiver.

      32.   TIME: Time is of the essence of each and every provision of this
Lease.

      33.   NO RECORDING: Lessee shall not record this Lease or any abstract or
memorandum of this Lease without the prior written consent of Lessor.

      34.   FEE MORTGAGES: This Lease is and shall be automatically subject and
subordinate to all present and future ground or underlying leases (including the
Master Lease), mortgages and deeds of trust and to all renewals, modifications,
consolidations, replacements and extensions thereof. Notwithstanding the
provisions of this immediately preceding sentence, the obligation of Lessee to
subordinate this Lease to a mortgage or deed of trust shall be conditioned upon
the holder of such mortgage or deed of trust entering into a subordination,
non-disturbance and attornment agreement with Lessee in a form reasonably
acceptable to Lessor, Lessee and the holder of such mortgage or deed of trust.

      35.   INVALIDITY: If any provision or any part of this Lease shall be
determined to be invalid, unenforceable or illegal, then such provision shall be
deemed severed from this Lease, and shall not affect the remaining provisions of
this Lease.

      36.   CONSTRUCTION: This Lease, its construction, validity and effect,
shall be governed and construed by and in accordance with the laws of the State
of Arizona. All provisions of this Lease have been negotiated by both parties at
arm's length and neither party shall be deemed to be the scrivener of this
Lease. In addition, if either party has made a scrivener's error with regard to
division, multiplication, addition, or subtraction of any numbers or arithmetic
calculation in this Lease, this Lease shall not be construed for or against
either party by reason of the authorship or alleged authorship of any provision
of this Lease.

      37.   ATTORNEYS' FEES: In the event that it becomes necessary for any
party to employ an attorney to enforce any of the terms or provisions of this
Lease, the defaulting party shall pay to the prevailing party all reasonable
attorneys' fees and court costs (if any) incurred, the amount to be fixed by the
court without a jury.

      38.   BINDING EFFECT: This Lease shall inure to the benefit of and shall
be binding upon the parties, their heirs, personal representatives, successors
and permitted assignees.

      39.   TRIPLE NET LEASE: It is the purpose and intent of Lessor and Lessee
that this Lease be a so-called "TRIPLE NET LEASE." As such, Lessor and Lessee
intend and agree that (a) the Base Rent shall be absolutely net to Lessor, so
that this Lease shall yield, net to Lessor the Base Rent specified in this
Lease, (b) come hell or high water, all costs, operating expenses, taxes
premiums, fees, interest, charges, expenses, reimbursements and obligations of
every kind and nature whatsoever relating to the Premises, excepting only
certain net income taxes of Lessor which may arise or become due during or out
of the Lease Term, shall be paid or discharged by Lessee, (c) come hell or high
water, each and every obligation that may arise or be related to the Premises
shall be performed by Lessee at its sole cost and expense, and (d) that Lessor
shall be indemnified and held harmless by Lessee for, from and against such
costs, operating expenses,

                                       17
<PAGE>

taxes, premiums, fees, interest, charges, expenses, reimbursements and
obligations, Lessee expressly covenanting to pay and perform all of the
foregoing.

      40.   CONVEYANCE BY LESSOR: In the event Lessor or any successor Lessor
shall convey or otherwise dispose of the Premises, it shall thereupon be
released from all liabilities and obligations imposed upon the Lessor under this
Lease (except those accruing prior to such conveyance or other disposition) and
such liabilities and obligations shall be binding solely upon the then owner of
the Premises.

      41.   NO PERSONAL LIABILITY TO LESSOR: Lessee shall look solely to
Lessor's interest in the Premises for the satisfaction of any judgment or decree
requiring the payment of money by Lessor which is based on any default or other
claim arising under this Lease (whether in contract, tort or for breach of any
express or implied covenant contained in this Lease). No other property or
assets of Lessor, or any member, partner of, or shareholder or investor in
Lessor, shall be subject to levy, execution or other enforcement procedures for
satisfaction of any such judgment or decree. Lessee hereby waives, to the
fullest extent permitted by law, any right to satisfy any money judgment against
Lessor except from Lessor's interest in the Premises.

      42.   QUIET ENJOYMENT: So long as there is not in existence an Event of
Default, Lessee may quietly have, hold and enjoy the Premises during the Lease
Term, free from hindrance or molestation by Lessor and persons claiming by,
through and under Lessor, subject, however, to the terms, covenants and
provisions of the Master Lease.

      43.   COMMISSIONS: Lessee warrants and represents to Lessor that no
finder's fee, real estate sales or brokerage commissions are or will be due in
connection with this Lease. Further, Lessee agrees to indemnify, defend and hold
harmless for, from and against any claims by third parties claiming by, through
or under any relationship with Lessee for a finder's fee, real estate or
brokerage commissions in connection with this Lease.

      44.   NO PARTNERSHIP: Nothing contained in this Lease shall be deemed or
construed as creating an agency, partnership or joint venture relationship
between Lessor and Lessee or between Lessor and any other party, or cause Lessor
to be responsible in any way for the debts or obligations of Lessee or any other
party.

      45.   [INTENTIONALLY OMITTED].

      46.   CONSENT OF LESSOR: Lessor shall have no liability to Lessee for any
damages resulting from Lessor's failure to give any consent, approval or
instruction expressly reserved in this Lease to Lessor. Lessee acknowledges and
agrees that Lessee's sole remedy in any such event shall be to commence an
action against Lessor seeking injunctive relief.

      47.   SURVIVAL OF OBLIGATIONS: Lessee's obligations set forth in this
Lease shall survive the expiration or earlier termination of this Lease with
respect to acts, omissions, liabilities and amounts which occurred or accrued,
as the case may be, prior to the expiration or earlier termination of this
Lease. Similarly, Lessor's obligations to Lessee contained in this Lease shall
survive the expiration or earlier termination of this Lease with respect to such
acts, omissions, liabilities and amounts which occurred or accrued, as the case
may be, prior to the expiration or earlier termination of this Lease.

                                       18
<PAGE>

      48.   ENTIRE AGREEMENT: This Lease constitutes the entire agreement
between Lessor and Lessee with respect to the lease of the Premises and
supersedes any and all other prior written or oral agreements or understandings
with respect to the Premises. This Lease may not be modified or amended in any
respect except by an instrument signed in writing by both Lessor and Lessee.

      49.   RUBBISH REMOVAL: Lessee shall keep the Premises clean, both inside
and outside, at its sole cost and expense and shall remove the ashes, garbage,
excelsior, straw, and other refuse from the Premises. Lessee shall not burn any
materials or rubbish of any description upon the Premises. Lessee shall keep all
accumulated rubbish in covered containers and shall have same removed regularly.

      50.   HAZARDOUS MATERIALS:

            (a)   HAZARDOUS MATERIALS LAWS: The term "HAZARDOUS MATERIALS LAWS"
means any and all federal, state or local laws, ordinances, rules, decrees,
orders, regulations or court decisions (including the so-called "COMMON-LAW")
relating to hazardous substances, hazardous materials, hazardous waste, toxic
substances, environmental conditions on, under or about any of the improved real
properties comprising the Premises, or soil and ground water conditions,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, 42 U.S.C.. 9601,
et seq., the Resource Conversation and Recovery Act ("RCRA"), 42 U.S.C.. 6901,
et seq., the Hazardous Materials Transportation Act, 49 U.S.C.. 1801, et seq.,
any amendments to the foregoing, and any similar federal, state or local laws,
ordinances, rules, decrees, orders or regulations.

            (b)   HAZARDOUS MATERIALS: The term "HAZARDOUS MATERIALS" means any
chemical, compound, material, substance or other matter that: (i) is a flammable
explosive, asbestos, radioactive material, nuclear medicine material, drug,
vaccine, bacteria, virus, hazardous waste, toxic substance, petroleum product,
or related injurious or potentially injurious material, whether injurious or
potentially injurious by itself or in combination with other materials; (ii) is
controlled, designated in or governed by any Hazardous Materials Law; (iii)
gives rise to any reporting, notice or publication requirements under any
Hazardous Materials Law; or (iv) gives rise to any liability, responsibility or
duty on the part of Lessee or Lessor with respect to any third person under any
Hazardous Materials Law.

            (c)   USE: Except as expressly provided otherwise in this Lease,
Lessee shall not allow any Hazardous Material to be used, generated, released,
stored or disposed of on, under or about, or transported from, any of the
Premises, unless: (i) such use is specifically disclosed to and approved by
Lessor in writing prior to such use; and (ii) such use is conducted in
compliance with the provisions of this PARAGRAPH 50. Lessor may approve such use
subject to reasonable conditions to protect the Premises and Lessor's interests.
Lessor may withhold approval if Lessor determines that such proposed use
involves a material risk of a release or discharge of Hazardous Materials or a
violation of any Hazardous Materials Laws or that Lessee has not provided
reasonable assurances of its ability to remedy such a violation and fulfill its
obligations under this PARAGRAPH 50(c). Notwithstanding the provisions of this
PARAGRAPH 50(c) to the contrary, Lessee shall be permitted to store and use on
the Premises such Hazardous Materials in de minimis quantities as are
reasonable, necessary and incidental to business operations on the Premises as
described in this Lease so long as Lessee does so in strict compliance with
applicable Hazardous Materials Laws.

            (d)   COMPLIANCE WITH LAWS: Lessee shall strictly comply with, and
shall maintain its operations on the Premises in compliance with, all Hazardous
Materials Laws. Lessee shall obtain and maintain in full force and effect all
permits, licenses and other governmental approvals required for Lessee's

                                       19
<PAGE>

operations on the Premises under any Hazardous Materials Laws and shall comply
with all terms and conditions thereof. At Lessor's request, Lessee shall deliver
copies of, or allow Lessor to inspect, all such permits, licenses and approvals.
Lessee shall perform any monitoring, investigation, clean-up, removal and other
remedial work (collectively, "REMEDIAL WORK") required as a result of any
release or discharge by Lessee of Hazardous Materials affecting the Premises or
any violation of Hazardous Materials Laws by Lessee or any assignee or sublessee
of Lessee or their respective agents, contractors, employees, licensees, or
invitees. Lessor shall have the right to intervene in any governmental action or
proceeding involving any Remedial Work, and to approve performance of the work,
in order to protect Lessor's interests.

            (e)   COMPLIANCE WITH INSURANCE REQUIREMENTS: Lessee shall comply
with the requirements of Lessor's and Lessee's respective insurers regarding
Hazardous Materials and with such insurers' recommendations based upon prudent
industry practices regarding management of Hazardous Materials.

            (f)   NOTICE; REPORTING: Lessee shall notify Lessor, in writing,
within two (2) days after any of the following: (a) a release or discharge of
any Hazardous Material, whether or not the release or discharge is in quantities
that would otherwise be reportable to a public agency; (b) Lessee's receipt of
any order of a governmental agency requiring any Remedial Work pursuant to any
Hazardous Materials Laws; (c) Lessee's receipt of any warning, notice of
inspection, notice of violation or alleged violation, or Lessee's receipt of
notice or knowledge of any proceeding, investigation of enforcement action,
pursuant to any Hazardous Materials Laws; or (d) Lessee's receipt of notice or
knowledge of any claims made or threatened by any third party against Lessee or
the Premises relating to any loss or injury resulting from Hazardous Materials.
Lessee shall deliver to Lessor copies of all test results, reports and business
or management plans required to be filed with any governmental agency pursuant
to any Hazardous Materials Laws.

            (g)   TERMINATION; EXPIRATION: Upon the termination or expiration of
this Lease, Lessee shall remove any equipment, improvements or storage
facilities utilized by Lessee in connection with any Hazardous Materials and
shall, clean up, detoxify, repair and otherwise restore the Premises to a
Hazardous Materials condition comparable to such condition as existed on the
Commencement Date.

            (h)   INDEMNITY: Lessee shall protect, indemnify, defend and hold
Lessor, the lessor under the Master Lease and the fee owner of the Land harmless
for, from and against any and all claims, costs, expenses, suits, judgments,
actions, investigations, proceedings and liabilities arising out of or in
connection with any breach by Lessee, any assignee or sublessee of Lessee or
their respective agents, servants, contractors or employees of any provisions of
this PARAGRAPH 50 or directly or indirectly arising out of the use, generation,
storage, release, disposal or transportation of Hazardous Materials by Lessee or
any sublessee or assignee of Lessee, or their respective agents, contractors,
employees, licensees, or invitees, on, under or about the Premises during the
Lease term or Lessee's occupancy of Premises, including, but not limited to, all
foreseeable and unforeseeable consequential damages and the cost of any Remedial
Work. Neither the consent by Lessor to the use, generation, storage, release,
disposal or transportation of Hazardous Materials nor the strict compliance with
all Hazardous Material Laws shall excuse Lessee from Lessee's indemnification
obligations pursuant to this PARAGRAPH 50(h). The foregoing indemnity shall be
in addition to and not a limitation of the indemnification provisions of
PARAGRAPH 14 of this Lease.

            (i)   ENTRY AND INSPECTION; CURE: Lessor and its agents, employees
and contractors, shall have the right, but not the obligation, to enter the
Premises at all reasonable times to inspect the same and Lessee's compliance
with the terms and conditions of this PARAGRAPH 50, or to conduct investigations

                                       20
<PAGE>

and tests. No prior notice to Lessee shall be required in the event of an
emergency, or if Lessor has reasonable cause to believe that violations of this
PARAGRAPH 50 have occurred, or if Lessee consents at the time of entry. In all
other cases, Lessor shall give at least twenty-four (24) hours prior notice to
Lessee. Lessor shall have the right, but not the obligation, to remedy any
violation by Lessee of the provisions of this PARAGRAPH 50 or to perform any
Remedial Work which is necessary or appropriate as a result of any governmental
order, investigation or proceeding attributable to the acts or omissions of
Lessee or any sublessee or assignee or their respective agents, servants,
contractors or employees. Lessee shall pay, upon demand, as additional rent, all
costs incurred by Lessor in remedying such violations or performing all Remedial
Work, plus interest thereon at the rate of fifteen percent (15%) per annum from
the date of demand until the date received by Lessor.

            (j)   EVENT OF DEFAULT: The release or discharge by Lessee or any
sublessee or assignee of Lessee or their respective agents, servants,
contractors or employees of any Hazardous Material or the violation by Lessee or
any sublessee or assignee or their respective agents, servants, contractors or
employees of any Hazardous Materials Law shall constitute an Event of Default by
Lessee under this Lease. In addition to and not in lieu of the remedies
available under this Lease as a result of such Event of Default, Lessor shall
have the right, without terminating this Lease, to require Lessee to suspend its
operations and activities on the Premises affected thereby until Lessor is
satisfied that appropriate Remedial Work has been or is being adequately
performed and Lessor's election of this remedy shall not constitute a waiver of
Lessor's right thereafter to pursue the other remedies set forth in this Lease.

      51.   REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee represents and
warrants to Lessor as follows:

            (a)   AUTHORITY OF LESSEE: Lessee is a corporation, duly organized,
validly existing under the laws of the State of Delaware and qualified to do
business in the State of Arizona. The persons who have executed this Lease on
behalf of Lessee are duly authorized to do so.

            (b)   ENFORCEABILITY: This Lease constitutes the legal, valid and
binding obligation of Lessee, enforceable against Lessee in accordance with its
terms, subject, however, to bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, general principles of equity, whether enforceability is
considered in a proceeding in equity or at law and to the qualification that
certain waivers, procedures, remedies and other provisions of this Lease may be
unenforceable under or limited by applicable law, however, none of the foregoing
shall prevent the practical realization to Lessor of the benefits intended by
this Lease.

            (c)   LITIGATION: To the best of its knowledge, there are no suits,
actions, proceedings or investigations pending, or to the best of its knowledge,
threatened against or involving Lessee before any court, arbitrator or
administrative or governmental body which might reasonably result in any
material adverse change in the contemplated business, condition or operations of
Lessee.

            (d)   ABSENCE OF BREACHES OR DEFAULTS: To the best of its knowledge,
Lessee is not, and the execution, delivery and performance of this Lease and the
documents, instruments and agreements, if any, provided for herein will not
result in any breach of or default under any other document, instrument or
agreement to which Lessee is a party or by which Lessee is subject or bound.

                                       21
<PAGE>

      52.   REPRESENTATIONS AND WARRANTIES OF LESSOR: Lessor represents and
warrants to Lessee as follows:

            (a)   AUTHORITY OF LESSOR: Lessor is a limited liability company,
duly formed and organized and validly existing under the laws of the State of
Arizona and qualified to do business in the State of Arizona. The persons who
have executed this Lease on behalf of Lessor are duly authorized to do so.

            (b)   ENFORCEABILITY: This Lease constitutes the legal, valid and
binding obligation of Lessor, enforceable against Lessor in accordance with its
terms, subject, however, to bankruptcy, insolvency, reorganization, arrangement,
moratorium or other similar laws relating to or affecting the rights of
creditors generally, general principles of equity, whether enforceability is
considered in a proceeding in equity or at law and to the qualification that
certain waivers, procedures, remedies and other provisions of this Lease may be
unenforceable under or limited by applicable law, however, none of the foregoing
shall prevent the practical realization to Lessor of the benefits intended by
this Lease.

            (c)   LITIGATION: To Lessor's actual knowledge, there are no suits,
actions, proceedings or investigations pending, or to the best of its knowledge,
threatened against or involving Lessor before any court, arbitrator or
administrative or governmental body which might reasonably result in any
material adverse change in the contemplated business, condition or operations of
Lessor.

            (d)   ABSENCE OF BREACHES OR DEFAULTS: To Lessor's actual knowledge,
Lessor is not, and the execution, delivery and performance of this Lease and the
documents, instruments and agreements, if any, provided for herein will not
result in any breach of or default under any other document, instrument or
agreement to which Lessor is a party or by which Lessor is subject or bound.

      53.   SEVERABILITY: If any provision of this Lease shall be determined to
be void by any court of competent jurisdiction, then such determination shall
not affect any other provision of this Lease and all such other provisions shall
remain in full force and effect. It is the intention of Lessor and Lessee that
if any provision of this Lease is capable of two constructions, one of which
would render the provision void and the other of which would render the
provision valid, then the provision shall have the meaning which renders it
valid.

      54.   LESSEE FINANCIAL INFORMATION: Annually during the Lease Term,
promptly following Lessor's request, Lessee shall provide to Lessor financial
statements for Lessee which will include a balance sheet, income statement,
statement of changes in equity, statement of consolidated cash flows and such
other financial information as Lessor may reasonably request.

      55.   WAIVER OF REDEMPTION: Lessee hereby expressly waives any and all
rights of redemption granted by or under any present or future laws in the event
Lessee shall be evicted or dispossessed for any cause, or in the event of Lessor
obtaining possession of the Premises by reason of the violation by Lessee of any
of the covenants and conditions of this Lease or otherwise. The rights given to
Lessor in this PARAGRAPH 55 are in addition to any rights that may be given to
Lessor by any statute or otherwise.

      56.   DISCLAIMER: LESSOR AND LESSEE EACH HEREBY WAIVE AND DISCLAIM ANY
COVENANT OR OBLIGATION OF GOOD FAITH AND FAIR DEALING THAT MAY BE IMPLIED IN
THIS LEASE AND EACH OF LESSOR AND LESSEE ACKNOWLEDGE AND

                                       22
<PAGE>

AGREE THAT NEITHER HAS ANY OBLIGATION TO BARGAIN IN GOOD FAITH OR IN ANY WAY
OTHER THAN AT ARM'S LENGTH. NEITHER LESSOR NOR LESSEE MAY REASONABLY RELY ON ANY
PROMISE INCONSISTENT WITH THE PROVISIONS OF THIS ARTICLE. THIS ARTICLE
SUPERSEDES ANY OTHER CONFLICTING LANGUAGE CONTAINED IN THIS LEASE WHICH MAY
IMPLY THE EXISTENCE OF A COVENANT OF GOOD FAITH AND FAIR DEALING.

      57.   BROKERAGE DISCLOSURE: Lessor and Lessee acknowledge and agree that
Lessor has disclosed to Lessee that officers, directors, shareholders, employees
and/or affiliates of Lessor may be licensed real estate brokers and salespersons
in the State of Arizona.

      58.   WAIVER OF RIGHT TO JURY TRIAL: LESSOR AND LESSEE EACH WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY OF ANY CONTRACT OR TORT CLAIM, COUNTERCLAIM,
CROSS-COMPLAINT OR CAUSE OF ACTION IN ANY ACTION, PROCEEDING OR HEARING BROUGHT
BY EITHER LESSOR OR LESSEE AGAINST THE OTHER ON ANY MATTER ARISING OUT OF OR IN
ANY WAY CONNECTED TO THIS LEASE, THE RELATIONSHIP OF LESSOR AND LESSEE OR
LESSEE'S USE OR OCCUPANCY OF THE PREMISES, INCLUDING ANY CLAIM OF INJURY OR
DAMAGE OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY CURRENT OR FUTURE LAW,
STATUTE, REGULATION, CODE OR ORDINANCE.

                                       23
<PAGE>

      IN WITNESS WHEREOF, the parties have executed this Lease on the day and
year first above written.

LESSOR:                                     LESSEE:

PAPAGO PARAGON PARTNERS, LLC, an            THREE-FIVE SYSTEMS, INC., a Delaware
Arizona limited liability company           corporation

By: APEX Property Solutions, LLC, an
Arizona limited liability company, its
Manager

                                            By: /s/ Jeffrey D. Buchanan
                                                -----------------------------
By: /s/ Douglas A. Dragoo                   Name: Jeffrey D. Buchanan
    ---------------------------             Its: Executive Vice President/Chief
Name: Douglas A. Dragoo                          Financial Officer
Its: Manager

                                       24

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