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                                                                   EXHIBIT 10.15

                              EMPLOYMENT AGREEMENT

     This agreement is dated and made effective the 15th day of July, 2004
between John Lennon ("Executive") and Pyramid Breweries Inc., a Washington
corporation (the "Company").

     1. Employment. Subject to passing the Company's pre-employment drug test, a
background and reference check, and proof of authorization to work in the United
States, Company employs Executive and Executive accepts employment on the terms
and conditions in this agreement.

     2. Duties. Executive shall be employed in the capacity of President and
Chief Executive Officer of the Company. Executive shall perform the duties
customarily performed by a president and chief executive officer, including
having the primary responsibility for the strategic direction, operational
planning, and execution of all aspects of the Company's business. In addition,
Executive shall have such other executive and managerial powers and duties with
respect to the Company and its subsidiaries as may reasonably be assigned to him
by the Company's Board of Directors, consistent with his duties and
responsibilities as President and Chief Executive Officer. Executive shall
report directly to the Company's Board of Directors. Furthermore, he will become
a Director himself and be expected to perform the normal duties of a member of a
public company's board of directors. Executive shall perform his duties at the
Company's Seattle headquarters or other mutually agreed location, or, as
reasonably required and consistent with his position, temporarily at other
locations while on business travel status. During the term of this agreement,
Executive shall be based in Seattle, but he shall be entitled to maintain a
residence in Florida or elsewhere, provided that doing shall not interfere with
his material duties to the Company.

     3. Intensity of Effort; Other Business. Executive shall devote his entire
working time, attention, and efforts to the Company's business and affairs,
shall faithfully and diligently serve the Company's interests and shall not
engage in any business or employment activity that is not on the Company's
behalf (whether or not pursued for gain or profit) except for (a) activities
approved in writing in advance by the Board and (b) passive investments that do
not involve Executive providing any advice or services to the businesses in
which the investments are made and (c) subject to approval by the Board, which
shall not unreasonably be withheld, service as a member of the board of
directors of one or more corporations not in competition with the Company or as
a member of the board of directors of any nonprofit corporation

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     4. Term. The term of this agreement is of indefinite duration. As stated in
paragraph 10 below, and subject to paragraph 12 below (Termination Payments),
this agreement and Executive's employment relationship may be terminated at any
time, with or without Cause (as defined below).

     5. Compensation. Executive's compensation will be as follows:

          (a) Salary. The Company shall pay Executive a base salary in the gross
amount of $250,000 per annum (in addition to stock grants as provided below).
The base salary will be payable bi-weekly in arrears, by direct bank transfer
("Annual Base Pay"). Payday is the Friday following each two-week period.
Executive's performance and salary will be reviewed on or about February 1,
2005, and on or about January 1 each year thereafter, and increased as
determined in the sole discretion of the Board of Directors Compensation
Committee ("Compensation Committee").

          (b) Employee Stock Purchase Plan. Executive shall be eligible for
participation in the Employee Stock Purchase Plan on the first day of the
calendar quarter commencing at least 90 days after his first day of employment.

          (c) Stock Awards. Subject to approval by the Company's Compensation
Committee, the Executive will be granted stock awards or stock units for up to
350,000 shares of the Company's Common Stock on the following terms:

               (i) Annual Awards. Executive will be granted stock awards or
stock units for 35,000 shares on each of January 1, 2006 and the next four
anniversaries of that date; provided, however, that if Executive's employment is
terminated by the Company without Cause or by Executive for Good Reason, or as a
result of Executive's death or Disability (all as defined below), Executive will
receive a prorated portion of the relevant annual award as of the date
Executive's employment is terminated;

               (ii) Annual Performance Awards. Executive will be granted stock
awards or stock units for an additional 35,000 shares based on the Company's
achievement of certain performance goals as follows; provided that if
Executive's employment is terminated by the Company without Cause or by
Executive for Good Reason, or as a result of Executive's death or Disability
(all as defined below), Executive will receive a prorated portion of the
relevant annual performance award as set forth below as if the relevant annual
performance goal had been reached, prorated to the date Executive's employment
is terminated and granted as of the date Executive's employment is terminated:

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                    (A) On January 1, 2006, if the Company achieves an increase
in return on average net equity for the year ending December 31, 2005, of at
least 200 basis points as compared to return on average net equity for the year
ending December 31, 2004;

                    (B) On January 1, 2007, if the Company achieves an increase
in return on average net equity for the year ending December 31, 2006, of at
least 200 basis points as compared to return on average net equity for the year
ending December 31, 2005;

                    (C) On January 1, 2008, if the Company achieves an increase
in return on average net equity for the year ending December 31, 2007, of at
least 200 basis points as compared to return on average net equity for the year
ending December 31, 2006

                    (D) On January 1, 2009, if the Company achieves an increase
in return on average net equity for the year ending December 31, 2008, of at
least 200 basis points as compared to return on average net equity for the year
ending December 31, 2007; and

                    (E) On January 1, 2010, if the Company achieves an increase
in return on average net equity for the year ending December 31, 2009, of at
least 200 basis points as compared to return on average net equity for the year
ending December 31, 2008.

               The awards granted to Executive pursuant to this paragraph 5 will
be in the form of stock awards, provided that Executive can elect instead to
receive an award in the form of stock units by delivering to the Company written
notice to that effect no later than the 10th business day prior to the grant
date for that award. The stock awards or stock units will be granted either
under the Company's 2004 Equity Incentive Plan (the "Plan"), or outside of the
Plan, but subject to the terms and conditions of the Plan. The stock awards or
stock units will be subject to a forfeiture restriction that will lapse on the
first anniversary of their respective grant dates. The stock awards or stock
units will be evidenced by award agreements in substantially the form attached
hereto as Exhibit A (the "Stock Agreement"), and will be subject to the terms
and conditions set forth in the Stock Agreement, the Plan and this agreement.
Notwithstanding any contrary provisions of the Plan or any successor incentive
plan, no stock award or stock units that have become vested under this agreement
shall be subject to forfeiture thereafter. The forfeiture restrictions will
lapse on an accelerated basis under certain circumstances in the event of a
Company Transaction or Change in Control (both as defined in the Plan) or upon a
termination of Executive's employment by the Company without Cause (as defined
below), by

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Executive for Good Reason (as defined below) or as a result of Executive's death
or Disability. The Company shall use its best efforts to obtain Form S-8
registration with respect to the shares of the Company's Common Stock issuable
pursuant to this agreement and to maintain such registration for as long as
Executive holds such shares.

          (c) Incentive Compensation Bonuses. Executive shall be eligible for an
annual bonus opportunity based on the performance of the Company, in accordance
with the Officer Incentive Compensation Plan then in effect.

          (d) Car Allowance. Executive shall receive a car allowance of $500 per
month in addition to reimbursement for gas purchased by Executive for business
use.

          (e) Relocation Expenses. The Company will provide Executive a budget
of $100,000 for relocation expenses. This can be used to reimburse Executive for
relocation expenses reasonably incurred, including for temporary accommodation
in Seattle, flights to and from his residences in Florida and Connecticut for
him and his immediate family, and costs of moving personal effects from his
residence in Florida and residence in Connecticut to the Seattle area where he
will be based. Provided, however, the Company reserves the right to recover 100
percent of payments made in this connection if Executive elects to terminate
employment or is terminated for Cause (as defined below) within one year of
starting.

     6. Benefit Plans. Executive (and qualifying immediate family members where
applicable) shall be eligible to participate in the Company's Employee Benefit
Package offered generally to employees, which is subject to change and currently
includes health insurance through Regence Blue Shield, life and AD&D insurance,
sixty percent (60%) Company-payment of vision and dental, health insurance
continuation, sick leave, paid vacation, holidays, and 401(k). The exact terms
and conditions of the Company's benefits, including eligibility, are governed by
the benefit plans, not this agreement or any summary provided to Executive.
Executive will be reimbursed for his premiums paid for his medical insurance
from the start of his employment with the Company until the waiting period for
eligibility under the Company's health insurance plan has been satisfied.

     7. Vacation and Sick Leave. Executive shall earn 40 hours of paid vacation
each quarter year of service, which can be used as earned. Executive can
accumulate a maximum of 160 hours of unused vacation. He shall also earn 40
hours of paid sick leave per year of service , and can accumulate a maximum of
160 hours. Upon termination of employment for any reason, Executive shall be
paid for earned

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but unused vacation. Unused sick leave is not paid upon termination of
employment, regardless of the reason.

     8. Business Expenses. Executive is authorized to incur reasonable travel
and entertainment expenses to promote the Company's business. The Company shall
reimburse Executive for those expenses. Executive shall provide to Company the
itemized expense account information that the Company reasonably requests.

     9. Indemnification. The Company shall indemnify and hold Executive
harmless, in accordance with the bylaws of the Company and any applicable
directors and officers (D&O) insurance policy, to the full extent permitted by
applicable law, with respect to claims made or threatened by reason of his
service as a director, officer, employee or agent of the corporation.

     10. Termination. Executive's employment may be terminated as follows, in
which event this agreement and Executive's compensation and benefits shall
terminate except as otherwise provided below:

          (a) Without Cause or Good Reason. Either party may terminate
Executive's employment at any time by giving written notice of termination to
the other, without the necessity of cause, in the case of the Company-initiated
termination, provided that written notice is provided to the Executive at least
14 days before such termination is effective, or Good Reason (as defined below),
in the case of Executive-initiated termination. For purposes of this agreement,
"Good Reason" means a breach by the Company of a material obligation to the
Executive under this agreement, any Stock Agreement, or any other material
agreement with the Executive relating to Executive's employment including but
not limited to any diminution in Executive's title or salary or material
diminution of his duties, as provided in Paragraph 2, above, or benefits, as
provided in Paragraphs 6 above, that is not cured within fourteen (14) days
after written notice of such breach is received by the Company.

          (b) By the Company for Cause. The Company may terminate Executive's
employment for Cause (as defined below) by giving written notice of such
termination. Any termination of Executive's employment for Cause must be
approved by a majority of the Board other than Executive. Executive must be
given notice of the meeting at which his termination is to be considered
concurrently with notice to the Board, and an opportunity to address the Board.
Executive agrees that if his employment is terminated for Cause that he will
immediately resign from the Board. For purposes of this agreement, "Cause" means
dishonesty, fraud, serious or willful misconduct, unauthorized use or disclosure
of confidential information or trade

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secrets, intoxication while at work, or conduct prohibited by law (except minor
violations).

          (c) Notice of Resignation. Executive shall give four (4) months'
advance written notice of resignation, provided that if Executive resigns for
Good Reason, the notice period shall be 14 days.

          (d) Death. Executive's employment shall terminate automatically upon
Executive's death.

          (e) Permanent Disability. Termination of the Executive's employment if
Executive becomes permanently disabled, shall be deemed "for Cause." For
purposes of this agreement Executive will be considered "permanently disabled"
("Disability") if, for a continuous period of twenty-four (24) weeks or more,
Executive has been unable to perform the essential functions of the job because
one or more mental or physical illnesses and/or disabilities, provided that the
Company may grant Executive unpaid leave or other accommodation if and to the
extent that, in the Company's judgment, doing so is required by law. A
determination of Disability shall be made by a physician satisfactory to both
the Executive and the Company, provided that if the Executive and the Company do
not agree on a physician, the Executive and the Company shall each select a
physician who together shall select a third physician whose determination as to
Disability shall be binding on all parties.

     11. Golden Parachute Limitation.

          (a) Notwithstanding any other provision of this agreement, if any
portion of the termination payments set forth in Section 12 or any other payment
that is required to be made by the Company (or its affiliates) to or for the
benefit of the Executive under this agreement, or under any other agreement with
or plan of the Company or its affiliates (each a "Payment" and, collectively,
"Total Payments"), would constitute an "excess parachute payment," within the
meaning of Section 280G of the Internal Revenue Code of 1986, as amended, and
the regulations promulgated thereunder (the "Code") that is subject to the tax
imposed by Section 4999 of the Code (the "Excise Tax"), then the Total Payments
to be made to or for the benefit of the Executive shall be reduced such that the
aggregate present value of the Total Payments shall be one dollar ($1.00) less
than the maximum amount that the Executive may receive without becoming subject
to the Excise Tax (the "Reduction"); provided that the Reduction shall not apply
if the after-tax value to the Executive of the Total Payments prior to the
Reduction is greater than the after-tax value to the Executive if Total Payments
are determined taking into account the Reduction.

          (b) Within forty (40) days following delivery of the notice of
termination or notice by the Company to the Executive of its belief that there
is a

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Payment that may be treated as an excess parachute payment, the Company, at its
expense, shall obtain the opinion (which need not be unqualified) of tax counsel
("Tax Counsel") selected by the Company and reasonably acceptable to Executive,
which opinion sets forth (i) the amount of the Executive's base amount, (ii) the
amount and the aggregate present value of Total Payments, (iii) the aggregate
amount of excess parachute payments determined without regard to the Reduction,
(iv) the after-tax value of the Total Payments if the Reduction did not apply,
and (v) the after-tax value of the Total Payments taking into account the
Reduction. For purposes of determining the after-tax value of Total Payments,
(x) the Executive shall be deemed to pay income taxes at the highest rate of
federal income tax and the highest rate or rates of state and local income taxes
in the state and locality of the Executive's domicile for income tax purposes
for the taxable year in which the Total Payments will be made, provided that the
state and local income tax rate shall be determined assuming that such taxes are
fully deductible for federal income tax purposes, and (y) the Executive shall be
deemed to pay employment taxes at the applicable rate under Section 3101(b) of
the Code. The opinion of Tax Counsel shall be dated as of the date of the
Executive's termination and addressed to the Company and the Executive and shall
be binding upon the Company and the Executive. If such opinion determines that
there would be an excess parachute payment and that the after-tax value of the
Total Payments taking into account the Reduction is greater than the after-tax
value of the Total Payments if the Reduction did not apply, then the payments
hereunder or any other payment or benefit determined by such counsel to be
includible in Total Payments shall be reduced or eliminated as the Company shall
reasonably determine. If Tax Counsel requests, the Executive and the Company
shall obtain, at the Company's expense, and the Tax Counsel may rely on in
providing the opinion, the advice of a firm of recognized executive compensation
consultants as to the reasonableness of any item of compensation to be received
by the Executive.

     12. Termination Payments.

          (a) Termination without Cause or Good Reason.

               (i) If the Company terminates Executive's employment when neither
Cause nor Disability exists, or if, having given 14 days advance written notice
of resignation, Executive terminates his employment for Good Reason , the
Company shall pay Executive, as liquidated damages and in lieu of all other
remedies to which Executive might be entitled arising out of the termination,
termination payments equal to one year's salary, in the event of termination
within the first three (3) years of employment, and eighteen (18) months' salary
if after three years' of employment, plus any incentive compensation bonuses
under Section 5(c) for which Executive is eligible under the terms of the
applicable plan at that time, and for the same one-year or 18-month period, as
the case may be, the Company shall also continue to provide at

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the Company's cost, the Company's medical benefits to employee and qualifying
family members. Such liquidated damages shall be paid only if Executive executes
a full and final general release of all claims against the Company (including
the Company's officers, directors, agents, employees and assigns) arising out of
Executive's employment relationship with the Company or its termination, and
Executive shall have no duty to mitigate his losses in order to receive such
liquidated damages. Termination resulting from expiration of this agreement or,
in connection with a sale or merger or Company Transaction, resulting from
failure of the Company to assign this agreement to a successor that accepts the
Company's duties hereunder, shall be a termination without Cause for purposes of
these termination payment provisions.

               (ii) In addition, if the Company terminates Executive's
employment when neither Cause nor Disability exists, but the Company gives
Executive less than the fourteen (14) days' advance written notice, termination
payments equal to the additional salary Executive would have received if the
Company had given Executive fourteen (14) days' advance written notice of
termination.

               (iii) Termination payments shall be paid out at Executive's
normal payroll rate on regular payroll days subject to normal payroll
deductions, commencing first with the termination payments called for by subpart
(ii), if any, followed by the termination payments called for by subpart (i).
Any reimbursable expenses incurred prior to termination will be paid immediately
upon termination.

          (b) All Other Terminations. In all other cases of termination
(including termination of Executive's employment by the Company for Cause or
Executive's resignation of employment without Good Reason), except as provided
above with respect to death and Disability under the appropriate paragraphs,
Executive's compensation and benefits shall terminate on the date the employment
ends and Executive shall not be entitled to any termination payments or damages.

     13. Confidentiality/Unfair Competition. Executive agrees that the Company
has many substantial, legitimate business interests that can be protected only
by Executive agreeing not to compete with the Company unfairly. These interests
include, without limitation, the Company' s contacts and relationships with its
supply sources, the Company's reputation and goodwill in the industry, and the
Company's rights in its confidential information. Executive agrees that
information not generally known to the public to which Executive has been or
will be exposed as a result of Executive's employment by the Company is
confidential information that belongs to the Company. This includes information
developed by Executive, alone or with others, or entrusted to the Company by its
supply sources, customers or others.

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The Company's confidential information includes, without limitation, information
relating to the Company's trade secrets, know-how, procedures, pricing,
products, services, purchasing, accounting, marketing, sales, supply sources,
employees, and customers and active prospects and their related needs. Executive
will hold the Company's confidential information in strict confidence and will
not disclose or use it except as authorized by the Company and for the Company's
benefit. Executive will not, apart from good faith competition, interfere with
the Company's relationships with its clients, employees, vendors, bankers or
others. During his employment with the Company, Executive will not directly or
indirectly, in any capacity (such as a business principal, consultant,
contractor or employee), engage or participate in any business that is in
competition in any manner whatsoever with the business of the Company, nor for
three (3) months following his termination for any reason, take a position in
any capacity with a domestic brewer producing less than two million barrels a
year.

     14. Possession of Materials. Executive agrees that upon conclusion of
employment or request by the Company, Executive shall turn over to the Company
all documents, files, office supplies and any other material or work product in
Executive's possession or control that were created pursuant to or derived from
Executive's services for the Company.

     15. Nonraiding of Employees. Executive recognizes that the Company's
workforce is a vital part of its business. Therefore, Executive agrees that for
twelve (12) months after Executive's employment with the Company ends,
regardless of the reason it ends, Executive will not solicit, directly or
indirectly, any employee to leave his or her employment with the Company. For
purposes of this agreement, the phrase "shall not solicit, directly or
indirectly," includes, without limitation, that Executive (a) shall not identify
any the Company employees to any third party as potential candidates for
employment, such as by disclosing the names, backgrounds and qualifications of
any the Company employees; (b) shall not personally or through any other person
approach, recruit or otherwise solicit employees of the Company to work for any
other employer; and (c) shall not participate in any pre-employment interviews
with any person who was employed by the Company while Executive was employed or
retained by the Company.

     16. Dispute Resolution. The Company and Executive agree to resolve all
disputes arising out of their employment relationship by the following alternate
dispute resolution process: (a) the Company and Executive agree to seek a fair
and prompt negotiated resolution; but if this is not successful, (b) all
disputes shall be resolved by binding arbitration; provided that during this
process, (c) at the request of either party, not made later than seventy-five
(75) days after the initial arbitration demand, the parties agree to attempt to
resolve any dispute by non-binding third-party

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intervention including either mediation or evaluation or both (but without
delaying the arbitration hearing date). By entering into this contract, both
parties give up their right to have the dispute decided in court by a judge or
jury. The provisions of the Washington arbitration statute, Chapter 7.04 RCW,
are incorporated herein to the extent not inconsistent with the other terms of
this agreement.

          (a) Binding Arbitration. Any controversy or claim arising out of or
connected with Executive's employment at the Company, including but not limited
to claims for compensation or severance and claims of wrongful termination, age,
sex, racial or other discrimination, or civil rights violations shall be
determined by arbitration commenced in accordance with RCW 7.04.060 by a single
arbitrator (as opposed to a majority of three arbitrators). The location of the
arbitration shall be Seattle, Washington, or such other city to which the
parties may agree. If the Company and Executive cannot agree on the arbitrator,
then the arbitrator shall be selected by the administrator of the American
Arbitration Association (AAA) office nearest the city where the arbitration is
to be conducted. The arbitrator shall be an attorney with at least 15 years'
experience in commercial law or judicial arbitration experience. All statutes of
limitations, which would otherwise be applicable, shall apply to any arbitration
proceeding hereunder. Any issue about whether a controversy or claim is covered
by this agreement shall be determined by the arbitrator.

          (b) Procedures. The arbitration shall be conducted in accordance with
this agreement using as appropriate the AAA Employment Dispute Resolution Rules
in effect on the date hereof. There shall be no discovery or dispositive motion
practice (such as motions for summary judgment or to dismiss or the like) except
that the arbitrator shall authorize such discovery as may be shown to be
necessary to ensure a fair hearing. The arbitrator shall not be bound by the
rules of evidence or of civil procedure, but rather may consider such writings
and oral presentations as reasonable business people would use in the conduct of
their day-to-day affairs, and may require both parties to submit some or all of
their respective cases by written declaration or such other manner of
presentation as the arbitrator may determine to be appropriate.

          (c) Hearing; Law; Appeal Limited. The arbitrator's written decision
shall be made not later than fourteen (14) calendar days after the hearing. The
parties agree that they have included these time limits in order to expedite the
proceeding, but they are not jurisdictional, and the arbitrator may for good
cause allow reasonable extensions or delays, which shall not affect the validity
of the award. The written decision shall contain a brief statement of the
claim(s) determined and the award made on each claim. In making the decision and
award the arbitrator(s) shall apply applicable substantive law. Absent fraud,
collusion or willful misconduct by the

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arbitrator or any other ground provided by Washington law, the award shall be
final and judgment may be entered in any court having jurisdiction thereof. The
arbitrator may award injunctive relief or any other remedy available from a
judge, including the joinder of parties or consolidation of this arbitration
with any other involving common issues of law or fact or which may promote
judicial economy, and may award attorneys' fees and costs to the prevailing
party.

          (d) Injunctive Relief. In the case of a breach of any of Executive's
obligations to the Company, the Company may request a court of competent
jurisdiction to issue such temporary or interim relief (including temporary
restraining orders and preliminary injunctions as may be appropriate, either
before arbitration is commenced or pending the outcome of arbitration. No such
request shall be a waiver of the right or obligation to submit any claim or
controversy to arbitration, and any such temporary or interim relief shall
terminate if the Company fails to proceed with an arbitration within 120 days of
the entry of such order Any issues of law or fact, which arise in connection
with such request, shall, at the Company's election, be determined by
arbitration in accordance with subparagraph (a) through (c) above.

     17. Venue and Jurisdiction. Venue and jurisdiction of any lawsuit involving
this agreement or Executive's employment shall exist exclusively in state and
federal courts in King County, Washington, unless injunctive relief is sought by
the Company and, in the Company's judgment, that relief might not be effective
unless obtained in some other venue. The provisions of this Section are subject
to and do not supersede the dispute resolution provisions described above.

     18. Governing Law. This agreement shall be governed by the internal laws of
the state of Washington without giving effect to provisions thereof related to
choice of laws or conflict of laws.

     19. Saving Provision. If any part of this agreement is held to be
unenforceable, it shall not affect any other part. If any part of this agreement
is held to be unenforceable as written, it shall be enforced to the maximum
extent allowed by applicable law. The confidentiality, possession of materials,
non-competition and nonraiding provisions of this agreement shall survive after
Executive's employment by the Company ends, regardless of the reason it ends,
and shall be enforceable regardless of any claim Executive may have against the
Company.

     20. Waiver. No waiver of any provision of this agreement shall be valid
unless in writing, signed by the party against whom the waiver is sought to be
enforced. The waiver of any breach of this agreement or failure to enforce any
provision of this agreement shall not waive any later breach.

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     21. Assignment; Successors. The Company may assign its rights and delegate
its duties under this agreement. Executive may not assign his or her rights or
delegate his or her duties under this agreement, but all payments and benefits
to which Executive is entitled under this agreement shall be payable on his
death to his personal representatives heirs, successors and assigns.

     22. Tax Withholding. The Company shall be entitled to withhold from any
amounts payable under this agreement any tax (including any Excise Tax) that may
be required to be withheld pursuant to any applicable law or regulation, as
determined by the Company or the Tax Advisor.

     23. Binding Effect. This agreement is binding upon the parties and their
personal representatives, heirs, successors and assigns.

     24. Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be an original and all of which, taken
together, shall constitute a single agreement.

     25. Complete Agreement. This agreement, together with the Stock Agreement,
is the final and complete expression of the parties' agreement relating to
Executive's employment. Only a writing signed by both parties may amend this
agreement; it may not be amended orally or by course of dealing. The parties are
not entering into this agreement relying on anything not set out in this
agreement. In the event of a conflict between this agreement and the Stock
Agreement or any Equity Incentive Plan, the terms of this agreement shall
govern. This agreement shall control over any contrary policies or procedures of
the Company, whether in effect now or adopted later.

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     DATED as of the date first written above.

                                   EXECUTIVE:

                                   -------------------------------------------
                                   John Lennon

                                   COMPANY:

                                   PYRAMID BREWERIES INC.

                                   By
                                     -------------------------------------------
                                      Name:
                                            ------------------------------------
                                      Title:
                                            ------------------------------------

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                                    EXHIBIT A

                             FORM OF STOCK AGREEMENT

                                       14<PAGE>
                                                                   EXHIBIT 10.17

                                                             MS Loan No 04-17356

                                 PROMISSORY NOTE
                              (Fixed -- Defeasance)

$7,850,000 00                                               Berkeley, California
                                                                January 27, 2005

      FOR VALUE RECEIVED, PYRAMID GILMAN STREET PROPERTY, LLC, a Delaware
limited liability company, as maker, having its principal place of business at
c/o Pyramid Breweries, Inc, Attention. Chief Financial Officer, 91 S. Royal
Brougham Way, Seattle, Washington 98134 ("Borrower"), hereby unconditionally
promises to pay to the order of MORGAN STANLEY MORTGAGE CAPITAL INC, a New York
corporation, as payee, having an address at c/o ARCap Servicing, Inc, 5605 North
MacArthur Boulevard, Suite 950, Irving, Texas 75038 ("Lender"), or at such other
place as the holder hereof may from time to time designate in writing, the
principal sum of Seven Million Eight Hundred Fifty Thousand and 00/100 Dollars
($7,850,000 00), in lawful money of the United States of America with interest
thereon to be computed from the date of this Note at the Applicable Interest
Rate (defined below) in accordance with the terms of this Note.

                            ARTICLE 1: PAYMENT TERMS

      Borrower agrees to pay sums under this Note in installments as follows:

      (a) on the date hereof, a payment of interest only with respect to the
period commencing on the date hereof and ending on, and including, the last day
of the month in which this Note is executed;

      (b) a constant payment of Forty-Five Thousand Nine Hundred Ten and 25/100
Dollars ($45,910 25) on the first day of April, 2005 and on the first day of
each calendar month thereafter up to and including the first day of February,
2015 (each, a "Payment Date"), each of the payments to be applied as follows:
(i) first, to the payment of interest computed at the Applicable Interest Rate,
and (ii) the balance toward the reduction of the principal sum; and

      (c) the balance of the principal sum and all interest thereon on the first
day of March, 2015 (the "Maturity Date")

                               ARTICLE 2: INTEREST

      The interest rate on this Note is five and 77/100 percent (5.77%) per
annum (the "Applicable Interest Rate") Interest on the principal sum of this
Note shall be calculated by multiplying (a) the actual number of days elapsed in
the period for which the calculation is being made by (b) a daily rate based on
a three hundred sixty (360) day year (that is, the Applicable Interest Rate or
the Default Rate, as then applicable, divided by 360) by (c) the outstanding
principal balance

<PAGE>

                       ARTICLE 3: DEFAULT AND ACCELERATION

      Borrower covenants and agrees that if (a) any payment required hereunder
(other than the payment due on the Maturity Date) is not paid prior to the fifth
(5th) day after the same is due, or (b) the entire Debt (defined below) is not
paid on or before the Maturity Date or (c) any other Event of Default (as
defined in the Security Instrument (defined below)) shall occur, then at the
option of Lender (i) the whole of the principal sum of this Note, (ii) interest,
default interest, late charges and other sums, as provided in this Note, the
Security Instrument or the Other Security Documents (as defined in the Security
Instrument), (iii) all other monies agreed or provided to be paid by Borrower in
this Note, the Security Instrument or the Other Security Documents, (iv) all
sums advanced pursuant to the Security Instrument to protect and preserve the
Property (defined below) and the lien and the security interest created thereby,
and (v) all sums advanced and costs and expenses incurred by Lender in
connection with the Debt or any part thereof, any renewal, extension, or change
of or substitution for the Debt or any part thereof, or the acquisition or
perfection of the security therefor, whether made or incurred at the request of
Borrower or Lender (all the sums referred to in (i) through (v) above shall
collectively be referred to as the "Debt") shall without notice become
immediately due and payable.

                           ARTICLE 4: DEFAULT INTEREST

      Borrower agrees that upon the occurrence of an Event of Default, Lender
shall be entitled to receive and Borrower shall pay interest on the entire
unpaid principal sum at a per annum rate equal to the lesser of (a) five percent
(5%) plus the Applicable Interest Rate or (b) the maximum interest rate which
Borrower may by law pay (the "Default Rate") The Default Rate shall be computed
from the occurrence of the default giving rise to such Event of Default (without
regard to any notice or grace period) until the earlier of the date upon which
the Event of Default is cured or the date upon which the Debt is paid in full
Interest calculated at the Default Rate shall be deemed part of the Debt, and
shall be deemed secured by the Security Instrument. This clause, however, shall
not be construed as an agreement or privilege to extend the date of the payment
of the Debt, nor as a waiver of any other right or remedy accruing to Lender by
reason of the occurrence of any Event of Default.

                             ARTICLE 5: LATE CHARGE

      If any monthly installment payable under this Note is not paid prior to
the fifth (5th) day after the applicable Payment Date, Borrower shall pay to
Lender upon demand an amount equal to the lesser of five percent (5%) of such
unpaid sum or the maximum amount permitted by applicable law to defray the
expenses incurred by Lender in handling and processing the delinquent payment
and to compensate Lender for the loss of the use of the delinquent payment and
the amount shall be secured by the Security Instrument and the Other Security
Documents.

                        ARTICLE 6: PREPAYMENT; DEFEASANCE

      (a) The principal balance of this Note may not be prepaid in whole or in
part except as expressly permitted pursuant hereto.

      (b) Subject to compliance with and satisfaction of the terms and
conditions of this Article 6 and provided that no Event of Default exists,
Borrower may elect to obtain a release

                                       2
<PAGE>

(the "Release") of the Property from the lien of the Security Instrument on any
Payment Date after the Lockout Period Expiration Date (defined below) by
delivering to Lender, as security for the payment of all interest and principal
due and to become due pursuant to this Note through the Maturity Date, plus the
principal balance of this Note scheduled to be outstanding on the Maturity Date,
Defeasance Collateral (defined below) sufficient to generate Scheduled
Defeasance Payments (defined below) (the Release and the delivery of the
Defeasance Collateral, a "Defeasance")

      (c) As a condition precedent to a Defeasance, and prior to any Release,
Borrower shall have complied with all of the following.

            (i) Borrower shall provide not less than sixty (60) days prior
written notice to Lender specifying a Payment Date upon which it intends to
effect a Defeasance hereunder (the "Defeasance Date")

            (ii) All accrued and unpaid interest on the principal balance of
this Note to and including the Defeasance Date, the scheduled amortization
payment due on such Defeasance Date, and all other sums then due under this
Note, the Security Instrument and the Other Security Documents, shall be paid in
full on or prior to the Defeasance Date

            (iii) Borrower shall execute and deliver to Lender any and all
certificates, opinions, documents or instruments reasonably required by Lender
in connection with the Defeasance and Release, including, without limitation, a
pledge and security agreement reasonably satisfactory to Lender creating a first
priority lien on the Defeasance Collateral (a "Defeasance Security Agreement").
This Note shall thereafter be secured by the Defeasance Collateral delivered in
connection with the Defeasance. After Defeasance, this Note cannot be prepaid in
whole or in part or be the subject of any further Defeasance.

            (iv) Borrower shall have delivered to Lender an opinion of
Borrower's counsel that would be satisfactory to a prudent lender stating (A)
that the Defeasance Collateral and the proceeds thereof have been duly and
validly assigned and delivered to Lender and that Lender has a valid, perfected,
first priority lien and security interest in the Defeasance Collateral delivered
by Borrower and the proceeds thereof, (B) that if the holder of this Note shall
at the time of the Release be a REMIC (defined below), (1) the Defeasance
Collateral has been validity assigned to the REMIC Trust which holds this Note
(the "REMIC Trust"), (2) the Defeasance has been effected in accordance with the
requirements of Treasury Regulation 1 860(g)-2(a)(8) (as such regulation may be
amended or substituted from time to time) and will not be treated as an exchange
pursuant to Section 1001 of the IRS Code and (3) the tax qualification and
status of the REMIC Trust as a REMIC will not be adversely affected or impaired
as a result of the Defeasance and (C) that the delivery of the Defeasance
Collateral and the grant of a security interest therein to Lender shall not
constitute an avoidable preference under Section 547 of the U S Bankruptcy Code
or applicable state law. The term "REMIC" shall mean a "real estate mortgage
investment conduit" within the meaning of Section 860D of the IRS Code. The term
"IRS Code" shall mean the United States Internal Revenue Code of 1986, as
amended, and the related Treasury Department regulations, including temporary
regulations.

                                       3
<PAGE>

            (v) Borrower shall have delivered to Lender written confirmation
from the Rating Agencies (defined in the Security Instrument) that such
Defeasance will not result in a withdrawal, downgrade or qualification of the
then current ratings by the applicable Rating Agencies of the Securities or
Participations (each as defined in the Security Instrument). If required by the
Rating Agencies, Borrower shall, at Borrower's expense, also deliver or cause to
be delivered a non-consolidation opinion with respect to the Defeasance Obligor
(as defined below), if any, in form and substance that would be satisfactory to
a prudent lender.

            (vi) Borrower shall have delivered to Lender a certificate given by
Borrower's independent certified public accountant certifying that the
Defeasance Collateral shall generate the Scheduled Defeasance Payments.

      (d) In connection with any Defeasance hereunder, Borrower may and, if
requested by Lender shall, at Borrower's expense, establish or designate a
successor entity, which shall be a single purpose, bankruptcy remote entity
which is not directly or indirectly owned by Borrower and which shall be
approved by Lender (the "Defeasance Obligor") and Borrower shall transfer and
assign all obligations, rights and duties under and to this Note and the
Defeasance Security Agreement together with the pledged Defeasance Collateral to
such Defeasance Obligor. Such Defeasance Obligor shall assume the obligations
under the Note and any Defeasance Security Agreement and shall be bound by and
obligated under Sections 3.1, 7.2, 7.4(a), 11.2, 11.7 and 14.2 and Articles 13
and 15 of the Security Instrument; provided, however, that all references
therein to "Property" or "Personal Property" shall be deemed to refer only to
the Defeasance Collateral delivered to Lender, and Borrower shall be relieved of
its obligations under such documents and, except with respect to any provisions
therein which by their terms expressly survive payment of the Debt in full, the
Other Security Documents. Borrower shall pay $1,000 to any such Defeasance
Obligor as consideration for assuming such obligations.

      (e) The following terms shall have the meaning set forth below.

            (i) The term "Defeasance Collateral" as used herein shall mean
direct, non-callable and non-redeemable obligations of the United States of
America for the payment of which its full faith and credit is pledged, each of
which shall be duly endorsed by the holder thereof as directed by Lender or
accompanied by a written instrument of transfer in form and substance wholly
satisfactory to Lender (including, without limitation, such instruments as may
be required by the depository institution holding such securities or by the
issuer thereof, as the case may be, to effectuate book-entry transfers and
pledges through the book-entry facilities of such institution) in order to
perfect upon the delivery of the Defeasance Collateral a first priority security
interest therein in favor of the Lender in conformity with all applicable state
and federal laws governing the granting of such security interests. Borrower
shall authorize and direct that the payments received from such obligations
shall be made directly to Lender or Lender's designee and applied to satisfy the
obligations of Borrower or, if applicable, the Defeasance Obligor, under this
Note.

            (ii) The term "Scheduled Defeasance Payments" as used herein shall
mean the scheduled payments of interest and principal in accordance with the
terms of the Defeasance Collateral (without consideration of any reinvestment of
interest therefrom), providing for payments prior, but as close as possible, to
all successive Payment Dates after the Defeasance

                                       4
<PAGE>

Date through and including the Maturity Date, and in amounts equal to or greater
than the scheduled payments of interest and principal due under this Note,
including the principal balance of this Note scheduled to be outstanding on the
Maturity Date.

            (iii) The term "Lockout Period Expiration Date" shall mean the date
which is the earlier of (A) the second anniversary of the date that is the
"startup day," within the meaning of Section 860G(a) (9) of the IRS Code, of a
REMIC that holds this Note or (B) the four year anniversary of the first day of
the first full calendar month following the date of this Note.

      (f) Upon Borrower's compliance with all of the conditions to Defeasance
and a Release set forth in this Article 6, Lender shall release the Property
from the lien of the Security Instrument and the Other Security Documents. All
costs and expenses of Lender, third parties and the Rating Agencies incurred in
connection with the Defeasance and Release, including, without limitation,
Lender's counsel's fees and expenses, shall be paid by Borrower simultaneously
with the delivery of the Release documentation Any revenue, documentary stamp or
intangible taxes or any other tax or charge due in connection with the
Defeasance shall be paid by Borrower simultaneously with the occurrence of any
Defeasance.

      (g) If a Default Prepayment (defined below) occurs, Borrower shall pay to
Lender the entire Debt, including, without limitation, an amount (the "Default
Consideration") equal to the greater of (i) the amount (if any) which when added
to the then outstanding principal amount of this Note will be sufficient to
purchase Defeasance Collateral providing the required Scheduled Defeasance
Payments assuming Defeasance would be permitted hereunder, or (ii) one percent
(1%) of the Default Prepayment. For purposes of this Note, the term "Default
Prepayment" shall mean a prepayment of the principal amount of this Note made
after the occurrence of any Event of Default or an acceleration of the Maturity
Date under any circumstances, including, without limitation, a prepayment
occurring in connection with reinstatement of the Security Instrument provided
by statute under foreclosure proceedings or exercise of a power of sale, any
statutory right of redemption exercised by Borrower or any other party having a
statutory right to redeem or prevent foreclosure, any sale in foreclosure or
under exercise of a power of sale or otherwise.

      (h) Notwithstanding anything to the contrary herein, Borrower may prepay
the principal balance of this Note in whole, without premium or penalty, on any
Payment Date during the three months prior to the Maturity Date. In addition,
Borrower shall prepay without premium or penalty the principal balance of this
Note in an amount equal to any insurance proceeds or condemnation awards which
Lender elects to have applied to the Debt pursuant to Sections 36 and 37 of
the Security Instrument or the amount required by Lender due to changes in tax
and debt credit pursuant to Section 7.3 (a) or (b) of the Security Instrument
(provided, however, that in the event any such prepayment pursuant to this
sentence shall be made on a date other than a Payment Date, the amount so
prepaid shall include all interest which would have accrued on such amount
through the next Payment Date). In each instance of prepayment permitted under
this subparagraph (h), Borrower shall be required to pay all other sums due
hereunder, and no principal amount repaid may be reborrowed.

                                       5
<PAGE>

                               ARTICLE 7: SECURITY

      This Note is secured by that certain Deed of Trust, Assignment of Leases
and Rents, Security Agreement and Fixture Filing dated the date hereof in the
principal sum of $7,850,000.00 given by Borrower to (or for the benefit of)
Lender covering the fee simple estate of Borrower in certain premises located in
Alameda County, State of California, and other property, as more particularly
described therein (collectively, the "Property") and intended to be duly
recorded in said County (the "Security Instrument"), and by the Other Security
Documents.

                             ARTICLE 8: LOAN CHARGES

      This Note, the Security Instrument and the Other Security Documents are
subject to the express condition that at no time shall Borrower be obligated or
required to pay interest on the principal balance due hereunder at a rate which
could subject Lender to either civil or criminal liability as a result of being
in excess of the maximum interest rate which Borrower is permitted by applicable
law to contract or agree to pay. If by the terms of this Note, the Security
Instrument and the Other Security Documents, Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder at a rate in
excess of such maximum rate, the Applicable Interest Rate or the Default Rate,
as the case may be, shall be deemed to be immediately reduced to such maximum
rate and all previous payments in excess of the maximum rate shall be deemed to
have been payments in reduction of principal and not on account of the interest
due hereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the Debt, shall, to the extent permitted by
applicable law, be amortized, prorated, allocated, and spread throughout the
full stated term of the Note until payment in full so that the rate or amount of
interest on account of the Debt does not exceed the maximum lawful rate of
interest from time to time in effect and applicable to the Debt for so long as
the Debt is outstanding.

                               ARTICLE 9: WAIVERS

      Borrower and all others who may become liable for the payment of all or
any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest and notice of protest and non-payment and
all other notices of any kind, except for notices expressly provided for in this
Note, the Security Instrument or the Other Security Documents. No release of any
security for the Debt or extension of time for payment of this Note or any
installment hereof, and no alteration, amendment or waiver of any provision of
this Note, the Security Instrument or the Other Security Documents made by
agreement between Lender or any other person or party shall release, modify,
amend, waive, extend, change, discharge, terminate or affect the liability of
Borrower, and any other person or entity who may become liable for the payment
of all or any part of the Debt, under this Note, the Security Instrument or the
Other Security Documents. No notice to or demand on Borrower shall be deemed to
be a waiver of the obligation of Borrower or of the right of Lender to take
further action without further notice or demand as provided for in this Note,
the Security Instrument or the Other Security Documents. If Borrower is a
partnership, corporation or limited liability company, the agreements contained
herein shall remain in full force and effect, notwithstanding any changes in the
individuals or entities comprising the Borrower, and the term "Borrower," as
used herein, shall include any alternate or successor entity, but any
predecessor entity, and its

                                       6
<PAGE>

partners or members, as the case may be, shall not thereby be released from any
liability (Nothing in the foregoing sentence shall be construed as a consent to,
or a waiver of, any prohibition or restriction on transfers of interests in
Borrower which may be set forth in the Security Instrument or any Other Security
Document)

                       ARTICLE 10: WAIVER OF TRIAL BY JURY

      BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT
TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT,
TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THIS
NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THIS NOTE, THIS NOTE, THE
SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF
LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.

                             ARTICLE 11: EXCULPATION

      (a) Notwithstanding anything to the contrary contained in this Note, the
Security Instrument or any Other Security Document (but subject to the
provisions of subsections (b), (c) and (d) of this Article 11), Lender shall not
enforce the liability and obligation of Borrower to perform and observe the
obligations contained in this Note or the Security Instrument by any action or
proceeding wherein a money judgment or any deficiency judgment or other judgment
establishing any personal liability shall be sought against Borrower or any
principal, director, officer, employee, beneficiary, shareholder, partner,
member, trustee, agent or affiliate of Borrower or any person owning, directly
or indirectly, any legal or beneficial interest in Borrower, or any successors
or assigns of any of the foregoing (collectively, the "Exculpated Parties"),
except that Lender may bring a foreclosure action, action for specific
performance or other appropriate action or proceeding to enable Lender to
enforce and realize upon this Note, the Security Instrument, the Other Security
Documents, and the interest in the Property, the Rents (as defined in the
Security Instrument) and any other collateral given to Lender to secure this
Note, provided, however, subject to the provisions of subsections (b), (c) and
(d) of this Article 11, that any judgment in any such action or proceeding shall
be enforceable against Borrower only to the extent of Borrower's interest in the
Property, in the Rents and in any other collateral given to Lender to secure
this Note Lender, by accepting this Note and the Security Instrument, agrees
that it shall not, except as otherwise provided in this Article 11, sue for,
seek or demand any deficiency judgment against Borrower or any of the Exculpated
Parties, in any such action or proceeding, under or by reason of or under or in
connection with this Note, the Security Instrument or the Other Security
Documents. The provisions of this Article 11 shall not, however, (i) constitute
a waiver, release or impairment of any obligation evidenced or secured by this
Note, the Security Instrument or the Other Security Documents delivered to
Lender; (ii) impair the right of Lender to name Borrower as a party defendant in
any action or suit for judicial foreclosure and sale under the Security
Instrument, (iii) affect the validity or enforceability of any indemnity,
guaranty, master lease or similar instrument made in connection with this Note,
the Security Instrument, or the Other Security Documents, (iv) impair the right
of Lender to obtain the appointment of a receiver; (v) impair the enforcement of
the Assignment of Leases and Rents executed in connection herewith, (vi) impair
the right of Lender to enforce the

                                       7
<PAGE>

provisions of Section 12.2 of the Security Instrument or of Section 3 12(e) of
the Security Instrument; or (vii) impair the right of Lender to obtain a
deficiency judgment or other judgment on the Note against Borrower if necessary
to fully realize the security granted by the Security Instrument or to commence
any other appropriate action or proceeding in order for Lender to exercise its
remedies against the Property.

      (b) Notwithstanding the provisions of this Article 11 to the contrary,
Borrower shall be personally liable to Lender for the Losses (as defined in the
Security Instrument) Lender incurs due to: (i) fraud or intentional
misrepresentation by Borrower or any of the Exculpated Parties in connection
with the Loan; (ii) the gross negligence or willful misconduct of Borrower,
(iii) the removal or disposal of any portion of the Property after an Event of
Default. (iv) Borrower's misapplication, misappropriation or conversion of Rents
received by Borrower after the occurrence of an Event of Default; (v) Borrower's
misapplication, misappropriation or conversion of tenant security deposits or
Rents collected in advance; (vi) the misapplication, misappropriation or
conversion of insurance proceeds or condemnation awards; (vii) Personal Property
(as defined in the Security Instrument) taken from the Property by or on behalf
of Borrower or any of the Exculpated Parties and not replaced with Personal
Property of the same utility and of the same or greater value; (viii) any act of
arson by Borrower or any of the Exculpated Parties, (ix) any fees or commissions
paid by Borrower after the occurrence of an Event of Default to any Exculpated
Party in violation of the terms of this Note, the Security Instrument or the
Other Security Documents; (x) failure to pay charges for labor or materials or
other charges that can create liens on any portion of the Property; (xi) any
security deposits, advance deposits or any other deposits collected with respect
to the Property not being delivered to Lender upon a foreclosure of the Property
or action in lieu thereof, except to the extent any such security deposits were
applied in accordance with the terms and conditions of any of the Leases (as
defined in the Security Instrument) prior to the occurrence of the Event of
Default that gave rise to such foreclosure or action in lieu thereof; (xii) any
failure by Borrower to permit on-site inspections of the Property as required
by the Security Instrument and/or the Other Security Documents, (xiii) any
failure of Borrower to appoint a new property manager upon the request of Lender
as required by the terms of the Security Instrument and/or the Other Security
Documents, and/or (xiv) Borrower's breach of, or failure to comply with, the
representations, warranties and covenants contained in Articles 5 8(b) and/or 12
of the Security Instrument.

      (c) Notwithstanding the foregoing, the agreement of Lender not to pursue
recourse liability as set forth in subsection (a) above SHALL BECOME NULL AND
VOID and shall be of no further force and effect and the Debt shall be fully
recourse to Borrower in the event that, (i) the first full monthly payment of
principal and interest under this Note is not paid when due, (ii) Borrower fails
to provide financial information to Lender as required by Section 3.12 of the
Security Instrument or fails to comply with any provision of Section 4 2 of the
Security Instrument, (iii) Borrower defaults under Article 8 of the Security
Instrument; (iv) Borrower files a voluntary petition under the U S Bankruptcy
Code or any other Federal or state bankruptcy or insolvency law; (v) an
affiliate, officer, director or representative which controls Borrower, directly
or indirectly, files, or joins in the filing of, an involuntary petition against
Borrower under the U S Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law, or solicits or causes to be solicited petitioning creditors
for any involuntary petition against Borrower from any person or entity, (vi)
Borrower files an answer consenting to or otherwise acquiescing in or joining in
any involuntary petition filed against it, by any other person or entity

                                       8
<PAGE>

under the U.S Bankruptcy Code or any other Federal or state bankruptcy or
insolvency law, or solicits or causes to be solicited petitioning creditors for
any involuntary petition from any person or entity; (vii) any affiliate,
officer, director or representative which controls Borrower consents to or
acquiesces in or joins in an application for the appointment of a custodian,
receiver, trustee, or examiner for Borrower or any portion of the Property, or
(viii) Borrower makes an assignment for the benefit of creditors, or admits, in
writing or in any legal proceeding, its insolvency or inability to pay its debts
as they become due.

      (d) Nothing herein shall be deemed to be a waiver of any right which
Lender may have under Section 506(a), 506(b), 1111(b) or any other provision of
the U.S Bankruptcy Code to file a claim for the full amount of the indebtedness
secured by the Security Instrument or to require that all collateral shall
continue to secure all of the indebtedness owing to Lender in accordance with
this Note, the Security Instrument and the Other Security Documents.

                              ARTICLE 12: AUTHORITY

      Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute
and deliver this Note, the Security Instrument and the Other Security Documents
and that this Note, the Security Instrument and the Other Security Documents
constitute valid and binding obligations of Borrower.

                            ARTICLE 13: GOVERNING LAW

      This Note shall be governed, construed, applied and enforced in accordance
with the laws of the State of California.

                               ARTICLE 14: NOTICES

      All notices required or permitted hereunder shall be given as provided in
the Security Instrument.

                     ARTICLE 15: INCORPORATION BY REFERENCE

      All of the terms, covenants and conditions contained in the Security
Instrument and the Other Security Documents are hereby made part of this Note to
the same extent and with the same force as if they were fully set forth herein.

                            ARTICLE 16: MISCELLANEOUS

      (a) Wherever pursuant to this Note it is provided that Borrower pay any
costs and expenses, such costs and expenses shall include, but not be limited
to, reasonable legal fees and disbursements of Lender, whether with respect to
retained firms, the reimbursement for the expenses of in-house staff, or
otherwise. Borrower shall pay to Lender on demand any and all expenses,
including legal expenses and reasonable attorneys' fees, incurred or paid by
Lender in enforcing this Note, whether or not any legal proceeding is commenced
hereunder, together with interest thereon at the Default Rate from the date paid
or incurred by Lender until such expenses are paid by Borrower.

                                       9
<PAGE>

      (b) This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.

      (c) If Borrower consists of more than one person or party, the obligations
and liabilities of each person or party shall be joint and several.

      (d) Whenever used, the singular number shall include the plural, the
plural number shall include the singular, and the words "Lender" and "Borrower"
shall include their respective successors, assigns, heirs, executors and
administrators.

                        ARTICLE 17: CALIFORNIA PROVISIONS

      (a) BY INITIALLING BELOW, BORROWER EXPRESSLY ACKNOWLEDGES AND UNDERSTANDS
THAT, PURSUANT TO THE TERMS OF THIS NOTE, IT HAS AGREED THAT IT HAS NO RIGHT TO
PREPAY THE NOTE PRIOR TO THE LOCKOUT DATE IN ARTICLE 6 AND THAT IT SHALL BE
LIABLE FOR THE PAYMENT OF THE PREPAYMENT CONSIDERATION FOR PREPAYMENT OF THIS
NOTE UPON ACCELERATION OF THIS NOTE IN ACCORDANCE WITH ITS TERMS FURTHER, BY
INITIALLING BELOW, BORROWER WAIVES ANY RIGHTS IT MAY HAVE UNDER SECTION 2954.10
OF THE CALIFORNIA CIVIL CODE, OR ANY SUCCESSOR STATUTE, AND EXPRESSLY
ACKNOWLEDGES AND UNDERSTANDS THAT LENDER HAS MADE THE LOAN IN RELIANCE ON THE
AGREEMENTS AND WAIVER OF BORROWER AND THAT LENDER WOULD NOT HAVE MADE THE LOAN
WITHOUT SUCH AGREEMENTS AND WAIVER OF BORROWER. BORROWER ACKNOWLEDGES THAT
LENDER'S AGREEMENT TO MAKE THE LOAN AND THE OTHER TERMS SET FORTH HEREIN
CONSTITUTES ADEQUATE AND VALUABLE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY
BORROWER, FOR THE ABOVE WAIVER AND AGREEMENT.

                              /s/ J H
                              --------------------
                              Borrowers's Initials

      (b) BORROWER HEREBY ACKNOWLEDGES THAT INTEREST IN THIS NOTE IS TO BE
CALCULATED BY LENDER ON THE BASIS OF A THREE HUNDRED SIXTY (360) DAY YEAR AND
IS FULLY AWARE THAT SUCH CALCULATIONS MAY RESULT IN AN ACCRUAL AND/OR PAYMENT
OF INTEREST IN AMOUNTS GREATER THAN CORRESPONDING INTEREST CALCULATIONS BASED ON
A THREE HUNDRED SIXTY-FIVE (365) DAY YEAR.

      (c) Borrower recognizes that its default in making any payment as provided
herein or in the Security Instrument or any Other Security Document as agreed to
be paid when due, or the occurrence of any other Event of Default hereunder or
under the Security Instrument or any Other Security Document, will require
Lender to incur additional expense in servicing and administering the Loan, in
loss to Lender of the use of the money due and in frustration to Lender in
meeting its other financial and loan commitments and that the damages caused
thereby

                                       10
<PAGE>

would be extremely difficult and impractical to ascertain. Borrower agrees (a)
that an amount equal to the Late Charge plus the accrual of interest at the
Default Rate is a reasonable estimate of the damage to Lender in the event of a
late payment, and (b) that the accrual of interest at the Default Rate following
any other Event of Default is a reasonable estimate of the damage to Lender in
the event of such other Event of Default, regardless of whether there has been
an acceleration of the loan. Nothing in this Note shall be construed as an
obligation on the part of Lender to accept, at any time, less than the full
amount then due hereunder, or as a waiver or limitation of Lender's right to
compel prompt performance.

      (d) Upon notice from Lender to Borrower of the loss, theft, destruction or
mutilation of this Note and, upon receipt of indemnity reasonably satisfactory
to Borrower from Lender (except that if the Lender initially named herein is the
holder of this Note, an indemnification from the Lender initially named herein
shall be sufficient) or, in the case of mutilation hereof, upon surrender of the
mutilated Note, Borrower will make and deliver a new note of the tenor in lieu
of this Note.

      (e) Lender, at any time and without the consent of Borrower, may grant
participations in or sell, transfer, assign and convey ail or any portion of its
right, title and interest in and to the loan evidenced by this Note, this Note
and the other Loan Documents, any guaranties given in connection with the loan
evidenced by this Note and any collateral given as security for the loan
evidenced by this Note.

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