Document:

Exhibit
      10.07

    

     

    CREDIT
      AGREEMENT

     

    This
      Credit Agreement (as amended, supplemented and restated, this “Agreement”)
      dated
      as of May 9, 2005 between SANDERS MORRIS HARRIS GROUP INC. (the “Borrower”),
      a
      Texas corporation, and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (the
“Lender”),
      a
      national banking association;

     

    W
      I T
      N E S S E T H:

     

    THAT,
      in
      consideration of the mutual covenants, agreements and undertakings herein
      contained, the Obligors hereto agree as follows: 

     

    1. Definitions.
      

    

    1.1 Defined
      Terms.
      Unless
      a particular word or phrase is otherwise defined or the context otherwise
      requires, capitalized words and phrases used in the Credit Documents have the
      meanings provided below. 

    

    Adjusted
      EBITDA
      means
      (a) net income plus
      (b)
      interest expense plus
      (c)
      depreciation plus
      (d)
      amortization and impairment of goodwill plus
      (e)
      deferred income taxes minus
      (f)
      capital expenditures (net of proceeds from Indebtedness used to make capital
      expenditures) minus
      (g)
      payments of cash dividends.

    

    Affiliate
      means
      any Person controlling, controlled by or under common control with any other
      Person. For purposes of this definition, “control” (including “controlled by”
      and “under common control with”) means the possession, directly or indirectly,
      of the power to direct or cause the direction of the management and policies
      of
      such Person, whether through the own-ership of voting securities or otherwise.
      

     

    Annual
      Financial Statements
      means
      the annual Financial Statements of a Person, accompanied by a report and opinion
      of independent certified public accountants satisfactory to the Lender, which
      shall (a) state that such financial statements, in the opinion of such
      accountants, present fairly the financial position of such Person as of the
      date
      thereof and the results of its operations for the period covered thereby in
      conformity with Generally Accepted Accounting Principles
      and (b)
      not express a doubt as to the ability of such Person to continue as a going
      concern; in the case of a Person with Subsidiaries, its Annual Financial
      Statements shall also include its consolidating Financial Statements,
but
      such
      consolidating Financial Statements need not be covered by the report and opinion
      of such Person’s independent certified public accountants described in the
      preceding clause of this definition.

    

    Applications
      means
      all applications and agreements for Letters of Credit, or similar instruments
      or
      agreements, in
      a form
      then used by the Lender; to the extent that an Application is inconsistent
      with
      this Agreement, this Agreement shall control.

     

    Business
      Day
      means a
      day when the main office of the Lender is open for the making of commercial
      loans in Houston, Texas. 

     

    Code
      means
      the Internal Revenue Code of 1986, as amended, as now or hereafter in effect,
      together with all regula-tions, rulings and interpretations thereof or
      thereunder by the Internal Revenue Service. 

     

    Collateral
      means
      all Property, tangible or intangible, real, personal or mixed, now or hereafter
      subject to the Security Documents, or intended so to be. 

     

    Credit
      Documents
      means
      this Agreement, the Note, the Interest Rate Agreement, all Applications, all
      Security Documents, all instruments, certificates and agreements now or
      hereafter executed or delivered to the Lender pursuant to any of the foregoing,
      and all amendments, modifications, renewals, extensions, increases and
      rearrangements of, and substitutions for, any of the foregoing. 

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Debt
      means
      all Indebtedness for borrowed money, including capitalized leases.

    

    Entities
      means
      corporations, partnerships, joint ventures, limited liability companies, joint
      stock associations, business trusts and other business entities. 

     

    ERISA
      means
      the Employee Retirement Income Security Act of 1974, as amended from time to
      time, and all rules, regula-tions, rulings and interpretations adopted by the
      Internal Revenue Service or the Department of Labor thereunder. 

     

    Event
      of Default
      means
      any of the events specified in Section
      7.1,
      if
      there
      has been satisfied any requirement in connection with such event for the giving
      of notice, or the lapse of time, or the happening of any further condition,
      event or act, and Default
      means
      any of such events, whether or not any such requirement has been satisfied.
      

     

    Existing
      Letters of Credit
      means
      the letters of credit heretofore issued by the Lender and described on
Schedule
      1.

     

    Financial
      Statements
      means
      the financial statements of a Person, including all notes (if any) thereto,
      which shall include a balance sheet as of the date of such financial statements
      and an income statement and a statement of cash flows for the calendar year
      to
      date, all setting forth in comparative form the corresponding figures from
      the
      previous calendar year and prepared in accordance with Generally Accepted
      Accounting Principles (subject, in all cases except Annual Financial Statements,
      to normal year-end adjustments).

     

    Generally
      Accepted Accounting Principles
      means,
      as to a particular Person, such accounting practice as, in the opinion of the
      independent accountants of recognized national standing regu-larly retained
      by
      such Person and acceptable to the Lender, conforms at the time to generally
      accepted accounting principles, consistently applied. Generally accepted
      accounting principles means those principles and practices which are (a)
      recognized as such by the Financial Accounting Standards Board; (b) applied
      for all periods after the date hereof in a manner con-sistent with the manner
      in
      which such principles and practices were applied to the most recent audited
      financial statements of the relevant Person furnished to the Lender, and
      (c) consistently applied for all periods after the date hereof so as
      to
      reflect properly the financial condition, and results of operations and changes
      in financial position, of such Person. If any change in any accounting principle
      or practice is required by the Financial Accounting Standards Board in order
      for
      such prin-ciple or practice to continue as a generally accepted accounting
      principle or practice, all reports and financial statements required hereunder
      may be prepared in accordance with such change only after written notice of
      such
      change is given to the Lender. 

     

    Governmental
      Authority
      means
      any foreign governmental authority, the United States of America, any State
      of
      the United States and any political subdivision of any of the fore-going, and
      any agency, department, commission, board, bureau, court or other tribunal
      having jurisdiction over the Lender, the Borrower, any of the Borrower’s
      Subsidiaries or their respec-tive Property. 

     

    Highest
      Lawful Rate
      means
      the maximum nonusurious rate of interest permitted to be charged by applicable
      federal or Texas law (whichever shall permit the higher lawful rate) from time
      to time in effect. At all times, if any, as the Texas Finance Code shall
      establish the Highest Lawful Rate, the Highest Lawful Rate shall be the “weekly
      ceiling” (as defined therein) from time to time in effect.

     

    Indebtedness
      means
      and include (a) all items which in accordance with Generally Accepted
      Accounting Principles would be included on the liability side of a balance
      sheet
      on the date as of which Indebtedness is to be determined (excluding capital
      stock, surplus, surplus reserves and deferred credits); (b) all
      guar-anties, endorsements and other contingent obligations in respect of, or
      any
      obligations to purchase or otherwise acquire, Indebt-edness of others, and
      (c) all Indebtedness secured by any Lien existing on any interest of
      the
      Person with respect to which Indebtedness is being determined in Property owned
      subject to such Lien whether or not the Indebtedness secured thereby shall
      have
      been assumed; but
      such
      term shall not mean or include any Indebtedness in respect of which monies
      sufficient to pay and discharge the same in full (either on the expressed date
      of maturity thereof or on such earlier date as such Indebtedness may be duly
      called for redemption and payment) shall be deposited with a depository, agency
      or trustee acceptable to the Lender in trust for the payment thereof.

     

    
      
         

      

      
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    Interest
      Rate Agreement
      means
      the Interest Rate Agreement of even date herewith between the Borrower and
      the
      Lender.

     

    Legal
      Requirement
      means
      any law, statute, ordinance, decree, requirement, order, judgment, rule,
      regulation (or inter-pretation of any of the foregoing) of, and the terms of
      any
      license or permit issued by, any Governmental Authority or any Self-Regulatory
      Organization. 

     

    Letter
      of Credit Drawing
      means
      any drawing under a Letter of Credit.

     

    Letter
      of Credit Exposure
      means,
      on any date, the sum of (a) the aggregate then-undrawn face amount of all
      outstanding Letters of Credit plus (b) all then-unreimbursed Letter of Credit
      Drawings.

     

    Letter
      of Credit Sublimit
      means
      $1,500,000.

     

    Letters
      of Credit
      means
      all letters of credit issued pursuant to this Agreement, including the Existing
      Letters of Credit.

     

    Leverage
      Ratio
      means,
      on the last day of any calendar quarter, the ratio of (a) Debt as of such date
      to (b) Adjusted EBITDA for the four calendar quarters then ending.

    

    Lien
      means
      any mortgage, pledge, charge, encumbrance, security interest, collateral
      assignment or other lien or restriction of any kind, whether based on common
      law, constitutional provision, statute or contract, and shall include
      reservations, exceptions, encroach-ments, easements, rights of way, covenants,
      conditions, restrictions, leases and other title exceptions. 

    

    Liquidity
      means,
      on any date, (a) cash and cash equivalents plus
      (b)
      marketable securities owned plus
      (c)
      marketable securities available for sale minus
      (d)
      securities sold, not yet purchased.

    

    Liquidity
      Ratio
      means,
      on any date, the ratio of (a) Liquidity to (b) Debt.

    

    Loan
      means
      each advance of funds pursuant to this Agreement. 

     

    Loan
      Commitment
      means,
      on any date, the difference of (a) the Maximum Commitment minus (b) the Letter
      of Credit Exposure.

     

    Management
      Group
      means
      George L. Ball; Robert E. Garrison II; Titus H. Harris, Jr.; Ben T. Morris,
      and
      Don A. Sanders.

     

    Margin
      Stock
      shall
      have the meaning ascribed to such term in Regulation U.

    

    Maximum
      Commitment
      means
      $15,000,000.

     

    Note
      means
      the promissory note of the Borrower described in Section
      2.1,
      and any
      and all renewals, extensions, modifications, rearrangements and replacements
      thereof and any and all substitutions therefor. 

     

    Obligations
      means
      all Indebtedness of the Obligors under the Credit Documents, including the
      Loans, the Indebtedness under the Applications, the Letter of Credit Drawings,
      the expenses of the Lender of the type described in Section
      8.8,
      other
      expenses paid or incurred by the Lender in performing any agreement of any
      Obligor under any Credit Document which such Obligor has failed to perform
      and
      obligations under Section
      8.9.

     

    
      
         

      

      
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    Obligors
      means
      all Persons other than the Lender executing any Credit Document. 

     

    Organizational
      Documents
      means,
      with respect to an Entity, the documents
      and instruments providing for the formation, organization and governance
      thereof.

     

    Past
      Due Rate
      means a
      rate per annum equal to the lesser of (a) the Prime Rate plus 2% or (b) the
      Highest Lawful Rate. 

     

    Person
      means
      any individual, Entity, trust, unin-corporated organization, Governmental
      Authority, Self-Regulatory Organization or any other form of entity.

     

    Plan
      means
      any plan subject to Title IV of ERISA and maintained for employees of the
      Borrower, any of its Subsidiaries or any member of a “controlled group of
      corporations”, as such term is defined in the Code, of which the Borrower or any
      of its Subsidiaries is a part, or any such plan to which the Borrower or any
      of
      its Subsidiaries is required to contribute on behalf of its employees.

     

    Prime
      Rate
      means
the
      rate
      of interest per annum publicly announced from time to time by the Lender as
      its
      prime rate in effect at its principal office in New York City; each change
      in
      the Prime Rate shall be effective from and including the date such change is
      publicly announced as being effective. 

    

    Proper
      Form
      means in
      form and substance reasonably satisfactory to the Lender. 

     

    Property
      means
      any interest in any kind of property or asset, whether real, personal or mixed,
      tangible or intangible. 

     

    Regulation
      U
      means
      Regulation U of the Board of Governors of the Federal Reserve
      System.

     

    Quarterly
      Financial Statements
      means
      the quarterly Financial Statements of a Person. 

     

    Secretary’s
      Certificate
      means a
      certificate of the Secretary or an Assistant Secretary (or similar officer)
      of
      an Entity as to (a) the resolutions of the Board of Directors (or similar body)
      of such Entity authorizing
      the
      execution, delivery and performance of the Credit Documents to be delivered
      by
      such Entity; (b) the incumbency and signature of the officer(s) of such Entity
      executing such Credit Documents on behalf of such Entity, and (c) the
      Organizational Documents of such Entity.

     

    Security
      Agreement
      means
      the security agreement, in Proper Form, in favor of the Lender in connection
      with the Loans, covering the equity in certain Subsidiaries of the Borrower
      and
      other property therein described and securing, without limitation, the
      Obligations. 

     

    Security
      Documents
      means
      this Agreement, the Security Agreement and any and all other agreements and
      other instruments and Financing Statements now or hereafter executed and
      delivered or authorized by any Person (other than solely by the Lender and/or
      any other creditor partici-pating in any of the Obligations or any collateral
      or
      security therefor) in connection with, or as security for the payment or
      performance of, the Obligations. 

     

    Self-Regulatory
      Organizations
      means
      all securities exchanges, commodity exchanges, the National Association of
      Securities Dealers and other Persons (a) to which any Governmental Authority
      has
      delegated any of its powers and (b) which has jurisdiction over the Borrower
      or
      any of its Subsidiaries.

     

    Subsidiary
      means,
      as to a particular parent Entity, any Entity of which more than 50% of the
      indicia of equity rights (whether outstanding capital stock or otherwise) is
      at
      the time directly or indirectly owned by, such parent Entity, or by one or
      more
      of its Affiliates. 

     

    
      
         

      

      
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    Termination
      Date
      means
      the earlier of (a) 364 days after the date hereof (or, if such day is not a
      Business Day, the immediately preceding Business Day) or (b) the date specified
      by the Lender in accordance with Section
      7.1(3).
      

     

    Total
      Exposure
      means,
      on any date, the sum of (a) the outstanding principal balance of the Note plus
      (b) the Letter of Credit Exposure, in each case for such day. 

     

    Unused
      Commitment
      means,
      on any date, the difference of (a) the Maximum Commitment minus (b) the Total
      Exposure.

     

    1.2      
      Other
      Terms and References.
      Except
      where specifically otherwise provided in the Credit Documents:

    

    (a)  Each
      of
      the following terms shall have the meaning ascribed to it in the Texas Uniform
      Commercial Code on the date hereof:

    

    accessions,
      continuation statement, fixtures, general intangibles, goods, proceeds, security
      in-terest and security agreement.

     

    (b)  Any
      accounting term not otherwise defined shall have the meaning ascribed to it
      under Generally Accepted
      Accounting Principles.

    

    (c)  All
      calculations of amounts and ratios with respect to each covenant contained
      in
      the Credit Documents shall be carried out to the precision implied in such
      covenant; e.g.,
      if a
      ratio is expressed in a covenant as “at least 1.00 to 1” then such ratio shall
      be rounded to the nearest 0.01, while if a ratio is expressed in a covenant
      as
“at least 1.0 to 1” then such ratio shall be rounded to the nearest
      0.1.

    

    
      (d)     
        Unless
        otherwise specified, all references to time shall be references to Houston
        time.

    

    

    (e)  Wherever
      the term “including” or any of its correlatives appears in a Credit Document, it
      shall be read as if it were written “including (by way of example and without
      limiting the generality of the subject or concept referred to)”.

    

    (f)  Wherever
      the word “herein” or “hereof” is used in a Credit Document, it is a reference to
      that entire Credit Document and not just to the subdivision of it in which
      the
      word is used.

    

    (g)  References
      in a Credit Document to Section and Article numbers are references to the
      Sections and Articles, respectively, of such Credit Document.

    

    (h)  References
      in a Credit Document to Exhibits, Schedules, Riders, Annexes and Appendices
      are
      to the Exhibits, Schedules, Riders, Annexes and Appendices to such Credit
      Document, and they shall be deemed incorporated into such Credit Document by
      reference.

    

    (i)  Any
      term
      defined in the Credit Documents which refers to a particular agreement,
      instrument or document shall also mean, refer to and include all modifications,
      amendments, supplements, restatements, renewals, extensions and substitutions
      of
      the same; but
      nothing
      in this Section shall be construed to authorize any such modification,
      amendment, supplement, restate-ment, renewal, extension or substitution except
      as may be permitted by other provisions of the Credit Documents.

    

    
      (j)      
        Defined
        terms may be used in the singular or plural, as the context
        requires.

    

    

    (k)  The
      pronouns used in the Credit Documents are in the neuter gender but shall be
      construed as feminine, masculine or neuter, as the context
      requires.

    

    
      
         

      

      
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    2.  The
      Credits. 

    

    2.1  Loans.
      Subject
      to the terms and conditions hereof, the Lender agrees to make Loans to the
      Borrower from time to time before the Termination Date, not to exceed the Loan
      Commitment at any one time outstanding, the Borrower having the right to borrow,
      repay and reborrow. Each Loan shall be an integral multiple of $10,000 or the
      Unused Commitment, whichever is less. Each repayment of the Loans shall be
      an
      integral multiple of $10,000 or the principal balance of the Note, whichever
      is
      less. The Loans shall be evidenced by the Note substantially in the form of
      Exhibit
      A.

    

    
      2.2  Letters
        of Credit.

    

    

    (a)  Subject
      to the terms and conditions hereof, the Lender agrees to issue Letters of Credit
      for the account of the Borrower (or the account of a Subsidiary of the Borrower,
      as favouree) from time to time before the Termination Date, in such face amount,
      with such expiry date (but
      no
      Letter of Credit shall have an expiry date which is more than one year after
      the
      scheduled Termination Date) and for the benefit of such beneficiary as the
      Borrower may designate in the Application for such Letter of Credit;
but
      the
      Lender shall have no obligation to issue a Letter of Credit if, after giving
      effect to such issuance, either (x) the Letter of Credit Exposure would exceed
      the Letter of Credit Sublimit or (y) the Total Exposure would exceed the Maximum
      Commitment. In consideration for the issuance of each Letter of Credit, the
      Borrower agrees to pay the Lender (1) a letter of credit fee equal to the lesser
      of $500 or 1% per annum of the face amount of such Letter of Credit for its
      term, paid as a condition to the issuance of such Letter of Credit, and (2)
      the
      usual and customary fees of the Lender for each amendment and wire advice of
      and
      drawing under such Letter of Credit. All past due fees shall accrue interest
      at
      the Past Due Rate.

    

    (b)  The
      obligation of the Borrower to reimburse the Lender for amounts drawn under
      each
      Letter of Credit shall be a demand obligation as described in the related
      Application; but
      if the
      Borrower fails to promptly reimburse the Lender for any such draw, then the
      Lender may advance the amount of such draw as a Loan, regardless of the
      procedures (including conditions precedent) described in this Agreement
      concerning the making of Loans, the size of such Loan or the acceleration of
      the
      Termination Date as provided in Section
      8.1(2).

    

    (c)  On
      the
      Termination Date (whether by the passage of time or otherwise), the Borrower
      shall immediately provide the Lender with either (1) cash collateral in an
      amount equal to the Letter of Credit Exposure, such collateral to be subject
      to
      Security Documents in Proper Form, or (2) a back-up letter of credit for each
      outstanding Letter of Credit, each such back-up letter of credit in a face
      amount equal to the relevant Letter of Credit, with an expiry date at least
      one
      month after the expiry date of such Letter of Credit, issued by an issuer
      reasonably satisfactory to the Lender and in Proper Form.

    

    2.3  Unused
      Commitment Fee; Reduction of Maximum Commitment.
      In
      consideration of the Maximum Commitment, the Borrower agrees to pay a commitment
      fee (computed on the basis of the actual number of days elapsed in a year
      composed of 360 days) of 1/8% per annum on the daily average Unused Commitment,
      such fee to be due and payable on the last Business Day of each June, September,
      December and March before the Termination Date and on the Termination Date.
      All
      past due commitment fees shall bear interest at the Past Due Rate. The Borrower
      may, upon ten Business Days’ prior written notice to the Lender, permanently
      reduce the Maximum Commitment in integral multiples of $100,000; but
      the
      Borrower may not reduce the Maximum Commitment to an amount less than the
      then-current Total Exposure. 

    

    
      2.4  Capital
        Adequacy.

    

    

    (a)  If
      after
      the date of this Agreement, the Lender shall have determined that the adoption
      or effectiveness of any appli-cable law, rule or regulation regarding capital
      adequacy, or any change therein, or any change in the interpretation or
      adminis-tration thereof by any Governmental Authority, central bank or
      comparable agency charged with the interpretation or administration thereof,
      or
      compliance by the Lender with any request or directive regarding capital
      adequacy (whether or not having the force of law) of any such Governmental
      Authority, central bank or comparable agency, has or would have the effect
      of
      reducing the rate of return on the Lender’s capital as a consequence of its
      obligations under the Credit Documents to a level below that which the Lender
      could have achieved but for such adoption, change or compliance (taking into
      consideration the Lender’s policies with respect to capital adequacy) by an
      amount deemed by the Lender to be material, then from time to time, the Borrower
      shall pay to the Lender such additional amount or amounts as will compensate
      the
      Lender for such reduction.

    

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    (b) A
      certificate of the Lender setting forth in reasonable detail the cause and
      such
      amount or amounts as shall be necessary to compensate the Lender as speci-fied
      in Section
      2.4(a),
      detailing the calculation of such amount(s), shall be delivered as soon as
      practicable to the Borrower and shall be conclusive and binding, absent manifest
      error. The Borrower shall pay the Lender the amount shown as due on any such
      certificate within 15 days after the Lender delivers such certificate. In
      preparing such certi-ficate, the Lender may employ such assumptions and
      allocations of costs and expenses as it shall in good faith deem reasonable
      and
      may use any reasonable averaging and attribution method.

     

    2.5  Payments.
      Unless
      otherwise expressly provided therein, all payments of principal, interest and
      other fees and amounts due from any Obligor under the terms of the Credit
      Documents shall be made in immediately available dollars to the Lender at its
      principal banking building in Houston, Harris County, Texas, by no later than
      12:00 noon on the date when due; each payment made after that time shall be
      considered for all purposes (including the payment of interest, to the extent
      permitted by law) as having been made on the next succeeding Business Day.
      Except as otherwise provided in the Credit Documents, if any payment or
      prepayment becomes due and payable on a day which is not a Business Day, then
      the date for the payment thereof shall be extended to the next succeeding
      Business Day, and interest shall be payable thereon at the then-applicable
      rate
      per annum during such extension.

    

    3.  Conditions.
      

    

    3.1  All
      Extensions of Credit.
      The
      obligation of the Lender to make any Loan or to issue any Letter of Credit
      is
      subject to (a) the accuracy, in all material respects, of all representations
      and warranties of the Obligors on the date thereof; (b) the performance by
      the
      Obligors of their respective obligations under the Credit Documents and (c)
      the
      satisfaction of the following further conditions: (1) the Lender shall
      have
      received the following, all of which shall be duly executed and in Proper Form:
      (A) in the case of a Loan, a Request for Loan, substantially in the
      form of
Exhibit
      B,
      by the
      relevant Rate Designation Date (as defined in the Interest Rate Agreement)
      before the date (which shall be a Business Day) of such proposed Loan;
      (B) in the case of a Letter of Credit, an Application, five Business
      Days
      before the date (which shall be a Business Day) of the proposed issuance of
      such
      Letter of Credit, and (C) such other documents as the Lender may reasonably
      require; (2) before the making of the Loan or the issuance of the Letter
      of
      Credit, as the case may be, there shall have occurred, in the sole opinion
      of
      the Lender, no material adverse change in the assets, liabilities, financial
      condition, business or affairs of the Borrower and its Subsidiaries, taken
      as a
      whole; (3) no Default or Event of Default shall have occurred and be
      continuing, and (4) the making of the Loan or the issuance of the Letter
      of
      Credit, as the case may be, shall not be prohibited by, or subject the Lender
      to
      any penalty or onerous condition under, any Legal Requirement. 

    

    3.2 First
      Extension of Credit.
      In
      addition to the matters described in Section
      3.1,
      the
      obligation of the Lender to make the first Loan or issue the first Letter of
      Credit hereunder (other than the Existing Letters of Credit) is subject to
      the
      receipt by the Lender of each of the following, in Proper Form: (a) the
      Note, the Security Agreement and the Interest Rate Agreement, each duly executed
      by the Borrower; (b) a Secretary’s Certificate for the Borrower; (c) a
      certificate from the Secretary of State or other appropriate public official
      as
      to the continued existence or authority to do business and good standing of
      the
      Borrower; Sanders Morris Harris, Inc., and SMH Capital Advisors, Inc.; (d)
      a
      legal opinion substantially to the effects set forth on Exhibit
      D,
      and
      (e) evidence satisfactory to the Lender as to the priority of the security
      interests created by the Security Documents, and to the further condition that,
      at the time of the initial Loan, all legal matters incident to the transactions
      herein contemplated shall be satisfactory to Locke Liddell & Sapp LLP,
      counsel for the Lender. Upon the satisfaction of the conditions described in
      the
      immediately preceding sentence, the Existing Letters of Credit shall be deemed
      to be Letters of Credit for all purposes, and the application for each Existing
      Letter of Credit shall be deemed to be an Application, without need for any
      further action and without any adjustment to the letter of credit fees
      previously paid in connection with the issuance of the Existing Letters of
      Credit.

    

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    4. Representations
      and Warranties.

     

    To
      induce
      the Lender to enter into this Agreement and to make the Loans, the Borrower
      represents and warrants as follows: 

    

    4.1 Organization.
      The
      Borrower and each of its Subsidiaries (a) is duly organized, validly existing
      and in good standing under the laws of the state of its organization; (b) has
      all power and authority to conduct its business as presently conducted; (c)
      is
      duly qualified to do business and in good standing in all jurisdictions where
      such qualification is necessary or desirable, and (d) has all licenses, permits
      and registrations necessary to conduct its business as presently conducted,
      and
      all of the same are in full force and effect.

    

    4.2  Financial
      Statements.
      The
      financial statements delivered to the Lender fairly present, in accordance
      with
      Generally Accepted Accounting Principles, the financial condition and the
      results of operations of the Borrower and its Subsidiaries as at the dates
      and
      for the periods indicated. No material adverse change has occurred in the
      assets, liabilities, financial condition, business or affairs of the Borrower
      and its Subsidiaries, taken as a whole, since the dates of such financial
      statements. Neither the Borrower nor any of such other Persons is subject to
      any
      instrument or agreement materially and adversely affecting its financial
      condition, business or affairs.

    

    4.3  Enforceable
      Obligations; Authorization.
      The
      Credit Documents are legal, valid and binding obligations of the Obligors,
      enforceable in accordance with their respective terms, except as may be limited
      by bankruptcy, insolvency and other similar laws affecting creditors’ rights
      generally and by general equitable principles. The execution, delivery and
      performance of the Credit Documents (a) have all been duly authorized by all
      necessary action by the Obligors; (b) are within the power and authority of
      the
      Obligors; (c) do not and will not contravene or violate any Legal Requirement
      or
      the Organizational Documents of the Obligors; (d) do not and will not result
      in
      the breach of, or constitute a default under, any material agreement or
      instrument by which the Obligors or any of their respective Property may be
      bound or affected, and (e) do not and will not result in the creation of any
      Lien upon any Property of any of the Obligors except as expressly contemplated
      therein. All necessary permits, registrations and consents for such making
      and
      performance have been obtained. Except as expressly set forth therein, the
      Liens
      of the Security Documents will constitute valid and perfected first and prior
      Liens on the Collateral, subject to no other Liens whatsoever. 

    

    4.4  Other
      Debt.
      Neither
      the Borrower nor any of its Subsidiaries is in default in the payment of any
      other Indebtedness or under any agreement, mortgage, deed of trust, security
      agreement or lease to which it is a party. 

    

    4.5 Litigation.
      Except
      as heretofore disclosed to the Lender, there is no litigation or administrative
      proceeding pending or, to the knowledge of the Borrower, threatened against,
      nor
      any outstanding judgment, order or decree affecting, the Borrower or any of
      its
      Subsidiaries before or by any Governmental Authority or any Self-Regulatory
      Organization. Neither the Borrower nor any of its Subsidiaries is in default
      with respect to any judgment, order or decree of any Governmental Authority
      or
      any Self-Regulatory Organization. 

    

    4.6 Title.  The
      Borrower and each of its Subsidiaries has good and marketable title to its
      respective Property, free and clear of all Liens other than Liens permitted
      under Section
      6.2.
      

    

    4.7 Taxes.  The
      Borrower and each of its Subsidiaries has filed all tax returns required to
      have
      been filed and paid all taxes shown thereon to be due, except those for which
      extensions have been obtained and those which are being contested in good faith
      by appropriate proceedings diligently conducted. 

     

    4.8 Investment
      Company Act.
      No
      Obligor is an “investment company” or a company “controlled” by an “investment
      company,” within the meaning of the Investment Company Act of 1940, as
      amended.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    4.9 Public
      Utility Holding Company Act.
      No
      Obligor is a “holding company,” a “subsidiary company” of a “holding company,”
      an “affiliate” of a “holding company” or an affiliate of a “subsidiary company”
      of a “holding company,” as such terms are defined in the Public Utility Holding
      Company Act of 1935, as amended.

    

    4.10 Subsidiaries.
      The
      Borrower has no Subsidiaries other than as listed on Appendix I.
      Each
      such Subsidiary is owned by the Borrower in the percentage set forth on
Appendix I.
      

    

    4.11 Representations
      by Others; No Misrepresentation.
      All
      statements made by or on behalf of any Obligor in connection with any Credit
      Document shall constitute representations and warranties of the Borrower
      hereunder. No information furnished by or on behalf of the Borrower to the
      Lender in connection with the negotiation of this Agreement or delivered
      hereunder contains any material misstatement of fact or omits to state any
      material fact necessary to make the statements therein, in the light of the
      circumstances under which they were made, not misleading.

    

    5. Affirmative
      Covenants.

     

    The
      Borrower covenants and agrees with the Lender that before the termination of
      this Agreement it will do, cause each of its Subsidiaries to do, and if
      necessary cause to be done, each and all of the following: 

    

    5.1 Taxes,
      Existence, Regulations, Property, etc.
      At all
      times (a) pay when due all taxes and governmental charges of every kind
      upon it or against its income, profits or Property, unless and only to the
      extent that the same shall be contested in good faith and reserves in accordance
      with Generally Accepted Accounting Principles have been established therefor;
      (b) do all things necessary to preserve its existence, qualifications,
      rights and franchises in all States where such qualification is necessary or
      desirable; (c) comply with all applicable Legal Requirements in respect
      of
      the conduct of its business and the ownership of its Property, and
      (d) cause its Property to be protected, maintained and kept in good
      repair
      and make all replacements and additions to its Property as may be reasonably
      necessary to conduct its business properly and efficiently. 

    

    5.2 Financial
      Statements and Information.
      Furnish
      to the Lender: (a) as soon as available and in any event within 120
      days
      after the end of each calendar year, Annual Financial Statements of the Borrower
      and its Subsidiaries; (b) as soon as available and in any event within
      45
      days after the end of each calendar quarter, Quarterly Financial Statements
      of
      the Borrower and its Subsidiaries; (c) concurrently with the financial
      statements provided for in Sections
      5.2(a)
      and
(b),
      a
      Certificate of No Default substantially in the form of Exhibit
      D;
      (d)
      promptly after the same become publicly available, copies of all periodic and
      other reports, proxy statements and other materials filed by the Borrower or
      any
      Subsidiary with (1) the Securities and Exchange Commission, or any Governmental
      Authority succeeding to any or all of the functions of said Commission; (2)
      any
      Self-Regulatory Organization, or (3) any national securities exchange, and
      (e) such other information relating to the financial condition and affairs
      of the Borrower and its Subsidiaries as from time to time may be reasonably
      requested by the Lender. 

    

    5.3 Financial
      Tests.
      Have
      and maintain as of the end of each calendar quarter: (a) total assets
      under
      management with a fair value of at least $8,000,000,000; (b) a Liquidity Ratio
      of at least 1.50 to 1, and (c) a Leverage Ratio of no more than 2.50 to
      1.

    

    5.4 Inspection.
      Upon at
      least one Business Day’s prior notice, permit the Lender to inspect its
      Property, to examine its files, books and records and make and take away copies
      thereof, and to discuss its affairs with its officers and accountants, all
      at
      such times and intervals and to such extent as the Lender may reasonably desire.
      

    

    5.5 Further
      Assurances.
      Promptly execute and deliver any and all other and further instruments which
      may
      be requested by the Lender to cure any defect in the execution and delivery
      of
      any Credit Document or more fully to describe particular aspects of the
      Borrower’s agreements set forth in the Credit Documents or so intended to be.

    

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    5.6 Books
      and Records.
      Maintain books of record and account in accordance with Generally Accepted
      Accounting Principles. 

    

    5.7 Insurance.
      Maintain insurance with such insurers, on such of its properties, in such
      amounts and against such risks as is satisfactory to the Lender, and furnish
      the
      Lender satisfactory evidence thereof promptly upon request. 

    

    5.8 Notice
      of Certain Matters.
      Notify
      the Lender immediately upon acquiring knowledge of (a) the institution or
      threatened institution of any lawsuit or administrative proceeding affecting
      the
      Borrower or any of its Subsidiaries; (b) any material adverse change in the
      assets, liabilities, financial condition, business or affairs of the Borrower
      or
      any of its Subsidiaries, or (c) the occurrence of any Event of Default or any
      Default. The Borrower will notify the Lender in writing at least 30 days before
      the date that the Borrower or any of its Subsidiaries changes its name or the
      location of its chief executive office or principal place of business or the
      place where it keeps its books and records. 

    

    5.9 Use
      of
      Credits.
      The
      Letters of Credit and proceeds of the Loans will be used for general corporate
      purposes. 

    

    6. Negative
      Covenants.

     

    The
      Borrower covenants and agrees with the Lender that before the termination of
      this Agreement it will not, and will not suffer or permit any of its
      Subsidiaries to, do any of the following: 

    

    6.1 Indebtedness.
      Create,
      incur, suffer or permit to exist, or assume or guarantee, directly or
      indirectly, or become or remain liable with respect to any Indebtedness, whether
      direct, indirect, absolute, contingent or otherwise, except
      the
      following: (a) Indebtedness to the Lender; (b) Indebtedness secured
      by
      Liens permitted by Section
      6.2;
      (c) other liabilities existing on the date of this Agreement and heretofore
      disclosed to the Lender, and all renewals and extensions (but not increases)
      thereof; (d) current accounts payable and unsecured current liabilities,
      not the result of borrowing, to vendors, suppliers and persons providing
      services, for expenditures for goods and services normally required by it in
      the
      ordinary course of business and on ordinary trade terms; (e) Indebtedness
      incurred in connection with assets sold in the ordinary course of business
      but
      not yet owned, and (f) other Indebtedness, not to exceed $250,000 in the
      aggregate at any one time outstanding. 

    

    6.2 Liens.
      Create
      or suffer to exist any Lien upon any of its Property now owned or hereafter
      acquired, or acquire any Property upon any conditional sale or other title
      retention device or arrangement or any purchase money security agreement; or
      in
      any manner directly or indirectly sell, assign, pledge or otherwise transfer
      any
      of its accounts or contract rights; but
      the
      Borrower or any of its Subsidiaries may create or suffer to exist:
      (a) artisans’ or mechanics’ Liens arising in the ordinary course of
      business, and Liens for taxes, but only to the extent that payment thereof
      shall
      not at the time be due; (b) Liens in effect on the date hereof and
      disclosed to the Lender in writing, but
      neither
      the maximum amount of Indebtedness secured thereby nor the Property covered
      thereby shall increase; (c) deposits with clearing brokers and dealers in the
      ordinary course of business and on customary terms; (d) purchase money Liens
      on
      Property to be acquired by it, if
      the
      Indebtedness secured thereby does not exceed the purchase price of such
      Property; (e) Liens on Margin Stock if
      such
      Liens do not cover Margin Stock with a fair value equal to at least 25% of
      the
      fair value of all of the Property of the Borrower and its Subsidiaries, measured
      at the time of creation of such Liens, and (f) Liens in favor of the
      Lender. 

    

    6.3 Contingent
      Liabilities.
      Directly or indirectly guarantee the performance or payment of, or purchase
      or
      agree to purchase, or assume or contingently agree to become or be secondarily
      liable in respect of, any obligation or liability of any other Person
except
      (a) as
      heretofore disclosed to the Lender; (b) guaranties of Indebtedness aggregating
      no more than $250,000 at any one time outstanding, and (c) for the endorsement
      of checks or other negotiable instruments in the ordinary course of business.
      

    

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    6.4 Mergers,
      Consolidations and Dispositions and Acquisitions of Assets.
      In any
      single transaction or series of transactions, directly or indirectly
      (a) liquidate or dissolve; (b) be a party to any merger or
      consolidation; (c) sell, convey or lease all or any substantial part
      of its
      assets (including any line of business), except for sale of securities in the
      ordinary course of business; (d) pledge, transfer or otherwise dispose
      of
      any shares of capital stock of a Subsidiary or any Indebtedness of a Subsidiary,
      or permit any Subsidiary to issue any additional shares of capital stock other
      than to the Borrower or to acquire any shares of capital stock of the Borrower
      or any Subsidiary; or (e) acquire all or substantially all of the assets
      or
      any line of business of any Person, or a majority of stock of or similar
      interest in any other Person, (other than the acquisition of all of the equity
      issued by The Edelman Financial Center, LLC) after the date hereof, if (with
      respect to this clause
      (e))
      the
      aggregate consideration for such transaction exceeds $15,000,000. 

    

    6.5 Nature
      of Business; Management.
      Change
      the nature of its business or enter into any business which is substantially
      different from the business in which it is presently engaged or permit any
      material change in its management. 

    

    6.6 Transactions
      with Related Parties.
      Enter
      into any transaction or agreement with any officer, director or holder of any
      outstanding interest in the Borrower or any of its Subsidiaries (or any
      Affiliate of any such Person) unless the same is upon terms substantially
      similar to those obtainable from wholly unrelated sources. 

     

    6.7 ERISA.
      At any
      time permit any Plan to (a) engage in any “prohibited transaction” as defined in
      ERISA; (b) incur any “accumulated funding deficiency” as defined in ERISA, or
      (c) be terminated in a manner which could result in the imposition of a Lien
      on
      any Property of the Borrower or any of its Subsidiaries pursuant to
      ERISA.

    

    7. Events
      of Default and Remedies.
      

    

    7.1 Events
      of Default.
      If any
      of the following events shall occur and be continuing, then the Lender may
      do
      any or all of the following: (1) without notice to the Borrower, declare
      the Note to be, and thereupon the Note shall forthwith become, immediately
      due
      and payable, together with all accrued interest thereon and all earned or
      accrued commitment fees hereunder, without notice of any kind, notice of
      acceleration or of intention to accelerate, presentment and demand or protest,
      all of which are hereby expressly waived; (2) without notice to the
      Borrower, terminate all commitments; (3) by notice in writing to the
      Borrower, accelerate the Termination Date to a date as early as the date of
      the
      notice; (4) exercise its rights of offset against each account and all
      other Property of the Borrower in the possession of the Lender, which right
      is
      hereby granted by the Borrower to the Lender, and (5) exercise any and
      all
      other rights pursuant to the Credit Documents: 

    

    (a) The
      Borrower shall fail to pay or prepay any principal of the Note as and when
      due;
      or 

    

    (b) The
      Borrower shall fail to pay any interest on the Note or any commitment fee or
      other Obligation as and within five days of when due; or 

    

    (c) The
      Borrower or any of its Subsidiaries (1) shall fail to pay at maturity,
      or
      within any applicable period of grace, any principal of or interest on any
      other
      borrowed money obligation or shall fail to observe or perform any term, covenant
      or agreement contained in any agreement or obligation by which it is bound,
      or
      (2) is in default under or in violation of any Legal Requirement; or
      

    

    (d) Any
      representation or warranty made in connection with any Credit Document shall
      prove to have been incorrect, false or misleading; or 

    

    (e) Default
      shall occur in the punctual and complete performance of any covenant of the
      Borrower or any other Person contained in any Credit Document; or 

    

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    (f) A
      final
      judgment for the payment of money shall be rendered against the Borrower or
      any
      of its Subsidiaries and (1) the same shall remain undischarged by the date
      as of
      which the judgment creditor may execute thereon and (2) such execution shall
      not
      be effectively stayed; or

    

    (g) Any
      Obligor shall claim, or any court shall find or rule, that the Lender does
      not
      have a valid Lien as provided for herein on any security which may have been
      provided by such Obligor; or 

    

    (h) The
      sale,
      encumbrance or abandonment (except as otherwise expressly permitted by the
      Credit Documents) of any Collateral; or the making of any levy, seizure or
      attachment thereof or thereon; or the loss, theft, substantial damage, or
      destruction thereof; or 

    

    (i) Any
      order
      shall be entered in any proceeding against the Borrower or any of its
      Subsidiaries decreeing the dissolution, liquidation or split-up thereof, and
      such order shall remain in effect for 30 days; or 

    

    (j) The
      occurrence of an Event of Default under any Credit Document; or 

    

    (k) The
      Borrower or any of its Subsidiaries shall make a general assignment for the
      benefit of creditors or shall petition or apply to any tribunal for the
      appointment of a trustee, custodian, receiver or liquidator of all or any
      substantial part of its business, estate or assets or shall commence any
      proceeding under any bankruptcy, reorganization, arrangement, insolvency,
      readjustment of debt, dissolution or liquidation law of any jurisdiction,
      whether now or hereafter in effect; or 

    

    (l) Any
      such
      petition or application shall be filed or any such proceeding shall be commenced
      against the Borrower or any of its Subsidiaries and the Borrower or such
      Subsidiary by any act or omission shall indicate approval thereof, consent
      thereto or acquiescence therein, or an order shall be entered appointing a
      trustee, custodian, receiver or liquidator of all or any substantial part of
      the
      assets of the Borrower or any of its Subsidiaries or granting relief to the
      Borrower or any of its Subsidiaries or approving the petition in any such
      proceeding, and such order shall remain in effect for more than 60 days;
      or

     

    (m) The
      Borrower or any of its Subsidiaries shall fail generally to pay its debts as
      they become due or suffer any writ of attachment or execution or any similar
      process to be issued or levied against it or any substantial part of its
      Property which is not released, stayed, bonded or vacated within 30 days after
      its issue or levy; or 

    

    (n) The
      Borrower or any of its Subsidiaries shall have concealed, removed, or permitted
      to be concealed or removed, any part of its Property, with intent to hinder,
      delay or defraud its creditors or any of them, or made or suffered a transfer
      of
      any of its Property which may be fraudulent under any bankruptcy, fraudulent
      conveyance or similar law; or shall have made any transfer of its Property
      to or
      for the benefit of a creditor at a time when other creditors similarly situated
      have not been paid; or

    

    (o) The
      President or Chief Executive Officer of the Borrower is an individual who is
      not
      a member of the Management Group; or

    

    (p) Members
      of the Management Group and their respective spouses, descendants and Affiliates
      in the aggregate do not own at least 15% of the outstanding equity issued by
      the
      Borrower. 

    

    7.2 Remedies
      Cumulative.
      No
      remedy, right or power conferred upon the Lender is intended to be exclusive
      of
      any other remedy, right or power given hereunder or now or hereafter existing
      at
      law, in equity, or otherwise, and all such remedies, rights and powers shall
      be
      cumulative. 

    

    8. Miscellaneous.
      

    

    8.1 No
      Waiver.
      No
      waiver of any Default shall be deemed to be a waiver of any other Default.
      No
      failure to exercise or delay in exercising any right or power under any Credit
      Document shall operate as a waiver thereof, nor shall any single or partial
      exercise of any such right or power preclude any further or other exercise
      thereof or the exercise of any other right or power. No amendment, modification
      or waiver of any Credit Document shall be effective unless the same is in
      writing and signed by the Person against whom such amendment is sought to be
      enforced. No notice to or demand on the Borrower or any other Person shall
      entitle the Borrower or any other Person to any other or further notice or
      demand in similar or other circumstances. 

    

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    8.2 Notices.
      All
      notices under the Credit Documents shall be in writing and either
      (1) delivered against receipt therefor;
      (2) mailed
      by registered or certified mail, return receipt requested, or (3) sent
      by
      telecopy, in each case addressed as follows: 

    

    
      	
              (a)

            	
              If
                to the Borrower, to:

            
	 	 
	 	
              Sanders
                Morris Harris Group Inc.

            
	 	
              3100
                JPMorgan Chase Tower

            
	 	
              600
                Travis, Suite 3100

            
	 	
              Houston,
                Texas 77002

            
	 	
              Telecopy
                No.: (713) 993-4677

            
	 	 
	
              (b)

            	
              If
                to the Lender, to:

            
	 	 
	 	
              JPMorgan
                Chase Bank, National Association

            
	 	
              712
                Main Street, 9th
                Floor CBB-N/397

            
	 	
              Houston,
                Texas 77002

            
	 	
              Attention:
                Kevin K. Rech

            
	 	
              Telecopy
                No.: (713) 216-3024

            

    

    

    or
      to
      such other address as a party may designate. Notices shall be deemed to have
      been given (whether actually received or not) when delivered (or, if mailed,
      on
      the second Business Day after deposit with the United States Postal Service);
      but,
      the
      notices required or permitted by Sections
      2.3
      and
3.1(c)(1)
      shall be
      effective only when actually received by the Lender. Actual notice shall always
      be effective.

     

    8.3 Governing
      Law.  Unless
      otherwise specified therein, each Credit Document shall be governed by and
      construed in accordance with the laws of the State of Texas and the United
      States of America. 

    

    8.4 Survival;
      Parties Bound.  All
      representations, warranties, covenants and agreements made by or on behalf
      of
      the Borrower in connection herewith shall (a) survive the execution and delivery
      of the Credit Documents; (b) not be affected by any investigation made by any
      Person, and (c) bind the Borrower and its successors, trustees, receivers and
      assigns and inure to the benefit of the successors and assigns of the Lender;
      but
      the
      undertaking of the Lender hereunder to make Loans and issue Letters of Credit
      shall not inure to the benefit of any successor or assign of the Borrower.
      The
      term of this Agreement shall be until the final maturity of the Note, the expiry
      or cancellation of all Letters of Credit and the payment of all amounts due
      under the Credit Documents. 

    

    8.5 Counterparts.  This
      Agreement may be executed in several identical counterparts, and by the parties
      hereto on separate counterparts, and each counterpart, when so executed and
      delivered, shall constitute an original instrument, and all such separate
      counterparts shall constitute but one and the same instrument. 

    

    8.6 Usury
      Not Intended; Refund of Any Excess Payments.
      It is
      the intent of the parties in the execution and performance of this Agreement
      to
      contract in strict compliance with the usury laws of the State of Texas and
      the
      United States of America from time to time in effect. In furtherance thereof,
      the Lender and the Borrower stipulate and agree that none of the terms and
      provisions contained in any Credit Document shall ever be construed to create
      a
      contract to pay for the use, forbearance or detention of money with interest
      at
      a rate in excess of the Highest Lawful Rate and that for purposes hereof
“interest” shall include the aggregate of all charges which constitute interest
      under such laws that are contracted for, reserved, taken, charged or received
      under this Agreement. In determining whether or not the interest paid or
      payable, under any specific contingency, exceeds the Highest Lawful Rate, the
      Borrower and the Lender shall, to the maximum extent permitted under applicable
      law, (a) treat all Loans as but a single extension of credit (and Borrower
      and the Lender agree that such is the case and that provision herein for
      multiple Loans and Notes is for convenience only); (b) characterize
      any
      nonprincipal payment as an expense, fee or premium rather than as interest;
      (c) exclude voluntary prepayments and the effects thereof, and
      (d) ”spread” the total amount of interest throughout the entire
      contemplated term of the Loans. The Lender and the Borrower agree that Chapter
      346 of the Texas Finance Code shall not apply to this Agreement, the Note,
      any
      Loan or any Letter of Credit. The provisions of this Section shall control
      over
      all other provisions of the Credit Documents which may be in apparent conflict
      herewith. 

    

    
      
         

      

      
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    8.7 Captions.  The
      headings and captions appearing in the Credit Documents have been included
      solely for convenience and shall not be considered in construing the Credit
      Documents. 

    

    8.8 Expenses.  Any
      provision to the contrary notwithstanding, and whether or not the transactions
      contemplated by this Agreement shall be consummated, the Borrower shall pay
      on
      demand all out-of-pocket expenses (including, without limitation, the fees
      and
      expenses of counsel for the Lender) in connection with (a) the negotiation,
      preparation, execution, filing, recording, refiling, re-recording, modification,
      supplementing and waiver of the Credit Documents; (b) the realizing upon the
      Collateral and all costs and expenses relating to the Lender’s exercising any of
      its rights and remedies under any Credit Document or at law, and (c) the
      performance by the Lender (in the applicable Obligor’s name or in the name of
      the Lender) of any agreement, covenant or obligations of any Obligor under
      the
      Credit Documents which such Obligor has not performed, in each case including
      all appraisal fees, consulting fees, filing fees, taxes, brokerage fees and
      commissions and Uniform Commercial Code search fees; but
      (x) no
      right or option granted by an Obligor to the Lender pursuant to any Credit
      Document shall be deemed to impose or admit a duty on the Lender to supervise,
      monitor or control any aspect of the character or condition of any of the
      Collateral or any operations conducted in connection with it for the benefit
      of
      any Obligor or any other Person, and (y) the performance by the Lender of an
      agreement, covenant or obligation of any Obligor under any Credit Document
      which
      such Obligor has not performed shall not be considered or constitute a cure
      of
      such default or a waiver of the Lender’s right at any time after an Event of
      Default to exercise its rights and remedies under the Credit Documents and
      applicable law. If the Lender makes a payment in satisfaction of an agreement,
      covenant or obligation of any Obligor under any Credit Document which such
      Obligor has not performed, then the Lender shall be fully and automatically
      subrogated to all of the rights of the Person receiving such payment. Interest
      shall accrue on all such expenses from the date of written demand therefor
      at
      the Past Due Rate if
      such
      expenses are not reimbursed within 15 days after such date of demand. The
      obligations of the Borrower under this and the following Section shall survive
      the termination of this Agreement and/or the payment of the Note. 

    

    8.9 Indemnification.  The
      Borrower agrees to indemnify, defend and hold the Lender and its shareholders,
      directors, officers, employees and agents harmless from and against any and
      all
      loss, liability, obligation, damage, penalty, judgment, claim, deficiency and
      expense (including interest, penalties, attorneys’ fees and amounts paid in
      settlement) to which such Person may become subject arising out of or based
      upon
      the Credit Documents any Loan or any Letter of Credit, WHETHER
      THROUGH THE ACTUAL OR ALLEGED NEGLIGENCE OF SUCH PERSON OR
      OTHERWISE,
      except
      and to the extent caused by the gross negligence, willful misconduct or bad
      faith of the Person otherwise so indemnified. 

    

    8.10 Entire
      Agreement.  The
      Credit Documents embody the entire agreement between the Borrower and the Lender
      and supersede all prior proposals, agreements and understandings relating to
      the
      subject matter hereof. 

    

    8.11 Severability.  If
      any provision of any Credit Document shall be invalid, illegal or unenforceable
      in any respect under any applicable law, the validity, legality and
      enforceability of the remaining provisions shall not be affected or impaired
      thereby. Each waiver in the Credit Documents is subject to the overriding and
      controlling rule that it shall be effective only if and to the extent that
      (a)
      it is not prohibited by applicable law and (b) applicable law neither provides
      for nor allows any material sanction to be imposed against the Lender for having
      bargained for and obtained it.

    

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

    8.12 Disclosures.  Every
      reference in the Credit Documents to disclosures of the Borrower to the Lender,
      to the extent that such references refer to disclosures at or before the
      execution of this Agreement, shall be deemed strictly to refer only to written
      disclosures delivered to the Lender in an orderly manner concurrently with
      the
      execution hereof. 

    

    THE
      CREDIT DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY
      NOT
      BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
      AGREEMENTS OF THE PARTIES.

    

    THERE
      ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

    

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

    

    
      	 	 	 
	 	
              SANDERS
                MORRIS HARRIS GROUP, INC.,

              a Texas corporation

            
	 
 	 
 	 
 
	 	By:  	/s/ Ben
              T. Morris
	 	
              

            
	 	
              Ben
                T. Morris

              Chief Executive
                Officer

            

    

     

    
      	 	 	 
	 	
              JPMORGAN
                CHASE BANK, NATIONAL ASSOCIATION

              a national banking
                association

            
	 
 	 
 	 
 
	 	By:  	/s/ Kevin
              K. Rech
	 	
              

            
	 	
              Kevin
                K. Rech

              Senior Vice President

            
	 	 

      Exhibit
        A
        - Note

      Exhibit
        B
        - Request for Loan

      Exhibit
        C
        - Legal Opinion

      Exhibit
        D
        - Certificate of No Default

      

      Schedule
        1 - Existing Letters of Credit

      

      Appendix
        I - Subsidiaries

    
      
         

      

      
        -15-Exhibit 10.42

                                     [LOGO]

            STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - NET
                     AIR COMMERCIAL REAL ESTATE ASSOCIATION

1. Basic Provisions ("Basic Provisions").

      1.1 Parties: This Lease ("Lease"), dated for reference purposes only March
17, 2005,  is made by and between Wells Fargo Bank N.A as Trustee for the Hutton
Trust  ("Lessor")  and  PhotoMedex,  Inc.,  a Delaware  Corporation  ("Lessee"),
(collectively the "Parties", or individually a "Party").

      1.2(a)  Premises:  That certain portion of the Project (as defined below),
including all  improvements  therein or to be provided by Lessor under the terms
of this Lease,  commonly  known by the street address of 2375 Camino Vida Roble,
Suite  B,  located  in the  City of  Carlsbad,  County  of San  Diego,  State of
California,  with zip code  92009,  as  outlined  on Exhibit A  attached  hereto
("Premises")  and  generally  described as  (describe  briefly the nature of the
Premises):  A multi Tenant single level tilt up building approximately 8,000 RSF
of an  approximately  15,920 RSF building within Camino  Corporate  Center I. In
addition  to  Lessee's  rights to use and occupy  the  Premises  as  hereinafter
specified,  Lessee  shall  have  non-exclusive  rights to the  Common  Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights  to the  roof,  exterior  walls  or  utility  raceways  of  the  building
containing the Premises  ("Building")  or to any other buildings in the Project.
The  Premises,  the  Building,  the Common  Areas,  the land upon which they are
located,  along with all other buildings and  improvements  thereon,  are herein
collectively referred to as the "Project." (See also Paragraph 2)

      1.2(b)  Parking:  3/1,000 usable square feet  unreserved  vehicle  parking
spaces  ("Unreserved  Parking Spaces");  and N/A reserved vehicle parking spaces
("Reserved Parking Spaces"). (See also Paragraph 2.6)

      1.3 Term: Seven (7) years and zero (0) months ("Original Term") commencing
June 15, 2005 (see addendum) ("Commencement Date") and ending eighty four months
from commencement ("Expiration Date"). (See also Paragraph 3)

      1.4 Early Possession:  N/A ("Early Possession Date"). (See also Paragraphs
3.2 and 3.3)

      1.5 Base Rent:  $6,640.00 per month ("Base Rent"),  payable on the 1st day
of each month commencing June 15, 2005, or upon substancial completion of Tenant
Improvements. (See also Paragraph 4)

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

      1.6 Lessee's  Share of Common Area Operating  Expenses:  Ten percent (10%)
("Lessee's Share").

      1.7 Base Rent and Other Monies Paid Upon Execution:

            (a)   Base Rent:  $6,640.00  for the period June 15, 2005 - July 14,
                  2005.

            (b)   Common Area Operating Expenses:  $2,240.00 for the period June
                  15, 2005-July 14, 2005.

            (c)   Security Deposit:  $7,929.00 ("Security  Deposit").  (See also
                  Paragraph 5)

            (d)   Other: $0.00 for _____________________________________________
                  _____________________________________________________________.

            (e)   Total Due Upon Execution of this Lease: $16,809.00.

      1.8 Agreed Use: General office, warehouse,  manufacturing and laboratories
for bio-medical products. (See also Paragraph 6)

      1.9 Insuring Party. Lessor is the "Insuring Party". (See also Paragraph 8)

      1.10 Real Estate Brokers: (See also Paragraph 15)

            (a)   Representation:   The  following   real  estate  brokers  (the
"Brokers")  and  brokerage   relationships  exist  in  this  transaction  (check
applicable boxes):

|X|  Grubb &  Ellis|BRE  Commercial  represents  Lessor  exclusively  ("Lessor's
Broker");

|X| CB Richard Ellis represents Lessee exclusively ("Lessee's Broker"); or

|_| _______________ represents both Lessor and Lessee ("Dual Agency").

            (b) Payment to Brokers: Upon execution and delivery of this Lease by
both  Parties,  Lessor shall pay to the Brokers the brokerage fee agreed to in a
separate  written  agreement (or if there is no such  agreement,  the sum of see
addendum or % of the total Base Rent for the brokerage  services rendered by the
Brokers).

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

      1.12  Addenda  and  Exhibits.  Attached  hereto is an  Addendum or Addenda
consisting  of  Paragraphs  1 through 10 and  Exhibits A through C, all of which
constitute a part of this Lease.

2. Premises.

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

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<PAGE>

      2.2 Condition. Lessor shall deliver that portion of the Premises contained
within the  Building  ('Unit")  to Lessee  broom clean and free of debris on the
Commencement  Date or the Early Possession Date,  whichever first occurs ("Start
Date"),  and, so long as the required service  contracts  described in Paragraph
7.1(b) below are obtained by Lessee and in effect within  thirty days  following
the Start Date, warrants that the existing electrical, plumbing, fire sprinkler,
lighting,  heating,  ventilating and air conditioning systems ("HVAC"),  loading
doors,  if any,  and all other  such  elements  in the Unit,  other  than  those
constructed  by Lessee,  shall be in good  operating  condition on said date and
that the  structural  elements of the roof,  bearing walls and foundation of the
Unit shall be free of material defects.  If a non-compliance  with such warranty
exists  as of the Start  Date,  or if one of such  systems  or  elements  should
malfunction or fail within the  appropriate  warranty  period,  Lessor shall, as
Lessor's  sole  obligation  with  respect to such  matter,  except as  otherwise
provided in this Lease,  promptly  after  receipt of written  notice from Lessee
setting  forth with  specificity  the nature and extent of such  non-compliance,
malfunction or failure,  rectify same at Lessor's expense.  The warranty periods
shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to
the  remaining  systems and other  elements of the Unit. If Lessee does not give
Lessor the required notice within the appropriate warranty period, correction of
any such  non-compliance,  malfunction  or failure  shall be the  obligation  of
Lessee at  Lessee's  sole cost and  expense  (except for the repairs to the fire
sprinkler systems, roof, foundations, and/or bearing walls - see Paragraph 7).

      2.3 Compliance.  Lessor warrants that the improvements on the Premises and
the Common Areas comply with the building  codes that were in effect at the time
that each such improvement,  or portion thereof, was constructed,  and also with
all applicable  laws,  covenants or  restrictions  of record,  regulations,  and
ordinances  in  effect  on the  Start  Date  ("Applicable  Requirements").  Said
warranty  does not apply to the use to which  Lessee will put the Premises or to
any Alterations or Utility  Installations  (as defined in Paragraph 7.3(a)) made
or to be made by Lessee.  NOTE: Lessee is responsible for determining whether or
not the Applicable Requirements,  and especially the zoning, are appropriate for
Lessee's  intended use, and  acknowledges  that past uses of the Premises may no
longer be allowed.  If the  Premises do not comply  with said  warranty,  Lessor
shall,  except as otherwise  provided,  promptly after receipt of written notice
from  Lessee  setting  forth  with  specificity  the  nature  and extent of such
non-compliance,  rectify the same at Lessor's  expense.  If Lessee does not give
Lessor written  notice of a  non-compliance  with this warranty  within 6 months
following  the  Start  Date,  correction  of that  non-compliance  shall  be the
obligation  of  Lessee at  Lessee's  sole cost and  expense.  If the  Applicable
Requirements  are  hereafter  changed so as to  require  during the term of this
Lease the construction of an addition to or an alteration of the Unit,  Premises
and/or   Building,   the  remediation  of  any  Hazardous   Substance,   or  the
reinforcement  or other  physical  modification  of the  Unit,  Premises  and/or
Building ("Capital  Expenditure"),  Lessor and Lessee shall allocate the cost of
such work as follows:

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

            (b) If such  Capital  Expenditure  is not the result of the specific
and unique  use of the  Premises  by Lessee  (such as,  governmentally  mandated
seismic modifications),  then Lessor and Lessee shall allocate the obligation to
pay for the  portion  of such  costs  reasonably  attributable  to the  Premises
pursuant to the formula set out in Paragraph 7.1(d); provided,  however, that if
such Capital Expenditure is required during the last 2 years of this Lease or if
Lessor  reasonably  determines that it is not  economically  feasible to pay its
share thereof, Lessor shall have the option to terminate this Lease upon 90 days
prior written notice to Lessee unless Lessee notifies Lessor, in writing, within
10 days after  receipt of Lessor's  termination  notice that Lessee will pay for
such Capital  Expenditure.  If Lessor does not elect to terminate,  and fails to
tender its share of any such Capital Expenditure,  Lessee may advance such funds
and deduct same,  with  Interest,  from Rent until  Lessor's share of such costs
have been fully paid. If Lessee is unable to finance  Lessor's  share, or if the
balance  of the Rent due and  payable  for the  remainder  of this  Lease is not
sufficient to fully reimburse  Lessee on an offset basis,  Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.

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

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

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

      2.6  Vehicle  Parking.  Lessee  shall be  entitled  to use the  number  of
Unreserved  Parking Spaces and Reserved  Parking  Spaces  specified in Paragraph
1.2(b) on those  portions of the Common  Areas  designated  from time to time by
Lessor for parking.  Lessee shall not use more parking  spaces than said number.
Said  parking  spaces  shall be used for  parking  by  vehicles  no larger  than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Lessor may regulate the loading and unloading of vehicles by adopting
Rules and  Regulations  as provided  in  Paragraph  2.9. No vehicles  other than
Permitted  Size  Vehicles  may be parked in the Common  Area  without  the prior
written permission of Lessor.

            (a) Lessee shall not permit or allow any vehicles  that belong to or
are controlled by Lessee or Lessee's employees,  suppliers, shippers, customers,
contractors  or invitees to be loaded,  unloaded,  or parked in areas other than
those designated by Lessor for such activities.

            (b) Lessee  shall not  service or store any  vehicles  in the Common
Areas.

            (c) If Lessee  permits  or allows any of the  prohibited  activities
described  in this  Paragraph  2.6,  then Lessor  shall have the right,  without
notice,  in  addition to such other  rights and  remedies  that it may have,  to
remove or tow away the  vehicle  involved  and charge the cost to Lessee,  which
cost shall be immediately payable upon demand by Lessor.

      2.7 Common Areas - Definition.  The term "Common  Areas" is defined as all
areas and facilities  outside the Premises and within the exterior boundary line
of the Project and interior utility raceways and  installations  within the Unit
that are provided and designated by the Lessor from time to time for the general
non-exclusive  use of Lessor,  Lessee and other tenants of the Project and their
respective employees, suppliers, shippers, customers,  contractors and invitees,
including  parking areas,  loading and unloading areas,  trash areas,  roadways,
walkways, driveways and

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(C)1999 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                FORM MTN-2-2/99E

<PAGE>

landscaped areas.

      2.8  Common  Areas - Lessee's  Rights.  Lessor  grants to Lessee,  for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees,  during the term of this Lease, the non-exclusive right to use, in
common with others  entitled  to such use,  the Common  Areas as they exist from
time to time, subject to any rights,  powers, and privileges  reserved by Lessor
under the terms  hereof  or under  the  terms of any  rules and  regulations  or
restrictions  governing the use of the Project. Under no circumstances shall the
right  herein  granted to use the Common Areas be deemed to include the right to
store any property,  temporarily or permanently,  in the Common Areas.  Any such
storage  shall be  permitted  only by the  prior  written  consent  of Lessor or
Lessor's  designated  agent,  which  consent may be revoked at any time.  In the
event that any  unauthorized  storage  shall  occur then  Lessor  shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee,  which cost shall be
immediately payable upon demand by Lessor.

      2.9 Common Areas - Rules and  Regulations.  Lessor or such other person(s)
as Lessor may appoint  shall have the  exclusive  control and  management of the
Common Areas and shall have the right, from time to time, to establish,  modify,
amend and enforce reasonable rules and regulations ("Rules and Regulations") for
the management,  safety,  care, and cleanliness of the grounds,  the parking and
unloading of vehicles  and the  preservation  of good order,  as well as for the
convenience  of other  occupants  or tenants of the Building and the Project and
their  invitees.  Lessee  agrees to abide by and  conform  to all such Rules and
Regulations,  and  to  cause  its  employees,  suppliers,  shippers,  customers,
contractors  and  invitees  to  so  abide  and  conform.  Lessor  shall  not  be
responsible to Lessee for the non-compliance  with said Rules and Regulations by
other tenants of the Project.

      2.10 Common Areas - Changes. Lessor shall have the right, in Lessor's sole
discretion, from time to time:

            (a)  To  make  changes  to  the  Common  Areas,  including,  without
limitation,  changes  in the  location,  size,  shape and  number of  driveways,
entrances,  parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;

            (b) To close  temporarily  any of the Common  Areas for  maintenance
purposes so long as reasonable access to the Premises remains available;

            (c) To designate other land outside the boundaries of the Project to
be a part of the Common Areas;

            (d) To add  additional  buildings  and  improvements  to the  Common
Areas;

            (e) To use the  Common  Areas  while  engaged  in making  additional
improvements, repairs or alterations to the Project, or any portion thereof; and

            (f) To do and  perform  such other acts and make such other  changes
in, to or with  respect to the Common  Areas and  Project as Lessor  may, in the
exercise of sound business judgment, deem to be appropriate.

3. Term.

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

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

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

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

4. Rent.

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

      4.2 Common Area Operating Expenses.  Lessee shall pay to Lessor during the
term  hereof,  in addition to the Base Rent,  Lessee's  Share (as  specified  in
Paragraph 1.6) of all Common Area Operating  Expenses,  as hereinafter  defined,
during each  calendar  year of the term of this Lease,  in  accordance  with the
following provisions:

            (a) "Common Area  Operating  Expenses" are defined,  for purposes of
this Lease,  as all costs  incurred  by Lessor  relating  to the  ownership  and
operation of the Project, including, but not limited to, the following:

            (i)   The operation,  repair and maintenance,  in neat,  clean, good
                  order and condition of the following:

                  (aa) The Common Areas and Common Area improvements,  including
                  parking  areas,  loading and  unloading  areas,  trash  areas,
                  roadways,  parkways,  walkways,  driveways,  landscaped areas,
                  bumpers,  irrigation systems, Common Area lighting facilities,
                  fences and gates, elevators, roofs, and roof drainage systems.

                  (bb) Exterior signs and any tenant directories.

                  (cc) Any fire detection and/or sprinkler systems.

            (ii)  The cost of water,  gas,  electricity and telephone to service
                  the Common Areas and any utilities not separately metered.

            (iii) Trash disposal,  pest control services,  property  management,
                  security   services,   and  the  costs  of  any  environmental
                  inspections.

            (iv)  Reserves set aside for maintenance and repair of Common Areas.

            (v)   Real Property Taxes (as defined in Paragraph 10).

            (vi)  The  cost of the  premiums  for the  insurance  maintained  by
                  Lessor pursuant to Paragraph 8.

            (vii) Any  deductible  portion of an  insured  loss  concerning  the
                  Building or the Common Areas.

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            (viii) The cost of any Capital  Expenditure  to the  Building or the
                  Project not covered  under the  provisions  of  Paragraph  2.3
                  provided;  however, that Lessor shall allocate the cost of any
                  such  Capital  Expenditure  over a 12 year  period  and Lessee
                  shall  not be  required  to pay more  than  Lessee's  Share of
                  1/144th of the cost of such Capital  Expenditure  in any given
                  month.

            (ix)  Any other  services  to be  provided by Lessor that are stated
                  elsewhere in this Lease to be a Common Area Operating Expense.

            (b) Any Common Area Operating  Expenses and Real Property Taxes that
are specifically attributable to the Unit, the Building or to any other building
in the Project or to the operation,  repair and  maintenance  thereof,  shall be
allocated  entirely to such Unit,  Building,  or other  building.  However,  any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable  to the  Building  or to any other  building  or to the  operation,
repair and maintenance  thereof,  shall be equitably  allocated by Lessor to all
buildings in the Project.

            (c) The inclusion of the  improvements,  facilities and services set
forth in  Subparagraph  4.2(a) shall not be deemed to impose an obligation  upon
Lessor to either  have said  improvements  or  facilities  or to  provide  those
services  unless the Project already has the same,  Lessor already  provides the
services,  or Lessor has agreed  elsewhere  in this Lease to provide the same or
some of them.

            (d)  Lessee's  Share of  Common  Area  Operating  Expenses  shall be
payable by Lessee within 10 days after a reasonably detailed statement of actual
expenses is presented to Lessee. At Lessor's option,  however,  an amount may be
estimated  by Lessor from time to time of Lessee's  Share of annual  Common Area
Operating Expenses and the same shall be payable monthly or quarterly, as Lessor
shall designate,  during each 12 month period of the Lease term, on the same day
as the Base Rent is due hereunder. Lessor shall deliver to Lessee within 60 days
after the  expiration  of each  calendar  year a reasonably  detailed  statement
showing  Lessee's  Share of the actual Common Area Operating  Expenses  incurred
during the preceding  year. If Lessee's  payments  under this  Paragraph  4.2(d)
during the preceding year exceed  Lessee's Share as indicated on such statement,
Lessor shall credit the amount of such  over-payment  against  Lessee's Share of
Common Area  Operating  Expenses next becoming due. If Lessee's  payments  under
this Paragraph 4.2(d) during the preceding year were less than Lessee's Share as
indicated  on such  statement,  Lessee  shall  pay to Lessor  the  amount of the
deficiency within 10 days after delivery by Lessor to Lessee of the statement.

      4.3 Payment.  Lessee shall cause  payment of Rent to be received by Lessor
in lawful money of the United  States,  without  offset or deduction  (except as
specifically  permitted in this Lease), on or before the day on which it is due.
Rent for any  period  during  the term  hereof  which is for less  than one full
calendar  month shall be prorated  based upon the actual  number of days of said
month.  Payment of Rent shall be made to Lessor at its address  stated herein or
to such  other  persons or place as Lessor  may from time to time  designate  in
writing.  Acceptance  of a payment  which is less than the amount then due shall
not be a waiver of Lessor's  rights to the balance of such Rent,  regardless  of
Lessor's  endorsement  of any check so  stating.  In the event  that any  check,
draft,  or other  instrument  of payment given by Lessee to Lessor is dishonored
for any reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any
late charges which may be due.

5. Security Deposit.  Lessee shall deposit with Lessor upon execution hereof the
Security  Deposit  as  security  for  Lessee's   faithful   performance  of  its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this  Lease,  Lessor may use,  apply or retain all or any  portion of said
Security  Deposit  for the payment of any amount due Lessor or to  reimburse  or
compensate  Lessor for any liability,  expense,  loss or damage which Lessor may
suffer or incur by reason thereof.  If Lessor uses or applies all or any portion
of the  Security  Deposit,  Lessee shall  within 10 days after  written  request
therefor deposit monies with Lessor  sufficient to restore said Security Deposit
to the full amount required by this Lease. If the Base Rent increases during the
term of this Lease,  Lessee  shall,  upon written  request from Lessor,  deposit
additional  monies with Lessor so that the total amount of the Security  Deposit
shall at all times bear the same  proportion to the  increased  Base Rent as the
initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be
amended  to  accommodate  a  material  change  in the  business  of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary,  in Lessor's reasonable  judgment,  to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such  change  the  financial  condition  of Lessee  is, in  Lessor's  reasonable
judgment,  significantly  reduced,  Lessee shall deposit such additional  monies
with  Lessor as shall be  sufficient  to cause the  Security  Deposit to be at a
commercially  reasonable  level  based on such  change in  financial  condition.
Lessor  shall not be required to keep the  Security  Deposit  separate  from its
general  accounts.  Within 14 days after the  expiration or  termination of this
Lease,  if Lessor elects to apply the Security  Deposit only to unpaid Rent, and
otherwise  within 30 days  after the  Premises  have been  vacated  pursuant  to
Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit
not  used or  applied  by  Lessor.  No part of the  Security  Deposit  shall  be
considered to be held in trust,  to bear  interest or to be  prepayment  for any
monies to be paid by Lessee under this Lease.

6. Use.

      6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably  comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful,  creates damage, waste or a nuisance, or that disturbs occupants of
or  causes  damage to  neighboring  premises  or  properties.  Lessor  shall not
unreasonably  withhold  or  delay  its  consent  to any  written  request  for a
modification  of the  Agreed  Use,  so long as the  same  will  not  impair  the
structural  integrity of the  improvements  on the Premises or the mechanical or
electrical  systems therein,  and/or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after
such request give written  notification  of same,  which notice shall include an
explanation of Lessor's objections to the change in the Agreed Use.

      6.2 Hazardous Substances.

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

            (b) Duty to Inform Lessor.  If Lessee knows, or has reasonable cause
to believe,  that a Hazardous  Substance has come to be located in, on, under or
about the  Premises,  other than as  previously  consented to by Lessor,  Lessee
shall immediately give written notice of such

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fact to Lessor, and provide Lessor with a copy of any report, notice, claim or
other documentation which it has concerning the presence of such Hazardous
Substance.

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

            (d) Lessee Indemnification.  Lessee shall indemnify, defend and hold
Lessor, its agents, employees,  lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or  damages,  liabilities,  judgments,
claims, expenses, penalties, and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party (provided, however, that Lessee shall have no liability under
this Lease with  respect to  underground  migration of any  Hazardous  Substance
under the Premises  from areas  outside of the  Project).  Lessee's  obligations
shall include, but not be limited to, the effects of any contamination or injury
to person,  property or the environment  created or suffered by Lessee,  and the
cost of investigation,  removal, remediation,  restoration and/or abatement, and
shall  survive the  expiration or  termination  of this Lease.  No  termination,
cancellation  or release  agreement  entered  into by Lessor  and  Lessee  shall
release Lessee from its  obligations  under this Lease with respect to Hazardous
Substances,  unless  specifically  so agreed by Lessor in writing at the time of
such agreement.

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

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

            (g) Lessor Termination  Option. If a Hazardous  Substance  Condition
(see Paragraph  9.1(e))  occurs during the term of this Lease,  unless Lessee is
legally responsible  therefor (in which case Lessee shall make the investigation
and remediation  thereof required by the Applicable  Requirements and this Lease
shall  continue in full force and effect,  but subject to Lessor's  rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's  option,  either (i)
investigate and remediate such Hazardous Substance  Condition,  if required,  as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect,  or (ii) if the  estimated  cost to remediate
such  condition  exceeds  12  times  the then  monthly  Base  Rent or  $100,000,
whichever  is  greater,  give  written  notice to  Lessee,  within 30 days after
receipt by Lessor of knowledge of the  occurrence  of such  Hazardous  Substance
Condition,  of Lessor's  desire to  terminate  this Lease as of the date 60 days
following  the  date  of such  notice.  In the  event  Lessor  elects  to give a
termination notice,  Lessee may, within 10 days thereafter,  give written notice
to  Lessor of  Lessee's  commitment  to pay the  amount by which the cost of the
remediation of such Hazardous  Substance Condition exceeds an amount equal to 12
times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with said funds or satisfactory  assurance thereof within 30 days
following  such  commitment.  In such event,  this Lease shall  continue in full
force and effect,  and Lessor shall proceed to make such  remediation as soon as
reasonably  possible after the required funds are available.  If Lessee does not
give such notice and provide the required funds or assurance  thereof within the
time provided,  this Lease shall  terminate as of the date specified in Lessor's
notice of termination.

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

      6.4 Inspection;  Compliance.  Lessor and Lessor's  "Lender" (as defined in
Paragraph 30) and consultants shall have the right to enter into Premises at any
time, in the case of an emergency,  and otherwise at reasonable  times,  for the
purpose of inspecting the condition of the Premises and for verifying compliance
by Lessee with this  Lease.  The cost of any such  inspections  shall be paid by
Lessor,  unless a violation of Applicable  Requirements,  or a contamination  is
found to exist or be imminent,  or the  inspection  is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor
for the  cost of such  inspection,  so  long as such  inspection  is  reasonably
related to the violation or contamination.

7. Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations.

      7.1 Lessee's Obligations.

            (a)  In  General.   Subject  to  the  provisions  of  Paragraph  2.2
(Condition),   2.3  (Compliance),   6.3  (Lessee's  Compliance  with  Applicable
Requirements),  7.2 (Lessor's  Obligations),  9 (Damage or Destruction),  and 14
(Condemnation),  Lessee  shall,  at Lessee's  sole  expense,  keep the Premises,
Utility  Installations  (intended  for Lessee's  exclusive  use, no matter where
located),  and  Alterations in good order,  condition and repair (whether or not
the portion of the Premises  requiring  repairs,  or the means of repairing  the
same,  are  reasonably or readily  accessible to Lessee,  and whether or not the
need for such  repairs  occurs as a result of Lessee's  use,  any prior use, the
elements or the age of such portion of the Premises), including, but not limited
to, all equipment or facilities,  such as plumbing, HVAC equipment,  electrical,
lighting  facilities,  boilers,  pressure  vessels,  fixtures,  interior  walls,
interior surfaces of exterior walls,  ceilings,  floors,  windows,  doors, plate
glass,  and skylights but  excluding any items which are the  responsibility  of
Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good order,
condition and repair,  shall  exercise and perform good  maintenance  practices,
specifically  including the procurement and maintenance of the service contracts
required  by  Paragraph  7.1(b)  below.   Lessee's   obligations  shall  include
restorations,  replacements  or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state of
repair.

            (b) Service  Contracts.  Lessee  shall,  at Lessee's  sole  expense,
procure and maintain  contracts,  with copies to Lessor,  in customary  form and
substance  for,  and  with  contractors  specializing  and  experienced  in  the
maintenance  of the following  equipment and  improvements,  if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure vessels,
(iii)  clarifiers,  and (iv) any other  equipment,  if  reasonably  required  by
Lessor.  However,  Lessor reserves the right,  upon notice to Lessee, to procure
and  maintain  any or all of such  service  contracts,  and if Lessor so elects,
Lessee shall reimburse Lessor, upon demand, for the cost thereof.

            (c)  Failure  to  Perform.  If  Lessee  fails  to  perform  Lessee's
obligations under this Paragraph 7.1, Lessor may enter upon

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the Premises  after 10 days' prior written  notice to Lessee (except in the case
of an  emergency,  in which  case no notice  shall be  required),  perform  such
obligations on Lessee's  behalf,  and put the Premises in good order,  condition
and repair, and Lessee shall promptly reimburse Lessor for the cost thereof.

            (d) Replacement.  Subject to Lessee's  indemnification  of Lessor as
set forth in  Paragraph  8.7 below,  and without  relieving  Lessee of liability
resulting  from  Lessee's  failure to  exercise  and  perform  good  maintenance
practices,  if an item  described in Paragraph  7.1(b) cannot be repaired  other
than at a cost  which is in excess of 50% of the cost of  replacing  such  item,
then such item  shall be  replaced  by  Lessor,  and the cost  thereof  shall be
prorated  between the Parties and Lessee shall only be  obligated  to pay,  each
month during the remainder of the term of this Lease,  on the date on which Base
Rent is due,  an amount  equal to the  product of  multiplying  the cost of such
replacement by a fraction, the numerator of which is one, and the denominator of
which is 144 (ie.  1/144th of the cost per month).  Lessee shall pay interest on
the  unamortized  balance  at a rate  that  is  commercially  reasonable  in the
judgment of Lessor's accountants.  Lessee may, however, prepay its obligation at
any time.

      7.2 Lessor's  Obligations.  Subject to the  provisions of  Paragraphs  2.2
(Condition),  2.3 (Compliance),  4.2 (Common Area Operating Expenses),  6 (Use),
7.1 (Lessee's  Obligations),  9 (Damage or Destruction)  and 14  (Condemnation),
Lessor,  subject to reimbursement  pursuant to Paragraph 4.2, shall keep in good
order,  condition  and  repair  the  foundations,   exterior  walls,  structural
condition of interior  bearing  walls,  exterior roof,  fire  sprinkler  system,
Common Area fire alarm and/or smoke detection  systems,  fire hydrants,  parking
lots,  walkways,  parkways,  driveways,  landscaping,  fences, signs and utility
systems serving the Common Areas and all parts thereof, as well as providing the
services  for  which  there is a  Common  Area  Operating  Expense  pursuant  to
Paragraph  4.2.  Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain,  repair or
replace windows,  doors or plate glass of the Premises.  Lessee expressly waives
the  benefit  of any  statute  now or  hereafter  in effect to the  extent it is
inconsistent with the terms of this Lease.

      7.3 Utility Installations; Trade Fixtures; Alterations.

            (a)  Definitions.  The term  "Utility  Installations"  refers to all
floor and window coverings,  air lines, power panels,  electrical  distribution,
security and fire protection systems,  communication systems, lighting fixtures,
HVAC  equipment,  plumbing,  and fencing in or on the Premises.  The term "Trade
Fixtures"  shall  mean  Lessee's  machinery  and  equipment  that can be removed
without doing material damage to the Premises. The term "Alterations" shall mean
any modification of the improvements,  other than Utility Installations or Trade
Fixtures,  whether by addition or deletion.  "Lessee  Owned  Alterations  and/or
Utility  Installations" are defined as Alterations and/or Utility  Installations
made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

            (b)  Consent.  Lessee  shall  not make any  Alterations  or  Utility
Installations to the Premises  without  Lessor's prior written  consent.  Lessee
may, however,  make non-structural  Utility Installations to the interior of the
Premises (excluding the roof) without such consent but upon notice to Lessor, as
long as they  are not  visible  from the  outside,  do not  involve  puncturing,
relocating or removing the roof or any existing  walls,  and the cumulative cost
thereof  during this Lease as extended  does not exceed a sum equal to 3 month's
Base Rent in the  aggregate  or a sum equal to one month's  Base Rent in any one
year.  Notwithstanding  the foregoing,  Lessee shall not make or permit any roof
penetrations  and/or  install  anything on the roof  without  the prior  written
approval of Lessor.  Lessor may, as a  precondition  to granting such  approval,
require  Lessee to utilize a contractor  chosen and/or  approved by Lessor.  Any
Alterations or Utility  Installations that Lessee shall desire to make and which
require the consent of the Lessor  shall be  presented to Lessor in written form
with detailed  plans.  Consent shall be deemed  conditioned  upon Lessee's:  (i)
acquiring all  applicable  governmental  permits,  (ii)  furnishing  Lessor with
copies  of  both  the  permits  and  the  plans  and  specifications   prior  to
commencement  of the work,  and (iii)  compliance  with all  conditions  of said
permits and other  Applicable  Requirements in a prompt and expeditious  manner.
Any  Alterations  or Utility  Installations  shall be performed in a workmanlike
manner with good and sufficient materials. Lessee shall promptly upon completion
furnish Lessor with as-built plans and  specifications.  For work which costs an
amount in excess of one month's Base Rent, Lessor may condition its consent upon
Lessee  providing a lien and  completion  bond in an amount equal to 150% of the
estimated cost of such Alteration or Utility  Installation  and/or upon Lessee's
posting an additional Security Deposit with Lessor.

            (c)  Indemnification.  Lessee  shall pay,  when due,  all claims for
labor or materials  furnished or alleged to have been furnished to or for Lessee
at or  for  use on the  Premises,  which  claims  are or may be  secured  by any
mechanic's or materialman's  lien against the Premises or any interest  therein.
Lessee shall give Lessor not less than 10 days notice prior to the  commencement
of any work in, on or about the  Premises,  and  Lessor  shall have the right to
post notices of non-responsibility.  If Lessee shall contest the validity of any
such lien,  claim or demand,  then Lessee shall,  at its sole expense defend and
protect  itself,  Lessor  and the  Premises  against  the same and shall pay and
satisfy  any such  adverse  judgment  that may be  rendered  thereon  before the
enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond
in an  amount  equal to 150% of the  amount  of such  contested  lien,  claim or
demand,  indemnifying Lessor against liability for the same. If Lessor elects to
participate in any such action,  Lessee shall pay Lessor's  attorneys'  fees and
costs.

      7.4 Ownership; Removal; Surrender; and Restoration.

            (a) Ownership. Subject to Lessor's right to require removal or elect
ownership as hereinafter  provided,  all Alterations  and Utility  Installations
made by Lessee  shall be the  property of Lessee,  but  considered a part of the
Premises.  Lessor may,  at any time,  elect in writing to be the owner of all or
any specified part of the Lessee Owned  Alterations  and Utility  Installations.
Unless  otherwise  instructed  per  paragraph  7.4(b)  hereof,  all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease,  become the property of Lessor and be surrendered by Lessee with the
Premises.

            (b) Removal. By delivery to Lessee of written notice from Lessor not
earlier  than 90 and not later than 30 days prior to the end of the term of this
Lease,  Lessor may require that any or all Lessee Owned  Alterations  or Utility
Installations be removed by the expiration or termination of this Lease.  Lessor
may  require  the  removal  at any time of all or any part of any  Lessee  Owned
Alterations or Utility Installations made without the required consent.

            (c) Surrender;  Restoration.  Lessee shall surrender the Premises by
the  Expiration  Date  or  any  earlier   termination  date,  with  all  of  the
improvements,  parts and surfaces thereof broom clean and free of debris, and in
good  operating  order,  condition  and state of repair,  ordinary wear and tear
excepted. "Ordinary wear and tear" shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Notwithstanding the
foregoing,  if this Lease is for 12 months or less,  then Lessee shall surrender
the Premises in the same condition as delivered to Lessee on the Start Date with
NO  allowance  for  ordinary  wear and tear.  Lessee  shall  repair  any  damage
occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee
owned Alterations and/or Utility  Installations,  furnishings,  and equipment as
well as the removal of any storage tank installed by or for Lessee. Lessee shall
also  completely  remove  from the  Premises  any and all  Hazardous  Substances
brought onto the Premises by or for Lessee, or any third party (except Hazardous
Substances which were deposited via underground  migration from areas outside of
the Project)  even if such removal  would  require  Lessee to perform or pay for
work that  exceeds  statutory  requirements.  Trade  Fixtures  shall  remain the
property  of Lessee and shall be removed  by  Lessee.  The  failure by Lessee to
timely vacate the Premises pursuant to this Paragraph 7.4(c) without the express
written  consent of Lessor shall  constitute a holdover  under the provisions of
Paragraph 26 below.

8. Insurance; Indemnity.

      8.1  Payment  of  Premiums.  The cost of the  premiums  for the  insurance
policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a)
and  8.3(b),  shall be a Common  Area  Operating  Expense.  Premiums  for policy
periods  commencing prior to, or extending beyond,  the term of this Lease shall
be prorated to coincide with the corresponding Start Date or Expiration Date.

      8.2 Liability Insurance.

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            (a)  Carried  by  Lessee.  Lessee  shall  obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor as
an additional  insured  against  claims for bodily injury,  personal  injury and
property  damage based upon or arising out of the ownership,  use,  occupancy or
maintenance of the Premises and all areas  appurtenant  thereto.  Such insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than  $1,000,000 per occurrence  with an annual  aggregate of not less than
$2,000,000, an "Additional  Insured-Managers or Lessors of Premises Endorsement"
and contain the "Amendment of the Pollution  Exclusion  Endorsement"  for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured  exclusions as between insured persons or  organizations,  but
shall  include  coverage for  liability  assumed under this Lease as an "insured
contract"  for the  performance  of Lessee's  indemnity  obligations  under this
Lease. The limits of said insurance shall not,  however,  limit the liability of
Lessee nor relieve Lessee of any obligation hereunder.  All insurance carried by
Lessee  shall be  primary to and not  contributory  with any  similar  insurance
carried by Lessor, whose insurance shall be considered excess insurance only.

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

      8.3 Property Insurance - Building, Improvements and Rental Value.

            (a) Building and Improvements. Lessor shall obtain and keep in force
a policy or policies of  insurance  in the name of Lessor,  with loss payable to
Lessor,  any  ground-lessor,  and to any Lender  insuring  loss or damage to the
Premises.  The amount of such insurance  shall be equal to the full  replacement
cost of the  Premises,  as the same shall exist from time to time, or the amount
required by any Lender,  but in no event more than the  commercially  reasonable
and available  insurable  value thereof.  Lessee Owned  Alterations  and Utility
Installations,  Trade Fixtures,  and Lessee's personal property shall be insured
by Lessee under  Paragraph  8.4. If the coverage is available  and  commercially
appropriate,  such policy or policies  shall insure  against all risks of direct
physical  loss or damage  (except the perils of flood and/or  earthquake  unless
required by a Lender), including coverage for debris removal and the enforcement
of  any   Applicable   Requirements   requiring   the   upgrading,   demolition,
reconstruction  or replacement of any portion of the Premises as the result of a
covered  loss.  Said policy or policies  shall also contain an agreed  valuation
provision  in  lieu  of any  coinsurance  clause,  waiver  of  subrogation,  and
inflation guard protection  causing an increase in the annual property insurance
coverage  amount by a factor of not less than the adjusted  U.S.  Department  of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located.  If such insurance  coverage has a deductible  clause,
the deductible amount shall not exceed $1,000 per occurrence.

            (b)  Rental  Value.  Lessor  shall  also  obtain and keep in force a
policy or  policies  in the name of Lessor  with loss  payable to Lessor and any
Lender,  insuring the loss of the full Rent for one year with an extended period
of  indemnity  for an  additional  180 days  ("Rental  Value  insurance").  Said
insurance shall contain an agreed valuation provision in lieu of any coinsurance
clause,  and the amount of coverage  shall be  adjusted  annually to reflect the
projected Rent otherwise payable by Lessee, for the next 12 month period.

            (c)  Adjacent  Premises.  Lessee  shall pay for any  increase in the
premiums for the property  insurance of the Building and for the Common Areas or
other  buildings  in the Project if said  increase  is caused by Lessee's  acts,
omissions, use or occupancy of the Premises.

            (d)  Lessee's  Improvements.  Since  Lessor is the  Insuring  Party,
Lessor  shall not be required to insure  Lessee  Owned  Alterations  and Utility
Installations  unless the item in  question  has become the  property  of Lessor
under the terms of this Lease.

      8.4 Lessee's Property; Business Interruption Insurance.

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

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

            (c)  No  Representation  of  Adequate  Coverage.   Lessor  makes  no
representation  that the  limits or forms of  coverage  of  insurance  specified
herein  are  adequate  to  cover  Lessee's  property,   business  operations  or
obligations under this Lease.

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

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

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

      8.8  Exemption  of Lessor from  Liability.  Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee,  Lessee's  employees,  contractors,  invitees,  customers,  or any other
person in or about the  Premises,  whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage,  obstruction  or  other  defects  of  pipes,  fire  sprinklers,  wires,
appliances,  plumbing,  HVAC or  lighting  fixtures,  or from any  other  cause,
whether the said  injury or damage  results  from  conditions  arising  upon the
Premises  or upon other  portions  of the  Building,  or from  other  sources or
places.  Lessor  shall not be liable  for any  damages  arising  from any act or
neglect of any other  tenant of Lessor nor from the failure of Lessor to enforce
the  provisions  of any other  lease in the  Project.  Notwithstanding  Lessor's
negligence  or breach of this  Lease,  Lessor  shall under no  circumstances  be
liable  for  injury  to  Lessee's  business  or for any loss of income or profit
therefrom.

9. Damage or Destruction.

      9.1 Definitions.

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            (a) "Premises  Partial  Damage" shall mean damage or  destruction to
the  improvements  on the  Premises,  other than Lessee  Owned  Alterations  and
Utility Installations, which can reasonably be repaired in 3 months or less from
the date of the damage or  destruction,  and the cost  thereof does not exceed a
sum equal to 6 month's Base Rent.  Lessor shall notify Lessee in writing  within
30 days from the date of the  damage or  destruction  as to  whether  or not the
damage is Partial or Total.

            (b) "Premises Total Destruction" shall mean damage or destruction to
the  improvements  on the  Premises,  other than Lessee  Owned  Alterations  and
Utility Installations and Trade Fixtures, which cannot reasonably be repaired in
3 months or less  from the date of the  damage or  destruction  and/or  the cost
thereof  exceeds a sum equal to 6 month's Base Rent.  Lessor shall notify Lessee
in  writing  within 30 days from the date of the  damage  or  destruction  as to
whether or not the damage is Partial or Total.

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

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

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

      9.2 Partial Damage - Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense,  repair such damage
(but not  Lessee's  Trade  Fixtures  or Lessee  Owned  Alterations  and  Utility
Installations)  as soon as reasonably  possible and this Lease shall continue in
full force and  effect;  provided,  however,  that  Lessee  shall,  at  Lessor's
election,  make the repair of any damage or destruction the total cost to repair
of which is $5,000 or less, and, in such event, Lessor shall make any applicable
insurance  proceeds  available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance  proceeds are not sufficient to effect such repair, the Insuring Party
shall  promptly  contribute  the  shortage in  proceeds as and when  required to
complete said repairs. In the event,  however, such shortage was due to the fact
that, by reason of the unique nature of the improvements,  full replacement cost
insurance coverage was not commercially  reasonable and available,  Lessor shall
have no  obligation  to pay for the shortage in  insurance  proceeds or to fully
restore the unique aspects of the Premises  unless Lessee  provides  Lessor with
the funds to cover same, or adequate assurance thereof, within 10 days following
receipt of written  notice of such  shortage  and  request  therefor.  If Lessor
receives said funds or adequate assurance thereof within said 10 day period, the
party  responsible  for  making  the  repairs  shall  complete  them  as soon as
reasonably  possible  and this Lease shall  remain in full force and effect.  If
such funds or  assurance  are not  received,  Lessor may  nevertheless  elect by
written notice to Lessee within 10 days thereafter to: (i) make such restoration
and repair as is  commercially  reasonable  with Lessor  paying any  shortage in
proceeds,  in which case this Lease shall  remain in full force and  effect,  or
(ii) have this Lease terminate 30 days thereafter.  Lessee shall not be entitled
to reimbursement of any funds contributed by Lessee to repair any such damage or
destruction. Premises Partial Damage due to flood or earthquake shall be subject
to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such  insurance  shall be made available for the repairs
if made by either Party.

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

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

      9.5 Damage  Near End of Term.  If at any time  during the last 6 months of
this Lease there is damage for which the cost to repair exceeds one month's Base
Rent,  whether or not an Insured Loss, Lessor may terminate this Lease effective
60 days  following  the date of  occurrence  of such  damage by giving a written
termination notice to Lessee within 30 days after the date of occurrence of such
damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable
option to extend  this  Lease or to  purchase  the  Premises,  then  Lessee  may
preserve this Lease by, (a) exercising such option and (b) providing Lessor with
any shortage in insurance  proceeds (or adequate  assurance  thereof)  needed to
make the repairs on or before the earlier of (i) the date which is 10 days after
Lessee's receipt of Lessor's written notice  purporting to terminate this Lease,
or (ii) the day prior to the date upon which such option expires. If Lessee duly
exercises  such option  during such  period and  provides  Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds,  Lessor
shall, at Lessor's commercially  reasonable expense,  repair such damage as soon
as reasonably  possible and this Lease shall  continue in full force and effect.
If Lessee  fails to exercise  such option and  provide  such funds or  assurance
during such period, then this Lease shall terminate on the date specified in the
termination notice and Lessee's option shall be extinguished.

      9.6 Abatement of Rent; Lessee's Remedies.

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

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

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

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

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10. Real Property Taxes.

      10.1  Definition.  As used herein,  the term "Real  Property  Taxes" shall
include any form of  assessment;  real  estate,  general,  special,  ordinary or
extraordinary, or rental levy or tax (other than inheritance, personal income or
estate  taxes);  improvement  bond;  and/or  license fee imposed  upon or levied
against any legal or equitable interest of Lessor in the Project, Lessor's right
to other income therefrom, and/or Lessor's business of leasing, by any authority
having the  direct or  indirect  power to tax and where the funds are  generated
with reference to the Project address and where the proceeds so generated are to
be applied by the city, county or other local taxing authority of a jurisdiction
within which the Project is located.  The term "Real Property  Taxes" shall also
include any tax,  fee,  levy,  assessment  or charge,  or any increase  therein,
imposed by reason of events occurring  during the term of this Lease,  including
but not  limited  to, a change in the  ownership  of the  Project or any portion
thereof or a change in the  improvements  thereon.  In calculating Real Property
Taxes for any calendar  year,  the Real  Property  Taxes for any real estate tax
year  shall be  included  in the  calculation  of Real  Property  Taxes for such
calendar  year based upon the  number of days which such  calendar  year and tax
year have in common.

      10.2 Payment of Taxes. Lessor shall pay the Real Property Taxes applicable
to the Project,  and except as otherwise  provided in Paragraph  10.3,  any such
amounts shall be included in the  calculation of Common Area Operating  Expenses
in accordance with the provisions of Paragraph 4.2.

      10.3  Additional  Improvements.  Common Area Operating  Expenses shall not
include Real Property  Taxes  specified in the tax  assessor's  records and work
sheets as being  caused by  additional  improvements  placed upon the Project by
other  lessees or by Lessor for the exclusive  enjoyment of such other  lessees.
Notwithstanding  Paragraph 10.2 hereof,  Lessee shall, however, pay to Lessor at
the time Common Area  Operating  Expenses are payable under  Paragraph  4.2, the
entirety of any increase in Real Property Taxes if assessed  solely by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises by
Lessee or at Lessee's request.

      10.4 Joint Assessment.  If the Building is not separately  assessed,  Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed,  such proportion to be determined by Lessor from the respective
valuations  assigned in the assessor's work sheets or such other  information as
may be reasonably available.  Lessor's reasonable determination thereof, in good
faith, shall be conclusive.

      10.5 Personal  Property  Taxes.  Lessee shall pay prior to delinquency all
taxes  assessed  against and levied upon Lessee  Owned  Alterations  and Utility
Installations,  Trade Fixtures, furnishings, equipment and all personal property
of Lessee  contained  in the  Premises.  When  possible,  Lessee shall cause its
Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings,
equipment and all other personal  property to be assessed and billed  separately
from the real  property of Lessor.  If any of Lessee's  said  property  shall be
assessed  with  Lessor's  real  property,  Lessee  shall  pay  Lessor  the taxes
attributable  to  Lessee's  property  within 10 days after  receipt of a written
statement setting forth the taxes applicable to Lessee's property.

11.  Utilities.  Lessee  shall  pay for all  water,  gas,  heat,  light,  power,
telephone,  trash  disposal and other  utilities  and  services  supplied to the
Premises,  together with any taxes  thereon.  Notwithstanding  the provisions of
Paragraph 4.2, if at any time in Lessor's sole judgment,  Lessor determines that
Lessee  is  using a  disproportionate  amount  of  water,  electricity  or other
commonly metered utilities,  or that Lessee is generating such a large volume of
trash as to require an increase in the size of the  dumpster  and/or an increase
in the number of times per month that the  dumpster is emptied,  then Lessor may
increase Lessee's Base Rent by an amount equal to such increased costs.

12. Assignment and Subletting.

      12.1 Lessor's Consent Required.

            (a) Lessee  shall not  voluntarily  or by  operation  of law assign,
transfer, mortgage or encumber (collectively,  "assign or assignment") or sublet
all or any part of Lessee's  interest in this Lease or in the  Premises  without
Lessor's prior written consent.

            (b) A change in the control of Lessee shall constitute an assignment
requiring  consent.  The transfer,  on a cumulative basis, of 25% or more of the
voting control of Lessee shall constitute a change in control for this purpose.

            (c) The involvement of Lessee or its assets in any  transaction,  or
series  of  transactions  (by  way  of  merger,  sale,  acquisition,  financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation  of this Lease or Lessee's  assets  occurs,  which results or will
result in a reduction  of the Net Worth of Lessee by an amount  greater than 25%
of such Net Worth as it was  represented  at the time of the  execution  of this
Lease  or at the  time  of the  most  recent  assignment  to  which  Lessor  has
consented, or as it exists immediately prior to said transaction or transactions
constituting such reduction, whichever was or is greater, shall be considered an
assignment of this Lease to which Lessor may withhold its consent. "Net Worth of
Lessee"  shall  mean  the  net  worth  of  Lessee   (excluding  any  guarantors)
established under generally accepted accounting principles.

            (d) An assignment or subletting  without  consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a noncurable
Breach without the necessity of any notice and grace period. If Lessor elects to
treat such unapproved  assignment or subletting as a noncurable  Breach,  Lessor
may either:  (i)  terminate  this Lease,  or (ii) upon 30 days  written  notice,
increase the monthly Base Rent to 110% of the Base Rent then in effect. Further,
in the event of such Breach and rental adjustment, (i) the purchase price of any
option to  purchase  the  Premises  held by Lessee  shall be  subject to similar
adjustment  to 110% of the price  previously  in effect,  and (ii) all fixed and
non-fixed  rental  adjustments  scheduled during the remainder of the Lease term
shall be increased to 110% of the scheduled adjusted rent.

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

      12.2 Terms and Conditions Applicable to Assignment and Subletting.

            (a)  Regardless  of Lessor's  consent,  no  assignment or subletting
shall: (i) be effective without the express written  assumption by such assignee
or sublessee of the obligations of Lessee under this Lease,  (ii) release Lessee
of any obligations hereunder, or (iii) alter the primary liability of Lessee for
the  payment  of Rent or for the  performance  of any  other  obligations  to be
performed by Lessee.

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

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

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

            (e) Each request for consent to an assignment or subletting shall be
in writing,  accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or  sublessee,  including  but not limited to the  intended  use and/or
required  modification of the Premises, if any, together with a fee of $1,000 or
10% of the current  monthly Base Rent  applicable to the portion of the Premises
which is the  subject of the  proposed  assignment  or  sublease,  whichever  is
greater, as consideration for Lessor's  considering and processing said request.
Lessee agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested.

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

            (g)  Lessor's  consent to any  assignment  or  subletting  shall not
transfer to the assignee or sublessee any Option granted to the original  Lessee
by this Lease  unless such  transfer is  specifically  consented to by Lessor in
writing. (See Paragraph 39.2)

      12.3  Additional  Terms  and  Conditions  Applicable  to  Subletting.  The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises  and shall be deemed  included in all  subleases  under
this Lease whether or not expressly incorporated therein:

            (a) Lessee  hereby  assigns and  transfers to Lessor all of Lessee's
interest in all Rent payable on any  sublease,  and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided,  however,
that until a Breach  shall occur in the  performance  of  Lessee's  obligations,
Lessee may collect said Rent.  Lessor  shall not, by reason of the  foregoing or
any  assignment of such  sublease,  nor by reason of the  collection of Rent, be
deemed  liable to the  sublessee for any failure of Lessee to perform and comply
with any of Lessee's  obligations to such sublessee.  Lessee hereby  irrevocably
authorizes and directs any such sublessee, upon receipt of a written notice from
Lessor stating that a Breach exists in the  performance of Lessee's  obligations
under  this  Lease,  to pay to Lessor  all Rent due and to become  due under the
sublease.  Sublessee  shall rely upon any such  notice from Lessor and shall pay
all Rents to Lessor  without  any  obligation  or right to inquire as to whether
such Breach exists, notwithstanding any claim from Lessee to the contrary.

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

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

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

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

13. Default; Breach; Remedies.

      13.1 Default; Breach. A "Default" is defined as a failure by the Lessee to
comply  with or perform  any of the terms,  covenants,  conditions  or Rules and
Regulations  under this Lease. A "Breach" is defined as the occurrence of one or
more of the following  Defaults,  and the failure of Lessee to cure such Default
within any applicable grace period: (a) The abandonment of the Premises;  or the
vacating of the Premises  without  providing a commercially  reasonable level of
security, or where the coverage of the property insurance described in Paragraph
8.3  is  jeopardized  as a  result  thereof,  or  without  providing  reasonable
assurances to minimize potential vandalism.

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

            (c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable  Requirements,  (ii) the service contracts,  (iii)
the rescission of an  unauthorized  assignment or  subletting,  (iv) an Estoppel
Certificate,  (v)  a  requested  subordination,  (vi)  evidence  concerning  any
guaranty  and/or  Guarantor,  (vii) any document  requested  under  Paragraph 41
(easements),  or (viii) any other  documentation or information which Lessor may
reasonably  require  of Lessee  under the  terms of this  Lease,  where any such
failure continues for a period of 10 days following written notice to Lessee.

            (d) A Default by Lessee as to the terms,  covenants,  conditions  or
provisions of this Lease,  or of the rules  adopted under  Paragraph 2.9 hereof,
other than those described in subparagraphs  13.1(a),  (b) or (c), above,  where
such Default  continues for a period of 30 days after written notice;  provided,
however,  that if the nature of Lessee's  Default is such that more than 30 days
are reasonably required for its cure, then it shall not be deemed to be a Breach
if  Lessee  commences  such  cure  within  said  30 day  period  and  thereafter
diligently prosecutes such cure to completion.

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

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

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

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

            (a)  Terminate  Lessee's  right to possession of the Premises by any
lawful  means,  in which  case this  Lease  shall  terminate  and  Lessee  shall
immediately  surrender  possession  to  Lessor.  In such event  Lessor  shall be
entitled to recover  from  Lessee:  (i) the unpaid Rent which had been earned at
the time of  termination;  (ii) the worth at the time of award of the  amount by
which the unpaid rent which would have been earned after  termination  until the
time of award  exceeds  the amount of such  rental  loss that the Lessee  proves
could have been reasonably avoided;  (iii) the worth at the time of award of the
amount by which the  unpaid  rent for the  balance of the term after the time of
award  exceeds the amount of such rental  loss that the Lessee  proves  could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the  detriment  proximately  caused by the  Lessee's  failure to perform its
obligations  under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering

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possession  of  the  Premises,   expenses  of  reletting,   including  necessary
renovation and alteration of the Premises,  reasonable attorneys' fees, and that
portion of any leasing  commission  paid by Lessor in connection with this Lease
applicable to the unexpired  term of this Lease.  The worth at the time of award
of the  amount  referred  to in  provision  (iii) of the  immediately  preceding
sentence  shall be computed by  discounting  such amount at the discount rate of
the Federal  Reserve Bank of the District  within which the Premises are located
at the time of award plus one  percent.  Efforts by Lessor to  mitigate  damages
caused by  Lessee's  Breach of this  Lease  shall  not waive  Lessor's  right to
recover  damages under  Paragraph 12. If  termination  of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such  proceeding  any unpaid Rent and  damages as are  recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period  required  under  Paragraph 13.1 was
not previously  given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful  detainer  statute shall also constitute the notice
required by Paragraph  13.1. In such case, the applicable  grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently,  and
the  failure of Lessee to cure the  Default  within the  greater of the two such
grace periods shall  constitute  both an unlawful  detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.

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

            (c) Pursue any other  remedy now or  hereafter  available  under the
laws or judicial  decisions of the state  wherein the Premises are located.  The
expiration or termination of this Lease and/or the termination of Lessee's right
to  possession  shall not relieve  Lessee  from  liability  under any  indemnity
provisions  of this Lease as to matters  occurring  or accruing  during the term
hereof or by reason of Lessee's occupancy of the Premises.

      13.3 Inducement Recapture.  Any agreement for free or abated rent or other
charges,  or for the  giving or paying by Lessor to or for Lessee of any cash or
other bonus,  inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement Provisions",
shall be deemed  conditioned upon Lessee's full and faithful  performance of all
of the terms,  covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement  Provision shall  automatically be deemed deleted
from this Lease and of no further force or effect,  and any rent,  other charge,
bonus,  inducement or consideration  theretofore abated, given or paid by Lessor
under such an  Inducement  Provision  shall be  immediately  due and  payable by
Lessee to Lessor,  notwithstanding any subsequent cure of said Breach by Lessee.
The  acceptance by Lessor of rent or the cure of the Breach which  initiated the
operation  of this  paragraph  shall  not be  deemed a waiver  by  Lessor of the
provisions of this paragraph unless  specifically so stated in writing by Lessor
at the time of such acceptance.

      13.4 Late Charges.  Lessee hereby acknowledges that late payment by Lessee
of Rent will cause  Lessor to incur costs not  contemplated  by this Lease,  the
exact  amount of which will be  extremely  difficult  to  ascertain.  Such costs
include,  but are not limited to,  processing and accounting  charges,  and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be  received by Lessor  within 5 days after such amount  shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a
one-time late charge equal to 10% of each such overdue amount or $100, whichever
is greater. The parties hereby agree that such late charge represents a fair and
reasonable  estimate  of the  costs  Lessor  will  incur by  reason of such late
payment. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's  Default or Breach with respect to such overdue  amount,  nor
prevent the exercise of any of the other rights and remedies granted  hereunder.
In the event that a late charge is payable hereunder,  whether or not collected,
for 3 consecutive  installments of Base Rent, then notwithstanding any provision
of this Lease to the contrary,  Base Rent shall, at Lessor's option,  become due
and payable quarterly in advance.

      13.5 Interest. Any monetary payment due Lessor hereunder,  other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within 30 days following the date on which it was due for non-scheduled
payment,  shall bear interest from the date when due, as to scheduled  payments,
or the 31st day  after it was due as to  non-scheduled  payments.  The  interest
("Interest")  charged  shall be equal to the  prime  rate  reported  in the Wall
Street  Journal  as  published  closest  prior to the date when due plus 4%, but
shall not  exceed  the  maximum  rate  allowed  by law.  Interest  is payable in
addition to the potential late charge provided for in Paragraph 13.4.

      13.6 Breach by Lessor.

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

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

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

15. Brokerage Fees.

      15.1 Additional  Commission.  In addition to the payments owed pursuant to
Paragraph  1.10  above,  and unless  Lessor and the Brokers  otherwise  agree in
writing,  Lessor agrees that: (a) if Lessee exercises any Option,  (b) if Lessee
acquires  from  Lessor any rights to the  Premises  or other  premises  owned by
Lessor and located  within the Project,  (c) if Lessee  remains in possession of
the Premises, with the consent of Lessor, after the expiration of this Lease, or
(d) if  Base  Rent  is  increased,  whether  by  agreement  or  operation  of an
escalation  clause  herein,  then,  Lessor shall pay Brokers a fee in accordance
with the schedule of the Brokers in effect at the time of the  execution of this
Lease.

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      15.2  Assumption  of  Obligations.  Any buyer or  transferee  of  Lessor's
interest  in this  Lease  shall be deemed to have  assumed  Lessor's  obligation
hereunder.  Brokers  shall be third party  beneficiaries  of the  provisions  of
Paragraphs  1.10,  15, 22 and 31. If Lessor  fails to pay to Brokers any amounts
due as and for  brokerage  fees  pertaining  to this Lease  when due,  then such
amounts shall accrue Interest.  In addition,  if Lessor fails to pay any amounts
to Lessee's  Broker when due,  Lessee's Broker may send written notice to Lessor
and Lessee of such  failure and if Lessor  fails to pay such  amounts  within 10
days after said  notice,  Lessee  shall pay said monies to its Broker and offset
such amounts against Rent. In addition,  Lessee's Broker shall be deemed to be a
third party  beneficiary  of any  commission  agreement  entered  into by and/or
between  Lessor and Lessor's  Broker for the limited  purpose of collecting  any
brokerage fee owed.

      15.3 Representations and Indemnities of Broker  Relationships.  Lessee and
Lessor each  represent and warrant to the other that it has had no dealings with
any  person,  firm,  broker  or  finder  (other  than  the  Brokers,  if any) in
connection  with this  Lease,  and that no one other than said named  Brokers is
entitled to any  commission or finder's fee in connection  herewith.  Lessee and
Lessor do each hereby  agree to  indemnify,  protect,  defend and hold the other
harmless  from and against  liability for  compensation  or charges which may be
claimed by any such unnamed  broker,  finder or other similar party by reason of
any  dealings  or  actions  of the  indemnifying  Party,  including  any  costs,
expenses, attorneys' fees reasonably incurred with respect thereto.

16. Estoppel Certificates.

            (a) Each Party (as  "Responding  Party")  shall within 10 days after
written  notice  from  the  other  Party  (the   "Requesting   Party")  execute,
acknowledge  and deliver to the Requesting  Party a statement in writing in form
similar to the then most current  "Estoppel  Certificate"  form published by the
AIR  Commercial  Real  Estate  Association,  plus such  additional  information,
confirmation and/or statements as may be reasonably  requested by the Requesting
Party.

            (b) If the  Responding  Party  shall fail to execute or deliver  the
Estoppel Certificate within such 10 day period, the Requesting Party may execute
an Estoppel  Certificate stating that: (i) the Lease is in full force and effect
without  modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party's  performance,  and (iii)
if Lessor is the Requesting  Party, not more than one month's rent has been paid
in advance. Prospective purchasers and encumbrances may rely upon the Requesting
Party's  Estoppel  Certificate,  and the Responding Party shall be estopped from
denying the truth of the facts contained in said Certificate.

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

17. Definition of Lessor.  The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises,  or, if this
is a sublease,  of the Lessee's  interest in the prior lease.  In the event of a
transfer of Lessor's  title or  interest in the  Premises or this Lease,  Lessor
shall  deliver to the  transferee  or assignee (in cash or by credit) any unused
Security  Deposit held by Lessor.  Except as provided in Paragraph 15, upon such
transfer or assignment and delivery of the Security Deposit,  as aforesaid,  the
prior Lessor shall be relieved of all liability with respect to the  obligations
and/or  covenants  under this Lease  thereafter  to be  performed by the Lessor.
Subject to the foregoing,  the obligations  and/or covenants in this Lease to be
performed  by the Lessor  shall be binding  only upon the Lessor as  hereinabove
defined.  Notwithstanding  the above, and subject to the provisions of Paragraph
20 below,  the original Lessor under this Lease,  and all subsequent  holders of
the Lessor's  interest in this Lease shall remain  liable and  responsible  with
regard to the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6.2 above.

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

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

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

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

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

23. Notices.

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

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

24. Waivers.  No waiver by Lessor of the Default or Breach of any term, covenant
or  condition  hereof by  Lessee,  shall be  deemed a waiver of any other  term,
covenant or condition hereof,  or of any subsequent  Default or Breach by Lessee
of the same or of any other term, covenant or condition hereof. Lessor's consent
to, or  approval  of,  any act shall  not be  deemed to render  unnecessary  the
obtaining of Lessor's  consent to, or approval of, any subsequent or similar act
by Lessee,  or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such

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consent.  The  acceptance of Rent by Lessor shall not be a waiver of any Default
or Breach by Lessee.  Any payment by Lessee may be accepted by Lessor on account
of moneys or damages due Lessor,  notwithstanding  any qualifying  statements or
conditions made by Lessee in connection therewith,  which such statements and/or
conditions shall be of no force or effect whatsoever unless  specifically agreed
to in writing by Lessor at or before the time of deposit of such payment.

25. Disclosures Regarding The Nature of a Real Estate Agency Relationship.

            (a)  When  entering  into a  discussion  with a  real  estate  agent
regarding a real estate  transaction,  a Lessor or Lessee should from the outset
understand what type of agency  relationship or  representation  it has with the
agent or agents in the transaction.  Lessor and Lessee acknowledge being advised
by the Brokers in this transaction,  as follows:

                  (i) Lessor's Agent. A Lessor's agent under a listing agreement
with the Lessor  acts as the agent for the  Lessor  only.  A  Lessor's  agent or
subagent has the following affirmative  obligations:  To the Lessor: A fiduciary
duty of utmost  care,  integrity,  honesty,  and  loyalty in  dealings  with the
Lessor. To the Lessee and the Lessor: (a) Diligent exercise of reasonable skills
and care in  performance  of the agent's  duties.  (b) A duty of honest and fair
dealing  and good  faith.  (c) A duty to  disclose  all facts known to the agent
materially  affecting  the value or  desirability  of the property  that are not
known to, or within the diligent  attention and observation of, the Parties.  An
agent is not  obligated to reveal to either Party any  confidential  information
obtained from the other Party which does not involve the affirmative  duties set
forth above.

                  (ii)  Lessee's  Agent.  An agent can agree to act as agent for
the Lessee only. In these situations,  the agent is not the Lessor's agent, even
if by agreement the agent may receive compensation for services rendered, either
in full or in part from the  Lessor.  An agent  acting only for a Lessee has the
following  affirmative  obligations.  To the Lessee:  A fiduciary duty of utmost
care, integrity, honesty, and loyalty in dealings with the Lessee. To the Lessee
and  the  Lessor:  (a)  Diligent  exercise  of  reasonable  skills  and  care in
performance  of the agent's  duties.  (b) A duty of honest and fair  dealing and
good  faith.  (c) A duty to  disclose  all facts  known to the agent  materially
affecting  the value or  desirability  of the property that are not known to, or
within the diligent  attention and observation of, the Parties.  An agent is not
obligated to reveal to either Party any confidential  information  obtained from
the other Party which does not involve the affirmative duties set forth above.

                  (iii) Agent Representing Both Lessor and Lessee. A real estate
agent,  either acting  directly or through one or more associate  licenses,  can
legally be the agent of both the Lessor  and the  Lessee in a  transaction,  but
only with the knowledge and consent of both the Lessor and the Lessee. In a dual
agency situation,  the agent has the following  affirmative  obligations to both
the Lessor and the  Lessee:  (a) A  fiduciary  duty of utmost  care,  integrity,
honesty and loyalty in the dealings with either Lessor or the Lessee.  (b) Other
duties to the  Lessor  and the Lessee as stated  above in  subparagraphs  (i) or
(ii).  In  representing  both Lessor and  Lessee,  the agent may not without the
express permission of the respective Party, disclose to the other Party that the
Lessor will accept rent in an amount less than that  indicated in the listing or
that the  Lessee is willing to pay a higher  rent than that  offered.  The above
duties  of the agent in a real  estate  transaction  do not  relieve a Lessor or
Lessee from the responsibility to protect their own interests. Lessor and Lessee
should  carefully  read all  agreements to assure that they  adequately  express
their  understanding  of  the  transaction.  A real  estate  agent  is a  person
qualified  to advise  about  real  estate.  If legal or tax  advice is  desired,
consult a competent professional.

            (b) Brokers  have no  responsibility  with respect to any default or
breach  hereof  by  either  Party.  The  liability  (including  court  costs and
attorneys'  fees),  of any Broker with  respect to any breach of duty,  error or
omission relating to this Lease shall not exceed the fee received by such Broker
pursuant to this Lease; provided, however, that the foregoing limitation on each
Broker's  liability  shall not be applicable to any gross  negligence or willful
misconduct of such Broker.

            (c) Buyer and Seller agree to identify to Brokers as  "Confidential"
any  communication or information given Brokers that is considered by such Party
to be confidential.

26.  No Right To  Holdover.  Lessee  has no right to  retain  possession  of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee  holds over,  then the Base Rent shall be  increased to
150% of the  Base  Rent  applicable  immediately  preceding  the  expiration  or
termination. Nothing contained herein shall be construed as consent by Lessor to
any holding over by Lessee.

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

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

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

30. Subordination; Attornment; Non-Disturbance.

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

      30.2 Attornment. In the event that Lessor transfers title to the Premises,
or the Premises are acquired by another upon the foreclosure or termination of a
Security Device to which this Lease is subordinated (i) Lessee shall, subject to
the non-disturbance  provisions of Paragraph 30.3, attorn to such new owner, and
upon request, enter into a new lease, containing all of the terms and provisions
of this Lease, with such new owner for the remainder of the term hereof,  or, at
the  election  of such new owner,  this Lease shall  automatically  become a new
Lease between  Lessee and such new owner,  upon all of the terms and  conditions
hereof,  for the remainder of the term hereof,  and (ii) Lessor shall thereafter
be relieved of any further obligations hereunder and such new owner shall assume
all of Lessor's obligations hereunder, except that such new owner shall not: (a)
be liable for any act or omission of any prior  lessor or with respect to events
occurring  prior to acquisition  of ownership;  (b) be subject to any offsets or
defenses  which  Lessee  might have  against any prior  lessor,  (c) be bound by
prepayment of more than one month's rent, or (d) be liable for the return of any
security deposit paid to any prior lessor.

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

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

31.  Attorneys'  Fees.  If any  Party or Broker  brings an action or  proceeding
involving  the  Premises  whether  founded in tort,  contract  or equity,  or to
declare rights  hereunder,  the Prevailing  Party (as hereafter  defined) in any
such  proceeding,  action,  or appeal  thereon,  shall be entitled to reasonable
attorneys'  fees.  Such fees may be awarded in the same suit or  recovered  in a
separate  suit,  whether or not such action or proceeding is pursued to decision
or judgment. The term, "Prevailing Party" shall include,  without limitation,  a
Party or Broker who  substantially  obtains or defeats the relief sought, as the
case may be, whether by compromise,  settlement, judgment, or the abandonment by
the other Party or Broker of its claim or  defense.  The  attorneys'  fees award
shall not be computed in accordance  with any court fee  schedule,  but shall be
such as to fully reimburse all attorneys' fees reasonably incurred. In addition,
Lessor shall be entitled to attorneys' fees, costs and expenses  incurred in the
preparation  and service of notices of Default and  consultations  in connection
therewith, whether or not a legal action is subsequently commenced in connection
with  such  Default  or  resulting  Breach  ($200 is a  reasonable  minimum  per
occurrence for such services and consultation).

32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall
have the right to enter the Premises at any time,  in the case of an  emergency,
and  otherwise  at  reasonable  times for the  purpose  of  showing  the same to
prospective  purchasers,  lenders,  or  tenants,  and making  such  alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities  shall be without  abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises  any ordinary  "For Sale" signs and
Lessor may during the last 6 months of the term hereof place on the Premises any
ordinary  "For Lease"  signs.  Lessee may at any time place on the  Premises any
ordinary "For Sublease" sign.

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

34. Signs.  Except for ordinary "For Sublease" signs which may be placed only on
the Premises,  Lessee shall not place any sign upon the Project without Lessor's
prior written consent. All signs must comply with all Applicable Requirements.

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

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

37. Guarantor.

      37.1 Execution.  The Guarantors,  if any, shall each execute a guaranty in
the form most recently published by the AIR Commercial Real Estate  Association,
and each such  Guarantor  shall have the same  obligations  as Lessee under this
Lease.

      37.2 Default. It shall constitute a Default of the Lessee if any Guarantor
fails or refuses,  upon request to provide: (a) evidence of the execution of the
guaranty,  including the authority of the party signing on Guarantor's behalf to
obligate Guarantor,  and in the case of a corporate Guarantor,  a certified copy
of a  resolution  of its  board of  directors  authorizing  the  making  of such
guaranty, (b) current financial statements, (c) an Estoppel Certificate,  or (d)
written confirmation that the guaranty is still in effect.

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

39.  Options.  If Lessee is  granted  an  option,  as  defined  below,  then the
following provisions shall apply.

      39.1 Definition.  "Option" shall mean: (a) the right to extend the term of
or renew  this  Lease or to extend or renew any lease  that  Lessee has on other
property  of  Lessor;  (b) the right of first  refusal  or first  offer to lease
either the  Premises or other  property of Lessor;  (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.

      39.2 Options Personal To Original Lessee.  Any Option granted to Lessee in
this  Lease is  personal  to the  original  Lessee,  and cannot be  assigned  or
exercised by anyone other than said original  Lessee and only while the original
Lessee is in full  possession of the Premises and, if requested by Lessor,  with
Lessee  certifying  that Lessee has no  intention  of  thereafter  assigning  or
subletting.

      39.3 Multiple  Options.  In the event that Lessee has any multiple Options
to extend or renew this Lease,  a later Option  cannot be  exercised  unless the
prior Options have been validly exercised.

      39.4 Effect of Default on Options.

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

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

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

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

41.  Reservations.  Lessor reserves the right: (i) to grant, without the consent
or joinder of Lessee,  such easements,  rights and dedications that Lessor deems
necessary,

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(ii) to cause the  recordation  of parcel  maps and  restrictions,  and (iii) to
create and/or install new utility raceways,  so long as such easements,  rights,
dedications,  maps,  restrictions,  and  utility  raceways  do not  unreasonably
interfere  with the use of the  Premises  by Lessee.  Lessee  agrees to sign any
documents reasonably requested by Lessor to effectuate such rights.

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

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

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

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

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

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

48. Waiver of Jury Trial.  The Parties hereby waive their  respective  rights to
trial by jury in any action or proceeding  involving the Property or arising out
of this Agreement.

49. Mediation and Arbitration of Disputes.  An Addendum  requiring the Mediation
and/or the  Arbitration  of all  disputes  between  the Parties  and/or  Brokers
arising out of this Lease |_| is |X| is not attached to this Lease.

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

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

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

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

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

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

<TABLE>
<S>                                            <C>
Execute at: San Diego, CA                      Executed at: Montgomeryville, PA
            ---------------------------------               ---------------------------------
On:         April 12, 2005                     On:          April 4, 2005
            ---------------------------------               ---------------------------------

By LESSOR:                                     By LESSEE:

Wells Fargo Bank N.A as Trustee                PhotoMedex, Inc.
for the Hutton Trust                           a Delaware Corporation
--------------------------------------------   ---------------------------------------------

By:/s/Danny Flowers                            By:/s/Jeff O'Donnell
   -----------------------------------------      ------------------------------------------
Name Printed: Danny Flowers                    Name Printed: Jeff O'Donnell
              ------------------------------                 -------------------------------
Title: Vice President                          Title: CEO
       -------------------------------------          --------------------------------------

By: /s/Delbert McGue III                       By: /s/D.M. McGrath
    ----------------------------------------       -----------------------------------------
Name Printed: Delbert McGue III                Name Printed: Dennis McGrath
              ------------------------------                 -------------------------------
Title: Vice President                          Title: CFO
       -------------------------------------          --------------------------------------
Address: 1350 Fashion Valley Road, 3rd Floor   Address: 147 Keystone Drive
         San Diego, California 92108                    Montgomery, Pennsylvania 18936
         -----------------------------------            Montgomery County
                                                        ------------------------------------
Telephone: (619) 668-2820                      Telephone: (215) 619-3600
           ---------------------------------              ----------------------------------
Facsimile: (619) 668-2828                      Facsimile: (215) 619-3208
           ---------------------------------              ----------------------------------
Federal ID No.                                 Federal ID No. 59-2058100
               -----------------------------                  ------------------------------
</TABLE>

These forms are often modified to meet changing requirements of law and needs of
the  industry.  Always  write or call to make  sure you are  utilizing  the most
current form: AIR Commercial Real Estate  Association,  700 South Flower Street,
Suite 600, Los Angeles, CA 90017. (213) 687-8777.

          (C)Copyright 1999 By AIR Commercial Real Estate Association.
                              All rights reserved.

                 No part of these works may be reproduced in any
                      form without permission in writing.

                Abramson- 2375 Camino Vida Roble-Photomedex-MTLN

                                  PAGE 15 OF 15
___________                                                          ___________
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INITIALS                                                                INITIALS

(C)1999 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                FORM MTN-2-2/99E

<PAGE>

March 17, 2005

ADDENDUM TO LEASE DATED MARCH 17, 2005 BY AND BETWEEN WELLS FARGO BANK, N.A., AS
TRUSTEE  FOR THE  HUTTON  TRUST  AS  LESSOR  AND  PHOTOMEDEX,  INC.  A  DELAWARE
CORPORATION AS LESSEE.

--------------------------------------------------------------------------------
The above-mentioned Lease is modified in the following particulars only:

Should the terms and  conditions  of this  Addendum  conflict with the terms and
conditions  of the  above-mentioned  Lease,  the  terms and  conditions  of this
Addendum shall prevail.

      1.    Base Rent               Months   PSF/Mo.  Monthly Payment
            (Triple Net):           ---------------------------------
                                    1.       $0.83    $6,640.00
                                    2-4.     $0.00    $0.00 (Free Rent)
                                    5.-12.   $0.83    $6,640.00

                                    **  Base  rent   shall   increase   annually
                                    thereafter at a rate of 3% over the previous
                                    year's Base Rent.

      2.    Operating Expense       In addition to the Base Rent,  Tenant  shall
            Payment                 pay its prorated share of project  operating
                                    expenses  (including during their "free rent
                                    period"),   which   are   estimated   to  be
                                    approximately  $0.28  per  square  foot  per
                                    month.

                                    These  expenses   include   property  taxes,
                                    property   insurance,    water,    landscape
                                    maintenance     common    area    utilities,
                                    association  fee,  and  property  management
                                    fees.   Utilities   directly   serving   the
                                    Premises are not included in this amount and
                                    are  separately  metered  and  paid  for  by
                                    Tenant.

      3.    Tenant Improvements:    Landlord  shall  hire  their  contractor  to
                                    complete  all  Tenant   Improvements   on  a
                                    turnkey basis,  utilizing  building standard
                                    materials and finishes subject to a mutually
                                    acceptable  Space Plan  (attached as Exhibit
                                    A) and Final  Construction  Bid (attached as
                                    Exhibit B).

                                    Landlord  will fund an amount up to $195,000
                                    that will be utilized  for the  construction
                                    of  Tenants  improvements  within the suite.
                                    Tenant will be responsible to contribute any
                                    amounts required above said amount needed to
                                    complete  Tenant's suite  according to their
                                    mutually acceptable Space Plan. These Tenant
                                    Improvements  (costing up to $195,000) shall
                                    be  amortized  at a fixed six  percent  (6%)
                                    interest   over  the   initial   Lease  Term
                                    estimated  to  be  approximately  $0.36  psf
                                    based upon 8,000  rentable  square  feet and
                                    considered as  "additional  rents" above the
                                    base rental rate and NNN charges.

                                    Landlord  agrees to  deliver  the roof is in
                                    good  condition and repair as of the date of
                                    this  Proposal.  Landlord  agrees to deliver
                                    all HVAC units in good  operating  condition
                                    at  lease  execution.   Landlord  agrees  to
                                    warrant  the  HVAC  at  his  sole  cost  and
                                    expense  for one  hundred  eighty days (180)
                                    days of the Initial Lease Term.

                                    Costs related to ADA Compliance or any other
                                    fees  associated  with  standard  City  code
                                    compliance  at time of  occupancy  shall  be
                                    paid for by Lessor unless such compliance is
                                    directly  related to Tenants specific use of
                                    said space  whereas  Tenant would pay costs.
                                    This does not include  the costs  associated
                                    with normal building  construction that must
                                    be  done to  complete  the  interior  of the
                                    space.

      4.    Delivery of             Landlord  will  use  its  best  commercially
            Possession:             reasonable  efforts to deliver possession of
                                    the Premises by the Commencement Date.

      5.    Tenant's Option to      Provided  Tenant has abided by the terms and
            Terminate               conditions  of the Lease,  Tenant shall have
                                    the  Option to  Terminate  the  Lease  after
                                    month sixty (60) of the initial  Lease Term.
                                    Should   Tenant   exercise   the  Option  to
                                    Terminate,   Tenant   agrees   to  pay   any
                                    unamortized  Tenant  Improvement  costs  and
                                    Leasing   Commissions   from   the  date  of
                                    termination  through  the end of the initial
                                    Lease Term.  Tenant shall  provide  Landlord
                                    with six (6) month's advanced written notice
                                    in  order  to   exercise   the   Option   to
                                    Terminate.

<PAGE>

      6.    Signage:                Tenant shall be granted standard sign rights
                                    for the subject Premises. Said signage shall
                                    be mutually agreed upon between Landlord and
                                    Tenant in accordance  with the sign criteria
                                    for the  project  and  according  to City of
                                    Carlsbad codes and regulations.

      7.    Option to Extend:       Provided  Tenant is not in uncured  material
                                    default  and has  abided  by the  terms  and
                                    conditions   of  the  Lease,   Tenant  shall
                                    receive  two (2) three (3) year  Options  to
                                    Extend  the lease  under the same  terms and
                                    conditions of the original  lease except for
                                    the  Base   Monthly   Rent  which  shall  be
                                    adjusted  to  95%  of  the  then  prevailing
                                    market  rent for  comparable  space  but not
                                    less than the  previous  months  base rental
                                    rate. Tenant shall provide Landlord with six
                                    (6) months' advanced written notice in order
                                    to exercise the Option to Extend.

      8.    Required Letter of      Prior to receipt of said funds,  Lessee must
            Credit:                 provide the Lessor will a $195,000 Letter of
                                    Credit  (LC) for a major  AAA  credit  rated
                                    banking  institution.  Provided  that Lessee
                                    has been in good standing of their terms and
                                    conditions  set forth in their lease,  their
                                    Letter  of  Credit  will be  reduced  by 20%
                                    annually  after  the  first  year  that  the
                                    Letter of Credit is put into place  provided
                                    that Lessee has not and/or is not in default
                                    of the terms and  conditions of their lease.
                                    Said  LC  shall  remain  in  place  for  the
                                    initial sixty (60) months of the lease term.

      9.    Brokerage Commission:   Landlord  shall pay a Leasing  Commission to
                                    CB Richard Ellis, Inc. in an amount equal to
                                    three percent (3%) on the transaction  value
                                    of the  first  five (5)  years of the  Lease
                                    Term and a one and one-half  percent  (1.5%)
                                    on the remaining term  thereafter.  One-half
                                    of the  commission  will be paid upon  Lease
                                    execution   and  the  final   one-half  upon
                                    Tenant's occupancy of the Building.  Listing
                                    agents  shall be paid  according  to Listing
                                    agreement.

     10.    Agency:                 Tenant and Landlord  acknowledge and approve
                                    that CB Richard Ellis, Inc.,  represents the
                                    Tenant  and  Grubb  &  Ellis|BRE  Commercial
                                    represents the Landlord in this transaction.

ALL OTHER TERMS AND CONDITIONS SET FORTH IN THE ORIGINAL LEASE DATED MARCH 17,
2005 ARE IN FULL FORCE.

AGREED TO AND ACCEPTED BY:

LESSOR:                                    LESSEE:
WELLS FARGO, N.A., AS TRUSTEE              PHOTOMEDEX, INC.
THE HUTTON TRUST                           A DELAWARE CORPORATION

By:/s/Danny Flowers                       By: /s/Jeff O'Donnell
   ------------------------------             ------------------------------
   Danny Flowers                              Jeff O'Donnell
   Its: Vice President                        Its: CEO

By: /s/Del Mcghue III
   ------------------------------
   Del Mcgue III

Its: Vice President

DATED:4/12/05                             DATED: 4/4/05
      ---------------------------                ---------------------------

<PAGE>

                                    Exhibit A
                             Conceptual Floor Plan
                                 (not to scale)

                          [FLOOR PLAN GRAPHIC OMITTED]

Initial________                                                  Initial________

<PAGE>

                                     [LOGO]

                            RULES AND REGULATIONS FOR
                              STANDARD OFFICE LEASE
                                    Exhibit B

Dated: March 17, 2005

By and  Between  Wells  Fargo  Bank N.A.  as Trustee  for the  Hutton  Trust and
PhotoMedex, Inc., a Delaware Corporation

                                 GENERAL RULES

      1. Lessee shall not suffer or permit the  obstruction of any Common Areas,
including driveways, walkways and stairways.

      2. Lessor  reserves  the right to refuse  access to any persons  Lessor in
good faith judges to be a threat to the safety and reputation of the Project and
its occupants.

      3.  Lessee  shall not make or  permit  any  noise or odors  that  annoy or
interfere with other lessees or persons having business within the Project.

      4. Lessee shall not keep  animals or birds  within the Project,  and shall
not bring  bicycles,  motorcycles or other vehicles into areas not designated as
authorized for same.

      5. Lessee shall not make,  suffer or permit litter  except in  appropriate
receptacles for that purpose.

      6. Lessee shall not alter any lock or install new or  additional  locks or
bolts.

      7. Lessee shall be  responsible  for the  inappropriate  use of any toilet
rooms, plumbing or other utilities.  No foreign substances of any kind are to be
inserted therein.

      8. Lessee shall not deface the walls,  partitions or other surfaces of the
Premises or Project.

      9. Lessee shall not suffer or permit anything in or around the Premises or
Building  that causes  excessive  vibration or floor  loading in any part of the
Project.

      10.  Furniture,  significant  freight and equipment shall be moved into or
out of the building only with the Lessor's knowledge and consent, and subject to
such  reasonable  limitations,  techniques  and timing,  as may be designated by
Lessor.

      11.  Lessee  shall be  responsible  for any damage to the Office  Building
Project  arising from any such activity.  Lessee shall not employ any service or
contractor  for  services or work to be  performed  in the  Building,  except as
approved by Lessor.

      12. Lessor reserves the right to close and lock the Building on Saturdays,
Sundays and Building Holidays, and on other days between the hours of _____ P.M.
and _____ A.M. of the  following  day. If Lessee uses the  Premises  during such
periods,  Lessee shall be responsible for securely locking any doors it may have
opened for entry.

      13.  Lessee  shall return all keys at the  termination  of its tenancy and
shall be responsible for the cost of replacing any keys that are lost.

      14. No window  coverings,  shades or awnings shall be installed or used by
Lessee.

      15. No Lessee, employee or invitee shall go upon the roof of the Building.

      16.  Lessee  shall not  suffer or permit  smoking or  carrying  of lighted
cigars or cigarettes in areas  reasonably  designated by Lessor or by applicable
governmental agencies as non-smoking areas.

      17. Lessee shall not use any method of heating or air  conditioning  other
than as provided by Lessor.

      18.  Lessee  shall not install,  maintain or operate any vending  machines
upon the Premises without Lessor's written consent.

      19. The Premises shall not be used for lodging or  manufacturing,  cooking
or food  preparation.

      20. Lessee shall comply with all safety,  fire  protection  and evacuation
regulations established by Lessor or any applicable governmental agency.

      21.  Lessor  reserves  the  right  to  waive  any one of  these  rules  or
regulations,  and/or as to anyparticular  Lessee,  and any such waiver shall not
constitute  a  waiver  of  any  other  rule  or  regulation  or  any  subsequent
application  thereof  to such  Lessee.

      22.  Lessee  assumes all risks from theft or vandalism  and agrees to keep
its Premises  locked as maybe  required.

      23.  Lessor  reserves  the right to make such other  reasonable  rules and
regulations  as it may from  time to time  deem  necessary  for the  appropriate
operation and safety of the Project and its occupants. Lessee agrees to abide by
these and such rules and regulations.

                                  PARKING RULES

      1. Parking areas shall be used only for parking by vehicles no longer than
full size,  passenger  automobiles  herein  called  "Permitted  Size  Vehicles."
Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized
Vehicles."

      2.  Lessee  shall not permit or allow any  vehicles  that belong to or are
controlled by Lessee or Lessee's employees,  suppliers,  shippers, customers, or
invitees to be loaded,  unloaded, or parked in areas other than those designated
by Lessor for such activities.

      3. Parking  stickers or  identification  devices  shall be the property of
Lessor and be returned to Lessor by the holder  thereof upon  termination of the
holder's  parking  privileges.  Lessee  will pay such  replacement  charge as is
reasonably established by Lessor for the loss of such devices.

      4. Lessor reserves the right to refuse the sale of monthly  identification
devices  to any  person or entity  that  willfully  refuses  to comply  with the
applicable rules, regulations, laws and/or agreements.

      5. Lessor  reserves the right to relocate all or a part of parking  spaces
from floor to floor,  within one floor,  and/or to reasonably  adjacent  offsite
location(s),  and to reasonably  allocate them between compact and standard size
spaces,  as long as the same  complies  with  applicable  laws,  ordinances  and
regulations.

      6. Users of the parking  area will obey all posted  signs and park only in
the areas designated for vehicle parking.

      7. Unless  otherwise  instructed,  every  person using the parking area is
required to park and lock his own vehicle.  Lessor will not be  responsible  for
any damage to  vehicles,  injury to persons  or loss of  property,  all of which
risks are assumed by the party using the parking area.

      8. Validation, if established,  will be permissible only by such method or
methods  as  Lessor  and/or  its  licensee  may  establish  at  rates  generally
applicable to visitor parking.

      9. The maintenance, washing, waxing or cleaning of vehicles in the parking
structure or Common Areas is prohibited.

      10.  Lessee  shall be  responsible  for seeing that all of its  employees,
agents and invitees comply with the applicable parking rules, regulations,  laws
and agreements.

      11.  Lessor  reserves  the right to modify  these rules  and/or adopt such
other  reasonable and  non-discriminatory  rules and  regulations as it may deem
necessary for the proper operation of the parking area.

      12. Such parking use as is herein provided is intended merely as a license
only and no bailment isintended or shall be created hereby.

Abramson-2375 Camino Vida Roble-Photomedex-RR

                                   PAGE 1 OF 1
___________                                                          ___________
___________                                                          ___________
INITIALS                                                                INITIALS

(C)1999 - AIR COMMERCIAL REAL ESTATE ASSOCIATION                FORM OFG-1-9/99E

<PAGE>

                                    EXHIBIT C

        ADDENDUM TO AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION STANDARD
             INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - MODIFIED NET

The American Industrial Real Estate Association  Standard  Industrial/Commercial
Multi-Tenant Lease - Modified Net ("Lease"),  to which this Addendum is attached
and  incorporated  into by this  reference,  is hereby  modified  and amended as
follows, notwithstanding any provision of the Lease to the contrary:

1.  BROKER'S  COMPENSATION:  Notwithstanding  any other  provision of the Lease,
Wells Fargo Bank, N.A., in its fiduciary capacity,  only agrees to pay Broker as
a commission per separate agreement.

The commission shall be earned and payable only upon receipt of a fully executed
Lease  between the Lessor and  Lessee.  Any fee or  commission  due to any other
broker  in  connection  with  the  Lease  shall  be paid by  Broker  prior to or
concurrently with payment by Wells Fargo Bank, N.A., in its fiduciary  capacity,
to Broker.

2.  EXCULPATION OF WELLS FARGO BANK, N.A.: It is understood and agreed by Lessee
that Wells Fargo Bank,  N.A. is executing  this Lease in its fiduciary  capacity
only and Wells Fargo Bank, N.A., in all capacities, and Wells Fargo Bank, N.A.'s
affiliates,  shareholders, officers, directors, employees and agents are not and
shall not be liable  hereunder,  directly  or  indirectly,  except  for  willful
misconduct, under or by execution of this Lease. The rights and claims of Lessee
or Broker as against Wells Fargo Bank,  N.A., in any capacity,  shall be limited
exclusively  to such  rights as Lessee or Broker may have  against  the trust or
other  estate or  entity  represented  herein  by Wells  Fargo  Bank,  N.A.  Any
liability  of  Wells  Fargo  Bank,  N.A.,  in any  capacity  (including  without
limitation  Wells  Fargo  Bank,  N.A.'s   shareholders,   officers,   directors,
affiliates,  agents, and employees) to Lessee,  Broker or any other person shall
be  limited  to the  estate of the trust or other  estate or entity  represented
herein by Wells Fargo Bank, N.A. in the subject property leased.  Lessee, Broker
or any other person  claiming  through Lessee or Broker agrees to look solely to
such interest for the recovery of any judgment  against Wells Fargo Bank,  N.A.,
in any capacity.  It is the intent of the parties that neither (a) such trust or
other estate or entity  represented  herein by Wells Fargo Bank,  N.A.,  (b) its
trustees  or  beneficiaries,  nor (c) any other  assets  of such  trust or other
estate or entity represented herein by Wells Fargo Bank, N.A. or its trustees or
beneficiaries shall be liable for any such judgment.

3.  APPROVALS:  The  obligations  of Wells Fargo Bank,  N.A.,  in its  fiduciary
capacity,  under  this  Lease are  expressly  contingent  upon  obtaining  court
approval,  if  required,  and  approval of the  required  management  persons or
committee  at Wells Fargo Bank,  N.A.,  and all other owners of interests in the
subject property, if any.

4. |_| [CHECK IF  APPLICABLE]  MULTIPLE  OWNERS:  The  undersigned  Other Owners
(multiple owners) each agree to perform in accordance with this Lease as Lessor.
In the event any such party fails to perform his, her or its  obligations  under
this Lease,  such  defaulting  party agrees to hold  harmless and  indemnify the
other co-owners for and against any and all claims,  liabilities, or expenses of
any kind  whatsoever  which such co-owners may incur as a result of such failure
to perform.

5.  CONDITION:  The subject  property  leased,  including any fixtures,  and any
personal  property,  is  being  leased  in its "AS IS"  condition,  without  any
expressed or implied  warranties.  Any and all representations and warranties of
Lessor set forth in the Lease are hereby deleted.  Lessee hereby represents that
Lessee or Lessee's agents have inspected the subject property to the full extent
deemed  appropriate  and that Lessee is  satisfied  with its  condition.  Lessee
acknowledges  that as of the date of this Lease,  the subject  property  and the
Premises and improvements are in good order, repair, and condition. Lessor shall
not be liable to Lessee or any person for any latent or  existing  defect in the
subject property,  or for any injury or damages that may result to any person or
property, including, without limitation, the person or property of Lessee, by or
from any cause whatsoever  arising out of the present actual or latent condition
of the subject property.

6. INDEPENDENT  INVESTIGATION:  Lessee has not relied on any acts, including any
written  or oral  statements,  by  Wells  Fargo  Bank,  N.A.,  in its  fiduciary
capacity,  or any person  acting on behalf of Wells  Fargo  Bank,  N.A.,  in its
fiduciary  capacity,  in entering into this Lease, but rather has relied on his,
her or its own independent investigation of the subject property.

7. MATTERS OF RECORD: Lessee agrees to accept the property leased subject to any
and   all   covenants,   conditions,    restrictions,    reservations,   rights,
rights-of-way, and easements of record, if any.

8.  BROKER'S  INDEMNITY:  Broker  agrees to indemnify and hold Wells Fargo Bank,
N.A.,  in all  capacities,  free and  harmless  of and from any and all  claims,
liability,  demands,  suits,  actions or judgments,  made,  brought or recovered
against Wells Fargo Bank,  N.A., in any capacity,  or Broker,  or both,  and all
damages, costs and expenses,  including attorneys' fees, incurred by Wells Fargo
Bank,  N.A.,  in any  capacity,  in  connection  with or in any way arising from
Broker's  negligence  or  willful  misconduct  in  connection  with this  Lease,
including,  without  limitation,  (a)  Broker's  unauthorized  written  or  oral
representations; (b) Broker's use of unauthorized advertising materials; (c) any
claim or claims for  commissions  made against  Wells Fargo Bank,  N.A.,  in any
capacity,  by any other  broker or  salesman  arising out of or  connected  with
Broker's  acts or omissions  in  connection  with this Lease.  Wells Fargo Bank,
N.A., in its fiduciary  capacity,  agrees to save and hold harmless  Broker only
from such damages, claims, disputes,  litigation,  and/or judgments arising from
any knowingly incorrect  information  supplied by Wells Fargo Bank, N.A., in its
fiduciary  capacity,  or from any material  fact  actually  known by Wells Fargo
Bank,  N.A., in its fiduciary  capacity,  concerning the subject property leased
which Wells Fargo Bank,  N.A., in its fiduciary  capacity,  fails to disclose to
Broker.

9. ADA: Lessee's  obligations to comply with all laws shall include,  but not be
limited to, the Americans with  Disabilities Act and all similar laws enacted in
the future.

10. INTRABUILDING NETWORK CABLES:  Regardless of any provisions of this Lease to
the  contrary,  Lessor and Lessee agree as follows:

(a) Cabling and Equipment.  Unless Lessor  expressly elects to perform the work,
in which case all costs incurred will be deemed an operating  expense and passed
through to the Lessee under Section 4.2, Lessee will be responsible, at Lessee's
sole   cost,   for   the   installation,   maintenance,   and   repair   of  all
telecommunication  cabling,  wiring,  and risers running  throughout the subject
property serving Lessee, together with all of Lessee's telephones,  telecopiers,
computers,  telephone switching, telephone panels, and related equipment. Lessee
agrees to install,  maintain, and repair such telecommunication cabling, wiring,
and risers in a good and proper manner.

(b) Right of Entry.  In addition to  Lessor's  other  rights of entry under this
Lease,  Lessor may enter the leased  Premises to inspect  the  telecommunication
cabling,  wiring, and risers to assure that the installation,  maintenance,  and
repair are being performed in a good and proper manner.

(c) Approval of Provider.  Lessee agrees to have the installation,  maintenance,
and repair of the  telecommunication  cabling,  wiring,  and  risers  done by an
independent contractor approved by Lessor in writing in advance.

(d)  Indemnity.  Lessee agrees to indemnify,  release,  defend,  and hold Lessor
harmless against any damages, claims, or other liability resulting from Lessee's
installation,  repair, or maintenance of the telecommunication  cabling, wiring,
and risers, including, but not limited to, the costs of repair.

(e) Release. Lessee releases Lessor from all losses, claims, injuries,  damages,
or other  liability,  including,  but not  limited  to,  consequential  damages,
whether to persons or property  and no matter how caused,  in any way  connected
with the interruption of  telecommunications  services due to the failure of any
telecommunications cabling, wiring, or risers. Lessee

                                   Page 1 of 2
<PAGE>

expressly  waives the right to claim that any interruption  constitutes  grounds
for a claim of abatement of rent, of constructive  eviction,  or for termination
of the Lease.

(f)  Restrictions on Tenant  Repairs.  Regardless of Lessee's other rights under
the Lease to make  alterations to the Leased  Premises,  Lessee may not alter or
modify the telecommunication  cabling,  wiring, and risers located in the Leased
Premises or otherwise without Lessor's prior written consent.

11. ARBITRATION:

(a) Except with regard to any claim,  counterclaim,  dispute,  and other  matter
relating  to the  payment of rent or any other sum owing  from  Lessee to Lessor
under this Lease,  Lessor and Lessee  agree that,  if and to the extent that any
claim, counterclaim,  dispute, and other matter in question between them arising
out  of  or  relating  to  this  Lease  or  the  breach  thereof  (collectively,
"Non-Monetary  Disputes")  cannot be resolved through direct  discussions,  such
Non-Monetary  Dispute  shall at the  election of either  party be  submitted  to
arbitration in accordance  with this  subsection  (a). In the event either party
elects to submit any  Non-Monetary  Dispute to arbitration,  the judgment or the
award  rendered  in any such  arbitration  may be  entered  in any court  having
jurisdiction  and shall be final and binding upon the parties.  The  arbitration
shall be conducted in accordance with the then prevailing  rules of the American
Arbitration Association or its successor for arbitration of commercial disputes,
and the provisions of California Code of Civil Procedure Section 1283.05, or any
successor or amended statute or law containing similar provisions.

(b) The arbitrator shall award to the prevailing party, if any, as determined by
the  arbitrator,  all of its costs and fees.  "Costs  and fees"  shall  mean all
expenses of the  arbitration,  including the arbitrators'  fees,  administrative
fees, travel expenses,  out-of-pocket  expenses,  such as copying and telephone,
court costs, witness fees and attorneys fees.

(c)  Notwithstanding  the foregoing,  nothing contained in this section shall be
deemed to limit or restrict  Lessor's rights to file an unlawful detainer action
under  California  Code of Civil  Procedure  ss.ss.  1161 et. seq.  and obtain a
judgment hereunder.

12. LESSEE  OBLIGATIONS:  The  obligations  of Lessee other than rent under this
Lease shall not be limited in any manner by the total  amount of rent or term of
Lease, and shall be limited only as may be specifically  and explicitly  limited
by an express provision of this Lease.

13.  LESSOR  INSURANCE:  Notwithstanding  any  provision  of this  Lease  to the
contrary,  Lessor shall have no obligation  of any kind  whatsoever to carry any
insurance policy or coverage of any kind or in any specified amount.

14.  ENVIRONMENTAL:  Lessee shall furnish  Lessor a copy of any hazardous  waste
removal contract in force at any time during Lessee's occupancy of the Premises.
All such contracts shall provide that the  contracting  party shall give written
notice of any termination of the contract to Lessor.

15. INSPECTIONS: Lessee shall reimburse Lessor for all costs incurred by Lessor,
if any,  for  inspections  by  environmental,  health or safety  experts  deemed
necessary or appropriate by Lessor to assure Lessee's compliance with Applicable
Law.

16. Sections 15.1, 15.2 and 15.3 are hereby deleted.

The parties have executed this Addendum as of the date of the Lease.

LESSOR:                                    BROKER:
WELLS FARGO BANK, N.A.,                    NAME: Grubb & Ellis|BRE Commercial
in its fiduciarycapacity,
as Trustee for the Hutton Trust

By:/s/Danny Flowers                        By:/s/Jeff Abramson
   ------------------------------             ------------------------------
   Danny Flowers                              Jeff Abramson
   Title: Vice President                      Title: Agent

                                           Date:5/2/05
                                                -----------------------------

By:/s/Delbert McGhue III                   By:/s/Barry Hendler
   ------------------------------             --------------------------------
   Delbert McGue III                          Barry Hendler
   Title: Vice President                      Title: Agent

Date:4/12/05                               Date:5/2/05
     ----------------------------               ------------------------------

LESSEE:
PHOTOMEDEX, INC. A DELAWARE CORPORATION

By: /s/Jeff O'Donnell
    -----------------------------
    Jeff O'Donnell
    Title: CEO

Date:4/12/05
     --------------------------

                                   Page 2 of 2

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