Document:

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                                                                    Exhibit 10.8

                                 IMPERIAL BANK

                          SECURITY AND LOAN AGREEMENT
                             (ACCOUNTS RECEIVABLE)

This Agreement is entered into between Active Power, Inc.

                              , a Texas Corporation

(herein called "Borrower") and IMPERIAL BANK (herein called  "Bank").

1.   Bank hereby commits, subject to all the terms and conditions of this
     Agreement and prior to the termination of its commitment as hereinafter
     provided, to make loans to Borrower from time to time in such amounts as
     may be determined by Bank up to, but not exceeding in the aggregate unpaid
     principal balance, the following Borrowing Base:

                            80 % of Eligible Accounts

and in no event more than $   1,000,000.00

2.   The amount of each loan made by Bank to Borrower hereunder shall be debited
     to the loan ledger account of Borrower maintained by Bank (herein called
     "Loan Account") and Bank shall credit the Loan Account with all loan
     repayments made by Borrower. Borrower promises to pay Bank (a) the unpaid
     balance of Borrower's Loan Account on demand and (b) on or before the tenth
     day of each month, interest on the average daily unpaid balance of the Loan
     Account during the immediately preceding month at the rate of Zero percent
     ( 0.00 %) per annum in excess of the rate of interest which Bank has
     announced as its prime lending rate ("Prime Rate") which shall vary
     concurrently with any change in such Prime Rate. Interest shall be computed
     at the above rate on the basis of the actual number of days during which
     the principal balance of the loan account is outstanding divided by 360,
     which shall for interest computation purposes be considered one year. Bank
     at Its option may demand payment of any or all of the amount due under the
     Loan Account including accrued but unpaid Interest at any time. Such notice
     may be given verbally or in writing and should be effective upon receipt by
     Borrower. The amount of interest payable each month by Borrower shall not
     be less than a minimum monthly charge of $ 250.00 . Bank is hereby
     authorized to charge Borrower's deposit account(s) with Bank for all sums
     due Bank under this Agreement.

3.   Requests for loans hereunder shall be in writing duly executed by Borrower
     in a form satisfactory to Bank and shall contain a certification setting
     forth the matters referred to in Section 1, which shall disclose that
     Borrower is entitled to the amount of loan being requested.

4.   As used In this Agreement, the following terms shall have the following
     meanings:

     A.   "Accounts" means any right to payment for goods sold or leased, or to
          be sold or to be leased, or for services rendered or to be rendered no
          matter how evidenced, Including accounts receivable, contract rights,
          chattel paper, Instruments, purchase orders, notes, drafts,
          acceptances, general intangibles and other forms of obligations and
          receivables.

     B.   "Collateral" means any and all personal property of Borrower which is
          assigned or hereafter is assigned to Bank as security or in which Bank
          now has or hereafter acquires a security interest.

     C.   "Eligible Accounts" means all of Borrower's Accounts excluding,
          however, (1) all Accounts under which payment is not received within
          90 days from any invoice date, (2) all Accounts against which the
          account debtor or any other person obligated to make payment thereon
          asserts any defense, offset, counterclaim or other right to avoid or
          reduce the liability represented by the Account and (3) any Accounts
          if the account debtor or any other person liable in connection
          therewith is insolvent, subject to bankruptcy or receivership
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          proceedings or has made an assignment for the benefit of creditors or
          whose credit standing is unacceptable to Bank and Bank has so notified
          Borrower. Eligible Accounts shall only include such accounts as Bank
          in its sole discretion shall determine are eligible from time to time.

5.   Borrower hereby assigns to Bank all Borrower's present and future Accounts,
     including all proceeds due thereunder, all guaranties and security
     therefor, and hereby grants to Bank a continuing security interest in all
     moneys in the Collateral Account referred to in Section 6 hereof, as
     security for any and all obligations of Borrower to Bank, whether now owing
     or hereafter incurred and whether direct, indirect, absolute or contingent.
     So -long as Borrower is indebted to Bank or Bank is committed to extend
     credit to Borrower, Borrower will execute and deliver to Bank such
     assignments, including Bank's standard forms of Specific or General
     Assignment covering individual Accounts, notices, financing statements, and
     other documents and papers as Bank may require In order to affirm,
     effectuate or further assure the assignment to Bank of the Collateral or to
     give any third party, including the account debtors obligated on the
     Accounts, notice of Bank's interest in the Collateral.

6.   Until Bank exercises its rights to collect the Accounts pursuant to
     paragraph 10, Borrower will collect with reasonable diligence all
     Borrower's Accounts, provided that no legal action shall be maintained
     thereon or in connection therewith without Bank's prior written consent.
     Any collection of Accounts by Borrower, whether In the form of cash,
     checks, notes, or other instruments for the payment of money (properly
     endorsed or assigned where required to enable Bank to collect same), shall
     be in trust for Bank, and Borrower shall keep all such collections separate
     and apart from all other funds and property so as to be capable of
     identification as the property of Bank and deliver said collections daily
     to Bank in the identical form received. The proceeds of such collections
     when received by Bank may be applied by Bank directly to the payment of
     Borrower's Loan Account or any other obligation secured hereby. Any credit
     given by Bank upon receipt of said proceeds shall be conditional credit
     subject to collection. Returned items at Bank's option may be charged to
     Borrower's general account. All collections of the Accounts shall be set
     forth on an itemized schedule, showing the name of the account debtor, the
     amount of each payment and such other information as Bank may reasonably
     request.

7.   Until Bank exercises its rights to collect the Accounts pursuant to
     paragraph 10, Borrower may continue its present policies with respect to
     returned merchandise and adjustments. However, Borrower shall notify Bank
     within two (2) working days of all cases involving returns, repossessions,
     and loss or damage of or to merchandise represented by the Accounts and of
     any credits, adjustments or disputes arising in connection with the goods
     or services represented by the Accounts, and in any of such events,
     Borrower will immediately pay to Bank form its own funds (and not from the
     proceeds of Accounts or Inventory) for application to Borrower's Loan
     Account or any other obligation secured hereby the amount of any credit for
     such returned or repossessed merchandise and adjustments made to any of the
     Accounts.

8.   Borrower represents and warrants to Bank: (i) if Borrower is a corporation,
     that Borrower is duly organized and existing in the State of its
     incorporation and the execution, deliver, and performance hereof are within
     Borrower's corporate powers, have been duly authorized and are not in
     conflict with law or the terms of any charter, by-law or other
     incorporation papers, or of any indenture, agreement or undertaking to
     which Borrower is a party or by which Borrower is found or affected; (ii)
     Borrower is, or at the time the collateral becomes subject to Bank's
     security interest will be, the true and lawful owner of and has, or at the
     time the Collateral becomes subject to Bank's security interest will have,
     good and clear title to the Collateral, subject only to Bank's right
     therein; (iii) Each Account is, or at the time the Account comes into
     existence will be, a true and correct statement of a bona fide indebtedness
     incurred by the debtor named therein in the amount of the Account for
     either merchandise sold or delivered (or being held subject to Borrower's
     delivery instruction) to, or services rendered, performed and accepted by,
     the account debtor; (iv) That, to the best of Borrower's knowledge, there
     are or will be no defenses, counterclaims, or setoffs which may be asserted
     against the Accounts; and (v) to the best of Borrower's knowledge, any and
     all financial information, including

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     information relating to the Collateral, submitted by Borrower to Bank,
     whether previously or in the future, is or will be true and correct.

9.   Borrower will: (i) Furnish Bank from time to time such financial statements
     and information as Bank may reasonably request and inform Bank within two
     (2) working days the occurrence of a material adverse change therein; (ii)
     Furnish Bank periodically, in such form and detail and at such times as
     Bank may reasonably require, statements showing aging and reconciliation of
     the Accounts and collections thereon; (iii) Permit representatives of Bank
     to inspect the Borrower's books and records relating to the Collateral and
     make extracts therefrom at any reasonable time and upon giving reasonable
     notice to the Borrower to arrange for verification of the Accounts, under
     reasonable procedures, acceptable to Bank, directly with the account
     debtors or otherwise at Borrower's expense; (iv) Promptly notify Bank of
     any attachment or other legal process levied against any of the Collateral
     and any information received by Borrower relative to the Collateral,
     including the Accounts, the account debtors or other persons obligated in
     connection therewith, which may in any way affect the value of the
     Collateral or the rights and remedies of Bank in respect thereto; (v)
     Reimburse Bank upon demand for any and all reasonable legal costs,
     including reasonable attorneys' fees, and other expense incurred in
     collecting any sums payable by Borrower under Borrower's Loan Account or
     any other obligation secured hereby, enforcing any term or provision of
     this Security Agreement or otherwise or in the checking, handling and
     collection of the Collateral and the preparation and enforcement of any
     agreement relating thereto; (vi) Notify Bank of each location and of each
     office of Borrower at which records of Borrower relating to the Accounts
     are kept; (vii) Provide, maintain and deliver to Bank policies insuring the
     Collateral against loss or damage by such risks and in such amounts, forms
     and companies as Bank may reasonably require and with loss payable solely
     to Bank, and, in the event Bank takes possession of the Collateral, the
     insurance policy or policies and any unearned or returned premium thereon
     shall at the option of Bank become the sole property of Bank, such policies
     and the proceeds of any other insurance covering or in any way relating to
     the Collateral, whether now in existence or hereafter obtained, being
     hereby assigned to Bank; (viii) In the event the unpaid balance of
     Borrower's Loan Account shall exceed the maximum amount of outstanding
     loans to which Borrower is entitled under Section 1 hereof, Borrower shall,
     within two (2) working days, pay to Bank, from its own funds and not from
     the proceeds of Collateral, for credit to Borrower's Loan Account the
     amount of such excess.

10.  Bank may at any time, without prior notice to Borrower, collect the
     Accounts and may give notice of assignment to any and all account debtors,
     and Borrower does hereby make, constitute and appoint Bank its irrevocable,
     true and lawful attorney with power to receive, open and dispose of all
     mail addressed to Borrower, to endorse the name of Borrower upon any checks
     or other evidences of payment that may come into the possession of Bank
     upon the Accounts to endorse the name of the undersigned upon any document
     or instrument relating to the Collateral; in its name or otherwise, to
     demand, sue for, collect and give acquittances for any and all moneys due
     or to become due upon the Accounts; to compromise, prosecute or defend any
     action, claim or proceeding with respect thereto; and to do any and all
     things necessary and proper to carry out the purpose herein contemplated.

11.  Until Borrower's Loan Account and all other obligations secured hereby
     shall have been repaid in full, Borrower shall not sell, dispose of or
     grant a security interest in any of the Collateral other than to Bank, or
     execute any financing statements covering the Collateral in favor of any
     secured party or person other than Bank.

12.  Should: (i) Default be made in the payment of any obligation, or breach be
     made in any warranty, statement, promise, term or condition, contained
     herein or hereby secured; (ii) Any statement or representation made for the
     purpose of obtaining credit hereunder prove false; (iii) Bank reasonably
     deem the Collateral inadequate or unsafe or in danger of misuse; (iv)
     Borrower become insolvent or make an assignment for the benefit of
     creditors; or (v) Any proceeding be commenced by or against Borrower under
     any bankruptcy, reorganization, arrangement, readjustment of debt or
     moratorium law or statute; then in any such event, Bank may, at its option
     and without demand first made and without notice to Borrower, do any one or
     more of the following: (a) Terminate its obligation to make loans to
     Borrower as provided in Section 1 hereof; (b) Declare all

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     sums secured hereby immediately due and payable; (c) Immediately take
     possession of the Collateral wherever it may be found, using all necessary
     force so to do, or require Borrower to assemble the Collateral and make it
     available to Bank at a place designated by Bank which is reasonably
     convenient to Borrower and Bank, and Borrower waives all claims for damages
     due to or arising from or connected with any such taking; (d) Proceed in
     the foreclosure of Bank's security interest and sale of the Collateral in
     any manner permitted by law, or provided for herein; (e) Sell, lease or
     otherwise dispose of the Collateral at public or private sale, with or
     without having the Collateral at the place of sale, and upon terms and in
     such manner as Bank may determine, and Bank may purchase same at any such
     sale; (f) Retain the Collateral in full satisfaction of the obligations
     secured thereby; (g) Exercise any remedies of a secured party under the
     Uniform Commercial Code. Prior to any such disposition, Bank may, at as
     option, cause any of the Collateral to be repaired or reconditioned in such
     manner and to such extent as Bank may deem advisable, and any sums expended
     therefor by Bank shall be repaid by Borrower and secured hereby. Bank shall
     have the right to enforce one or more remedies hereunder successively or
     concurrently, and any such action shall not estop or prevent Bank from
     pursuing any further remedy which it may have hereunder or by law. If a
     sufficient sum is not realized from any such disposition of Collateral to
     pay all obligations secured by this Security Agreement, Borrower hereby
     promises and agrees to pay Bank any deficiency.

13.  If any writ of attachment, garnishment, execution or other legal process be
     issued against any property of Borrower, or if any assessment for taxes
     against Borrower, other than real property, is made by the Federal or State
     government or any department thereof, the obligation of Bank to make loans
     to Borrower as provided in Section 1 hereof shall immediately terminate and
     the unpaid balance of the Loan Account, all other obligations secured
     hereby and all other sums due hereunder shall immediately become due and
     payable without demand, presentment or notice.

14.  Borrower authorizes Bank to destroy all invoices, delivery receipts,
     reports and other types of documents and records submitted to Bank in
     connection with the transactions contemplated herein at any time subsequent
     to four months from the time such items are delivered to Bank.

15.  Nothing herein shall in any way limit the effect of the conditions set
     forth in any other security or other agreement executed by Borrower, but
     each and every condition hereof shall be in addition thereto.

16.  Should default be made in the payment of principal or interest when due, or
     in the performance or observance, when due, of any item, covenant or
     condition of this Agreement, any deed of trust, security agreement or other
     agreement (including amendments or extensions thereof) securing or
     pertaining to this Agreement, at the option of the holder hereof and
     without notice or demand, the entire balance of principal and accrued
     interest then remaining unpaid shall (a) become immediately due and
     payable, and (b) thereafter bear interest, until paid in full, at the
     increased rate of 5% per year in excess of the rate provided for above, as
     it may vary from time to time.

17.  If any installment payment, interest payment, principal payment or
     principal balance payment due hereunder is delinquent twenty (20) or more
     days, Borrower agrees to pay Bank a late charge in the amount of 5% of the
     payment so due and unpaid, in addition to the payment; but nothing in this
     paragraph is to be construed as any obligation on the part of the Bank to
     accept payment of any payment past due or less than the total unpaid
     principal balance after maturity.

     All payments shall be applied first to any late charges owing,  then to
     interest and the remainder, if any, to principal.

18.  Reference Provision.

     A.   Other than (i) non-judicial foreclosure and all matters in connection
          therewith regarding security interests in real or personal property;
          or (ii) the appointment of a receiver, or the exercise of other
          provisional remedies (any and all of which may be initiated pursuant
          to applicable law), each controversy, dispute or claim

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          between the parties arising out of or relating to this document
          ("Agreement"), which controversy, dispute or claim is not settled in
          writing within thirty (30) days after the "Claim Date" (defined as the
          date on which a party subject to the Agreement gives written notice to
          all other parties that a controversy, dispute or claim exists), will
          be settled by a reference proceeding in California in accordance with
          the provisions of Section 638 et seq. of the California Code of Civil
          Procedure, or their successor section ("CCP"), which shall constitute
          the exclusive remedy for the settlement of any controversy, dispute or
          claim concerning this Agreement, including whether such controversy,
          dispute or claim is subject to the reference proceeding and except as
          set forth above, the parties waive their rights to initiate any legal
          proceedings against each other in any court or jurisdiction other than
          the Superior Court in the County where the Real Property, if any, is
          located or Los Angeles County if none (the "Court"). The referee shall
          be a retired Judge of the Court selected by mutual agreement of the
          parties, and if they cannot so agree within forty-five (45) days after
          the Claim Date, the referee shall be promptly selected by the
          Presiding Judge of the Court (or his representative). The referee
          shall be appointed to sit as a temporary judge, with all of the powers
          of a temporary judge, as authorized by law, and upon selection should
          take and subscribe to the oath of office as provided for in Rule 244
          of the California Rules of Court (or any subsequently enacted Rule).
          Each party shall have one peremptory challenge pursuant to CCP
          (S)170.6. The referee shall (a) be requested to set the matter for
          hearing within sixty (60) days after the Claim Date and (b) try any
          and all issues of law or fact and report a statement of decision upon
          them, if possible, within ninety (90) days of the Claim Date. Any
          decision rendered by the referees will be final, binding and
          conclusive and judgment shall be entered pursuant to CCP (S)644 in any
          court in the State of California having jurisdiction. Any party may
          apply for a reference proceeding at any time after thirty (30) days
          following notice to any other party of the nature of the controversy,
          dispute or claim, by filing a petition for a hearing and/or trial. All
          discovery permitted by this Agreement shall be completed no later than
          fifteen (15) days before the first hearing date established by the
          referee. The referee may extend such period in the event of a party's
          refusal to provide requested discovery for any reason whatsoever,
          including, without limitation, legal objections raised to such
          discovery or unavailability of a witness due to absence or illness. No
          party shall be entitled to "priority" in conducting discovery.
          Depositions may be taken by either party upon seven (7) days written
          notice, and request for production or inspection of documents shall be
          responded to within ten (10) days after service. All disputes relating
          to discovery which cannot be resolved by the parties shall be
          submitted to the referee whose decision shall be final and binding
          upon the parties. Pending appointment of the referee as provided
          herein, the Superior Court is empowered to issue temporary and or
          provisional remedies, as appropriate.

     B.   Except as expressly set forth in this Agreement and the riders
          attached hereto, the referee shall determine the manner in which the
          reference proceeding is conducted including the time and place of all
          hearings, the order of presentation of evidence, and all other
          questions that arise with respect to the course of the reference
          proceeding. All proceedings and hearings conducted before the referee,
          except for trial, shall be conducted without a court reporter, except
          that when any party so requests, a court reporter will be used at any
          hearing conducted before the referee. The party making such a request
          shall have the obligation to arrange for and pay for the court
          reporter. The costs of the court reporter at the trial shall be borne
          equally by the parties.

     C.   The referee shall be required to determine all issues in accordance
          with existing case law and the statutory laws of the State of
          California. The rules of evidence applicable to proceedings at law in
          the State of California will be applicable to the reference
          proceeding. The referee shall be empowered to enter equitable as well
          as legal relief, to provide all temporary and/or provisional remedies
          and to enter equitable orders that will be binding upon the parties.
          The referee shall Issue a single judgment at the close of the
          reference proceeding which shall dispose of all of the claims of the
          parties that are the subject of the reference. The

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          parties hereto expressly reserve the right to contest or appeal from
          the final judgment or any appealable order or appealable judgment
          entered by the referee. The parties hereto expressly reserve the right
          to findings of fact, conclusions of law, a written statement of
          decision, and the right to move for a new trial or a different
          judgment, which new trial, if granted, is also to be a reference
          proceeding under this provision.

     D.   In the event that the enabling legislation which provides for
          appointment of a referee is repealed (and no successor statute is
          enacted), any dispute between the parties that would otherwise be
          determined by the reference procedure herein described will be
          resolved and determined by arbitration. The arbitration will be
          conducted by a retired judge of the Court, in accordance with the
          California Arbitration Act, (S)1280 through (S)1294.2 of the CCP as
          amended from time to time. The limitations with respect to discovery
          as set forth hereinabove shall apply to any such arbitration
          proceeding.

19.  Additional Provisions: Subject to the provisions of the Credit Terms and
     Conditions Agreement dated August 3, 1999, and all amendments and riders
     thereto and replacements therefor.

     If checked, the Addendum or Exhibit 'A" attached (and all amendments
     thereto and replacements therefor) is incorporated herein by this
     reference.

By signing in the space below, each of the undersigned agrees that the foregoing
Riders are incorporated in and made a part of the Security and Loan Agreement
between Active Power, Inc. and Imperial Bank dated August ___, 1999.

     Executed this 3rd    day of August, 1999

                                        Active Power, Inc., a Texas corporation
                                        ---------------------------------------
                                                  (Name of Borrower)

IMPERIAL BANK                           By: /s/
                                           ------------------------------------
                                           (Authorized Signature and Title)

BY: /s/                                 BY: /s/
   ---------------------------------       ------------------------------------
     Title                                 (Authorized Signature and Title)

                                       6<PAGE>

                                                                    Exhibit 10.9

                                LEASE AGREEMENT

                                    Between

                            Braker Phase III, Ltd.,
                            -----------------------

                                 as Landlord,

                                      and

                     Magnetic Bearing Technologies, Inc.,
                     ------------------------------------

                                  as Tenant,

                Covering approximately 4,050 gross square feet
                                       -----
                   of the Building known (or to be known) as

                         Braker Center III, Building 1
                         -----------------------------

                                  located at

                      11525 Stonehollow Drive, Suite 135
                      ----------------------------------

                             Austin, Texas, 78758.
                             ------         -----
<PAGE>

STANDARD INDUSTRIAL LEASE AGREEMENT
(AUS/91)
                                           Approximately 4,050 gross square feet
                                           11525 Stonehollow Drive, Suite 135
                                           Austin, Texas 78758
                                           (Braker Center III, Building 1)

                             LEASE AGREEMENT

THIS LEASE AGREEMENT is made and entered into by and between Braker Phase III,
                                                             -----------------
Ltd., hereinafter referred to as "Landlord," and Magnetic Bearing Technologies,
----                                             ------------------------------
Inc., hereinafter referred to as "Tenant."
----

1. PREMISES AND TERM. In consideration of the mutual obligations of Landlord and
Tenant set forth herein, Landlord leases to Tenant, and Tenant hereby takes from
Landlord, certain leased premises situated within the County of Travis, State of
Texas, as                                                       ------
more particularly described on EXHIBIT "A" attached hereto and incorporated
herein by reference (the "Premises"), to have and to hold, subject to the terms,
covenants and conditions in this Lease.  The term of this Lease shall commence
on the Commencement Date hereinafter set forth and shall end on the last day of
the month that is Sixty (60) months after the Commencement Date.

   A. Building or Improvements to be Constructed. If the Premises or part
      ------------------------------------------
thereof are to be constructed, the "Commencement Date" shall be deemed to be the
earliest of:  (i) the date upon which the Premises and other improvements to be
erected in accordance with the plans and specifications described on EXHIBIT "B"
attached hereto and incorporated herein by reference (the "Plans") have been
substantially completed; (ii) the date on which the Premises or such
improvements would have been substantially completed but for delays caused
directly by Tenant, including Plan delays or change orders; (iii) the date on
which Tenant occupies any part of the Premises.  As used herein, the term
"substantially completed" shall mean that, in the opinion of the architect or
space planner that prepared the Plans, such improvements have been completed in
accordance with the Plans, and the Premises are in good and satisfactory
condition, with the exception of completion of minor punch list items.  As soon
as such improvements have been substantially completed, Landlord shall notify
Tenant in writing that the Commencement Date has occurred.  Should the Landlord
fail to deliver the space for occupancy by June 1, 1996, the Tenant will have
the right to cancel this Lease Agreement.

2. BASE RENT, SECURITY DEPOSIT AND ESCROW DEPOSITS.

   A. Base Rent.  Tenant agrees to pay Landlord rent for the Premises, in
      ---------
advance, without demand, deduction or set off, at the rate of See Rental Rate
Paragraph in Exhibit "C"  ($_____________) per month during the term hereof.
One such monthly installment, plus the other monthly charges set forth in
Paragraph 2C below, shall be due and payable on the date hereof, and a like
monthly installment shall be due and payable on or before the first day of each
calendar month succeeding the Commencement Date, except that all payments due
hereunder for any fractional calendar month shall be prorated.

   B. Security Deposit.  In addition, Tenant agrees to deposit with Landlord
      ----------------
on the date hereof the sum of Two Thousand Five Hundred and No/100 Dollars
($2,500.00), which shall be held by Landlord, without obligation for interest,
as security for the performance of Tenant's obligations under this Lease (the
"Security Deposit"), it being expressly understood and agreed that the Security
Deposit is not an advance rental deposit or a measure of Landlord's damages in
case of Tenant's default.  Upon occurrence of an Event of Default, Landlord may
use all or part of the Security Deposit to pay past due rent or other payments
due Landlord under this Lease or the cost of any other damage, injury, expense
or liability caused by such Event of Default, without prejudice to any other
remedy provided herein or provided by law.  On demand, Tenant shall pay Landlord
the amount that will restore the Security Deposit to its original amount.  The
Security Deposit shall be deemed the property of Landlord, but any remaining
balance of the Security Deposit shall be returned by Landlord to Tenant when all
of Tenant's present and future obligations under this Lease have been fulfilled.

   C. Escrow Deposits.  Without limiting in any way Tenant's other obligations
      ---------------
under this Lease, Tenant agrees to pay to Landlord its Proportionate Share (as
defined in this Paragraph 2C below) of (i) Taxes (hereinafter defined) payable
by Landlord pursuant to Paragraph 3A below, (ii) the cost of utilities payable
by Landlord pursuant to

                                           Initials  _______  _______
                                           Date      _______  _______

<PAGE>

Paragraph 8 below, (iii) Landlord's cost of maintaininginsurance pursuant to
Paragraph 9A below, and (iv) Landlord's cost of maintaining the Premises
pursuant to paragraph 5E below and any common area charges payable by Tenant in
accordance with Paragraph 4B below (collectively, the "Tenant Costs"). During
each month of the term of this Lease, on the same day that rent is due
hereunder, Tenant shall deposit in escrow with Landlord an amount equal to one-
twelfth (1/12) of the estimated amount of Tenant's Proportionate Share of the
Tenant Costs. Tenant authorizes Landlord to use the funds deposited with
Landlord under this Paragraph 2C to pay such Tenant Costs. The initial monthly
escrow payments are based upon the estimated amounts for the year in question
and shall be increased or decreased annually to reflect the projected actual
amount of all Tenant Costs. If the Tenant's total escrow deposits for any
calendar year are less than Tenant's actual Proportionate Share of the Tenant
Costs for such calendar year, Tenant shall pay the difference to Landlord within
thirty (30) days after demand. If the total escrow deposits of Tenant for any
calendar year are more than Tenant's actual Proportionate Share of the Tenant
Costs for such calendar year, Landlord shall return the excess to the Tenant
within sixty (60) days. In the event the Premises constitute a portion of a
multiple occupancy building (the "Building"), Tenant's "Proportionate Share"
with respect to the Building, as used in this Lease, shall mean a fraction, the
numerator of which is the gross rentable area contained in the Premises and the
denominator of which is the gross rentable area contained in the entire
Building. In the event the Premises or the Building is part of a project or
business park owned, managed or leased by Landlord or an affiliate of Landlord
(the "Project"), Tenant's "Proportionate Share" of the Project, as used in this
Lease, shall mean a fraction, the numerator of which is the gross rentable area
contained in the Premises and the denominator of which is the gross rentable
area contained in all of the buildings (including the Building) within the
Project.

3. TAXES

   A. Real Property Taxes. Subject to reimbursement under Paragraph 2C
      -------------------
herein, Landlord agrees to pay all taxes, assessments and governmental charges
of any kind and nature (collectively referred to herein as "Taxes") that accrue
against the Premises, the Building and/or the land of which the Premises or the
Building are a part.  If at any time during the term of this Lease there shall
be levied, assessed or imposed on Landlord a capital levy or other tax directly
on the rents received therefrom and/or a franchise tax, assessment, levy or
charge measured by or based, in whole or in part, upon such rents from the
Premises and/or the land and improvements of which the Premises are a part, then
all such taxes, assessments, levies or charges, or the part thereof so measured
or based shall be deemed to be included within the term "Taxes" for the purposes
hereof.  The Landlord shall have the right to employ a tax consulting firm to
attempt to assure a fair tax burden on the real property within the applicable
taxing jurisdiction.  Tenant agrees to pay its Proportionate Share of the cost
of such consultant.

   B. Personal Property Taxes. Tenant shall be liable for all taxes levied or
      -----------------------
assessed against any personal property or fixtures placed in or on the Premises.
If any such taxes are levied or assessed against Landlord or Landlord's property
and (i) Landlord pays the same or (ii) the assessed value of Landlord's property
is increased by inclusion of such personal property and fixtures and Landlord
pays the increased taxes, then Tenant shall pay to Landlord, upon demand, the
amount of such taxes.

4. LANDLORD'S REPAIRS AND MAINTENANCE.

   A. Structural Repairs.  Landlord, at its own cost and expense, shall
      ------------------
maintain the roof, foundation and the structural soundness of the exterior walls
of the Building in good repair, reasonable wear and tear excluded.  The term
"walls" as used herein shall not include windows, glass or plate glass, any
doors, special store fronts or office entries, and the term "foundation" as used
herein shall not include loading docks.  Tenant shall immediately give Landlord
written notice of defect or need for repairs, after which Landlord shall have
reasonable opportunity to effect such repairs or cure such defect.

   B. Tenant's Share of Common Area Charges. Tenant agrees to pay its
      -------------------------------------
Proportionate Share of the cost of (i) maintenance and/or landscaping (including
both maintenance and replacement of landscaping) of any property that is a part
of the Building and/or the Project; (ii) operating, maintaining and repairing
any property, facilities or services (including without limitation utilities and
insurance therefor) provided for the use or benefit of Tenant or the common use
or benefit of Tenant and other lessees of the Project or the Building; and (iii)
an administrative and or management fee of up to ten percent (10%).

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                                       2
<PAGE>

5. TENANT'S REPAIRS.

   A. Maintenance of Premises and Appurtenances. Tenant, at its own cost and
      -----------------------------------------
expense, shall (i) maintain all parts of the Premises and promptly make all
necessary repairs and replacements to the Premises (except those for which
Landlord is expressly responsible hereunder), and (ii) keep the parking areas,
driveways and alleys surrounding the Premises in a clean and sanitary condition.
Tenant's obligation to maintain, repair and make replacements to the Premises
shall cover, but not be limited to, pest control (including termites), trash
removal and the maintenance, repair and replacement of all HVAC, electrical,
plumbing, sprinkler and other mechanical systems which service the Tenant's
lease space.

   B. Parking. Tenant and its employees, customers and licensees shall have
      -------
the right to use only its Proportionate Share of any parking areas that have
been designated for such use by Landlord in writing, subject to (i) all rules
and regulations promulgated by Landlord, and (ii) rights of ingress and egress
of other lessees.  Landlord shall not be responsible for enforcing Tenant's
parking rights against any third parties, and Tenant expressly does not have the
right to tow or obstruct improperly parked vehicles.  Tenant agrees not to park
on any public streets or private roadways adjacent to or in the vicinity of the
Premises.

   C. System Maintenance. Tenant, at its own cost and expense, shall enter
      ------------------
into a regularly scheduled preventive maintenance/service contract with a
maintenance contractor approved by Landlord for servicing all hot water, heating
and air conditioning systems and equipment within the Premises.  The service
contract must include all services suggested by the equipment manufacturer in
its operations/maintenance manual and must become effective within thirty (30)
days of the date Tenant takes possession of the Premises.

   D. Option to Maintain Premises. Landlord reserves the right to perform, in
      ---------------------------
whole or in part and without notice to Tenant, maintenance, repairs and
replacements to the Premises, paving, common area, landscape, exterior painting,
common sewage line plumbing and any other items that are otherwise Tenant's
obligations under this Paragraph 5, in which event, Tenant shall be liable for
its Proportionate Share of the cost and expense of such repair, replacement,
maintenance and other such items.

6. ALTERATIONS. Tenant shall not make any alterations, additions or improvements
to the Premises without the prior written consent of Landlord such consent will
not be unreasonably withheld. Tenant, at its own cost and expense, may erect
such shelves, bins, machinery and trade fixtures as it desires, provided that
(i) such items do not alter the basic character of the Premises or the Building,
(ii) such items do not overload or damage same, (iii) such items may be removed
without injury to the Premises, and (iv) the construction, erection or
installation thereof complies with all applicable governmental laws, ordinances,
regulations and with Landlord's specifications and requirements. Tenant shall be
responsible for compliance with The Americans With Disabilities Act of 1990.
Without implying any consent of Landlord thereto, all alterations, additions,
improvements and partitions erected by Tenant shall be and remain the property
of Tenant during the term of this Lease. All shelves, bins, machinery and trade
fixtures installed by Tenant shall be removed on or before the earlier to occur
of the day of termination or expiration of this Lease or vacating the Premises,
at which time Tenant shall restore the Premises to their original condition. All
alterations, installations, removals and restorations shall be performed in a
good and workmanlike manner so as not to damage or alter the primary structure
or structural qualities of the Building or other improvements situated on the
Premises or of which the Premises are a part.

7. SIGNS. Any signage Tenant desires for the Premises shall be subject to
Landlord's written approval and shall be submitted to Landlord prior to the
Commencement Date of this Lease. Tenant shall repair, paint and/or replace the
Building fascia surface to which its signs are attached upon Tenant's vacating
the Premises or the removal or alteration of its signage. Tenant shall not,
without Landlord's prior written consent, (i) make any changes to the exterior
of the Premises, such as painting; (ii) install any exterior lights,
decorations, balloons, flags, pennants or banners; or (iii) erect or install any
signs, windows or door lettering, placards, decorations or advertising media of
any type which can be viewed from the exterior of the Premises. All signs,
decorations, advertising media, blinds, draperies and other window treatment or
bars or other security installations visible from outside the Premises shall
conform in all respects to the criteria established by Landlord or shall be
otherwise subject to Landlord's prior written consent.

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                                       3
<PAGE>

8. UTILITIES. Landlord agrees to provide normal water and electricity service to
the Premises. Tenant shall pay for all water, gas, heat, light, power,
telephone, sewer, sprinkler charges and other utilities and services used on or
at the Premises, together with any taxes, penalties, surcharges or the like
pertaining to the Tenant's use of the Premises and any maintenance charges for
utilities. Landlord shall have the right to cause any of said services to be
separately metered to Tenant, at Tenant's expense. Tenant shall pay its pro rata
share, as reasonably determined by Landlord, of all charges for jointly metered
utilities. Landlord shall not be liable for any interruption or failure of
utility service on the Premises, and Tenant shall have no rights or claims as a
result of any such failure the Landlord will use its best reasonable efforts to
restore service. In the event water is not separately metered to Tenant, Tenant
agrees that it will not use water and sewer capacity for uses other than normal
domestic restroom and kitchen usage, and Tenant further agrees to reimburse
Landlord for the entire amount of common water and sewer costs as additional
rental if, in fact, Tenant uses water or sewer capacity for uses other than
normal domestic restroom and kitchen uses without first obtaining Landlord's
written permission, including but not limited to the cost for acquiring
additional sewer capacity to service Tenant's excess sewer use. Furthermore,
Tenant agrees in such event to install at its own expense a submeter to
determine Tenant's usage.

9.  INSURANCE.

    A. Landlord's Insurance.  Subject to reimbursement under Paragraph 2C
       --------------------
herein, Landlord shall maintain insurance covering the Building in an amount not
less than eighty percent (80%) of the "replacement cost" thereof, insuring
against the perils of fire, lightning, extended coverage, vandalism and
malicious mischief.

    B. Tenant's Insurance.  Tenant, at its own expense, shall maintain during
       ------------------
the term of this Lease a policy including personal injury and property damage,
with contractual liability endorsement, in the amount of Five Hundred Thousand
Dollars ($500,000.00) for property damage and One Million Dollars
($1,000,000.00) per occurrence and Two Million Dollars ($2,000,000.00) in the
aggregate for personal injuries or deaths of persons occurring in or about the
Premises.  Tenant, at its own expense, shall also maintain during the term of
this Lease fire and extended coverage insurance covering the replacement cost of
(i) all alterations, additions, partitions and improvements installed or placed
on the Premises by Tenant or by Landlord on behalf of Tenant; and (ii) all of
Tenant's personal property contained within the Premises.  Said policies shall
(i) name the Landlord as an additional insured and insure Landlord's contingent
liability under or in connection with this Lease (except for the workers'
compensation policy, which instead shall include a waiver of subrogation
endorsement in favor of Landlord); (ii) be issued by an insurance company which
is acceptable to Landlord; and (iii) provide that said insurance shall not be
cancelled unless thirty (30) days prior written notice has been given to
Landlord.  Said policy or policies or certificates thereof shall be delivered to
Landlord by Tenant on or before the Commencement Date and upon each renewal of
said insurance.

    C. Prohibited Uses.  Tenant will not permit the Premises to be used for any
       ---------------
purpose or in any manner that would (i) void the insurance thereon, (ii)
increase the insurance risk or cost thereof, or (iii) cause the disallowance of
any sprinkler credits; including without limitation, use of the Premises for the
receipt, storage or handling of any product, material or merchandise that is
explosive or highly inflammable.  If any increase in the cost of any insurance
on the Premises or the Building is caused by Tenant's use of the Premises or
because Tenant vacates the Premises, then Tenant shall pay the amount of such
increase to Landlord upon demand therefor.

10. FIRE AND CASUALTY DAMAGE.

    A. Total or Substantial Damage and Destruction.  If the Premises or the
       -------------------------------------------
Building should be damaged or destroyed by fire or other peril, Tenant shall
immediately give written notice to Landlord of such damage or destruction.  If
the Premises or the Building should be totally destroyed by any peril covered by
the insurance to be provided by Landlord under Paragraph 9A above, or if they
should be so damaged thereby that, in Landlord's estimation, rebuilding or
repairs cannot be completed within one hundred eighty (180) days after the date
of such damage or after such completion there would not be enough time remaining
under the terms of this Lease to fully amortize  such rebuilding or repairs,
then this Lease shall terminate and the rent shall be abated during the
unexpired portion of this Lease, effective upon the date of the occurrence of
such damage.

    B. Partial Damage or Destruction.  If the Premises or the Building should
       -----------------------------
be damaged by any peril covered by the insurance to be provided by Landlord
under Paragraph 9A above and, in Landlord's estimation, rebuilding or repairs
can be substantially completed within one hundred twenty (120) days after the
date of such damage, then this

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                                       4
<PAGE>

Lease shall not terminate and Landlord shall substantially restore the Premises
to its previous condition, except that Landlord shall not be required to
rebuild, repair or replace any part of the partitions, fixtures, additions and
other improvements that may have been constructed, erected or installed in or
about the Premises for the benefit of, by or for Tenant.

    C. Lienholders' Rights in Proceeds.  Notwithstanding anything herein to the
       -------------------------------
contrary, in the event the holder of any indebtedness secured by a mortgage or
deed of trust covering the Premises requires that the insurance proceeds be
applied to such indebtedness, then Landlord shall have the right to terminate
this Lease by delivering written notice of termination to Tenant within fifteen
(15) days after such requirement is made known to Landlord by any such holder,
whereupon all rights and obligations hereunder shall cease and terminate.

    D. Waiver of Subrogation.  Notwithstanding anything in this Lease to the
       ---------------------
contrary, Landlord and Tenant hereby waive and release each other of and from
any and all rights of recovery, claims, actions or causes of action against each
other, or their respective agents, officers and employees, for any loss or
damage that may occur to the Premises, improvements to the Building or personal
property (Building contents) within the Building and/or Premises, for any reason
regardless of cause or origin.  Each party to this Lease agrees immediately
after execution of this Lease to give written notice of the terms of the mutual
waivers contained in this subparagraph to each insurance company that has issued
to such party policies of fire and extended coverage insurance and to have the
insurance policies properly endorsed to provide that the carriers of such
policies waive all rights of recovery under subrogation or otherwise against the
other party.

11. LIABILITY AND INDEMNIFICATION. Except for any claims, right of recovery and
causes of action that Landlord has released, Tenant shall hold Landlord harmless
from and defend Landlord against any and all claims or liability for any injury
or damage (i) to any person or property whatsoever occurring in, on or about the
Premises or any part thereof, the Building and/or other common areas, the use of
which Tenant may have in accordance with this Lease, if (and only if) such
injury or damage shall be caused in whole or in part by the act, neglect, fault
or omission of any duty by Tenant, its agents, servants, employees or invitees;
(ii) arising from the conduct or management of any work done by the Tenant in or
about the Premises; (iii) arising from transactions of the Tenant; and (iv) all
costs, counsel fees, expenses and liabilities incurred in connection with any
such claim or action or proceeding brought thereon. The provisions of this
Paragraph 11 shall survive the expiration or termination of this Lease. Landlord
shall not be liable in any event for personal injury or loss of Tenant's
property caused by fire, flood, water leaks, rain, hail, ice, snow, smoke,
lightning, wind, explosion, interruption of utilities or other occurrences.
Landlord strongly recommends that Tenant secure Tenant's own insurance in excess
of the amounts required elsewhere in this Lease to protect against the above
occurrences if Tenant desires additional coverage for such risks. Tenant shall
give prompt notice to Landlord of any significant accidents involving injury to
persons or property. Furthermore, Landlord shall not be responsible for lost or
stolen personal property, equipment, money or jewelry from the Premises or from
the public areas of the Building or the Project, regardless of whether such loss
occurs when the area is locked against entry. Landlord shall not be liable to
Tenant or Tenant's employees, customers or invitees for any damages or losses to
persons or property caused by any lessees in the Building or the Project, or for
any damages or losses caused by theft, burglary, assault, vandalism or other
crimes. Landlord strongly recommends that Tenant provide its own security
systems and services and secure Tenant's own insurance in excess of the amounts
required elsewhere in this Lease to protect against the above occurrences if
Tenant desires additional protection or coverage for such risks. Tenant shall
give Landlord prompt notice of any criminal or suspicious conduct within or
about the Premises, the Building or the Project and/or any personal injury or
property damage caused thereby. Landlord may, but is not obligated to, enter
into agreements with third parties for the provision, monitoring, maintenance
and repair of any courtesy patrols or similar services or fire protective
systems and equipment and, to the extent same is provided at Landlord's sole
discretion, Landlord shall not be liable to Tenant for any damages, costs or
expenses which occur for any reason in the event any such system or equipment is
not properly installed, monitored or maintained or any such services are not
properly provided. Landlord shall use reasonable diligence in the maintenance of
existing lighting, if any, in the parking garage or parking areas servicing the
Premises, and Landlord shall not be responsible for additional lighting or any
security measures in the Project, the Premises, the parking garage or other
parking areas.

12. USE.  The Premises shall be used only for the purpose of receiving, storing,
shipping and selling developing, manufacturing, assembling and testing (other
than retail) products, materials and merchandise made and/or distributed by
Tenant and for such other lawful purposes as may be directly incidental thereto.
Outside storage,

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                                       5
<PAGE>

including without limitation storage of trucks and other vehicles, is prohibited
without Landlord's prior written consent. Tenant shall comply with all
governmental laws, ordinances and regulations applicable to the use of the
Premises and shall promptly comply with all governmental orders and directives
for the correction, prevention and abatement of nuisances in, upon or connected
with the Premises, all at Tenant's sole expense. Tenant shall not permit any
objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to
emanate from the Premises, nor take any other action that would constitute a
nuisance or would disturb, unreasonably interfere with or endanger Landlord or
any other lessees of the Building or the Project.

13. HAZARDOUS WASTE. The term "Hazardous Substances," as used in this Lease,
shall mean pollutants, contaminants, toxic or hazardous wastes, radioactive
materials or any other substances, the use and/or the removal of which is
required or the use of which is restricted, prohibited or penalized by any
"Environmental Law," which term shall mean any federal, state or local statute,
ordinance, regulation or other law of a governmental or quasi-governmental
authority relating to pollution or protection of the environment or the
regulation of the storage or handling of Hazardous Substances. Tenant hereby
agrees that: (i) no activity will be conducted on the Premises that will produce
any Hazardous Substances, except for such activities that are part of the
ordinary course of Tenant's business activities (the "Permitted Activities"),
provided said Permitted Activities are conducted in accordance with all
Environmental Laws and have been approved in advance in writing by Landlord and,
in connection therewith, Tenant shall be responsible for obtaining any required
permits or authorizations and paying any fees and providing any testing required
by any governmental agency; (ii) the Premises will not be used in any manner for
the storage of any Hazardous Substances, except for the temporary storage of
such materials that are used in the ordinary course of Tenant's business (the
"Permitted Materials"), provided such Permitted Materials are properly stored in
a manner and location meeting all Environmental Laws and have been approved in
advance in writing by Landlord, and, in connection therewith, Tenant shall be
responsible for obtaining any required permits or authorizations and paying any
fees and providing any testing required by any governmental agency; (iii) no
portion of the Premises will be used as a landfill or a dump; (iv) Tenant will
not install any underground tanks of any type; (v) Tenant will not allow any
surface or subsurface conditions to exist or come into existence that
constitute, or with the passage of time may constitute, a public or private
nuisance; and (vi) Tenant will not permit any Hazardous Substances to be brought
onto the Premises, except for the Permitted Materials, and if so brought or
found located thereon, the same shall be immediately removed, with proper
disposal, and all required clean-up procedures shall be diligently undertaken by
Tenant at its sole cost pursuant to all Environmental Laws. Landlord and
Landlord's representatives shall have the right but not the obligation to enter
the Premises for the purpose of inspecting the storage, use and disposal of any
Permitted Materials to ensure compliance with all Environmental Laws. Should it
be determined, in Landlord's sole opinion, that any Permitted Materials are
being improperly stored, used or disposed of, then Tenant shall immediately take
such corrective action as requested by Landlord. Should Tenant fail to take such
corrective action within twenty-four (24) hours, Landlord shall have the right
to perform such work and Tenant shall reimburse Landlord, on demand, for any and
all costs associated with said work. If at any time during or after the term of
this Lease, the Premises is found to be contaminated with Hazardous Substances,
Tenant shall diligently institute proper and thorough clean-up procedures, at
Tenant's sole cost. Tenant agrees to indemnify and hold Landlord harmless from
all claims, demands, actions, liabilities, costs, expenses, damages, penalties
and obligations of any nature arising from or as a result of any contamination
of the Premises with Hazardous Substances, or otherwise arising from the use of
the Premises by Tenant. The foregoing indemnification and the responsibilities
of Tenant shall survive the termination or expiration of this Lease.

14. INSPECTION. Landlord's agents and representatives shall have the right to
enter the Premises at any reasonable time during business hours (or at any time
in case of emergency) (i) to inspect the Premises, (ii) to make such repairs as
may be required or permitted pursuant to this Lease, and/or (iii) during the
last six (6) months of the Lease term, for the purpose of showing the Premises.
In addition, Landlord shall have the right to erect a suitable sign on the
Premises stating the Premises are available for lease. Tenant shall notify
Landlord in writing at least thirty (30) days prior to vacating the Premises and
shall arrange to meet with Landlord for a joint inspection of the Premises prior
to vacating. If Tenant fails to give such notice or to arrange for such
inspection, then Landlord's inspection of the Premises shall be deemed correct
for the purpose of determining Tenant's responsibility for repairs and
restoration of the Premises.

15. ASSIGNMENT AND SUBLETTING. Tenant shall not have the right to sublet, assign
or otherwise transfer or encumber this Lease, or any interest therein, without
the prior written consent of Landlord which shall not be unreasonably withheld.
Any attempted assignment, subletting, transfer or encumbrance by Tenant in
violation of

                                           Initials  _______  _______
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                                       6
<PAGE>

the terms and covenants of this paragraph shall be void. Any assignee, sublessee
or transferee of Tenant's interest in this Lease (all such assignees, sublessees
and transferees being hereinafter referred to as "Transferees"), by assuming
Tenant's obligations hereunder, shall assume liability to Landlord for all
amounts paid to persons other than Landlord by such Transferees to which
Landlord is entitled or is otherwise in contravention of this Paragraph 15. No
assignment, subletting or other transfer, whether or not consented to by
Landlord or permitted hereunder, shall relieve Tenant of its liability under
this Lease. If an Event of Default occurs while the Premises or any part thereof
are assigned or sublet, then Landlord, in addition to any other remedies herein
provided or provided by law, may collect directly from such Transferee all rents
payable to the Tenant and apply such rent against any sums due Landlord
hereunder. No such collection shall be construed to constitute a novation or a
release of Tenant from the further performance of Tenant's obligations
hereunder. If Landlord consents to any subletting or assignment by Tenant as
hereinabove provided and any category of rent subsequently received by Tenant
under any such sublease is in excess of the same category of rent payable under
this Lease, or any additional consideration is paid to Tenant by the assignee
under any such assignment, then Landlord may, at its option, declare such excess
rents under any sublease or such additional consideration for any assignment to
be due and payable by Tenant to Landlord as additional rent hereunder.

16. CONDEMNATION. If more than eighty percent (80%) of the Premises are taken
for any public or quasi-public use under governmental law, ordinance or
regulation, or by right of eminent domain or private purchase in lieu thereof,
and the taking prevents or materially interferes with the use of the remainder
of the Premises for the purpose for which they were leased to Tenant, then this
Lease shall terminate and the rent shall be abated during the unexpired portion
of this Lease, effective on the date of such taking. If less than eighty percent
(80%) of the Premises are taken for any public or quasi-public use under any
governmental law, ordinance or regulation, or by right of eminent domain or
private purchase in lieu thereof, or if the taking does not prevent or
materially interfere with the use of the remainder of the Premises for the
purpose for which they were leased to Tenant, then this Lease shall not
terminate, but the rent payable hereunder during the unexpired portion of this
Lease shall be reduced to such extent as may be fair and reasonable under all of
the circumstances. All compensation awarded in connection with or as a result of
any of the foregoing proceedings shall be the property of Landlord, and Tenant
hereby assigns any interest in any such award to Landlord; provided, however,
Landlord shall have no interest in any award made to Tenant for loss of business
or goodwill or for the taking of Tenant's trade fixtures and personal property,
if a separate award for such items is made to Tenant.

17. HOLDING OVER. At the termination of this Lease by its expiration or
otherwise, Tenant shall immediately deliver possession of the Premises to
Landlord with all repairs and maintenance required herein to be performed by
Tenant completed. If, for any reason, Tenant retains possession of the Premises
after the expiration or termination of this Lease, unless the parties hereto
otherwise agree in writing, such possession shall be deemed to be a tenancy at
will only, and all of the other terms and provisions of this Lease shall be
applicable during such period, except that Tenant shall pay Landlord from time
to time, upon demand, as rental for the period of such possession, an amount
equal to one and one-quarter (1 1/4) times the rent in effect on the date of
such termination of this Lease, computed on a daily basis for each day of such
period. No holding over by Tenant, whether with or without consent of Landlord,
shall operate to extend this Lease except as otherwise expressly provided. The
preceding provisions of this Paragraph 17 shall not be construed as consent for
Tenant to retain possession of the Premises in the absence of written consent
thereto by Landlord.

18. QUIET ENJOYMENT. Landlord represents that it has the authority to enter into
this Lease and that, so long as Tenant pays all amounts due hereunder and
performs all other covenants and agreements herein set forth, Tenant shall
peaceably and quietly have, hold and enjoy the Premises for the term hereof
without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease.

19. EVENTS OF DEFAULT. The following events (herein individually referred to as
an "Event of Default") each shall be deemed to be a default in or breach of
Tenant's obligations under this Lease:

    A. Tenant shall fail to pay any installment of the rent herein reserved
when due, or any other payment or reimbursement to Landlord required herein when
due, and such failure shall continue for a period of five (5) days from the date
such payment was due.

    B. Tenant shall fail to discharge any lien placed upon the Premises in
violation of Paragraph 22 hereof within twenty (20) days after any such lien or
encumbrance is filed against the Premises.

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                                       7
<PAGE>

    C. Tenant shall default in the performance of any of its obligations under
any other lease to Tenant from Landlord, or from any person or entity affiliated
with or related to Landlord, and same shall remain uncured after the lapsing of
any applicable cure periods provided for under such other lease.

    D. Tenant shall fail to comply with any term, provision or covenant of this
Lease (other than those listed above in this paragraph) and shall not begin to
cure such failure within twenty (20) days after written notice thereof from
Landlord.

20. REMEDIES. Upon each occurrence of an Event of Default, Landlord shall have
the option to pursue any one or more of the following remedies without any
notice or demand:

       (a)  Terminate this Lease;

       (b)  Enter upon and take possession of the Premises without terminating
this Lease;

       (c)  Make such payments and/or take such action and pay and/or perform
whatever Tenant is obligated to pay or perform under the terms of this Lease,
and Tenant agrees that Landlord shall not be liable for any damages resulting to
Tenant from such action; and/or

    A. Damages Upon Termination. If Landlord terminates this Lease at
       ------------------------
Landlord's option, Tenant shall be liable for and shall pay to Landlord the sum
of all rental and other payments owed to Landlord hereunder accrued to the date
of such termination, plus, as liquidated damages, an amount equal to (i) the
present value of the total rental and other payments owed hereunder for the
remaining portion of the Lease term, calculated as if such term expired on the
date set forth in Paragraph 1, less (ii) the present value of the then fair
market rental for the Premises for such period, provided that, because of the
difficulty of ascertaining such value and in order to achieve a reasonable
estimate of liquidated damages hereunder, Landlord and Tenant stipulate and
agree, for the purposes hereof, that such fair market rental shall in no event
exceed seventy-five percent (75%) of the rental amount for such period set forth
in Paragraph 2 above.

    B. Damages Upon Repossession. If Landlord repossesses the Premises without
       -------------------------
terminating this Lease, Tenant, at Landlord's option, shall be liable for and
shall pay Landlord on demand all rental and other payments owed to Landlord
hereunder, accrued to the date of such repossession, plus all amounts required
to be paid by Tenant to Landlord until the date of expiration of the term as
stated in Paragraph 1, diminished by all amounts actually received by Landlord
through reletting the Premises during such remaining term (but only to the
extent of the rent herein reserved).  Actions to collect amounts due by Tenant
to Landlord under this paragraph may be brought from time to time, on one or
more occasions, without the necessity of Landlord's waiting until expiration of
the Lease term.

    C. Costs of Reletting, Removing, Repairs and Enforcement. Upon an Event of
       -----------------------------------------------------
Default, in addition to any sum provided to be paid under this Paragraph 20,
Tenant also shall be liable for and shall pay to Landlord (i) brokers' fees and
all other costs and expenses incurred by Landlord in connection with reletting
the whole or any part of the Premises; (ii) the costs of removing, storing or
disposing of Tenant's or any other occupant's property; (iii) the costs of
repairing, altering, remodeling or otherwise putting the Premises into condition
acceptable to a new tenant or tenants; (iv) any and all costs and expenses
incurred by Landlord in effecting compliance with Tenant's obligations under
this Lease; and (v) all reasonable expenses incurred by Landlord in enforcing or
defending Landlord's rights and/or remedies hereunder, including without
limitation all reasonable attorneys' fees and all court costs incurred in
connection with such enforcement or defense.

    D. Late Charge. In the event Tenant fails to make any payment due
       -----------
hereunder within five (5) days after such payment is due, including without
limitation any rental or escrow payment, in order to help defray the additional
cost to Landlord for processing such late payments and not as interest, Tenant
shall pay to Landlord on demand a late charge in an amount equal to five percent
(5%) of such payment.  The provision for such late charge shall be in addition
to all of Landlord's other rights and remedies hereunder or at law, and shall
not be construed as liquidated damages or as limiting Landlord's remedies in any
manner.

     E.   Interest on Past Due Amounts.  If Tenant fails to pay any sum which at
          ----------------------------
any time becomes due to Landlord under any provision of this Lease as and when
the same becomes due hereunder, and such failure continues for ten

                                           Initials  _______  _______
                                           Date      _______  _______

                                       8
<PAGE>

(10) days after the due date for such payment, then Tenant shall pay to Landlord
interest on such overdue amounts from the date due until paid at an annual rate
which equals the lesser of (i) twelve percent (12%) or (ii) the highest rate
then permitted by law.

     F.   No Implied Acceptances or Waivers.  Exercise by Landlord of any one or
          ---------------------------------
more remedies hereunder granted or otherwise available shall not be deemed to be
an acceptance by Landlord of Tenant's surrender of the Premises, it being
understood that such surrender can be effected only by the written agreement of
Landlord.  Tenant and Landlord further agree that forbearance by Landlord to
enforce any of its rights under this Lease or at law or in equity shall not be a
waiver of Landlord's right to enforce any one or more of its rights, including
any right previously forborne, in connection with any existing or subsequent
default.  No re-entry or taking possession of the Premises by Landlord shall be
construed as an election on its part to terminate this Lease, unless a written
notice of such intention is given to Tenant, and, notwithstanding any such
reletting or re-entry or taking possession of the Premises, Landlord may at any
time thereafter elect to terminate this Lease for a previous default.  Pursuit
of any remedies hereunder shall not preclude the pursuit of any other remedy
herein provided or any other remedies provided by law, nor shall pursuit of any
remedy herein provided constitute a forfeiture or waiver of any rent due to
Landlord hereunder or of any damages occurring to Landlord by reason of the
violation of any of the terms, provisions and covenants contained in this Lease.
Landlord's acceptance of any rent following an Event of Default hereunder shall
not be construed as Landlord's waiver of such Event of Default.  No waiver by
Landlord of any violation or breach of any of the terms, provisions and
covenants of this Lease shall be deemed or construed to constitute a waiver of
any other violation or default.

     G.   Reletting of Premises.  In the event of any termination of this Lease
          ---------------------
and/or repossession of the Premises for an Event of Default, Landlord shall use
reasonable efforts to relet the Premises and to collect rental after reletting,
with no obligation to accept any lessee that Landlord deems undesirable or to
expend any funds in connection with such reletting or collection of rents
therefrom.  Tenant shall not be entitled to credit for or reimbursement of any
proceeds of such reletting in excess of the rental owed hereunder for the period
of such reletting.  Landlord may relet the whole or any portion of the Premises,
for any period, to any tenant and for any use or purpose.

     H.   Landlord's Default. If Landlord fails to perform any of its
          ------------------
obligations hereunder within thirty (30) days after written notice from Tenant
specifying such failure, Tenant's exclusive remedy shall be an action for
damages. Unless and until Landlord fails to so cure any default after such
notice, Tenant shall not have any remedy or cause of action by reason thereof.
All obligations of Landlord hereunder will be construed as covenants, not
conditions; and all such obligations will be binding upon Landlord only during
the period of its possession of the premises and not thereafter. The term
"Landlord" shall mean only the owner, for the time being, of the Premises and,
in the event of the transfer by such owner of its interest in the Premises, such
owner shall thereupon be released and discharged from all covenants and
obligations of the Landlord thereafter accruing, provided that such covenants
and obligations shall be binding during the Lease term upon each new owner for
the duration of such owner's ownership. Notwithstanding any other provision of
this Lease, Landlord shall not have any personal liability hereunder. In the
event of any breach or default by Landlord in any term or provision of this
Lease, Tenant agrees to look solely to the equity or interest then owned by
Landlord in the Premises or the Building; however, in no event shall any
deficiency judgement or any money judgement of any kind be sought or obtained
against any Landlord.

     I.   Tenant's Personal Property.  If Landlord repossesses the Premises
          --------------------------
pursuant to the authority herein granted, or if Tenant vacates or abandons all
or any part of the Premises, then, in addition to Landlord's rights under
Paragraph 27 hereof, Landlord shall have the right to (i) keep in place and use,
or (ii) remove and store, all of the furniture, fixtures and equipment at the
Premises, including that which is owned by or leased to Tenant, at all times
prior to any foreclosure thereon by Landlord or repossession thereof by any
lessor thereof or third party having a lien thereon.  In addition to the
Landlord's other rights hereunder, Landlord may dispose of the stored property
if Tenant does not claim the property within ten (10) days after the date the
property is stored.  Landlord shall give Tenant at least ten (10) days prior
written notice of such intended disposition.  Landlord shall also have the right
to relinquish possession of all or any portion of such furniture, fixtures,
equipment and other property to any person ("Claimant") who presents to Landlord
a copy of any instrument represented by Claimant to have been executed by Tenant
(or any predecessor of Tenant) granting Claimant the right under various
circumstances to take possession of such furniture, fixtures, equipment or other
property, without the necessity on the part of Landlord to inquire into the
authenticity or legality of said instrument. The rights of Landlord herein
stated shall be in addition to any and

                                                Initials  ________  _________
                                                Date      ________  _________

                                       9
<PAGE>

all other rights that Landlord has or may hereafter have at law or in equity,
and Tenant stipulates and agrees that the rights granted Landlord under this
paragraph are commercially reasonable.

21.  MORTGAGES.  Tenant accepts this Lease subject and subordinate to any
mortgages and/or deeds of trust now or at any time hereafter constituting a lien
or charge upon the Premises or the improvements situated thereon or the
Building, provided, however, that if the mortgagee, trustee or holder of any
such mortgage or deed of trust elects to have Tenant's interest in this Lease
superior to any such instrument, then by notice to Tenant from such mortgagee,
trustee or holder, this Lease shall be deemed superior to such lien, whether
this Lease was executed before or after said mortgage or deed of trust. Tenant,
at any time hereafter on demand, shall execute any instruments, releases or
other documents that may be required by any mortgagee, trustee or holder for the
purpose of subjecting and subordinating this Lease to the lien of any such
mortgage. Tenant shall not terminate this Lease or pursue any other remedy
available to Tenant hereunder for any default on the part of Landlord without
first giving written notice by certified or registered mail, return receipt
requested, to any mortgagee, trustee or holder of any such mortgage or deed of
trust, the name and post office address of which Tenant has received written
notice, specifying the default in reasonable detail and affording such
mortgagee, trustee or holder a reasonable opportunity (but in no event less than
thirty (30) days) to make performance, at its election, for and on behalf of
Landlord.

22. MECHANIC'S LIENS. Tenant has no authority, express or implied, to create or
place any lien or encumbrance of any kind or nature whatsoever upon, or in any
manner to bind, the interest of Landlord or Tenant in the Premises. Tenant will
save and hold Landlord harmless from any and all loss, cost or expense,
including without limitation attorneys' fees, based on or arising out of
asserted claims or liens against the leasehold estate or against the right,
title and interest of the Landlord in the Premises or under the terms of this
Lease.

23.  MISCELLANEOUS.

     A.   Interpretation. The captions inserted in this Lease are for
          --------------
convenience only and in no way define, limit or otherwise describe the scope or
intent of this Lease, or any provision hereof, or in any way affect the
interpretation of this Lease. Any reference in this Lease to rentable area shall
mean the gross rentable area as determined by the roofline of the building in
question.

     B.   Binding Effect.  Except as otherwise herein expressly provided, the
          --------------
terms, provisions and covenants and conditions in this Lease shall apply to,
inure to the benefit of and be binding upon the parties hereto and upon their
respective heirs, executors, personal representatives, legal representatives,
successors and assigns.  Landlord shall have the right to transfer and assign,
in whole or in part, its rights and obligations in the Premises and in the
Building and other property that are the subject of this Lease.

     C.   Evidence of Authority.  Tenant agrees to furnish to Landlord, promptly
          ---------------------
upon demand, a corporate resolution, proof of due authorization by partners or
other appropriate documentation evidencing the due authorization of such party
to enter into this Lease.

     D.   Force Majeure. Landlord shall not be held responsible for delays in
          -------------
the performance of its obligations hereunder when caused by material shortages,
acts of God, labor disputes or other events beyond the control of Landlord.

     E.   Payments Constitute Rent. Notwithstanding anything in this Lease to
          ------------------------
the contrary, all amounts payable by Tenant to or on behalf of Landlord under
this Lease, whether or not expressly denominated as rent, shall constitute rent.

     F.   Estoppel Certificates.  Tenant agrees, from time to time, within ten
          ---------------------
(10) days after request of Landlord, to deliver to Landlord, or Landlord's
designee, an estoppel certificate stating that this Lease is in full force and
effect, the date to which rent has been paid, the unexpired term of this Lease,
any defaults existing under this Lease (or the absence thereof) and such other
factual or legal matters pertaining to this Lease as may be requested by
Landlord.  It is understood and agreed that Tenant's obligation to furnish such
estoppel certificates in a timely fashion is a material inducement for
Landlord's execution of this Lease.

     G.   Entire Agreement.  This Lease constitutes the entire understanding and
          ----------------
agreement of Landlord and Tenant with respect to the subject matter of this
Lease, and contains all of the covenants and agreements of Landlord and Tenant
with respect thereto.  Landlord and Tenant each acknowledge that no
representations, inducements, promises or agreements, oral or written, have been
made by Landlord

                                                 Initials  ________  _________
                                                 Date      ________  _________

                                       10
<PAGE>

or Tenant, or anyone acting on behalf of Landlord or Tenant, which are not
contained herein, and any prior agreements, promises, negotiations or
representations not expressly set forth in this Lease are of no force or effect.
EXCEPT AS SPECIFICALLY PROVIDED IN THIS LEASE, TENANT HEREBY WAIVES THE BENEFIT
OF ALL WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES, INCLUDING
WITHOUT LIMITATION ANY IMPLIED WARRANTY THAT THE PREMISES ARE SUITABLE FOR ANY
PARTICULAR PURPOSE. Landlord's agents and employees do not and will not have
authority to make exceptions, changes or amendments to this Lease, or factual
representations not expressly contained in this Lease. Under no circumstances
shall Landlord or Tenant be considered an agent of the other. This Lease may not
be altered, changed or amended except by an instrument in writing signed by both
parties hereto.

     H.   Survival of Obligations. All obligations of Tenant hereunder not fully
          -----------------------
performed as of the expiration or earlier termination of the term of this Lease
shall survive the expiration or earlier termination of the term hereof,
including without limitation all payment obligations with respect to taxes and
insurance and all obligations concerning the condition and repair of the
Premises. Upon the expiration or earlier termination of the term hereof, and
prior to Tenant vacating the Premises, Tenant shall pay to Landlord any amount
reasonably estimated by Landlord as necessary to put the Premises in good
condition and repair, reasonable wear and tear excluded, including without
limitation the cost of repairs to and replacements of all heating and air
conditioning systems and equipment therein. Tenant shall also, prior to vacating
the Premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's
obligation hereunder for real estate taxes and insurance premiums for the year
in which the Lease expires or terminates. All such amounts shall be used and
held by Landlord for payment of such obligations of Tenant hereunder, with
Tenant being liable for any additional costs therefore upon demand by Landlord,
or with any excess to be returned to Tenant after all such obligations have been
determined and satisfied, as the case may be. Any Security Deposit held by
Landlord may, at Landlord's option, be credited against any amounts due from
Tenant under this Paragraph 23H.

     I.   Severability of Terms.  If any clause or provision of this Lease is
          ---------------------
illegal, invalid or unenforceable under present or future laws effective during
the term of this Lease, then, in such event, it is the intention of the parties
hereto that the remainder of this Lease shall not be affected thereby, and it is
also the intention of the parties to this Lease that in lieu of each clause or
provision of this Lease that is illegal, invalid or unenforceable, there be
added, as a part of this Lease, a clause or provision as similar in terms to
such illegal, invalid or unenforceable clause or provision as may be possible
and be legal, valid and enforceable.

     J    Effective Date.  All references in this Lease to "the date hereof" or
          --------------
similar references shall be deemed to refer to the last date, in point of time,
on which all parties hereto have executed this Lease.

     K.   Brokers' Commission.  Tenant represents and warrants that it has dealt
          -------------------
with and will deal with no broker, agent or other person other than Hill
Partners, Inc. in connection with this transaction or future related
transactions and that no broker, agent or other person other than Hill Partners,
Inc. brought about this transaction, and Tenant agrees to indemnify and hold
Landlord harmless from and against any claims by any broker, agent or other
person other than Hill Partners, Inc. claiming a commission or other form of
compensation by virtue of having dealt with Tenant with regard to this leasing
transaction.

     L.   Ambiguity.  Landlord and Tenant hereby agree and acknowledge that this
          ---------
Lease has been fully reviewed and negotiated by both Landlord and Tenant, and
that Landlord and Tenant have each had the opportunity to have this Lease
reviewed by their respective legal counsel, and, accordingly, in the event of
any ambiguity herein, Tenant does hereby waive the rule of construction that
such ambiguity shall be resolved against the party who prepared this Lease.

     M.   Joint Several Liability.  If there be more than one Tenant, the
          -----------------------
obligations hereunder imposed upon Tenant shall be joint and several.  If there
be a guarantor of Tenant's obligations hereunder, the obligations hereunder
imposed upon Tenant shall be joint and several obligations of Tenant and such
guarantor, and Landlord need not first proceed against Tenant before proceeding
against such guarantor, nor shall any such guarantor be released from its
guaranty for any reason whatsoever, including, without limitation, in case of
any amendments hereto, waivers hereof or failure to give such guarantor any
notices hereunder.

                                                  Initials  ________  _________
                                                  Date      ________  _________

                                       11
<PAGE>

     N.   Third Party Rights. Nothing herein expressed or implied is intended,
          ------------------
or shall be construed, to confer upon or give to any person or entity, other
than the parties hereto, any right or remedy under or by reason of this Lease.

     O.   Exhibits and Attachments. All exhibits, attachments, riders and
          ------------------------
addenda referred to in this Lease, and the exhibits listed herein below and
attached hereto, are incorporated into this Lease and made a part hereof for all
intents and purposes as if fully set out herein. All capitalized terms used in
such documents shall, unless otherwise defined therein, have the same meanings
as are set forth herein.

     P.   Applicable Law. This Lease has been executed in the State of Texas and
          --------------
shall be governed in all respects by the laws of the State of Texas. It is the
intent of Landlord and Tenant to conform strictly to all applicable state and
federal usury laws. All agreements between Landlord and Tenant, whether now
existing or hereafter arising and whether written or oral, are hereby expressly
limited so that in no contingency or event whatsoever shall the amount
contracted for, charged or received by Landlord for the use, forbearance or
retention of money hereunder or otherwise exceed the maximum amount which
Landlord is legally entitled to contract for, charge or collect under the
applicable state or federal law. If, from any circumstance whatsoever,
fulfillment of any provision hereof at the time performance of such provision
shall be due shall involve transcending the limit of validity prescribed by law,
then the obligation to be fulfilled shall be automatically reduced to the limit
of such validity, and if from any such circumstance Landlord shall ever receive
as interest or otherwise an amount in excess of the maximum that can be legally
collected, then such amount which would be excessive interest shall be applied
to the reduction of rent hereunder, and if such amount which would be excessive
interest exceeds such rent, then such additional amount shall be refunded to
Tenant.

24.  NOTICES.  Each provision of this instrument or of any applicable
governmental laws, ordinances, regulations and other requirements with reference
to the sending, mailing or delivering of notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivering of
any notice or the making of any payment by Tenant to Landlord shall be deemed to
be complied with when and if the following steps are taken:

               (i)   All rent and other payments required to be made by Tenant
to Landlord hereunder shall be payable to Landlord at the address for Landlord
set forth below or at such other address as Landlord may specify from time to
time by written notice delivered in accordance herewith. Tenant's obligation to
pay rent and any other amounts to Landlord under the terms of this Lease shall
not be deemed satisfied until such rent and other amounts have been actually
received by Landlord.

               (ii)  All payments required to be made by Landlord to Tenant
hereunder shall be payable to Tenant at the address set forth below, or at such
other address within the continental United States as Tenant may specify from
time to time by written notice delivered in accordance herewith.

               (iii) Except as expressly provided herein, any written notice,
document or payment required or permitted to be delivered hereunder shall be
deemed to be delivered when received or, whether actually received or not, when
deposited in the United States Mail, postage prepaid, Certified or Registered
Mail, addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have theretofore specified by written notice
delivered in accordance herewith.

25.  ADDITIONAL PROVISIONS.  See EXHIBIT "C" attached hereto and incorporated
herein by reference.

26.  LANDLORD'S LIEN.  In addition to any statutory lien for rent in Landlord's
favor, Landlord shall have and Tenant hereby grants to Landlord a continuing
security interest in all rentals and other sums of money which may become due
under this Lease from Tenant, all goods, equipment, fixtures, furniture,
inventory, and other personal property of Tenant now or hereafter situated at,
on or within the real property described in EXHIBIT "A" attached hereto and
incorporated herein by reference, and such property shall not be removed
therefrom without the consent of Landlord, except in the ordinary course of
Tenant's business. In the event any of the foregoing described property is
removed from the Premises in violation of the covenant in the preceding
sentence, the security interest shall continue in such property and all proceeds
and products, regardless of location. Upon an Event of Default hereunder by
Tenant, in addition to all of Landlord's other rights and remedies, Landlord
shall have all rights and remedies under the Uniform Commercial Code, including
without limitation the right to sell the property described in this paragraph at
public or private sale at any time after ten (10) days prior notice by Landlord.
Tenant hereby agrees to

                                                  Initials  ________  _________
                                                  Date      ________  _________

                                       12
<PAGE>

execute such other instruments deemed by Landlord as necessary or desirable
under applicable law to perfect more fully the security interest hereby created.
Landlord and Tenant agree that this Lease and security agreement and EXHIBIT "A"
attached hereto serves as a financing statement and that a copy, photograph or
other reproduction of this portion of this Lease may be filed of record by
Landlord and have the same force and effect as the original. This security
agreement and financing statement also covers fixtures located at the Premises
subject to this Lease and legally described in EXHIBIT "A" attached hereto, and
all rents or other consideration received by or on behalf of Tenant in
connection with any assignment of Tenant's interest in this Lease or any
sublease of the Premises or any part thereof, and, therefore, may also be filed
for record in the appropriate real estate records. Landlord will agree to
subordinate this lien to the Tenant's priority lenders so long as the Tenant is
not in default of this Lease Agreement.

        EXECUTED BY LANDLORD, this _____ day of _______________, 19___.

                                  BRAKER PHASE III, LTD.
                                  By:  2800 Industrial, Inc., General Partner

                                  /s/ Richard E. Anderson
                                  ----------------------------------------------
Attest/Witness                    By:      Richard E. Anderson
______________________________    Title:   Vice President
______________________________    Address: c/o Hill Partners, Inc.
Title: _______________________             2800 Industrial Terrace, Austin,
                                            TX 78758

         EXECUTED BY TENANT, this _____ day _________________, 19___.

                                   MAGNETIC BEARING TECHNOLOGIES, INC.

                                   /s/
                                   ---------------------------------------------
Attest/Witness                     By:
_____________________________      Title:
By: _________________________      Address:
Title: ______________________

EXHIBIT "A"  -   Description of Premises
EXHIBIT "B"  -   Plans
EXHIBIT "C"  -   Additional Provisions

                                                  Initials  ________  _________
                                                  Date      ________  _________

                                       13
<PAGE>

                                  EXHIBIT "B"
                                     PLANS

                        TO BE ATTACHED AT A LATER DATE

<PAGE>

                                  EXHIBIT "C"
                             ADDITIONAL PROVISIONS

RENTAL RATE
-----------

The monthly base rental rate shall be structured as follows:

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------
             Year                   Base Rental Rate                   Rental Rate
                               Per Square Foot Per Month                Per Month
     ---------------------------------------------------------------------------------
     <S>                       <C>                                     <C>
           Year 1                         $.55                         $2,227.50
     ---------------------------------------------------------------------------------
           Year 2                         $.60                         $2,430.00
     ---------------------------------------------------------------------------------
           Year 3                         $.65                         $2,632.50
     ---------------------------------------------------------------------------------
           Year 4                         $.70                         $2,835.00
     ---------------------------------------------------------------------------------
           Year 5                         $.75                         $3,037.50
     ---------------------------------------------------------------------------------
</TABLE>

TENANT FINISH ALLOWANCE
-----------------------

Landlord shall provide a maximum tenant finish allowance of  Twelve and No/00
Dollars ($12.00) per square foot or Forty-eight Thousand Six Hundred and No/00
Dollars ($48,600.00) to be applied toward interior improvements, excluding
extraordinary items installed on behalf of the Tenant.  Included in this Twelve
and No/00 Dollars ($12.00) per square foot or Forty-eight Thousand Six Hundred
and No/00 Dollars ($48,600.00)  are all costs associated with the interior
construction of the premises including architectural and engineering fees, a
construction management fee of four (4) percent of hard costs and all other
costs associated with the interior improvement construction.  Any finish out
dollars required over and above the finish-out allowance of Twelve and No/00
Dollars ($12.00) per square foot or Forty-eight Thousand Six Hundred and No/00
Dollars ($48,600.00) will be amortized over the lease term at ten (10) percent
per annum interest.

INTERIOR IMPROVEMENTS
---------------------

All improvements must comply with Landlord's standard specifications and all
applicable governmental regulations.  Prior to beginning construction of any
such improvements, Tenant shall submit architectural drawings of the proposed
improvements to Landlord and shall obtain Landlord's written consent to begin
construction.

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