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Exhibit 10.1

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE—MODIFIED
American Industrial Real Estate Association

1.  BASIC PROVISIONS ("BASIC PROVISIONS").  

    1.1  Parties:  This Lease ("Lease"), dated for reference purposes only,
February 1, 2001, is made by and between THE WRIGHT FAMILY C LIMITED
PARTNERSHIP, a California limited partnership ("Lessor") and QAD INC., a
Delaware corporation ("Lessee") (collectively the "Parties," or individually a
"Party").

    1.2(a)  Premises:  That certain building, including all improvements therein
or to be provided by Lessor under the terms of the Lease, commonly known by the
street address of 6410 Via Real, located in the City of Carpinteria, County of
Santa Barbara, State of California, with zip code 93013 ("Premises"). The
Premises is generally described as (describe briefly the nature of the
Building): Building A of South Coast Business Part to be constructed as provided
in the Addendum. In addition to Lessee's rights to use and occupy the Premises
as hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (defined in Paragraph 2.7 below) as hereinafter specified, but shall not
have any rights to other buildings in the Industrial Center. The Premises, the
Common Areas, the land upon which they are located, along with all other
buildings and improvements thereon, are herein collectively referred to as the
"Industrial Center." (Also see Paragraph 2.)

    1.2(b)  Parking:  0 unreserved vehicle parking spaces ("Unreserved Parking
Spaces") and 90 reserved vehicle parking spaces ("Reserved Parking Spaces").
(Also see Paragraph 2.6.)

    1.3  Term:  10 years and 0 months ("Original Term") commencing (see
Addendum) ("Commencement Date") and ending (see Addendum) ("Expiration Date").
(Also see Paragraph 3.)

    1.4  Early Possession:  (see Addendum) ("Early Possession Date"). (Also see
Paragraphs 3.2 and 3.3).

    1.5  Base Rent:  $43,155.18 per month ("Base Rent"), payable on the first
day of each month commencing (see Addendum). (Also see Paragraph 4.)

/x/  If this box is checked, this Lease provides for the Base Rent to be
adjusted per Addendum  , attached hereto.

    1.6(a)  Base Rent Paid Upon Execution:  $43,155.18 as Base Rent for the
first full month's rent for the period commencing on the 1st day of the first
month occurring after the Commencement Date and ending on the last day of such
month, unless the Commencement Date occurs on the first day of the month, in
which case such amount shall be for the first month's rent. See Addendum
regarding proration and payment of Base Rent due on the Commencement Date.

    1.6(b)  Lessee's Share of Common Area Operating Expenses:  Thirty percent
(30%) ("Lessee's Share").

    1.7  Security Deposit:  $43,155.18 ("Security Deposit"). (Also see
Paragraph 5.)

    1.8  Permitted Use:  General office use and corporate data and information
systems use and no other use without Lessor's prior written consent. See
Addendum for additional terms. ("Permitted Use"). (Also see Paragraph 6).

    1.9  Insuring Party.  Lessor is the "Insuring Party." (Also see
Paragraph 8.)

    1.10  Deleted

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    1.11  Deleted

    1.12  Addenda and Exhibits:  Attached hereto is an Addendum or Addenda
consisting of Paragraphs 49 through 63 and Schedules 1 through 4, all of which
constitute a part of this Lease.

2.  PREMISES, PARKING AND COMMON AREAS.  

    2.1  Letting.  Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of the terms,
covenants and conditions set forth in the Lease. Unless otherwise provided
herein, any statement of square footage set forth in this Lease, or that may
have been used in calculating rental and/or Common Area Operating Expenses, is
an approximation which Lessor and Lessee agree is reasonable and the rental and
Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to
revision whether or not the actual square footage is more or less.

    2.2  Condition.  Subject to Lessee's obligation to construct the Data Center
as provided in Paragraph 62, Lessor shall deliver the Premises to Lessee clean
and free of debris on the Completion Date and warrants to Lessee that the
existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating system, and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition on
the Completion Date. If a non-compliance with said warranty exists as of the
Completion Date, Lessor shall, except as otherwise provided in this Lease,
promptly after the receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor's expense. If Lessee does not give Lessor written notice of
non-compliance with this warranty within sixty (60) days after the Completion
Date, correction of that non-compliance shall be the obligation of Lessee and
Lessee's sole cost and expense.

    2.3  Compliance with Covenants, Restrictions and Building Code.  Subject to
Lessee's obligation to construct the Data Center as provided in Paragraph 62,
Lessor warrants that any improvements (other than those constructed by Lessee or
at Lessee's direction) on or in the Premises which have been constructed or
installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances in effect on the Completion Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Completion Date. Said warranties shall not apply to any
Alternation or Utility installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the Completion
Data and setting forth with specificity the nature and extent of such
non-compliance, take such action, at Lessor's expense, as may be reasonable or
appropriate to rectify the non-compliance. Lessor make no warranty that the
Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable
Laws (as defined in Paragraph 2.4).

    2.4  Deleted  

    2.5  Deleted  

    2.6  Vehicle Parking.  Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in
Paragraph 1.2(b) on those portions of the Common Areas designated from time to
time by Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no larger than
full-size passenger automobiles or pick-up trucks, herein called "Permitted Size
Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9).

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

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

    (c) Lessor shall at the Completion Date of this Lease provide the Parking
facilities required by Applicable Law.

    2.7  Common Areas—Definition.  The term "Common Areas" is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and interior utility raceways within the Premises that
are provided and designated by the Lessor from time to time for the general
nonexclusive use of Lessor, Lessee and other lessees of the Industrial Center
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, parkways, driveways and landscaped areas.

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

    2.9  Common Areas—Rules and Regulations.  Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish, modify, amend
and enforce reasonable Rules and Regulations with respect thereto in accordance
with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees on the Industrial Center.

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

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

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

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

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

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

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

3.  TERM  

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

    3.2  Early Possession.  If an Early Possession Date is specified in
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including, but not limited to, the obligation to
pay Lessee's Share of Common Area Operating Expenses and to carry the insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.

    3.3  Deleted  

4.  RENT  

    4.1  Base Rent.  Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time to Lessor in lawful money of the
United States, without offset or deduction, on or before the day on which it is
due under the terms of this Lease. Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall be
prorated based upon the actual number of days of the month involved. Payment of
Base Rent and other charges shall be made to Lessor at its address stated herein
or to such other person or at such other addresses as Lessor may from time to
time designate in writing to Lessee.

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

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

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

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

    (bb) Exterior signs and any tenant directories.

    (cc) Fire detection and sprinkler systems.

    (ii) The cost of water, gas, electricity and telephone to service the Common
Areas.

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

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

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    (v) Real Property Taxes (as defined in Paragraph 10.2) to be paid by Lessor
for the Premises and the Common Areas under Paragraph 10 hereof.

    (vi) The costs of the premiums for the insurance policies maintained by
Lessor under Paragraph 8 hereof.

    (vii) Any deductible portion of an insured loss concerning the Premises or
the Common Area.

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

    (ix) Property management fees.

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

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

    (d) Lessee's Share of Common Area Operating Expenses shall be payable by
Lessee within thirty (30) days after a reasonably detailed statement of actual
expenses is presented to Lessee by Lessor. At Lessor's option, however, an
amount may be estimated by Lessor from time to time of Lessee's Share of annual
Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12 month period of the Lease
term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within sixty (60) days after the expiration of each calendar year a
reasonable detailed statement showing Lessee's Share of the actual Common Area
Operating Expenses incurred during the Preceding year. If Lessee's payments
under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as
indicated on said statement, Lessee shall be credited the amount of such
overpayment against Lessee's Share of Common Area Operating Expenses next
becoming due. If Lessee's payments under this Paragraph 4.2(d) during said
preceding year were less than Lessee's Share as indicated on said statement,
Lessee shall pay to Lessor the amount of the deficiency within thirty (30) days
after delivery by Lessor to Lessee of said statement. See Addendum.

5.  SECURITY DEPOSIT.  Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1) Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the

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Premises, return to Lessee (or, at Lessor's option, to the last assignee, if
any, of Lessee's interest herein), that portion of the Security Deposit not used
or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no
part of the Security Deposit shall be considered to be held in trust, to bear
interest or other increment for its use, or to be prepayment for any monies to
be paid by Lessee under this Lease.

6.  USE  

    6.1  Permitted Use.  

    (a) Lessee shall use and occupy the Premises only for the Permitted Use set
forth in Paragraph 1.8, or any other legal use which is reasonably comparable
thereto, and for no other purpose. Lessee shall not use or permit the use of the
Premises in a manner that is unlawful, creates waste or nuisance, or that
disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring premises or properties.

    (b) Lessor hereby agrees to not unreasonable withhold or delay its consent
to any written request by Lessee, Lessee's assignees or subtenants, and by
prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or the mechanical
or electrical systems therein, does not conflict with uses by other lessees, is
not significantly more burdensome to the Premises and the improvements thereon,
and is otherwise permissible pursuant to this Paragraph 6. If Lessor elects to
withhold such consent, Lessor shall within five (5) business days after such
request give a written notification of same, which notice shall include an
explanation of Lessor's reasonable objections to the change in use.

    6.2  Hazardous Substances.  

    (a) Reportable Uses Require Consent. The term "Hazardous Substance" as used
in this Lease shall mean any product, substance, chemical, material or waste
whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises, is
either: (i) potentially injurious to the public health, safety or welfare, the
environment, or the Premises; (ii) regulated or monitored by any governmental
authority; or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substance shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, crude oil or any products or by-products thereof. Lessee
shall not engage in any activity in or about the Premises which constitutes a
Reportable Use (as hereinafter defined) or Hazardous Substances without the
express prior written consent of Lessor, which consent may be withheld by Lessor
in its sole and absolute discretion, and compliance in a timely manner (at
Lessee's sole cost and expense) with all Applicable Requirements (as defined in
Paragraph 6.3). "Reportable Use" shall mean (i) the installation or use of any
above or below ground storage tank; (ii) the generation, possession, storage,
use, transportation, or disposal of a Hazardous Substance that require a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority; and (iii) the presence
in, or about the Premises of a Hazardous Substance with respect to which any
"Applicable Laws" (defined herein to mean all applicable zoning, municipal,
county, state and federal laws, ordinances and regulations) require that a
notice be give to persons entering or occupying the Premises or neighborhood
properties. Notwithstanding the foregoing, Lessee may, without Lessor's prior
consent, but upon notice to Lessor and in compliance with all Applicable
Requirements, use any ordinary and customary materials reasonable required to be
used by Lessee in the normal course of the Permitted Use, so long as such use is
not a Reportable Use and does not expose the Premises or neighboring properties
to any meaningful risk of contamination or damage or expose Lessor to any
liability therefore. In addition, Lessor may (but without any obligation to do
so)

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condition its consent to any Reportable Use of any Hazardous Substance by Lessee
upon Lessee's giving Lessor such additional assurances as Lessor, it its
reasonable discretion, deems necessary to protect itself, the public, the
Premises and the environment against damage, contamination or injury and/or
liability therefore, including, but not limited to, the installation (and at
Lessor's option, removal on or before Lease expiration or earlier termination)
of reasonably necessary protective modifications to the Premises (such as
concrete encasements) and/or the deposit of an additional Security Deposit under
Paragraph 5 hereof.

    (b) Duty to inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, or under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall immediately give Lessor written notice thereof together with a copy of any
statement, report, notice, registration, application, permit, business plan,
license, claim, action, or proceeding given to, or received from, any
governmental authority or private party concerning the presence, spill, release,
discharge of, or exposure to, such Hazardous Substance including, but not
limited to, all such documents as may be involved in any Reportable Use
Involving the Premises. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, or, under or about the Premises (including,
without limitation, through the plumbing or sanitary sewer system).

    (c) Indemnification. Lessee shall indemnify, protect, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or injury to person, property or the
environment created or suffered by Lessee, and the cost of investigation
(including consultants' and attorneys' fees and testing), removal, remedies,
restoration and/or abatement thereof, or of any contamination therein involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement. See Addendum.

    6.3  Lessee's Compliance with Requirements.  Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner comply with all
"Applicable Requirements," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises (including,
but not limited to, matters pertaining to (i) industrial hygiene;
(ii) environmental conditions on, in, under or about the Premises, including
soil and groundwater conditions; and (iii) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage, spill,
or release of any Hazardous Substance), now in effect or which may hereafter
come into effect. Lessee shall, within five (5) days after receipt of Lessor's
written request, provide Lessor with copies of all documents and information,
including, but not limited to, permits, registrations, manifests, applications,
reports and certificates, evidencing Lessee's compliance with any Applicable
Requirements specified by Lessor, and shall immediately upon receipt, notify
Lessor in writing (with copies of any documents involved) of any threatened or
actual claim, notice citation, warning, complaint or report pertaining to or
involving failure by Lessee or the Premises to comply with any Applicable
Requirements.

    6.4  Inspection; Compliance with Law.  Lessor, Lessor's agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of an emergency and otherwise at
reasonable times, for the purpose of inspecting the condition of the

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Premises and for verifying compliance by Lessee with this Lease and all
Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall be
entitled to employ experts and/or consultants in connection therewith to advise
Lessor with respect to Lessee's activities, including but not limited to
Lessee's installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises. The costs and expenses of any
such inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Lessee is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination. In such case, Lessee shall upon request reimburse Lessor or
Lessor's lender, as the case may be, for the costs and expense of such
inspections.

7.  MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS  

    7.1  Lessee's Obligations.  

    (a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance
with Covenants, Restrictions and Building Code), 7.2 (Lessor's Obligations), 9
(Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole
cost and expense and at all times, keep the Premises in every part thereof in
good order, condition and repair (whether or not such portion of the Premises
requiring repair, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of such portion
of the Premises), including, without limiting the generality of the foregoing,
all equipment or facilities specifically serving the Premises, such as plumbing,
heating, air conditioning, ventilating, electrical, lighting facilities,
boilers, fired or unfilled pressure vessels, fire hose connections if within the
Premises, fixtures, interior walls, interior surfaces of exterior walls,
ceilings, floors, windows, doors, plate glass, and skylights, but excluding any
items which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's obligations shall
include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.

    (b) Lessee shall, at Lessee's sole cost and expense, procure and maintain a
contract, with copies to Lessor, in customary form and substance, for and with a
contractor specializing and experienced in the inspection, maintenance and
service of the heating, air conditioning and ventilation system for the
Premises. However, Lessor reserves the right, upon notice to Lessee, to procure
and maintain the contract for heating, air conditioning and ventilation systems,
and if Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the
cost thereof.

    (c) If Lessee fails to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises in good order, condition and repair, in accordance with
Paragraph 13.2 below.

    7.2  Lessor's Obligations.  Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code),
4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9
(Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement
pursuant to Paragraph 4.2, shall keep in good order, condition and repair the
foundations, exterior walls, structural condition of interior bearing walls,
exterior roof, fire sprinkler and/or standpipe and hose (if located in the
Common Areas) or other automatic fire extinguishing system including fire alarms
and/or smoke detection systems and equipment, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs, and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common

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Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated
to paint the exterior or interior surfaces of exterior walls nor shall Lessor be
obligated to maintain, repair or replace windows, doors or place glass of the
Premises. Lessee expressly waives the benefit of any statute now or hereafter in
effect which would otherwise afford Lessee the right to make repairs at Lessor's
expense or to terminate this Lease because of Lessor's failure to keep the
Premises, Industrial Center or Common Areas in good order, condition and repair.

    7.3  Utility Installations, Trade Fixtures, Alterations.  

    (a) Definitions; Consent Required. The term "Utility Installations" is used
in this Lease to refer to all air lines, power panels, electrical distribution,
security, fire protection systems, communications systems, lighting fixtures,
heating, ventilating and air conditioning equipment, plumbing, and fencing in,
on or about the Premises. The term "Trade Fixtures" shall mean Lessee's
machinery and equipment which can be removed without doing material damage to
the Premises. The term "Alterations" shall mean any modification of the
improvements on the Premises which are provided by Lessor under the terms of
this Lease, other than Utility Installations or Trade Fixtures. "Lessee-Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor pursuant
to Paragraph 7.4(a). Lessee shall not make, nor cause to be made any Alterations
or Utility Installations in, on, under or about the Premises without Lessor's
prior written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof) without
Lessor's consent but upon notice to Lessor, so long as they are not visible from
the outside of the Premises, do not involve puncturing, relocating or removing
the roof or any existing walls, or changing or interfering with the fire
sprinkler or fire detection systems and the cumulative cost thereof during the
term of this Lease as extended does not exceed $2,500.00.

    (b) Consent. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with detailed plans. All consents given by Lessor,
whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall
be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alteration or Utility Instillations by Lessee during
the term of this Lease shall be done in a good and workmanlike manner, with good
and sufficient materials, and be in compliance with all Applicable Requirements.
Lessee shall promptly upon completion thereof furnish Lessor with as-built plans
and specifications therefore. Lessor may (but without obligation to do so)
condition its consent to any requested Alteration or Utility Installation that
costs $2,500.00 or more upon Lessee's providing Lessor with a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation.

    (c) Lien Protection. Lessee shall pay when due all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee or for
use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on, or about the Premises, and Lessor shall have the right to post
notices of non-responsibility in or on the Premises as provided by law. If
Lessee shall, in good faith, contest the validity of any such lien, claim, or
demand, then Lessee shall, at its sole expense, defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Lessor or the Premises. If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to

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Lessor, in an amount equal to one and one-half times the amount of such
contested lien claim or demand, indemnifying Lessor against liability for the
same, as required by law for the holding of the Premises free from the effect of
such lien or claim. In addition, Lessor may require Lessee to pay Lessor's
attorneys' fees and costs in participating in such action if Lessor shall decide
it is to its best interest to do so.

    7.4  Ownership, Removal, Surrender, and Restoration.  

    (a) Ownership. Subject to Lessor's right to require their removal and to
cause Lessee to become the owner thereof as hereafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.

    (b) Removal. Unless otherwise agreed in writing, Lessor may require that any
or all Lessee-Owned Alterations or Utility Installations be removed by the
expiration or earlier termination of this Lease, notwithstanding that their
installation may have been consented to by Lessor. Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.

    (c) Surrender/Restoration. Lessee shall surrender the Premises by the end of
the last day of the Lease term or any earlier termination date, clean and free
of debris and in good operating order, condition and state of repair, ordinary
wear and tear excepted. Ordinary wear and tear shall not include any damage or
deterioration that would have been prevented by good maintenance practice or by
Lessee performing all of its obligations under this Lease. Except as otherwise
agreed or specified herein, the Premises, as surrendered, shall include the
Alterations and Utility Instillations. The obligation of Lessee shall include
the repair of any damage occasioned by the installation, maintenance or removal
of Lessee's Trade Fixtures, furnishings, equipment and Lessee-Owned Alterations
and Utility Installations, as well as the removal of any storage take installed
by or for Lessee, and the removal, replacement or remediation of any soil,
material or ground water contaminated by Lessee, all as may then be required by
Applicable Requirements and/or good practices. Lessee's Trade Fixtures shall
remain the property of Lessee and shall be removed by Lessee subject to its
obligation to repair and restore the Premises per this Lease.

8.  INSURANCE; INDEMNITY  

    8.1  Payment of Premiums.  The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the term of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.

    8.2  See Addendum  

    8.3  Property Insurance—Building, Improvements and Rental Value  

    (a) Lessor shall obtain and keep in force during the term of this Lease a
policy or policies in the name of Lessor with loss payable to Lessor and to any
Lender(s), insuring against loss or damage to the Premises. Such insurance shall
be for full replacement cost, as the same shall exist from time to time, or the
amount required by any Lender(s), but in no event more than the commercially
reasonable and available insurance value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than full
replacement cost. Lessee-

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Owned Alteration and Utility Installations, Trade Fixtures and Lessee's personal
property shall be insured by Lessee pursuant to Paragraph 8.4. If the coverage
is available and commercially appropriate, Lessor's policy or policies shall
insure against all risks of direct physical loss or damage (except the perils or
flood and/or earthquake unless required by a Lender), including coverage for any
additional costs resulting from debris removal and reasonable amount of coverage
for the enforcement of any ordinance or law regulating the reconstruction or
replacement of any undamaged sections of the Premises required to be demolished
or removed by reason of the enforcement of any building, zoning, safety or land
use laws as the result of a covered loss, but not including plate glass
insurance. Said policy or policies shall also contain an agreed valuation
provision in lieu of any co-insurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located.

    (b) Rental Value. At Lessor's election, Lessor shall also obtain and keep in
force during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and any lender(s), insuring the loss of the full
rental and other charges payable by Lessee under this Lease to Lessor for one
year (including all Real Property Taxes, insurance costs, all Common Area
Operating Expenses and any scheduled rental increases). Said insurance may
provide that in the event the Lease is terminated by reason of an insure loss,
the period of indemnity for such coverage shall be extended beyond the date of
the completion of repairs or replacement of the Premises, to provide for one
full year's loss of rental revenues from the date of any such loss. Said
insurance shall contain an agreed valuation provision in lieu of any
co-insurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental income, Real Property Taxes, insurance premium
costs and other expenses, if any, otherwise payable, for the next 12-month
period. Common Area Operating Expenses shall include any deductible amount in
the event of such loss.

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

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

    8.4  Lessee's Property Insurance.  Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures and Lessee-Owned
Alterations and Utility Installations in, on, or about the Premises similar in
coverage to that carried by Lessor as the insuring Party under Paragraph 8.3(a).
Such insurance shall be full replacement cost coverage with a deductible not to
exceed $1,000 per occurrence. The proceeds from any such insurance shall be used
by Lessee for the replacement of personal property and the restoration of Trade
Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request
from Lessor, Lessee shall provide Lessor with written evidence that such
insurance is in force.

    8.5  Insurance Policies.  Insurance required hereunder shall be in companies
duly licensed to transact business in the state where the Premises are located,
and maintaining during the policy term a "General Policyholders Rating" of at
least B+, V, or such other rating as may be required by a Lender, as set forth
in the most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor,
within seven (7) days after the earlier of the Early Possession Date or the
Commencement Date, certified copies of, or certificates evidencing the existence
and amounts of,

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the insurance required under Paragraph 8.2(a) and 8.4. No such policy shall be
cancelable or subject to modification except after thirty (30) days' prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand.

    8.6  Waiver of Subrogation.  Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages (whether in contract or in tort) against the
other, for loss or damage to their property arising out of or incident to the
perils required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.

    8.7  Indemnity.  Except for Lessor' negligence and/or breach of express
warranties, Lessee shall indemnify, protect and hold harmless the Premises,
Lessor and its agents, Lessor's master or ground lessor, partners and Lenders,
from and against any and all claims, loss of rents and/or damages, costs, liens,
judgment, penalties, loss of permits, attorneys' and consultants' fees, expenses
and/or liabilities arising out of, involving, or in connection with, the
occupancy of the Premises by Lessee, the conduct of Lessee's business, any act,
omission or neglect of Lessee, its agents, contractors, employees or invitees,
and out of any Default or Breach by Lessee in the performance in a timely manner
of any obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of any
claim or any action or proceeding involved therein, and whether or not (in the
case of claims made against Lessor) litigated and/or reduced to judgment. In
case any action or proceeding be brought against Lessor by reason of any of the
foregoing matters, Lessee, upon notice from Lessor, shall defend the same at
Lessee's expense by counsel reasonable satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid any such
claim in order to be so indemnified.

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

9.  DAMAGE OR DESTRUCTION  

    9.1  Definitions.  

    (a) "Premises Partial Damage" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is less than fifty percent (50%) of
the then Replacement Cost (as defined in Paragraph 9.1(d) of the Premises
(excluding Lessee-Owned Alterations and Utility Installations and Trade
Fixtures) immediately prior to such damage or destruction.

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    (b) "Premises Total Destruction" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost of which damage or destruction is fifty percent (50%) or more of the
then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and
Utility Installations and Trade Fixtures) immediately prior to such damage or
destruction.

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

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

    9.2  Premises Partial Damage—Insure Loss.  If Premises Partial Damage that
is an Insured Less occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and Utility
Installations) as soon as reasonable possible and this Lease shall continue in
full force and effect. In the event, however, that there is a shortage of
insurance proceeds and such shortage is due to the fact that, by reason of the
unique nature of the improvement in the Premises, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within ten (10) days
following receipt of written notice of such shortage and request therefore. If
Lessor receives said funds or adequate assurance thereof within said ten
(10) day period, Lessor shall complete them as soon as reasonable possible and
this Lease shall remain in full force and effect. If Lessor does not receive
such funds or assurances within said period, Lessor may nevertheless elect by
written notice to Lessee within ten (10) days thereafter to make such
restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect. If Lessor does not receive such funds or assurance with such ten
(10) day period, and if Lessor does not so elect to restore and repair, then
this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.

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

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provide the funds or assurance thereof within the times specified above, this
Lease shall terminate as of the date specified in Lessor's notice of
termination.

    9.4  Total Destruction.  Notwithstanding any other provision hereof, if
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction is an Insured Loss or was caused by a negligent or willful act of
Lessee. In the event, however, that the damage or destruction was caused by
Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as released and waived in Paragraph 9.7.

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

    9.6  Abatement of Rent; Lessee's Remedies.  

    (a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance
Condition for which Lessee is not legally responsible, the Base Rent, Common
Area Operating Expenses and other charges, if any, payable by Lessee hereunder
for the period during which such damage or condition, its repair, remediation or
restoration continues, shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired, but not in excess of proceeds from
insurance required to be carried under Paragraph 8.3(b). Except for abatement of
Base Rent, Common Area Operating Expenses and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed by
Lessee, and Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair, remediation or restoration.

    (b) If Lessor shall be obligated to repair or restore the Premises under the
provisions of this Paragraph 9 and shall not commence, in a substantial and
meaningful way, the repair or restoration of the Premises within ninety
(90) days after such obligation shall accrue, Lessee may, at any time prior to
the commencement of such repair or restoration, give written notice to Lessor
and to any Lenders of which Lessee has actual notice of Lessee's election to
terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises with thirty (30) days after the receipt of such notice, this Lease
shall continue in full force and effect. "Commence" as used in this
Paragraph 9.6 shall mean either the unconditional authorization of the
preparation of the required plans, or the beginning of the actual work on the
Premises, whichever occurs first.

    9.7  Deleted  

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    9.8  Termination—Advance Payments.  Upon termination of this Lease pursuant
to this Paragraph 9, Lessor shall return to Lessee any advance payment made by
Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is
not then required to be, used by Lessor under the terms of this Lease.

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

10.  REAL PROPERTY TAXES  

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

    10.2  Real Property Tax Definition.  As used herein, the term "Real Property
Taxes" shall include any form of real estate tax or assessment, general,
special, ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof, Lessor's
right to rent or other income therefrom, and/or Lessor's business of leasing the
Premises. The term "Real Property Taxes" shall also include any tax, fee, levy,
assessment or charge, or any increase therein, imposed by reason of event
occurring, or changes in Applicable Law taking effect, during the term of this
Lease, including, but not limited to, a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this Lease,
or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. In calculating Real Property Taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.

    10.3  Additional Improvements.  Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records an work
sheets as being caused by additional improvements place upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to
Lessor at the time Common Area Operating Expenses are payable under
Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed
solely by reason of Alteration, Trade Fixtures or Utility Installations place
upon the Premises by Lessee or at Lessee's request.

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

    10.5  Lessee's Property Taxes.  Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishing, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real

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property, Lessee shall pay Lessor the taxes attributable to Lessee's property
within ten (10) days after receipt of a written statement setting forth the
taxes applicable to Lessee's property.

11.  UTILITIES.  Lessee shall pay directly for all utilities and services
supplied to the Premises, including, but not limited to, electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. If
any such utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Industrial Center, in the manner and within
the time periods set forth in Paragraph 4.2(d).

12.  ASSIGNMENT AND SUBLETTING  

    12.1  Lessor's Consent Required.  

    (a) Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or otherwise transfer or encumber (collectively "assign") or sublet all
or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent given under and subject to the terms of
Paragraph 36.

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

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

    (d) An assignment or subletting of Lessee's interest in this Lease without
Lessor's specific prior written consent shall, at Lessor's option, be a Default
curable after notice per Paragraph 13.1, or a non-curable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (i) terminate this Lease, or (ii) upon thirty
(30) days written notice (Lessor's Notice"), increase the monthly Base Rent for
the Premises to the greater of the then fair market rental value of the
Premises, as reasonable determined by Lessor, or one hundred ten percent (110%)
of the Base Rent then in effect. Pending determination of the new fair market
rental value, if disputed by Lessee, Lessee shall pay the amount set forth in
Lessor's Notice, with any overpayment credited against the next installment(s)
of Base Rent coming due, and any underpayment for the period retroactively to
the effective date of the adjustment being due and payable immediately upon the
determination thereof. Further, in the event of such Breach and rental
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to the then fair market value
as reasonably determined by Lessor (without the Lease being considered an
encumbrance or any deduction for depreciation or obsolescence, and considering
the Premises at its highest and best use and in good condition) or one hundred
ten percent (110%) of the price previously in effect, (ii) any index-oriented
rental or price adjustment formulas contained in this Lease shall be adjusted to
require that the base index

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be determined with reference to the index applicable to the time of such
adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease terms shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior the adjustment
specified in Lessor's Notice.

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

    12.2  Terms and Conditions Applicable to Assignment and Subletting.  

    (a) Regardless of Lessor's consent, any assignment or subletting shall not
(i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, nor (iii) alter the primary liability of Lessee for
the payment of Base Rent and other sums due Lessor hereunder or for the
performance of any other obligations to be performed by Lessee under this Lease.

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

    (c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Lessee or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent subletting and assignment
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relive such persons from
liability under this Lease or the sublease.

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

    (e) Each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including, but not limited to, the intended use and/or
required modification of the Premises, if any. Lessee agrees to provide Lessor
with such other or additional information and/or documentation as may be
reasonable requested by Lessor.

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

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

    (a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest
in all rentals and income arising from any sublease of all or a portion of the
Premises heretofore or hereafter made by Lessee, and Lessor may collect such
rent and income and apply same toward Lessee's

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obligations under this Lease; provided, however, that until a Breach (as defined
in Paragraph 13.1) shall occur in the performance of Lessee's obligations under
this Lease, Lessee may, except as otherwise provided in this Lease, receive,
collect and enjoy the rents accruing under such sublease. Lessor shall not, by
reason of the foregoing provision or any other assignment of such sublease to
Lessor, nor by reason of the collection of the rents from a sublessee, be deemed
liable to the sublessee for any failure of Lessee to perform and comply with any
of Lessee's obligations to such sublessee under such Sublease. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a written
notice from Lessor stating that a Breach exists in the performance of Lessee's
obligations under this Lease, to pay to Lessor the rents and other charges due
and to become due under the sublease. Sublessee shall rely upon any such
statement and request from Lessor and shall pay such rents and other charges to
Lessor without any obligation or right to inquire as to whether such Breach
exists and notwithstanding any notice from or claim from Lessee to the contrary.
Lessee shall have no right or claim against such sublessee, or, until the Breach
has been cured, against Lessor, for any such rents and other charges so paid by
said sublessee to Lessor.

    (b) In the event of a Breach by Lessee in the performance of its obligation
under this Lease, Lessor, at its option and without any obligation to do so, may
require any sublessee to attorn to Lessor, in which event Lessor shall undertake
the obligations of the sublessor under such sublease from the time of the
exercise of said option to the expiration of such sublease; provided, however,
Lessor shall not be liable for any prepaid rents or security deposit paid by
such sublessee to such sublessor or for any other prior defaults or breaches of
such sublessor under such sublease.

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

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

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

13.  DEFAULT; BREACH; REMEDIES.  

    13.1  Default; Breach.  Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence
for legal services and costs in the preparation and service of a notice of
Default, and that Lessor may include the cost of such services and costs in said
notice as rent due and payable to cure said default. A "Default" by Lessee is
defined as a failure by Lessee to observe, comply with or perform any of the
terms, covenants, conditions or rules applicable to Lessee under this Lease. A
"Breach" by Lessee is defined as the occurrence of any one or more of the
following Defaults, and, where a grace period for cure after notice is specified
herein, the failure by Lessee to cure such Default prior to the expiration of
the applicable grace period, and shall entitle Lessor to pursue the remedies set
forth in Paragraphs 13.2 and/or 13.3:

    (a) The vacating of the Premises without the intention to reoccupy same, or
the abandonment of the Premises.

    (b) Except as expressly otherwise provided in this Lease, the failure by
Lessee to make any payment of Base Rent, Lessee's Share of Common Area Operating
Expenses, or any other monetary payment required to be made by Lessee hereunder
as and when due, the failure by Lessee to provide Lessor with reasonable
evidence of insurance or surety bond required under this Lease, or the failure
of Lessee to fulfill any obligation under this Lease which endangers or

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threatens life or property, where such failure continues for a period of five
(5) business days following written notice thereof by or on behalf of Lessor to
Lessee.

    (c) Except as expressly otherwise provided in this Lease, the failure by
Lessee to provide Lessor with reasonable written evidence (in duly executed
original form, if applicable) of (I) compliance with Applicable Requirements per
Paragraph 6.3, (ii) the inspection, maintenance and service contract required
under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37,
(v) the subordination or non-subordination of this Lease per Paragraph 30,
(vi) the guaranty of the performance of Lessee's obligations under this Lease if
required under Paragraphs 1, 11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of ten (10) business
days following written notice by or on behalf of Lessor to Lessee.

    (d) A default by Lessee as to the terms, covenants, conditions or provisions
of this Lease, or of the rules adopted under Paragraph 40 hereof that are to be
observed, complied with or performed by Lessee, other than those described in
Subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a
period of thirty (30) days after written notice thereof by or on behalf of
Lessor to Lessee; provided, however, that if the nature of Lessee's Default is
such that more than thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee' provided, however, that if the nature of Lessee
Default is such that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.

    (e) The occurrence of any of the following events: (i) the making by Lessee
of any general arrangement or assignment for the benefit of creditors;
(ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days; (iii) the appointment of a
trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where possession
is not restored to Lessee within thirty (30) days' or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days' provided, however, in the
event that any provision of this Subparagraph 13.1(e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.

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

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

    13.2  Remedies.  If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) business days after
written notice to Lessee (or in case of an emergency, without notice), Lessor
may at its option (but without obligation to do so), perform such duty or
obligation on

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Lessee's behalf, including, but not limited to, the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee to Lessor upon invoice therefore. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn twice
within a 12 month period, Lessor, at its own option, may require all future
payments to be made under this Lease by Lessee to be made only by cashier's
check. In the event of a Breach of this Lease by Lessee (as defined in
Paragraph 13.1), with or without further notice or demand, and without limiting
Lessor in the exercise of any right or remedy which Lessor may have by reason of
such Breach, Lessor may:

    (a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease and the term hereof shall terminate and Lessee
shall immediately surrender possession of the Premises to Lessor. In such event
Lessor shall be entitled to recover from Lessee: (i) the worth at the time of
the award of the unpaid rent which had been earned at the time of termination;
(ii) the worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that the Lessee proves could have been reasonably
avoided; (iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that the Lessee proves could be reasonably avoided' and
(iv) any other amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee's failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, the cost of recovering possession of
the Premises, expense of reletting, including necessary renovation and
alteration of the Premises, reasonable attorney's fees, and that portion of any
leasing commission paid by Lessor in connection with this Lease applicable to
the unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco or the Federal Reserve Bank District in which the Premises
are located at the time of award plus one percent (1%). Efforts by Lessor to
mitigate damages caused by Lessee's Default or Breach of this Lease shall not
waive Lessor's right to recover damages under this Paragraph 13.2. If
termination of this Lease is obtained through the provisional remedy of unlawful
detainer, Lessor shall have the right to recover in such proceeding the unpaid
rent and damages as are recoverable therein, or Lessor may reserve the right to
recover all or any part thereof in a separate suit for such rent and/or damages.
If a notice and grace period required under Subparagraphs 13.1(b), (c) or
(d) was not previously given, a notice to pay rent or quit, or to perform or
quit, as the case may be, given to Lessee under any statute authorizing the
forfeiture of leases for unlawful detainer shall also constitute the applicable
notice for grace period purposes required by Subparagraph 13.1(b), (c) or (d).
In such case, the applicable grace period under the unlawful detainer stature
shall run concurrently after the one such statutory notice, and the failure of
Lessee to cure the Default within the greater of the two (2) such grace periods
shall constitute both an unlawful retainer and a Breach of this Lease entitling
Lessor to the remedies provided for in this Lease and/or by said statute.

    (b) Continue the Lease and Lessee's right to possession in effect (in
California under California Civil Code Section 1951.4) after Lessee's Breach and
recover the rent as it becomes due, provided Lessee has the right to sublet or
assign, subject only to reasonable limitations. Lessor and Lessee agree that the
limitations on assignment and subletting in this Lease are reasonable. Acts of
maintenance or preservation, efforts to relet the Premises, or the appointment
of a receiver to protect the Lessor's interest under this Lease, shall not
constitute a termination of the Lessee's right to possession.

    (c) Pursue any other remedy now or hereafter available to Lessor under the
laws or judicial decisions of the state wherein the Premises are located.

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    (d) The expiration or termination of this Lease and /or the termination of
Lessee's right to possession shall not relieve Lessee form liability under any
indemnity provisions of this Lease as to matters occurring or accruing during
the term hereof or by reason of Lessee's occupancy of the Premises.

    13.3  Inducement Recapture in Event of Breach.  Any agreement by Lessor for
free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "Inducement Provisions" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
no further force or effect, and any rent, other charge, bonus, inducement or
considerations therefore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.

    13.4  Late Charges.  Lessee hereby acknowledges that late payment by Lessee
to Lessor of rent and other sums due hereunder will cause Lessor to incur costs
not contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to, processing
and accounting charges, and late charges which may be imposed upon Lessor by the
terms of any ground lease, mortgage or deed of trust covering the Premises.
Accordingly, if any installment of rent or other sum due from Lessee shall not
be received by Lessor or Lessor's designee within ten (10 days) after such
amount shall be due, then, without any requirement for notice to Lessee, Lessee
shall pay to Lessor a late charge equal to six percent (6%) of such overdue
amount. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of such late charge by Lessor shall in no event constitute a
waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.

    13.5  Breach by Lessor.  Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable
time shall in no event be less than thirty (30) days after receipt by Lessor,
and by an Lender(s) whose name and address shall have been furnished to Lessee
in writing for such purposes, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days from such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.

14.  CONDEMNATION.  If the Premises or any portion thereof are taken under the
power of eminent domain or sold or sold under the threat of the exercise of said
power (all of which are herein called "condemnation"), this Lease shall
terminate as to the part so taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than ten percent (10%) of
the floor area of the Premises, or more than twenty-five percent (25%) of the
portion of the Common Areas designated for Lessee's parking, is taken by
condemnation, Lessee may, at Lessee's option, to be exercised in writing within
ten (10) days after Lessor shall have given Lessee written notice of such

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taking (or in the absence of such notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of the
date of the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the Base Rent shall be reduced in the same proportion as the rentable floor
area of the Premises taken bears to the total rentable floor area of the
Premises. No reduction of Base Rent shall occur if the condemnation does not
apply to any portion of the Premises. Any award for the taking of all or any
part of the Premises under the power of eminent domain or any payment made under
threat of the exercise of such power shall be the property of Lessor, whether
such award shall be made as compensation for diminution of value of the
leasehold or for the taking of the fee, or as severance damages; provided,
however, that Lessee shall be entitled to any compensation, separately awarded
to Lessee for Lessee's relocation expenses and/or loss of Lessee's trade
Fixtures. In the event that this Lease is not terminated by reason of such
condemnation, Lessor shall to the extent of its net severance damages received,
over and above Lessee's share of the legal and other expenses incurred by Lessor
in the condemnation matter, repair any damage to the Premises caused by such
condemnation authority. Lessee shall be responsible for the payment of any
amount in excess of such net severance damages required to complete such repair.

15.  BROKERS' FEES  

    15.1  Deleted  

    15.2  Deleted  

    15.3  Deleted.  

    15.4  Representations and Warranties.  Lessee and Lessor each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder in connection with the negotiation of this Lease and/or the
consummation of the transaction, contemplated hereby, and that no broker or
other person, firm or entity is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the Indemnifying Party including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.

16.  TENANCY AND FINANCIAL STATEMENTS.  

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

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

17.  LESSOR'S LIABILITY.  The term "Lessor" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises. In the event
of a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor at the time of such transfer or
assignment. Except as provided in Paragraph 15.3, upon such transfer and
assignment and delivery of the Security Deposit, as

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aforesaid, the prior Lessor shall be relieved of all liability with respect to
the obligations and/or covenants under this Lease thereafter to be performed by
the Lessor. Subject to the foregoing, the obligations and/or covenants in this
Lease to be performed by the Lessor shall be binding only upon the Lessor as
hereinabove defined.

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

19.  INTEREST ON PAST-DUE OBLIGATIONS.  Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law. In addition to the potential late charge provided
for in Paragraph 13.4.

20.  TIME OF ESSENCE.  Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parities under this Lease.

21.  RENT DEFINED.  All monetary obligation of Lessee to Lessor under the terms
of this Lease are deemed to be rent.

22.  NO PRIOR OR OTHER AGREEMENTS;  This Lease contains all agreements between
the Parties with respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective.

23.  NOTICES.  

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

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

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

23

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consent. Regarding Lessor's knowledge of a Default or Breach at the time of
accepting rent, the acceptance of rent by Lessor shall not be a waiver of any
Default or Breach by Lessee of any provision hereof. Any payment given Lessor by
Lessee may be accepted by Lessor on account of monies or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of not
force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.

25.  RECORDING.  Either Lessor or Lessees shall, upon request of the other,
execute, acknowledge and deliver to other a short form memorandum of this Lease
for recording purposes. The Party requesting recordation shall be responsible
for payment of any fees or taxes applicable thereto.

26.  NO RIGHT TO HOLDOVER.  Lessees has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this termination of this Lease. In the event that Lessee holds over in violation
of this Paragraph 26 than the Base Rent payable from and after the time of the
expiration or earlier termination of this Lease shall be the Base Rent
applicable during the month immediately preceding such expiration or earlier
termination. Nothing contained herein shall be construed as consent by Lessor to
any holding over by Lessee.

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

28.  COVENANTS AND CONDITIONS. All provisions of the Lease to be observed or
performed by Lessees are both covenants and conditions.

29.  BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the state in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.

30.  SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.  

    30.1  Subordination.  This Lease and Option granted hereby shall be subject
and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device") now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof. Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing such purpose notice of Lessor's default pursuant to
Paragraph 13.5. If any Lender shall elect to have this Lease and/or any Option
granted hereby superior to the lien of its Security Device and shall given
written notice thereof to Lessee, this Lease and such Options shall be deemed
prior to such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.

    30.2  Attornment.  Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device and that in the event of such foreclosure, such new owner shall not:
(i) be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership, (ii) be subject to any
offsets or defenses which Lessee might have against any prior lessor, or (iii)be
a bound by prepayment of more that one (1) month's rent.

    30.3  Non-Disturbance.  With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a "non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any

24

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options to extend the term hereof, will not disturbed so long as Lessee is not
in Breach hereof and attorn to the record owner of the Premises.

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

31.  ATTORNEYS' FEES.  If any party brings an action or proceeding to enforce
the terms hereof or declare rights hereunder, the Prevailing Party (as hereafter
defined) in any such proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys; fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a party who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other Party of its claim or defense. The attorneys' fee award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys' fee reasonably incurred. Lessor shall
be entitled to attorneys' fees, costs and expenses incurred in preparation and
service of notices of Default and consultations in connection therewith, whether
or not a legal action is subsequently commenced in connection with such Default
or resulting Breach.

32.  LESSOR'S ACCESS: SHOWING PREMISES: REPAIRS.  Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may reasonably deem
necessary. Lessor may at any time place on or about the Premises any ordinary
"For Sale" signs and Lessor may at any time during the last one hundred eighty
(180) days of the term hereof place on or about the Premises any ordinary "For
Lease" signs. All such activities of Lessor shall be without abatement of Rent
or liability to Lessee.

33.  AUCTIONS.  Lessee shall not conduct, nor permit to be conducted either
voluntarily or involuntarily, any auction upon the Premises with first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease. Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.

34.  SIGNS.  Lessee shall not place any sign upon the exterior of the Premises,
except that Lessee may, with Lessor's prior written consent, install (but not on
the roof) such signs as are reasonably required to advertise Lessee's own
business so long as such signs are in a location designated by Lessor and comply
with Applicable Requirements and the signage criteria established for the
Industrial Center by Lessor. The installation of any sign on the Premises by or
for Lessee shall be subject to the provisions of Paragraph 7 (Maintenance,
Repairs, Utility Installations, Trade Fixtures and Alterations). Unless
otherwise expressly agreed herein, Lessor reserves all rights to the use of the
roof of the Premises building, and the right to install advertising signs on the
Premises including the roof, which do not unreasonably interfere with the
conduct of Lessee's business: Lessor shall be entitled to all revenues from such
advertising signs.

35.  TERMINATION: MERGER.  Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises: provided, however, Lessor shall, in the event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure with ten (10) days following any such
event to make a written election to the contrary by written notice

25

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to the holder of any such Lessor interest, shall constitute Lessor's election to
have such event constitute the termination of such interest.

36.  CONSENTS.  

    (a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an act by
or for the other Party, such consent shall not be unreasonably withheld or
delayed. Lessor's actual reasonable costs and expenses (including, but not
limited to, architects', attorneys', engineers' and other consultants' (fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including, but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefore. In addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur in considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Lessee without interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lease shall not constitute an
acknowledgement that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.

    (b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.

37.  DELETED  

38.  QUIET POSSESSION.  Upon payment by Lessee of the Rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.

39.  OPTIONS.  

    39.1  Definition.  As used in this Lease, the work "Option" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease. See Addendum.

    39.2  Options Personal to Original Lessee.  Each Option granted to Lessee in
this Lease is personal to the original Lessee named in Paragraph 1.1 hereof, and
cannot be voluntarily or involuntarily assigned or exercised by any person or
entity other than said original Lessee while the original Lessee is in full and
actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise. See Addendum.

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

    39.4  Effect of Default on Options.  

    (a) Lessee shall have no right to exercise an Option, notwithstanding any
provision in the grant of Option to the contrary: (i) during the period
commencing with the giving of any notice of Default under Paragraph 1.1 and
continuing until the noticed Default is cured, or (ii) during the period of time
any monetary obligation due Lessor from Lessee is unpaid (without regard to

26

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whether notice thereof is given Lessee), or (iii) during the time Lessee is in
Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three
(3) or more notices of separate Default under Paragraph 13.1 during the twelve
(12) month period immediately preceding the exercise of the Option, whether or
not the Defaults are cured.

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

    (c) All rights of Lessee under the provisions of an Option shall terminate
and be of no further force or effect, notwithstanding Lessee's due and timely
exercise of the Option, if, after such exercise and during the term of this
Lease, (i) Lessee fails to pay to Lessor a monetary obligation of Lease for a
period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(iii) if Lessee commits a Breach of this Lease.

40.  RULES AND REGULATIONS.  Lessee agrees that it will abide by, and keep and
observe all reasonable rules and relations ("Rules and Regulations") which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Industrial Center and their invitees.

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

42.  RESERVATIONS.  Lessor reserves the right, from time to time, to grant,
without the consent, or joinder of Lessee, such easements, rights of way,
utility raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

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

44.  AUTHORITY.  If either Party hereto is a corporation, trust or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee is a corporation, trust or
partnership, Lessee shall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.

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

46.  OFFER.  Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all parties hereto.

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47.  AMENDMENTS.  This Lease may be modified only writing, signed by the Parties
in interest at the time of the modification. The Parties shall amend this Lease
from time to time to reflect any adjustments that are made to the Base Rent or
other rent payable under this Lease. As long as they do not materially change
Lessee's obligations hereunder, Lessee agrees to make such reasonable
non-monetary modifications to this Lease as may be reasonably required by an
institutional insurance company or pension plan Lender in connection with the
obtaining of normal financing or refinancing of the property of which the
Premises are a part.

48.  MULTIPLE PARTIES.  Except as otherwise expressly provide herein, if more
than one person or entity is named herein as either Lessor or Lessee, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.

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

IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S
REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUTATE THE
CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDRGROUND
STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLEY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO
THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A
STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS
LOCATED SHOULD BE CONSULTED

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

Executed at: Santa Barbara, CA   Executed at: Santa Barbara, CA On: February 10,
2001   On: February 5, 2001
By LESSOR:
 
By LESSEE: THE WRIGHT FAMILY C LIMITED PARTNERSHIP, a California limited
partnership   QAD Inc., a Delaware corporation
By:
 
/s/ WILLIAM D. WRIGHT
_________________________________
 
By:
 
/s/ KARL LOPKER
_________________________________ Name Printed: William D. Wright
Title: Trustee of The Wright Family Living Trust   Name Printed: Karl Lopker
Title: CEO
UTA dated June 19, 1989, as amended,
General Partner
 
 
 
 
By:
 
/s/ EDNA J. WRIGHT
_________________________________
 
By:
 
/s/ JOSEPH E. NIDA
_________________________________ Name Printed: Edna J. Wright
Title: Trustee of the Wright Family Living Trust   Name Printed: Joseph E. Nida
Title: Secretary
UTA dated June 19, 1989, as amended,
General Partner
 
 
 
 
By:
 
/s/ JEANNE WRIGHT BORTOLAZZO
_________________________________
 
 
 
  Name Printed: Jeanne Wright Bortolazzo, General Partner        
Address: 130 Garden St.
Santa Barbara, CA 93101
 
Address: 6450 Via Real
Carpinteria, CA 93013

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ADDENDUM TO LEASE

    This Addendum is attached to and forms a part of that certain Standard
Industrial/ Commercial Multi-Tenant Lease- Modified Net dated for reference
purposes February 1, 2001 by and between THE WRIGHT FAMILY C LIMITED
PARTNERSHIP, a California limited partnership ("Lessor"), and QAD INC., a
Delaware corporation ("Lessee"). The Standard Industrial Lease is hereby amended
(and as amended is hereinafter referred to as "this Lease"), as set forth below.
In the event of any conflict or inconsistency between the terms and provisions
of the printed form lease and this Addendum, the terms and provisions of this
Addendum shall control. Unless otherwise defined in this Addendum, the
capitalized terms used in this Addendum shall have the same meaning as set forth
in the printed form lease.

    49.  Commencement Date; Delay in Commencement Date.  

    49.1  Commencement Date.  

    The Commencement Date under this Lease shall be the earlier of
(i) August 17, 2001 (the "Scheduled Commencement Date") which is the date
identified as the "Early Finish Date" for the line item identified as "TI
Construction-Typical" on the construction schedule prepared by Melchiori
Construction attached hereto as Schedule "1" (the "Construction Schedule"), and
(ii) the Completion Date (as defined in Paragraph 61.1 below), if the Completion
Date occurs before the Scheduled Commencement Date. Lessor and Lessee shall
execute an amendment to the Lease setting forth the exact date of the
Commencement Date of the Lease; provided, however, the failure to do so shall
not otherwise modify the Commencement Date. The "Term" of the Lease shall be ten
(10) years commencing on the Commencement Date and ending at 11:59 p.m. on the
day immediately preceding the tenth anniversary of the Commencement Date (the
"Expiration Date"), subject to the Lessee's right to extend the term of the
Lease for two additional periods of five (5) years each as provided in
Paragraph 51 below. Except as provided in Paragraphs 49.2 or 50.3 below, the
obligation of Lessee to pay Base Rent and all other amounts due under this Lease
shall commence no later than August 17, 2001, whether or not the Completion Date
has been achieved on or before August 17, 2001.

    49.2  Delay in Issuance of Building Permit for Tenant Improvements.  

    Subject to the terms and conditions of this Lease, including, without
limitation, Paragraph 62 below, if a "Permit Approval Delay" (as that term is
defined below) occurs, the August 17, 2001 Scheduled Commencement Date shall be
extended by the "Permit Approval Delay Period", as that term is defined below.
As used herein, a "Permit Approval Delay" shall be a delay in the construction
of the Tenant Improvements pursuant to the Tenant Improvement Construction Plans
(as defined below) caused by the failure of the City of Carpinteria to issue a
building permit for the construction of the Tenant Improvements on or before the
"Early Finish Date" as provided for in the Construction Schedule under the line
item entitled "Tenant Improvement Permit Process". As used herein, the "Permit
Approval Delay Period", shall be the period of time (i) commencing from such
"Early Finish Date" provided for in the Construction Schedule under the line
item entitled "Tenant Improvement Permit Process" and (ii) ending on the date
the building permit for the Tenant Improvements is actually issued.
Notwithstanding the foregoing, to the extent that Lessee is the cause of any
Permit Approval Delay, then the Permit Approval Delay Period shall be reduced to
the extent of any such Lessee caused delay. Except as otherwise provided herein
in connection with a Permit Approval Delay, Lessor shall not be subject to any
liability for the failure of the Completion Date to occur on or before
August 17, 2001.

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    50.  Base Rent; Proration;Abatement of Base Rent For Data Center Premises.  

    50.1.  Base Rent.  

    Lessee shall pay Lessor Base Rent in the amount of Forty Three Thousand One
Hundred Fifty Five Dollars and Eighteen Cents ($43,155.18) per month, as
adjusted pursuant to the terms of this Lease, commencing on the Commencement
Date. Except as provided in Paragraphs 49.2 or 50.3 the obligation of Lessee to
pay Base Rent and all other amounts due under this Lease shall commence no later
than August 17, 2001, whether or not the Completion Date has been achieved on or
before August 17, 2001.

    50.2.  Proration.  

    Notwithstanding the provisions of Paragraphs 1.5 and 4.1 of the Lease, if
the Commencement Date occurs on a day other than the first day of a calendar
month, Base Rent for the first partial calendar month of the commencement of the
Term shall be prorated based on the actual number of days in said partial month,
and such initial Base Rent shall be due on the Commencement Date.

    50.3.  Abatement of Base Rent For Data Center Premises.  

    As provided below, Tenant shall be obligated to construct the Data Center
(as defined below) at its sole cost and expense. In the event that the Data
Center is not completed by the Commencement Date, then the Base Rent payable for
the Premises shall be abated for that portion of the Building containing the
Data Center (the "Data Center Premises") until the Data Center Rent Commencement
Date (as that term is defined below); provided, however in no event shall such
abatement of Base Rent for the Data Center Premises continue beyond October 1,
2001. Such abatement in rent shall be equal to the product of the Base Rent
multiplied by a fraction, the numerator of which is four thousand one hundred
ten (4,110) square feet (the square footage of the Data Center Premises) and the
denominator of which is twenty six thousand six hundred thirty nine (26,639)
square feet.

    51.  Option to Extend Term of Lease.  

    Lessee is hereby granted the option to extend the term of this Lease for two
(2) additional successive periods of five (5) years each (each such period
referred to as an "Extension Period"). The options shall be exercised by the
delivery of written notice to Lessor no earlier than three hundred sixty five
(365) days and no later than two hundred seventy (270) days prior to the
expiration of the lease term then in effect. Any extensions granted hereunder
shall be on the same terms and conditions applicable to the initial term except
as to rent, which shall be increased in accordance with Paragraph 52 below.
Lessee's right to exercise the options granted herein is subject to the terms
and conditions set forth in paragraph 39 of this Lease.

    52.  Adjustments to Base Rent.  

    52.1.  Cost of Living Adjustments to Base Rent.  

    The Base Rent payable pursuant to Paragraph 4.1 shall be subject to further
adjustment as of the first anniversary of the Commencement Date and as of the
same date each year thereafter during the initial lease term and any extension
period. Said date is hereinafter referred to as the "Adjustment Date". The
adjustment shall be made as follows:

    The Base Rent for the Premises shall be adjusted by the same percentage as
the increase, if any, in the Consumer Price Index (All Items for All Urban
Consumers 1982-84=100 Base), of the

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United States Department of labor, Bureau of Labor Statistics for Los
Angeles-Anaheim-Riverside, CA (the "Index"). The adjustment shall be calculated
according to the following formula:

    X = A × B
C  
 
 
X
=
Adjusted rent
 
 
A
=
Base Rent as of the first month of the term then in effect.
 
 
B
=
The monthly index for the third month immediately preceding the Adjustment Date.
 
 
C
=
The monthly index for the third month immediately preceding the first month of
the term then in effect.

    The monthly rent as so adjusted shall be payable for each month commencing
with the Adjustment Date and continuing until the next Adjustment Date. In no
event shall the monthly rent as adjusted be less than the monthly rent payable
for the month immediately preceding the rent adjustment.

    If the Index is discontinued or revised during the term of this Lease, such
other government Index or computation with which it is replaced shall be used in
order to obtain substantially the same result as would be obtained if the Index
had not been discontinued or revised.

    52.2.  Determination of Base Rent During Extension Periods.  

    In the event Lessee exercises the option to extend granted in Paragraph 51
above, the Base Rent payable at the commencement of the applicable Extension
Period shall be the then prevailing market rate for a modified net lease of real
property comparable to the Premises in the surrounding geographical area.
Prevailing market rate shall be determined by mutual agreement of Lessor and
Lessee on the basis of the value which will be obtained in an arms-length
transaction between an informed and willing tenant (other than a tenant
currently in possession of the demised Premises) and an informed and willing
landlord (other than the then existing landlord of the demised Premises) under
no compulsion to lease. If Lessor and Lessee have not agreed upon the prevailing
market rental rate by the date which is thirty (30) days prior to the expiration
of the lease term then in effect, then the option to extend will automatically
cease and be deemed extinguished. The base monthly rent as determined pursuant
to this Paragraph 52.2 shall thereafter be subject to further cost of living
adjustments pursuant to the terms of Paragraph 52.1 above.

    53.  Common Area Operating Expenses—Inspection and Audit Rights.  

    If Lessee provides Lessor written notice within thirty (30) days after its
receipt of Lessor's statement or billing as provided for in Paragraph 4.2 of the
Lease, Lessee may require clarification as to any amount of Common Area
Operating Expense. This clarification may include, with respect to the disputed
items and pursuant to the terms hereafter specified, inspection of legible
copies of all of Lessor's invoices and paid receipts, and an audit performed by
a Certified Public Accountant using generally accepted accounting principals.
Should Lessee elect to inspect and/or audit any disputed amount of Common Area
Operating Expense amount, Lessee's inspection and/or audit shall be completed,
and the results thereof submitted to Lessor, no later than six months after
Lessee's receipt of Lessor's statement or billing. Lessee shall be solely
responsible for all costs of such inspection and/or audit. Lessee's inspection
and/or audit shall be scheduled promptly at the reasonable convenience of both
Lessor and Lessee, with such inspection or audit to take place in Lessor's
offices or such other reasonable location designated by the Lessor. Lessor and
its representatives shall have the right to participate in such inspection or
audit and entitled to copies of all work papers and other documents

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prepared by or on behalf Lessee in connection with such inspection or audit. If
the results of such inspection or audit indicate that Lessee has been
overcharged, Lessor shall refund this amount to Lessee. If the results of such
inspection or audit indicate that Lessee has been undercharged, Lessee shall pay
the additional amount to Lessor.

    54.  Use.  

    Paragraph 6 of this Lease is hereby supplemented as follows:

    54.1  Prohibited Uses.  

    Lessee shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will in any way increase the existing
rate of or affect any fire or other insurance upon the Premises or any of its
contents, or cause a cancellation of any insurance policy covering the Premises
or any part thereof or any of its contents. Lessee shall not commit or suffer to
be committed any nuisance or waste in or upon the Premises. Lessee shall not use
the Premises or permit anything to be done in or about the Premises which will
in any way conflict with any law, statute, ordinance or governmental rule or
regulation now in force or which may hereafter be enacted or promulgated. Lessee
shall not keep any animals or pets on the Premises. Lessor shall have a right of
re-entry upon the Premises on reasonable notice and at reasonable times for
purposes of inspection, contamination testing and remediation.

    54.2.  Installation of Specialized Equipment and Use of Lessee's Possessions
on the Premises.

    Lessee shall not install on the Premises any specialized equipment requiring
the use of a power source (including, but not limited to, computer hardware or
software) without the prior written consent of Lessor. Lessor shall give its
consent to such installation provided the conditions contained herein are
satisfied. Lessor shall not be liable to Lessee for damage to Lessee or Lessee's
possessions, including but not limited to, furniture, fixtures, equipment
(specialized or otherwise) and inventory, from any cause. Lessee waives all
claims against Lessor for damage to Lessee's possessions arising for any reason.
Lessee shall comply with all laws, regulations and ordinances relating to the
condition and use of any and all of Lessee's possessions on the Premises,
including laws requiring the alteration, maintenance and restoration of the
Premises as a result of Lessee's particular use. Provided, however, any required
alterations to the Premises shall be conditioned upon Lessor's prior written
consent. The Premises shall not be electrically overloaded. No equipment,
apparatus or other appliance shall be used or operated on the Premises in such a
manner that such equipment will in any way injure, vibrate or shake the
Premises, or place an excessive burden on power sources installed on the
Premises.

    54.3.  Diesel Generator.  

    Notwithstanding Paragraph 6.2 of this Lease to the contrary and subject to
this Paragraph 54.3 and the terms and conditions of the Lease, Lessee shall have
the right to install a diesel generator for emergency backup power (the
"Generator")for data center applications, at a location outside of the Premises.
Lessor shall have the right to review and approve all matters related to the
Generator as it affects the Premises and the Industrial Center, including,
without limitation, the location, installation and screening of the Generator.
The Generator shall be installed and used in compliance with all Applicable Laws
and all Applicable Requirements and in such a location as not to disturb the
quiet enjoyment of other tenants in the Industrial Center. As part of obtaining
Lessor's consent Lessee shall be obligated to (i) obtain all applicable permits
required by governmental authorities; (ii) furnish copies of such permits
together with a copy of any plans and specifications for the Generator and
related improvements prior to its installation; and (iii) comply with all
conditions of such permits in a prompt and expeditious manner. The Generator
shall be used for emergency backup purposes only and shall be used at all times
in a manner not to disturb the quiet enjoyment of other tenants in the
Industrial Center.

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    55.  Assignment and Subletting.  

    Lessee hereby understands and agrees that Lessor may withhold its consent to
any requested assignment or subletting, and such withholding of consent shall be
deemed reasonable, in the event that the proposed assignee or sublessee intends
to use or store Hazardous Substances on the Premises. Also, if Lessor consents
to such assignment or subletting, Lessor shall receive seventy-five percent
(75%) of any consideration or increase in rent received or to be received by
Lessee for such assignment or sublease. Any such amount payable by Lessee shall
be paid to Lessor within fifteen (15) days after such amounts are paid to
Lessee, and Lessee agrees to furnish such information with regard to such
consideration or increased rent as Lessor may reasonably request from time to
time

    56.  Default.  

    Paragraph 13 of this Lease is supplemented to provide that the release or
discharge by Lessee of any Hazardous Substances in or about the Premises, or
violation of any Applicable Requirements in the use or storage of Hazardous
Substances, shall, at Lessor's election, constitute a Breach under
Paragraph 13.1 of the Lease and shall entitle Lessor to the remedies provided
for under Paragraph 13.2 and elsewhere in the Lease.

    57.  Modification by Lender.  

    If in connection with obtaining financing for the Premises, the Lessor's
lender requests reasonable modifications in this Lease as a condition to such
financing, Lessee will not unreasonably withhold, delay or defer its consent
thereto, provided that such modifications do not increase the obligations of
Lessee hereunder or materially adversely affect the leasehold interest hereby
created.

    58.  Mortgage Protection.  

    Lessee agrees to give any mortgages and/or trust deed holders, as to all or
a portion of the Premises, by registered mail, a copy of any notice of default
served upon Lessor, provided that prior to such notice, Lessee has been notified
in writing (by way of notice or assignment of rents and leases, or otherwise) of
the addresses of such mortgages and/or trust deed holders. Lessee agrees not to
exercise any remedies available by virtue of a default unless Lessor shall have
failed to cure such default within thirty (30) days after receipt of notice of
default or such additional time as may be reasonably necessary to cure the
default in the case of a default incapable of being cured within thirty
(30) days. Lessee further agrees that the mortgages and/or trust deed holder
shall have an additional thirty (30) days within which to cure such default, or
if such default cannot be cured within that time, then such additional time as
may be necessary if within such thirty (30) days any mortgagee and/or trust deed
holder has commenced and is diligently pursuing the remedies necessary to cure
such default (including, but not limited to, commencement of foreclosure
proceedings if necessary to effect such cure), in which event, such right, if
any, as Lessee might otherwise have to terminate the Lease shall not be
exercised while such remedies are being so diligently pursued.

    59.  Liability Insurance.  

    Paragraph 8.2 (Liability Insurance) of the Lease is amended to read in full
as follows:

    "8.2 Liability Insurance.

    (a)  Carried by Lessee.  Lessee shall, at Lessee's expense, obtain and keep
in force during the term of this Lease a policy of Comprehensive General
Liability insurance utilizing an Insurance Services office standard form with
Broad Form General Liability Endorsement (GLO404), or equivalent, in an amount
of not less than (i) $1,000,000 per occurrence of Bodily Injury and Property
Damage combined single limit with a $1,000,000 excess liability policy, or
(ii) $1,000,000 per occurrence of Bodily Injury and Property Damage with a
$2,000,000 General Aggregate Bodily Injury and Property Damage, and shall insure
Lessee with Lessor as an

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additional insured against liability arising out of the use, occupancy or
maintenance of the Premises. Such insurance shall include an "Additional
Insured-Managers or Lessors of Premises" endorsement and contain the "Amendment
of the Pollution Exclusion Endorsement" for damage caused by heat, smoke or
fumes from a hostile fire. The policy shall not contain the intra-insured
exclusions as between insured persons or organizations, but shall include
coverage of liability assumed under this Lease as an "insured contract" for the
performance of Lessee's indemnity obligations under this Lease and shall insure
performance by Lessee of the indemnity provisions of Paragraphs 6.2(c), 8.7 and
elsewhere under the Lease. The limits of said insurance shall not, however,
limit the liability of Lessee hereunder. All insurance to be carried by Lessee
shall be primary to and not contributory with any similar insurance carried by
Lessor, whose insurance shall be considered excess insurance only.

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

    60.  Construction of Building.  

    60.1.  Shell.  

    60.1.1.  Construction of Shell.  

    (a) Lessor shall, at Lessor's sole cost and expense, construct a two-story
building consisting of approximately twenty-six thousand six hundred thirty nine
(26,639) square feet of commercial space on the Premises (the "Building")
together with 90 parking spaces. Work for the Building shall consist of a basic
shell (the "Shell") based on plans and specifications prepared at Lessor's sole
cost and expense by Lenvik & Minor Architects (the "Lessor's Architect") and
listed on Schedule 2 attached hereto (the "Shell Building Plans"). Lessee has
reviewed and hereby approves the Shell Building Plans. Lessor shall have the
right to amend and revise the Shell Building Plans if it determines that such
revision or modification is necessary or appropriate for the completion of the
Shell. As part of the Shell, Lessor shall provide 120/208 volt three phase to
the Building and upgraded amperage from 1,200 to 2,000.

    60.1.2.  HVAC System.  

    As part of the Shell, Lessor shall provide the rooftop and/or ground-mounted
components of the primary HVAC system as reflected in the Shell Building Plans.
As part of the Tenant Improvements (as defined below) and as shown on the Tenant
Improvement Construction Plans, Lessor shall install, balance, program and test
all secondary HVAC delivery components that are downstream from the Primary HVAC
System (the "Secondary HVAC System").

    60.1.3.  Completion of Shell.  

    The Shell shall be deemed substantially completed ("Shell Substantial
Completion") when (i) the Shell has been constructed in substantial conformance
with the Shell Building Plans and (ii) the City of Carpinteria has issued a
temporary certificate of occupancy for the Shell. Shell Substantial Completion
shall be deemed to have been achieved even though "punch list" items still
remain to be performed; provided, however, Lessor shall cause all "punch list"
items to be corrected as soon a reasonably practical after the date of Shell
Substantial Completion.

    60.2.  Tenant Improvements.  

    60.2.1.  Generally.  

    In addition to the Shell, Lessor shall construct the interior improvements
and other exterior improvements of the Premises (the "Tenant Improvements") to
be used in connection

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with the use of the Premises by Lessee for office purposes and not otherwise
constructed by Lessor as part of the Shell or constructed by Lessee as part of
the Lessee's Work, as defined below.   The Tenant Improvements shall consist
generally of the following:

    (a) Ceilings—building standard acoustical ceilings;

    (b) Window coverings—building standard window coverings installed on all
exterior windows;

    (c) Lights—building standard lighting fixtures;

    (d) Walls, doors and decorating—all interior partitions, doors, fixtures and
furnishings and decoration and finishing of all surfaces within the Premises;

    (e) Floors—floor covering and base;

    (f)  Heating, cooling and ventilation—any plumbing and HVAC services to and
in the Premises, including without limitation, the Secondary HVAC System;

    (g) Power—electrical distribution systems for power and supplementary
lighting to and in the Premises for the electrical room, including any special
electrical systems;

    (h) Telephone and communications equipment—telephone and communications
systems to and in the Premises from the electrical or telephone room; and

    (i)  Any and all other components necessary to complete the Tenant
Improvements.

The Tenant Improvements shall exclude the Lessee's Work (as defined below)
related to the Data Center.

    60.2.2.  Tenant Improvement Allowance.  

    Lessor shall provide Lessee with a tenant improvement allowance of Thirty
Dollars ($30) per square foot of the Premises, subject to the terms of
Paragraph 60.2.8. below regarding the obligation of Lessee to fund all monies
necessary to construct the Tenant Improvements for all costs which exceed the
Tenant Improvement Allowance. To the extent that any Tenant Improvement
Allowance has not been expended after completion of the Tenant Improvements, and
provided further that Lessee is not in default hereunder, Lessee shall have the
right to use any remaining Tenant Improvement Allowance for the construction of
improvements to the Data Center, so long as such improvements are not otherwise
Trade Fixtures (as defined in the Lease) or personal property.

    60.2.3.  Preparation of Tenant Improvement Preliminary Plans.  

    Attached hereto as Schedule "3" is a list of the, preliminary drawings and
documents prepared by Lessee and hereby approved by Lessor, showing general
description, basic elements and conceptual layout of the Tenant Improvements
(the "Tenant Improvement Preliminary Plans").

    60.2.4  Preparation of Tenant Improvement Construction Plans.  

    On or before the forty ninth (49th) day following the date of Lessee's
execution of this Lease, Lessor shall deliver to Lessee construction drawings
consisting of all drawings, plans and specifications in order to construct the
Tenant Improvements (the "Tenant Improvement Construction Plans"). Lessee shall
approve such Tenant Improvement Construction Plans or specify with particularity
its objection thereto within three (3) business days following receipt thereof.
Failure to approve or disapprove within said three (3) business day period of
time shall constitute approval thereof. In the event that Lessee requests
changes to the Tenant Improvement Construction Plans, Lessor and Lessee shall
meet to resolve such request;

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provided that, in the event Lessor and Lessee are unable to agree within three
(3) days after Lessee requests such changes, then the issues which the parties
are unable to agree upon shall be determined by Lessor in Lessor's sole and
absolute discretion. Upon completion of the Tenant Improvement Construction
Plans, Lessor shall obtain any and all necessary approvals to the Tenant
Improvement Construction Plans from the City of Carpinteria and any other
governmental agencies with jurisdiction, and after such approval, a copy of such
approved Tenant Improvement Construction Plans shall be initialed and dated by
parties.

    60.2.5  Amendment to Tenant Improvement Construction Plans.  

    After approval by Lessee of the Tenant Improvement Construction Plans,
Lessee may request that Lessor amend the Tenant Improvement Construction Plans.
Any such request shall be submitted to Lessor in writing and accompanied by such
drawings or documents (the "Revision Documents") to allow Lessor's Architect to
revise the Tenant Improvement Construction Plans consistent with the Revision
Documents. Lessor's Architect shall revise the Tenant Improvement Construction
Plans consistent with the Revision Documents within thirty 30 days of receipt
thereof. Lessor, shall, within thirty 30 days after it receives such revised
Tenant Improvement Construction Plans, notify Lessee of the estimated cost which
will be chargeable to Lessee by reason of such change, addition or deletion.
Such estimated cost shall include Lessor's cost of any delay in completion of
the Premises resulting from such change (including loss of rent, additional
interest and extra labor costs incurred in order to minimize further delay).
Within fifteen (15) days after receiving Lessor's estimated cost, Lessee shall
notify Lessor whether Lessee desires to proceed with such change. In the absence
of any notification, Lessee shall be deemed to have elected not to proceed with
such change. If Lessee elects to proceed with such change, Lessee shall
immediately pay to Lessor the amount of Lessor's estimated cost of such change,
which amount shall be deposited into the Reserve Account (as defined below).

    60.2.6.  Construction Contract for Tenant Improvements.  

    Upon the parties approval of the Tenant Improvement Construction Plans,
Lessor shall negotiate a construction contract for the construction of the
Tenant Improvements (the "Tenant Improvement Construction Contract") with
Melchiori Construction who is hereby approved by Tenant. The terms and
conditions of the Tenant Improvement Construction Contract shall be determined
by Lessor in Lessor's sole and absolute discretion.

    60.2.7.  Total Costs of Construction.  

    The "Total Costs of Construction" to Lessor of the Tenant Improvements shall
be all costs and expenses incurred by Lessor in connection with completing the
Tenant Improvements, including without limitation, the sum of the following:

    1.  Payments made to the contractors and subcontractors performing
construction work in connection with the Tenant Improvements;

    2.  Other costs of onsite and offsite improvements related to the Tenant
Improvements;

    3.  Fees for building permits, licenses, inspections;

    4.  Fees of engineers, surveyors, architects (including Lessor's Architect)
and others providing professional or extra services in connection with the
construction of the Tenant Improvements;

    5.  Premiums for contractor's faithful performance and for mechanic's lien
bonds, if any;

    6.  Fees for all consultants and other professionals reasonably necessary
for construction of the Tenant Improvements;

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    7.  Such other costs as reasonably may be incurred by Lessor in connection
with the construction of the Tenant Improvements; and

    8.  Any of the foregoing costs, fees or expenses incurred by Lessor in
connection with the Tenant Improvements, prior to the execution of this Lease by
the parties.

    60.2.8  Reserve Account.  

    The parties acknowledge that the Lessor's costs to complete the Tenant
Improvements will exceed the Tenant Improvement Allowance and Lessee shall pay
for all costs ("Lessee's Share") in excess of the Tenant Improvement Allowance.
Upon completion of the Tenant Improvement Construction Plans, Lessor shall give
Lessee notice of Lessor's reasonable estimate of the total amount necessary to
construct the Tenant Improvements and Lessee's Share of the Tenant Improvement
costs. Lessee shall pay Lessor, within ten (10) days of such notice an amount
equal to Lessee's Share of the Tenant Improvement Costs, which amount shall be
paid over to Lessor prior to construction of the Tenant Improvements and shall
be deposited in an account maintained by Lessor (the "Reserve Account"). Lessee
shall have no right or ability to withdraw any funds from the Reserve Account,
but any interest that may accrue on such funds shall be for the account of
Lessee. If at any time thereafter Lessor reasonably increases its estimate of
Lessee's Share of the Tenant Improvement Costs, Lessor may give notice to Lessee
of the amount of such increase and Lessee shall pay Lessor within ten (10) days
of such notice an amount equal to such increase, which amount shall be added to
the Reserve Account. The Reserve Account shall be disbursed by Lessor in the
same manner as the Tenant Improvement Allowance, as set forth below; provided,
however, that no funds shall be disbursed from the Reserve Account until the
Tenant Improvement Allowance has been exhausted, at which time, the balance of
the Total Costs of Construction shall be paid from the Reserve. Reference herein
to disbursements made from, or credits made against, the Tenant Improvement
Allowance, shall include the Reserve Account in the event the Tenant Improvement
Allowance is exhausted. Lessee shall have no right of reimbursement from Lessor
for any contributions made by Lessee toward the Tenant Improvements if this
Lease is terminated for any reason other than a material default or breach by
Lessor.

    60.2.9  Disbursements from Tenant Improvement Allowance.  

    Lessor is authorized to disburse funds from the Tenant Improvement Allowance
and the Reserve Account on Lessee's behalf to Lessor's Architect, the contractor
retained by Lessor to complete the Tenant Improvements or any subcontractor,
materials supplier or any other party entitled to compensation in connection the
Tenant Improvements. At Lessee's request, Lessor shall provide Lessee with a
monthly notice, together with copies of invoices and other appropriate
documentation, identifying payments made from the Tenant Improvement Allowance
or the Reserve Account and stating the amount remaining in the Tenant
Improvement Allowance or the Reserve Account, as applicable. Upon completion of
the Tenant Improvements and the payment of all costs in connection therewith,
any amount remaining in the Reserve Account shall be refunded to Lessee.

    60.2.10  Completion of Tenant Improvements.  

    The Tenant Improvements shall be deemed substantially completed ("Tenant
Improvements Substantial Completion") when (i) the Tenant Improvements have been
constructed in substantial conformance with the Tenant Improvement Construction
Plans and (ii) the City of Carpinteria has issued a certificate of occupancy or
temporary certificate of occupancy for the Premises or that portion of the
Premises excluding the Data Center Premises; provided, however, if the City of
Carpinteria fails to issue a certificate of occupancy or temporary certificate
of occupancy for either the Premises or that portion of the Premises

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excluding the Data Center because the Data Center is not completed, then a
certificate of occupancy or temporary certificate of occupancy shall not be a
condition precedent to achieving either Shell Substantial Completion or Tenant
Improvement Substantial Completion. Tenant Improvement Substantial Completion
shall be deemed to have been achieved even though "punch list" items still
remain to be performed; provided, however, Lessor shall cause all "punch list"
items to be corrected as soon a reasonably practical after the date of the
Tenant Improvement Substantial Completion.

    61.  Completion Date; Acceptance of Premises.  

    61.1.  Completion Date.  

    The date that both Shell Substantial Completion and Tenant Improvement
Substantial Completion are achieved shall be referred to as the "Completion
Date". Lessor shall use its best efforts to obtain Shell Substantial Completion
and Tenant Improvement Substantial Completion on or before the Scheduled
Commencement Date. In the event that the Completion Date has not been achieved
by August 17, 2001 the Lease shall not be invalid, but rather Lessor shall
complete the same as soon thereafter as is possible and Lessor shall not be
liable to Lessee for damages in any respect whatsoever. Furthermore, even if the
Completion Date has not been achieved by August 17, 2001, Lessee shall be
obligated to pay Base Rent effective August 17, 2001, subject to the provisions
of Paragraph 49.2 and 50.3. Lessor shall notify Lessee of the estimated date of
the Completion Date at least thirty (30) days before such date. Lessee shall
have the right to enter the Premises to equip and fixturize the Premises thirty
(30) days prior to the Completion Date, as long as such entry does not interfere
with Lessor's Work. At Lessor's discretion, Lessee may be permitted to enter the
Premises to equip and fixturize the Premises prior to such thirty (30) day
period. Any such entry by Lessee shall be subject to the terms and conditions of
the Lease. Nothing herein shall be construed to limit the access provided Lessee
to the Data Center Premises on or after the Data Center Premises Access Date (as
defined below) as provided in Paragraph 62.4.1 below.

    61.2  Acceptance of the Premises.  

    Lessee shall notify Lessor in writing of any items that Lessee deems
incomplete or incorrect in order for the Premises to be acceptable to Lessee
within sixty (60) days following the Completion Date. Lessee shall be deemed to
have accepted the Premises and approved construction of the Shell and the Tenant
Improvements if Lessee does not deliver such a list to Lessor within said number
of days.

    62.  Data Center.  

    62.1  Generally.  

    Lessee shall have the right and obligation to construct and install a four
thousand one hundred ten (4,110) square foot data and information systems center
(the "Data Center") at its sole cost and expense. The construction by Lessee of
the Data Center is at times referred to herein as the "Lessee's Work". The
construction by Lessor of the Shell and Tenant Improvements is at times referred
to herein as the "Lessor's Work".

    62.2  Preparation of the Data Center Preliminary Plans.  

    Attached hereto as Schedule 4 is a list of the preliminary drawings and
documents prepared by Lessee and hereby approved by Lessor, showing the general
description, basic elements and conceptual layout of the Data Center (the "Data
Center Preliminary Plans").

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    62.3  Preparation of Data Center Construction Plans.  

    On or before the forty ninth (49th) day following the date of Lessee's
execution of this Lease, Lessee shall deliver to Lessor construction drawings
consisting of all drawings, plans and specifications in order to construct the
Data Center (the "Data Center Improvement Construction Plans".) Lessor shall
approve such Data Center Construction Plans or specify with particularity its
objection thereto within three (3) days following receipt thereof. Failure to
approve or disapprove within said three (3) day period of time shall constitute
approval thereof. In the event that Lessor requests changes to the Data Center
Construction Plans and Lessee is unwilling to make such changes, Lessor and
Lessee shall meet to resolve such requested changes; provided that, in the event
Lessor and Lessee are unable to agree within ten (10) days after Lessor requests
such changes, then the issues which the parties are unable to agree upon shall
be determined by Lessor in Lessor's sole and absolute discretion. Upon
completion of the Data Center Construction Plans, Lessee shall obtain any and
all necessary approvals for construction of the Data Center from the City of
Carpinteria and any other governmental agencies with jurisdiction, and after
such approval, a copy of such approved Data Center Construction Plans shall be
initialed and dated by parties. After approval by Lessor of the Data Center
Construction Plans, Lessee may amend such Plans in accordance with the
provisions of this Paragraph 62.3.

    62.4  Construction of Data Center.  

    62.4.1  Data Center Premises Access Date  

    Lessor shall allow Lessee access to the Data Center Premises on or after the
date that the City of Carpinteria issues a building permit for the Data Center
pursuant to the Data Center Construction Plans, in order for Lessee to begin
construction of the Data Center.

    62.4.2  General Requirements.  

    The Data Center shall be constructed in compliance with the following
conditions:

    (a) Lessor and Lessee shall cause their respective architects, contractors
and consultants to cooperate with one another in order to coordinate the work of
the Lessor in connection with the Lessor's Work and the work of the Lessee in
connection with the Lessee's Work. To the extent that any portion of Lessor's
Work and Lessee's Work cannot be performed at the same time, Lessor's Work shall
take precedence, at the option of Lessor. Lessor and its contractor or architect
shall have the right to schedule meetings with Lessee and its contractor or
architect, in order to schedule and coordinate the different components
comprising the Lessor's Work and the Lessee's Work, and Lessee and its
contractor or architect shall participate in such meetings. Prior to
commencement of Lessee's Work, Lessee shall provide Lessor with a schedule of
the various components of the Lessee's Work for Lessor's review and approval,
which approval shall not be unreasonably withheld.

    (b) No work shall proceed in connection with the Data Center without
Lessor's prior written approval (which shall not be unreasonably withheld) of
(i) Lessee's contractor and subcontractors, (ii) the insurance requirements set
forth in subparagraph (g) below; and the lien and completion bond provided for
in subparagraph (k) below.

    (c) All such work shall be done in conformity with (i) the final approved
Data Center Construction Plan, (ii) all Applicable Requirements, (iii) valid
building permits and other authorizations from appropriate governmental
agencies. Lessee shall furnish copies of all such permits prior to commencing
work and shall construct the Data Center in compliance with all conditions
therein. All work shall be done in a good and workmanlike manner, with good and
sufficient materials. Lessee shall promptly upon completion of the Data Center
furnish Lessor with as-built plans and specifications therefor. Any work not
acceptable to the appropriate

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governmental agencies or not reasonably satisfactory to Lessor, shall be
promptly replaced at Lessee's expense. All contractors and subcontractors
retained by Lessee shall be bondable, licensed contractors, possessing good
labor relations and capable of performing quality workmanship and working in
harmony with Lessor's general contractor and other contractors on the Premises.

    (d) Lessee and Lessee's contractors shall abide by all safety and
construction rules and regulations of Lessor and any governmental entity having
jurisdiction over the Premises, and all work and deliveries shall be deemed to
be under all the terms, covenants, provisions and conditions of the Lease
including, without limitation, provisions in the Lease governing Utility
Installations, Trade Fixtures and Alterations in Paragraph 7.3. All Lessee's
materials, work, and installations of any nature brought upon or installed in
the Premises shall be at Lessee's risk, and neither Lessor nor any party acting
on Lessor's behalf shall be responsible for any damage thereto or loss or
destruction thereof;

    (e) Lessor shall have the right to perform, on behalf of and at the expense
of Lessee, any portion of Lessee's Work that Lessor determines should be
performed for the best interests of the Premises, including, without limitation,
work that pertains to structural components and the general utility systems for
the Premises;

    (f)  Lessee's Work shall be subject to the general inspection and approval
of Lessor and Lessor's architect and general contractor, which approval shall
not be unreasonably withheld.

    (g) Before any work is commenced or any contractor's equipment is moved onto
any part of the Premises, Lessee's contractors shall deliver to Lessor original
or duplicate original policies evidencing the following types of insurance
coverage in the following minimum amounts, which policies shall be issued by
companies approved by Lessor, shall be maintained by Lessee and Lessee's
contractors at all times during the performance of Lessee's work, and

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which shall name Lessor and any other persons having an interest in the Premises
as additional insureds as their interest may appear:

    (1)   Workers' Compensation         State:   Statutory        
Applicable Federal:   Statutory         Employer's Liability:   $1,000,000      
  Benefits Required by Union Labor Contracts: As applicable
 
 
(2)
 
Comprehensive General Liability (Including Premises—Operations;        
Independent Contractors' Protective; Products and Completed Operations;        
Broad Form Property Damage):
 
 
 
 
Bodily Injury:
 
$1,000,000 Each Occurrence             $3,000,000 Aggregate and Products        
    $3,000,000 Completed Operations
 
 
 
 
Property Damage:
 
$1,000,000 Each Occurrence             $3,000,000 Aggregate             Include
X, C and U hazards
 
 
 
 
Contractual Liability (Hold Harmless Coverage):
 
 
 
 
Bodily Injury:
 
$1,000,000 Each Occurrence
 
 
 
 
Property Damage:
 
$1,000,000 Each Occurrence             $3,000,000 Aggregate
 
 
 
 
Personal Injury, with Employment Exclusion deleted:             $3,000,000
Aggregate
 
 
(3)
 
Comprehensive Automobile Liability (owned, non-owned, hired):
 
 
 
 
Bodily Injury:
 
$1,000,000 Each Person                 $1,000,000 Each Accident
 
 
 
 
Property Damage:
 
$1,000,000 Each Occurrence
 
 
(4)
 
Builder's risk insurance, in an amount not less than 100% of the cost of the
Data Center improvements being performed by Lessee's contractor.

    (h) Lessee shall pay when due all claims for labor or materials furnished or
alleged to have been furnished to or for Lessee at or for use on the Premises,
which claims are or may be secured by any mechanic's or materialmen's lien
against the Premises or any interest therein. Lessee shall give Lessor not less
than ten (10) days' notice prior to the commencement of any work in, on, or
about the Premises, and Lessor shall have the right to post notices of
non-responsibility.

    (i)  On the completion of the Data Center, Lessor's architect and/ or
contractor shall inspect the Premises, and shall confirm that the Lessee has
satisfactorily completed the work as contemplated by the Data Center
Construction Plans and hereunder.

    (j)  At the request of Lessor, Lessee shall furnish Lessor with waivers of
liens and sworn statements from all persons who have performed labor or supplied
materials in connection with the Lessee Work, showing that they have been
compensated in full.

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    (k) Lessee shall cause its contractor to furnish a lien and completion bond
issued by a corporate surety qualified to transact surety business in the State
of California on a form which is acceptable to Lessor in an amount equal to one
and one half times the cost of the Data Center improvements

    62.5  Data Center Rent Commencement Date.  

    The Data Center Rent Commencement Date shall be the earlier of (i) the date
the Data Center has been constructed in substantial conformance with the Data
Center Construction Plans and the City of Carpinteria has issued a certificate
of occupancy for the Building and (ii) October 1, 2001.

    63.  Early Termination of Existing Leases.  

    Effective as of the Commencement Date, and subject to Lessee having taken
possession of and accepting the Premises, (i) that certain Standard Industrial
Lease—Multi-Tenant dated September 29, 1999 by and between Lessee and William
D. & Edna J. Wright dba South Coast Business Park for the premises commonly
known as 6440 Via Real, suites 9 and 10, Carpinteria California, shall be
automatically terminated, subject to the terms and conditions thereof and
(ii) that certain Standard Industrial Lease-Multi Tenant dated November 30, 1993
(the "6430 Via Real Lease") by and between Lessee and William D. & Edna J.
Wright dba South Coast Business Park for the premises commonly known as 6430 Via
Real Suites 3,4,5,6,7&8 shall be deemed to no longer include Suites 6,7 and 8
and shall thereafter relate only to Suites 3,4 and 5. At such time, the Base
Rent and Lessee's Share of Operating Expenses as provided for in the 6430 Via
Real Lease shall be reduced by a fraction, the numerator of which is the square
footage of Suites 6,7 and 8 and the denominator of which is the square footage
of Suites 3,4,5,6,7, & 8. Notwithstanding the foregoing, Lessee shall not be
required to pay an early termination penalty, if any, for such early termination
of the foregoing Lease of 6440 Via Real or deletion of Suites 6,7&8 from the
6430 Via Real Lease.

[the remainder of this page is intentionally left blank]

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    IN WITNESS WHEREOF, the parties have executed this Addendum as of the date
first written above.

"Lessor"   "Lessee"
THE WRIGHT FAMILY C LIMITED PARTNERSHIP, a California limited partnership
 
QAD INC., a Delaware corporation
By:
  /s/ WILLIAM D. WRIGHT, TRUSTEE   
 
By:
  /s/ KARL LOPKER     

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William D. Wright, Trustee of The Wright Family Living Trust UTA dated June 19,
1989, as amended, General Partner    

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Karl Lopker, CEO
By:
  /s/ EDNA J. WRIGHT, TRUSTEE   
 
By:
  /s/ JOSEPH E. NIDA     

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Edna J. Wright, Trustee of The Wright Family Living Trust UTA dated June 19,
1989, as amended, General Partner    

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Joseph E. Nida, Secretary
By:
  /s/ JEANNE M. BORTOLAZZO   
 
 
   

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Jeanne M. Bortolazzo, General Partner      

15

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Schedules 1-4 to Addendum to Standard Industrial/
Commercial Multi-Tenant Lease—Modified Net
Dated February 1, 2001 between
The Wright Family C Limited Partnership, as Lessor, and
QAD Inc., as Lessee

Lessor Initials   Lessee Initials

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Schedule "1"

Construction Schedule

[See attached]

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Schedule "2"

Shell Building Plans

LENVIK & MINOR ARCHITECTS

PLAN
NUMBER

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

  TITLE

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

  DATE

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

A-1   Site Plan, Site Details   3/1/91 A-2   Ground Floor Plan   3/1/91 A-2.3  
Second Floor Plan   1/18/01 A-3   Second Floor Plan   3/1/91 A-4   Roof Plan,
Reflected Ceiling Plans   3/1/91 A-5   Exterior Elevations   3/1/91 A-6   Wall
Sections Details   3/1/91 A-7   Enlarged Plans, Interior Elevations Details  
3/1/91

PETER W. EHLEN ASSOCIATES STRUCTURAL ENGINEERS

PLAN
NUMBER

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

  TITLE

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

  DATE

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

ST-1   General Notes   2/28/91 ST-2   Typical Details   2/28/91 S-1   Foundation
Plan   2//28/91 S-2   Second Floor Framing Plan   2/28/91 S-3   Roof Framing
Plan   2/28/91 S-4   Foundation Sections and Details   2/28/91 S-5   Floor
Sections   2/28/91 S-6   Floor Sections and Details   2/28/91 S-7   Roof
Sections and Details   2/28/91 S-8   Steel and Miscellaneous Details   2/28/91
S-9   Steel and Miscellaneous Details   2/28/91

MECHANICAL ENGINEERING CONSULTANTS

PLAN
NUMBER

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

  TITLE

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

  DATE

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

MP-1   Abbreviations, Symbols, Schedules and Details   10/23/98 MP-2  
Mechanical Ground Floor and Second Floor Toilet Rooms   10/23/98 MP-3  
Plumbing, Ground Floor and Second Floor Toilet Rooms and Details   10/23/98 MP-4
  Specifications   10/23/98 MP-5   Specifications Continued   10/23/98 MP-6  
Specifications Continued   10/23/98

Page 1 of 2

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ELECTRICAL DESIGN GROUP, INC.

PLAN
NUMBER

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

  TITLE

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

  DATE

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

E-1   Electrical Ground Floor Plan, Notes, Symbols   3/1/91 E-2   Second Floor
Electrical Plan Panel Schedules, Fixture Schedule   3/1/91 E-3   Single Line
Diagram Toilet Room Electrical Plans   3/1/91

MECHANICAL ENGINEERING CONSULTANTS

PLAN
NUMBER

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

  TITLE

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

  DATE

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

M-1   Abbreviations, Symbols, Notes and Schedules   10/18/00 M-2   Mechanical
Site Plan   10/18/00 M-3   Ground Floor Mechanical Plan   10/18/00 M-4   Second
Floor Mechanical Plan   10/18/00

Page 2 of 2

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Schedule "3"

Tenant Improvement Preliminary Plans

LENVIK & MINOR ARCHITECTS

PLAN
NUMBER

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

  TITLE

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

  DATE

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

A-2   Second Floor Plan   Undated

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Schedule "4"

Data Center Preliminary Plans

IBM

PLAN
NUMBER

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

  TITLE

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

  DATE

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

SD1.01   Site Plan Schematic Design Emergency Generator Alt. Location 1  
10-10-00 SD 2.01   Floor Plan Schematic Design   10-10-00 SD 2.02   Floor Plan
Schematic Design Int. Zoning   10-10-00

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QuickLinks

Exhibit 10.1

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE—MODIFIED American Industrial
Real Estate Association
ADDENDUM TO LEASE