RENAULT & HANDLEY
                       INDUSTRIAL & COMMERCIAL REAL ESTATE
                                 LEASE AGREEMENT

PARTIES

      This Lease, executed in duplicate at Palo Alto, California, this 6th day
of April, 2000, by and between

            Renault & Handley Employees Investment Co.
            and Drexler Technology Corporation, a Delaware corporation,

      hereinafter referred to respectively as "Lessor" and "Lessee" without
regard to number or gender.

      PREMISES 1. WITNESSETH: That Lessor hereby leases to Lessee, and Lessee
hires from Lessor, those certain premises, hereinafter referred to as "the
Premises," situated in the City of Mountain View, County of Santa Clara, State
of California, and more particularly described as follows:

            An approximate 80,000 square foot parcel improved with an industrial
            building of approximately 27,000 square feet and further identified
            as 2644-2648 East Bayshore Frontage Road.

      USE 2. The Premises shall be used and occupied by Lessee solely for the
following purposes: the design and manufacturing of data storage media systems
and legally related uses and for no other purpose without the prior written
consent of Lessor.

      TERM 3. The term shall be for six years, commencing on the 1st day of June
2000, and ending on the 31st day of May 2006.

      RENTAL 4. Monthly Base Rent shall be payable to the Lessor without
defense, deduction or offset at the address set forth in paragraph 23 below, or
at such other place or places as may be designated from time to time by the
Lessor, in the following amounts:

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      Fifty-Four Thousand and No/100th Dollars ($54,000.00) shall be due upon
execution of this lease representing rental due June 1st 2000. Fifty-Four
Thousand and No/100ths Dollars ($54,000.00) shall be due on July 1st 2000 and on
the first day of each and every month through May 1st 2001. Fifty-Six Thousand
Seven Hundred Fifty and No/100ths Dollars ($56,700.00) shall be due on June 1st
2001 and on the first day of each and every month through May 1st 2002.
Fifty-Nine Thousand Four Hundred and No/100th Dollars (59,400.00) shall be due
on June 1st 2002 and on the first day of each and every month through May 1st
2003. Sixty-Two Thousand One Hundred and No/100ths Dollars ($62,100.00) shall be
due on June 1st 2003 and on the first day of each and every month through May
1st 2004. Sixty-Four Thousand Eight Hundred and No/100th Dollars ($64,800.00)
shall be due on June 1st 2004 and on the first day of each and every month
through May 1st 2005. Sixty-Seven Thousand Five Hundred and No/100ths Dollars
($67,500.00) shall be due on June 1st 2005 and on the first day of each and
every month through May 1st 2006.

      Base Rent shall be paid monthly in advance. In addition, Lessee shall pay
to Lessor with the Monthly Base Rent, as additional rent, a monthly management
fee equal to three percent (3%) of the Monthly Base Rent. All other costs and
charges payable by Lessee in accordance with the terms of this Lease (including
property taxes, insurance premiums and maintenance costs) shall be deemed to be
additional rent.

      SECURITY DEPOSIT 5. Lessee has deposited with Lessor $0.00 as security for
the full and faithful performance of each and every term, provision, covenant
and condition of this Lease. In the event Lessee defaults in respect of any of
the terms, provisions, covenants or conditions of this Lease, including, but not
limited to the payment of rent, Lessor may use, apply or retain the whole or any
part of such security for the payment of any rent in default or for any other
sum which Lessor may spend or be required to spend by reason of Lessee's
default. Should Lessee faithfully and fully comply with all of the terms,
provisions, covenants and conditions of this Lease, the security or any balance
thereof shall be promptly returned to Lessee or, at the option of Lessor, to the
last assignee of Lessee's interest in this Lease at the expiration of the term
hereof. Lessee shall not be entitled to any interest on said security deposit.

      POSSESSION 6. If Lessor, for any reason whatsoever, cannot deliver
possession of the Premises to Lessee at the commencement of the said term, as
hereinbefore specified, this Lease shall not be void or voidable, nor shall
Lessor, or Lessor's agents, be liable to Lessee for any loss or damage resulting
therefrom; but in that event the commencement and termination dates of the Lease
and all other dates affected thereby shall be revised to conform to the date of
Lessor's delivery of possession. Notwithstanding the foregoing, if the period of
delay of delivery exceeds N/A days, Lessee, at his or its option, may declare
this Lease null and void by notice to Lessor at any time prior to delivery of
the Premises.

      ACCEPTANCE OF PREMISES AND CONSENT TO SURRENDER 7. By entry hereunder, the
Lessee accepts the Premises from Lessor in its "as is", "where is" condition.
Lessor has made no representations or warranties respecting the Premises and
Lessee has investigated and inspected the Premises and has satisfied itself that
the Premises are suitable for the Lessee's intended use thereof and are in
compliance with applicable laws and codes; provided, however, Lessor hereby
warrants that it shall repair any material defects in the roof covering, HVAC,
electrical and plumbing systems existing as of the commencement of the Lease,
provided Lessee gives Lessor written notice specifying such defects in
reasonable detail within thirty (30) days following commencement of this Lease.
Lessor shall have no obligation to contribute toward any improvements to the
Premises whatsoever. The Lessee agrees on the last day of the term hereof, or on
sooner termination of this Lease, to surrender to Lessor the Premises, which
shall, except as otherwise provided in paragraph 9 below, include all
alterations, additions, and improvements which may have been made in, to, or on
the Premises by Lessor or Lessee, in the same good condition as at Lessee's
entry into the Premises excepting for such wear and tear as would be normal for
the period of the Lessee's occupancy. The Lessee, on or before the end of the
term or sooner termination of this Lease, shall remove all Lessee's personal
property and trade fixtures from the premises and all property not so removed
shall be deemed to be abandoned by the Lessee. If the Premises are not
surrendered at the end of the term or sooner termination of this Lease, the
Lessee shall indemnify the Lessor against loss or liability resulting from delay
by the Lessee in so surrendering the Premises including, without limitation, any
claims made by any succeeding tenant founded on such delay.

      USES PROHIBITED 8. Lessee shall not commit, or suffer to be committed, any
waste upon the Premises, or any nuisance, or other act or thing which may
disturb the quiet enjoyment of any other tenant in or around the buildings in
which the Premises may be located, or allow any sale by auction upon the
Premises, or allow the Premises to be used for any improper, immoral, unlawful
or objectionable purpose, or place any loads upon the floor, walls, or roof
which endanger the structure, or place any harmful liquids in the drainage
system of the building. No waste materials or refuse shall be dumped upon or
permitted to remain upon any part of the Premises outside of the building
proper. No materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain on any portion of the Premises outside of the buildings
proper.

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      ALTERATIONS AND ADDITIONS 9. Lessee shall make no alterations, additions
or improvements to the Premises or any part thereof (collectively "Alterations")
without first obtaining the prior written consent of the Lessor which shall not
be unreasonably withheld or delayed. All Alterations shall be in accordance with
plans and specifications approved by Lessor and shall be carried out by a
reputable licensed contractor and in compliance with all applicable laws, codes,
rules and regulations. The Lessor may impose as a condition to the aforesaid
consent such additional requirements as Lessor may deem necessary in Lessor's
sole but reasonable discretion, including without limitation requirements
respecting the manner in which the work is done, Lessor's right of approval of
the contractor by whom the work is to be performed, and the times during which
it is to be accomplished. Upon written request of Lessor prior to the expiration
or earlier termination of the Lease, Lessee will remove any or all Alterations
installed by or for Lessee. Lessor shall indicate to Lessee at the time Lessor
grants its consent, which alteration Lessor may require Lessee to remove. All
Alterations not specified to be removed shall at the expiration of earlier
termination of the lease become the property of the Lessor and remain upon and
be surrendered with the Premises. All movable furniture, business and trade
fixtures, and machinery and equipment shall remain the property of the Lessee
and may be removed by the Lessee at any time during the Lease term . Items which
are not to be deemed as movable furniture, business and trade fixtures, or
machinery and equipment shall include heating, lighting, electrical systems, air
conditioning, partitioning, carpeting, or any other installation which has
become an integral part of the Premises. The Lessee will give the Lessor five
(5) business days notice prior to the commencement of any Alterations work and
will at all times permit notices of non-responsibility to be posted and to
remain posted until the completion of Alterations.

      MAINTENANCE OF PREMISES 10. Lessee shall, at Lessee's sole cost, keep and
maintain the Premises and appurtenances and every part thereof, including but
not limited to, glazing, sidewalks, plumbing, and electrical systems, any store
front, exterior paint and all components of the interior of the Premises in good
order, condition, and repair. Lessor shall, at Lessor's sole cost and expense,
maintain the structural integrity of the exterior walls, and structural portions
of the roof, foundations and floors, except that Lessee shall pay, as additional
rent, the cost of any repairs or replacements necessitated by the negligence or
wrongful act of the Lessee or Lessee's agents or employees. Lessor shall, at
Lessee's sole cost and expense, maintain, repair and (if necessary in the
judgment of Lessor's experts) replace the roof covering, HVAC system,
landscaping and parking lot surface ("Lessor's Maintenance Services") during the
term of this Lease, as may be extended. Lessee shall reimburse Lessor as
Additional Rent the cost incurred by Lessor in performing Lessor's Maintenance
Services, without mark-up, within thirty (30) days after receipt of invoice from
Lessor; provided, however, that (except where replacement of the parking lot
surface, landscaping, roof or HVAC components are necessitated by the acts of
the Lessee or Lessee's agents or employees, in which event Lessee shall pay the
costs thereof in a lump sum on demand), costs of replacement (as opposed to
repair) of the foregoing shall be amortized over the useful life thereof, in
accordance with generally accepted accounting principles, and Lessee shall pay
Lessor as Additional Rent a monthly payment equal to the monthly amortization,
together with interest on the unamortized amount at an annual rate of twelve
percent (12%). Lessee expressly waives the benefits of any statute now or
hereafter in effect which would otherwise afford the Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Premises in good order, condition or repair.

      FIRE AND EXTENDED COVERAGE INSURANCE AND SUBROGATION 11. Lessee shall not
use, or permit the Premises, or any part thereof, to be used, for any purposes
other than that for which the Premises are hereby leased and no use shall be
made or permitted to be made on the Premises, nor acts done, which will cause a
cancellation of any insurance policy covering the Premises, or any part thereof,
nor shall Lessee sell or permit to be kept, used or sold, in or about the
Premises, any article which may be prohibited by the standard form of fire
insurance policies. Lessee shall, at its sole cost and expense, comply with any
and all requirements, pertaining to the Premises, of any insurance organization
or company, necessary for the maintenance of reasonable fire and public
liability insurance, covering said building and appurtenances.

      11.1 Lessee shall, at its expense, obtain and keep in force during the
term of this Lease a policy of commercial general liability insurance (including
cross liability) insuring Lessee, Lessor, Lessor's Officers, Lessor's property
manager and Lessor's lender, against any liability arising out of the condition,
use, occupancy or maintenance of the Premises. Evidence of coverage must be in
the form of a certificate of insurance accompanied by the appropriate additional
insured endorsements. Such insurance policy shall have a combined single limit
for both bodily injury and property damage in an amount not less than Two
Million and no/100ths Dollars ($2,000,000), which aggregate amount shall be
specific to the Premises. The limits of said insurance shall not limit the
liability of Lessee hereunder.

      11.2 Lessee shall at its expense, keep in force during the term of this
Lease, a policy of fire and property damage insurance in a "special" form with a
sprinkler leakage endorsement, insuring Lessee's inventory, fixtures, equipment
and personal property within the Premises for the full replacement value
thereof. Upon execution of this Lease and annually thereafter upon renewal of
such policies, Lessee shall provide Lessor with certificates of insurance,
together with appropriate endorsements, evidencing coverages the Lessee is
required to carry pursuant to 11.1 and 11.2. The policies shall provide for
thirty (30) days advance written notice of cancellation to Lessor and Lessor's
lender.

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      11.3 Lessor shall maintain a policy of commercial general liability
insurance and a policy or policies of fire and property damage insurance in a
"special" form, with sprinkler leakage and, at the option of Lessor, earthquake
endorsements, covering loss or damage to the building, including Lessee's
leasehold improvements installed with the written consent of Lessor, for the
full replacement cost thereof.

      11.4 Lessee shall pay to Lessor as additional rent, during the term
hereof, upon receipt of an invoice therefore, one hundred percent (100%) of the
premiums and deductibles (provided, the deductible amount shall be amortized
over the useful life of the improvement for which such insurance deductible is
applicable and Lessee shall only be obligated to reimburse Lessor for the
amortized portion of the deductible amount that occurs during the term of this
Lease) for any insurance obtained by Lessor pursuant to 11.3 above. Lessor may
obtain such insurance for the Premises separately, or together with other
property which Lessor elects to insure together under blanket policies of
insurance. In such case Lessee shall be liable for only such portion of the
premiums for such blanket policies as are allocable to the Premises. It is
understood and agreed that Lessee's obligation under this paragraph shall be
prorated to reflect the Commencement Date and Expiration Date of the Lease.

      11.5 Lessee and Lessor each hereby waive any and all rights of recovery
against the other, or against the officers, directors, employees, partners,
agents and representatives of the other, for loss of or damage to the property
of the waiving party or the property of others under its control, to the extent
such loss or damage is insured against under any insurance policy carried or
required to be carried by Lessor or Lessee hereunder. Each party shall notify
their respective insurance carriers of this waiver.

      ABANDONMENT 12. Lessee shall not abandon the Premises at any time during
the term; and if Lessee shall abandon or surrender the Premises, or be
dispossessed by process of law, or otherwise, any personal property belonging to
Lessee and left on the Premises shall be deemed to be abandoned, at the option
of Lessor, except such property as may be mortgaged to Lessor.

      FREE FROM LIENS 13. Lessee shall keep the Premises and the property in
which the Premises are situated, free from any liens arising out of any work
performed, materials furnished, or obligations incurred by Lessee.

      COMPLIANCE WITH GOVERNMENTAL REGULATIONS 14. Lessee shall, at his sole
cost and expense, comply with all statutes, codes, ordinances, rules,
regulations and other requirements of all Municipal, State and Federal
authorities (collectively, "Laws") now in force, or which may hereafter be in
force, pertaining to the Premises, and shall faithfully observe in the use of
the Premises all Municipal ordinances and State and Federal statutes now in
force or which may hereafter be in force. The judgment of any court of competent
jurisdiction, or the admission of Lessee in any action or proceeding against
Lessee, whether Lessor be a party thereto or not, that Lessee has violated, or
that the Premises are not in compliance with, any Laws in the use of the
Premises, shall be conclusive of that fact as between Lessor and Lessee.
Lessee's obligations under this paragraph 14 shall include the obligation to
make, at Lessee's sole cost, any alterations or improvements to the Premises
which are required by applicable Laws, provided that (a) as to such alterations
or improvements which are not required by reason of Lessee's particular use of
the Premises or by reason of other alterations or improvements being undertaken
by Lessee, Lessee shall only be required to pay an allocable portion of the
costs of such required alterations or improvements based on the ratio of the
remaining lease term to the useful life of such alterations or improvements, and
(b) Lessee shall not be required to pay any portion of the cost of alterations
or improvements which are legally required to be made as of the date of this
Lease

      INDEMNIFICATION OF LESSOR 15. Neither Lessor nor Lessor's agents, nor any
shareholder, constituent partner or other owner of Lessor or any agent of
Lessor, nor any contractor, officer, director or employee of any thereof shall
be liable to Lessee and Lessee waives all claims against Lessor and such other
persons for any injury to or death of any person or for loss of use of or damage
to or destruction of property in or about the Premises by or from any cause
whatsoever, except to the extent caused by the negligence or willful misconduct
of Lessor, its agents or employees. Lessee agrees to indemnify and hold Lessor,
Lessor's agents, the shareholders, constituent partners and/or other owners of
Lessor or any agent of Lessor, and all contractors, officers, directors and
employees of any thereof (collectively, "Indemnitees"), and each of them,
harmless from and to protect and defend each Indemnitee against any and all
claims, demands, suits, liability, damage or loss and against all costs and
expenses, including reasonable attorneys' fees incurred in connection therewith,
(a) arising out of any injury or death of any person or damage to or destruction
of property occurring in, on or about the Premises, from any cause whatsoever,
except to the extend caused by the negligence or willful misconduct of such
Indemnitee, or (b) occurring in, on or about the Premises, when such claim,
injury or damage is caused or allegedly caused in whole or in part by the act,
neglect, default, or omission of any duty by Lessee, its former or current
agents, contractors, employees, invitees, or subtenants, or (c) arising from any
failure of Lessee to observe or perform any of its obligations hereunder. The
provisions of this paragraph shall survive the termination of this Lease with
respect to any claims or liability occurring prior to such termination.

      ADVERTISEMENTS AND SIGNS 16. Lessee will not place or permit to be placed,
in, upon or about the Premises any unusual or extraordinary signs, or any signs
not approved by the city or other governing authority. The Lessee will not
place, or

<PAGE>

permit to be placed, upon the Premises, any signs, advertisements or notices
without the written consent of the Lessor first had and obtained. Any sign so
placed on the Premises shall be so placed upon the understanding and agreement
that Lessee will remove same at the termination of the tenancy herein created
and repair any damage or injury to the Premises caused thereby, and if not so
removed by Lessee then Lessor may have same so removed at Lessee's expense.

      UTILITIES 17. Lessee shall pay for all water, gas, heat, light, power,
telephone service and all other service supplied to the Premises. If the
Premises are not served by a separate water meter, Lessee shall pay to Lessor
its share of the water bill for the entire property covered by said bill and of
which the Premises are a part, as determined by Lessor based on square footage
or other equitable method.

      ATTORNEY'S FEES 18. In case suit should be brought for the possession of
the Premises, for the recovery of any sum due hereunder, or because of the
breach of any other covenant herein, the losing party shall pay to the
prevailing party a reasonable attorney's fee, which shall be deemed to have
accrued on the commencement of such action and shall be enforceable whether or
not such action is prosecuted to judgment.

      DEFAULT AND REMEDIES 19. The occurrence of any one or more of the
following events (each an "Event of Default") shall constitute a breach of this
Lease by Lessee:

      (a) Lessee fails to pay any Monthly Base Rent or additional rent under
this Lease as and when it becomes due and payable and such failure continues for
more than ten (10) days after written notice from Lessor; or

      (b) Lessee fails to perform or breaches any other covenant of this Lease
to be performed or observed by Lessee as and when performance or observance is
due and such failure or breach continues for more than ten (10) days after
Lessor gives written notice thereof to Lessee; provided, however, that if such
failure or breach cannot reasonably be cured within such period of ten (10)
days, an Event of Default shall not exist as long as Lessee commences with due
diligence and dispatch the curing of such failure or breach within such period
of ten (10) days and, having so commenced, thereafter prosecutes with diligence
and dispatch and completes the curing of such failure or breach within a
reasonable time; or

      (c) Lessee files, or consents by answer or otherwise to the filing against
it of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy, insolvency or other debtors' relief law of any jurisdiction; makes
an assignment for the benefit of its creditors; or consents to the appointment
of a custodian, receiver, trustee or other officer with similar powers of Lessee
or of any substantial part of Lessee's property; or

      (d) A court or government authority enters an order, and such order is not
vacated within sixty (60) days, appointing a custodian, receiver, trustee or
other officer with similar powers with respect to Lessee or with respect to any
substantial part of Lessee's property; or constituting an order for relief or
approving a petition for relief or reorganization or arrangement or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy, insolvency or other debtors' relief law of any jurisdiction; or
ordering the dissolution, winding-up or liquidation of Lessee; or

      (e) Lessee abandons the Premises.

      19.1 If an Event of Default occurs, Lessor shall have the right at any
time to give a written termination notice to Lessee and, on the date specified
in such notice, Lessee's right to possession shall terminate and this Lease
shall terminate. Upon such termination, Lessor shall have the right to recover
from Lessee:

      (i) The worth at the time of award of all unpaid rent which had been
earned at the time of termination;

      (ii) The worth at the time of award of the amount by which all unpaid rent
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Lessee proves could have been reasonably
avoided;

      (iii) The worth at the time of award of the amount by which all unpaid
rent for the balance of the term of this Lease after the time of award exceeds
the amount of such rental loss that Lessee proves could be reasonably avoided;
and

      (iv) All other amounts necessary to compensate Lessor for all the
detriment proximately caused by Lessee's failure to perform all of Lessee's
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom.

      The "worth at the time of award" of the amounts referred to in clauses (i)
and (ii) above shall be computed by allowing interest at the maximum annual
interest rate allowed by law for business loans (not primarily for personal,
family or household purposes) not exempt from the usury law at the time of
termination or, if there is no such maximum annual interest rate, at the rate

<PAGE>

of ten percent (10%) per annum. The "worth at the time of award" of the amount
referred to in clause (iii) above shall be computed by discounting such amount
at the discount rate of the Federal Reserve Bank of San Francisco at the time of
award plus one percent (1%). For the purpose of determining unpaid rent under
clauses (i), (ii) and (iii) above, the rent reserved in this Lease shall be
deemed to be the total rent payable by Lessee under this Lease, including
Monthly Base Rent, additional rent and all other sums payable by Lessee under
this Lease.

      19.2 Even though Lessee has breached this Lease, this Lease shall continue
in effect for so long as Lessor does not terminate Lessee's right to possession,
and Lessor shall have all of its rights and remedies, including the right,
pursuant to California Civil Code section 1951.4, to recover all rent as it
becomes due under this Lease. Acts of maintenance or preservation or efforts to
relet the Premises or the appointment of a receiver upon initiative of Lessor to
protect Lessor's interest under this Lease shall not constitute a termination of
Lessee's right to possession unless written notice of termination is given by
Lessor to Lessee.

      19.3 The remedies provided for in this Lease are in addition to all other
remedies available to Lessor at law or in equity by statute or otherwise.

      LATE CHARGES AND INTEREST 20. 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 on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designee within ten (10) days after
written notice from Lessor of such delinquency , Lessee shall pay to Lessor a
late charge equal to ten percent (10%) 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 with respect to such overdue amount, nor prevent Lessor from exercising
any of the other rights and remedies granted hereunder.

      If any rent payable under the Lease remains delinquent for a period in
excess of ten (10) calendar days, then, in addition to any late charge payable,
Lessee shall pay to Lessor interest on any rent that is not so paid from the
date due until paid at the then maximum rate of interest not prohibited or made
usurious by Law.

      SURRENDER OF LEASE 21. The voluntary or other surrender of this Lease by
Lessee, or a mutual cancellation thereof, shall not work a merger, and shall, at
the option of Lessor, terminate all or any existing subleases or subtenancies,
or may, at the option of Lessor, operate as an assignment to Lessor of any or
all such subleases or subtenancies.

      TAXES 22. The Lessee shall be liable for all taxes levied against personal
property and trade or business fixtures. The Lessee also agrees to pay, as
additional rental, during the term of this Lease and any extensions thereof, all
real estate taxes plus the yearly installments of any special assessments which
are of record or which may become of record during the term of this lease. If
the Premises are a portion of a tax parcel or parcels and this Lease does not
cover an entire tax parcel or parcels, the taxes and assessment installments
allocated to the Premises shall be pro-rated on a square footage or other
equitable basis, as calculated by the Lessor. It is understood and agreed that
the Lessee's obligation under this paragraph will be pro-rated to reflect the
commencement and termination dates of this Lease. Lessee shall not be required
to pay any penalties, interest or late charges with respect to such real estate
taxes unless such amounts are caused by Lessee's failure to timely pay such
taxes.

      NOTICES 23. All notices to be given to Lessee may be given in writing
personally, by commercial overnight courier or by depositing the same in the
United States mail, postage prepaid, and addressed to Lessee at the said
Premises, whether or not Lessee has departed from, abandoned or vacated the
Premises, and any other address of Lessee set forth below. Notices given in
accordance with this paragraph shall be deemed received one business day after
sent by commercial overnight courier, three business days after being deposited
in the United States mail, or when delivered if delivered personally. All
notices to be given to Lessor may be given in writing personally or by
depositing the same in the United States mail, postage prepaid, and addressed to
Lessor at the following address or such other address as Lessor may, from time
to time designate:

                              c/o Renault & Handley
                              2500 El Camino Real
                              Palo Alto, CA 94306

      ENTRY BY LESSOR 24. Lessee shall permit Lessor and his agents to enter
into and upon the Premises at all reasonable times and upon reasonable notice
for the purpose of inspecting the same or for the purpose of maintaining the
building

<PAGE>

in which the Premises are situated, or for the purpose of making repairs,
alterations or additions to any other portion of said building, including the
erection and maintenance of such scaffolding, canopies, fences and props as may
be required without any rebate of rent and without any liability to Lessee for
any loss of occupation or quiet enjoyment of the Premises thereby occasioned;
and shall permit Lessor and his agents, at any time within ninety days prior to
the expiration of this Lease, to place upon the Premises any usual or ordinary
"For Sale" or "For Lease" signs and exhibit the Premises to prospective tenants
at reasonable hours.

      DESTRUCTION OF PREMISES 25. In the event of a partial destruction of the
Premises during the term of this Lease from any cause covered by insurance
carried, or required to be carried, by Lessor under this Lease, Lessor shall
forthwith repair the same, provided such repairs can be made within one hundred
eighty (180) days from the date of destruction under the laws and regulations of
State, Federal, County or Municipal authorities, but such partial destruction
shall in no way annul or void this Lease, except that Lessee shall be entitled
to a proportionate reduction of rent while such repairs are being made, such
proportionate reduction to be based upon the extent to which the making of such
repairs shall interfere with the business carried on by Lessee in the Premises.
If the cause of such repairs is not so covered by insurance or cannot be made in
one hundred eighty (180) days from the date of destruction, Lessor may, at his
option, make same within a reasonable time, this Lease continuing in full force
and effect and the rent to be proportionately reduced as aforesaid in this
paragraph provided. In the event that Lessor does not so elect to make such
repairs the cause of which is not so covered by insurance or cannot be made in
one hundred eighty (180) days from the date of destruction, or such repairs
cannot be made under such laws and regulations, this Lease may be terminated at
the option of either party provided, however, if Lessor elects to terminate this
Lease because of lack of insurance, Lessee may by notice given to Lessor within
10 days following Lessor's election, reinstate this Lease by depositing with
Lessor the full amount necessary to restore the premises. In respect to any
partial destruction which Lessor is obligated to repair or may elect to repair
under the terms of this paragraph, the provision of Section 1932, Subdivision 2,
and of Section 1933, Subdivision 4, of the Civil Code of the State of California
are waived by Lessee. In the event that the building in which the Premises may
be situated be destroyed to the extent of not less than 33 1/3% the replacement
cost thereof, Lessor may elect to terminate this Lease, whether the Premises be
injured or not. A total destruction of the building in which the Premises may be
situated shall terminate this Lease. In the event of any dispute between Lessor
and Lessee relative to the provisions of this paragraph, they shall each select
an arbitrator, the two arbitrators so selected shall select a third arbitrator
and the three arbitrators so selected shall hear and determine the controversy
and their decision thereon shall be final and binding upon both Lessor and
Lessee, who shall bear the cost of such arbitration equally between them.

      ASSIGNMENT AND SUBLETTING 26. The Lessee shall not assign, transfer, or
hypothecate the leasehold estate under this Lease, or any interest therein, and
shall not sublet the Premises, or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person or entity to occupy or use the
Premises, or any portion thereof, without, in each case, the prior written
consent of the Lessor. Lessor shall not unreasonably withhold or delay its
consent to a subletting or assignment. The Lessee shall, by sixty (60) days
written notice, advise the Lessor of its intent to assign this Lease or sublet
the Premises or any portion thereof for any part of the term hereof, which
notice shall include a description of all of the material terms of such
assignment or subletting, and a reasonably detailed description of the proposed
assignee or sublessee and its business and financial condition. Within thirty
(30) days after receipt of Lessee's notice, Lessor shall either give approval to
Lessee to assign the Lease or sublease the portion of the Premises described in
Lessee's notice, or notify Lessee of Lessor's disapproval. In addition, Lessor
shall have the right to terminate this Lease as to the portion of the Premises
described in Lessee's notice on the date specified in Lessee's notice. If Lessee
intends to assign this Lease or sublet the entire Premises and Lessor elects to
terminate this Lease, this Lease shall be terminated on the date specified in
Lessee's notice. If, however, this Lease shall terminate pursuant to the
foregoing with respect to less than all the Premises, the rent, as defined and
reserved hereinabove shall be adjusted on a prorata basis to the number of
square feet retained by Lessee, and this Lease as so amended shall continue in
full force and effect. If the Lessor approves an assignment or subletting, the
Lessee may assign or sublet immediately after receipt of the Lessor's written
approval. In the event Lessee is allowed to assign, transfer or sublet the whole
or any part of the Premises, with the prior written consent of Lessor, then no
assignee, transferee or sublessee shall assign or transfer this Lease, either in
whole or in part, or sublet the whole or any part of the Premises, without also
having obtained the prior written consent of the Lessor. In the event of any
approved assignment or subletting, Lessee shall pay to the Lessor, as additional
rental, fifty percent (50%) of all assignment proceeds and rents received by the
Lessee from its assignee or sublessee which are in excess of the amount payable
by the Lessee to the Lessor hereunder, after deducting the amount of any market
rate real estate brokerage commissions and reasonable attorney's fees required
for approval of the Sublease document paid by Lessee in connection with the
assignment or subletting. A consent of Lessor to one assignment, transfer,
hypothecation, subletting, occupation or use by any other person shall not
release Lessee from any of Lessee's obligations hereunder or be deemed to be a
consent to any subsequent similar or dissimilar assignment, transfer,
hypothecation, subletting, occupation or use by any other person. Any such
assignment, transfer, hypothecation, subletting, occupation or use without such
consent shall be void and shall constitute a breach of this Lease by Lessee and
shall, at the option of Lessor exercised by written notice to Lessee, terminate
this Lease. The leasehold estate under this Lease shall not, nor shall any
interest therein, be assignable for any purpose by operation of law without the
written consent of

<PAGE>

Lessor. As a condition to its consent, Lessor may require Lessee to pay all
expenses in connection with the assignment, and Lessor may require Lessee's
assignee or transferee (or other assignees or transferees) to assume in writing
all of the obligations under this Lease.

      Any dissolution, merger, consolidation, recapitalization or other
reorganization of Lessee, or the sale or other transfer in the aggregate over
the term of the Lease of a controlling percentage of the capital stock of Lessee
(excluding transfers over a national securities exchange), or the sale or
transfer of all or a substantial portion of the assets of Lessee, shall be
deemed a voluntary assignment of Lessee's interest in this Lease; provided that,
a merger, consolidation, recapitalization, reorganization or sale of assets
shall not require Lessor's consent hereunder unless Lessee's tangible net worth
(determined in accordance with generally accepted accounting principles)
immediately after such transaction is less than Lessee's tangible net worth
immediately prior to such transaction. The phrase "controlling percentage" means
the ownership of and the right to vote stock possessing more than fifty percent
of the total combined voting power of all classes of Lessee's capital stock
issued, outstanding and entitled to vote for the election of directors. If
Lessee is a partnership, a withdrawal or change, voluntary, involuntary or by
operation of Law, of any general partner, or the dissolution of the partnership,
shall be deemed a voluntary assignment of Lessee's interest in this Lease. In
the event that, through a merger, stock sale or other transaction, Lessee
becomes the subsidiary of any other entity (a "parent"), Lessor shall have the
right to require that the parent guaranty all of Lessee's obligations under the
Lease pursuant to a form of guaranty reasonably satisfactory to Lessor.

      CONDEMNATION 27. If any part of the premises shall be taken for any public
or quasi-public use, under any statute or by right of eminent domain or private
purchase in lieu thereof, and a part thereof remains which is susceptible of
occupation hereunder, this Lease shall, as to the part so taken, terminate as of
the date title shall vest in the condemnor or purchaser, and the rent payable
hereunder shall be adjusted so that the Lessee shall be required to pay for the
remainder of the term only such portion of such rent as the value of the part
remaining after such taking bears to the value of the entire Premises prior to
such taking; but in such event, and if a material portion of the premises is
taken Lessor shall have the option to terminate this Lease as of the date when
title to the part so taken vests in the condemnor or purchaser. If all of the
premises, or such part thereof be taken so that there does not remain a portion
susceptible for occupation hereunder, this Lease shall thereupon terminate. If a
part or all of the Premises be taken, all compensation awarded upon such taking
shall go to the Lessor and the Lessee shall have no claim thereto, except that
Lessee may make a separate claim for Lessee's personal property, relocation &
moving expenses and loss of business or goodwill.

      EFFECT OF CONVEYANCE 28. The term "Lessor" as used in this Lease, means
only the owner for the time being of the land and building containing the
Premises, so that, in the event of any sale of said land or building, the Lessor
shall be and hereby is entirely freed and relieved of all covenants and
obligations of the Lessor hereunder, and it shall be deemed and construed,
without further agreement between the parties and the purchaser at any such
sale, that the purchaser of the building has assumed and agreed to carry out any
and all covenants and obligations of the Lessor hereunder. If any security be
given by the Lessee to secure the faithful performance of all or any of the
covenants of this Lease on the part of the Lessee, the Lessor may transfer and
deliver the security, as such, to the purchaser at any such sale, and thereupon
the Lessor shall be discharged from any further liability in reference thereto.

      SUBORDINATION 29. Lessee agrees that this Lease shall be subject and
subordinate to any mortgage, deed of trust or other instrument of security which
has been or shall be placed on the land and building or land or building of
which the Premises form a part, and this subordination is hereby made effective
without any further act of Lessee. The Lessee shall, at any time hereinafter, on
demand, execute any instruments, releases, or other documents that may be
required by any mortgagee, mortgagor, or trustor or beneficiary under any deed
of trust for the purpose of subjecting and subordinating this Lease to the lien
of any such mortgage, deed of trust or other instrument of security, and the
failure of the Lessee to execute any such instruments, releases or documents,
within twenty (20) days of Lessor's request, shall constitute a default
hereunder. Notwithstanding Lessee's obligations, and the subordination of the
Lease, under this paragraph 29, no mortgagee, trustee or beneficiary under any
deed of trust or other instrument of security which may be placed on the
Premises shall have the right to terminate the Lease or disturb Lessee's
occupancy thereunder so long as no Event of Default has occurred and is
continuing under this Lease.

      WAIVER 30. The waiver by Lessor of any breach of any term, covenant or
condition, herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition therein contained. The subsequent acceptance of rent
hereunder by Lessor shall not be deemed to be a waiver of any preceding breach
by Lessee of any term, covenant or condition of this Lease, other than the
failure of Lessee to pay the particular rental so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.

      HOLDING OVER 31. Any holding over after the expiration or other
termination of the term of this Lease with the written consent of Lessor, shall
be construed to be a tenancy from month to month, at a rental to be negotiated
by Lessor and

<PAGE>

Lessee prior to the expiration of said term, and shall otherwise be on the terms
and conditions herein specified, so far as applicable. Any holding over after
the expiration or other termination of the term of this Lease without the
written consent of Lessor shall be construed to be a tenancy at sufferance on
all the terms set forth herein, except that the monthly rental shall be an
amount equal to two hundred percent (200%) of the monthly rental payable by
Tenant immediately prior to such holding over, or the fair market rent for the
Premises as of such date, whichever is greater.

      SUCCESSORS AND ASSIGNS 32. The covenants and conditions herein contained
shall, subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of all of the parties hereto;
and all of the parties hereto shall be jointly and severally liable hereunder.

      TIME 33. Time is of the essence of this Lease.

      MARGINAL CAPTIONS; COMPLETE AGREEMENT; AMENDMENT 34. The marginal headings
or titles to the paragraphs of this Lease are not a part of this Lease and shall
have no effect upon the construction or interpretation of any part thereof. This
instrument contains all of the agreements and conditions made between the
parties hereto and may not be modified orally or in any other manner than by an
agreement in writing signed by all of the parties hereto or their respective
successors in interest.

      ENVIRONMENTAL OBLIGATIONS 35. Lessee's obligations under this Paragraph 35
shall survive the expiration or termination of this Lease.

      35.1 As used herein, the term "Hazardous Materials" shall mean any toxic
or hazardous substance, material or waste or any pollutant or infectious or
radioactive material, including but not limited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations and any and all of those substances included within the definitions
of "hazardous substances," "hazardous materials," "hazardous waste," "hazardous
chemical substance or mixture," "imminently hazardous chemical substance or
mixture," "toxic substances," "hazardous air pollutant," "toxic pollutant," or
"solid waste" in the (a) Comprehensive Environmental Response, Compensation and
Liability Act of 1990 ("CERCLA" or "Superfund"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. ss. 9601 et seq.,
(b) Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C. ss. 6901
et seq., (c) Federal Water Pollution Control Act ("FSPCA"), 33 U.S.C. ss. 1251
et seq., (d) Clean Air Act ("CAA"), 42 U.S.C. ss. 7401 et seq., (e) Toxic
Substances Control Act ("TSCA"), 14 U.S.C. ss. 2601 et seq., (f) Hazardous
Materials Transportation Act, 49 U.S.C. ss. 1801, et seq., (g)
Carpenter-Presley-Tanner Hazardous Substance Account Act ("California
Superfund"), Cal. Health & Safety Code ss. 25300 et seq., (h) California
Hazardous Waste Control Act, Cal. Health & Safety code ss. 25100 et seq., (i)
Porter-Cologne Water Quality Control Act ("Porter-Cologne Act"), Cal. Water Code
ss. 13000 et seq., (j) Hazardous Waste Disposal Land Use Law, Cal. Health &
Safety codes ss. 25220 et seq., (k) Safe Drinking Water and Toxic Enforcement
Act of 1986 ("Proposition 65"), Cal. Health & Safety code ss. 25249.5 et seq.,
(l) Hazardous Substances Underground Storage Tank Law, Cal. Health & Safety code
ss. 25280 et seq., (m) Air Resources Law, Cal. Health & Safety Code ss. 39000 et
seq., and (n) regulations promulgated pursuant to said laws or any replacement
thereof, or as similar terms are defined in the federal, state and local laws,
statutes, regulations, orders or rules. The term "Hazardous Materials" shall
also mean any and all other biohazardous wastes and substances, materials and
wastes which are, or in the future become, regulated under applicable Laws for
the protection of health or the environment, or which are classified as
hazardous or toxic substances, materials or wastes, pollutants or contaminants,
as defined, listed or regulated by any federal, state or local law, regulation
or order or by common law decision. The term "Hazardous Materials" shall
include, without limitation, (i) trichloroethylene, tetrachloroethylene,
perchloroethylene and other chlorinated solvents, (ii) any petroleum products or
fractions thereof, (iii) asbestos, (iv) polychlorinted biphenyls, (v) flammable
explosives, (vi) urea formaldehyde, (vii) radioactive materials and waste, and
(viii) materials and wastes that are harmful to or may threaten human health,
ecology or the environment.

      35.2 Notwithstanding anything to the contrary in this Lease, Lessee, at
its sole cost, shall comply with all Laws relating to the storage, use and
disposal of Hazardous Materials; provided, however, that Lessee shall not be
responsible for contamination of the Premises by Hazardous Materials existing as
of the date the Premises are delivered to Lessee unless caused by Lessee. Lessee
shall not store, use or dispose of any Hazardous Materials except for those
Hazardous Materials ("Permitted Materials") which are (a) listed in a Hazardous
Materials management plan ("HMMP") which Lessee shall submit to appropriate
governmental authorities as and when required under applicable Laws, or (b) are
either normal quantities of ordinary office supplies or are approved in writing
by Lessor. Lessee may use, store and dispose of Permitted Materials provided
that (i) such Permitted Materials are used, stored, transported, and disposed of
in strict compliance with applicable Laws, and (ii) such Permitted Materials
shall be limited to the materials listed on and may be used only in the
quantities specified in the HMMP. In no event shall Lessee cause or permit to be
discharged into the plumbing or sewage system of the Premises or onto the land
underlying or adjacent to the Premises any Hazardous Materials. If the presence
of Hazardous Materials on the Premises caused or


<PAGE>

permitted by Lessee results in contamination or deterioration of water or soil,
then Lessee shall promptly take any and all action necessary to clean up such
contamination, but the foregoing shall in no event be deemed to constitute
permission by Lessor to allow the presence of such Hazardous Materials.

      35.3 Lessee shall immediately notify Lessor in writing of:

      (a) Any enforcement, cleanup, removal, or other governmental or regulatory
action instituted, completed or threatened against Lessee related to any
Hazardous Materials;

      (b) Any claim made or threatened by any person against Lessee or the
Premises relating to damage, contribution, cost recovery compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials; and,

      (c) Any reports made to any environmental agency arising out of or in
connection with any Hazardous Materials in, discharged at, or removed from the
Premises, including any complaints, notices, warnings or asserted violations in
connection therewith.

      Lessee shall also supply to Lessor as promptly as possible, and in any
event within five (5) business days after Lessee first receives or sends the
same, with copies of all claims, reports, complaints, notices, warnings or
asserted violations related in any way to the existence of Hazardous Materials
at, in, under or about the Premises or Lessee's use thereof. Lessee shall, upon
Lessor's request, promptly deliver to Lessor copies of any documents or
information relating to the use, storage or disposal of Hazardous Material on or
from the Premises.

      35.4 Upon termination or expiration of the Lease, Lessee at its sole
expense shall cause all Hazardous Materials placed in or about the Premises, by
Lessee, its agents, contractors, or invitees, and all installations (whether
interior or exterior) made by or on behalf of Lessee relating to the storage,
use, disposal or transportation of Hazardous Materials to be removed from the
property and transported for use, storage or disposal in accordance and
compliance with all Laws and other requirements respecting Hazardous Materials
used or permitted to be used by Lessee. Lessee shall apply for and shall obtain
from all appropriate regulatory authorities (including any applicable fire
department or regional water quality control board) all permits, approvals and
clearances necessary for the closure of the Premises and shall take all other
actions as may be required to complete the closure of the Premises. In addition,
prior to vacating the Premises, Lessee shall undertake and submit to Lessor an
environmental site assessment from an environmental consulting company
reasonably acceptable to Lessor which site assessment shall evidence Lessee's
compliance with this Paragraph 35.

      35.5 At any time prior to expiration of the Lease term, subject to
reasonable prior notice (not less than forty-eight (48) hours) and Lessee's
reasonable security requirements and provided such activities do not
unreasonably interfere with the conduct of Lessee's business at the Leased
Premises, Lessor shall have the right to enter in and upon the Premises in order
to conduct appropriate tests of water and soil to determine whether levels of
any Hazardous Materials in excess of legally permissible levels has occurred as
a result of Lessee's use thereof. Lessor shall furnish copies of all such test
results and reports to Lessee and, at Lessee's option and cost, shall permit
split sampling for testing and analysis by Lessee. Such testing shall be at
Lessee's expense if Lessor has a reasonable basis for suspecting and confirms
the presence of Hazardous Materials in the soil or surface or ground water in,
on, under, or about the Premises, which has been caused by or resulted from the
activities of Lessee, its agents, contractors, or invitees.

      35.6 Lessor may voluntarily cooperate in a reasonable manner with the
efforts of all governmental agencies in reducing actual or potential
environmental damage. Lessee shall not be entitled to terminate this Lease or to
any reduction in or abatement of rent by reason of such compliance or
cooperation. Lessee agrees at all times to cooperate fully with the requirements
and recommendations of governmental agencies regulating, or otherwise involved
in, the protection of the environment.

      35.7 Except to the extent caused by the negligent or willful acts of
Lessor or its employees or agents, Lessee shall indemnify, defend by counsel
reasonably acceptable to Lessor, protect and hold Lessor and each of Lessor's
partners, employees, agents, attorneys, successors, and assignees, free and
harmless from and against any and all claims, damages, liabilities, penalties,
forfeitures, losses or expenses (including reasonable attorney's fees) or death
of or injury to any person or damage to any property whatsoever arising from or
caused in whole or in part, directly or indirectly by (A) the presence in, or
under or about the Premises or discharge in or from the Premises of any
Hazardous Materials caused by Lessee, its agents, employees, invitees,
contractors, assignees, or Lessee's use, analysis, storage, transportation,
disposal, release, threatened release, discharge or generation of Hazardous
Materials to, in, on, under, about or from the leased Premises, or (B) Lessee's
failure to comply with any Hazardous Materials Law. Lessee's obligations
hereunder shall include, without limitation, whether foreseeable or
unforeseeable, all costs, of any required or necessary repair, cleanup or
detoxification or decontamination of the Premises, and the preparation and


<PAGE>

implementation of any closure, remedial action or other required plans in
connection therewith, and shall survive the expiration or earlier termination of
the term of this Lease. For purposes of indemnity provision hereof, any actions
or omissions of Lessee or by employees, agents, assignees, contractors or
subcontractors of Lessee or others acting for or on behalf of Lessee (whether or
not they are negligent, intentional, willful or unlawful) shall be strictly
attributable to Lessee.

      35.8 Lessor shall hold Lessee and Lessee's officers, directors, employees,
agents, successors and assigns harmless from all such claims, damages,
liabilities, penalties, forfeitures, losses for death or injury to any person or
damage to any property whatsoever arising from or caused in whole or in part,
directly or indirectly by (A) the presence in or about the Premises, of any
Hazardous Materials existing at the commencement date of the Lease unless caused
by Lessee or (B) the negligent or willful acts of the Lessor or its employees or
agents.

      LESSOR'S RIGHT TO PERFORM 36. If Lessee shall fail to perform any
obligation or covenant pursuant to this Lease within a reasonable period of time
(not to exceed 15 days) following notice from Lessor to do so, then Lessor may,
at its election and without waiving any other remedy it may otherwise have under
this Lease or at law, perform such obligation or covenant and Lessee shall pay
to Lessor, as Additional Rent, the costs incurred by Lessor in performing such
obligation or covenant.

      37. The Lessee is granted the option of renewing the Lease for a five (5)
year period to commence on June 1st 2006. All the terms and conditions of this
Lease shall govern the extension period excepting the monthly rental and this
option to renew. The monthly rental shall be renegotiated using the following
procedure: The rental for the option period is to be the average rental for
similar buildings as to size, improvements and number of parking spaces in the
general vicinity of the herein demised Premises. Only rentals which have been
negotiated within a period of twelve (12) months prior to the exercise date of
this option shall be considered for comparison purposes. In order to exercise
this option, Lessee must give written notice to the Lessor a minimum of 90 and a
maximum of 120 days prior to June 1st 2006. This option may only be exercised if
the Lessee also exercises its option to Lease the Premises commonly known as
2644 E. Bayshore Frontage Road, Mountain View simultaneously. This option is
personal to Drexler Technology and is not transferable to any other entity
without the prior consent of the Lessor.

      38. The Lessee is granted the first right to purchase the herein demised
Premises as follows: In the event that the Lessor decides to offer said Premises
for sale, it will first offer them for sale, in writing, to the Lessee at the
same price and other terms of sale as it will later be offered on the open
market. The Lessee will have thirty (30) days from the date it receives the
written offer to execute a purchase agreement to purchase the Premises at the
price and terms quoted by the Lessor. If the Lessee does not execute a purchase
agreement as above to purchase said Premises within the thirty day period, the
Lessor will be free to offer the Premises on the open market at the same price
and terms of sale as it was offered to the Lessee, and to finalize a sale at
that price and those terms to a third party with no further liability to the
Lessee under this paragraph. If the Lessor should wish to accept a lower price
offer and/or better terms of sale from a third party, the Lessor must offer to
sell to the Lessee at the lower price and/or better terms of sale that were
acceptable from the third party. The Lessee will have five (5) business days
from receipt of the new offer to execute a purchase agreement at the lower price
and/or better terms of sale. If the Lessee rejects or does not answer the new
offer to sell within said five (5) business days, the Lessor will be free to
sell to the third party without further liability to the Lessee under this
paragraph. If the Premises are not sold to a third party for a period of one
year from the date of the final offer to the Lessee, the Lessor must follow the
procedure above, before the Premises can be sold to any entity other than
Drexler Technology. If the Premises commonly known as 2644 East Bayshore
Frontage Road, Mountain View, are offered for sale by the Lessor simultaneously
with the herein demised Premises, the Lessee must purchase both properties in
order to purchase 2648 East Bayshore. This first-right-of-refusal is
automatically void at the termination of the Lessee's occupancy of the Premises.
This first right to purchase is personal to Drexler Technology and is not
transferable to any other entity without the prior consent of the Lessor.

      THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY WHO WILL
REVIEW THE DOCUMENT AND ASSIST YOU TO DETERMINE WHETHER YOUR LEGAL RIGHTS ARE
ADEQUATELY PROTECTED. RENAULT & HANDLEY IS NOT AUTHORIZED TO GIVE LEGAL AND TAX
ADVICE. NO REPRESENTATION OR RECOMMENDATION IS MADE BY RENAULT & HANDLEY OR ITS
AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX
CONSEQUENCES OF THIS DOCUMENT OR ANY TRANSACTION RELATING THERETO. THESE ARE
QUESTIONS FOR YOUR ATTORNEY WITH WHOM YOU SHOULD CONSULT BEFORE SIGNING THIS
DOCUMENT.

      IN WITNESS WHEREOF, Lessor and Lessee have executed these presents, the
day and year first above written.


<PAGE>

LESSOR:

RENAULT & HANDLEY EMPLOYEES INVESTMENT CO.


By: /s/George McKee

LESSEE:

DREXLER TECHNOLOGY CORPORATION


By: /s/Steven G. Larson, Vice President, Finance