LEASE AGREEMENT

This Lease, executed in duplicate at Palo Alto, California, this 16th day of
February, 2000

Parties

by and between

The Milla and Raymond Handley 1992 Trust and

Drexler Technology Corporation, a Delaware corporation

hereinafter called respectively 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 in this lease designated as "the
Premises", with the appurtenances, situated in the City of Mountain View, County
of Santa Clara, State of California, and more particularly described as follows,
to-wit:

An approximate 13,100 square foot freestanding industrial building situated on
an approximate 0.92 acre lot, commonly referred to as 2751 Marine Way (the
"Building").

Use

      2. The Premises shall be used and occupied by Lessee for the purpose of
general office, marketing, design, manufacture and assembly and other related
legal uses and for no other purpose without the prior written consent of Lessor.

Term

      3. The term shall be for four (4) years, commencing on the 1st day of May
2000 (the "Commencement Date"), and terminating on the 30th day of April 2004
(the "Termination Date".)

Rental

      4. Rent shall be payable to the Lessor without deduction or offset at such
place or places as may be designated from time to time by the Lessor as follows:

Twenty Eight Thousand Five Hundred Thirty Seven and 70/100ths Dollars
($28,537.70) shall be due on May 1, 2000 and on the 1st day of each and every
month including April 1, 2001. Twenty Nine Thousand Five Hundred Ninety Five and
90/100ths Dollars ($29,595.90) shall be due on

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May 1, 2001 and on the 1st day of each and every month through April 1, 2002.
Thirty Thousand Six Hundred Fifty Four and 10/100ths Dollars ($30,654.10) shall
be due on May 1, 2002 and on the 1st day of each and every month through April
1, 2003. Thirty One Thousand Seven Hundred Twelve and 30/100ths Dollars
$31,712.30) shall be due on May 1, 2003 and on the 1st day of each and every
month through April 1, 2004. See Addendum Paragraph 102.

Security Deposit

      5. Lessee has deposited with Lessor Thirty One Thousand Seven Hundred
Twelve and 30/100ths Dollars ($31,712.30) 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 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. The above is, however, subject to the provision that the
period of delay of delivery of the Premises shall not exceed zero (0) days from
the commencement date herein. If the period of delay of delivery exceeds the
foregoing, Lessee, at his or its option, may declare this Lease null and void.

Acceptance of Premises and Consent to Surrender

      7. By entry hereunder, the Lessee accepts the Premises as being in good
and satisfactory condition, as of the Entry Date unless within thirty (30) days
after such entry date Lessee shall give Lessor written notice specifying in
reasonable detail the respects in which the Premises were not in satisfactory
condition. The Lessee agrees on the last day of the term hereof, or on sooner
termination of this Lease, to surrender the premises, together with all
alterations, additions, and improvements which may have been made in, to, or on
the Premises by Lessor or Lessee, unto Lessor 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

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be abandoned by the Lessee. If the Premises be 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. See Addendum Paragraph 103.

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.

Alterations and Additions

      9. The Lessee shall make no alterations, additions or improvements to the
Premises or any part thereof without first obtaining the prior written consent
of the Lessor. Lessor agrees not to unreasonably withhold or delay consent. The
Lessor may impose as a condition to the aforesaid consent such requirements as
Lessor may deem necessary in Lessor's sole discretion, including without
limitation thereto, the manner in which the work is done, a right of approval of
the contractor by whom the work is to be performed, the times during which it is
to be accomplished, and the requirement that upon written request of Lessor
prior to the expiration or earlier termination of the Lease, Lessee will remove
any or all improvements or additions to the Premises installed at Lessee's
expense. All such alterations, additions or improvements not specified to be
removed shall at the expiration or 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 when Lessee is not in default hereunder. 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 at all times permit
notices of non-responsibility to be posted and to remain posted until the
completion of alterations or additions which have been approved by the Lessor.
See Addendum Paragraph 104.

Maintenance of Premises

      10. The Lessor will replace the roof covering if repairs to said covering
are no longer economically feasible in the judgment of

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roofing experts, and provided that said replacement is not made necessary by
acts of the Lessee and Lessee's agents. The Lessee shall water, maintain and
replace, when necessary, any shrubbery and landscaping provided by the Lessor on
the Premises. The 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. See Addendum
Paragraph 105.

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 cause a cancellation of any insurance policy covering said
building, 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 his 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 comprehensive public liability insurance insuring
Lessee, Lessor, and any third parties named by Lessor which may include Lessor's
lender, against any liability arising out of the condition, use, occupancy or
maintenance of the Premises. Such insurance policy shall have a combined single
limit for both bodily injury and property damage in an amount of not less than
One Million Dollars ($1,000,000.00). 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 an "all risk" form with
a sprinkler leakage endorsement, insuring Lessee's inventory, fixtures,
equipment and personal property within the Premises for the full replacement
value thereof.

      11.3 Lessor shall maintain a policy or policies of fire and property
damage insurance in an "all risk" form, with sprinkler and, at the option of the
Lessor, earthquake endorsements, covering loss or damage to the building,
including Lessee's leasehold improvements installed with the written consent of
the Lessor, in such amounts and with such coverage as Lessor deems advisable.

      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 for any insurance obtained by Lessor pursuant to 11.3 above. Lessor may
obtain such insurance for the Building separately, or together with other
buildings and improvements 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

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paragraph shall be prorated to reflect the Commencement Date and Expiration Date
of the Lease.

      11.5 Notwithstanding anything to the contrary contained in this Lease
Lessee and Lessor each hereby waives any and all rights of recovery against the
other, or against the officers, directors, employees, partners, agents and
representatives of the other, for loss 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 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 vacate or abandon the Premises at any time during the
term; and if Lessee shall abandon, vacate 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 of the
requirements of all Municipal, State and Federal authorities now in force, or
which may hereafter be in force (the "Applicable Laws") 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 any such ordinance or statute in the
use of the Premises, shall be conclusive of that fact as between Lessor and
Lessee. See Addendum Paragraph 106.

Indemnification of Lessor and Lessee's Liability Insurance

      15. The Lessee, as a material part of the consideration to be rendered to
the Lessor, hereby waives all claims against the Lessor for damages to goods,
wares and merchandise, and all other personal property in, upon, or about the
Premises and for injuries to persons in or about the Premises, from any cause
arising at any time, excepting claims arising from negligence or willful
misconduct of Lessor, or Lessor's agents, employees or contractors, and the
Lessee will hold the Lessor exempt and harmless from any damage or injury to any
person, or to the goods, wares and merchandise and all other personal property
of any person, arising from the use of the Premises by the Lessee, or from the
failure of the Lessee to keep the Premises in good condition and repair, as
herein provided, excepting any claims

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arising from the negligence or willful misconduct of Lessor or Lessor's agents,
employees or contractors.

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 permit to be
placed, upon the Premises, any signs, advertisements or notices without the
written consent of the Lessor first had and obtained (which consent will not be
unreasonably withheld or delayed). 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.

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

      19. In the event of any breach of this lease by the Lessee, or an
abandonment of the Premises by the Lessee, the Lessor has the option of 1)
removing all persons and property from the Premises and repossessing the
Premises in which case any of the Lessee's property which the Lessor removes
from the Premises may be stored in a public warehouse or elsewhere at the cost
of, and for the account of Lessee, or 2) allowing the Lessee to remain in full
possession and control of the Premises. If the Lessor chooses to repossess the
Premises, the Lease will automatically terminate in accordance with provisions
of the California Civil Code, Section 1951.2. In the event of such termination
of the Lease, the Lessor may recover from the Lessee: 1) the worth at the time
of award of the unpaid rent which had been earned at the time of termination
including interest at(seven percent) 7% per annum; 2) 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 including interest at
(seven percent) 7% per annum; 3) 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
reasonable avoided; and 4) any other amount necessary to compensate the Lessor
for all the detriment proximately caused by the Lessee's failure to perform his
obligations under the Lease or which in the ordinary course of things would be
likely to result

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therefrom. If the Lessor chooses not to repossess the premises, but allows the
Lessee to remain in full possession and control of the Premises, then in
accordance with provisions of the California Civil Code, Section 1951.4, the
Lessor may treat the Lease as being in full force and effect, and may collect
from the Lessee all rents as they become due through the termination date of the
lease as specified in the lease. For the purposes of this paragraph, the
following do not constitute a termination of Lessee's right to possession: (a)
Acts of maintenance or preservation or efforts to re-let the property. (b) The
appointment of a receiver on the initiative of the Lessor to protect his
interest under this Lease.

Late Charges

      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 such amount shall be due,
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.

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 him 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
said taxes and assessments are assessed against the entire building and building
site, and this Lease does not cover the entire building or building site, 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.

Notices

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      23. All notices to be given to Lessee shall be given in writing personally
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.

Entry by Lessor

      24. Lessee shall permit Lessor and his agents to enter into and upon the
Premises at all reasonable times after twenty four (24) hour prior written
notice for the purpose of inspecting the same or for the purpose of maintaining
the building 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
(90) days prior to the expiration of this Lease, to place upon the Premises any
usual or ordinary "For Sale" or "To Lease" signs and exhibit the Premises to
prospective tenants at reasonable hours. See Addendum Paragraph 107.

Destruction of Premises

      25. In the event of a partial destruction of the Premises during the said
term from any cause covered by Insurance except earthquake, Lessor shall
forthwith repair the same, provided such repairs can be made within ninety (90)
days 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 such repairs cannot be made in ninety
(90) days, Lessor may, at his option, make same within a reasonable time not to
exceed one hundred eighty (180) days, 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 which
cannot be made in ninety (90) days, or such repairs cannot be made under such
laws and regulations within one hundred eighty (180) days, this Lease may be
terminated at the option of either party. 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 thirty three and one third percent
(331/3%) of 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

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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 appurtenance 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 agrees not to unreasonably withhold or delay consent to sublet or assign.
The Lessee shall, by one hundred twenty (120) days written notice, advise the
Lessor of its intent to sublet the Premises or any portion thereof for any part
of the term hereof. Within thirty (30) days after receipt of Lessee's notice,
Lessor shall either give approval to Lessee to sublease the portion of the
Premises described in Lessee's notice, or Lessor shall 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 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 a subletting, the
Lessee may 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, 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. 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 Lessor. As a condition to its consent, Lessor may require
Lessee to pay all expense 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. See Addendum
Paragraph 108.

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 condemner

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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 Lessor
shall have the option to terminate this Lease as of the date when title to the
part so taken vests in the condemner 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 of all
of the Premises be taken, all compensation awarded upon such taking shall go to
the Lessor and Lessee shall have no claim thereto.

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, or in the event of a lease of said
building, the Lessor shall be and hereby is entirely freed and relieved of all
covenants and obligations of the Lessor hereunder to the extent that they
pertain to the period of time on or after the effective date of such transfer
and it shall be deemed and construed, without further agreement between the
parties and the purchaser at any such sale, or the Lessee of the building, that
the purchaser or lessee 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 or the lessee
of the building, and thereupon the Lessor shall be discharged from any further
liability in reference thereto.

Subordination

      29. Lessee agrees that this Lease may, at the option of Lessor, 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, shall constitute a default hereunder. See Addendum
Paragraph 109.

Waiver

      30. The waiver by either Lessor or Lessee 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

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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 of the said term, with the
consent of Lessor, shall be construed to be a tenancy from month to month, at a
rental to be negotiated by Lessor and Lessee prior to the expiration of said
term, and shall otherwise be on the terms and conditions herein specified, so
far as applicable.

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

      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. See
Addendum Paragraphs 110 and 111.

ADDENDUM TO LEASE ATTACHED HERETO IS HEREBY MADE A PART OF THIS LEASE.

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.

LESSOR                              LESSEE

The Milla and Raymond               Drexler Technology Corporation
Handley 1992 Trust


/s/R. J. Handley                    /s/Steven G. Larson
------------------------------      ------------------------------------


By: R. J. Handley                   By: Steven G. Larson
------------------------            ------------------------------------

<PAGE>

Its: Co-Trustee                     Vice President, Finance
------------------------            ------------------------------------

                                    February 5, 2000

                                ADDENDUM TO LEASE

This Addendum to Lease ("Addendum") shall add the following provisions to the
Lease between Raymond G. Handley ("Lessor"), and Drexler Technology Corporation,
a Delaware corporation ("Lessee") dated February 16, 2000 (the "Lease"). The
term "this Lease" when used herein shall mean the Lease as modified by this
Addendum. All capitalized terms not defined in this Addendum shall have the
meanings given in the Lease. If the terms of this Addendum conflict with the
other terms of the Lease, the terms of this Addendum shall prevail and be
controlling.

            102. Early Occupancy. This Lease, effective May 1, 2000, supersedes
the lease between Lessor and Lessee dated January 28, 1999 for the approximate
5,038 square foot portion of the Premises demised under this Lease and upon
execution hereof, Lessor and Lessee hereby acknowledge that the above referenced
lease is surrendered. Notwithstanding the foregoing, Lessor shall allow Lessee
to occupy the entire Building commencing March 1, 2000 so that Lessee may design
and construct alterations and improvements as necessary. Such early occupancy
shall be on all the terms and conditions of this Lease excepting that the
monthly rental for March and April of 2000 shall be Nine Thousand Three Hundred
Forty and No/100ths Dollars ($9,340.00). Lessee's design and construction of
improvements and alterations shall be subject to the terms contained in
Paragraph 9 of this Lease and Paragraph 104 of this Addendum.

            103. Acceptance of Premises and Consent to Surrender. The following
provision is added to the end of Section 7 of the Lease:

      Notwithstanding anything to the contrary contained in Paragraph 7 of the
      Lease, Lessee hereby Leases the Premises from Lessor in "as is", "where
      is" condition and Lessor shall only be obligated to deliver to Lessee that
      portion of the Premises which is not currently occupied by Lessee in broom
      clean condition with the roof covering, HVAC, plumbing and electrical
      systems (collectively, the "Building Systems") in good working order and
      repair, damaged ceiling tiles replaced, fluorescent light fixtures
      revamped and the tile flooring in the area indicated on Exhibit A removed.
      Lessee shall be solely responsible for all costs of any improvements or
      alterations and Lessor shall have no obligation to contribute toward the
      cost of any improvements or alterations whatsoever. If Lessee gives Lessor
      written notice within such thirty (30) day period that the Building
      Systems were not found in good and satisfactory condition, then promptly
      after receiving such notice Lessor shall cause the same to be corrected at
      its own expense without right to reimbursement from Lessee.

            104. Alterations and Additions. The following provision is added to
the end of Section 9 of the Lease:

<PAGE>

      Notwithstanding anything to the contrary in this Lease, at the time Lessor
      grants its consent to any alterations, additions or improvements, Lessor
      shall notify Lessee whether or not Lessor will require Lessee to remove
      such alterations, additions or improvements at the end of the Lease term.

            105. Maintenance of the Premises. The following provision is added
to the beginning of Section 10 of the Lease:

      Lessee shall, at Lessee's cost, keep and maintain the interior of the
      Premises, including but not limited to, glazing, plumbing, electrical
      systems, any store front, roof covering - unless it is not feasible to
      repair the existing roof covering and a new roof covering is required, in
      good order, condition and repair. Lessor, at Lessor's sole cost and
      expense, shall maintain the exterior of the walls, and structural portions
      of the roof, foundations and floors except for any repairs caused by the
      wrongful act of the Lessee and Lessee's agents. The Lessor will replace
      the roof covering if repairs to said covering are no longer economically
      feasible in the judgment of roofing experts and provided that said
      replacement is not made necessary by acts of the Lessee or Lessee's
      agents. The Lessee shall maintain heating and air conditioning
      installations. Costs or expenses which are incurred by Lessor that
      according to generally accepted accounting principles are required to be
      capitalized, shall be reimbursable by Lessee only on an amortized basis
      over the useful life of the improvement; provided, however, Lessee shall
      have no obligation to reimburse Lessor for the cost of repairs or
      replacements to the heating and air conditioning installations or roof
      covering required during the first twelve (12) months of the Lease term,
      or if the need for such repair or replacement is caused by the negligence
      or willful misconduct of Lessor or Lessor's agents, employees, or
      contractors, or other tenants of the Building.

            106. Compliance with Governmental Regulations. The following
provision is added to the end of Section 14 of the Lease:

      Notwithstanding the foregoing, Lessee shall be responsible for bringing
      the Premises into compliance with Applicable Laws only to the extent that
      such compliance is "triggered" by Lessee's unique and particular use of
      the Premises and by Lessee's construction of interior improvements.

            107. Entry of Lessor. The following provision is added to the end of
Section 24 of the Lease:

      Any work performed by Lessor pursuant to this Section shall be done in a
      manner which causes the least amount of inconvenience and interference to
      Lessee's use of the Premises and the common areas as reasonably possible.

            108. Assignment and Subletting. The following provision is added
after the first sentence of Section 26 of the Lease:

      As a condition for granting its consent of any subletting, the Lessor
      shall require the Lessee to agree to pay to Lessor, as

<PAGE>

      additional rental fifty percent (50%) of all rent received by the Lessee
      from its Sublessee which are in excess of the amount payable by Lessee to
      Lessor hereunder, provided, however, in calculating the sums in excess of
      rent payable by Lessee to Lessor, Lessee shall first be entitled to
      recover (i) reasonable leasing commissions paid to third parties in order
      to obtain the assignment or subletting in question, (ii) reasonable
      attorney's fees paid by Lessee with respect to the assignment or
      subletting in question, and (iii) the unamortized cost of Lessee's
      improvements and alterations.

The following provision is added to the end of Section 26 of the Lease.

      Lessor's prior consent shall not be required for any assignment, sublease
      or other transfer of Lessee's interest in the Premises or the Lease to any
      corporation with which Lessee may merge or consolidate or become
      affiliated as a parent, subsidiary, holding company or otherwise, or to an
      entity in which Lessee has a controlling interest.

            109. Subordination. The following provision shall be added to the
end of Section 29 of the Lease.

      Notwithstanding anything to the contrary in this Section 29 of the Lease,
      any such subordination shall not provide for or permit a termination of
      this Lease by any party or under any circumstances so long as Lessee is
      not in default under the terms of this Lease beyond any applicable cure
      period.

            110. Hazardous Materials. Lessor agrees that Lessee shall have no
liability or responsibility whatsoever for any Hazardous Material on or about
the Premises, the Building, or the related common areas which were not created
by Lessee, or Lessee's agents, employees, contractors, or affiliates. Lessor
shall indemnify, defend and hold Lessee harmless against all claims, losses,
costs or liabilities arising out of or related to testing for, or the presence,
use, storage, disposal, removal, remediation or clean-up of any Hazardous
Material in or about the Premises, the Building or the common areas, unless
caused by, contributed to, or created by Lessee. As used herein, the term
"Hazardous Material" shall mean any hazardous or toxic substance, material or
waste which is or becomes regulated by any state, federal, local government
authority, including asbestos and all of those materials and substances
designated as hazardous or toxic by the Environmental Protection Agency, the
California Water Quality Control Board, the Department of Labor, the California
Department of Industrial Relations, the Department of Transportation, the
Department of Agriculture, the Department of Health Services or the Food and
Drug Agency.

            111. Option to Extend. Subject to the conditions below, Lessee shall
have the option(s) to extend the term of this Lease for one (1) period of five
(5) years (the "Extension Term"), which Extension Term shall commence upon the
expiration of the previous term. Lessee shall give Lessor notice of the exercise
of its option at least six (6) months but not more than nine (9) months prior to
the expiration of the then current term. The Extension Term shall be upon

<PAGE>

the same terms and conditions as contained in the Lease, except that the Rent
shall be determined in accordance with the procedure set forth below. If Lessee
has exercised its option to extend, the phrase "Lease Term" as used in the Lease
shall mean the initial term of the lease and the Extension Term.

            Rent for the Option Term shall be at fair market rental value,
determined as follows:

      (i)   Lessor shall deliver to Lessee written notice of Lessor's
            determination of fair market rental value within thirty (30) days
            after Lessor receives notice from Lessee that Lessee has exercised
            its option to extend.

      (ii)  If Lessee disputes Lessor's determination of the fair market rental
            value as contained in Lessor's notice, Lessee shall notify Lessor in
            writing within ten (10) days of its receipt of Lessor's
            determination, which notice shall set forth Lessee's determination
            of the fair market rental value. Should Lessee timely notify Lessor
            as aforesaid, Lessor and Lessee shall attempt to resolve their
            differences within ten (10) days following Lessor's receipt to
            Lessee's notice.

      (iii) If Lessor and Lessee cannot agree on fair market rental value during
            such ten (10) day period, Lessor and Lessee shall each appoint a
            disinterested real estate broker experienced in leasing similar
            space in the county in which the Premises are located and give
            notice of such appointment to the other within ten (10) days after
            the preceding ten (10) day period. If either Lessor or Lessee shall
            fail timely to appoint a broker, then the single broker appointed by
            one party shall proceed to make the determination of fair market
            rental value. Such broker(s) shall, within thirty (30) days after
            the appointment of the last of them to be appointed, complete their
            written determinations of fair market rental value and furnish the
            same to Lessor and Lessee. Each party shall pay the fees and costs
            of the broker appointed by it. If the valuations vary by ten percent
            (10%) or less of the higher value, the fair market rental value
            shall be the average of the two variations.

      (iv)  If the valuations vary by more than ten percent (10%) of the higher
            value, the two brokers shall, within ten (10) days after submission
            of the last appraisal report, appoint a third disinterested broker.
            Such third broker shall, within thirty (30) days after appointment,
            select one of the two valuations submitted by the first two brokers
            as such third broker's determination of fair market value, and shall
            submit such decision to Lessor and Lessee. The fair market rental
            value of the Premises as determined by the third broker shall be
            controlling. All fees and costs incurred in connection with the
            determination of fair market rental value by the third broker shall
            be paid one-half by Lessor and one-half by Lessee.

<PAGE>

      (v)   For purposes of this Paragraph, the fair market rental value of the
            Premises shall take into consideration all current market factors,
            including without limitation the quality, size and location of the
            Premises. In no event, however, shall the monthly rental amount be
            less than that being paid during the final year of the original
            lease period.

LESSOR:                                   LESSEE:

The Milla and Raymond                     Drexler Technology Corporation,
Handley 1992 Trust                        a Delaware Corporation


By: /s/R. J. Handley                      By: /s/ Steven G. Larson
------------------------------------      ------------------------------

                                          Date: February 25, 2000