<PAGE>

                                                                EXHIBIT 10.40

                            Tenant: MEMRY CORPORATION
                                     LEASE
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Article                              Title                             Page
-------                              -----                             ----
<S>                                                                    <C>
1  - Premises and Term..................................................    1
2  - Rent ..............................................................    1
3  - Landlord's Work - Tenant's Work ...................................    2
4  - Streets ...........................................................    2
5  - Utility Services ..................................................    3
6  - Assignment - Change of Ownership ..................................    3
7  - Tenant's Additional Agreements ....................................    5
8  - Use of Premises ...................................................    7
9  - Indemnity and Public Liability Insurance ..........................    7
10 - Fire Insurance and Casualty .......................................    8
11 - Repair ............................................................   11
12 - Fixtures & Alterations ............................................   12
13 - Remedies ..........................................................   12
14 - Bankruptcy ........................................................   14
15 - Surrender of Premises .............................................   15
16 - Eminent Domain ....................................................   15
17 - Real Property Taxes ...............................................   16
18 - Common Area, Parking Facilities ...................................   17
19 - Miscellaneous .....................................................   19
</TABLE>

<PAGE>

                               BUSINESS PARK LEASE

         THIS LEASE is made this 27th day of August, 2001, between 4065
ASSOCIATES, L.P., a California limited partnership, herein referred to as
"Landlord," and MEMRY CORPORATION, a Delaware corporation, herein referred to as
"Tenant".

                          ARTICLE 1 - Premises and Term

         Section 1.1. Landlord hereby leases to Tenant and Tenant hereby leases
         -----------
from Landlord the demised premises, including the building and other
improvements thereon (as described in Exhibit "A" and located substantially as
                                      ----------
shown on Exhibit "B" attached hereto) upon and subject to the terms and
         ----------
provisions of this Lease for the demised term of approximately eighteen (18)
months, commencing on October 1, 2001, and ending on March 31, 2003.

                                ARTICLE 2 - Rent

         Section 2.1. Tenant covenants and agrees to pay to Landlord without
         -----------
set-off, recoupment, deduction or demand of any nature whatsoever, base rent for
each year during the demised term in the amount of Five Hundred Eighty Eight
Thousand Six Hundred Seventy Two Dollars ($588,672.00) per annum, payable in
twelve (12) equal monthly installments of Forty Nine Thousand Fifty Six Dollars
($49,056.00). Base rent shall be paid monthly in advance on the first (1st) day
of each calendar month.

         Section 2.2. For the purpose of this Lease, a year shall be twelve (12)
         -----------
calendar months, commencing with the first day of the first full calendar month
of the demised term and the succeeding anniversaries thereof. For any period
prior to the commencement of the first year or subsequent to the end of the last
year of the demised term, rent shall be prorated on the basis of the rental rate
then payable.

         Section 2.3. All sums payable and all statements deliverable to
         -----------
Landlord by Tenant under this Lease shall be paid and delivered at 60 Hillsdale
Mall, San Mateo, California 94403-3497, or at such other place as Landlord may
from time to time direct by notice to Tenant and all such sums shall be paid in
lawful money of the United States.

         Section 2.4. Tenant shall pay to the Landlord the following:
         -----------

         (A) Upon commencement of the demised term, Forty Nine Thousand Fifty
Six Dollars ($49,056.00) which shall be applied by Landlord to the first base
rent to become due and payable under this Lease, and

         (B) Upon execution of this Lease, Forty Nine Thousand Fifty Six Dollars
($49,056.00) which shall be held as a Security Deposit pursuant to the terms of
Section 19.9.
------------

         Section 2.5. In addition to base rent under Section 2.1., all other
         -----------                                 -----------
payments to be made under this Lease by Tenant to Landlord shall be deemed to be
and shall become additional rent hereunder, whether or not the same to be
designated as such, and shall be included in the term "rent" wherever used in
this Lease; and, unless another time shall be expressly provided for the payment
thereof, all rent and additional rent shall be due and payable together with the
next succeeding installment of base rent; and Landlord shall have the same
remedies for failure to pay the same as for a nonpayment of base rent.

         Section 2.6. Any amount due from Tenant to Landlord that is not paid
         -----------
when due shall bear interest at the highest rate then permitted to be charged on
late payments under leases under California law; provided, however, the payment
of any such interest shall not

                                       -1-

<PAGE>

excuse or cure the default upon which such interest accrued. Tenant acknowledges
and agrees that payment of such interest on late payments is reasonable
compensation to Landlord for the additional costs incurred by Landlord caused by
such late payment, including, but not limited to, collection and administration
expenses and the loss of the use of the money that was late in payment.

                   ARTICLE 3 - Landlord's Work - Tenant's Work

         Section 3.1. Except as provided in Section 3.2. below, in connection
         -----------
with the commencement of this Lease, Landlord shall not be required to perform
any work in the demised premises; and Tenant accepts the demised premises in an
"as is" condition.

         Section 3.2. Landlord agrees to provide and install new HVAC units and
         -----------
the necessary duct distribution system ("HVAC work") in the manufacturing
portion of the building on the demised premises. Except as provided herein, such
HVAC work shall be completed before the commencement date of the demised term.
In the event the City of Menlo Park or other governmental agency requires
Landlord to apply for a conditional use permit in order to obtain building
permit(s) for such HVAC work, then Landlord may, at Landlord's sole and
unfettered discretion, choose not to perform such HVAC work in the building on
the demised premises, and such failure to so provide the HVAC work shall not be
deemed a default by Landlord of any terms of this Lease. Landlord agrees to use
reasonable business efforts to not interfere with Tenant's manufacturing
operations during the performance of any HVAC work, and such work may be
performed during business hours so long as such work otherwise complies with
this sentence and this Lease.

         Any work or improvements which Tenant elects to make in the demised
premises shall be performed by Tenant pursuant to the provisions of Article 12
below.

                               ARTICLE 4 - Streets

         Section 4.1. Tenant agrees to encourage employees, and to direct
         -----------
customers and other persons visiting Tenant, to park in the parking area
provided in the Parking and Accommodation Areas.

                          ARTICLE 5 - Utility Services

         Section 5.1. Landlord has at its own cost and expense secured the
         -----------
installation of water, gas, sanitary sewers and electrical services to the
demised premises and made all necessary connections thereof to the building.
Tenant shall pay all meter or service charges made by public utilities companies
and shall pay for the water, gas and/or electricity used on the demised premises
and sewer use fees and charges whether ad valorum or not and any so called
"sewer connection charges" based on increased wastewater discharge from the
demised premises exclusively. Tenant shall maintain such connections of
utilities to the building to the extent they serve the demised premises
exclusively.

         Section 5.2. Landlord shall not be liable to Tenant for the failure of
         -----------
any utility services except to the extent such failure is due to Landlord's
gross negligence or willful misconduct.

                                       -2-

<PAGE>

                  ARTICLE 6 - Assignment - Change of Ownership

         Section 6.1.
         -----------

         A. Except as otherwise provided herein, Tenant shall not, by operation
of law or otherwise, transfer, assign, sublet, enter into license or concession
agreements, enter into a change of ownership, mortgage or hypothecate this Lease
or the Tenant's interest in and to the demised premises without first procuring
the written consent of Landlord. Any attempted transfer, assignment, subletting,
license or concession agreement, change of ownership, mortgage or hypothecation
without Landlord's written consent shall be void and confer no rights upon any
third person. Landlord's consent to a proposed assignment, sublease or change of
ownership shall not be unreasonably withheld provided that the proposed assignee
or sublessee or post-change-of-ownership Tenant shall have: (i) a net worth, at
the time of the assignment, sublease or change ownership, determined in
accordance with good accounting principles, equal to or in excess of the net
worth of Tenant at the date of this Lease; (ii) been active in its current
business for a minimum of three (3) years immediately prior to the assignment,
sublease or change of ownership; or be assuming substantially all of the
business of Tenant; and (iii) a good reputation in the business community. In
addition, Tenant shall give Landlord not less than thirty (30) days notice prior
to the effective date of any such assignment or sublease, and, so long as same
is not to an affiliate of Tenant or to a purchaser of substantially all of the
business of Tenant, Landlord shall have the option to terminate this Lease with
respect to the space to be assigned or subleased by notice to Tenant given
within twenty (20) days of Landlord's receipt of Tenant's notice. Nothing herein
contained shall relieve Tenant from its covenants and obligations for the
demised term. Tenant agrees to reimburse Landlord for up to Five Hundred Dollars
($500.00) of Landlord's reasonable outside attorneys' fees incurred in
conjunction with the processing and documentation of any such requested
transfer, assignment, subletting, licensing or concession agreement, change of
ownership, mortgage or hypothecation of this Lease or Tenant's interest in and
to the demised premises. If Landlord consents to any assignment or sublease
pursuant to this Article, Tenant shall pay Landlord, as additional rent:

            (a) in the case of each and every assignment, an amount equal to ALL
         monies, property, and other consideration of every kind whatsoever paid
         or payable to Tenant by the assignee for such assignment and for all
         property of Tenant transferred to the assignee as part of the
         assignment (including, but not limited to, any fixtures, other
         leasehold improvements, furniture, equipment, and furnishings so
         included as consideration); and

            (b) in the case of each and every sublease, ALL rent, and/or other
         monies, property, and consideration of every kind whatsoever paid or
         payable to Tenant by the subtenant under the sublease, LESS all base
         rent and additional rent under this Lease accruing during the term of
         the sublease in respect of the subleased space (as reasonably
         determined by Landlord, taking into account the useable area of the
         premises demised under the sublease).

         B. Each transfer, assignment, subletting, license, concession
agreement, change of ownership, mortgage and hypothecation to which there has
been consent shall be by an instrument in writing in form reasonably
satisfactory to Landlord, and shall be executed by the transferor, assignor,
sublessor, licensor, concessionaire, hypothecator or mortgagor and the
transferee, assignee, sublessee, licensee, concessionaire or mortgagee in each
instance, as the case may be; and each transferee, assignee, sublessee,
licensee, concessionaire or mortgagee shall agree in writing for the benefit of
Landlord herein to

                                       -3-

<PAGE>

assume, to be bound by, and to perform the terms, covenants and conditions of
this Lease to be done, kept and performed by Tenant, relating to the portion of
the demised premises affected, including the payment of all amounts due or to
become due under this Lease directly to Landlord. One (1) executed copy of such
written instrument shall be delivered to Landlord. Failure to first obtain in
writing Landlord's consent or failure to comply with the provisions of this
Article shall operate to prevent any such transfer, assignment, subletting,
license, concession agreement, mortgage, or hypothecation from becoming
effective.

         C. If Tenant hereunder is a corporation which, under the then current
laws of the State of California, is not deemed a public corporation, or is an
unincorporated association or partnership, the transfer, assignment or
hypothecation of any stock or interest in such corporation, association or
partnership in the aggregate in excess of fifty percent (50%) shall be deemed a
change of ownership within the meaning and provisions of this Section 6.1.
                                                              -----------

         D. Landlord's rights to assign this Lease are and shall remain
unqualified. Upon any sale of the demised premises and provided the purchaser
assumes all obligations under this Lease, Landlord shall thereupon be entirely
released of all obligations of Landlord hereunder and shall not be subject to
any liability resulting from any act or omission or event occurring after such
sale.

         E. The consent of Landlord to any transfer, assignment, sublease,
license or concession agreement, change of ownership, mortgage or hypothecation
of this Lease is not and shall not operate as a consent to any future or further
transfer, assignment, sublease, license or concession agreement, change of
ownership, mortgage or hypothecation, and Landlord specifically reserves the
right to refuse to grant any such consents except as otherwise provided in this
Section 6.1.
-----------

                   ARTICLE 7 - Tenant's Additional Agreements

         Section 7.1. Tenant agrees at all times during the demised term to: (A)
         -----------
Keep the demised premises in a neat and clean condition. (B) Promptly remove all
waste, garbage or refuse from the demised premises. (C) Promptly comply with all
laws and ordinances and all rules and regulations of duly constituted
governmental authorities affecting the demised premises, and the cleanliness,
safety, use and occupation thereof, but this clause (C) shall not be construed
to require Tenant to comply with any such laws, ordinances, rules or regulations
which require structural changes in or capital improvements to the demised
premises unless the same are made necessary by act or work performed by or for
Tenant or the nature of Tenant's business. (D) Prevent the escape from the
demised premises of all fumes, odors and other substances which are offensive or
may constitute a nuisance or interfere with other tenants.

         Section 7.2. Tenant agrees that it will not at any time during the
         -----------
demised term without first obtaining the Landlord's written consent: (A) Conduct
or permit any fire, bankruptcy or auction sale in the demised premises. (B)
Place on the exterior walls (including both interior and exterior surfaces of
windows and doors), the roof of any buildings or any other part of the demised
premises, any sign, symbol, advertisement, neon light, other light or other
object or thing visible to public view outside of the demised premises. (C)
Change the exterior color of the building on the demised premises, or any part
thereof, or the color, size, location or composition of any sign, symbol or
advertisement that may have been approved by Landlord. (D) Park, operate, load
or unload, any truck or other delivery vehicle on any place other than the
loading area designated for Tenant's use. (E) Use the plumbing facilities for
any purpose other than that for which they were constructed or dispose of any
foreign substance therein. (F) Install any exterior lighting or

                                       -4-

<PAGE>

plumbing facilities, shades or awnings, amplifiers or similar devices, or use
any advertising medium which may be heard or experienced outside the demised
premises, such as loudspeakers, phonographs, or radio broadcasts. (G) Deface any
portion of the building or improvements on the demised premises, normal usage
excepted. In the event any portion of the building is defaced or damaged by
Tenant, its agents, servants, invitees or employees, Tenant agrees to repair
such damage. (H) Permit any rubbish or garbage to accumulate on the demised
premises, or any part thereof, unless confined in metal containers so located as
not to be visible to members of the public. (I) Install, maintain or operate any
sign except as approved in writing by Landlord. (J) Store materials, supplies,
equipment, finished products, raw materials or articles of any nature outside of
the demised premises. (K) Use the demised premises for retail, commercial or
residential purposes.

         Section 7.3. Tenant agrees that it will not at any time during the
         -----------
demised term: (A) Perform any act or carry on any practice which may injure the
demised premises. (B) Burn anything in or about the demised premises. (C) Keep
or display any merchandise or other object on or otherwise obstruct any
sidewalks, walkways or areaways. (D) Use or permit the use of any portion of the
demised premises as living quarters, sleeping apartments, lodging rooms, or for
any unlawful purpose. (E) Use or permit the demised premises to be used for any
purpose which is or shall not then be allowed under the Zoning Ordinance of the
City of Menlo Park, California, in that area.

         Section 7.4. Tenant shall, at its expense, comply with all applicable
         -----------
laws, regulations, rules and orders, regardless of when they become or became
effective, including, without limitation, those relating to health, safety,
noise, environmental protection, waste disposal, and water and air quality (but
this Section 7.4 shall not be construed to require Tenant to make structural
     -----------
changes in or capital improvements to the demised premises unless the same are
made necessary by act or work performed by or for Tenant or the nature of
Tenant's business or otherwise is Tenant's responsibility hereunder), and
furnish satisfactory evidence of such compliance upon request of Landlord.

         Should any discharge, leakage, spillage, emission or pollution of any
type occur upon or from the demised premises due to Tenant's use and occupancy
thereof, Tenant, at its expense, shall be obligated to remedy the same to the
satisfaction of Landlord and any governmental body having jurisdiction
thereover. Tenant agrees to indemnify, hold harmless, and defend Landlord
against all liability, cost, and expense (including without limitation any
fines, penalties, judgments, litigation costs, and reasonable attorneys' fees)
incurred by Landlord as a result of Tenant's breach of this section, or as a
result of any such discharge, leakage, spillage, emission, or pollution,
regardless of whether such liability, cost, or expense arises during or after
the demised term, unless such liability, cost or expense is proximately caused
solely by the gross negligence or willful misconduct of Landlord or its
contractors, licensees, agents, servants or employees.

         Tenant shall pay all amounts due Landlord under this section, as
additional rent, within ten (10) days after any such amounts become due.

         Tenant shall, at least thirty (30) days prior to the termination of the
demised term, or any earlier termination of this Lease, submit a plan to the San
Mateo County Environmental Health Services Division or other appropriate
governmental agency and to the Menlo Park Fire Protection District in accordance
with, and to the extent required under, applicable provisions of the Uniform
Fire Code and any other appropriate governmental rules and regulations, with a
copy to Landlord, demonstrating, if and to the extent so required, how any
hazardous materials which were stored, dispensed, handled or used in, at or upon
the demised premises by Tenant, its agents, servants, contractors, invitees or
employees during the demised term will be transported, disposed of or reused

                                       -5-

<PAGE>

at the expiration or sooner termination of the demised; and Tenant shall, at the
expiration or sooner termination of the demised term, comply with all applicable
laws, regulations, rules and orders of any governmental body having jurisdiction
thereover (including without limitation, if applicable, the Menlo Park Fire
Protection District) regarding the disposal of any such hazardous materials.

         Tenant's obligations under this Section 7.4. shall survive the
                                         -----------
expiration or earlier termination of this Lease, including without limitation
any termination resulting from any default by Tenant under this Lease.

                           ARTICLE 8 - Use of Premises

         Section 8.1. Tenant shall use the demised premises solely for office,
         -------------------
warehouse , laboratory, manufacturing, and distribution and related uses, and
for no other purposes without Landlord's written consent.

              ARTICLE 9 - Indemnity and Public Liability Insurance

         Section 9.1. Except for claims, costs, fees, expenses or liability
         -----------
arising from the gross negligence or willful misconduct of Landlord or its
contractors, licensees, agents, servants or employees, Tenant agrees to
indemnify and save harmless Landlord from and against all claims arising from
any act, omission or negligence of Tenant, or its contractors, licensees,
agents, servants, invitees or employees, or arising from any accident, injury or
damage whatsoever caused to any person, or to the property of any person
occurring during the demised term in or about the demised premises, the
sidewalks (if any) adjoining the same and from and against all costs, expenses
and liabilities incurred in or in connection with any such claim or proceeding
brought thereon, including, but not limited to, reasonable attorneys' fees and
court costs.

         Landlord agrees to indemnify and save harmless Tenant from and against
all claims, costs, fees, expenses and liability, including, but not limited to,
reasonable attorneys' fees and court costs, arising from the gross negligence or
willful misconduct of Landlord or its contractors, licensees, agents, servants
or employees.

         Section 9.2. Tenant agrees to maintain in full force during the demised
         -----------
term a policy of public liability and property damage insurance under which
Landlord (and such other persons, firms or corporations as are designated by
Landlord and are properly includible as additional insureds under the terms of
any such policies of insurance) and Tenant are named as insureds, and the
insurer agrees to indemnify and hold Landlord and Landlord's said designees
harmless from and against all cost, expense and/or liability arising out of or
based upon any and all claims, accidents, injuries and damage mentioned in
Section 9.1., except for claims, costs, fees, expenses or liability arising from
-----------
the gross negligence or willful misconduct of Landlord or its contractors,
licensees, agents, servants or employees. All public liability and property
damage policies shall contain a provision that Landlord, although named as an
insured, shall nevertheless be entitled to recovery under said policies for any
loss occasioned to it, its servants, agents and employees, by reason of the
negligence of Tenant. Each such policy shall be approved as to form and
insurance company by Landlord, such approval not to be unreasonably withheld, be
noncancellable with respect to the Landlord and Landlord's said designees
without twenty (20) (or, in the case of non-payment of premiums, ten (10)) days'
written notice to the Landlord and Landlord's said designees, and a duplicate
original or certificate thereof shall be delivered to Landlord prior to
commencement of the demised term and thereafter thirty (30) days

                                       -6-

<PAGE>

prior to expiration of the term of each policy. The limits of liability of such
comprehensive general liability insurance shall be Two Million Dollars
($2,000,000.00) for injury or death to one or more persons and damage to
property, combined single limit. All public liability, property damage and other
casualty policies shall be written as primary policies, not contributing with
and not in excess of coverage which Landlord may carry.

         If Tenant shall not comply with its covenants to maintain insurance
made above, or if Tenant fails to provide duplicate originals or certificates
thereof to Landlord as is provided above within five (5) business days after
written notice of such failure, Landlord may, but shall not be required to,
obtain any such insurance; and if Landlord does obtain any such insurance,
Tenant shall, on demand, reimburse Landlord for the premium for any such
insurance.

         Section 9.3. Tenant agrees to use and occupy the demised premises, the
         -----------
Parking and Accommodation Areas and to use all other portions of the Business
Park (which it is herein given the right to use) at its own risk and, except for
claims arising from the gross negligence or willful misconduct of Landlord or
its contractors, licensees, agents, servants or employees, hereby releases to
the full extent permitted by law the Landlord, and its agents, servants, and
employees, from all claims and demands of every kind resulting from any
accident, damage or injury occurring therein. Landlord shall have no
responsibility or liability for any loss of or damage to fixtures or other
personal property of Tenant. The provisions of this Section shall apply during
the whole of the demised term.

                    ARTICLE 10 - Fire Insurance and Casualty

         Section 10.1. If the building on the demised premises should be damaged
         ------------
or destroyed during the demised term by any casualty insurable under Landlord's
standard fire and extended coverage insurance policies, Landlord shall (except
as hereinafter provided) repair and/or rebuild the same to substantially the
condition in which the same existed immediately prior to such damage or
destruction. Landlord's obligation under this Section shall in no event exceed
either (A) the scope of the work done by Landlord in the original construction
of such building, or (B) the proceeds of any such insurance policy if Landlord
keeps the building and the demised premises insured against loss or damage by
such fire and extended coverage insurance to the extent of at least eighty
percent (80%) of the insurable value of the building if reasonably obtainable
from responsible insurance companies licensed to do business in California,
unless Landlord nevertheless elects to repair and/or rebuild the building and
the demised premises. Tenant shall in the event of any such damage or
destruction, unless this Lease shall be terminated as hereinafter provided, be
responsible for the cost of replacing or repairing all exterior signs, trade
fixtures, equipment, display cases and other installations whether or not
originally installed by the Tenant. Landlord shall have no interest in the
proceeds of any insurance carried by Tenant on Tenant's interest in this Lease
and Tenant shall have no interest in the proceeds of any insurance carried by
Landlord.

         Section 10.2. Unless and until this Lease is terminated as provided
         ------------
herein, Tenant's base rent (and any other rent allocated based on Tenant's
square footage in the building) shall be abated proportionately during any
period in which, by reason of any such damage or destruction (including any
damage or destruction referred to in Section 10.3 and Section 10.7 hereinafter
                                     ------------     ------------
set forth), there is substantial interference with the operation of the business
of Tenant in the demised premises to the extent that Tenant is required to
discontinue all or a substantial portion of its business in the demised
premises. Such abatement shall continue for the period commencing with such
destruction or damage and ending with the substantial completion by the Landlord
of such work or repair and/or

                                       -7-

<PAGE>

reconstruction as Landlord is obligated to do.

         Section 10.3. If the building on the demised premises should be damaged
         ------------
or destroyed to the extent of thirty three percent (33%) or more of the then
monetary value thereof by an event described in Section 10.1., then Landlord may
                                                ------------
terminate this Lease by written notice to Tenant within ninety (90) days of such
damage or destruction.

         If the demised premises should be damaged or destroyed and the time
needed to repair and/or rebuild the same is reasonably estimated by Landlord to
exceed one hundred eighty (180) days, then Tenant may terminate this Lease by
written notice to Landlord as follows:

         Landlord shall notify Tenant within sixty (60) days following any
damage to or destruction of the demised premises of the length of time Landlord
reasonably estimates to be necessary for repair or restoration of the demised
premises. Tenant shall have the right to terminate this Lease within fifteen
(15) business days following receipt of such notice if restoration or repair of
the demised premises is so estimated by Landlord to take more than one hundred
eighty (180) days from the date of damage.

         If Landlord or Tenant does not elect to terminate this Lease then
Landlord shall repair and/or rebuild the same as provided in Section 10.1. If
                                                             ------------
such damage or destruction occurs and this Lease is not so terminated, this
Lease shall remain in full force and effect and the parties waive the provisions
of any law to the contrary. The Landlord's obligation under this Section shall
in no event exceed the scope of the work to be done by the Landlord in the
original construction of said building and the demised premises.

         Section 10.4. Tenant agrees to comply with all of the applicable
         ------------
regulations and rules of the Insurance Service Office or any similar body and
will not do, suffer, or permit an act to be done in or about the demised
premises which will increase any insurance rate with respect thereto.

         Section 10.5. Tenant agrees, in addition to any rent provided for
         ------------
herein, to pay to the Landlord the cost of the fire and extended coverage
insurance policy carried by Landlord on the demised premises during the entire
demised term or any renewal or extension thereof. This Section expressly permits
the Landlord to carry standard fire and extended coverage policies to the extent
of one hundred percent (100%) of the replacement value.

         Section 10.6. During the demised term, Tenant shall carry, at its
         ------------
expense, insurance against loss and damage by fire with an "All Risk"
endorsement for the full insurable value of Tenant's merchandise, trade
fixtures, furnishings, operating equipment and personal property, including wall
coverings, carpeting and drapes. Landlord and Landlord's mortgagee (to the
extent Tenant has been notified of such mortgagee by Landlord in writing) shall
be named as additional insureds under said policy, which shall be non-cancelable
with respect to Landlord and Landlord's mortgagee without twenty (20) (or, in
the case of non-payment of premiums, ten (10)) days' prior written notice. A
certificate evidencing such coverage shall be delivered to Landlord prior to
commencement of the demised term and thereafter thirty (30) days prior to the
expiration of the term of such policy. Such insurance shall be written as a
primary policy, not contributing with and not in excess of coverage Landlord may
carry. If Tenant shall not comply with its covenants to maintain said insurance,
or if Tenant fails to provide a certificate thereof to Landlord as provided
above within five (5) business days after written notice of such failure,
Landlord may, but shall not be required to, obtain any such insurance, and if
Landlord does obtain any such insurance, Tenant shall, on demand, reimburse
Landlord for the premium for any such insurance.

         Section 10.7. In the event the building on the demised premises shall
         ------------
be damaged as a result of any flood, earthquake, act of war, nuclear reaction,
nuclear radiation or radioactive contamination, or from any other casualty not
covered by Landlord's fire and

                                       -8-

<PAGE>

extended coverage insurance, to any extent whatsoever, Landlord may within
ninety (90) days following the date of such damage, commence repair,
reconstruction or restoration of the building and prosecute the same diligently
to completion, in which event this Lease shall continue in full force and
effect, or within said ninety (90) day period elect not to so repair,
reconstruct or restore the building, in which event this Lease shall cease and
terminate. In either such event Landlord shall give Tenant written notice of its
intention within said ninety (90) day period.

         If the demised premises should be damaged by an event described in
Section 10.7 and the time needed to repair and/or rebuild the same is reasonably
------------
estimated by Landlord to exceed one hundred eighty (180) days, then Tenant may
terminate this Lease by written notice to Landlord as follows:

         Landlord shall notify Tenant within sixty (60) days following any
damage to or destruction of the demised premises of the length of time Landlord
reasonably estimates to be necessary for repair or restoration of the demised
premises. Tenant shall have the right to terminate the Lease within fifteen (15)
business days following receipt of such notice if restoration or repair of the
demised premises is so estimated by Landlord to take more than one hundred
eighty (180) days from the date of damage.

         Section 10.8. Upon any termination of this Lease under the provisions
         ------------
of this Article 10, the rent shall be adjusted as of the date of such
        ----------
termination and the parties shall be released without further obligation to the
other party upon the surrender of possession of the demised premises to
Landlord, except for items that have been theretofore accrued and are then
unpaid, and except for obligations that are designated as surviving such
termination.

         Section 10.9. Notwithstanding anything in this Article 10 or elsewhere
         ------------                                   ----------
in this Lease to the contrary, Landlord may maintain any insurance on the
demised premises that Landlord deems necessary or advisable, including, but not
limited to, any rental insurance, owner's protective liability insurance or any
insurance required by any mortgagee of Landlord; and Landlord may include the
amount of the premiums for such insurance in the total of the insurance premiums
which Tenant is required to pay under the terms hereof.

                               ARTICLE 11 - Repair

         Section 11.1. Landlord agrees, at Landlord's sole expense, to repair
         ------------
structural defects of the building on the demised premises throughout the life
of this Lease and to perform any work described pursuant to Section 3.2.
                                                            -----------
Structural defects and maintenance shall not be deemed to include cracks or
fissures in walls or floors, nor the requirement of painting or caulking.

         Section 11.2. Tenant agrees during the demised term or any extension
         ------------
thereof to maintain the interior of the building on the demised premises, and
every part thereof, except as to work to be performed by Landlord under Sections
                                                                        --------
11.1. and 11.3. Tenant further agrees to clean, inside and out, all of the glass
--------------
on the exterior of the building. If Tenant should fail to faithfully perform its
maintenance obligations hereunder then Landlord shall, after giving Tenant at
least ten (10) days' written notice of such failure, have the right to perform,
or cause to be performed, said maintenance and Tenant shall on demand reimburse
Landlord for Landlord's reasonable costs of providing such maintenance.
Landlord's reservation of the right to enter upon the demised premises (during
reasonable business hours, after notice to Tenant and, at Tenant's option, with
a Tenant representative, and in emergencies at all times without the requirement
of notice to Tenant) to perform any repairs or maintenance or other work in, to,
or about the demised premises

                                       -9-

<PAGE>

under such circumstances shall not be deemed to impose any obligation on
Landlord to do so, nor shall Landlord be rendered liable to Tenant or any third
party for the failure to do so, and Tenant shall not be relieved from any
obligation to indemnify Landlord as otherwise provided elsewhere in this Lease.

         Section 11.3 Landlord shall provide the following services and Tenant
         ------------
shall, in addition to all other payments required to be made under other
provisions of this Lease, on demand reimburse Landlord for Landlord's
out-of-pocket costs of: (i) maintaining and repairing the roof; (ii) maintaining
and repairing the exterior of the building; (iii) maintenance and repair of the
trash enclosure utilized in connection with the building; (iv) maintenance and
repair of the glass on the exterior of the building and (v) any other
maintenance and repair other than that which Landlord is required to perform at
Landlord's expense per Section 11.1. Tenant shall also, on demand, reimburse
                       ------------
Landlord for Landlord's out of pocket costs of maintaining and repairing the
heating and air conditioning equipment serving the demised premises, whether
furnished by Landlord or Tenant (except any work that is described in Section
                                                                      -------
3.2). Landlord's said costs as used in this Section 11.3. shall include all
---                                         ------------
costs and expenses of every kind or nature incurred by Landlord in the
performance of such maintenance or repair and Landlord's determination of the
amount of said costs and expenses will be final absent manifest error. Upon
Tenant's written request, Landlord shall provide Tenant with reasonable evidence
of such costs and expenses.

         Notwithstanding anything to the contrary contained herein, repair
and/or maintenance costs included in this Section 11.3. are exclusive of
                                          ------------
replacement; provided, however, that any costs for repair, maintenance or
replacements which are occasioned by (x) Tenant's negligent acts or omissions or
those of its employees, contractors, agents, invitees or servants, or (y) the
particular nature of Tenant's business, then all of such costs shall be borne
solely by Tenant.

                       ARTICLE 12 - Fixtures & Alterations

         Section 12.1. All trade fixtures owned by Tenant and installed in the
         ------------
demised premises shall remain the property of Tenant and may be removed from
time to time and shall be removed at the expiration of the demised term. Tenant
shall repair any damage to the demised premises caused by the removal of said
fixtures. If Tenant fails to remove such fixtures on or before the last day of
the demised term, all such fixtures shall become the property of Landlord,
unless Landlord elects to require their removal, in which case Tenant shall
promptly remove them and restore the demised premises to its condition prior to
such removal. Landlord may also, at Landlord's sole discretion, store such
fixtures at Tenant's expense.

         Section 12.2. Tenant shall not make any alterations, additions or
         ------------
improvements in or to the demised premises or the building during the demised
term without submitting plans and specifications therefor for the prior written
consent of Landlord, which consent shall not be unreasonably withheld, and which
consent, if granted, may be subject to such conditions as Landlord may deem
appropriate. Any such alterations, additions or improvements consented to by
Landlord shall be made at Tenant's sole cost and expense in accordance with the
plans and specifications therefor and Tenant agrees to provide Landlord with an
"as built" set of plans and specifications in IBM-compatible AutoCAD format or
such other format which is compatible to Landlord's computer aided design
software after any such work is completed. Tenant shall secure any and all
governmental permits, approvals or authorizations required in connection with
any such work, and shall hold Landlord harmless from any and all liability,
costs, damages, expenses (including

                                       -10-

<PAGE>

reasonable attorneys' fees) and any and all liens resulting therefrom.

        Section 12.3. All alterations, decorations, additions and improvements
        ------------
(and expressly including all light fixtures and floor coverings) except
furniture, removable paneling, wall fixtures, trade fixtures, appliances and
equipment which do not become a part of the demised premises, shall be deemed to
belong to Tenant, but shall be deemed to have been attached to the demised
premises or the building and to have become the property of Landlord upon the
termination of the demised term. Upon the expiration or sooner termination of
the demised term hereof, Tenant shall, upon written demand by Landlord made on
or prior to the end of the demised term, at Tenant's sole cost and expense,
forthwith remove (A) all of the items listed on Exhibit "C" attached hereto
and/or (B) any alterations, decorations, additions or improvements made by
Tenant during the demised term, that are designated by Landlord to be removed,
and Tenant shall forthwith at its sole cost and expense repair any damage to the
demised premises or the building caused by such removal.

                              ARTICLE 13 - Remedies

        Section 13.1. Should Tenant default in the performance of any of its
        ------------
obligations under this Lease with reference to the payment of rent and such a
default in the payment of base rent continues for five (5) days after the date
payment is due, or such a default in the payment of other rent continues for
five (5) days after receipt of written notice from Landlord specifying such
default, or should Tenant default in the performance of any other obligations
under this Lease and such default continue for thirty (30) days after receipt of
written notice from Landlord specifying such default or beyond the time
reasonably necessary to cure if such default is of a nature to require more than
thirty (30) days to remedy, then, in addition to all other rights and remedies
Landlord may have under this Lease or under applicable law, Landlord shall have
the following rights and remedies:

        (1) The Landlord has the remedy described in California Civil Code
Section 1951.4 (Landlord may continue this Lease in effect after Tenant's breach
and abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations). If Tenant breaches
any covenants of this Lease or if any event of default occurs, whether or not
Tenant abandons the demised premises, this Lease shall continue in effect until
Landlord terminates Tenant's right to possession, and Tenant shall remain liable
to perform all of its obligations under this Lease and Landlord may enforce all
of Landlord's rights and remedies, including the right to recover rent as it
falls due. If Tenant abandons the demised premises or fails to maintain and
protect the same as herein provided, Landlord shall have the right to do all
things necessary or appropriate to maintain, preserve and protect the demised
premises, including the installation of guards, and may do all things
appropriate to a re-letting of the demised premises, and none of said acts shall
be deemed to terminate Tenant's right of possession, unless Landlord elects to
terminate the same by written notice to Tenant. Tenant agrees to reimburse
Landlord on demand for all amounts reasonably expended by Landlord in
maintaining, preserving and protecting the demised premises, together with
interest on the amounts expended from time to time at the rate provided in
Section 2.6. Landlord shall also have the right to repair, the demised premises
-----------
at the expense of Tenant to the condition in which Tenant was required to
deliver them at the end of the demised term.

        (2) Landlord shall have the right to terminate Tenant's possession of
the demised premises, and if Tenant's right to possession of the demised
premises is terminated by Landlord by reason of a breach of this Lease by
Tenant, or by reason of the happening of

                                      -11-

<PAGE>

an event of default, or by reason of abandonment of the demised premises by
Tenant, Tenant agrees to pay to Landlord on demand (i) all unpaid rent earned at
the time of termination, together with interest on all unpaid installments from
the times they were due to the date of termination at the rate provided in
Section 2.6; (ii) the amounts by which the unpaid rent which would have been due
-----------
and payable by Tenant since the date of termination exceeds the amount of any
rental loss that Tenant proves could have been avoided, together with interest
on said amounts from the dates they were due at the rate provided in Section
                                                                     -------
2.6; (iii) the worth at the time of demand of the amount by which the unpaid
---
rent for the balance of the demised term exceeds the amount of rental loss that
Tenant proves may reasonably be avoided, together with interest on such amount
at the rate provided in Section 2.6 from the date of demand until paid; (iv) all
                        -----------
other amounts due Landlord from Tenant under the terms of this Lease, or
necessary to compensate Landlord for all detriment caused by Tenant's failure to
perform its obligations under this Lease. The right to possession of the demised
premises by Tenant should not be deemed terminated until Landlord gives Tenant
written notice of such termination or until Landlord re-lets all or a portion of
the demised premises. In the event that Landlord seeks to recover the amount
due, Landlord shall be entitled to recover the amounts specified in paragraphs
(a) (1), (a) (2) and (a) (4) of Section 1951.2 of the Civil Code of California
as such section reads at the date of this Lease, together with interest on said
amounts at the rate provided in Section 2.6 from the dates they were due,
                                -----------
computed as of the date of the award, together with the worth at the time of the
award of the amount by which the unpaid rent for the balance of the term exceeds
the amount of such rental loss that Tenant proves could reasonably have been
avoided. Landlord shall be required to mitigate damages by making a good faith
effort to re-let the demised premises.

        (3) No right or remedy herein conferred upon or reserved to Landlord is
intended to be exclusive of any other right or remedy herein or by law, provided
that each shall be cumulative and in addition to every other right or remedy
given herein or now hereafter existing at law or in equity or by statute.

        Section 13.2. Landlord shall in no event be in default in the
        ------------
performance of any of its obligations hereunder unless and until Landlord shall
have failed to perform such obligations within thirty (30) days or such
additional times as is reasonably required to correct any such default after
notice by Tenant to the Landlord properly specifying wherein the Landlord has
failed to perform any such obligation.

                             ARTICLE 14 - Bankruptcy

        Section 14.1. Tenant shall use reasonable business efforts to give
        ------------
written notice to Landlord of its intention to commence proceedings under any
state or federal insolvency or bankruptcy law, or any comparable law that is now
or hereafter may be in effect, whereby Tenant seeks to be, or would be,
discharged of its debts or the payment of its debts is sought to be delayed, at
least thirty (30) days prior to the commencement of such proceedings.

        Section 14.2. If any of the following events occur:
        ------------

        (1) The entry of an order for relief under Title 11 of the United States
Code as to Tenant or its executors, administrators or assigns, if any, or the
adjudication of Tenant or its executors, administrators or assigns, if any, as
insolvent or bankrupt pursuant to the provisions of any state insolvency or
bankruptcy act;

        (2) The appointment of a receiver, trustee or other custodian of all or
a substantial portion of the property of Tenant by reason of the insolvency or
inability of Tenant to pay its debts;

                                      -12-

<PAGE>

        (3) The assignment of all or a substantial portion of the property of
Tenant for the benefit of creditors; or

        (4) The commencement by Tenant (or by another that has not been
dismissed or released within sixty (60) days) of any proceedings under any state
or federal insolvency or bankruptcy law, or any comparable law that is now or
hereafter may be in effect, whereby Tenant seeks to be, or would be, discharged
of its debts or the payment of its debts is sought to be delayed; then Landlord
may, at any time thereafter, to the full extent permitted under applicable law,
in addition to any and all other rights or remedies of Landlord under this Lease
or under applicable law, upon written notice to Tenant, terminate this Lease,
and upon such notice this Lease shall cease and terminate with the same force
and effect as though the date set forth in said notice were the date originally
set forth herein and fixed for the expiration of the demised term. Tenant shall
thereupon vacate and surrender the demised premises, but shall remain liable as
herein provided.

                       ARTICLE 15 - Surrender of Premises

        Section 15.1. Tenant shall, upon termination of the demised term, or any
        ------------
earlier termination of this Lease, surrender to Landlord the demised premises,
including, without limitation, all building equipment and apparatus, and
fixtures (except as provided in Sections 12.1. and 12.2.) then upon the demised
                                -----------------------
premises without any damage, injury, or disturbance thereto, or payment
therefor, except damages due to ordinary wear and tear, acts of God, fire and
other perils to the extent the demised premises are not required to be repaired
or restored as hereinbefore provided, and Tenant shall dispose of any hazardous
materials stored, dispensed, handled or used in, at or upon the demised premises
by Tenant, its agents, servants, contractors or employees in accordance with the
provisions of Section 7.4.
              -----------

                           ARTICLE 16 - Eminent Domain

        Section 16.1. If more than thirty-three percent (33%) of the floor area
        ------------
of the building on the demised premises or if more than thirty-three percent
(33%) of the area of the Parking and Accommodation Areas shall be taken under
the power of eminent domain and the portion not so taken will not be reasonably
adequate for the operation of Tenant's business after the Landlord completes
such repairs or alterations as the Landlord is obligated or elects to make,
Tenant shall have the right to elect either to terminate this Lease, or, subject
to Landlord's right to terminate this Lease pursuant to Section 16.4., to
                                                        ------------
continue in possession of the remainder of the demised premises and shall notify
Landlord in writing within ten (10) days after such taking of Tenant's election.
In the event less than thirty-three percent (33%) of the floor area of the
building on the demised premises or less than thirty three percent (33%) of the
area of the Parking and Accommodation Areas shall be taken, all of the terms
herein provided shall continue in effect, except that the base rent (and any
other rent allocated based on Tenant's square footage in the building) shall be
reduced in the same proportion that the floor area of the building on the
demised premises taken bears to the original floor area of the building on the
demised premises, and Landlord shall at its own cost and expense make all
necessary repairs or alterations to the building so as to constitute the portion
of the building not taken a complete architectural unit and the demised premises
a complete unit for the purposes allowed by this Lease, but such work shall not
exceed the scope of the work to be done by Landlord in originally constructing
said building.

                                      -13-

<PAGE>

        Section 16.2. Each party waives the provisions of Code of Civil
        ------------
Procedure Section 1265.130 allowing either party to petition the Superior Court
to terminate this Lease in the event of a partial taking.

        Section 16.3. All damages or awards for any taking under the power of
        ------------
eminent domain whether for the whole or a part of the demised premises shall
belong to and be the property of Landlord whether such damages or awards shall
be awarded as compensation for diminution in value to the leasehold or to the
fee of the demised premises; provided however, that Landlord shall not be
entitled to the award made to Tenant or Landlord for loss of business,
depreciation to, and cost or removal of stock and fixtures and for leasehold
improvements which have been installed by Tenant at its sole cost and expense
less depreciation which is to be computed on the basis of completely
depreciating such leasehold improvements during the initial demised term of this
Lease, and any award made to Tenant in excess of the then depreciated value of
leasehold improvements shall be payable to the Landlord.

        Section 16.4. If more than thirty-three percent (33%) of the floor areas
        ------------
of the building on the demised premises shall be taken under power of eminent
domain, or if more than thirty-three percent (33%) of the area of the Parking
and Accommodation Areas shall be so taken, Landlord may, by written notice to
Tenant delivered on or before the date of surrendering possession to the public
authority pursuant to such taking, terminate this Lease as of such date.

        Section 16.5. If this Lease is terminated as provided in this Article,
        ------------
the rent shall be paid up to the day that possession is so taken by public
authority and Landlord shall make a prorata refund of any rent and all deposits
paid by Tenant in advance and not yet earned.

                        ARTICLE 17 - Real Property Taxes

        Section 17.1. Tenant shall reimburse Landlord for all real property
        ------------
taxes, assessments and ongoing sewer fees applicable to the demised premises
during the demised term. Such taxes, assessments and fees shall be prorated to
lease years for purpose of making this computation. Such payment shall be made
by Tenant the later of: (i) within thirty (30) days after receipt of Landlord's
written statement setting forth the amount of such computation thereof, or (ii)
by the thirtieth (30th) day prior to the delinquency date for such tax,
assessment or fee. If the demised term shall not expire concurrently with the
expiration date of the fiscal tax year, Tenant's liability for taxes for the
last partial lease year shall be prorated on an annual basis.

        Section 17.2. If the demised premises are not separately assessed,
        ------------
Tenant's liability shall be an equitable proportion of the real property taxes
for all of the land and improvements included within the tax parcel assessed,
such proportion to be determined by Landlord from the respective valuations
assigned in the assessor's work sheets or such other information as may be
reasonably available. Landlord's reasonable determination thereof, in good
faith, shall be conclusive.

        Section 17.3. Tenant shall pay prior to delinquency all taxes assessed
        ------------
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Tenant contained in the demised premises or elsewhere.
Tenant shall, if possible, cause said trade fixtures, furnishings, equipment and
all other personal property to be assessed and billed separately from the real
property of Landlord.

        If any of Tenant's said personal property shall be assessed with
Landlord's real property, Tenant shall pay Landlord the taxes attributable to
Tenant the later of: (i) within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Tenant's property, or (ii) by
the thirtieth (30/th/) day prior to the delinquency date for such

                                      -14-

<PAGE>

taxes.

        Section 17.4. In addition to all other payments provided for herein, the
        ------------
Tenant shall on demand reimburse Landlord for any surcharges, fees, and any
similar charges required to be paid by any instrumentality of local, state or
federal government in connection with parking in the parking area, including
policing; supervising with attendants; other costs in connection with providing
charged parking; repairs and maintenance not properly chargeable to capital
account under good accounting principles; interest and depreciation of the
actual cost of modification or improvements to the areas, facilities and
improvements maintained in this Article either (i) required by any
instrumentality of local, state or federal government, or (ii) installed by
Landlord to facilitate payment of a parking charge by the general public for
parking in the parking area, or both, and other similar costs; and there shall
be excluded from all of Article 17 (a) cost of construction of such improvements
                        ----------
which is properly chargeable to capital account and (b) depreciation of the
original cost of construction of all items not previously mentioned in this
sentence. If Landlord shall require the payment of a parking charge by the
general public for parking in the parking area, then during any period in which
such a charge is made the total revenue (after deducting excise and similar
taxes thereon and taxes, fees or surcharges imposed by any agency or
instrumentality of local, state or federal government) actually received in cash
or its equivalent by Landlord for such parking charge shall be credited against
said costs.

        Section 17.5. Notwithstanding the provisions of Article 17 hereinabove,
        ------------                                    ----------
Tenant shall pay any increase in "real property taxes" resulting from any and
all improvements of any kind whatsoever placed on or in the demised premises for
the benefit of or at the request of Tenant regardless of whether said
improvements were installed or constructed either by Landlord or Tenant.

        Section 17.6. In addition to all other payments provided for herein, the
        ------------
Tenant shall on demand reimburse Landlord for any tax (excluding income or
similar income-based tax) and/or business license fee or other levy that may be
levied, assessed or imposed upon the rent or other payments provided for herein
or on the square footage of the demised premises, on the act of entering into
this Lease, or on the occupancy of the Tenant however described, as a direct
substitution in whole or in part for, or in addition to, any real property
taxes, whether pursuant to laws presently existing or enacted in the future.

                  ARTICLE 18 - Parking and Accommodation Areas

        Section 18.1. Landlord grants to Tenant during the demised term the
        ------------
non-exclusive right to use the parking facilities and other areas provided and
designated as "Parking and Accommodation Areas" on Exhibit "B" hereto for the
                                                   -----------
accommodation and parking of such automobiles of the Tenant, its officers,
agents, employees and its customers while working or visiting Tenant. Tenant
agrees that it will encourage its officers, agents and employees park their
automobiles only in the parking areas provided in the Parking and Accommodation
Areas. Except as provided in Sections 17.4. and 18.3., Landlord shall not charge
                             -----------------------
parking fees for such right to use parking facilities.

        Section 18.2. All parking areas and facilities furnished by Landlord
        ------------
including, but not limited to, pedestrian sidewalks, landscaped areas and
parking areas shall at all times be subject to the control and management of
Landlord so that Landlord will be in a position to make available efficient and
convenient use thereof, and Landlord shall have the right from time to time to
establish, modify and enforce reasonable rules and regulations with respect to
all facilities and areas mentioned in this Article, and Tenant agrees to abide
by and conform therewith. Landlord shall have the right to construct, maintain
and operate lighting facilities on all of said areas and improvements, to police
the same, from time to time to

                                      -15-

<PAGE>

change the area, location and arrangement of parking areas and facilities, to
restrict employee parking to employee parking areas, to construct surface,
subterranean and/or elevated parking areas and facilities, to establish and from
time to time change the level of parking surfaces, to close (if necessary) all
or any portion of said areas or facilities to such extent as may in the opinion
of Landlord's counsel be legally sufficient to prevent a dedication thereof or
the accrual of any rights of any person or of the public therein, and to do and
perform such other acts in and to said areas and improvements respectively as in
the use of good business judgment the Landlord shall determine to be advisable
with a view to the improvement of the convenience and use thereof by Tenant,
other lessees, and their respective employees and visitors.

        Section 18.3. Tenant agrees during the demised term to pay to Landlord
        ------------
an annual charge which shall be Landlord's actual out-of-pocket costs of
operating, maintaining and/or repairing all of the areas and facilities
mentioned in this Article. The annual charge shall be an estimate computed on
the basis of periods of twelve (12) consecutive calendar months, commencing and
ending on such dates as may be designated by Landlord, and shall be paid in
monthly installments on the first day of each calendar month in the amount
estimated by Landlord. Within ninety (90) days after the end of each such annual
period, Landlord will determine (and furnish to Tenant a statement showing in
reasonable detail) the actual annual charge for such period and the amounts so
estimated and paid during such period shall be adjusted within such ninety (90)
days (including adjustments on a prorata basis of any partial such period at
either end of the demised term) and one party shall pay to the other on demand
whatever amount is necessary to effectuate such adjustment.

        Landlord's said costs shall consist of and include all costs and
expenses of every kind or nature incurred by Landlord in the operation,
maintenance and repair of all of the areas, facilities and improvements
mentioned in this Article determined in accordance with good accounting practice
by an accountant employed by Landlord. The determination of such accountant
shall be conclusive. Without otherwise limiting the generality of the foregoing,
there shall be included in such costs public liability and property damage
insurance, landscape maintenance, maintenance of utilities, water, cleaning of
areas, facilities and improvements, operation of lighting, common area taxes and
assessments determined in the same manner as taxes and assessments on the
demised premises, policing and sweeping of parking areas, supervising with
attendants, repairs and maintenance, and an amount equal to ten percent (10%) of
the total of all of the above for administration of the Parking and
Accommodation Areas.

        Notwithstanding anything to the contrary contained herein, repair and/or
maintenance costs included in this Section 18.3. are exclusive of replacement;
                                   ------------
provided, however, that any costs for repair, maintenance or replacements which
are occasioned by (x) Tenant's negligent acts or omissions or those of its
employees, contractors, agents, invitees or servants, or (y) the particular
nature of Tenant's business, then all of such costs shall be borne solely by
Tenant.

        Section 18.4. The Parking and Accommodation Areas included for the
        ------------
purpose of this Article are those shown on Exhibit "B" outside of the building
                                           -----------
area.

                                      -16-

<PAGE>

                           ARTICLE 19 - Miscellaneous

        Section 19.1. Landlord and its designee shall have the right during
        ------------
reasonable business hours, after notice to Tenant and, at Tenant's option, with
a Tenant representative, to enter the demised premises except restricted areas
as established by or on behalf of the Federal Government for security purposes
(and in emergencies at all times without the requirement of notice to Tenant),
(i) to inspect the same, (ii) for any purpose connected with Landlord's rights
or obligations under this Lease and, (iii) for all other lawful purposes.

        Section 19.2. Tenant shall not be entitled to make repairs at Landlord's
        ------------
expense, and Tenant waives the provisions of Civil Code Sections 1941 and 1942
with respect to Landlord's obligations for tenantability of the demised premises
and Tenant's right to make repairs and deduct the expenses of such repairs from
rent.

        Section 19.3. This Lease shall be governed exclusively by the provisions
        ------------
hereof and by the laws of the State of California as the same from time to time
exist. This Lease expresses the entire understanding and all agreements of the
parties hereto with each other and neither party hereto has made or shall be
bound by any agreement or any representation to the other party which is not
expressly set forth in this Lease.

        Section 19.4. If Tenant should hold over after the demised term and any
        ------------
extension thereof as herein provided for, then such holding over shall be
construed as a tenancy from month to month at a rent equal to 150% of that
provided for under the monthly rental of the principal demised term.

        Section 19.5. Tenant agrees to maintain all toilet and washroom
        ------------
facilities within the demised premises in a neat, clean and sanitary condition.

        Section 19.6. Landlord covenants and agrees that Tenant, subject to the
        ------------
terms and provisions of this Lease, on paying the rent and observing, keeping
and performing all of the terms and provisions of this Lease on its part to be
observed, kept and performed, shall lawfully, peaceably and quietly have, hold,
occupy and enjoy the demised premises during the demised term without hindrance
or ejection by any person lawfully claiming under or against the Landlord.

        Section 19.7. Subject to Article 6, the terms and provisions hereof
        ------------             ---------
shall be construed as running with the land and shall be binding upon and inure
to the benefit of heirs, executors, administrators, successors and assigns of
Landlord and Tenant.

        Section 19.8.
        ------------

        A. Tenant shall promptly pay all sums of money with respect to any
labor, services, materials, supplies or equipment furnished or alleged to have
been furnished to Tenant in, at or about the demised premises, or furnished to
Tenant's agents, employees, contractors or subcontractors, that may be secured
by any mechanic's, materialmen's, supplier's or other liens against the demised
premises or Landlord's interest therein. In the event any such or similar liens
shall be filed, Tenant shall, within five (5) business days of receipt thereof,
give notice to Landlord of such lien, and Tenant shall discharge such lien by
payment of the amount due to the lien claimant within ten (10) business days
after receiving notice of the filing of the lien, or by the date the lien
claimant claims payment is due (if the lien claimant filed such lien before
payment was due). However, Tenant may in good faith contest such lien provided
that within such ten (10) day period Tenant provides Landlord with a surety bond
from a company acceptable to Landlord, protecting against said lien in an amount
at least one and one-half (1-1/2) times the amount claimed or secured as a lien
or such greater amount as may be required by applicable law; and provided
further that Tenant, if it should decide to contest such lien, shall agree to
indemnify, defend and save harmless Landlord from and against all costs arising
from or in connection with any proceeding with respect to such lien. Failure of
Tenant to discharge

                                      -17-

<PAGE>

the lien, or, if contested, to provide such bond and indemnification, shall
constitute a default under this Lease and in, addition to any other right or
remedy of Landlord, Landlord may, but shall not be obligated, to discharge or
secure the release of any lien by paying the amount claimed to be due, and the
amount so paid by Landlord, and all costs and expenses incurred by Landlord
therewith, including, but not limited to, court costs and reasonable attorneys'
fees, shall be due and payable by Tenant to Landlord forthwith on demand.

        B. At least fifteen (15) days before the commencement by Tenant of any
material construction or remodeling work on the demised premises, Tenant shall
give written notice thereof to Landlord. Landlord shall have the right to post
and maintain on the demised premises such Notices of Non-Responsibility, or
similar notices, provided for under applicable laws.

        Section 19.9.
        ------------

        A. Tenant shall deposit with Landlord the sum specified in Section
                                                                   -------
2.4.(B) hereof as a "Security Deposit". The Security Deposit shall be held by
-------
Landlord as security for the faithful performance of all the terms of this Lease
to be observed and performed by Tenant. The Security Deposit shall not be
mortgaged, assigned, transferred or encumbered by Tenant without the written
consent of Landlord and any such act on the part of Tenant shall be without
force and effect and shall not be binding upon Landlord.

        B. If any of the rents herein reserved or any other sum payable by
Tenant to Landlord shall be overdue and unpaid, or should Landlord make payments
on behalf of Tenant as permitted hereunder, or should Tenant fail to perform any
of the terms of this Lease, then Landlord may, at its option and without
prejudice to any other remedy which Landlord may have on account thereof, apply
the entire Security Deposit, or so much thereof as may be necessary, to
compensate Landlord toward the payment of rent or additional rent, loss, or
damage sustained by Landlord due to such breach on the part of Tenant, and
Tenant shall forthwith upon demand restore said Security Deposit to the original
sum deposited. The remainder of said Security Deposit shall be returned in full
to Tenant at the end of the demised term.

        C. In the event of bankruptcy or other similar proceedings listed in
Article 14 hereof, the Security Deposit shall be deemed to be applied first to
----------
the payment of rent and other charges due Landlord for all periods prior to the
filing of such proceedings.

        D. In the event Landlord delivers the Security Deposit to the purchaser
of Landlord's interest in the demised premises, Landlord, after written notice
to Tenant of said delivery, shall be discharged from any further liability with
respect to the Security Deposit. This provision shall also apply to any
subsequent transferees.

        Section 19.10. All notices, statements, demands, requests, consents,
        -------------
approvals, authorizations, offers, agreements, appointments or designations
hereunder by either party to the other shall be in writing and shall be
sufficiently given and served upon the other party if sent by United States
certified mail, return receipt requested, postage prepaid, or overnight courier
(provided a receipt is given), and addressed as follows:

        If sent by mail to Tenant, the same shall be addressed to the Tenant at
Memry Corporation, 4065 Campbell Avenue, Menlo Park, CA 94025, with a copy
(until 7/1/00) to Memry Corporation, 57 Commerce Drive, Brookfield, CT 06804 and
(after 7/1/00) to Memry Corporation, 3 Berkshire Boulevard, Bethel, CT 06801, or
at such other place as Tenant may from time to time designate by notice to
Landlord.

        If sent by mail to Landlord, the same shall be addressed to Landlord at
Sixty 31/st/ Avenue, San Mateo, California 94403-3497, or at such other place as
Landlord may from time to time designate by notice to Tenant.

        Any such notice when sent by certified mail as above provided shall be
deemed duly served on the third business day following the date of such mailing.
Any such notice when

                                      -18-

<PAGE>

sent by overnight courier as above provided shall be deemed duly served on the
first business day following the date on which it is delivered to such courier.

        Section 19.11. As used in this Lease and when required by the context,
        -------------
each number (singular or plural) shall include all numbers, and each gender
shall include all genders; and unless the context otherwise requires, the word
"person" shall include corporation, firm or association.

        Section 19.12. In case of litigation with respect to the mutual rights,
        -------------
obligations, or duties of the parties hereunder, the prevailing party shall be
entitled to reimbursement from the other party of all costs and reasonable
attorneys' fees actually incurred.

        Section 19.13. Each term and each provision of this instrument
        -------------
performable by Tenant shall be construed to be both a covenant and a condition.

        Section 19.14. Except as otherwise expressly stated, each payment
        -------------
provided herein to be made by Tenant to Landlord shall be in addition to and not
in substitution for the other payments to be made by Tenant to Landlord.

        Section 19.15. Time is and shall be of the essence of this Lease and all
        -------------
of the terms, provisions, covenants and conditions hereof.

        Section 19.16. The Tenant warrants that it has not had any dealings with
        -------------
any realtor, broker, or agent in connection with the negotiation of this Lease
excepting only ResourceOne (Joseph Carroll), whom Tenant agrees to pay whatever
commission may be due. The Landlord warrants that it has not had any dealings
with any realtor, broker, or agent in connection with the negotiation of this
Lease. Each party agrees to hold the other harmless from any cost, expense or
liability for any compensation, commissions or charges claimed by any realtor,
broker, or agent with respect to this Lease and/or the negotiation thereof with
whom such party has or purportedly has dealt.

        Section 19.17. Tenant agrees that its interest in this Lease shall be
        -------------
subordinate to any mortgage, deed of trust and/or other security indenture
hereafter placed upon the demised premises and to any and all advances made or
to be made thereunder and to the interest thereon made and all renewals,
replacements, and extensions thereof, but nothing herein contained shall be
deemed to alter or limit Tenant's rights as set forth in Section 19.6. Tenant
                                                         ------------
shall, at the request of Landlord or any mortgagee, trustee or holder of any
such security instrument, execute in writing an agreement subordinating its
rights under this Lease to the lien of such mortgage, deed of trust and/or other
security indenture. If any mortgagee, trustee or holder of such security
instrument elects to have the Tenant's interest in this Lease superior to any
such instrument by notice to Tenant, then this Lease should be deemed superior
to the lien of any such mortgage, deed of trust or security indenture whether
this Lease was executed before or after said mortgage, deed of trust and/or
security indenture.

        Section 19.18. Landlord reserves the right during the last six months of
        -------------
the demised term or the last six months of any extension hereof to enter the
property during reasonable business hours (after notice to Tenant and, at
Tenant's option, with a Tenant representative) for the purpose of showing the
demised premises (except restricted areas established by, or on behalf of, the
Federal Government for security purposes) to prospective tenants or purchasers
and to place signs (for the last year) on the demised premises advertising the
property for lease or sale. Notwithstanding the above, Landlord acknowledges
that Tenant has sensitive and confidential trade secrets (including its plant
layout and processes), and Landlord agrees not to show, or allow brokers or
other agents to show, the demised premises to any competitors of Tenant
identified by Tenant. In order to do so, Landlord agrees to give Tenant
reasonable advance notice of the name and affiliation of each visitor and the
prospective tenant or purchaser that they represent, and to provide Tenant with
reasonable evidence of such affiliations, so as to allow Tenant a reasonable
amount of time to verify this information and to object and refuse entry to any

                                      -19-

<PAGE>

competitor, its affiliates or representatives.

        Section 19.19. The following terms as used in this Lease shall have the
        -------------
following meaning:

        (a) "Unavoidable Delay" means any prevention, delay or stoppage due to
strike(s), lockout(s), labor dispute(s), act(s) of God, inability to obtain
labor or materials or reasonable substitutes therefor, governmental
restrictions, governmental regulations, governmental controls, enemy or hostile
governmental action, civil commotion, fire or other casualty, and other
conditions or causes beyond the reasonable control of the party obligated to
perform.

        Section 19.20. Tenant shall at any time during the demised term, within
        -------------
ten (10) business days after written notice from Landlord, execute, acknowledge
and deliver to Landlord's prospective mortgagee or prospective purchaser, an
estoppel certificate in writing (i) certifying that this Lease is unmodified and
in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, (ii) acknowledging that here are not, to Tenant's knowledge,
any uncured defaults on the part of Landlord hereunder, or specifying such
defaults, if any, as are claimed, and (iii) ratifying and certifying any such
other matters as may reasonably be requested. Any such certificate may be
conclusively relied upon by such prospective mortgagee or prospective purchaser.
Tenant's failure to deliver such certificate within such time shall be
conclusive upon Tenant that this Lease is in full force and effect, without
modification except as may be represented by Landlord; that, to Tenant's
knowledge, there are no uncured defaults in Landlord's performance, and that not
more than one month's rent has been paid in advance.

                                      -20-

<PAGE>

     IN WITNESS WHEREOF, the parties have executed this instrument.
TENANT:                               LANDLORD:
MEMRY CORPORATION,                    4065 ASSOCIATES, L.P.,
a Delaware corporation                a California limited partnership


By:    /s/ Robert P. Belcher          By:  /s/ Frances B. Nelson
   --------------------------------      -------------------------
Title: SVP Finance & Administration        Frances B. Nelson, Trustee
                                           General Partner

By:    /s/ Joseph Pasqualucci         By:  /s/ Robert L. Webster
   --------------------------------      -------------------------
Title: VP & GM, Eastern Operations         Robert L. Webster, Trustee
                                           General Partner

                                      -21-

<PAGE>


                                    EXHIBIT A

                               [legal description]

<PAGE>

                                    EXHIBIT B

                                    [survey]

<PAGE>

                                    EXHIBIT C

                       [items to be removed from premises]

<PAGE>

                                    AGREEMENT

         This AGREEMENT TO DEFER CERTAIN WORK ("Agreement") is entered into as
of August 27, 2001 by and between 4065 Associates L.P., a California limited
partnership ("Landlord") and Memry Corporation, a Delaware corporation ("Memry")
(Landlord and Memry, each a "Party", and together, the "Parties").

         WHEREAS, Frances E. Nelson, ("Nelson") as landlord, and Raychem
Corporation, a Delaware corporation ("Raychem") as tenant, entered into a lease
dated as of April 25, 1983, for the property located at 4065 Campbell Avenue in
Menlo Park, California ("Property"), which lease was amended by the First,
Second, Third and Fourth Amendments to Lease, dated as of May 8, 1989, June 10,
1992, June 7, 1995, and September 21, 1998, respectively (as so amended, the
"Old Lease"); Landlord is the successor-in-interest to Nelson under the Old
Lease;

         WHEREAS, the Old Lease will expire on September 30, 2001;

         WHEREAS, subsequent to entering into the Old Lease, and in connection
with entering into that certain Asset Purchase Agreement by and between Raychem
and Memry, dated as of May 10, 1996 ("Purchase Agreement"), Raychem, as
sublessor, subleased the entire premises demised under the Old Lease to Memry,
as sublessee, pursuant to that certain sublease dated as of June 28, 1996, as
amended by the Amendment to Sublease dated as of March 26, 1998 (as amended, the
"Sublease");

         WHEREAS, in connection with the expiration of the Old Lease, the
Landlord engaged Green Environment Inc. ("GEI") to perform an environmental site
assessment of the Property; GEI recommended that the conditioned air supply
heating, ventilating and air conditioning units and vents be cleaned to remove
particulates containing nickel and titanium as documented in Exhibit A to this
Agreement ("HVAC Cleaning") (the Parties hereto acknowledge and agree that the
HVAC Cleaning does not include cleaning of the HVAC work to be installed by
Landlord pursuant to Section 3.2. of the New Lease and which HVAC work Memry
does not plan to use during the term of the New Lease; Landlord agrees that so
long as Memry does not use the HVAC work described in Section 3.2. of the New
Lease, Landlord shall be solely responsible for any maintenance, cleaning and
repair of such HVAC work); and but for this Agreement, Landlord would require
that Raychem perform the HVAC Cleaning or cause the HVAC Cleaning to be
performed at the time of the termination of the Old Lease;

         WHEREAS, further, in connection with the expiration of the Old Lease,
the

                                       -1-

<PAGE>

Landlord has requested that Raychem perform, or reimburse to Landlord the cost
to perform, certain repairs to the parking lot and paint the exterior of the
building located on the Property the current estimates of which are documented
in Exhibit B to this Agreement ("Repairs");

         WHEREAS, pursuant to the Sublease, Raychem has requested that Memry
perform or cause to be performed the HVAC Cleaning and make the Repairs or cause
the Repairs to be made;

         WHEREAS, simultaneous herewith the Parties are entering into a lease
for the Property as of the date hereof ("New Lease");

         WHEREAS, Memry prefers that the HVAC Cleaning and the Repairs be
deferred until the termination of the New Lease to minimize disruption to its
business operations and to avoid possible duplication of costs that might be
incurred were it necessary to perform certain tasks more than once during the
combined terms of the Old Lease and the New Lease (including any extension
thereof); and

         WHEREAS, Landlord is amenable to the deferral of the HVAC Cleaning and
the Repairs pursuant to the terms and conditions of this Agreement.

         NOW, THEREFORE, incorporating the foregoing recitals and in
consideration of the promises and covenants herein made, the sufficiency of
which consideration is hereby acknowledged by the Parties, the Parties agree as
follows.

1.       HVAC Cleaning. Memry agrees to perform or cause to be performed the
         HVAC Cleaning at no cost to Landlord. Memry may, at its option, absorb
         the costs associated with the HVAC Cleaning or seek to recover all or a
         portion of such costs from Raychem.

2.       Repairs. Memry agrees to reimburse Landlord for (a) its costs of
         completing the painting-related Repairs, and (b) its costs of
         completing the parking-lot related Repairs, provided, in each case,
         that such Repairs are completed within sixty (60) days of the
         termination of the New Lease, subject to force majeure. For reference
         purposes only, and not to serve as a cap or limit on the amount that
         Memry shall reimburse Landlord for such Repairs, the Parties
         acknowledge that as of the date of this Agreement the estimated cost of
         the painting-related Repairs is $5,450.00 and the estimated cost of the
         parking-lot-related Repairs is $49,850.00. Memry may, at its option,
         absorb the costs associated with the

                                       -2-

<PAGE>

         Repairs or seek to recover all or a portion of such costs from Raychem.

3.       Fulfillment of Obligations Pursuant to the Old Lease. Landlord
         acknowledges and agrees that, to the best of Landlord's knowledge, as
         of the date of this Agreement the only outstanding obligations of
         Raychem pursuant to the terms of the Old Lease are the HVAC Cleaning
         and the Repairs. Upon the completion of the HVAC Cleaning and the
         Repairs, and the Exhibit C Work described below, Landlord waives any
         direct or indirect claim it might have against Memry arising out of or
         related to the Old Lease and/or the Sublease as of the date of this
         Agreement and releases Memry from any and all liability related in any
         way to the Old Lease and/or the Sublease and arising on or before the
         date of this Agreement, except nothing contained herein shall release
         Raychem or Memry from any indemnity obligations contained in the Old
         Lease or the Sublease.

4.       Completion of HVAC Cleaning, Repairs and Exhibit C Work. Memry agrees
         to perform or cause to be performed the HVAC Cleaning, the Repairs and
         the tasks enumerated on Exhibit C to the New Lease ("Exhibit C Work")
         and to have the HVAC Cleaning, the Repairs and the Exhibit C Work
         completed on or before the last day of the term of the New Lease.

5.       No Release of Raychem. Nothing in this Agreement is intended by the
         Parties to represent a waiver or release of Raychem by Memry and/or
         Landlord of any of Raychem's obligations under the Old Lease, the
         Sublease and the Purchase Agreement, including without limitation,
         Raychem's obligations with respect to the HVAC Cleaning or the Repairs.

                                       -3-

<PAGE>

6.       Cooperation. Upon Memry's request, Landlord covenants to provide full
         cooperation to Memry if, as, and when Memry seeks to obtain any
         contribution from Raychem toward the costs of the HVAC Cleaning and/or
         the Repairs, pursuant to the Old Lease, the Sublease or the Purchase
         Agreement, at no cost to Landlord. In the event that Memry requests
         that Landlord participate in litigation against Raychem in any way
         related to the HVAC Cleaning or the Repairs, Memry will reimburse
         Landlord for its out-of-pocket costs related to such litigation.

7.       Counterparts. This Agreement may be executed in counterparts, each
         counterpart will be deemed an original and all counterparts together
         will constitute a single agreement.

8.       Governing Law. This Agreement will be governed by the laws of the State
         of California without regard to its conflict of laws provisions.

9.       Exhibits. Exhibits A and B are by this reference incorporated into this
         Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement.

                                          4065 CAMPBELL ASSOCIATES L.P.


                                          By:  /s/ Frances B. Nelson
                                             ------------------------
                                             Frances B. Nelson, Trustee
                                             General Partner

                                          By:  /s/ Robert L. Webster
                                             -----------------------
                                             Robert L. Webster, Trustee
                                             General Partner


                                          MEMRY CORPORATION

                                          By:  /s/ Robert P. Belcher
                                             -----------------------
                                          Name:    Robert P. Belcher
                                               ---------------------
                                          Title:  SVP Finance & Administration
                                                ------------------------------


                                          By:  /s/ Joseph Pasqualucci
                                             ------------------------
                                          Name:   Joseph Pasqualucci
                                               ---------------------
                                          Title: VP & GM, Eastern Operations
                                                ----------------------------

                                       -4-

<PAGE>

                                                                       EXHIBIT A

                         [Environmental Site Assessment]

<PAGE>

                                                                       EXHIBIT B

                             [Proposals & Contracts]