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                                                                    EXHIBIT 10.5

                                     LEASE
                       (SINGLE TENANT;STAND-ALONE; NET)

                                    BETWEEN

                               THE IRVINE COMPANY

                                       AND

                               MICRUS CORPORATION

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                                     LEASE
                              (Single Tenant; Net)

      THIS LEASE is made as of the 20th day of August, 2002, by and between THE
IRVINE COMPANY, a Delaware corporation hereafter called "Landlord," ad MICRUS
CORPORATION, a Delaware corporation hereafter called "Tenant"

                        ARTICLE I. BASIC LEASE PROVISIONS

      Each reference in this Lease to the "Basic Lease Provisions" shall mean
and refer to the following collective terms, the application of which shall be
governed by the provisions in the remaining Articles of this Lease.

1.    Premises: 610 Palomar Avenue(The Premises are more particularly described
      in Section 2.1.)

2.    Address of Building: 610 Palomar Avenue, Sunnyvale, CA 94089

3.    Use-of Premises: General office, R&D, manufacturing, storage, shipping,
      receiving and other consistent-legal uses.

4.    Estimated Commencement Date: November 1, 2002

5.    Term: Sixty-Two (62) months, plus such additional days as may be required
      to cause this Lease to terminate on the final day of the calendar month.

6.    Basic Rent: Thirty Thousand Dollars ($30,000.00)per month.

      Basic Rent is subject to adjustment as follows:

      Commencing fourteen (14) months following the Commencement Date, the Basic
      Rent shall be Thirty Thousand Nine Hundred Dollars ($30,900.00) per month.

      Commencing twenty-six (26) months following the Commencement Date, the
      Basic Rent shall be Thirty-One Thousand Eight Hundred Twenty-Seven Dollars
      ($31,827.00) per month.

      Commencing thirty-eight (38) months following the Commencement Date, the
      Basic Rent shall be Thirty-Two Thousand Seven Hundred Eighty-One Dollars
      ($32,781.00) per month.

      Commencing fifty (50) months following the Commencement Date, the Basic
      Rent shall be Thirty-Three Thousand Seven Hundred Sixty-Five Dollars
      ($33,765.00) per month.

7.    Guarantor(s): N/A

8.    Floor Area: Approximately 20,000 rentable square feet

9.    Security Deposit: $33,765.00

10.   Broker(s): CB Richard Ellis

11.   Additional Insureds: Insignia/ESG, Int.

12.   Address for Payments and Notices:

      LANDLORD                                      TENANT

      THE IRVINE COMPANY                            Micrus Corporation
      c/o Insignia/ESG, Inc.                        610 Palomar Avenue
      160 West Santa Clara Street                   Sunnyvale, CA 94085
      Suite 1350
      San Jose, CA 95113

      with a copy of notices to:

      THE IRVINE COMPANY
      dba Office Properties
      8105 Irvine Center Drive, Suite 300
      Irvine, CA 92618
      Attn: Senior Vice President, Operation
      Office Properties

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13.   Tenant's Liability Insurance Requirement: $2,000,000.00

14.   Plan Approval Date: August 16, 2002





                                       2

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                              ARTICLE II. PREMISES

      SECTION 2.1. LEASED PREMISES. Landlord leases to Tenant and Tenant leases
from Landlord the Premises shown in Exhibit A (the "Premises"), containing
approximately the rentable square footage set forth as the "Floor Area" in Item
8 of the Basic Lease Provisions and known by the address set forth in Item 1 of
the Basic Lease Provisions. The Premises consist of all of the rentable square
footage within the Building identified in Item 1 of the Basic Lease Provisions
(the Building and all attendant Common Areas shall hereinafter be called the
"Site"), All references to "Floor Area" in this Lease shall mean the rentable
square footage set forth in Item 8 of the Basic Lease Provisions. The rentable
square footage set forth in Item 8 may include or have been adjusted by various
factors, including, without limitation, a load factor for any vertical
penetrations, stairwells or similar features or areas of the Building. Tenant
agrees that the Floor Area set forth in Item 8 shall be binding on Landlord and
Tenant for purposes of this Lease regardless of whether any future or differing
measurements of the Premises or the Building are consistent or inconsistent with
the Floor Area set forth in Item 8.

      SECTION 2.2. ACCEPTANCE OF PREMISES. Tenant acknowledges that except as
provided below, neither Landlord nor any representative of Landlord has made any
representation or warranty with respect to the Premises, the Building or the
Site or their respective suitability or fitness for any purpose, including
without limitation any representations or warranties regarding zoning or other
land use matters, and that neither Landlord nor any representative of Landlord
has made any representations or warranties regarding (i) what other tenants or
uses may be permitted or intended in the Building or the Site, (ii) any
exclusivity of use by Tenant with respect to its permitted use of the Premises
as set forth in Item 3 of the Basic Lease Provisions, or (iii) any construction
of portions of the Site not yet completed. Tenant further acknowledges that
neither Landlord nor any representative of Landlord has agreed to undertake any
alterations or additions or construct any improvements to the Premises except as
expressly provided in this Lease. As of the Commencement Date, Tenant shall be
conclusively deemed to have accepted the Premises and those portions of the
Building and Site in which Tenant has any rights under this Lease, which
acceptance shall mean that it is conclusively established that the Premises and
those portions of the Building and Site in which Tenant has any rights under
this Lease were in satisfactory condition and in conformity with the provisions
of this Lease, subject only to those defective or incomplete portions of the
Tenant Improvements constructed by Landlord pursuant to the Work Letter, if any,
attached hereto as Exhibit X ("Work Letter"), which Tenant shall have itemized
on a written punch list and delivered to Landlord within thirty (30) days after
the Commencement Date (as defined in Section 3.1) If no items are required of
Landlord under the Work Letter, Tenant shall be conclusively deemed to have
accepted the Premises, and those portions of the Building and Site in which
Tenant has any rights under this Lease, in their existing condition as of the
Commencement Date, and to have waived any and all right or claim regardless of
the nature thereof against Landlord arising out of the condition of the
Premises, the Building or the Site. Nothing contained in this Section shall
affect the commencement of the Term or the obligation of Tenant to pay rent.
Landlord shall diligently complete all punch list items of which it is notified
as provided above. Notwithstanding the foregoing, however, Landlord represents
that as of the Commencement Date, the Premises and all Building systems therein
shall be in good working order and condition.

      SECTION 2.3. BUILDING NAME AND ADDRESS. Tenant shall not utilize any name
selected by Landlord from time to time for the Building and/or the Site as any
part of Tenant's corporate or trade name. Landlord shall Leave the right to
change the name, address, number or designation of the Building or Site without
liability to Tenant.

                                ARTICLE III. TERM

      SECTION 3.1. GENERAL. The term of this Lease ("Term") shall be for the
period shown in Item 5 of the Basic Lease Provisions. Subject to the provisions
of Section 3.2 below, the Term shall commence ("Commencement Date") on the
earlier of (a) the date Tenant acquires possession of or commences use of the
Premises for any purposes other than any construction permitted to be performed
by Tenant pursuant to the Work letter, or (b) the first day of the calendar
month next following the date the Premises are tendered to Tenant, provided that
the Premises shall not be tendered to Tenant until the work to be performed by
Landlord pursuant to the Work Letter has been substantially completed (except
for minor punch list items that do not materially impair Tenant's use of the
Premises) and any approvals by relevant governmental authorities of the tenant
improvements constructed by Landlord pursuant to the Work Letter ("Tenant
Improvements") which are required for occupancy of the Premises have been
obtained (as evidenced by written approval thereof in accordance with the
building permits issued for the Tenant Improvements or issuance of a temporary
or final certificate of occupancy for the Premises). The date of which this
Lease is scheduled to terminate is referred to as the "Expiration Date." Within
ten (10) days after possession of the Premises is tendered to Tenant, the
parties shall memorialize on a form provided by Landlord the actual Commencement
Date and the Expiration Date of this Lease. Tenant's failure to execute that
form shall not affect the validity of Landlord's determination of those dates.

      SECTION 3.2. DELAY IN POSSESSION. If Landlord, for any reason whatsoever,
cannot deliver possession of the Premises to Tenant on or before the Estimated
Commencement Date as set forth in Item 4 of the Basic Lease Provisions
("Estimated Commencement Date"), this Lease shall not be void or voidable nor
shall Landlord be liable to Tenant for any resulting loss or damage. However,
Tenant shall not be liable for any rent and the Commencement Date shall not
occur until Landlord tenders possession of the Premises in accordance with
Section 3.1(b) above, except that if Landlord cannot so tender possession of the
Premises on or before the Estimated Commencement Date due to any action or
inaction of Tenant (including without limitation any Tenant Delay described in
the Work Letter, if any, attached to this Lease), then the Commencement Date
shall be deemed to have occurred and Landlord shall be entitled to full
performance by Tenant (including the payment of rent) from the date Landlord
would have been able to deliver the Premises to Tenant but for Tenant's action
or inaction, including without limitation any Tenant Delay described in the
attached Work Letter, if any.

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<PAGE>

      SECTION 3.3. RIGHT TO EXTEND THIS LEASE. Provided that there is no Event
of Default by Tenant under any provision of this Lease at the time of exercise
of the extension right granted herein, and provided further that Tenant is
occupying the entire Premises and has not assigned or sublet any of its interest
in this Lease, Tenant may extend the Term of this Lease for one (1) period of
sixty (60) months. Tenant shall exercise its right to extend the Term by and
only by delivering to Landlord, not less than nine (9) months or more than
twelve (12) months prior to the expiration date of the Term, Tenant's written
notice of its irrevocable commitment to extend (the "Commitment Notice"). Should
Tenant fail timely to deliver the Commitment Notice, then this extension right
shall thereupon lapse and be of no further force or effect. The Basic Rent
payable under the Lease during the extension of the Term shall be at ninety-five
percent (95%) of the prevailing market rental rate (including periodic
adjustments) for comparable and similarly improved buildings within the
Sunnyvale area as of the commencement of the extension period, as determined by
landlord based on a reasonable extrapolation of then-current leasing rates. In
no event shall the monthly Basic Rent payable for the extension period be less
than the Basic Rent payable during the month immediately preceding the
commencement of such extension period. Within twenty (20) days following receipt
of the Commencement Notice, Landlord shall notify Tenant in writing of
Landlord's determination of the prevailing market rental rate and, based
thereon, the Basic Rent for the extension period (the "Rent Notice"). Should the
parties fail to agree in writing on those rental terms within thirty (30) days
following delivery of the Rent Notice, then Tenant may, by written notice to
Landlord delivered not later than the end of that thirty (30) day period, elect
to submit the determination of the prevailing market rental rate for the
extension period to binding arbitration. Such arbitration shall, unless
otherwise agreed in writing by the parties, be with the American Arbitration
Association and shall be conducted pursuant to their Commercial Arbitration
Rules. Should Tenant fail timely to notify Landlord of its election to
arbitrate, then the rental rate set forth in Landlord's Rent Notice shall be
deemed accepted by Tenant. Promptly following the establishment of the Basic
Rent for the extension period, Landlord shall prepare an appropriate amendment
to the Lease memorializing the extension of the Term in accordance with the
foregoing, and Tenant shall duly execute and return same to Landlord within
fifteen (15) days. Should Tenant fail timely to execute and deliver the
amendment, then Landlord may, at its sole written election, either specifically
enforce the Commitment Notice or extinguish Tenant's right to extend the Term.
Should Landlord elect the latter, then this Lease shall terminate upon the
scheduled date of expiration and Tenant's rights under this paragraph shall be
of no further force or effect. Any attempt to assign or transfer any right or
interest created by this paragraph shall be void from its inception. Tenant
shall have no other right to extend the Term beyond the single sixty (60) month
extension created by this paragraph. Unless agreed to in a writing signed by
Landlord and Tenant, any extension of the Term, whether created by an amendment
to this Lease or by a holdover of the Premises by Tenant, or otherwise, shall be
deemed a part of, and not in addition to, any duly exercised extension period
permitted by this paragraph. Time is specifically made of the essence of this
paragraph.

                    ARTICLE IV. RENT AND OPERATING EXPENSES

      SECTION 4.1. BASIC RENT. From and after the Commencement Date, Tenant
shall pay to Landlord without deduction or offset, the rental amount for the
Premises shown in Item 6 of the Basic Lease Provisions (the "Basic Rent")
including subsequent adjustments, if any; provided, however, that Tenant shall
not be obligated to pay Basic Rent for the two (2) Lease months following the
Commencement Date. Any rental adjustment to Basic Rent shown in Item 6 shall be
deemed to occur on the specified monthly anniversary of the Commencement Date,
whether or not the Commencement Date occurs at the end of a calendar month. The
rent shall be due and payable in advance commencing on the Commencement Date (as
prorated for any partial month) and continuing thereafter on the first day of
each successive calendar month of the Term. No demand, notice or invoice shall
be required for the payment of Basic Rent. An installment of rent in the amount
of one (1) full month's Basic Rent at the initial rate specified in Item 6 of
the Basic Lease Provisions shall be delivered to Landlord concurrently with
Tenant's execution of the Lease and shall be applied against the Basic Rent
first due hereunder.

      SECTION 4.2. OPERATING EXPENSES.

      (a) Tenant shall pay to Landlord, as additional rent, Tenant's Share
of all Operating Expenses, as defined in Section 4.2(f), incurred by Landlord in
the operation of the Building and the Site. The term "Tenant's Share" means one
hundred percent (100%) of any Operating Expenses determined by Landlord to
benefit or relate the subsequently to the Building and/or the Site, plus an
allocated portion of any Operating Expenses, as determined from time to time by
Landlord, which benefit or relate both to the Building or the Site and to other
projects owned by Landlord an/or its affiliates. The full amount of any
management fee payable by Landlord for the management of Tenant's Premises that
is calculated as a percentage of the rent payable by Tenant shall be paid in
full by Tenant as additional rent.

      (b) Prior to the start of each full Expense Recovery Period (as defined in
this Section 4.2), Landlord shall give Tenant a written estimate of the amount
of Tenant's Share of Operating Expenses for the applicable Expense Recovery
Period. Failure to provide such estimate shall not relieve Tenant from its
obligation to pay Tenant's Share of Operating Expenses or estimated amounts
thereof, if and when Landlord provides such estimate or final payment amount.
Tenant shall pay the estimated amounts to Landlord in equal monthly
installments, in advance concurrently with payments of Basic Rent. If Landlord
has not furnished its written estimate for any Expense Recovery Period by the
time set forth above, Tenant shall continue to pay monthly the estimated
Tenant's Share of Operating Expenses in effect during the prior Expense Recovery
Period; provided that when the new estimate is delivered to Tenant, Tenant
shall, at the next monthly payment date, pay any accrued estimated Tenant's
Share of Operating Expenses based upon the new estimate. For purposes hereof,
"Expense Recovery Period" shall mean every twelve month period during the Term
(or portion thereof for the first and last lease years) commencing July 1 and
ending June 30, provided that Landlord shall have the right to change the date
on which an Expense Recovery Period commences in which event appropriate
reasonable adjustments shall be made to Tenant's Share of Operating Expenses so
that the amount payable by Tenant shall not materially vary as a result of such
change.

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      (c) Within one hundred twenty (120) days after the end of each Expense
Recovery Period, Landlord shall furnish to Tenant a statement showing in
reasonable detail the actual or prorated Tenant's Share of Operating Expenses
incurred by Landlord during the period, and the parties shall within thirty (30)
days thereafter make any payment or allowance necessary to adjust Tenant's
estimated payments of Tenant's Share of Operating Expenses, if any, to the
actual Tenant's Share of Operating Expenses as shown by the annual statement.
Any delay or failure by Landlord in delivering any statement hereunder shall not
constitute a waiver of Landlord's right to require Tenant to pay Tenant's Share
of Operating Expenses pursuant hereto. Any amount due Tenant shall be credited
against installments next coming due under this Section 4.2, and any deficiency
shall be paid by Tenant together with the next installment. Should Tenant fail
to object in writing to Landlord's determination of Tenant's Share of Operating
Expenses within sixty (60) days following delivery of Landlord's expense
statement, Landlord's determination of Tenant's Share of Operating Expenses for
the applicable Expense Recovery Period shall be conclusive and binding on the
parties for all purposes and any future claims to the contrary shall be barred.

      (d) Even though this Lease has terminated and the Tenant has vacated the
Premises, when the final determination is made of Tenant's Share of Operating
Expenses for the Expense Recovery Period in which this Lease terminates, Tenant
shall within thirty (30) days of written notice pay the entire increase over the
estimated Tenant's Share of Operating Expenses already paid. Conversely, any
overpayment by Tenant shall be rebated by Landlord to Tenant not later than
thirty (30) days after such final determination.

      (e) If, at any time during any Expense Recovery Period, any one or more of
the Operating Expenses are increased to a rate(s) or amount(s) in excess of the
rate(s) or amount(s) used in calculating the estimated Tenant's Share of
Operating Expenses for the year, then the estimate of Tenant's Share of
Operating Expenses may be increased by written notice from Landlord for the
month in which such rate(s) or amount(s) becomes effective and for all
succeeding months by an amount equal to Tenant's Share of the increase. If
Landlord gives Tenant written notice of the amount or estimated amount of the
increase, the month in which the increase will or has become effective, then
Tenant shall pay the increase to Landlord as a part of Tenant's monthly payments
of the estimated Tenant's share of Operating Expenses as provided in Section
4.2(b), commencing with the month following Tenant's receipt of Landlord's
notice. In addition, Tenant shall pay upon written request any such increases
which were incurred prior to the Tenant commencing to pay such monthly increase.

      (f) The term "OPERATING EXPENSES" shall mean and include all Site Costs,
as defined in subsection (g), and Property Taxes, as defined in subsection (h).

      (g) The term "Site Costs" shall include all expenses of operation, repair
and maintenance of the Building and the Site, including without limitation all
appurtenant Common Areas (as defined in Section 6.2), and shall include the
following charges by way of illustration but not limitation: water and sewer
charges; insurance premiums and deductibles (provided that Tenant shall not be
required to reimburse Landlord for casualty deductibles exceeding $10,000.00 per
occurrence) and/or reasonable premium and deductible equivalents should Landlord
elect to self-insure all or any portion of any risk that Landlord is authorized
to insure hereunder; license, permit, and inspection fees; heat; light; power,
air conditioning; supplies; materials; equipment; tools; the cost of any
environmental, insurance, tax or other consulted utilized by Landlord in
connection with the Building and/or Site; establishment of reasonable reserves
for replacements and/or repairs; costs incurred in connection with compliance
with any laws or changes in laws applicable to the Building or the Site; the
cost of any capital investments or replacements (other than tenant improvements
for specific tenants) to the extent of the amortized amount thereof over the
useful life of such capital investments or replacements calculated at a market
cost of funds, all as determined by Landlord, for each such year of useful life
during the Term; costs associated with the maintenance of an air conditioning,
heating and ventilation service agreement; labor; reasonably allocated wages and
salaries, fringe benefits, and payroll taxes for administrative and other
personnel directly applicable to the Building and/or Site, including both
Landlord's personnel and outside personnel; any expense incurred pursuant to
Sections 6.1, 6.2, 6.4, 7.2, and 10.2; and a reasonable overhead/management fee
for the professional operation of the Building and the Site that will be
consistent with the fee charged by other landlords in the vicinity but in no
event will exceed three and one-half percent (3.5%) of gross revenues. It is
understood and agreed that Site Costs may include competitive charges for direct
services provided by any subsidiary, division or affiliate of Landlord.

      (h) The term "PROPERTY TAXES" as used herein shall include any form of
federal, state, county or local government or municipal taxes, fees, charges or
other impositions of every kind (whether general, special, ordinary or
extraordinary) related to the ownership, leasing or operation of the Premises,
Building or Site, including without limitation, the following: (i) all real
estate taxes or personal property taxes, as such property taxes may be
reassessed from time to time; and (ii) other taxes, charges and assessments
which are levied with respect to this Lease or to the Building and/or the Site,
and any improvements, fixtures and equipment and other property of Landlord
located in the Building and/or the Site, (iii) all assessments and fees for
public improvements, services, and facilities and impacts thereon, including
without limitation arising out of any Community Facilities Districts, "Mello
Roos" districts, similar assessment districts, and any traffic impact mitigation
assessments or fees; (iv) any tax, surcharge or assessment which shall be levied
in addition to or in lieu of real estate or personal property taxes, other than
taxes covered by Article VIII; and (v) taxes based on the receipt of rent
(including gross receipts or sales taxes applicable to the receipt of rent), and
(vi) costs and expenses incurred in contesting the amount or validity of any
Property Tax by appropriate proceedings. Notwithstanding the foregoing, general
net income or franchise taxes imposed against Landlord shall be excluded.

      (i) Notwithstanding the foregoing, Operating Expenses shall exclude the
following:

                  (i) Any ground lease rental;

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                  (ii) Costs incurred by Landlord for repairs, replacements and/
or restoration to or of the Building to the extent that Landlord is reimbursed
by insurance or condemnation proceeds or by Tenant (other than through Operating
Expense pass-throughs), warrantors or other third persons;

                  (iii) Costs, including permit, license and inspection costs,
incurred with respect to the installation of tenant improvements;

                  (iv) Salaries and bonuses of officers and executives of
Landlord above the level of Building manager, except that the cost of a senior
manager may be allocated on a reasonable pro rata basis;

                  (v) Capital expenditures as determined in accordance with
generally accepted accounting principles, consistently applied; provided,
however, that the following costs (amortized with interest at a reasonable rate
on the unamortized balance) of the following capital improvements shall be
included in the definition of Operating Expenses: (i) capital improvements made
to comply with any law or governmental regulation enacted after the date of this
Lease; and (ii) any other capital improvements which reduce Operating Expenses,
but only to the extent of the annual cost savings;

                  (vi) Brokers commissions, finders' fees, attorneys' fees, and
entertainment and travel expenses;

                  (vii) Costs, fines or penalties incurred by Landlord due to
the violation by Landlord of any governmental rule or regulation (provided that
costs of complying with such governmental requirements may be included unless
otherwise provided herein);

                  (viii) Overhead and profit increments paid to subsidiaries or
affiliates of Landlord for services provided to the Building to the extent the
same exceeds the costs that would generally be charged for such services if
rendered on a competitive basis (based upon a standard of similar office
buildings in the general market area of the Premises) by unaffiliated third
parties capable of providing such service;

                  (ix) Interest on debt or amortization on any mortgage or
mortgages encumbering the Building;

                  (x) Landlord's general corporate overhead, except as it
relates to the specific management of the Building;

                  (xi) Costs of installing the initial landscaping for the
Building and Project; and

                  (xii) Advertising and promotional expenditures.

      SECTION 4.3. SECURITY DEPOSIT. Concurrently with Tenant's delivery of this
Lease, Tenant shall deposit with Landlord the sum, if any, stated in Item 9 of
the Basic Lease Provisions, to be held by Landlord as security for the full and
faithful performance of all of Tenants obligations under this Lease (the
"Security Deposit"). Landlord shall not be required to keep this Security
Deposit separate from its general funds, and Tenant shall not be entitled to
interest on the Security Deposit. Subject to the last sentence of this Section,
the Security Deposit shall be understood and agreed to be the property of
Landlord upon Landlord's receipt thereof, and may be utilized by Landlord in its
sole and absolute discretion towards the payment of all expenses by Landlord for
which Tenant would be required to reimburse Landlord under this Lease. Upon any
Event of Default by Tenant (as defined in Section 14.1), Landlord may, in its
sole and absolute discretion, retain, use or apply the whole or any part of the
Security Deposit to pay any sum which Tenant is obligated to pay under this
Lease, sums that Landlord may expend or be required to expend by reason of the
Event of Default by Tenant or any loss or damage that Landlord may suffer by
reason of the Event of Default or costs incurred by Landlord in connection with
the repair or restoration of the Premises pursuant to Section 15.3 of this Lease
upon expiration or earlier termination of this Lease. In no event shall Landlord
be obligated to apply the Security Deposit upon an Event of Default and
Landlord's rights and remedies resulting from an Event of Default, including
without limitation, Tenant's failure to pay Basic Rent, Tenant's Share of
Operating Expenses or any other amount due to Landlord pursuant to this Lease,
shall not be diminished or altered in any respect due to the fact that Landlord
is holding the Security Deposit. If any portion of the Security Deposit is
applied by Landlord as permitted by this Section, Tenant shall within five (5)
days after written demand by Landlord deposit cash with Landlord in an amount
sufficient to restore the Security Deposit to its original amount. Any unapplied
portion of the Security Deposit shall be returned to Tenant (or, at Landlord's
option, to the last assignee of Tenant's interest in this Lease) within thirty
(30) days after the expiration of the Term and Tenant's vacation of the
Premises, provided that should Landlord require additional time to determine
whether all amounts due from Tenant in accordance with this Lease have been paid
in full, Landlord shall have such additional time as is necessary, up to 60
days, to make such determination before it is required to return the unapplied
portion of the Security Deposit. Tenant agrees that Landlord may retain the
Security Deposit to the extent and until such time as all amounts due from
Tenant in accordance with this Lease have been determined and paid in full and
Tenant agrees that Tenant shall have no claim against Landlord for Landlord's
retaining such Security Deposit to the extent provided in this Section.

      SECTION 4.4. LETTER OF CREDIT. In addition to the Security Deposit
described above, Tenant shall deliver to Landlord, concurrently with Tenants
execution of this Lease, a letter of credit in the amount of Two Hundred Fifty
Thousand Dollars ($250,000.000), which letter of credit shall be in form and
with the substance of Exhibit G attached hereto. The letter of credit shall be
issued by a financial institution reasonably acceptable to Landlord with a
branch in the Sunnyvale area, California, at which draws on the letter of credit
will be accepted. The letter of credit shall provide for automatic yearly
renewals throughout the Term of this Lease and shall have an

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outside expiration date (if any) that is not earlier than thirty (30) days after
the expiration of the Lease Term. In the event the letter of credit is not
continuously renewed through the period set forth above, or upon an Event of
Default, including specifically Tenant's failure to pay rent or to abide by its
obligations under Sections 7.1 and 15.3 below, Landlord shall be entitled to
draw upon said letter of credit by the issuance of Landlord's sole written
demand to the issuing financial institution, which demand shall include a signed
certification by an officer of Landlord that Landlord is entitled to draw on the
Letter of Credit under the terms of the Lease. Any such draw shall be without
waiver of any rights Landlord may have under this Lease or at law or in equity
as a result of any default hereunder by Tenant. Provided there has not been an
Event of Default by Tenant, Landlord shall, upon written request by Tenant,
authorize annual reductions to the Letter of Credit in the amount of Sixty-Two
Thousand Five Hundred Dollars ($62,500.00) each as of January 1 of each year
commencing January 1, 2004.

                                 ARTICLE V. USES

      SECTION 5.1. USE. Tenant shall use the Premises and Common Areas only for
the purposes stated in Item 3 of the Basic Lease Provisions, all in accordance
with applicable laws and restrictions and pursuant to approvals to be obtained
by Tenant from all relevant and required governmental agencies and authorities.
The parties agree that any contrary use shall be deemed to cause material and
irreparable harm to Landlord and shall entitle Landlord to injunctive relief in
addition to any other available remedy. Tenant, at its expense, shall procure,
maintain and make available for Landlord's inspection throughout the Term, all
governmental approvals, licenses and permits required for the proper and lawful
conduct of Tenant's permitted use of the Premises. Tenant shall not use or allow
the Premises to be used for any unlawful purpose, nor shall Tenant permit any
nuisance or commit any waste in the Premises or the Site. Tenant shall not
perform any work or conduct any business whatsoever in the Site other than
inside the Premises. Tenant shall comply at its expense with all present and
future laws, ordinances, restrictions, regulations, orders, rules and
requirements of all governmental authorities that pertain to Tenant or its use
of the Premises, including without limitation all federal and state occupational
health and safety requirements, whether or not Tenant's compliance will
necessitate expenditures or interfere with its use and enjoyment of the
Premises. Tenant shall promptly upon demand reimburse Landlord for any
additional insurance premium charged by reason of Tenant's failure to comply
with the provisions of this Section, and shall indemnify Landlord from any
liability and/or expense resulting from Tenant's noncompliance.

      SECTION 5.2. SIGNS. Except as approved in writing by Landlord, in its sole
and absolute discretion, Tenant shall have no right to maintain signs in any
location in, on or about the Premises, the Building or the Site and shall not
place or erect any signs that are visible from the exterior of the Building. The
size, design, graphics, material, style, color and other physical aspects of any
permitted sign shall be subject to Landlord's written determination, as
determined solely by Landlord, prior to installation, that signage is in
compliance with any covenants, conditions or restrictions encumbering the
Premises and Landlord's signage program for the Site, as in effect from time to
time and approved by the City in which the Premises are located ("Signage
Criteria"). Prior to placing or erecting any such signs, Tenant shall obtain
and deliver to Landlord a copy of any applicable municipal or other governmental
permits and approvals and comply with any applicable insurance requirements for
such signage. Tenant shall be responsible for the cost of any permitted sign,
including the fabrication, installation, maintenance and removal thereof and the
cost of any permits therefor. If Tenant fails to maintain its sign in good
condition, or if Tenant fails to remove same upon termination of this Lease and
repair and restore any damage caused by the sign or its removal, Landlord may do
so at Tenant's expense. Landlord shall have the right to temporarily remove any
signs in connection with any repairs or maintenance in or upon the Building. The
term "sign" as used in this Section shall include all signs, designs, monuments,
displays, advertising materials, logos, banners, projected images, pennants,
decals, pictures, notices, lettering, numerals or graphics.

      SECTION 5.3 HAZARDOUS MATERIALS.

      (a) For purposes of this Lease, the term "Hazardous Materials" includes
(i) any "hazardous material" as defined in Section 25501(o) of the California
Health and Safety Code, (ii) hydrocarbons, polychlorinated biphenyls or
asbestos, (iii) any toxic or hazardous materials, substances, wastes or
materials as defined pursuant to any other applicable state, federal or local
law or regulation, and (iv) any other substance or matter which may result in
liability to any person or entity as result of such person's possession, use,
release or distribution of such substance or matter under any statutory or
common law theory.

      (b) Tenant shall not cause or permit any Hazardous Materials to be brought
upon, stored, used, generated, released or disposed of on, under, from or about
the Premises (including without limitation the soil and groundwater thereunder)
without the prior written consent of Landlord, which consent may be given or
withheld in Landlord's sole and absolute discretion. Notwithstanding the
foregoing, Tenant shall have the right, without obtaining prior written consent
of Landlord, to utilize within the Premises a reasonable quantity of standard
office products ("Normal Office Products") that may contain Hazardous Materials
(such as photocopy toner, "White Out", and the like), provided however, that (i)
Tenant shall maintain such products in their original retail packaging, shall
follow all instructions on such packaging with respect to the storage, use and
disposal of such products, and shall otherwise comply with all applicable laws
with respect to such products, and (ii) all of the other terms and provisions of
this Section 5.3 shall apply with respect to Tenant's storage, use and disposal
of all such products. Landlord may, in its sole and absolute discretion, place
such conditions as Landlord deems appropriate with respect to Tenant's use of
any Hazardous Materials (other than Normal Office Products) and may further
require that Tenant demonstrate that any such Hazardous Materials are necessary
or useful to Tenant's business and will be generated, stored, used and disposed
of in a manner that complies with all applicable laws and regulations pertaining
thereto and with good business practices. Tenant understands that Landlord may
utilize an environmental consultant to assist in determining conditions of
approval in connection with the storage, generation, release, disposal or use of
Hazardous Materials (other than Normal Office Products) by Tenant on or about
the Premises, and/or to conduct periodic inspections of the storage, generation,
use, release and/or disposal of such Hazardous Materials by Tenant

                                       7

<PAGE>

on and from the Premises, and Tenant agrees that any costs incurred by Landlord
in connection therewith shall be reimbursed by Tenant to Landlord as additional
rent hereunder upon demand.

      (c) Prior to the execution of this Lease, Tenant shall complete, execute
and deliver to Landlord an Environmental Questionnaire and Disclosure Statement
(the "Environmental Questionnaire") in the form of Exhibit B attached hereto.
The completed Environmental Questionnaire shall be deemed incorporated into this
Lease for all purposes, and Landlord shall be entitled to rely fully on the
information contained therein. On each anniversary of the Commencement Date
until the expiration or sooner termination of this Lease, Tenant shall disclose
to Landlord in writing the names and amounts of all Hazardous Materials which
were stored, generated, used, released and/or disposed of on, under or about the
Premises for the twelve-month period prior thereto, and which Tenant desires to
store, generate, use, release and/or dispose of on, under or about the Premises
for the succeeding twelve-month period. In addition, to the extent Tenant is
permitted to utilize Hazardous Materials upon the Premises, Tenant shall
promptly provide Landlord with complete and legible copies of all the following
environmental documents relating thereto: reports filed pursuant to any
self-reporting requirements; permit applications, permits, monitoring reports,
emergency response or action plans, workplace exposure and community exposure
warnings or notices and all other reports, disclosures, plans or documents (even
those which may be characterized as confidential) relating to water discharges,
air pollution, waste generation or disposal, and underground storage tanks for
Hazardous Materials; orders, reports, notices, listings and correspondence (even
those which may be considered confidential) of or concerning the release,
investigation of, compliance, cleanup, remedial and corrective actions, and
abatement of Hazardous Materials; and all complaints, pleadings and other legal
documents filed by or against Tenant related to Tenant's use, handling, storage,
release and/or disposal of Hazardous Materials.

      (d) Landlord and its agents shall have the right, but not the obligation,
to inspect, sample and/or monitor the Premises and/or the soil or groundwater
thereunder at any time to determine whether Tenant is complying with the terms
of this Section 5.3, and in connection therewith Tenant shall provide Landlord
with full access to all facilities, records and personnel related thereto.
Landlord's activities pursuant to the preceding sentence shall be at Landlord's
cost, with reasonable advance written or oral notice to Tenant, and with minimal
disruption of Tenant's use and occupancy of the Premises. If Tenant is not in
compliance with any of the provisions of this Section 5.3, or in the event of a
release of any Hazardous Material on, under or about the Premises by Tenant, its
agents, employees, contractors, licensees or invites, Landlord and its agents
shall have the right, but not the obligation, without limitation upon any of
Landlord's other rights and remedies under this Lease, to immediately enter upon
the Premises without notice and to discharge Tenant's obligations under this
Section 5.3 at Tenant's expense, including without limitation the taking of
emergency or long-term remedial action. Landlord and its agents shall endeavor
to minimize interference with Tenant's business in connection therewith, but
shall not be liable for any such interference. In addition, Landlord, at
Tenant's expense, shall have the right, but not the obligation, to join and
participate in any legal proceedings or actions initiated in connection with any
claims arising out of the storage, generation, use, release and/or disposal by
Tenant or its agents, employees, contractors, licensees or invitees of Hazardous
Materials on, under, from or about the Premises.

      (e) If the presence of any Hazardous Materials on, under, from or about
the Premises or the Site introduced by Tenant or its agents, employees,
contractors, licensees or invitees results in (i) injury to any person, (ii)
injury to or any contamination of the Premises or the Site, or (iii) injury to
or contamination of any real or personal property wherever situated, Tenant, at
its expense, shall promptly take all actions necessary to return the Premises
and the Site and any other affected real or personal property owned by Landlord
to the condition existing prior to the introduction of such Hazardous Materials
and to remedy or repair any such injury or contamination, including without
limitation, any cleanup, remediation, removal, disposal, neutralization or other
treatment of any such Hazardous Materials. Notwithstanding the foregoing, Tenant
shall not, without Landlord's prior written consent, which consent shall not be
unreasonably withheld, take any remedial action in response to the presence of
any Hazardous Materials on, from, under or about the Premises or the Site or any
other affected real or personal property owned by Landlord or enter into any
similar agreement, consent, decree or other compromise with any governmental
agency with respect to any Hazardous Materials claims; provided however,
Landlord's prior written consent shall not be necessary in the event that the
presence of Hazardous Materials on, under or about the Premises or the Site or
any other affected real or personal property owned by Landlord (i) imposes an
immediate threat to the health, safety or welfare of any individual and (ii) is
of such a nature that an immediate remedial response is necessary and it is not
possible to obtain Landlord's consent before talking such action. To the fullest
extent permitted by law, Tenant shall indemnify, hold harmless, protect and
defend (with attorneys acceptable to Landlord) Landlord and any successors to
all or any portion of Landlord's interest in the Premises and the Site and any
other real or personal property owned by Landlord from and against any and all
liabilities, losses, damages, diminution in value, judgments, fines, demands,
claims, recoveries, deficiencies, costs and expenses (including without
limitation attorneys' fees, court costs and other professional expenses),
whether foreseeable or unforeseeable, arising directly or indirectly out of the
use, generation, storage, treatment, release, on- or off-site disposal or
transportation of Hazardous Materials on, into, from, under or about the
Premises, the Building or the Site by Tenant, its agents, employees,
contractors, licensees or invitees during the Term. Such indemnity obligation
shall specifically include, without limitation, the cost of any required or
necessary repair, restoration, cleanup or detoxification of the Premises, the
Building and the Site and any other real or personal property owned by Landlord,
the preparation of any closure or other required plans, whether or not such
action is required or necessary during the Term or after the expiration of this
Lease and any loss of rental due to the inability to lease the Premises or any
portion of the Building or Site as a result of such Hazardous Material or
remediation thereof. If it is at any time discovered that Hazardous Materials
have been released on, into, from, under or about the Premises, the Building or
the Site during the Term by Tenant or its agents, employees, contractors
licensees or invitees, Tenant shall, at Landlord's request, immediately prepare
and submit to Landlord a comprehensive plan, subject to Landlord's approval,
specifying the actions to be taken by Tenant to return the Premises, the
Building or the Site to the condition existing prior to the introduction of such
Hazardous Materials. Upon Landlord's approval of such cleanup plan, Tenant
shall, at its

                                       8

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expense, and without limitation of any rights and remedies of Landlord under
this Lease or at law or in equity, immediately implement such plan and proceed
to cleanup such Hazardous Materials in accordance with all applicable laws and
as required by such plan and this Lease. The provisions of this Section 5.3(e)
shall expressly survive the expiration or sooner termination of this Lease.

      (f) Landlord hereby discloses to Tenant, and Tenant hereby acknowledges,
certain facts relating to Hazardous Materials at the Site known by Landlord to
exist as of the date of this Lease, as more particularly described in Exhibit C
attached hereto. Tenant shall have no liability or responsibility with respect
to the Hazardous Materials facts described in Exhibit C, nor with respect to any
Hazardous Materials which Tenant proves were neither released on the Premises
during the Term nor caused or permitted by Tenant, its agents, employees,
contractors, licensees or invitees. Notwithstanding the preceding two sentences,
Tenant agrees to notify its agents, employees, contractors, licensees, and
invitees as required by law of any exposure or potential exposure to Hazardous
Materials at the Premises that Landlord brings to Tenant's attention.

                       ARTICLE VI. COMMON AREAS; SERVICES

      SECTION 6.1. UTILITIES AND SERVICES. Tenant shall be responsible for and
shall pay promptly, directly to the appropriate supplier, all charges for water,
gas, electricity, sewer, heat, light, power, telephone, telecommunications
service, refuse pickup, janitorial service, interior landscape maintenance and
all other utilities, materials and services furnished directly to Tenant or the
Premises or used by Tenant in, on or about the Premises during the Term,
together with any taxes thereon. If any utilities or services are not separately
metered or assessed to Tenant, Landlord shall make a reasonable determination of
Tenant's proportionate share of the cost of such utilities and services,
including without limitation, after-hours HVAC usage, and Tenant shall pay such
amount to Landlord, as an item of additional rent, within ten (10) days after
receipt of Landlord's statement or invoice therefor. Alternatively, Landlord may
elect to include such cost in the definition of Site Costs in which event Tenant
shall pay Tenant's proportionate share of such costs in the manner set forth in
Section 4.2. Landlord shall not be liable for damages or otherwise for any
failure or interruption of any utility or other service furnished to the
Premises that is beyond the reasonable control of Landlord, and no such failure
or interruption shall be deemed an eviction or entitle Tenant to terminate this
Lease or withhold or abate any rent due hereunder. Landlord shall at all
reasonable times, upon reasonable prior written or oral notice to Tenant, have
free access to the Building and Premises to install, maintain, repair, replace
or remove all electrical and mechanical installations of Landlord, provided that
Landlord shall minimize any disruption to Tenant's use of the Premises. Tenant
acknowledges that the costs incurred by Landlord related to providing
above-standard utilities to Tenant, including, without limitation, telephone
lines, may be charged to Tenant.

      SECTION 6.2. OPERATION AND MAINTENANCE OF COMMON AREAS. During the Term,
Landlord shall operate all Common Areas within the Site. The term "Common Areas"
shall mean all areas of the Site on the exterior of the Building, including
without limitation parking areas and structures, driveways, sidewalks,
landscaped and planted areas.

      SECTION 6.3. USE OF COMMON AREAS. The occupancy by Tenant of the Premises
shall include the use of the Common Areas as provided in this Article VI,
subject, however, to compliance with all reasonable rules and regulations as are
prescribed from time to time by Landlord. Landlord shall operate and maintain
the Common Areas in the manner Landlord may determine to be appropriate. All
costs incurred by Landlord for the maintenance and operation of the Common Areas
shall be included in Site Costs. Landlord shall at all times during the Term
have exclusive control of the Common Areas, and may restrain or permit any use
or occupancy, except as authorized by Landlord's rules and regulations. Tenant
shall keep the Common Areas clear of any obstruction or unauthorized use related
to Tenant's operations or use of Premises, including without limitation,
planters and furniture, unless otherwise approved in writing by Landlord.
Nothing in this Lease shall be deemed to impose liability upon Landlord for any
damage to or loss of the property of, or for any injury to, Tenant, its invitees
or employees.

      SECTION 6.4. PARKING. Tenant shall be entitled to use the vehicle parking
spaces on those portions of the Common Areas established by Landlord for
parking. Tenant shall not permit or allow any vehicles that belong to or are
controlled by Tenant or Tenant's employees, suppliers, shippers, customers or
invitees to be loaded, unloaded or parked in areas other than those designated
by Landlord for such activities. Nothing contained in this Lease shall be deemed
to create liability upon Landlord for any damage to motor vehicles of visitors
or employees, for any loss of property from within those motor vehicles, or for
any injury to Tenant, its visitors or employees, unless ultimately determined to
be caused by the sole active negligence or willful misconduct of Landlord.
Landlord shall have the right to construct, maintain and operate lighting
facilities within the parking areas; to change the area, level, location and
arrangement of the parking areas and improvements therein so long as Tenant's
parking rights are not materially adversely affected, and to do and perform such
other acts in and to the parking areas and improvements therein as, in the use
of good business judgment, Landlord shall determine to be advisable. Any person
using the parking area shall observe all directional signs and arrows and any
posted speed limits. Parking areas shall be used only for parking vehicles.
Tenant shall be liable for any damage to the parking areas caused by Tenant or
Tenant's employees, suppliers, shippers, customers or invitees, including
without limitation damage from excess oil leakage. Tenant shall have no right to
install any fixtures, equipment or personal property in the parking areas.

      SECTION 6.5. CHANGES AND ADDITIONS BY LANDLORD. Landlord reserves the
right to make alterations or additions to the Building or the Site, or to the
attendant fixtures, equipment and Common Areas. Landlord may at any time
relocate or remove any of the driveways, sidewalks, landscaped and planted areas
and parking areas of the Common Areas, from time to time. No change shall
entitle Tenant to any abatement of rent or

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<PAGE>

other claim against Landlord, provided that the change does not deprive Tenant
of reasonable access to or use of the Premises.

                      ARTICLE VII. MAINTAINING THE PREMISES

      SECTION 7.1. TENANT'S MAINTENANCE AND REPAIR. Tenant at its sole expense
shall maintain and make all repairs and replacements necessary to keep the
Premises and the Building in the condition as existed on the Commencement Date
(or on any later date that the improvements may have been installed), excepting
ordinary wear and tear, including without limitation all interior and exterior
glass, windows, doors, door closures, hardware, fixtures, electrical, plumbing,
fire extinguisher equipment and other equipment. Any damage or deterioration of
the Premises shall not be deemed ordinary wear and tear if the same could have
been prevented by good maintenance practices by Tenant. As part of its
maintenance obligations hereunder, Tenant shall, at Landlord's request, provide
Landlord with copies of all maintenance schedules, reports and notices prepared
by, for or on behalf of Tenant. All repairs and replacements shall be at least
equal in quality to the original work, shall be made only by a licensed
contractor approved in writing in advance by Landlord and shall be made only at
the time or times approved by Landlord. Any contractor utilized by Tenant shall
be subject to Landlord's standard requirements for contractors, as modified from
time to time. Landlord may impose reasonable restrictions and requirements with
respect to repairs, as provided in Section 7.3, and the provisions of Section
7.4 shall apply to all repairs. Alternatively, Landlord may elect to perform any
repair and maintenance of the electrical and mechanical systems and any air
conditioning, ventilating or heating equipment serving the Premises and include
the cost thereof as part of Tenant's Share of Operating Expenses. If Tenant
fails to properly maintain and/or repair the Premises or the Building as herein
provided following Landlord's notice and the expiration of the applicable cure
period (or earlier if Landlord determines that such work must be performed prior
to such time in order to avoid damage to the Premises or Building or other
detriment), then Landlord may elect, but shall have no obligation, to perform
any repair or maintenance required hereunder on behalf of Tenant and at Tenant's
expense, and Tenant shall reimburse Landlord upon demand for all costs incurred
upon submission of an invoice.

      SECTION 7.2. LANDLORD'S MAINTENANCE AND REPAIR. Subject to Section 7.1 and
Article XI, Landlord shall provide service, maintenance and repair with respect
to any air conditioning, ventilating or heating equipment which serves the
Premises and shall maintain in good repair the roof, foundations, footings, the
exterior surfaces of the exterior walls of the Building (excluding exterior
glass), and the structural, electrical and mechanical systems, except that
Tenant at its expense shall make all repairs which Landlord deems reasonably
necessary as a result of the act or negligence of Tenant, its agents, employees,
invites, subtenants or contractors. Landlord shall have the right to employ or
designate any reputable person or firm, including any employee or agent of
Landlord or any of Landlord's affiliates divisions, to perform any service,
repair or maintenance function. Landlord need not make any other improvements or
repairs except as specifically required under this Lease, and nothing contained
in this Section shall limit Landlord's right to reimbursement from Tenant for
maintenance, repair costs and replacement costs as provided elsewhere in this
Lease. Tenant understands that it shall not make repairs at Landlord's expense
or by rental offset. Tenant further understands that Landlord shall not be
required to make any repairs to the roof, foundations, footings, the exterior
surfaces of the exterior walls of the Building (excluding exterior glass), or
structural, electrical or mechanical systems unless and until Tenant has
notified Landlord in writing of the need for such repair and Landlord shall have
a reasonable period of time thereafter to commence and complete said repair, if
warranted. All costs of any maintenance, repairs and replacement on the part of
Landlord provided hereunder shall be considered part of Site Costs, subject to
all applicable limitations on and exclusions from Site Costs. Tenant further
agrees that if Tenant fails to report any such need for repair in writing within
sixty (60) days of its discovery by Tenant, Tenant shall be responsible for any
costs and expenses and other damages related to such repair which are in excess
of those which would have resulted had such need for repair been reported to
Landlord within such sixty (60) day period.

      SECTION 7.3. ALTERATIONS. Except as otherwise provided in this Section,
Tenant shall make no alterations, additions, fixtures or improvements
("Alterations") to the Premises or the Building without the prior written
consent of Landlord which consent may be granted or withheld in Landlord's sole
and absolute discretion. Landlord shall not unreasonably withhold its consent to
any Alterations which cost less than One Dollar ($1.00) per square foot of the
improved portions of the Premises (excluding warehouse square footage) and do
not (i) affect the exterior of the Building or outside areas (or be visible from
adjoining sites), or (ii) affect or penetrate any of the structural portions of
the Building, including but not limited to the roof, or (iii) require any change
to the basic floor plan of the Premises or any change to any structural or
mechanical systems of the Premises, or (iv) fail to comply with any applicable
governmental requirements or require any governmental permit as a prerequisite
to the construction thereof, or (v) result in the Premises requiring building
services beyond the level normally provided to other tenants, or (vi) interfere
in any manner with the proper functioning of, or Landlord's access to, any
mechanical, electrical, plumbing or HVAC systems, facilities or equipment
located in or serving the Building, or (vii) diminish the value of the Premises
including, without limitation, using lesser quality materials than those
existing in the Premises, or (viii) alter or replace Standard Improvements.
Landlord may impose any condition to its consent, including but not limited to a
requirement that the installation and/or removal of all Alterations and
Replacements be covered by a lien and completion bond satisfactory to Landlord
in its sole and absolute discretion and requirements as to the manner and time
of performance of such work. Landlord shall in all events, whether or not
Landlord's consent is required, have the right to approve the contractor
performing the installation and removal of Alterations and Replacements and
Tenant shall not permit any contractor not approved by Landlord to perform any
work on the Premises or on the Building. Tenant shall obtain all required
permits for the installation and removal of Alterations and Replacements and
shall perform the installation and removal of Alterations and Replacements in
compliance with all applicable laws, regulations and ordinances, including
without limitation the Americans with Disabilities Act, all covenants,
conditions and restrictions affecting the Site, and the Rules and Regulations as
described in Article XVII. Tenant understands and agrees tat Landlord shall be
entitled to a supervision fee in the amount of five percent (5%) of the cost of
the Alterations; provided that such supervision fee shall not be charged for
cosmetic

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<PAGE>

improvements not requiring a permit. Under no circumstances shall Tenant make
any Alterations or Replacements which incorporate any Hazardous Materials,
including without limitation asbestos-containing construction materials into the
Premies, the Building or the Common Area. If any governmental entity requires,
as a condition to any proposed Alterations by Tenant, that improvements be made
to the Common Areas, and if Landlord consents to such improvements to the Common
Areas (which consent may be withheld in the sole and absolute discretion of
Landlord), then Tenant shall, at Tenant's sole expense, make such required
improvements to the Common Areas in such manner, utilizing such materials, and
with such contractors, architects and engineers as Landlord may require in its
sole and absolute discretion. Any request for Landlord's consent to any proposed
Alterations shall be made in writing and shall contain architectural plans
describing the work in detail reasonably satisfactory to Landlord. Unless
Landlord otherwise agrees in writing, all Alterations made or affixed to the
Premises, the Building or to the Common Area (excluding moveable trade fixtures,
equipment, and furniture installed by Tenant and not paid for by Landlord
pursuant to Exhibit X), including without limitation all Tenant Improvements
constructed pursuant to the Work Letter (except as otherwise provided in the
Work Letter), shall become the property of Landlord and shall be surrendered
with the Premises at the end of the Term; except that Landlord may, by notice to
Tenant given at the time of its consent to the Alteration, require Tenant to
remove same by the Expiration Date or sooner termination date of this Lease, and
to repair any damage to the Premises, the Building or the Common Area arising
from that removal and restore the Premises to their condition prior to making
such Alteration. It is understood that Tenant shall be permitted to install an
exterior air compressor for the Building, subject to Landlord's reasonable prior
written approval of the location, plans and screening therefor.

      SECTION 7.4. MECHANIC'S LIENS. Tenant shall keep the Premises and the Site
free from any liens arising out of any work performed, materials furnished, or
obligations incurred by or for Tenant. Upon request by Landlord, Tenant shall
promptly (but in no event later than five (5) business days following such
request) cause any such lien to be released by posting a bond in accordance with
California Civil Code Section 3143 or any successor statute. In the event that
Tenant shall not, within thirty (30) days following the imposition of any lien,
cause the lien to be released of record by payment or posting of a proper bond,
Landlord shall have, in addition to all other available remedies, the right to
cause the lien to be released by any means it deems proper, including payment of
or defense against the claim giving rise to the lien. All expenses so incurred
by Landlord, including Landlord's attorneys' fees, and any consequential or
other damages incurred by Landlord arising out of such lien, shall be reimbursed
by Tenant upon demand, together with interest from the date of payment by
Landlord at the maximum rate permitted by law until paid. Tenant shall give
Landlord no less than twenty (20) days' prior notice in writing before
commencing construction of any kind on the Premises or Common Area and shall
again notify Landlord that construction has commenced, such notice to be given
on the actual date on which construction commences, so that Landlord may post
and maintain notices of nonresponsibility on the Premises or Common Area, as
applicable, which notices Landlord shall have the right to post and which Tenant
agrees it shall not disturb. Tenant shall also provide Landlord notice in
writing within ten (10) days following the date on which such work is
substantially completed.

      SECTION 7.5. ENTRY AND INSPECTION. Landlord shall at all reasonable times,
upon 24 hours prior written or oral notice (except in emergencies, when no
notice shall be required), have the right to enter the Premises to inspect them,
to supply services in accordance with this Lease, to have access to install,
repair, maintain, replace or remove all electrical and mechanical installations
of Landlord and to protect the interests of Landlord in the Premises, and to
submit the Premises to prospective or actual purchasers or encumbrance holders
(or, during the last one hundred and eighty (180) days of the Term or when an
uncured Tenant Event of Default exists, to prospective tenants), all without
being deemed to have caused an eviction of Tenant and without abatement of rent
except as provided elsewhere in this Lease. Any such entry shall be in a
reasonable manner designed to minimize disruption to Tenant. Landlord shall have
the right, if desired, to retain a key which unlocks all of the doors in the
Premises, excluding Tenant's vaults and safes, and Landlord shall have the right
to use any and all means which Landlord may deem proper to open the doors in an
emergency in order to obtain entry to the Premises, and any entry to the
Premises obtained by Landlord shall not under any circumstances be deemed to be
a forcible or unlawful entry into, or a detainer of, the Premises, or any
eviction of Tenant from me Premises.

           ARTICLE VIII. TAXES AND ASSESSMENTS ON TENANT'S PROPERTY

      Tenant shall be liable for and shall pay, at least ten (10) days before
delinquency, all taxes and assessments levied against all personal property of
Tenant located in the Premises, and, if required by Landlord, against all Non
Standard Improvements to the Premises (as defined in Section 7.3) made by
Landlord or Tenant, and against any Alterations (as defined in Section 7.3) made
to the Premises or the Building by or on behalf of Tenant. If requested by
Landlord, Tenant shall cause its personal property, Non-Standard Improvements
and Alterations to be assessed and billed separately from the real property of
which the Premises form a part. If any taxes required to be paid by Tenant on
Tenant's personal property, Non-Standard Improvements and/or Alterations are
levied against Landlord or Landlord's property and if Landlord pays the same, or
if the assessed value of Landlord's property is increased by the inclusion of a
value placed upon the personal property, Non-Standard Improvements and/or
Alterations and if Landlord pays the taxes based upon the increased assessment,
Landlord shall have the right to require that Tenant pay to Landlord the taxes
so levied against Landlord or the proportion of the taxes resulting from the
increase in the assessment. In calculating what portion of any tax bill which is
assessed against Landlord separately, or Landlord and Tenant jointly, is
attributable to Tenant's Non-Standard Improvements, Alterations and personal
property, Landlord's reasonable determination shall be conclusive.

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                     ARTICLE IX. ASSIGNMENT AND SUBLETTING

      SECTION 9.1. RIGHTS OF PARTIES.

      (a) Notwithstanding any provision of this Lease to the contrary, and
except as to transfers expressly permitted without Landlord's consent pursuant
to Section 9.4, Tenant will not, either voluntarily or by operation of law,
assign, sublet, encumber, or otherwise transfer all or any part of Tenant's
interest in this Lease or the Premises, or permit the premises to be occupied by
anyone other than Tenant, without Landlord's prior written consent, which
consent shall not unreasonably be withheld in accordance with the provisions of
Section 9.1 (b). No assignment (whether voluntary, involuntary or by operation
of law) and no subletting shall be valid or effective without Landlord's prior
written consent and, at Landlord's election, any such assignment or subletting
shall be void and of no force and effect and any such attempted assignment or
subletting shall constitute an Event of Default of this Lease. Landlord shall
not be deemed to have given its consent to any assignment or subletting by any
course of action other than written consent. To the extent not prohibited by
provisions of the Bankruptcy Code, 11 U.S.C. Section 101 et seq., (the
"Bankruptcy Code"), including Section 365(f)(1), Tenant on behalf of itself and
its creditors, administrators and assigns waives the applicability of Section
365(e) of the Bankruptcy Code unless the proposed assignee of the Trustee for
the estate of the bankrupt meets Landlord's standard for consent as set-forth in
Section 9.1(b) of this Lease. If this Lease is assigned to any person or entity
pursuant to the provisions of the Bankruptcy code, any and all monies or other
considerations to be delivered in connection with the assignment shall be
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code. Any person or entity to which this Lease is
assigned pursuant to the provisions of the Bankruptcy Code shall be deemed to
have assumed all of the obligations arising under this Lease on and after the
date of the assignment, and shall upon demand execute and deliver to Landlord an
instrument confirming that assumption.

      (b) If Tenant desires to transfer an interest in this Lease or the
Premises, it shall first notify Landlord of its desire and shall submit in
writing to Landlord: (i) the name and address of the proposed transferee; (ii)
the nature of any proposed transferee's business to be carried on in the
Premises; (iii) the terms and provisions of any proposed sublease, assignment or
other transfer, including a copy of the proposed assignment, sublease or
transfer form; (iv) evidence that the proposed assignee, subtenant or transferee
will comply with the requirements of Exhibit D hereto; (v) a completed
Environmental Questionnaire from the proposed assignee, subtenant or transferee;
(vi) any other information requested by Landlord and reasonably related to the
transfer and (vii) the fee described in Section 9.1(e). Except as provided in
Section 9.1 (c), Landlord shall not unreasonably withhold its consent, provided
that the parties agree that it shall be reasonable for Landlord to withhold its
consent if: (1) the use of the premises will not be consistent with the
provisions of this Lease; (2) the proposed assignee or subtenant has been
required by any prior landlord, lender or governmental authority to take
remedial action in connection with Hazardous Materials contaminating a property
arising out of the proposed assignee's or subtenant's actions or use of the
property in question or is subject to any enforcement order issued by any
governmental authority in connection with the use, disposal or storage of a
Hazardous Material; (3) insurance requirements of the proposed assignee or
subtenant may not be brought into conformity with Landlord's then current
leasing practice; (4) a proposed subtenant or assignee has not demonstrated to
the reasonable satisfaction of Landlord that it is financially responsible or
has failed to submit to Landlord all reasonable information as requested by
Landlord concerning the proposed subtenant or assignee, including, but not
limited to, a certified balance sheet of the proposed subtenant or assignee as
of a date within ninety (90) days of the request for Landlord's consent,
statements of income or profit and loss of the proposed subtenant or assignee
for the two-year period preceding the request for Landlord's consent, and/or a
certification signed by the proposed subtenant or assignee that it has not been
evicted or been in arrears in rent at any other leased premises for the 3-year
period preceding the request for Landlord's consent; (5) any proposed subtenant
or assignee has not demonstrated to Landlord's reasonable satisfaction a record
of successful experience in business; (6) the proposed assignee or subtenant is
a prospect with whom Landlord is negotiating to become a tenant at the Site; or
(7) the proposed transfer will impose additional burdens or adverse tax effects
on Landlord. If Tenant has any exterior sign rights under this Lease, such
rights are personal to Tenant and may not be assigned or transferred to any
assignee of this Lease or subtenant of the Premises without Landlord's prior
written consent, which may be withheld in Landlord's sole and absolute
discretion.

      If Landlord consents to the proposed transfer, Tenant may within ninety
(90) days after the date of the consent effect the transfer upon the terms
described in the information furnished to Landlord; provided that any material
change in the terms shall be subject to Landlord's consent as set forth in this
Section 9.1. Landlord shall approve or disapprove any requested transfer within
thirty (30) days following receipt of Tenant's written request, the information
set forth above, and the fee set forth below.

      (c) Notwithstanding the provisions of Section 9.1(b) above, in lieu of
consenting to a proposed assignment or subletting, Landlord may elect, within
the thirty (30) day period permitted for Landlord to approve or disapprove a
requested transfer, to (i) sublease the Premises (or the portion proposed to be
subleased), or take an assignment of Tenant's interest in this Lease, upon
substantially the same terms as offered to the proposed subtenant or assignee
(excluding terms relating to the purchase of personal property, the use of
Tenant's name or the continuation of Tenant's business), or (ii) terminate this
Lease as to the portion of the Premises proposed to be subleased or assigned
with a proportionate abatement in the rent payable under this Lease, effective
thirty (30) days following written notice by Landlord of its election to so
sublease or terminate. Landlord may thereafter, at its option, assign, sublet
or re-let any space so sublet, obtained by assignment or obtained by termination
to any third party, including without limitation the proposed transferee of
Tenant.

      (d) In the event that Landlord approves the requested assignment or
subletting, Tenant agrees that fifty percent (50%) of any amounts paid by the
assignee or subtenant, however described, in excess of (i) the Basic Rent
payable by Tenant hereunder, or in the case of a sublease of a portion of the
Premises, in excess of the Basic

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<PAGE>

Rent reasonably allocable to such portion as determined by Landlord, plus (ii)
Tenant's direct out-of-pocket costs which Tenant certifies to Landlord have been
paid to provide occupancy related services to such assignee or subtenant of a
nature commonly provided by Landlords of similar space, shall be the property of
Landlord and such amounts shall be payable directly to Landlord by the assignee
or subtenant or, at Landlord's option, by Tenant within ten (10) days of
Tenant's receipt thereof. Landlord shall have the right to review or audit the
books and records of Tenant, or have such books and records reviewed or audited
by an outside accountant to confirm any such direct out-of-pocket costs. In the
event that such direct out-of-pocket costs claimed by Tenant are overstated by
more than five percent (5%), Tenant shall reimburse Landlord for any of
Landlord's costs related to such review or audit. At Landlord's request, a
written agreement shall be entered into by and among Tenant, Landlord and the
proposed assignee or subtenant confirming the requirements of this Section
9.1(d).

      (e)   Tenant shall pay to Landlord a fee equal to the greater of (i)
Landlord's actual costs related to such assignment, subletting or other transfer
or (ii) Five Hundred Dollars ($500.00), to process any request by Tenant for an
assignment, subletting or other transfer under this Lease. Tenant shall pay
Landlord the sum of Five Hundred Dollars ($500.00) concurrently with Tenant's
request for consent to any assignment, subletting or other transfer, and
Landlord shall have no obligation to consider such request unless accompanied by
such payment. Tenant shall pay Landlord upon demand any costs in excess of such
payment to the extent Landlord's actual costs related to such request exceeds
$500.00. Such fee is hereby acknowledged as a reasonable amount to reimburse
Landlord for its costs of review and evaluation of a proposed transfer.

      (f)   Notwithstanding the foregoing, provided Tenant is not then in
default hereunder, Tenant may, without Landlords's prior consent but with prior
written notice to Landlord and subject to the provisions of Section 9.2, assign
or transfer its right, title and interest in this Lease or sublease the Premises
to any of the following: (i) any entity resulting from a merger or consolidation
with Tenant; (ii) any entity succeeding to the business and assets of Tenant; or
(iii) any entity controlling, controlled by, or under common control with,
Tenant (collectively, "Tenant Affiliate").

      SECTION 9.2. EFFECT OF TRANSFER. No subletting or assignment, even with
the consent of Landlord, shall relieve Tenant of its obligation to pay rent and
to perform all its other obligations under this Lease. Moreover, Tenant shall
indemnify and hold Landlord harmless, as provided in Section 10.3, for any act
or omission by an assignee or subtenant. Each assignee, other than Landlord,
shall assume all obligations of Tenant under this Lease and shall be liable
jointly and severally with Tenant for the payment of all rent, and for the due
performance of all of Tenant obligations, under this Lease. No assignment or
subletting to other than a Tenant Affiliate shall be effective or binding on
Landlord unless documentation in form and substance satisfactory to Landlord in
its reasonable discretion evidencing the transfer, and in the case of an
assignment, the assignee's assumption of the obligations of Tenant under this
Lease, is delivered to Landlord and both the assignee/subtenant and Tenant
deliver to Landlord an executed consent to transfer instrument prepared by
Landlord and consistent with the requirements of this Article. The acceptance by
Landlord of any payment due under this Lease from any other person shall not be
deemed to be a waiver by Landlord of any provision of this Lease or to be a
consent to any transfer. Consent by Landlord to one or more transfers shall not
operate as a waiver or estoppel to the future enforcement by Landlord of its
rights under this Lease or as a consent to any subsequent transfer.

      SECTION 9.3. SUBLEASE REQUIREMENTS. The following terms and conditions
shall apply to any subletting by Tenant of all or any part of the Premises and
shall be deemed included in each sublease:

      (a)   Each and every provision contained in this Lease (other than with
respect to the payment of rent hereunder) is incorporated by reference
into and made a part of such sublease, with "LANDLORD" hereunder meaning
the sublandloard therein and "TENANT" hereunder meaning the subtenant therein.

      (b)   Tenant hereby irrevocably assigns to Landlord all of Tenant's
interest in all rentals and income arising from any sublease of the Premises,
and Landlord may collect such rent and income and apply same toward Tenant's
obligations under this Lease; provided, however, that until there is an Event of
Default by Tenant, Tenant shall have the right to receive and collect the
sublease rentals. Landlord shall not, by reason of this assignment or the
collection or sublease rentals, be deemed liable to the subtenant for the
performance of any of Tenant's obligations under the sublease. Tenant hereby
irrevocably authorizes and directs any subtenant, upon receipt of a written
notice from Landlord stating that an uncured Event of Default exists in the
performance of Tenant's obligations under this Lease, to pay to Landlord all
sums then and thereafter due under the sublease. Tenant agrees that the
subtenant may rely on that notice without any duty of further inquiry and
notwithstanding any notice or claim by Tenant to the contrary. Tenant shall have
no right or claim against the subtenant or Landlord for any rentals so paid to
Landlord.

      (c)   In the event of the termination of this Lease for any reason,
including without limitation as the result of an Event of Default by Tenant or
by the mutual agreement of Landlord and Tenant, Landlord may, at its sole
option, take over Tenant's entire interest in any sublease and, upon notice from
Landlord, the subtenant shall attorn to Landlord. In no event, however, shall
Landlord be liable for any previous act or omission by Tenant under the sublease
or for the return of any advance rental payments or deposits under the sublease
that have not been actually delivered to Landlord, nor shall Landlord be bound
by any sublease modification executed without Landlord's consent or for any
advance rental payment by the subtenant in excess of one month's rent. The
general provisions of this Lease, including without limitation those pertaining
to insurance and indemnification, shall be deemed incorporated by reference into
the sublease despite the termination of this Lease. In the event Landlord does
not elect to take over Tenant's interest in a sublease in the event of any such
termination of this Lease, such sublease shall terminate concurrently with the
termination of this Lease and such subtenant shall have no further rights under
such sublease and Landlord shall have no obligations to such subtenant.

                                       13
<PAGE>
      SECTION 9.4. CERTAIN TRANSFERS. The following shall be deemed to
constitute an assignment of this Lease; (a) the sale of all or substantially all
of Tenant's assets (other than bulk sales in the ordinary course of business),
(b) if Tenant is a corporation, an unincorporated association, a limited
liability company or a partnership, the transfer, assignment or hypothecation of
any stock or interest in such corporation, association, limited liability
company or partnership in the aggregate of twenty-five percent (25%) (except for
publicly traded shares of stock constituting a transfer of twenty-five percent
(25%) or more in the aggregate, so long as no change in the controlling interest
of Tenant occurs as a result thereof, or (c) any other direct or indirect change
of control of Tenant, including, without limitation, change of control of
Tenant's parent company or a merger by Tenant or its parent company.
Notwithstanding the foregoing, Landlord's consent shall not be required for the
assignment of this Lease as a result of a merger by Tenant with or into another
entity or a reorganization of Tenant, so long as (i) the net worth of the
successor or reorganized entity after such merger is at least equal to the
greater of the net worth of Tenant as of the execution of this Lease by Landlord
or the net worth of Tenant immediately prior to the date of such merger or
reorganization, evidence of which, satisfactory to Landlord, shall be presented
to Landlord prior to such merger or reorganization, (ii) Tenant shall provide to
Landlord, prior to such merger or reorganization, written notice of such merger
or reorganization and such assignment documentation and other information as
Landlord may require in connection therewith, and (iii) all of the other terms
and requirements Section 9.2 and 9.3 shall apply with respect to such
assignment.

                       ARTICLE X. INSURANCE AND INDEMNITY

      SECTION 10.1. TENANT'S INSURANCE. Tenant, at its sole cost and expense,
shall provide and maintain in effect the insurance described in Exhibit D.
Evidence of that insurance must be delivered to Landlord prior to the
Commencement Date.

      SECTION 10.2. LANDLORD'S INSURANCE. Landlord may, at its election, provide
any or all of the following types of insurance, with or without deductible and
in amounts and coverages as may be determined by Landlord in its sole and
absolute discretion: "all risk" or similar property insurance, subject to
standard exclusions, covering the Building and/or Site, and such other risks as
Landlord or its mortgagees may from time to time deem appropriate, including
Tenant Improvements made by Landlord pursuant to the Work Letter, and commercial
general liability coverage. Landlord shall not be required to carry insurance of
any kind on Tenant's Alterations or on Tenant's other property, including,
leasehold improvements, trade fixtures, furnishings, equipment, plate glass,
signs and all other items of personal property, and shall not be obligated to
repair or replace that property should damage occur. All proceeds of insurance
maintained by Landlord upon the Building and/or Site shall be the property of
Landlord, whether or not Landlord is obligated to or elects to make any repairs.
At Landlord's option, Landlord may self-insure all or any portion of the risks
for which Landlord elects to provide insurance hereunder.

      SECTION 10.3. TENANT'S INDEMNITY. To the fullest extent permitted by law,
Tenant shall defend, indemnify, protect, save and hold harmless Landlord, its
agents, and any and all affiliates of Landlord, including, without limitation,
any corporations or other entities controlling, controlled by or under common
control with Landlord, from and against any and all claims, liabilities, costs
or expenses arising either before or after the Commencement Date from any Event
of Default in the performance of any obligation on Tenant's part to be performed
under this Lease or from any act or negligence of Tenant or its agents,
employees, visitors, patrons, guests, invitees or licensees. Landlord may, at
its option, require Tenant to assume Landlord's defense in any action covered by
this Section through counsel satisfactory to Landlord. The provisions of this
Section shall expressly survive the expiration or sooner termination of this
Lease. Tenant's obligations under this Section shall not apply in the event that
the claim, liability, cost or expense is caused solely by the negligence or
willful misconduct of Landlord.

      SECTION 10.4. LANDLORD'S NONLIABILITY. Landlord shall not be liable to
Tenant, its employees, agents and invitees, and Tenant hereby waives all claims
against Landlord and knowingly assumes the risk of for loss of or damage to any
property, or loss or interruption of business or income, or any other loss,
cost, damage, injury or liability whatsoever (including without limitation any
consequential damages and lost profit or opportunity costs) resulting from, but
not limited to, Acts of God, acts of civil disobedience or insurrection, acts or
omissions of third parties and/or of other tenants within the Site or their
agents, employees, contractors, guests or invitees, fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak or flow from or
into any part of the Premises or from the breakage, leakage, obstruction or
other defects of the pipes, sprinklers, wires, appliances, plumbing, air
conditioning, electrical works, roof, windows or other fixtures in the Building,
whether the damage or injury results from conditions arising in the Premises or
in the Building. It is understood that any such condition may require the
temporary evacuation or closure of all or a portion of the Building. Landlord
shall have no liability (including without limitation consequential damages and
lost profit or opportunity costs) and, except as provided in Sections 11.1 and
12.1 below, there shall be no abatement of rent, by reason of any injury to or
interference with Tenant's business arising from the making of any repairs,
alterations or improvements to any portion of the Building, including repairs to
the Premises, nor shall any related activity by Landlord constitute an actual or
constructive eviction; provided, however, that in making repairs, alterations or
improvements, Landlord shall interfere as little as reasonably practicable with
the conduct of Tenant's business in the Premises. Neither Landlord nor its
agents shall be liable for interference with light or other similar intangible
interests. Tenant shall immediately notify Landlord in case of fire or accident
in the Premises, the Building or the Site and of defects in any improvements or
equipment. The foregoing provisions of this Section 10.4 shall not be deemed to
absolve Landlord of liability to the extent of any damage caused by the
negligence or willful misconduct of Landlord and not covered by Tenant's
insurance.

      SECTION 10.5. WAIVER OF SUBROGATION. Landlord and Tenant each hereby
waives all rights of recovery against the other and the other's agents on
account of loss and damage occasioned to the property of such waiving party to
the extent only that such loss or damage is required to be insured against, or,
if not required, is

                                       14
<PAGE>

actually insured against, under any property insurance policies contemplated by
this Article X; provided however, that (i) the foregoing waiver shall not apply
to the extent of Tenant's obligations to pay deductibles under any such policies
and this Lease and (ii) to the extent Tenant fails to maintain the insurance
required to be maintained by Tenant pursuant to this Lease, Landlord shall not
be deemed to have waived any right of recovery against Tenant. By this waiver it
is the intent of the parties that neither Landlord nor Tenant shall be liable to
any insurance company (by way of subrogation or otherwise) insuring the other
party for any loss or damage insured against under any property insurance
policies contemplated by this Lease, even though such loss or damage might be
occasioned by the negligence of such party, its agents, employees, contractors,
guests or invitees.

            ARTICLE XI. DAMAGE OR DESTRUCTION

      SECTION 11.1. RESTORATION.

      (a)   If the Building of which the Premises are a part is damaged as the
result of an event of casualty, then subject to the provisions below, Landlord
shall repair that damage as soon as reasonably possible unless: (i) Landlord
reasonably determines that the cost of repair would exceed ten percent (10%) of
the full replacement cost of the Building ("Replacement Cost") and the damage is
not covered by Landlord's fire and extended coverage insurance (or by a normal
extended coverage policy should Landlord fail to carry that insurance); or (ii)
Landlord reasonably determines that the cost of repair would exceed twenty-five
percent (25%) of the Replacement Cost; or (iii) Landlord reasonably determines
that the cost of repair would exceed ten percent (10%) of the Replacement Cost
and the damage occurs during the final twelve (12) months of the Term. Landlord
shall notify Tenant in writing ("Landlord's Notice") within sixty (60) days
after the damage occurs as to (A) whether Landlord is terminating this Lease as
a result of such material damage and (B) if Landlord is not terminating this
Lease, the number of days within which Landlord has estimated that the
Premises, with reasonable diligence, are likely to be fully repaired. In the
event Landlord elects to terminate this Lease, this Lease shall terminate as of
the date specified for termination by Landlord's Notice (which termination date
shall in no event be later than sixty (60) days following the date of the
damage, or, if no such date is specified, such termination shall be the date of
Landlord's Notice).

      (b)   If Landlord has the right to terminate this Lease pursuant to
Section 11.1(a) and does not elect to so terminate this Lease, and provided that
at the time of Landlord's Notice neither an Event of Default exists nor has
Landlord delivered Tenant a notice of any failure by Tenant to fulfill an
obligation under this Lease which, unless cured by Tenant within the applicable
grace period, would constitute an Event of Default, then within ten (10) days
following delivery of Landlord's Notice pursuant to Section 11.1a), Tenant may
elect to terminate this Lease by written notice to Landlord, but only if (i)
Landlord's Notice specifies that Landlord has determined that the Premises
cannot be repaired, with reasonable diligence, within one hundred eighty (180)
days after the date of damage or (ii) the casualty has occurred within the final
twelve (12) months of the Term and such material damage has a materially adverse
impact on Tenant's continued use of the Premises. If Tenant fails to provide
such termination notice within such ten (10) day period, Tenant shall be deemed
to have waived any termination right under this Section 11.1(b) or any other
applicable law.

      (c)   In the event that neither Landlord nor Tenant terminates this Lease
pursuant to this Section 11.1 as a result of material damage to the Building or
Premises resulting from a casualty, Landlord shall repair all material damage to
the Premises or the Building as soon as reasonably possible and this Lease shall
continue in effect for the remainder of the Term. Subject to any provision to
the contrary in the Work Letter, such repair by Landlord shall include repair of
material damage to the Tenant Improvements constructed pursuant to the Work
Letter, so long as insurance proceeds from insurance required to be carried by
Tenant are made available to Landlord. Landlord shall have the right, but not
the obligation, to repair or replace any other leasehold improvements made by
Tenant or any Alterations (as defined in Section 7.3) constructed by Tenant. If
Landlord elects to repair or replace such leasehold improvements and/or
Alterations, all insurance proceeds available for such repair or replacement
shall be made available to Landlord. Notwithstanding the foregoing, the repair
of damage to the Premises to the extent such damage is not material shall be
governed by Sections 7.1 and 7.2.

      (d)   Landlord shall not be required to repair or replace any improvements
or fixtures installed by Tenant and Tenant shall continue to be obligated to so
repair or replace any such improvements or fixtures, notwithstanding any
provisions to the contrary in this Article XI. In addition, in the event the
damage or destruction to the Premises or Building are due in substantial part to
the fault or neglect of Tenant or its employees, subtenants, invitees or
representatives, Tenant shall not be entitled to terminate this Lease as a
result, notwithstanding the provisions of Section 11.1(b).

      (e)   Tenant shall fully cooperate with Landlord in removing Tenant's
personal property, and any debris from the Premises to facilitate all
inspections of the Premises and the making of any repairs. Notwithstanding
anything to the contrary contained in this Lease, if Landlord in good faith
believes there is a risk of injury to persons or damage to property from entry
into the Building or Premises following any damage or destruction thereto,
Landlord may restrict entry into the Building or the Premises by Tenant, its
employees, agents and contractors in a non-discriminatory manner, without being
deemed to have violated Tenant's rights of quiet enjoyment to, or made an
unlawful detainer of, or evicted Tenant from, the Premises. Upon request.
Landlord shall consult with Tenant to determine if there are safe methods of
entry into the Building or the Premises solely in order to allow Tenant to
retrieve files, data in computers, and necessary inventory, subject however to
all indemnities and waivers of liability from Tenant to Landlord contained in
this Lease and any additional indemnities and waivers of liability which
Landlord may require.

      SECTION 11.2. LEASE GOVERNS. Tenant agrees that the provisions of this
Lease, including without limitation Section 11.1, shall govern any damage or
destruction and shall accordingly supersede any contrary statute or rule of law.

                                       15
<PAGE>

                          ARTICLE XII. EMINENT DOMAIN

      SECTION 12.1. TOTAL OR PARTIAL TAKING. If all or a material portion of the
Premises is taken by any lawful authority by exercise of the right of eminent
domain, or sold to prevent a taking, either Tenant or Landlord may terminate
this Lease effective as of the date possession is required to be surrendered to
the authority. In the event neither party has elected to terminate this Lease
as provided above, then Landlord shall promptly, after receipt of a sufficient
condemnation award, proceed to restore the Premises to substantially their
condition prior to the taking, and a proportionate allowance shall be made to
Tenant for the rent corresponding to the time during which, and to the part of
the Premises of which, Tenant is deprived on account of the taking and
restoration. In the event of a taking, Landlord shall be entitled to the entire
amount of the condemnation award without deduction for any estate or interest of
Tenant; provided that nothing in this Section shall be deemed to give Landlord
any interest in, or prevent Tenant from seeking any award against the taking
authority for, the taking of personal property and fixtures belonging to Tenant
or for relocation or business interruption expenses recoverable from the taking
authority.

      SECTION 12.2. TEMPORARY TAKING. No temporary taking of the Premises shall
terminate this Lease or give Tenant any right to abatement of rent, and any
award specifically attributable to a temporary taking of the Premises shall
belong entirely to Tenant. A temporary taking shall be deemed to be a taking of
the use or occupancy of the Premises for a period of not to exceed ninety (90)
days.

      SECTION 12.3. TAKING OF PARKING AREA. In the event there shall be a taking
of the parking area of the Site such that more than ten percent (10%) of the
vehicle parking spaces are taken, Landlord may substitute reasonably equivalent
parking in a location reasonably close to the Building; provided that if
Landlord fails to make that substitution within ninety (90) days following the
taking and if the taking materially impairs Tenant's use and enjoyment of the
Premises, Tenant may, at its option, terminate this Lease by written notice to
Landlord. If this Lease is not so terminated by Tenant, there shall be no
abatement of rent and this Lease shall continue in effect.

          ARTICLE XIII. SUBORDINATION; ESTOPPEL CERTIFICATE; FINANCIALS

      SECTION 13.1. SUBORDINATION. At the option of Landlord or any lender of
Landlord's that obtains a security interest in the Building, this Lease shall be
either superior or subordinate to all ground or underlying leases, mortgages and
deeds of trust, if any, which may hereafter affect the Building, and to all
renewals, modifications, consolidations, replacements and extensions thereof;
provided, that so long as no Event of Default exists under this Lease, Tenant's
possession and quiet enjoyment of the Premises shall not be disturbed and this
Lease shall not terminate in the event of termination of any such ground or
underlying lease, or the foreclosure of any such mortgage or deed of trust, to
which this Lease has been subordinated pursuant to this Section. Tenant shall
execute and deliver any commercially reasonable subordination, non-disturbance
and attornment agreements requested by Landlord or such lessor or lender which
provide Tenant with the non-disturbance protections set forth in this Section.
In the event of a termination or foreclosure, Tenant shall become a tenant of
and attorn to the successor-in-interest to Landlord upon the same terms and
conditions as are contained in this Lease, and shall execute any instrument
reasonably required by Landlord's successor for that purpose. Tenant shall also,
upon written request of Landlord, execute and deliver all commercially
reasonable subordination, non-disturbance and attornment agreements as may be
required from time to time to subordinate the rights of Tenant under this Lease
to any ground or underlying lease or to the lien of any mortgage or deed of
trust (provided that such instruments include the non-disturbance and attornment
provisions set forth above), or, if requested by Landlord, to subordinate, in
whole or in part, any ground or underlying lease or the lien of any mortgage or
deed of trust to this Lease. Tenant agrees that any purchaser at a foreclosure
sale or lender taking title under a deed-in-lieu of foreclosure shall not be
responsible for any act or omission of a prior landlord, shall not be subject to
any offsets or defenses Tenant may have against a prior landlord, and shall not
be liable for the return of the security deposit to the extent it is not
actually received by such purchaser or bound by any rent paid for more than the
current month in which the foreclosure occurred.

      SECTION 13.2. ESTOPPEL CERTIFICATE.

      (a)   Tenant shall, at any time upon not less than ten (10) days prior
written notice from Landlord, execute, acknowledge and deliver to Landlord, in
any form that Landlord may reasonably require, a statement in writing (i)
certifying that this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of the modification and certifying that this Lease,
as modified, is in full force and effect) and the dates to which the rental,
additional rent and other charges have been paid in advance, if any, and (ii)
acknowledging that, to Tenant's knowledge, there are no uncured defaults on the
part of Landlord, or specifying each default if any are claimed, and (iii)
setting forth all further information that Landlord or any purchaser or
encumbrancer may reasonably require. Tenant's statement may be relied upon by
any prospective purchaser or encumbrancer of all or any portion of the Building
or Site.

      (b)   Notwithstanding any other rights and remedies of Landlord, Tenant's
failure to deliver any estoppel statement within the provided time shall be
conclusive upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) there are no uncured
Events of Default in Landlord's performance, and (iii) not more than one month's
rental has been paid in advance.

      SECTION 13.3. FINANCIALS.

      (a)   Tenant shall deliver to Landlord, prior to the execution of this
Lease and thereafter at any time upon Landlord's request, Tenant's current tax
returns and financial statements, certified true, accurate and complete

                                       16
<PAGE>

by the chief financial officer of Tenant, including a balance sheet and profit
and loss statement for the most recent prior year, or, in the event Tenant is a
publicly traded corporation on a nationally recognized stock exchange, Tenant's
current financial reports filed with the Securities and Exchange Commission
(collectively, the "Statements"), which Statements shall accurately and
completely reflect the financial condition of Tenant. Landlord agrees that it
will keep the Statements confidential, except that Landlord shall have the right
to deliver the same to any proposed purchaser of the Building or Site, and to
any encumbrancer of all or any portion of the Building or Site.

      (b)   Tenant acknowledges that Landlord is relying on the Statements in
its determination to enter into this Lease, and Tenant represents to Landlord,
which representation shall be deemed made on the date of this Lease and again on
the Commencement Date, that no material change in the financial condition of
Tenant, as reflected in the Statements, has occurred since the date Tenant
delivered the Statements to Landlord. The Statements are represented and
warranted by Tenant to be correct and to accurately and fully reflect Tenant's
true financial condition as of the date of submission by any Statements to
Landlord.

                  ARTICLE XIV. EVENTS OF DEFAULT AND REMEDIES

      SECTION 14.1. TENANT'S DEFAULTS. In addition to any other breaches of this
Lease which are defined as Events of Default in this Lease, the occurrence of
any one or more of the following events shall constitute an Event of Default by
Tenant:

      (a)   The failure by Tenant to make any payment of Basic Rent or
additional rent required to be made by Tenant, as and when due, where the
failure continues for a period of five (5) business days after written notice
from Landlord to Tenant; provided, however, that any such notice shall be in
lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161 and 1161(a) as amended. For purposes of these
Events of Default and remedies provisions, the term "Additional Rent" shall be
deemed to include all amounts of any type whatsoever other than Basic Rent to be
paid by Tenant pursuant to the terms of this Lease.

      (b)   The assignment, sublease, encumbrance or other transfer of this
Lease by Tenant, either voluntarily or by operation of law, whether by judgment,
execution, transfer by intestacy or testacy, or other means, without the prior
written consent of Landlord when consent is required by this Lease.

      (c)   The discovery by Landlord that any financial statement provided by
Tenant, or by any affiliate, successor or guarantor of Tenant, was materially
false.

      (d)   The failure of Tenant to timely and fully provide any subordination
agreement, estoppel certificate or financial statements in accordance with the
requirements of Article XIII.

      (e)   The abandonment of the Premises by Tenant.

      (f)   The failure or inability by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in this Section 14.1, where the
failure continues for a period of thirty (30) days after written notice from
Landlord to Tenant or such shorter period as is specified in any other provision
of this Lease; provided, however, that any such notice shall be in lieu of, and
not in addition to, any notice required under California Code of Civil Procedure
Section 1161 and 1161(a) as amended. However, if the nature of the failure is
such that more than thirty (30) days are reasonably required for its cure, then
Tenant shall not be deemed to have committed an Event of Default if Tenant
commences the cure within thirty (30) days, and thereafter diligently pursues
the cure to completion.

      (g)   (i) The making by Tenant of any general assignment for the benefit
of creditors; (ii) the filing by or against Tenant of a petition to have Tenant
adjudged a Chapter 7 debtor under the Bankruptcy Code or to have debts
discharged or a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed against Tenant,
the same is dismissed within thirty (30) days); (iii) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, if possession is
not restored to Tenant within thirty (30) days; (iv) the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where the seizure is not
discharged within thirty (30) days; (v) Tenant's convening of a meeting of its
creditors for the purpose of effecting a moratorium upon or composition of its
debts or (vi) the failure of Tenant to pay its material obligations to creditors
as and when they become due and payable, other than as a result of a good faith
dispute by Tenant as to the amount due to such creditors. Landlord shall not be
deemed to have knowledge of any event described in this Section 14.1(g) unless
notification in writing is received by Landlord, nor shall there be any
presumption attributable to Landlord of Tenant's insolvency. In the event that
any provision of this Section 14.1 (g) is contrary to applicable law, the
provision shall be of no force or effect.

      SECTION 14.2. LANDLORD'S REMEDIES.

      (a)   If an Event of Default by Tenant occurs, then in addition to any
other remedies available to Landlord, Landlord may exercise the following
remedies:

            (i)   Landlord may terminate Tenant's right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Tenant shall immediately surrender possession of the Premises to Landlord. Such
termination shall not affect any accrued obligations of Tenant under this Lease.
Upon

                                       17
<PAGE>

termination, Landlord shall have the right to reenter the Premises and remove
all persons and property. Landlord shall also be entitled to recover from
Tenant:

                  (1)   The worth at the time of award of the unpaid Basic Rent
and additional rent which had been earned at the time of termination;

                  (2)   The worth at the time of award of the amount by which
the unpaid Basic Rent and additional rent which would have been earned after
termination until the time of award exceeds the amount of such loss that Tenant
proves could have been reasonably avoided;

                  (3)   The worth at the time of award of the amount by which
the unpaid Basic Rent and additional rent for the balance of the Term after the
time of award exceeds the amount of such loss that Tenant proves could be
reasonably avoided;

                  (4)   Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result from Tenant's Event of Default, including, but not limited to,
the cost of recovering possession of the Premises, refurbishment of the
Premises, marketing costs, commissions and other expenses of reletting,
including necessary repair, the unauthorised portion of any tenant improvements
and brokerage commissions funded by Landlord in connection, with this Lease,
reasonable attorneys' fees, and any other reasonable costs; and

                  (5)   At Landlord's election, all other amounts in addition to
or in lieu of the foregoing as may be permitted by law. Any sum, other than
Basic Rent, shall be computed on the basis of the average monthly amount
accruing during the twenty-four (24) month period immediately prior to the Event
of Default, except that if it becomes necessary to compute such rental before
the twenty-four (24) month period has occurred, then the computation shall be on
the basis of the average monthly amount during the shorter period. As used in
Sections 14.2(a)(i) (1) and (2) above, the "worth at the time of award" shall be
computed by allowing interest at the rate of ten percent (10%) per annum. As
used in Section 14.2(a)(i)(3) above, the "worth at the time of award" shall be
computed by discounting the amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).

            (ii)  Landlord may elect not to terminate Tenant's right to
possession of the Premises, in which event Landlord may continue to enforce all
of its rights and remedies under this Lease, including the right to collect all
rent as it becomes due. Efforts by the Landlord to maintain, preserve or relet
the Premises, or the appointment of a receiver to protect the Landlord's
interests under this Lease, shall not constitute a termination of the Tenant's
right to possession of the Premises. In the event that Landlord elects to avail
itself of the remedy provided by this Section 14.2(a)(ii), Landlord shall not
unreasonably withhold its consent to an assignment or subletting of the Premises
subject to the reasonable standards for Landlord's consent as are contained in
this Lease.

      (b)   Landlord shall be under no obligation to observe or perform any
covenant of this Lease on its part to be observed or performed which accrues
after the date of any Event of Default by Tenant unless and until the Event of
Default is cured by Tenant, it being understood and agreed that the performance
by Landlord of its obligations under this Lease are expressly conditioned upon
Tenant's full and timely performance of its obligations under this Lease. The
various rights and remedies reserved to Landlord in this Lease or otherwise
shall be cumulative and, except as otherwise provided by California law,
Landlord may pursue any or all of its rights and remedies at the same time.

      (c)   No delay or omission of Landlord to exercise any right or remedy
shall be construed as a waiver of the right or remedy or of any breach or Event
of Default by Tenant. The acceptance by Landlord of rent shall not be a (i)
waiver of any preceding breach or Event of Default by Tenant of any provision of
this Lease, other than the failure of Tenant to pay the particular rent
accepted, regardless of Landlord's knowledge of the preceding breach or Event of
Default at the time of acceptance of rent, or (ii) a waiver of Landlord's right
to exercise any remedy available to Landlord by virtue of the breach or Event of
Default. The acceptance of any payment from a debtor in possession, a trustee, a
receiver or any other person acting on behalf of Tenant or Tenant's estate shall
not waive or cure a breach or Event of Default under Section 14.1. No payment by
Tenant or receipt by Landlord of a lesser amount than the rent required by this
Lease shall be deemed to be other than a partial payment on account of the
earliest due stipulated rent, nor shall any endorsement or statement on any
check or letter be deemed an accord and satisfaction and Landlord shall accept
the check or payment without prejudice to Landlord's right to recover the
balance of the rent or pursue any other remedy available to it. No act or thing
done by Landlord or Landlord's agents during the Term shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept a
surrender shall be valid unless in writing and signed by Landlord. No employee
of Landlord or of Landlord's agents shall have any power to accept the keys to
the Premises prior to the termination of this Lease, and the delivery of the
keys to any employee shall not operate as a termination of this Lease or a
surrender of the Premises.

      SECTION 14.3. LATE PAYMENTS.

      (a)   Any payment due to Landlord under this Lease, including without
limitation Basic Rent, Tenant's Share of Operating Expenses or any other payment
due to Landlord under this Lease, that is not received by Landlord within five
(5) days following the date due shall bear interest at the maximum rate
permitted by law from the date due until fully paid. The payment of interest
shall not cure any breach or Event of Default by Tenant under

                                       18
<PAGE>

this Lease. In addition, Tenant acknowledges that the late payment by Tenant to
Landlord of Basic Rent and Tenant's Share of Operating Expenses will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of
which will be extremely difficult and impracticable to ascertain. Those costs
may include, but are not limited to, administrative, processing and accounting
charges, and late charges which may be imposed on Landlord by the terms of any
ground lease, mortgage or trust deed covering the Premises. Accordingly, if any
Basic Rent or Tenant's Share of Operating Expenses due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days following the
date due, then Tenant shall pay to Landlord, in addition to the interest
provided above, a late charge, which the Tenant agrees is reasonable, in a sum
equal to the greater of five percent (5%) of the amount overdue or Two Hundred
Fifty Dollars ($250.00) for each delinquent payment. Acceptance of a late charge
by Landlord shall not constitute a waiver of Tenant's breach or Event of Default
with respect to the overdue amount, nor shall it prevent Landlord from
exercising any of its other rights and remedies.

      (b)   Following each second installment of Basic Rent and/or the payment
of Tenant's Share of Operating Expenses within any twelve (12) month period that
is not paid within five (5) days following the date due, Landlord shall have the
option (i) to require that beginning with the first payment of Basic Rent next
due, Basic Rent and the Tenant's Share of Operating Expenses shall no longer be
paid in monthly installments but shall be payable quarterly three (3) months in
advance and/or (ii) to require that Tenant increase the amount, if any, of the
Security Deposit by one hundred percent (100%). Should Tenant deliver to
Landlord, at any time during the Term, two (2) or more insufficient checks, the
Landlord may require that all monies then and thereafter due from Tenant be paid
to Landlord by cashier's check. If any check for any payment to Landlord
hereunder is returned by the bank for any reason, such payment shall not be
deemed to have been received by Landlord and Tenant shall be responsible for any
applicable late charge, interest payment and the charge to Landlord by its bank
for such returned check. Nothing in this Section shall be construed to compel
Landlord to accept Basic Rent, Tenant's Share of Operating Expenses or any other
payment from Tenant if there exists an Event of Default unless such payment
fully cures any and all such Event of Default. Any acceptance of any such
payment shall not be deemed to waive any other right of Landlord under this
Lease. Any payment by Tenant to Landlord may be applied by Landlord, in its sole
and absolute discretion, in any order determined by Landlord to any amounts then
due to Landlord.

      SECTION 14.4. RIGHT OF LANDLORD TO PERFORM. All covenants and agreements
to be performed by Tenant under this Lease shall be performed at Tenant's sole
cost and expense and without any abatement of rent or right of set-off. If
Tenant fails to pay any sum of money, other than rent payable to Landlord, or
fails to perform any other act on its part to be performed under this Lease, and
the failure continues beyond any applicable grace period set forth in Section
14.1, then in addition to any other available remedies, Landlord may, at its
election make the payment or perform the other act on Tenant's part and Tenant
hereby grants Landlord the right to enter onto the Premises in order to carry
out such performance. Landlord's election to make the payment or perform the act
on Tenant's part shall not give rise to any responsibility of Landlord to
continue making the same or similar payments or performing the same or similar
acts nor shall Landlord be responsible to Tenant for any damage caused to Tenant
as the result of such performance by Landlord. Tenant shall, promptly upon
demand by Landlord, reimburse Landlord for all sums paid by Landlord and all
necessary incidental costs, together with interest at the maximum rate permitted
by law from the date of the payment by Landlord.

      SECTION 14.5. DEFAULT BY LANDLORD. Landlord shall not be deemed to be in
default in the performance of any obligation under this Lease, and Tenant shall
have no rights to take any action against Landlord, unless and until Landlord
has failed to perform the obligation within thirty (30) days after written
notice by Tenant to Landlord specifying in reasonable detail the nature and
extent of the failure; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be deemed to be in default if it commences
performance within the thirty (30) day period and thereafter diligently pursues
the cure to completion.

      SECTION 14.6. EXPENSES AND LEGAL FEES. All sums reasonably incurred by
Landlord in connection with any Event of Default by Tenant under this Lease or
holding over of possession by Tenant after the expiration or earlier termination
of this Lease, or any action related to a filing for bankruptcy or
reorganization by Tenant, including without limitation all costs, expenses and
actual accountants, appraisers, attorneys and other professional fees, and any
collection agency or other collection charges, shall be due and payable to
Landlord on demand, and shall bear interest at the rate of ten percent (10%) per
annum. Should either Landlord or Tenant bring any action in connection with this
Lease, the prevailing party shall be entitled to recover as a part of the action
its reasonable attorneys' fees, and all other costs. The prevailing party for
the purpose of this Section shall be determined by the trier of the facts.

      SECTION 14.7. WAIVER OF JURY TRIAL. LANDLORD AND TENANT EACH ACKNOWLEDGES
THAT IT IS AWARE OF AND HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT
TO ITS RIGHTS TO TRIAL BY JURY, AND EACH PARTY DOES HEREBY EXPRESSLY AND
KNOWINGLY WAIVE AND RELEASE ALL SUCH RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER
(AND/OR AGAINST ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, OR SUBSIDIARY OR
AFFILIATED ENTITIES) ON ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE, TENANT'S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY
CLAIM OF INJURY OR DAMAGE. FURTHERMORE, THIS WAIVER AND RELEASE OF ALL RIGHTS TO
A JURY TRIAL IS DEEMED TO BE INDEPENDENT OF EACH AND EVERY OTHER PROVISION,
COVENANT, AND/OR CONDITION SET FORTH IN THIS LEASE.

                                       19
<PAGE>

                             ARTICLE XV. END OF TERM

      SECTION 15.1. HOLDING OVER. This Lease shall terminate without further
notice upon the expiration of the Term, and any holding over by Tenant after the
expiration shall not constitute a renewal or extension of this Lease, or give
Tenant any rights under this Lease, except when in writing signed by both
parties. Any period of time following the Expiration Date or earlier termination
of this Lease required for Tenant to remove its property or to place the
Premises in the condition required pursuant to Section 15.3 (or for Landlord to
do so if Tenant fails to do so) shall be deemed a holding over by Tenant. If
Tenant holds over for any period after the Expiration Date (or earlier
termination) of the Term without the prior written content of Landlord, such
possession shall constitute a tenancy at sufferance only and an Event of Default
under this Lease; such holding over with the prior written consent of Landlord
shall constitute a month-to-month tenancy commencing on the first (1st) day
following the termination of this Lease and terminating thirty (30) days
following delivery of written notice of termination by either Landlord or Tenant
to the other. In either of such events, possession shall be subject to all of
the terms of this Lease, except that the monthly Basic Rent shall be one hundred
fifty percent (150%) of the greater of (a) the Basic Rent for the month
immediately preceding the date of termination or (b) the fair market rental for
the Premises. If Tenant fails to surrender the Premises upon the expiration of
this Lease despite demand to do so by Landlord, Tenant shall indemnify and hold
Landlord harmless from all loss or liability, including without limitation, any
claims made by any succeeding tenant relating to such failure to surrender.
Acceptance by Landlord of rent after the termination shall not constitute a
consent to a holdover or result in a renewal of this Lease. The foregoing
provisions of this Section are in addition to and do not affect Landlord's right
of re-entry or any other rights of Landlord under this Lease or at law.

      SECTION 15.2. MERGER ON TERMINATION. The voluntary or other surrender of
this Lease by Tenant, or a mutual termination of this Lease, shall terminate any
or all existing subleases unless Landlord, at its option, elects in writing to
treat the surrender or termination as an assignment to it of any or all
subleases affecting the Premises.

      SECTION 15.3. SURRENDER OF PREMISES; REMOVAL OF PROPERTY. Subject to the
provisions of 7.3 of this Lease, upon the Expiration Date or upon any earlier
termination of this Lease, Tenant shall quit and surrender possession of the
Premises to Landlord in as good order, condition and repair as when received or
as hereafter may be improved by Landlord or Tenant, reasonable wear and tear
and repairs which are Landlord's obligation excepted, and shall, without expense
to Landlord, remove or cause to be removed from the Premises all personal
property and debris, except for any items that Landlord may by written
authorization allow to remain. Tenant shall repair all damage to the Premises
resulting from the removal, which repair shall include the patching and filling
of holes and repair of structural damage, provided that Landlord may instead
elect to repair any structural damage at Tenant's expense. If Tenant shall fail
to comply with the provisions of this Section, Landlord may effect the removal
and/or make any repairs, and the cost to Landlord shall be additional rent
payable by Tenant upon demand. If Tenant fails to remove Tenant's persona]
property from the Premises upon the expiration of the Term, Landlord may remove,
store, dispose of and/or retain such personal property, at Landlord's option, in
accordance with then applicable laws, all at the expense of Tenant. If requested
by Landlord, Tenant shall execute, acknowledge and deliver to Landlord an
instrument in writing releasing and quitclaiming to Landlord all right, title
and interest of Tenant in the Premises.

                        ARTICLE XVI. PAYMENTS AND NOTICES

      All sums payable by Tenant to Landlord shall be deemed to be rent under
this Lease and shall be paid, without deduction or offset, in lawful money of
the United States to Landlord at its address set forth in Item 12 of the Basic
Lease Provisions, or at any other place as Landlord may designate in writing.
Unless this Lease expressly provides otherwise, as for example in the payment of
Basic Rent and the Tenant's Share of Operating Costs pursuant to Sections 4.1
and 4.2, all payments shall be due and payable within fifteen (15) days after
written demand. All payments requiring proration shall be prorated on the basis
of a thirty (30) day month and a three hundred sixty (360) day year. Any notice,
election, demand, consent, approval or other communication to be given or other
document to be delivered by either party to the other may be delivered in person
or by courier or overnight delivery service to the other party, or may be
deposited in the United States mail, duly registered or certified, postage
prepaid, return receipt requested, and addressed to the other party at the
address set forth in Item 12 of the Basic Lease Provisions, or if to Tenant, at
that address or, from and after the Commencement Date, at the Premises (whether
or not Tenant has departed from, abandoned or vacated the Premises). Either
party may, by written notice to the other, served in the manner provided in this
Article, designate a different address. If any notice or other document is sent
by mail, it shall be deemed served or delivered seventy-two (72) hours after
mailing. If more than one person or entity is named as Tenant under this Lease,
service of any notice upon any one of them shall be deemed as service upon all
of them.

                       ARTICLE XVII. RULES AND REGULATIONS

      Tenant agrees to observe faithfully and comply strictly with the Rules
and Regulations, attached as Exhibit E, and any reasonable and nondiscriminatory
amendments, modifications and/or additions as may be adopted and published by
written notice to tenants by Landlord for the safety, care, security, good
order, or cleanliness of the Premises, Building, Site and Common Areas. Landlord
shall not be liable to Tenant for any violation of the Rules and Regulations or
the breach of any covenant or condition in any lease by any other tenant or such
tenant's agents, employees, contractors, guests or invitees. One or more waivers
by Landlord of any breach of  the Rules and Regulations by Tenant or by any
other tenant(s) shall not be a waiver of any subsequent breach of that rule or
any other. Tenant's failure to keep and observe the Rules and Regulations shall
constitute a breach of this Lease. In the case of any conflict between the Rules
and Regulations and this Lease, this Lease shall be controlling.

                                       20
<PAGE>

                       ARTICLE XVIII. BROKER'S COMMISSION

      The parties recognize as the broker(s) who negotiated this Lease the
firm(s), if any, whose name(s) is (are) stated in Item 10 of the Basic Lease
Provisions, and agree that Landlord shall be responsible for the payment of
brokerage commissions to those broker(s) unless otherwise provided in this
Lease. Tenant warrants that it has had no dealings with any other real estate
broker or agent in connection with the negotiation of this Lease, and Tenant
agrees to indemnify add hold Landlord harmless from any cost, expense or
liability (including reasonable attorneys' fees) for any compensation,
commissions or charges claimed by any other real estate broker or agent employed
or claiming to represent or to have been employed by Tenant in connection with
the negotiation of this Lease. The foregoing agreement shall survive the
termination of this Lease. If Tenant fails to take possession of the Premises or
if this Lease otherwise terminates prior to the Expiration Date as the result of
failure of performance by Tenant, Landlord shall be entitled to recover from
Tenant the unamortized portion of any brokerage commission funded by Landlord in
addition to any other damages to which Landlord may be entitled.

                  ARTICLE XIX. TRANSFER OF LANDLORD'S INTEREST

      In the event of any transfer of Landlord's interest in the Premises, the
transferor shall be automatically relieved of all obligations on the part of
Landlord arising after the transfer, and the transferor shall be relieved of
any obligation to pay any funds in which Tenant has an interest to the extent
that such funds have been turned over, subject to that interest, to the
transferee and Tenant is notified of the transfer as required by law. No
beneficiary of a deed of trust to which this Lease is or may be subordinate, and
no landlord under a so-called sale-leaseback, shall be responsible in connection
with the Security Deposit, unless the mortgagee or beneficiary under the deed
of trust or the landlord actually receives the Security Deposit. It is intended
that the covenants and obligations contained in this Lease on the part of
Landlord shall, subject to the foregoing, be binding on Landlord, its successors
and assigns, only during and in respect to their respective successive periods
of ownership.

                           ARTICLE XX. INTERPRETATION

      SECTION 20.1. GENDER AND NUMBER. Whenever the context of this Lease
requires, the words "Landlord" and "Tenant" shall include the plural as well as
the singular, and words used in neuter, masculine or feminine genders shall
include the others.

      SECTION 20.2. HEADINGS. The captions and headings of the articles and
sections of this Lease are for convenience only, are not a part of this Lease
and shall have no effect upon its construction or interpretation.

      SECTION 20.3. JOINT AND SEVERAL LIABILITY. If more than one person or
entity is named as Tenant, the obligations imposed upon each shall be joint
and several and the act of or notice from, or notice or refund to, or the
signature of, any one or more of them shall be binding on all of them with
respect to the tenancy of this Lease, including, but not limited to, any
renewal, extension, termination or modification of this Lease.

      SECTION 20.4. SUCCESSORS. Subject to Articles IX and XIX, all rights and
liabilities given to or imposed upon Landlord and Tenant shall extend to and
bind their respective heirs, executors, administrators, successors and assigns.
Nothing contained in this Section is intended, or shall be construed, to grant
to any person other than Landlord and Tenant and their successors and assigns
any rights or remedies under this Lease.

      SECTION 20.5. TIME OF ESSENCE. Time is of the essence with respect to the
performance of every provision of this Lease.

      SECTION 20.6. CONTROLLING LAW/VENUE. This Lease shall be governed by and
interpreted in accordance with the laws of the State of California. Any
litigation commenced concerning any matters whatsoever arising out of or in any
way connected to this Lease shall be initiated in the Superior Court of the
county in which the Site is located.

      SECTION 20.7. SEVERABILITY. If any term or provision of this Lease, the
deletion of which would not adversely affect the receipt of any material benefit
by either party or the deletion of which is consented to by the party adversely
affected, shall be held invalid or unenforceable to any extent, the remainder of
this Lease shall not be affected and each term and provision of this Lease shall
be valid and enforceable to the fullest extent permitted by law.

      SECTION 20.8. WAIVER AND CUMULATIVE REMEDIES. One or more waivers by
Landlord or Tenant of any breach of any term, covenant or condition contained in
this Lease shall not be a waiver of any subsequent breach of the same or any
other term, covenant or condition. Consent to any act by one of the parties
shall not be deemed to render unnecessary the obtaining of that party's consent
to any subsequent act. No breach by either party of this Lease shall be deemed
to have been waived unless the waiver is in a writing signed by the other party.
The rights and remedies of each party under this Lease shall be cumulative and
in addition to any and all other rights and remedies which such party may have.

      SECTION 20.9. INABILITY TO PERFORM. In the event that either party shall
be delayed or hindered in or prevented from the performance of any work or in
performing any act required under this Lease by reason of any cause beyond the
reasonable control of that party, other than financial inability, then the
performance of the work or the doing of the act shall be excused for the period
of the delay and the time for performance shall be extended for a period
equivalent to the period of the delay. The provisions of this Section shall not
operate to

                                       21
<PAGE>

excuse Tenant from the prompt payment of rent or from the timely performance of
any other obligation under this Lease within Tenant's reasonable control.

      SECTION 20.10. ENTIRE AGREEMENT. This Lease and its exhibits and other
attachments cover in full each and every agreement of every kind between the
parties concerning the Premises, the Building and the Site, and all preliminary
negotiations, oral agreements, understandings and/or practices, except those
contained in this Lease, are superseded and of no further effect. Tenant waives
its rights to rely on any representations or promises made by Landlord or others
which are not contained in this Lease. No verbal agreement or implied covenant
shall be held to modify the provisions of this Lease, any statute, law, or
custom to the contrary notwithstanding.

      SECTION 20.11. QUIET ENJOYMENT. Upon the observance and performance of all
the covenants, terms and conditions on Tenant's part to be observed and
performed, and subject to the other provisions of this Lease, Tenant shall have
the right of quiet enjoyment and use of the Premises for the Term without
hindrance or interruption by Landlord or any other person claiming by or through
Landlord.

      SECTION 20.12. SURVIVAL. All covenants of Landlord or Tenant which
reasonably would be intended to survive the expiration or sooner termination of
this Lease, including without limitation any warranty or indemnity hereunder,
shall so survive and continue to be binding upon and inure to the benefit of the
respective parties and their successors and assigns.

      SECTION 20.13. INTERPRETATION. This Lease shall not be construed in favor
of or against either party, but shall be construed as if both parties prepared
this Lease.

                      ARTICLE XXI. EXECUTION AND RECORDING

      SECTION 21.1. COUNTERPARTS. This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.

      SECTION 21.2. CORPORATE, LIMITED LIABILITY COMPANY AND PARTNERSHIP
AUTHORITY. If Tenant is a corporation, limited liability company or partnership,
each individual executing this Lease on behalf of the corporation, limited
liability company or partnership represents and warrants that he or she is duly
authorized to execute and deliver this Lease on behalf of the corporation,
limited liability company or partnership, and that this Lease is binding upon
the corporation, limited liability company or partnership in accordance with its
terms. Tenant shall, at Landlord's request, deliver a certified copy of its
board of directors' resolution, operating agreement or partnership agreement or
certificate authorizing or evidencing the execution of this Lease.

      SECTION 21.3. EXECUTION OF LEASE; NO OPTION OR OFFER. The submission of
this Lease to Tenant shall be for examination purposes only, and shall not
constitute an offer to or option for Tenant to lease the Premises. Execution of
this Lease by Tenant and its return to Landlord shall not be binding upon
Landlord, notwithstanding any time interval, until Landlord has in fact executed
and delivered this Lease to Tenant, it being intended that this Lease shall only
become effective upon execution by Landlord and delivery of a fully executed
counterpart to Tenant.

      SECTION 21.4. RECORDING. Tenant shall not record this Lease without the
prior written consent of Landlord. Tenant, upon the request of Landlord, shall
execute and acknowledge a "Short Form" memorandum of this Lease for recording
purposes.

      SECTION 21.5. AMENDMENTS. No amendment or termination of this Lease shall
be effective unless in writing signed by authorized signatories of Tenant and
Landlord, or by their respective successors in interest. No actions, policies,
oral or informal arrangements, business dealings or other course of conduct by
or between the parties shall be deemed to modify this Lease in any respect.

      SECTION 21.6. EXECUTED COPY. Any fully executed photocopy or similar
reproduction of this Lease shall be deemed an original for all purposes.

      SECTION 21.7. ATTACHMENTS. All exhibits, amendments, riders and addenda
attached to this Lease are hereby incorporated into and made a part of this
Lease.

                           ARTICLE XXII. MISCELLANEOUS

      SECTION. 22.1. NONDISCLOSURE OF LEASE TERMS. Tenant acknowledges and
agrees that the terms of this Lease are confidential and constitute proprietary
information of Landlord. Disclosure of the terms could adversely affect the
ability of Landlord to negotiate other leases and impair Landlord's relationship
with other tenants. Accordingly, Tenant agrees that it, and its partners,
officers, directors, employees and attorneys, shall not intentionally and
voluntarily disclose, by public filings or otherwise, the terms and conditions
of this Lease ("Confidential Information") to any third party, either directly
or indirectly, without the prior written consent of Landlord, which consent may
be given or withheld in Landlord's sole and absolute discretion. The foregoing
restriction shall not apply if either: (i) Tenant is required to disclose the
Confidential Information in response to a subpoena or other regulatory,
administrative or court order, (ii) independent legal counsel to Tenant delivers
a written opinion to Landlord that Tenant is required to disclose the
Confidential Information to, or file a copy of this Lease with, any governmental
agency or any stock exchange; provided however, that in such event, Tenant
shall, before making any such disclosure (A) provide Landlord with prompt
written notice of such required disclosure, (B)

                                       22
<PAGE>

at Tenant's sole cost, take all reasonable legally available steps to resist or
narrow such requirement, including without limitation preparing and filing a
request for confidential treatment of the Confidential Information and (C) if
disclosure of the Confidential Information is required by subpoena or other
regulatory, administrative or court order, Tenant shall provide Landlord with as
much advance notice of the possibility of such disclosure as practical so that
Landlord may attempt to stop such disclosure or obtain an order concerning such
disclosure. The form and content of a request by Tenant for confidential
treatment of the Confidential Information shall be provided to Landlord at least
five (5) business days before its submission to the applicable governmental
agency or stock exchange and is subject to the prior written approval of
Landlord. In addition, Tenant may disclose the terms of this Lease to
prospective assignees of this Lease and prospective subtenants under this Lease
with whom Tenant is actively negotiating such an assignment or sublease.

      SECTION 22.2. GUARANTY. As a condition to the execution of this Lease by
Landlord, the obligations, covenants and performance of the Tenant as herein
provided shall be guaranteed in writing by the Guarantor(s) listed in Item 7 of
the Basic Lease Provisions ("Guarantor"), if any, on a form of guaranty provided
by Landlord ("Guaranty"). Any default by a Guarantor under the Guaranty shall be
deemed to be an Event of Default under the terms of this Lease. In addition, any
filing by or against a Guarantor of a petition to have such Guarantor adjudged a
Chapter 7 debtor under the Bankruptcy Code or to have debts discharged or a
petition for reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against such Guarantor, the same is
dismissed within thirty (30) days), a Guarantor's convening of a meeting of its
creditors for the purpose of effecting a moratorium upon or composition of its
debts or the failure of a Guarantor to pay its material obligations to creditors
as and when they become due and payable, other than as a result of a good faith
dispute by such Guarantor, shall be deemed to be an Event of Default by Tenant

      SECTION 22.3 CHANGES REQUESTED BY LENDER. If, in connection with obtaining
financing for the Site, the lender shall request reasonable modifications in
this Lease as a condition to the financing, Tenant will not unreasonably
withhold or delay its consent, provided that the modifications do not materially
increase the obligations of Tenant or materially and adversely affect the
leasehold interest created by this Lease.

      SECTION 22.4. MORTGAGEE PROTECTION. No act or failure to act on the part
of Landlord which would otherwise entitle Tenant to be relieved of its
obligations hereunder shall result in such a release or termination unless (a)
Tenant has given notice by registered or certified mail to any beneficiary of a
deed of trust or mortgage covering the Building whose address has been furnished
to Tenant and (b) such beneficiary is afforded a reasonable opportunity to cure
the default by Landlord (which in no event shall be less than sixty (60) days),
including, if necessary to effect the cure, time to obtain possession of the
Building by power of sale or judicial foreclosure provided that such foreclosure
remedy is diligently pursued. Tenant agrees that each beneficiary of a deed of
trust or mortgage covering the Building is an express third party beneficiary
hereof, Tenant shall have no right or claim for the collection of any deposit
from such beneficiary or from any purchaser at a foreclosure sale unless such
beneficiary or purchaser shall have actually received and not refunded the
deposit, and Tenant shall comply with any written directions by any beneficiary
to pay rent due hereunder directly to such beneficiary without determining
whether a default exists under such beneficiary's deed of trust.

      SECTION 22.5. COVENANTS AND CONDITIONS. All of the provisions of this
Lease shall be construed to be conditions as well as covenants as though the
words specifically expressing or imparting covenants and conditions were used in
each separate provision.

      SECTION 22.6. SECURITY MEASURES. Tenant hereby acknowledges that Landlord
shall have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises or the Site. Tenant assumes all
responsibility for the protection of Tenant, its employees, agents, invitees and
property from acts of third parties. Nothing herein contained shall prevent
Landlord, at its sole option, from providing security protection for the Site or
any part thereof, in which event the cost thereof shall be included within the
definition of Site Costs.

LANDLORD:                                 TENANT:

THE IRVINE COMPANY                        MICRUS CORPORATION

By: /s/ William R. Halford                By: /s/ Michel R. Mounier
    ------------------------                  ------------------------
    William R. Halford                        Name(Print): Michel R. Mounier
    President, Office Properties              ------------------------
                                              Title(Print): President & CEO

By: /s/Nancy E. Truillo                  By: /s/ Tom Holdych
    --------------------------               ------------------------
    Nancy E. Truillo                         Name(Print): Tom Holdych
    Assistant Secretary                      ------------------------
                                             Title(Print): Senior V.P. & COO
                                                           (Corporate Secretary)

                            [LEGAL APPROVAL SEAL]

                                       23
<PAGE>
                                   EXHIBIT A

                                  [FLOORPLAN]

                              610Palomar-Floorplan

<PAGE>

                                    EXHIBIT B

                THE IRVINE COMPANY - INVESTMENT PROPERTIES GROUP

                         HAZARDOUS MATERIAL SURVEY FORM

      The purpose of this form is to obtain information regarding the use of
hazardous substances on Investment Properties Group ("IPG") property.
Prospective tenants and contractors should answer the questions in light of
their proposed activities on the premises. Existing tenants and contractors
should answer the questions as they relate to ongoing activities on the premises
and should update any information previously submitted.

      If additional space is needed to answer the questions, you may attach
separate sheets of paper to this form. When completed, the form should be sent
to the following address:

                               INSIGNIA/ESG, INC.
                     160 West Santa Clara Street, Suite 1350
                               San Jose, CA 95113

      Your cooperation in this matter is appreciated. If you have any questions,
please call your property manager at (949) 753-4744 for assistance.

1.    GENERAL INFORMATION.

      Name of Responding Company: ______________________________________________
      Check all that apply:          Tenant        ( )        Contractor  ( )
                                     Prospective   ( )        Existing    ( )

      Mailing Address:__________________________________________________________

      Contact person & Title: __________________________________________________

      Telephone Number: ( ) ____________________________________________________

      Current TIC Tenant(s):

      Address of Lease Premises: _______________________________________________

      Length of Lease or Contract Term: ________________________________________

      Prospective TIC Tenant(s):

      Address of Leased Premises: ______________________________________________

      Address of Current Operations:____________________________________________

      Describe the proposed operations to take place on the property, including
      principal products manufactured or services to be conducted. Existing
      tenants and contractors should describe any proposed changes to ongoing
      operations.

      __________________________________________________________________________
      __________________________________________________________________________
      __________________________________________________________________________

                                     1 of 5
<PAGE>

2.    HAZARDOUS MATERIALS. For the purposes of this Survey Form, the term
      "hazardous material" means any raw material, product or agent considered
      hazardous under any state or federal law. The term does not include wastes
      which are intended to be discarded.

      2.1   Will any hazardous materials be used or stored on site?

            Chemical Products       Yes   ( )   No   ( )
            Biological Hazards/
             Infectious Wastes      Yes   ( )   No   ( )
            Radioactive Materials   Yes   ( )   No   ( )
            Petroleum Products      Yes   ( )   No   ( )

      2.2   List any hazardous materials to be used or stored, the quantities
            that will be on-site at any given time, and the location and method
            of storage (e.g., bottles in storage closet on the premises).

<TABLE>
<CAPTION>
                             Location and Method
  Hazardous Materials             of Storage                       Quantity
  -------------------             -----------                      ---------
<S>                          <C>                            <C>
______________________          ___________________         ____________________
______________________          ___________________         ____________________
______________________          ___________________         ____________________
______________________          ___________________         ____________________
</TABLE>

2.3   Is any underground storage of hazardous materials proposed or currently
      conducted on the premises? Yes ( ) No ( )

      If yes, describe the materials to be stored, and the size and construction
      of the tank. Attach copies of any permits obtained for the underground
      storage of such substances.

      __________________________________________________________________________
      __________________________________________________________________________
      __________________________________________________________________________

3.    HAZARDOUS WASTE. For the purposes of this Survey Form, the term "hazardous
      waste" means any waste (including biological, infectious or radioactive
      waste) considered hazardous under any state or federal law, and which is
      intended to be discarded.

      3.1   List any hazardous waste generated or to be generated on the
            premises, and indicate the quantity generated on a monthly basis.

<TABLE>
<CAPTION>
                             Location and Method
  Hazardous Materials             of Store                      Quantity
  -------------------             --------                      ---------
<S>                          <C>                            <C>
______________________          ___________________         ____________________
______________________          ___________________         ____________________
______________________          ___________________         ____________________
______________________          ___________________         ____________________
</TABLE>

                                     2 of 5
<PAGE>

      3.2   Describe the method(s) of disposal (including recycling) for each
            waste. Indicate where and how often disposal will take place.

<TABLE>
<CAPTION>
                                Location and Method
  Hazardous Materials               of Storage                Disposal Method
  -------------------               -----------               ---------------
<S>                             <C>                         <C>
______________________          ___________________         ____________________
______________________          ___________________         ____________________
______________________          ___________________         ____________________
______________________          ___________________         ____________________
</TABLE>

      3.3   Is any treatment or processing of hazardous, infectious or
            radioactive wastes currently conducted or proposed to be conducted
            on the premise? Yes( ) No( )

            If yes, please describe any existing or proposed treatment methods.

            ____________________________________________________________________
            ____________________________________________________________________
            ____________________________________________________________________

      3.4   Attach copies of any hazardous waste permits or licenses issued to
            your company with respect to its operations on the premises.

4.    SPILLS

      4.1   During the past year, have any spills or releases of hazardous
            materials occurred on the premises?   Yes ( ) No ( )


            If so, please describe the spill and attach the results of any
            testing conducted to determine the extent of such spills.

            ____________________________________________________________________
            ____________________________________________________________________
            ____________________________________________________________________

      4.2   Were any agencies notified in connection with such spills?
            Yes ( ) No( )

      If so, attach copies of any spill reports or other correspondence with
      regulatory agencies.

      4.3   Were any clean-up actions undertaken in connection with the spills?
            Yes ( ) No ( ) .

            If so, briefly describe the actions taken. Attach copies of any
            clearance letters obtained from any regulatory agencies involved and
            the results of any final soil or groundwater sampling done upon
            completion of the clean-up work.

            ____________________________________________________________________
            ____________________________________________________________________
            ____________________________________________________________________

5.    WASTEWATER TREATMENT/DISCHARGE

      5.1   Do you discharge industrial wastewater to:

            ____storm drain?                   ____sewer?

            ____surface water?                 ____no industrial discharge

                                     3 of 5
<PAGE>

      5.2   Is your industrial waste water treated before discharge?
            Yes ( ) No ( )

            If yes, describe the type of treatment conducted.

            ____________________________________________________________________
            ____________________________________________________________________
            ____________________________________________________________________

      5.3   Attach copies of any wastewater discharge permits issued to your
            company with respect to its operations on the premises.

6.    AIR DISCHARGES.

      6.1   Do you have any air filtration systems or stacks that discharge into
            the air? Yes ( ) No ( )

      6.2   Do you operate any equipment that require air emissions permits?
            Yes ( ) No ( )

      6.3   Attach copies of any air discharge permits pertaining to these
            operations.

7.    HAZARDOUS MATERIALS DISCLOSURES.

      7.1   Does your company handle an aggregate of at least 500 pounds, 55
            gallons or 200 cubic feet of hazardous material at any given time?
            Yes ( ) No ( )

      7.2   Has your company prepared a Hazardous Materials Disclosure -
            Chemical Inventory and Business Emergency Plan or similar disclosure
            document pursuant to state or county requirements? Yes ( ) No ( )

            If so, attach a copy.

      7.3   Are any of the chemicals used in your operations regulated under
            Proposition 65?

            If so, describe the procedures followed to comply with these
            requirements.

            ____________________________________________________________________
            ____________________________________________________________________
            ____________________________________________________________________

      7.4   Is your company subject to OSHA Hazard Communication Standard
            Requirements? Yes ( ) . No ( )

            If so, describe the procedures followed to comply with these
            requirements.

            ____________________________________________________________________
            ____________________________________________________________________
            ____________________________________________________________________

8.    ANIMAL TESTING.

      8.1   Does your company bring or intend to bring live animals onto the
            premises for research or development purposes? Yes ( ) No ( )

            If so, describe the activity.

            ____________________________________________________________________
            ____________________________________________________________________
            ____________________________________________________________________


                                     4 of 5
<PAGE>

      8.2   Does your company bring or intend to bring animal body parts or
            bodily fluids onto the premises for research or development
            purposes? Yes ( ) No ( )

            If so, describe the activity,

      __________________________________________________________________________
      __________________________________________________________________________
      __________________________________________________________________________

9.    ENFORCEMENT ACTIONS COMPLAINTS

      9.1   Has your company ever been subject to any agency enforcement
            actions, administrative orders, lawsuits, or consent orders/decrees
            regarding environmental compliance or health and safety? Yes ( ) No
            ( )

            If so, describe the actions and any continuing obligations imposed
            as a result of these actions.

      __________________________________________________________________________
      __________________________________________________________________________
      __________________________________________________________________________


      9.2   Has your company ever received any request for information, notice
            of violation or demand letter, complaint, or inquiry regarding
            environmental compliance or health and safety? Yes ( ) No ( )

      9.3   Has an environmental audit ever been conducted which concerned
            operations or activities on premises occupied by you? Yes ( ) No ( )

      9.4   If you answered "yes" to any questions in this section, describe the
            environmental action or complaint and any continuing compliance
            obligation imposed as a result of the same.

      __________________________________________________________________________
      __________________________________________________________________________
      __________________________________________________________________________
      __________________________________________________________________________
      __________________________________________________________________________

                                           _____________________________________
                                           _____________________________________

                                           By:__________________________________
                                                Name: __________________________
                                                Title: _________________________
                                                Date: __________________________

                                      5 of 5
<PAGE>

                                                                January 14, 1997

                                SUNNYVALE LEASES

                                    EXHIBIT C

                         HAZARDOUS MATERIALS DISCLOSURE

Tenant acknowledges the following disclosures by Landlord with respect to
Hazardous Materials at the Premises. Tenant agrees to comply with the
precautionary requirements and other provisions, set forth below, that are
associated with these Hazardous Materials.

      (1)   Portions of the structures on the Premises may contain
            asbestos-containing materials. Accordingly, Tenant agrees that it
            will not make any repairs or alterations to the structures on the
            Premises: (a) without inquiring from Landlord whether Tenant's
            planned repairs or alterations are likely to disturb asbestos-
            containing materials in the structures, and (b) if, in Landlord's
            judgment, the planned repairs or alterations will disturb the
            asbestos-containing judgment, the planned repairs or alterations
            will disturb the asbestos-containing materials, without securing
            Landlord's prior consent to the repairs or alterations.

      (2)   Portions of the groundwater in the City of Sunnyvale contain
            volatile organic compounds and/or solvents. These substances may be
            present in the groundwater beneath the Premises.

            Landlord is unaware of any practical impediment to the use or
            occupancy of the Premises as a result of the presence of these
            substances in the groundwater.

<PAGE>

                                    EXHIBIT D

                               TENANT'S INSURANCE

      The following standards for Tenant's insurance shall be in effect at the
Building. Landlord reserves the right to adopt reasonable nondiscriminatory
modifications and additions to those standards. Tenant agrees to obtain and
present evidence to Landlord that it has fully complied with the insurance
requirements.

      1.    Tenant shall, at its sole cost and expense, commencing on the date
Tenant is given access to the Premises for any purpose and during the entire
Term, procure, pay for and keep in full force and effect: (i) commercial general
liability insurance with respect to the Premises and the operations of or on
behalf of Tenant in, on or about the Premises, including but not limited to
personal injury, owned and nonowned automobile, blanket contractual, independent
contractors, broad form property damage (with an exception to any pollution
exclusion with respect to damage arising out of heat, smoke or fumes from a
hostile fire), fire and water legal liability, products liability (if a product
is sold from the Premises), liquor law liability (if alcoholic beverages are
sold, served or consumed within the Premises), and severability of interest,
which policy(ies) shall be written on an "occurrence" basis and for not less
than the amount set forth in Item 13 of the Basic Lease Provisions, with a
combined single limit (with a $50,000 minimum limit on fire legal liability) per
occurrence for bodily injury, death, and property damage liability, or the
current limit of liability carried by Tenant, whichever is greater, and subject
to such increases in amounts as Landlord may determine from time to time; (ii)
workers' compensation insurance coverage as required by law, together with
employers' liability insurance; (iii) with respect to improvements, alterations,
and the like required or permitted to be made by Tenant under this Lease,
builder's all-risk insurance, in an amount equal to the replacement cost of the
work; (iv) insurance against fire, vandalism, malicious mischief and such other
additional perils as may be included in a standard "all risk" form in general
use in the county in which the Premises are situated, insuring Tenant's
leasehold improvements, trade fixtures, furnishings, equipment and items of
personal property of Tenant located in the Premises, in an amount equal to not
less than ninety percent (90%) of their actual replacement cost (with
replacement cost endorsement); and (v) business interruption insurance in
amounts satisfactory to cover one (1) year of loss. In no event shall the limits
of any policy be considered as limiting the liability of Tenant under this
Lease.

      2.    In the event Landlord consents to Tenant's use, generation or
storage of Hazardous Materials on, under or about the Premises pursuant to
Section 5.3 of this Lease, Landlord shall have the continuing right to require
Tenant, at Tenant's sole cost and expense (provided the same is available for
purchase upon commercially reasonable terms), to purchase insurance specified
and approved by Landlord, with coverage not less than One Million Dollars
($1,000,000.00), insuring (i) any Hazardous Materials shall be removed from the
Premises, (ii) the Premises shall be restored to a clean, healthy, safe and
sanitary condition, and (iii) any liability of Tenant, Landlord and Landlord's
officers, directors, shareholders, agents, employees and representatives,
arising from such Hazardous Materials.

      3.    All policies of insurance required to be carried by Tenant pursuant
to this Exhibit D containing a deductible exceeding Fifty Thousand
Dollars($50,000.00) per occurrence must be approved in writing by Landlord
prior to the issuance of such policy. Tenant shall be solely responsible for the
payment of all deductibles.

      4.    All policies of insurance required to be carried by Tenant pursuant
to this Exhibit D shall be written by responsible insurance companies authorized
to do business in the State of California and with a Best's rating of not less
than "A" subject to final acceptance and approval by Landlord. Any insurance
required of Tenant may be furnished by Tenant under any blanket policy carried
by it or under a separate policy, so long as (i) the Premises are specifically
covered (by rider, endorsement or otherwise), (ii) the limits of the policy are
applicable on a "per location" basis to the Premises and provide for restoration
of the aggregate limits, and (iii) the policy otherwise complies with the
provisions of this Exhibit D. A true and exact copy of each paid up policy
evidencing the insurance(appropriately) authenticated by the insurer) or a
certificate of insurance, certifying that the policy has been issued, provides
the coverage required by this Exhibit D and contains the required provisions,
shall be delivered to Landlord prior to the date Tenant is given the right of
possession of the Premises. Proper evidence of the renewal of any insurance
coverage shall also be delivered to Landlord not less than thirty (30) days
prior to the expiration of the coverage. Landlord may at any time, and from time
to time, inspect and/or copy any and all insurance policies required by this
Lease.

      5.    Each policy evidencing insurance required to be carried by Tenant
pursuant to this Exhibit D shall contain the following provisions and/or clauses
satisfactory to Landlord: (i) a provision that the policy and the coverage
provided shall be primary and that any coverage carried by Landlord shall be
noncontributory with respect to any policies carried by Tenant except as to
workers' compensation insurance; (ii) a provision including Landlord, the
Additional Insureds identified in Item 11 of the Basic Lease Provisions, and any
other parties in interest designated by Landlord as an additional insured,
except as to workers' compensation insurance; (iii) a waiver by the insurer of
any right to subrogation against Landlord, its agents, employees, contractors
and representatives which arises or might arise by reason of any payment under
the policy or by reason of any act or omission of Landlord, its agents,
employees, contractors or representatives; and (iv) a provision that the insurer
will not cancel or change the coverage provided by the policy without first
giving Landlord thirty (30) days prior written notice.

      6.    In the event that Tenant fails to procure, maintain and/or pay for,
at the times and for the durations specified in this Exhibit D, any insurance
required by this Exhibit D, or fails to carry insurance required by any
governmental authority, Landlord may at its election procure that insurance and
pay the premiums, in which event Tenant shall repay Landlord all sums paid by
Landlord, together with interest at the maximum rate permitted by law and any
related costs or expenses incurred by Landlord, within ten (10) days following
Landlord's written demand to Tenant.

                                      -1-
<PAGE>

                                    EXHIBIT E

                              RULES AND REGULATIONS

      This Exhibit sets forth the rules and regulations governing Tenant's use
of the Premises leased to Tenant pursuant to the terms, covenants and conditions
of the Lease to which this Exhibit is attached and therein made part thereof. In
the event of any conflict of inconsistency between this Exhibit and the Lease,
the Lease shall control.

      1.    Tenant shall not place anything or allow anything to be placed near
the glass of any window, door, partition or wall which may appear unsightly from
outside the Premises.

      2.    The walls, walkways, sidewalks, entrance passages, courts and
vestibules shall not be obstructed or used for any purpose other than ingress
and egress of pedestrian travel to and from the Premises, and shall not be used
for loitering or gathering, or to display, store or place any merchandise,
equipment or devices, or for any other purpose. The walkways, entrance
passageways, courts, vestibules and roof are not for the use of the general
public and Landlord shall in all cases retain the right to control and prevent
access thereto by all persons whose presence in the judgment of the Landlord
shall be prejudicial to the safety, character, reputation and interests of the
Building and its tenants, provided that nothing herein contained shall be
construed to prevent such access to persons with whom Tenant normally deals in
the ordinary course of Tenant's business unless such persons are engaged in
illegal activities. No tenant or employee or invitee of any tenant shall be
permitted upon the roof of the Building.

      3.    No awnings or other projection shall be attached to the outside
walls of the Building. No security bars or gates, curtains, blinds, shades or
screens shall be attached to or hung in, or used in connection with, any window
or door of the Premises without the prior written consent of Landlord. Neither
the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the express written consent of Landlord.

      4.    Tenant shall not mark, nail, paint, drill into, or in any way deface
any part of the Premises or the Building. Tenant shall not lay linoleum, tile,
carpet or other similar floor covering so that the same shall be affixed to the
floor of the Premises in any manner except as approved by Landlord in writing.
The expense of repairing any damage resulting from a violation of this rule or
removal of any floor covering shall be borne by Tenant.

      5.    The toilet rooms, urinals, wash bowls and other plumbing apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, caused it.

      6.    Landlord shall direct electricians as to the manner and location of
any future telephone wiring. No boring or cutting for wires will be allowed
without the prior consent of Landlord. The locations of the telephones, call
boxes and other office equipment affixed to the Premises shall be subject to the
prior written approval of Landlord.

      7.    The Premises shall not be used for manufacturing or for the storage
of merchandise except as such storage may be incidental to the permitted use of
the Premises. No exterior storage shall be allowed at any time without the prior
written approval of Landlord. The Premises shall not be used for cooking or
washing clothes without the prior written consent of Landlord, or for lodging or
sleeping or for any immoral or illegal purposes.

      8.    Tenant shall not make, or permit to be made, any unseemly or
disturbing noises or disturb or interfere with occupants of this or neighboring
buildings or premises or those having business with them, whether by the use of
any musical instrument, radio, phonograph, noise, or otherwise. Tenant shall not
use, keep or permit to be used, or kept, any foul or obnoxious gas or substance
in the Premises or permit or suffer the Premises to be used or occupied in any
manner offensive or objectionable to Landlord or other occupants of this or
neighboring buildings or premises by reason of any odors, fumes or gases.

      9.    No animals shall be permitted at any time within the Premises.

      10.   Tenant shall not use the name of the Building or the Project in
connection with or in promoting or advertising the business of Tenant, except as
Tenant's address, without the written consent of Landlord. Landlord shall have
the right to prohibit any advertising by any Tenant which, in Landlord's
reasonable opinion, tends to impair the reputation of the Project or its
desirability for its intended uses, and upon written notice from Landlord any
Tenant shall refrain from or discontinue such advertising.

      11.   Canvassing, soliciting, peddling, parading, picketing, demonstrating
or otherwise engaging in any conduct that unreasonably impairs the value or use
of the Premises or the Project are prohibited and each Tenant shall cooperate to
prevent the same.

      12.   No equipment of any type shall be placed on the Premises which in
Landlord's opinion exceeds the load limits of the floor or otherwise threatens
the soundness of the structure or improvements of the Building.

                                     1 of 2
<PAGE>

      13.   No air conditioning unit or other similar apparatus shall be
installed or used by any Tenant without the prior written consent of Landlord.

      14.   The entire Premises, including vestibules, entrances, doors,
fixtures, windows and plate glass, shall at all times be maintained in a safe,
neat and clean condition by Tenant. All trash, refuse and waste materials shall
be regularly removed from the Premises by Tenant and placed in the containers at
the locations designated by Landlord for refuse collection. All cardboard boxes
must be "broken down" prior to being placed in the trash container. All
styrofoam chips must be bagged or otherwise contained prior to placement in the
trash container, so as not to constitute a nuisance. Pallets may not be disposed
of in the trash container or enclosures. The burning of trash, refuse or waste
materials is prohibited.

      15.   Tenant shall use at Tenant's cost such pest extermination contractor
as Landlord may direct and at such intervals as Landlord may require.

      16.   All keys for the premises shall be provided to Tenant by Landlord
and Tenant shall return to Landlord any of such keys so provided upon the
termination of the Lease. Tenant shall not change locks or install other locks
on doors of the Premises, without the prior written consent of Landlord. In the
event of loss of any keys furnished by Landlord for Tenant, Tenant shall pay to
Landlord the costs thereof.

      17.   No person shall enter or remain within the Project while intoxicated
or under the influence of liquor or drugs. Landlord shall have the right to
exclude or expel from the Project any person who, in the absolute discretion of
Landlord, is under the influence of liquor or drugs.

      Landlord reserves the right to amend or supplement the foregoing Rules and
Regulations and to adopt and promulgate additional rules and regulations
applicable to the Premises. Notice of such rules and regulations and amendments
and supplements thereto, if any, shall be given to the Tenant.

                                     2 of 2
<PAGE>

                       IRREVOCABLE STANDBY LETTER OF CREDIT

                           Number:     __________________________
                           Date:       __________________________
                           Amount:     __________________________
                           Expiration: __________________________

    BENEFICIARY                                     ACCOUNT PARTY

    The Irvine Company
    550 Newport Center Drive                        ____________________
    Newport Beach, CA 92660                         ____________________
    Attn:  Vice President, Asset Management,        ____________________
           Office Properties

We hereby issue our Irrevocable Letter of Credit No.______ in favour of The
Irvine Company ("Beneficiary"), its successors and assigns, for the account
of__________________. We undertake to honor your sight draft, upon presentation
at our office in __________________________, California, for any sum or sums not
to exceed a total of ____________ ($__) in favour of Beneficiary when
accompanied by the original of this Letter of Credit and a letter signed by a
purported officer of the Beneficiary certifying that the Beneficiary is entitled
to draw on this Letter of Credit.

Partial and multiple drawings are permitted under this Letter of Credit. In the
event of a partial draw, the amount of the draft shall be endorsed on the
reverse side hereof by the negotiating bank.

This Letter of Credit is transferable in its entire undrawn balance to a
successor beneficiary upon presentation by Beneficiary of the original of this
Letter of Credit, together with a written request for transfer executed by
Beneficiary.

It is a condition of this Letter of Credit that it shall remain enforceable
against us for a period of_____ from this date and further, that it shall be
deemed automatically extended for successive one-year periods without amendment
thereafter unless thirty (30) days prior to the expiration date set forth above,
or within thirty (30) days prior to the end of any yearly Anniversary Date
thereafter, you shall receive our notice in writing by certified mail, return
receipt requested, that we elect not to renew this Letter of Credit for any
subsequent year.

The draft must be marked "Drawn under___________Letter of Credit
No._________dated__________".

There are no other conditions of this letter of credit. Except so far as
otherwise stated, this credit is subject to the International Standby Practices
1998, International Chamber of Commerce Publication No. 590, and is otherwise
governed by the law of the State of California.

______________________________
______________________________

By:___________________________

BY:___________________________

<PAGE>

1.    ARCHITECTURAL AND CONSTRUCTION PROCEDURES

      A.    Tenant and Landlord have approved, or shall approve within the time
            period set forth below, both (i) a detailed space plan for the
            Premises, prepared by the architect engaged by Landlord for the work
            described herein ("Landlord's Architect"), which includes interior
            partitions, ceilings, interior finishes, interior office doors,
            suite entrance, floor coverings, window coverings, lighting,
            electrical and telephone outlets, plumbing connections, heavy floor
            loads and other special requirements ("Preliminary Plan"), and (ii)
            an estimate, prepared by the contractor engaged by Landlord for the
            work herein ("Landlord's Contractor"), of the cost for which
            Landlord will complete or cause to be completed the Tenant
            Improvements ("Preliminary Cost Estimate"). Tenant shall approve or
            disapprove each of the Preliminary Plan and the Preliminary Cost
            Estimate by signing copies of the appropriate instrument and
            delivering same to Landlord within three (3) business days of its
            receipt by Tenant. If Tenant disapproves any matter, Tenant shall
            specify in detail the reasons for disapproval and Landlord shall
            attempt to modify the Preliminary Plan and the Preliminary Cost
            Estimate to incorporate Tenant's suggested revisions in a mutually
            satisfactory manner. Notwithstanding the foregoing, however, Tenant
            shall approve in all respects a Preliminary Plan and Preliminary
            Cost Estimate not later than the date set forth in item 11 of the
            Basic Lease Provisions ("Plan Approval Date"), it being understood
            that Tenant's failure to do so shall constitute a "Tenant Delay" for
            purposes of this Lease.

      B.    On or before the Plan Approval Date, Tenant shall provide in writing
            to Landlord or Landlord's Architect all specifications and
            information requested by Landlord for the preparation of final
            construction documents and costing, including without limitation
            Tenant's final selection of wall and floor finishes, complete
            specifications and locations (including load and HVAC requirements)
            of Tenant's equipment, and details of all "Non-Standard
            Improvements" (as defined below) to be installed in the Premises
            (collectively, "Programming Information"). Tenant's failure to
            provide the Programming Information by the Plan Approval Date shall
            constitute a Tenant Delay for purposes of this Lease. Tenant
            understands that final construction documents for the Tenant
            Improvements shall be predicated on the Programming Information, and
            accordingly that such information must be accurate and complete.

      C.    Upon Tenant's approval of the Preliminary Plan and Preliminary Cost
            Estimate and delivery of the complete Programming Information,
            Landlord's Architect and engineers shall prepare and deliver to the
            parties working drawings and specifications ("Working Drawings and
            Specifications"), and Landlord's Contractor shall prepare a final
            construction cost estimate ("Final Cost Estimate") for the Tenant
            Improvements in conformity with the Working Drawings and
            Specifications. Tenant shall have five (5) business days from the
            receipt thereof to approve or disapprove the Working Drawings and
            Specifications and the Final Cost Estimate, and any disapproval or
            requested modification shall be limited to items not contained in
            the approved Preliminary Plan or Preliminary Cost Estimate. In no
            event shall Tenant disapprove the Final Cost Estimate if it does not
            exceed the approved Preliminary Cost Estimate. Should Tenant
            disapprove the Working Drawings and Specifications and the Final
            Cost Estimate, such disapproval shall be accompanied by a detailed
            list of revisions. Any revision requested by Tenant and accepted by
            Landlord shall be incorporated by Landlord's Architect into a
            revised set of Working Drawings and Specifications and Final Cost
            Estimate, and Tenant shall approve same in writing within three (3)
            business days of receipt without further revision. Tenant's failure
            to comply in a timely manner with any of the requirements of this
            paragraph shall constitute a Tenant Delay.

      D.    In the event that Tenant requests in writing a revision in the
            approved Working Drawings and Specifications ("Change"), then
            provided such Change is reasonably acceptable to Landlord, Landlord
            shall advise Tenant by written change order as soon as is practical
            of any increase in the Completion Cost and/or any Tenant Delay such
            Change would cause. Tenant shall approve or disapprove such change
            order in writing within three (3) business days following its
            receipt from Landlord. Tenant's approval of a Change shall be
            accompanied by Tenant's payment of any resulting increase in the
            Completion Cost. It is understood that Landlord shall have
<PAGE>

            no obligation to interrupt or modify the Tenant improvement work
            pending Tenant's approval of a change order.

      E.    It is understood that the Preliminary Plan and the Working Drawings
            and Specifications, together with any Changes thereto, shall be
            subject to the prior approval of Landlord. Landlord shall identify
            any disapproved items within three (3) business days (or two (2)
            business days in the case of Changes) after receipt of the
            applicable document. In lieu of disapproving an item, Landlord may
            approve same on the condition that Tenant pay to Landlord, prior to
            the start of construction and in addition to all sums otherwise due
            hereunder, an amount equal to the cost, as reasonably estimated by
            Landlord, of removing and replacing the item upon the expiration or
            termination of the Lease (provided that should Landlord impose such
            a condition, Tenant may promptly withdraw its request to install the
            item). Should Landlord approve work that would necessitate any
            ancillary Building modification or other expenditure by Landlord,
            then except to the extent of any remaining balance of the
            "Landlord's Contribution" as described below, Tenant shall, in
            addition to its other obligations herein, promptly fund the cost
            thereof to Landlord.

      F.    Notwithstanding any provision in the Lease to the contrary, if
            Tenant fails to comply with any of the time periods specified in
            this Work Letter, fails otherwise to approve or reasonably
            disapprove any submittal within three (3) business days, fails to
            approve in writing both the Preliminary Plan and Preliminary Cost
            Estimate for the Tenant Improvements by the Plan Approval Date,
            fails to provide all of the Programming Information requested by
            Landlord by the Plan Approval Date, fails to approve in writing the
            Working Drawings and Specifications and the Final Cost Estimate
            within the time provided herein, requests any Changes, fails to make
            timely payment of any sum due hereunder, furnishes inaccurate or
            erroneous specifications or other information; or otherwise delays
            in any manner the completion of the Tenant Improvements (including
            without limitation by specifying materials that are not readily
            available) or the issuance of an occupancy certificate (any of the
            foregoing being referred to in this Lease as "Tenant Delay"), then
            Tenant shall bear any resulting additional construction cost or
            other expenses, and the Commencement Date of this Lease shall be
            deemed to have occurred for all purposes, including Tenant's
            obligation to pay rent, as of the date Landlord reasonably
            determines that it would have been able to deliver the Premises to
            Tenant In accordance with the requirements of Section 3.1 of the
            Lease but for the collective Tenant Delays. In no event, however,
            shall such date be earlier than the Estimated Commencement Date set
            forth in the Basic Lease Provisions. Should Landlord determine that
            the Commencement Date should be advanced in accordance with the
            foregoing, it shall so notify Tenant in writing. Landlord's
            determination shall be conclusive unless Tenant notifies Landlord in
            writing, within five (5) business days thereafter, of Tenant's
            election to contest same by arbitration with JAMS/ENDISPUTE pursuant
            to Section 14.7(b) of the Lease. Pending the outcome of such
            arbitration proceedings, Tenant shall make timely payment of all
            rent due under this Lease based upon the Commencement Date set forth
            in the aforesaid notice from Landlord.

      G.    Landlord shall permit Tenant and its agents to enter the Premises
            prior to the Commencement Date of the Lease in order that Tenant may
            perform any work to be performed by Tenant hereunder through its own
            contractors, subject to Landlord's prior written approval, and in a
            manner and upon terms and conditions and at times satisfactory to
            Landlord's representative. The foregoing license to enter the
            Premises prior to the Commencement Date is, however, conditioned
            upon Tenant's contractors and their subcontractors and employees
            working in harmony and not interfering with the work being performed
            by Landlord. If at any time that entry shall cause disharmony or
            interfere with the work being performed by Landlord, this license
            may be withdrawn by Landlord upon twenty-four (24) hours written
            notice to Tenant. That license is further conditioned upon the
            compliance by Tenant's contractors with all requirements imposed by
            Landlord on third party contractors and subcontractors, including
            without limitation the maintenance by Tenant and its contractors and
            subcontractors of workers' compensation and public liability and
            property damage insurance in amounts and with companies and on forms
            satisfactory to Landlord, with certificates of such insurance being
            furnished to Landlord prior to proceeding with any such entry. The
            entry shall be deemed to be under all of the provisions of the Lease
            except as to the covenants to pay rent. Landlord shall not be liable
            in any way for any injury, loss or damage which may occur to any
            such work being performed by Tenant, the same being solely at
            Tenant's risk. In no event shall the failure of Tenant's contractors
            to complete any work in the Premises extend the Commencement Date of
            this Lease

      H.    Tenant hereby designates Michael Le, Telephone No. (650) 969-7000,
            as its representative, agent and attorney-in-fact for the purpose of
            receiving notices, approving submittals and issuing requests for
            Changes, and Landlord shall be entitled to rely upon authorizations
            and directives of such person(s) as it given directly by Tenant.
            Tenant may amend the designation of its construction
            representative(s) at any time upon delivery of written notice to
            Landlord.

<PAGE>

                                    EXHIBIT X

                                  WORK LETTER

                                DOLLAR ALLOWANCE
                           [SECOND GENERATION SPACE]

The Tenant Improvement work (herein "Tenant Improvements") shall consist of any
work required to complete the Premises pursuant to plans and specifications
approved by both Landlord and Tenant. All of the Tenant Improvement work shall
be performed by a contractor selected by Landlord and in accordance with the
procedures and requirements set forth below.

1.    ARCHITECTURAL AND CONSTRUCTION PROCEDURES

      A.    Tenant and Landlord have approved, or shall approve within the time
            period set forth below, both (i) a detailed space plan for the
            Premises, prepared by the architect engaged by Landlord for the work
            described herein ("Landlord's Architect"), which Includes interior
            partitions, ceilings, Interior finishes, interior office doors,
            suite entrance, floor coverings, window coverings, lighting,
            electrical and telephone outlets, plumbing connections, heavy floor
            loads and other special requirements ("Preliminary Plan"), and (ii)
            an estimate, prepared by the contractor engaged by Landlord for the
            work herein ("Landlord's Contractor"), of the cost for which
            Landlord will complete or cause to be completed the Tenant
            Improvements ("Preliminary Cost Estimate"). Tenant shall approve or
            disapprove each of the Preliminary Plan and the Preliminary Cost
            Estimate by signing copies of the appropriate instrument and
            delivering same to Landlord within three (3) business days of its
            receipt by Tenant, -- If Tenant disapproves any matter, Tenant
            shall specify in detail the reasons for disapproval and Landlord
            shall attempt to modify the Preliminary Plan and the Preliminary
            Cost Estimate to Incorporate Tenant's suggested revisions in a
            mutually satisfactory manner. Notwithstanding, the foregoing,
            however, Tenant shall approve in all respects a Preliminary Plan and
            Preliminary Cost Estimate not later than the date set forth in item
            11 of the Basic Lease Provisions ("Plan Approval Date"), it being
            understood that Tenant's failure to do so shall constitute a "Tenant
            Delay" for purposes of this Lease.

      B.    On or before the Plan Approval Date, Tenant shall provide in writing
            to Landlord or Landlord's Architect all specifications and
            information requested by Landlord for the preparation of final
            construction documents and costing, including without limitation
            Tenant's final selection of wall and floor finishes, complete
            specifications and locations (including load and HVAC requirements)
            of Tenant's equipment, and details of all "Non-Standard
            Improvements" (as defined below) to be installed in the Premises
            (collectively, "Programming Information"). Tenant's failure to
            provide the Programming Information by the Plan Approval Date shall
            constitute a Tenant Delay for purposes of this Lease. Tenant
            understands that final construction documents for the Tenant
            Improvements shall be predicated on the Programming Information, and
            accordingly that such information must be accurate and complete.

      C.    Upon Tenant's approval of the Preliminary Plan and Preliminary Cost
            Estimate and delivery of the complete Programming Information,
            Landlord's Architect and engineers shall prepare and deliver to the
            parties working drawings and specifications ("Working Drawings and
            Specifications"), and Landlord's Contractor shall prepare a final
            construction cost estimate ("Final Cost Estimate") for the Tenant
            Improvements In conformity with the Working Drawings and
            Specifications. Tenant shall have five (5) business days from the
            receipt thereof to approve or disapprove the Working Drawings and
            Specifications and the Final Cost Estimate, and any disapproval or
            requested modification shall be limited to items not contained in
            the approved Preliminary Plan or Preliminary Cost Estimate. In no
            event shall Tenant disapprove the Final Cost Estimate if it does not
            exceed the approved Preliminary Cost Estimate. Should Tenant
            disapprove the Working Drawings and Specifications and the Final
            Cost Estimate, such disapproval shall be accompanied by a detailed
            list of revisions. Any revision requested by Tenant and accepted by
            Landlord shall be incorporated by Landlord's Architect into a
            revised set of Working Drawings, and Specifications and Final Cost
            Estimate, and Tenant shall approve same in writing within three (3)
            business days of receipt without further revision. Tenants failure
            to comply in a timely manner with any of the requirements of this
            paragraph shall constitute a Tenant Delay.

      D.    In the event that Tenant requests in writing a revision in the
            approved Working Drawings and Specifications ("Change"), then
            provided such Change is reasonably acceptable to Landlord, Landlord
            shall advise Tenant by written change order as soon as is practical
            of any increase In the Completion Cost and/or any Tenant Delay such
            Change would cause. Tenant shall approve or disapprove such change
            order in writing within three (3) business days following its
            receipt from Landlord. Tenant's approval of a Change shall be
            accompanied by Tenant's payment of any resulting increase in the
            Completion Cost. It is understood that Landlord shall have

<PAGE>

II.   COST OF TENANT IMPROVEMENTS

      A.    Landlord shall complete, or cause to be completed, the Tenant
            Improvements, at the construction cost shown in the approved Final
            Cost Estimate (subject to the provisions of this Work Letter), in
            accordance with final Working Drawings and Specifications approved
            by both Landlord and Tenant. Landlord shall pay towards the final
            construction costs ("Completion Cost") as incurred a maximum of Five
            Hundred Seventy-Five Thousand Dollars ($575,000.00)("Landlord
            Contribution"), based on $28.75 per square foot of the Premises, and
            Tenant shall be fully responsible for the remainder ("Tenant's
            Contribution"). If the actual cost of completion of the Tenant
            Improvements is less than the maximum amount provided for the
            Landlord's Contribution, such savings shall inure to the benefit of
            Landlord and Tenant shall not be entitled to any credit or payment.

      B.    The Completion Cost shall include all direct out-of-pocket costs of
            Landlord in completing the Tenant Improvements, including but not
            limited to the following: (i) payments made to architects,
            engineers, contractors, subcontractors and other third party
            consultants in the performance of the work, (ii) permit fees and
            other sums paid to governmental agencies, (iii) costs of all
            materials incorporated into the work or used in connection with the
            work, and (iv) keying and signage costs. The Completion Cost shall
            also include an administrative/supervision fee to be paid to
            Landlord in the amount of five percent (5%) of all such direct
            costs.

      C.    Prior to start of construction of the Tenant Improvements, Tenant
            shall pay to Landlord the amount of the Tenant's Contribution set
            forth in the approved Final Cost Estimate. In addition, if the
            actual Completion Cost of the Tenant Improvements is greater than
            the Final Cost Estimate because of modifications or extras not
            reflected on the approved working drawings, or because of Tenant
            Delays, then Tenant shall pay to Landlord, within ten (10) days
            following submission of an invoice therefor, all such additional
            costs, including any additional architectural fee. If Tenant
            defaults in the payment of any sums due under this Work Letter,
            Landlord shall (in addition to all other remedies) have the same
            rights as in the case of Tenant's failure to pay rent under the
            Lease.